OPINION, P8 INTERNATIONAL, P14 CHANDRA BHUSHAN Ensure proper green nod, a new CER cess is a bad idea INTERNATIONAL, P14 EDITORIAL EASING TRADE TENSION TAKING THE LEAD Since state govts are making a windfall from crude price hike, let them cut VAT China to cut import duty on passenger vehicles to 15% Cunningham becomes first woman chief of NYSE in its 226-year history NEW DELHI, WEDNESDAY, MAY 23, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 70, 24 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: 34,651.24 ▲ 35.11 NIFTY: 10,536.70 ▲ 20 NIKKEI 225: 22,960.34 ▼ 42.03 HANG SENG: 31,234.35 ▲ 186.44 `/$: 68.04 ▲ 0.08 `/€: 80.34 ▼ 0.25 BRENT: $80.00 ▲ $0.78 GOLD: `31,065 ▲ `184 SBI posts Q4 net loss of `7,718 cr Continued on Page 2 Domestic NIM (%) 68,436 Continued on Page 2 all leased, these aircraft can be returned. Vistara, which launched flights three years ago, is also set to launch its international operations by the second half of this year and is looking to place orders forwide-bodyaircraft to service long-haul markets along with the existing single-aisle equipment that it currently has, giving it penetration in the domestic and medium haul markets. 7,718 15,883 3,442 of NPAs (non-performing assets) is concerned, that has been completed and we are fully compliant with the framework issued by RBI (Reserve Bank of India) on February 12,”Kumar added. India's largest bank saw its asset quality deteriorate in Q4 of 2017-18, pushing its gross NPAs to 10.91% of total assets or `2.23 lakh crore in absolute terms.However,thebank'sprovisioncoverageratio(PCR)rose 25 basis points sequentially followingasurgeinprovisions. NA « Gross NPA ratio (%) 10.91 6.9 25 bps Vistara’s 737Max thinking signals likely fleet change FULL SERVICE AIRLINE Vistara, a 49:51 joint venture between Singapore International Airlines (SIA) and Tata Sons, is mulling a Boeing 737Max order, which indicates a possible fleet change by the airline from its current aircraft type of Airbus A320s, multiple sources within the industry and the airline told FE. Since Vistara’s current fleet of Airbus A320s is Continued on Page 2 17,243 2.93 2.67 ● FLIGHT PLAN MANISHA SINGHAL Mumbai, May 22 SBIprojectedabetter2020, forecasting a credit growth of more than 12%, a net interest margin (NIM) of more than 3% and a gross NPA ratio of less than 6%. “If the lastyearwas theyear of disappointment,this year is theyearofhope,thenFY20will be the year of happiness. Improvements in NIM will come definitely as we have now provided for everything,” Kumar said. 7.89 401 bps « Source: SBI 3.87 « 2.23 Net loss THE “EQUALISATION LEVY” on online advertising fees paid by Indian customers to foreign companies like Google and Facebook is netting the government a tidy sum of money. The Centre’s EQL revenue in 2017-18 was over `700 crore, much higher than the `315 crore it garnered from the tax in the previous 10month period. The tax, meant to nullify the advantage of foreign ecommerce firms absent a physical presence in India over local competitors, came into effect in June 2016. Since the tax was mooted in Budget 2016-17, a government committee had proposed that its ambit be widened by extending it to a whole gamut of cross-border digital transactions — from website hosting and cloud services to facilitation of the sale of goods and services — between firms abroad and customers here. But the government hasn’t acted so faron this proposal. 12,495 12,222 19,974 21,065 5.18 Operating profit Total income 71,190 Other income Plane and simple: Flying to get a lot less stressful SUMIT JHA New Delhi, May 22 Chg (%) y-o-y « TO HELPCLEAR massive cane arrears,the Centre is exploring a raft of proposals, including offering an interest subsidy of more than `1,300 crore on loans to sugar mills to raise their ethanol production capacity and creating a buffer stock of 3 million tonnes of sugarforayear,sourcestoldFE. The options are aimed at containing a current slide in sugar prices that has bled the industry, and also help mills manufacture more biofuel to diversify their product basket and cut reliance on sugar sales revenue. The government will have to bear a carrying cost of `1,200 crore ayearforthe creation of the proposed buffer stock. Moreover, a two-year moratorium on repayment on the loans for increasing ethanol production could be provided to sugar mills. The government will pay a part of the total interest burden over fiveyears,which is expected to be in excess of `4,400 crore. While the Centre has been helping the sugar industry clear cane dues in recent years through loans and interest subsidy, the steps haven't prevented arrears from piling up inregularintervalswhensugar pricesdrop,thankstogenerous and unreasonable hikes in cane prices by both the Centre and states like Uttar Pradesh. STATE BANK OF India (SBI) on Tuesday reported a loss of `7,718 crore for the three months to March, the lender's second consecutive quarterly loss in FY18. The losses resulted from a spurt in provisions, largely for loan losses, along with mark-to-market (MTM)lossesfollowingahardening of yields. The loss would have been muchbiggerhaditnotbeenfor a `4,495-crore tax credit. The lender's provisions morethandoubledto`28,096 crore year-on-year in Q4FY18. However, shares of SBI rose 3.7% on the BSE onTuesdayto close at `254.15 each following an assurance from SBI chairman Rajnish Kumar the recognition of bad loans is over.