OPINION, P6 ECONOMY, P2 SUNIL JAIN Even if Air India sold for free, the govt will be a winner PM’S MESSAGE India can win the green race with supportive govt policies/incentives CRISIS MANAGEMENT Reduce, reuse, recycle for development, waste management: Modi S SRIVASTAV & R KATHURIA INTERNATIONAL, P4 Sewing tipped to become next Deutsche Bank CEO NEW DELHI, MONDAY, APRIL 9, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 32, 16 PAGES, `6.00 (PATNA `6.00, RAIPUR `7.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E Q4FY18 EARNINGS SEASON CVC awaits details, calls PNB auditors India Inc could see a partial recovery PRESS TRUST OF INDIA New Delhi, April 8 AWAITING A DETAILED vigilance report on the over `13,000-crorePunjabNational Bankscam,theCentralVigilance Commission (CVC) on Sunday saidithasaskedstatutoryauditorsofthebanktoappearbefore it to furnish specific details about financial transactions. The watchdog asserted the need for strengthening the preventive vigilance mechanism, ensuring procedures were not just routinely followed but that the veracity of reports was verified. “We are also in the process of examining the statutoryauditorswho hadconductedtheauditofthis bank(PNB).Wearelookinginto the human resource aspect of it, too,” central vigilance commissioner KV Chowdary said. He said the auditors have been given time to appear before the body. “There are aboutadozenofthem,”hesaid, pointing out that the audit period spanned several years. “These are chartered accountants.We have called them.We have to hear them one by one,” Chowdary said. He said a detailed report has been sought from the chief vigilance officer of the staterun lender. A STABLE QUARTER (%) Adjusted earnings growth of BSE-30 Index 9.2 9.7 9.7 Mar-18E 10 Dec-17 20 Sep-17 Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15 Sep-15 Jun-15 Mar-15 Dec-14 Automobiles Banks/FIs Consumer 18.2 23.1 23.8 Industrials Metals & mining Pharma Real estate Technology Telecom 14.3 -34.7 22.9 1.9 -808 (%, q-o-q) Source: Kotak Institutional Equities estimates lysts at Kotak Institutional Equities (KIE) estimate Sensex earnings,forthe three months toMarch,willgrowjustashade under 10% year-on-year. Makers of CVs, passenger vehicles, tractors and twowheelershavereportedreasonably good volumes indicating demand in rural India is fairly strong. At Ashok Leyland, for 6.2 (%, q-o-q) instance, M&HCV volumes were up 15% y-o-y. Maruti Suzukishouldpostagoodsetof numbers for Q4FY18; PV volumes increased nearly 11% yo-yduringthequarter.Assuch, auto manufacturers report a good growth in their top lines as also margin expansions. Continued on Page 2 Related report on Page 2 Continued on Page 2 MISSING GRADE Clinical One is a game changer for life sciences Private sector banks: CFO qualifications While RBI had advised banks to have CFOs with a minimum qualification as a chartered accountant (CA), a note by Macquarie Research pointed out that CFOs of Axis Bank and ICICI Bank are not CAs. Oracle Health Sciences’ portfolio of solutions can enable India to become a global player in the clinical trials industry, says global VP James Streeter ■ EFE, P8 Bank Centre to soon move Cabinet note to ensure farmers get MSP THE AGRICULTURE ministry will soon move a Cabinet note seeking approval for a new policy that aims to rope in both states and private firms in procurement of other crops than wheat and paddy, for ensuring MSP to farmers, a senior government official said, reports PTI. The objective of the proposed policy is to improve the speed of response and effectiveness of procurement in cases when prices drop below the minimum support price. PAGE 2 BE, PGDBM CA, other qualifications ICICI Bank Rakesh Jha No IIT, PGDBM IndusInd Bank SV Zaregaonkar Yes CA KMB Jaimin Bhatt Yes CA, cost accountant Yes Bank** Rajat Monga No BE, PGDBM Yes Bank* Raj Ahuja Yes CA, cost accountant Source: Company data, Macquarie Research, April 2018 Note: ** Existing CFO * New CFO POWER OUT UDAY obligations start to bite into states’ finances With the fiscal headroom gone, UDAY bonds inflate interest costs of many states, discoms’ loss reduction trails targets ANUPAM CHATTERJEE & PRASANTA SAHU New Delhi, April 8 THE STATE GOVERNMENTS in aggregate were expected to revert to well below 3% fiscal deficit in FY18,but an analysis by FE of 19 state budgets presented recently suggests they may not have. Nine of these states have revised their fiscal deficits for the just-concluded financialyeartobehigherthan projected a year ago, with the slippage ranging from a marginal 0.1 percentage point to an odd 13.25 percentage points (pps). Six states project their deficits to be higher than the FRBM threshold of 3% of GDP even in FY19,and manyothers might also incurdeficits above 3% in the year that has just begun.While a potential stress on spending, especially revenue expenditure, in the runup to the 2019 general elec- tions is a downside, an