OPINION, P8 COMPANIES, P6 INTERNATIONAL, P14 EDITORIAL PRANJUL BHANDARI TURBULENT TIMES MAJOR PHARMA DEAL FDI in multi-brand retail a must if FDI in e-tail is allowed Soaring deficits mean states’ debt has shot up — repayment bill will be high for a few years Neemuchwala-led Wipro posts 6.7% sequential decline in profit Weber-led Takeda agrees to buy Shire for $64 bn NEW DELHI, THURSDAY, APRIL 26, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 47, 82 PAGES, `6.00 (PATNA `6.00, RAIPUR `7.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 34,501.27 M 115.37 NIFTY: 10,570.55 M 43.80 NIKKEI 225: 22,215.32 M 62.80 HANG SENG: 30,328.15 M 308.09 `/$: 66.90 M 0.51 `/€: 81.55 M 0.47 BRENT: $73.58 M $0.28 GOLD: `31,304.00 L `173.00 IN THE NEWS Asaram found guilty of rape, gets life term AJODHPUR court on Wednesday sentenced self-styled godman Asaram to life in prison after finding him guilty of raping a teenage girl in his ashram five years ago, the second case of a powerful spiritual leader being convicted of a sexual offence in less than a year, reports PTI. The verdict was read out in Jodhpur Central Jail, where he has spent over four years. Jugnoo eyes Singapore as Uber drives off RIDE-HAILING firm Jugnoo plans to enter the Singapore market next month, CEO Samar Singla told Reuters on Wednesday, joining other firms eyeing the city state as Uber prepares to leave. The Uber app will continue to operate in Singapore till May 7, though it has shut down in rest of Southeast Asia after selling its regional operations to local competitor Grab. Govt sends notices to CA, Facebook again THE GOVERNMENT on Wednesday served a second set of notices to Cambridge Analytica (CA) and Facebook over the recent data breach after finding discrepancies between the earlier responses given by the two companies, sources told PTI. They have been asked to reply to the additional queries by May 10. ALOK INDUSTRIES G SOME RELIEF Debtors were not ‘locatable’, says RP Debt collection agency appointed by resolution professional to locate debtors to recover `11,037 cr SHAYAN GHOSH Mumbai, April 25 STEPS TAKEN BY the resolution professional (RP) for Alok Industries to recovertrade outstandings to the tune of `11,622 crore from 5,293 debtors of the textile company remained unsuccessful as 2,467 of them could not be traced, documents perused byFE show. “Debtors were not locatable at the addresses that were provided byAlok,”the documents, understood to have been made available to the committee of creditors (CoC) ahead of a meeting scheduled for April 13 underthe Insolvency and Bankruptcy Code (IBC) process, noted. The RP for Alok Industries is Ajay Joshi. Outlining the steps taken by the RP to recover the trade outstandings, the papers state: “Appointed an advocate to send legal notices to the debtors. Out of 5,293 legal notices sent during December, 2017, 2,822 letters returned undelivered and status of 2,467 legal notices remain unclear.” A debt collection agency had been appointed to locate debtors and recoveroutstanding,the documents said. According to the papers, the total “trading debt on account of sale of fabric (Trading Transactions) to various traders of Alok (numbering approximately 5,293) EXPOSURE (` crore) SBI 10,379 Axis Bank 1,688 IDBI Bank 1,265 Canara Bank 1,024 Bank of Baroda 877 Dena Bank 783 Andhra Bank 779 Corp Bank BoM* 452 371 Allahabad Bank 101 *Bank of Maharashtra Source: Insolvency Claims (‘Trading Debtors’) as at June 2017 amounted to about `11,622 Crores”. The papers say Damania & Varaiya, a CA firm, was appointed (pursuant to fourth CoC meeting) to conduct an independent verification of the transactions (trading transactions).“DNVwas unable to conclude its observations on the trading business segment of Alok with the perspective of reporting under Section 66 of IBC,2016,”the documents say. Theyalso noted that a forensic audit conducted by Grant Thornton — for the period April 1, 2012, to March 31, 2015 — found “no malfeasance on the part of promoters of the Alok or any transfer involving siphoning of was funds observed”. The RP cited some reports that were analysed to understand the reason for the high quantum of outstandings. While the stock audit reports of 2016 stated that “genuineness of sales made to Debtors with outstanding amounts above `50 lakh have been verified, the statutory auditor reports of FYs 2015-17 made no comment/qualification with respect to these trading transactions. Continued on Page 2 Special Feature `110-CR TAX DEMAND Our focus area is to design products for India: Asus I-T tribunal rules in favour of Flipkart Asus CEO Jerry Shen says India is a key market for the firm’s smartphone