“As far as the recognition Net interest income Q4FY18 « BANIKINKAR PATTANAYAK & PRABHUDATTA MISHRA New Delhi, May 22 FE BUREAU Mumbai, May 22 Q4FY17 « Govt to unveil another sugar package soon (` cr) ‘Google tax’ revenue goes past `1,000 crore « ● CANE DUES High provisioning for loan losses, but shares jump as chairman Rajnish Kumar says NPA recognition over DRAFT AIR PASSENGERS CHARTER ● EQUALISATION LEVY Oil on the boil The Centre last cut excise duty on auto fuels (by `2/litre) on October 3, 2017, when the Indian basket of crude ruled at $55.02 a barrel. It may opt for another excise cut if Indian basket crude breaches $80 per barrel. Report on Page 12 76.57 70 70.60 77.04 60 50 40 Continued on Page 2 54.41 Indian basket of crude oil prices ($/bbl) Jan 2, 2017 May 21, 2018 ● PSUs NEED TO CUT STAKES The govt has the right to sell or not sell Air India if the bid price is found to be inadequate... The right price for the airline will be decided by us. — RN CHOUBEY AVIATION SECRETARY (Nine days left but the govt is yet to receive any bid) Special Feature Are the good times over for balanced funds? ! Fixed income savers who have invested in balanced funds for monthly or regular returns are headed for tough times as it is a good category for a 3- to 5-year horizon ■ Personal Finance, P13 QuickPick SGX to launch Indian derivatives despite legal move by NSE SINGAPORE EXCHANGE (SGX) said it plans to list new India-related equity derivative products in June despite the National Stock Exchange of India (NSE) applying for an interim injunction in a Mumbai court against their launch, reports Reuters. NSE's legal move and SGX's response intensify the spat between the two exchanges after India's three main bourses unexpectedly announced in February they would stop licensing their indexes to foreign bourses from August. PAGE 11 UTI has to be Sebi-compliant: Trustees CHIRAG MADIA Mumbai, May 22 THE BOARD OF trustees of UTI Mutual Fund has written to the board of UTI Asset Management Company (AMC), drawing its attention to Securities and Exchange Board of India (Sebi) rules which state that by March 2019,UTIAMC’s public sector shareholders will have to lower their stakes to less than 10% each. Life Insurance Corporation of India (LIC), State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) each hold 18.25% of the AMC’s shares, US investment firm T Rowe Price holds RULE BOOK ■ UTI AMC’s public sector shareholders will have to lower stakes to less than 10% each ■ No sponsor of an MF can have more than a 10% stake or voting rights in an AMC or trustee company of any other MF 26% and employees 1%. According to Sebi’s March 13, 2018, regulations, no sponsorof a mutual fund — all four PSUs run their own mutual funds — can have PROPOSED: ■ Free, ifchanges made in 24 hours for journey 96 hours later ■ For other cases, base fare + fuel surcharge Missing connecting flights FE BUREAU New Delhi, May 22 THE CIVIL AVIATION ministry onTuesdayproposedaseriesof consumer-friendly measures relatingtochargesforcancellation of tickets, lost baggage, missing connecting flights and denial to board if the flight is overbooked, which once finalised will put in place a structured system where currently everything not only variesfromairlinetoairlinebut is also at theirdiscretion. The most important of the measures unveiled is the abolition of cancellation charges for domestic flight tickets if the cancellation is made within 24 hours of booking. However,the proposed rule won’t apply if the tickets are bookedlessthan96hours(four days) before the scheduled departure time of the flight. During this 24-hour “lockinperiod”,passengerswouldbe able to make corrections in names or amend the travel EXISTING: Refund/next available flight PROPOSED: `5,000-20,000 Lost/ Damage to Baggage EXISTING: `200-350/kg PROPOSED: ■ `3,000/kg for lost luggage ■ `1,000/kg for damage & delay Boarding denied for overbooking EXISTING: Refund/next available flight PROPOSED: Up to `20,000 date free of cost, minister of state for civil aviation Jayant Sinha said while unveiling the draft air passengers charter. “The airline will provide lock-in option for 24 hours after booking ticket where ticketcanbecancelledwithout anycharges.Thisfacilitywillbe available for passenger up to 96 hours prior to flight depar- ture,”he said. “We want to ensure safe and convenient passenger travel experience.Afterseveral rounds of consultations, we have come with a holistic passenger charter. It will help us achievethegoalofseamlessair travel,”Sinha added. Continued on Page 2 more than a 10% stake orvoting rights “in the asset management company or the trustee company of any other mutual fund”. If firms are not in compliance with this, they