additional risk factor is the rising power sector costs on account of obligations under the scheme for revival of electricity distribution companies. In FY16 and FY17, a fiscal headroom of up to 0.5 pps was available under the UDAY scheme forrevamp of electricitydistribution entities (UDAY bonds, according to the Economic Survey, had an impact of 0.5 and 0.6 pps of GDP on UDAY burden^ 0.74 Continued on Page 2 (% GSDP, FY18) Of 19 states 0.36 Rajasthan thedeficitsof26statesinFY16 and FY17 respectively). While that leeway was not availableforFY18,interestcosts on UDAY bonds, coupled with the obligation to take over 5% ofthediscoms’FY17losses,had cost some states considerably. As UDAY’s technical parameterslikeAT&Clossreductionare not met bymost states,the discoms continue to bleed. 0.32 Haryana which presented budgets recently, 0.14 9 UP Tamil Nadu ^Includes interest cost and 5% of FY17 discom losses States which slipped the most Assam Bihar reported fiscal slippage for FY18 (Fiscal deficit as % of GSDP) Of the 19 states, 10 have reduced capex from the budgeted level in 2017-18, the sharpest cuts by Tamil Nadu (20.5%), Telangana (18%) and Madhya Pradesh (16%) WB Budget estimate AP Revised estimate 3.46 COAI EXPECTS earnings of mobile operators to remain “depressed" for another 3-4 quarters, hurt by the sheer intensity of competition, reports PTI. Major operators are slated to announce their January-March quarter results in the coming weeks. "The intensity of competition will ensure that earnings will be depressed for 3-4 quarters. This is something that is going to be the new normal and I don't see how it will materially change,” COAI director-general Rajan Mathews said. PAGE 3 No Sashidhar Jagdishan Yes 3.5 COAI sees telco earnings under stress for 3-4 quarters more Jairam Sridharan HDFC Bank 3.0 LEADING PUBLIC sector lenders State Bank of India (SBI) and Punjab National Bank (PNB) have put their 15 non-performing assets worth `1,063 crore for sale, reports PTI. Both the banks said they will conduct the e-auction on April 20. SBI has put up a total of 12 accounts with a total outstanding of `848.54 crore for sale. The second largest public sector lender PNB will offer three NPA accounts with total outstanding of `214.45 crore for sale to ARCs/NBFCs/banks or other financial institutions. PAGE 2 Qualifications 1.9 SBI, PNB put their 15 NPAs worth `1,063 crore for sale CA? 7.5 QuickPicks CFO Axis Bank Taking a loan? Three basic rules to keep in mind Borrow only that much that you can repay and ensure that the overall EMI payout of all loans put together does not exceed 50% of your monthly income ■ Personal Finance, P9 SHAYAN GHOSH 2.87 Special Features 16.23 FINANCE MINSTER ARUN Jaitley continued to be under medical observation for the second day at the All Indian Institute of Medical Sciences on Sunday, reports PTI. No time for his kidney transplant surgery has been decided. He is suffering from a kidney ailment and hasn’t been attending office since last Monday. Sector-wise PAT growth (%, y-o-y) 2.98 FM remains under observation -20 Sep-14 THE UPTURN IN the economy and a favourable base effect notwithstanding,the Q4FY18 earnings for the Sensex set of companies may just about grow in double digits. That’s primarily because a few key sectors — state-owned banks and telecom — have been underpressure.The good news is that most companies have settled down in the new GST regime although exporters remain hobbled by delays in refunds. FMCG companies, in particular,should dowell,now that supplychains are running smoothly; they would benefit from GST credit. In general,top lines should grow well — it could be about 15% year-o-year for India Inc — given prices of most commodities are fairly stable and companies have been able to push through volumes. Ana- -10 Jun-14 THE CABINET MAY soon take a call on whether a fresh lease is required by state-owned Coal India for extracting coal bed methane (CBM), reports PTI. To expedite gas production from coal seams, however, the government had earlier permitted CIL to mine CBM through a notification. Mar-14 FE BUREAU Mumbai, April 8 -1.5 0 CBM mining: CIL awaits CCEA nod 2.99 Most firms have settled down in the new GST regime, but delay in refunds still a concern for exporters 10.1 TATA CHEMICALS SAID it has signed a pact with Allied Silica to buy its precipitated silica business for `123 crore on a slump sale basis, reports PTI. The deal is expected to be closed within three months. The acquisition is a part of the `295-crore investment approved by the Board in February last year, towards this specialty business. ` ● VIGILANCE REPORT 2.9 IN THE NEWS Tata Chemicals to acquire Allied Silica for `123 cr Rajasthan Making a point Kotak Mahindra Bank managing director Uday Kotak at the CII’s annual session inaugural speech, in New Delhi on Sunday EXPRESS PHOTO: ABHINAV SAHA FINANCIAL SECTOR Aadhaar to be a game changer in digital