business -- a key reason why India is among the first countries to get the Zenfone Max Pro I Gadgets, P13 QuickPicks Govt looks to take foodgrain production up 2% in 2018-19 THE GOVERNMENT has set a target to increase the country’s foodgrain production by over 2% to a record 283.7 million tonnes in the 2018-19 crop year (July-June), helped by a normal monsoon, reports fe Bureau in New Delhi. Speaking at the annual kharif conference, agriculture commissioner SK Malhotra said while the India Meteorological Department has predicted monsoon rainfall to be normal, a Japanese research body has forecast it to be more than normal. “This will definitely boost production,” he added. PAGE 12 PNB to hire detective agencies to locate untraceable borrowers THE FRAUD-HIT Punjab National Bank (PNB) has invited applications for empanelment of detective agencies to locate its untraceable borrowers as it looks to ‘significantly’ supplement efforts to recover bad loans, which surged to `57,519 crore at December-end, reports PTI. Interested parties have been asked to file applications and relevant documents by May 5. In its efforts to recover NPAs, PNB has also resorted to ‘Gandhigiri’, wherein its staff hope to ‘name and shame’ the defaulting borrowers to recover up to `150 crore worth of bad loans every month. PAGE 10 Rupee crashes 52 paise to 14-month low of 66.90 THE RUPEE on Wednesday nosedived 52 paise to hit a 14-month low of 66.90 against the US dollar, the third-biggest single-day fall for the domestic currency this year, amid surging crude prices coupled with headwinds on the macroeconomic front in the form of a widening trade deficit, reports PTI. This was the lowest closing since February 22, 2017. After a brief overnight recovery, the domestic unit tumbled following panic dollarbuying. Even suspected RBI intervention did little to save it from plunging in mid-afternoon trade, but managed to prevent it from touching the psychological 67 level. PAGE 10 SUMIT JHA New Delhi, April 25 IN A RELIEF to e-commerce firms,the Income Tax Appellate Tribunal (ITAT) in Bengaluru on Wednesdayinvalidated the revenue department’s treatment of their marketing expenditure as well discounts offered to retain market share as asset-creating capital expenditure that are“not deductible” from income.The ITATdecision came in the case of Flipkart, which was asked last yearto pay`110 crore as tax for FY16,while the companyclaimed nil tax liabilityas it had posted a loss of close to `800 crore. The tribunal has accepted Flipkart’s plea that it needed to Early 2017: Flipkart, Amazon get tax demands for FY16, despite posting losses in the year; taxman classifies discounts offered by them to customers and marketing spend as capex August 2017: Firms separately approach CIT (appeals) against the tax demands spend on discounts and marketing every year to retain market share and such revenue expenditure could be legitimately deducted.The tax department, the home-grown e-commerce firm said,was levying tax on“fictional income”. The latest ITAT order seeks to settle the debate over defining capital expenditure for the purpose of taxation. However, the department,which has sent notices on similar grounds to other e-commerce firms like Amazon also, is unlikely to budge and is likelyto challenge the tribunal’s order in the appropriate high court. Move to cap oilcos’ cost recovery dropped SAURABH KUMAR New Delhi, April 25 IN WHATWOULD give a modicum of relief to the high-taxpaying hydrocarbon exploration companies including Reliance Industries and Cairn, the government has withdrawn a decision to virtually denythese firms theircontractual right to recover full costs, before sharing profits with it. The Directorate General of Hydrocarbons (DGH) had, while approving the oil companies’ budget and work programmes forthe current financial year, introduced a clause that the “investment multiple at the end of the year 2018-19 shall not be reduced...” What this meant was that the government’s share of ‘profit petroleum’ would be intact, even if the companies stepped up capex during the year. The move was patently contraryto the terms of production-sharing contracts (PSC), which allowfull cost recoveryby the oil explorer-producers. These terms continue to be part of the earlier PSCs while a simpler revenue-sharing formula that allows minimal scope for uncertainties will be built into newcontracts under the Hydrocarbon Exploration Licensing Policy (HELP). Put simply,profit petroleum is the profit retained after all investments are recovered by the contractor; a part of such profit is required to be shared with the government, the determinant being the investment multiple