have one year to fix this. Interestingly, even when the PSUs invested in UTI, Sebi’s rules said that none of them was to be involved in the operations of UTI AMC. Yet four of the five Indian directors of UTI AMC are former senior executives of the PSUs. It was as part of the process of making UTI AMC Sebi-compliant that,last year,UTIAMC startedwork on an initial public offering (IPO). ● NCLAT RULING NCLAT turns down Dalmia Bharat plea Decision on Essar Steel after July 23 FE BUREAUS Mumbai/New Delhi, May 22 Tax cuts in the offing? Retail prices of petrol in Delhi (`/litre) Cancellation EXISTING: `3,000-4,500 STATUS QUO ON BINANI BIDS FE BUREAU 80 Proposes sweeping changes that will be standardised for the entire domestic flights sector + SECOND IN A ROW IN FY18 SURYA SARATHI RAY New Delhi, May 22 WHILE THE NATIONAL Company Law Appellate Tribunal (NCLAT) on Tuesday rejected Dalmia Bharat’s petition for a status quo on the resolution process for Binani Cement, the companyis unlikelyto raise the offerforthecementfirmtobetter that by UltraTech Cement, sources close to the development told FE.“The company is expectedtoletthecommitteeof creditors (CoC) knowof its decision by 12 pm on Wednesday. However, the company will await the final order of the NCLAT and may approach the SupremeCourt,”asourceadded. The next meeting meeting of the CoC is expected to be either on Wednesday or Thursday.TheAdityaBirlaGroup-controlled UltraTech Cement is understood to have offered `7,960croreforBinaniCement, A DECISION ON the bankrupt Essar Steel was pushed back even further on Tuesday,with the National Company Law Appellate Tribunal (NCLAT) scheduledtohearthecaseagain only on July 23. The NCLAT directedEssarSteel’sresolution professional(RP),committeeof creditors (CoC) and the adjudicatingauthoritynottopassany order, including liquidation, in the interim period. Essar Steel’s resolution, which has seen ArcelorMittal and Numetal locked in a bitter battle,willmissitsreviseddeadlineofMay28.Ithadalreadysurpasseditsinitial270-dayresolutionperiodonApril28. The NCLAT will have to hear multiple petitions, including whether the first or the second round of bids is eligible.The two-member bench of the NCLAT,headed bychairman justice SJ Mukhopadhaya, directed the RP to manage the day-to-day affairs of the company in the interim. Pleading before the NCLAT for Numetal, senior counsel MukulRohatgiarguedthatthe resolution plans submitted in the second round of bidding should be considered and the highest bid be selected. ■ Lenders to offer Dalmia first right of refusal if it matches UltraTech's bid ■ Dalmia gets time till May 23 to revise offer; CoC likely to meet in 1-2 days to take a call ■ Binani owes close to `6,500 crore to its financial creditors which is around `1,100 crore higherthanwhatDalmiaBharat has put on the table. Continued on Page 2 NCLATissues notices to Bhushan RP, CoC, Page 6 RCom moves NCLAT against order allowing insolvency RELIANCE COMMUNICATIONS has moved the National Company Law AppellateTribunalchallenginganNCLTorderallowinga pleaforitsinsolvencyfiledby Sweden’s Ericsson, reports Continued on Page 2 PTI. RCom told exchanges that it has approached NCLAT along with its two arms — Reliance Telecom and Reliance Infratel — to stay the order passed by the NCLTMumbai on May15. Continued on Page 2 MARKETS UNDER MODI In the NDA regime, bellwether indices hit record highs YOOSEF KP Mumbai, May 22 THE ECONOMY MAY not have scaled new peaks during the four years of the National Democratic Alliance (NDA) regime starting May 2014, but the stock markets did hit several highs. On January 29, 2018, the Nifty hit a lifetime high of 11,130.40 points as did the Sensex,which touched 36,283.25 points. Moreover, the markets in the last fouryears have traded Nifty 81.1 Change (%) RHS FPI flows to equity ($ bn) 12,500 90 30 10,000 60 20 7,500 30 10 5,000 0 0 2,500 -30 -10 0 -60 -20 10.2 FY04 at a higher price to earnings multiple (P/E) than they did before that. FY18 9.54 3.44 -10.71 FY04 To be sure, investors had high hopes of the Narendra Modi-led government.In that FY09 FY18 Source: Bloomberg context, the compounded annual growth rate (CAGR) of 10.8% in the last four fiscals through FY18 may not seem very impressive compared with a CAGRof 14.2% clocked 10 years through FY14. However, there have been strong rallies; the Nifty rallied a phenomenal 66% between September 2013 — when Modi was chosen to be the prime ministerial candidate for the Bharatiya Janata Party (BJP) — and March 2015, around the time of the elections.The best year during the NDA regime was 2014-15 when the markets returned a fabulous 27%. One remarkable feature of the markets in the three years to 2017-18 has been the emergence of domestic institutional players — insurance companies,banks and mutual funds — that invested more than foreign funds in these years.Over a four-year period, however,both foreign portfolio investors and local investors invested more or less the same amount. Continued on Page 2
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