OPINION, P6 ECONOMY, P2 EDITORIAL Homebuyers’ new status a bad idea, could wreck the IBC INTERNATIONAL, P4 A GULATI & S SAINI SHOWING METTLE LANDMARK TRIP Agriculture is just about trudging along under Modi, he needs to fix this at the earliest India saved `5,000-cr forex post new policy, says steel secretary Trump, Kim arrive in Singapore for historic meet MUMBAI, MONDAY, JUNE 11, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XXXXXV NO. 381, 20 PAGES, `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 FY19 EARNINGS FARM CRISIS Prices crash, but rural demand remains robust A 20% plus rise, but off a low base BABA RAMDEV-promoted Patanjali Ayurved, which is in the race with Adani group to acquire bankruptcy-hit Ruchi Soya, is likely to submit a revised bid on Monday as lenders of the edible oil firm have decided to hold a fresh round of resolution process between the two contenders to maximise asset value. FY18 6.8 480 500 Apr 750 Feb 500 2014 2015 2016 2017 2018 766 May 2014 2015 2016 2017 2018 Mar 644 700 599 350 0 May Apr 340 2014 2015 2016 2017 2018 Simple average wage (monthly) Two-wheelers (Domestic sales in cr) FY16 200 2.02 FE BUREAU New Delhi, June 10 ATAROUND `775 per quintal, onion prices in April were the lowest they have been in this harvestmonthoverthelastfour years — they were `1,499.1 in April 2014 (see graphic). At `464.7 per quintal, February potato prices were also the lowest in four years, over a third lower than in the same 150 113.61 100 Jan 2010 Source: CMIE Jan 2014 Prices crash and wages slow, but two-wheeler and tractor sales soar monthin2014.Andyet,tractor saleswereup16.6%inFY18on topofanevenmoreimpressive 18% in FY17. With agriculture GDP slowing to 2.4% since the Narendra Modi government came to power versus 5.2% in the last fouryears of Manmohan Singh — thanks also to two years of drought — rural wages for male agriculture workers slowed to 5.8% y-o-y in February,accordingtoCMIEdata,comparedwith 7.5% last year.Yet,sales of twowheelers,at least 40% of which STATE FINANCES Pick right ITR form based on your income source For individuals and HUFs, ITR 1-4 are applicable, basis source of income. Understand the changes in ITR, so as to prepare better for the tax filing season ■ Personal Finance, P9 QuickPicks ‘Bad bank’: Senior bankers to share ideas at meet with panel WITH THE finance ministry having formed a panel to explore the feasibility of a ‘bad bank’ to clear the dud assets mess, senior public-sector bankers are preparing to pitch in with ideas for likely discussions with the panel to help shape such an ecosystem, reports Banikinkar Pattanayak in New Delhi. A senior banker with a Delhi-based lender said India might take a cue from China. PAGE 2 SBI to auction 12 bad accounts to recover over `1,325 crore SBI WILL conduct an auction of 12 non-performing assets (NPAs) later this month to recover dues of over `1,325 crore, reports PTI. The e-auction will take place on June 25, according to an SBI notice. The NPA accounts to go under the hammer include Ankit Metal & Power (`690.08 crore), Modern Steels (`122.61 crore), Good Health Agrotech (`109.14 crore), Amit Cottons (`84.70 crore), and Ind-Swift (`80.49 crore). Jio’s claim of ‘best network’ misleading: Ad standards body ADVERTISING STANDARDS body ASCI has ruled that the claim made by Reliance Jio about its network being the best and the world’s largest are misleading, reports fe Bureau in New Delhi. It also termed the assertions made by the operator, that it offers the industry’s best postpaid plans, misleading. The Advertising Standards Council of India (ASCI) was responding to a complaint made by Bharti Airtel. PAGE 5 Fiscal deficit Sharp reduction in fiscal deficit (% of GDP) (% of GSDP) 4.96 2.3 4.14 2.58 3.5 2.23 1.53 0.9 Punjab 2.64* 3.53 As technologies such as AI, automation, IoT, blockchain and machine learning are impacting how business decisions are being taken, CFOs have learnt to go beyond number-crunching ■ eFE, P8 FY16 States FY17 FY18 Centre PRESS TRUST OF INDIA New Delhi, June 10 Continued on Page 2 Budget estimate Actuals (provisional) States with the sharpest capex cuts against BE (%) 59 37 34 33 Punjab Tamil Nadu Maharashtra UP THE CENTRE, WANTING to pump-prime the