or the ratio of total net income to total investment. So the more the investment, the lower the multiple and the government’s share of profits.Had the DGH’s fiat been implemented, oil companies would have been forced to scale back theirinvestments. MUMBAI REALTY Maximum City finally gets maximum land bank boost Govt clears 3,685 ha of land tagged as no development zone, will create 1 m affordable housing units by 2034 FE BUREAU Mumbai, April 25 IN THE BIGGESTeveraddition to Mumbai’s land bank, the Maharashtra government on Wednesday said it will unlock 3,685 hectares (ha) of public and private land currently tagged as no development zones. The land, it said, will be used to create a million affordable housing units by 2034, besides social infrastructure. According to the Development Plan 2034 (DP2034) document, the total cost of Estimated cost for Mumbai Development Plan 2034 Acquisition of all reserved land (100%) Cost of road construction 1,97,67,350 Cost of open space and cemetery development Total estimated cost: 80,15,228 Cost of building construction Estimated cost in ` crore 1,05,01,254 Cost of road widening Area in sq km 4,81,21,192 1,91,72,011 implementation of the plan by the planning authorityMunicipal Corporation of Greater Mumbai is estimated at `14.15 lakh crore. This includes the acquisition cost of all reserved lands, cost of con- OTT stuff 5,731 49,418 6,193 structing new roads and widening of existing ones, building construction as well as cost of open space and cemetery development. Continued on Page 2 ANUSHREE BHATTACHARYYA Local heroes Video over-the-top or OTT platforms catering to Hindi and regional audiences command a higher viewership while OTT platforms that primarily have English content are tying up with telcos as well as DTH players in an effort to boost viewership. Total unique viewers (million) Watch time (billion minutes) 300 120 102 220 200 80 138 57 100 21 8 6 01 Mar 2017 28 27 5 Jan 2018 4 40 0.6 0.04 0 3 Mar 2017 4 2 0.9 Jan 2018 0.6 0.3 Source: comScore MMX MP Continued on Page 2 G PROPOSED MERGER Bharti Infra, Indus to be world No. 2 FE BUREAU New Delhi, April 25 January 2018: Flipkart challenges CIT order in ITAT-Bangalore April: ITAT rules in favour of Flipkart, says the said expenses are deductible revenue expenses 9,472 `14,15,320 cr Continued on Page 2 December: CIT rules in favour of I-T department 13,44,506 India’s own ‘chunnel’ A rake of the East-West Metro Corridor in Salt Lake near Kolkata on Wednesday. The corridor will be the first to travel underwater through a tunnel under the Hooghly BHARTI INFRATELAND Indus Towers on Wednesday agreed to merge in a deal that will create a firm with an equityvalue of `96,500 crore ($14.6 billion).The combined entitywill have the world’s secondlargest number of mobile masts and in its fold more than 163,000 towers across 22 circles India — the largest after China Tower. Bharti Airtel and Vodafone will jointlycontrol the merged entity, which will have an enterprise value of `71,500 crore,the two companies said. Continued on Page 2 GOING FOR BROKE Bankruptcies are booming in India, but where are the judges? BLOOMBERG New Delhi/Mumbai, April 25 INDIA’S REVAMPED BANKRUPTCY process is in full swing and investors from Blackstone Group to Oaktree Capital Group are salivating overan estimated $210 billion of stressed assets that are up for grabs. But the courtrooms handling the thousands of bankruptcies are lacking a key component: Judges. Ten benches with a combined 26 judges and technical staff are hearing more than 2,500 insolvency cases, the latest official data show.Based on the workload a year ago, researchers estimated India needs about 80 benches over five years. That estimate is starting to look conservative, as tighter rules introduced by the ILLUSTRATION: ROHNIT PHORE banking regulatorin February are poised to tip hordes of additional deadbeat borrowers into bankruptcy. A streamlined bankruptcy process is crucial for Prime Minister Narendra Modi’s attempts to come to grips with a simmering banking crisis that’s sucking energy out of India’s economy. Any failure to resolve the shortage of judges also has implications for large global investors who are lining up to chase bargains across industries ranging from steel to cement. “The National Company Law Tribunal appears to be understaffed and ill-equipped to deal with the increasing volume,” said Punit Dutt Tyagi, Delhi-based executive partner at Lakshmikumaran & Sridharan Attorneys, referring to the court system set up to handle bankruptcies.“This situation is unlikelyto get better with time.” Continued on Page 2
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