space, says Kotak FE BUREAU New Delhi, April 8 AADHAAR WILL BE a gamechanger for the Indian digital space, which will develop at a fast pace in the comingyears in a way that is different from the one in the US and China, Uday Kotak,executivevice-chairman andmanagingdirectorofKotak MahindraBank,saidonSunday. Speaking on the financial sector at the CII annual session,Kotak said:“Digital space in India is going to be driven by the fact that we have Aadhaar, a platform that does the identityindependentofanyprivate platform. China didn’t have this; theyeffectivelygave away the eco-system ownership to the likes of Alibaba and Tencent.” He said even the US, where players like Google and Facebook dominate the digital space,doesn’t quite have a system like Aadhaar. AccordingtoLeoPuri,managing director at UTI Mutual ● AIR INDIA DISINVESTMENT KG-D6 BLOCK Govt rules out piecemeal sale as global suitors line up MANISHA SINGHAL Mumbai April 8 THE GOVERNMENTWILL not lookatmakinganyrevisionsto the transaction details for the divestment of Air India, sources told FE, as it is seeing enough interest from prospective overseas bidders. This assumes significance in light of homegrown budget airline IndiGo, the first airline to express its interest in buying into the ailing national carrier, pullingoutfromtheraceciting its inability to turn around the airline and consummate the deal in its current form. “Therearealotofinterested and probable bidders who are looking at the transaction and have shown interest and are figuring out the document, these carriers are interested in the domestic operations of Air Indiaaswell,andforapeculiarityandsingularrequirementof one probable bidderwe cannot changetheterms,”saidasource directly involved in the divestment process, not wanting to be identified. He added that among the global carriers that have shown interest are German carrier Lufthansa, British Airways and Singapore Airlines besides a few West Asian and SoutheastAsian airlines.Asecond source confirmed that Lufthansa has appointed someone to look into the details of the proposed sale of India’s national carrier. The last date for interested partiestosubmitwrittenquestionstothegovernmentonthe preliminary information memorandum (PIM) is April 16 and the government will get back to them with answers to these by April 30.The deadline for submitting expression of interest is May 14. Continued on Page 2 Fund, while corruption has grabbed the headlines (following the $2-billion fraud at Punjab National Bank involving jewellers Nirav Modi and Mehul Choksi),the real issue in thebankingsystemthatissaddledwith a massive bad debt is the ineffective deployment of capital. Importantly, nobody has also quantified value destruction“from the systematic misallocation of capital”. Continued on Page 2 RIL told to surrender two deep-sea finds `40,000 cr Planned investment over 3-5 years by RIL-BP in KG-D6 block (as announced in June 2017) Operator had chosen to develop 2 of the 4 satellite fields first and deferred plan for others SAURABH KUMAR New Delhi, April 8 RELIANCE INDUSTRIES (RIL) has been asked by the Directorate General of Hydrocarbons (DGH) to relinquish two deep-sea satellite gas discoveries—D6 and D19—in the KG-D6 block, off India’s east coast after the company told the regulator that it had no immediate plan to develop these fields. According to two people familiar with the development,the company,which had submitted a combined field development plan (FDP) for four discoveries namely D2, D6,D19andD22,hasnowsaid while it would develop two of these discoveries — D2 and D 22 — straightaway, investments in the other two fields would be contingent on the success in the first set of fields. “The managing committee (of 617 bn cubic feet Estimated reserves of satellite fields — D2, D6, D19 & D22 7-8 m standard cubic metres Current production from KG-D6 block the DGH) therefore asked the company to surrender D6 and D19 discoveries,” one of the sources said. RIL is the operator of the KG-D6 block with a 60% interest while BP has a 30% stake. The remaining 10% is held by Niko. The companies produce around 7-8 million standard cubic metres of gas per day at present. Emails sent to RIL and BP on April 5 for this story remained unanswered. RIL and BP in June last year had announced an investment of `40,000 crore to reverse the falling production at the KGD6 block. Apart from the four deep-sea satellite fields mentioned above,whichwere to be developed together, D29 and D30 finds along with R-Series and MJ gas discoveries were to be developed through these investments. In 2012, the government approved a $1.5-billion plan forthe foursatellite fieldswith an estimated reserve of 617 billion cubic feet, with an eight-year production plan withdailyoutputof10.36million standard cubic meters. The FDPswere to be submitted by 2016-17. Continued on Page 2
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