economy, let its fiscal targets slip in FY18 but the state governments went in the opposite direction: many of them cut spending massively to adhere to the deficit targets. The combined fiscal deficit of all states in the last financial year is seen to have been contained within the Fiscal Responsibility and Budget Management (FRBM) Act threshold of 3% of the gross domestic product (GDP). The flat, thanks to expenditure being reined in, higher, taxes, interest and depreciation resulted in net profits rising by less than 11% compared with more robust 26% increase in the previous year. That’s despite a big jump in other income. Continued on Page 2 IN AN OBLIQUE reference to China’s ambitious ‘belt and road initiative’, Prime Minister Narendra Modi on Sunday said mega connectivity projects must respect sovereignty and territorial integrity of the countries and assured India’s full support to initiatives which ensures inclusivity. In an address at the annual summit of the Shanghai Cooperation Organisation (SCO) in this port city, the Prime Minister also coined an acronym SECURE which he explained: ‘S’ for security for citizens, ‘E’ for economic development, ‘C’ for connectivity in the region, ‘U’ for unity,‘R’ for respect of sovereigntyand integrityand‘E’for environment protection. Continued on Page 2 Related report on Page 2 ICICI Bank, Kochhar under SEC scanner Continued on Page 2 Maharashtra *17 states excluding northeastern states, J&K, Bihar and Jharkhand Sample of 2,281 companies (excluding banks and financials) Source: Capitaline PRESS TRUST OF INDIA Qingdao (China), June 10 Continued on Page 2 consolidation came after two successive years (FY16 and FY17) when the states’ combined fiscal deficit crossed the 3% mark, owing in part to theirassumptionofmajorportions of the electricity distribution entities’debts,underthe UDAY scheme. Apart from sharp spending cuts, the assured GST revenue growth of 14% under a compensation scheme has also helped the states in fiscal consolidation,with many of them eithermeeting the tax revenue targets or coming close to it. Tamil Nadu PRASANTA SAHU New Delhi, June 10 sellinruralareas,grew14.7%in FY18against6.6%inFY17. With prices crashing for crops like potatoes, tomatoes andonionsthatcompriseafifth of all horticulture, experts believeoutputoffruits,vegetables and floriculture in FY18 would be significantly lower thanthe`4.5lakhcroreinFY15 and `3.3 lakh crore in FY16. AS A MULTI-AGENCY probe continues in India into alleged lapses involving ICICI Bank’s chief Chanda Kochhar and her family members, the matter has also come under the scanner of US markets regulator Securities and Exchange Commission (SEC). Besides, the Indian regulators and investigative agencies are mulling seeking help from their overseas counterparts includinginMauritiusaspartof theirown probes,officials said. When asked about its probe into matters related to ICICI BankandKochhar,aspokesperson for the SEC office of public affairs declined to comment. The queries sent to ICICI Bank also remained unanswered. The bank has already instituted an independent enquiry into allegations of ‘conflict of interest’ and ‘quid pro quo’ in Kochhar’s dealing with certain borrowers. Earlier in March, when the reports first surfaced in this regard,thebankhadsaidthatits board has “full confidence and reposes full faith”in Kochhar. Odisha FY15 Feb 2018 ALTHOUGH EARNINGS ESTIMATES have been trimmed by about 3-3.5% post the results season, a favourable base will see earnings in 2018-19 growing by 20% plus. Corporate results for 2017-18 have been disappointing,especially the Q4FY18 numbers with the net profits for the Nifty50 falling 9%,waybelow expectations. Despite elevated commodity prices, the top line for an aggregate of 2,281 companies grew at 8.6% in 2017-18, shade slower than the 9.9% rise in 2016-17. While the operating profit marginswere Modi calls for respect for sovereignty, connectivity ● NOW, A US PROBE Expenses reined in to meet deficit target 3.4 3.5 Digital disruption: What makes the modern CFO? 3.6 3.9 Special Features 4.1 THE FINANCE ministry is planning to transfer shares of five sick central publicsector enterprises (CPSEs), including HMT and Andrew Yule & Company, to the Special National Investment Fund (SNIF) to meet Sebi's minimum 25% public shareholding rule. These companies have time till August 21 to meet the 25% public shareholding norm. 256.49 250 1.76 FY18 312.37 300 1.65 2.63 Shares of 5 sick CPSEs may be moved to SNIF FY17 Men : ` per day 350 ` ` ` BHAVIK NAIR Mumbai, June 10 32.79 Jan 775 465 300 915 16.04 1,000 705 1,050 1,020 1,250 627 700 5.83 FY17 Dec 685 Jan 4.94 Feb 1,400 Mar Mar 25.99 FY16 1,500 900 FY18 Net RM to profit sales (bps) -21.19 (Domestic sales in lakh) 9.89 Tractor sales 1,750 FY17 OPM (bps) 8.59 1,100 IN THE NEWS Patanjali to put in revised bid for Ruchi Soya today TOMATO Net sales 10.69 ONION 1,750 % change 88.19 Results for 2017-18 are disappointing; Q4FY18 net profits for the Nifty50 fall 9% Monthly average wholesale price (Delhi, `/quintal) POTATO ● SCO SUMMIT Saying it with smiles UK Prime Minister Theresa May, French President Emmanuel Macron, German Chancellor Angela Merkel and Canadian PM Justin Trudeau share a light moment with US President Donald Trump during the G7 summit in Quebec, Canada Report on P4 UDAY Discoms cut losses, but their dues to gencos mount ANUPAM CHATTERJEE New Delhi, June 10 `17,352 cr `32,071 cr ELECTRICITY DISTRIBUTION COMPANIES (discoms) under the Ujwal Discom Assurance Yojana (UDAY) scheme may have reduced their financial lossesby`17,352croreor50% annually by March-end, but their outstanding dues to power generators have surged byover150%to`32,071crore inthesameperiod.Paymentsof `27,832 crore to gencos are pendingformorethan60-days. Irregularand often delayed payments by discoms have been cited as the primary reason behind private generation or 50% or 150% Annual reduction in discoms' losses at end of FY18 Increase in discoms' outstanding dues to generators during FY18 including Discoms with highest dues (` cr) ` UP 5,230 ` Telangana 3,954 Maharashtra 3,704 Tamil Nadu 3,699 `14,091 cr `9,476 cr Karnataka 3,614 to IPPs to NTPC assets becoming stressed. Power projects worth `1,80,000 crore are now stressed, including non-per- forming assets of some `70,000 crore. Continued on Page 2 REVERSE SWING Banks are once again the preferred port of call for borrowers SHRITAMA BOSE Mumbai, June 10 AFTER ALMOST FOUR years banks are once again the preferred port of call for borrowers as interest rates in the bond markets harden. Yields on AAA-rated bonds have moved up to levels of 8.4%; that’s a shade higher than State Bank of India’s (SBI) one-year marginal cost of funds-based lending rate (MCLR) of 8.25% and on a par with that of HDFC Bank, ICICI Bank and Punjab National Bank (PNB). Most Tier I lenders had raised interest rates much ahead of the Reserve Bank of India’s (RBI) first rate hike in four-and-a-half years last Wednesday when it hiked the key repo rate to 6.25%. The rest have done so in the past couple of days. With deposits coming in at a much slower pace lenders have also been forced to offer savers more. Thebiglosers,astheinterest Bank loans are now cheaper or on a par with bonds (%) 10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 6.5 Bank lending rate AA bond 8.9 8.4 8.4 AAA bond May 2014 May 2018 Note: (1) Base rate for large banks till Mar 16 and 1-year MCLR since Apr 16 for large covered banks has been used as bank lending rate. (2) 3-year tenure AAA & AA rated bonds have been used. Source: Bloomberg, banks, CLSA rate cycle turns, will be nonbanking financial companies (NBFCs), the biggest borrowers in the bond market. Bank too have lent large sums to NBFCs over the past year; loans outstanding to NBFCs stood at `4.52 lakh crore,as onApril 28, 2018,up 29.5% y-o-y.On April 28, 2017, the outstanding was down 4.4% overpreviousyear. Apart from the sharp spike in bond yields—150 basis points between last August and now---interest rates have hardenedalsobecauseofintermittent liquidity deficits over the past three or four months. In comparison, there were liquidity surpluses in 2016 and 2017 as credit off-take slowed sharply as companies flocked to the bond markets, even those that were not top-rated. A year back, bonds were growing at 23% y-o-y, significantly faster than bank credit growth,which stood at 4%. Continued on Page 2
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