OPINION, P6 COMPANIES, P5 MADAN SABNAVIS GST could have had an inflationary push INTERNATIONAL, P4 SUNIL JAIN CAPITAL GAINS MIGRATION ROW MSP plan will hit cotton & paddy exports, fan new agri-crisis Adani Group to raise up to `6k cr via stake sales, issuances Merkel appeals to Bavarian allies' European ideals MUMBAI, MONDAY, JULY 2, 2018 GIVEN HOW THE benchmark indiceshavebeenholdingup,it might seem like all’s well with India’sstockmarkets.However, just five stocks — Infosys,TCS, HDFC Bank, HDFC and Kotak Mahindra Bank (KMB) — have accountedfortwo-thirdsofthe grossup-moveoftheNiftywith Reliance Industries being the sixth driver. Worryingly, as muchas70%oftheadditionto market capitalisation of these stockshascomesfromare-rating—anexpansionofthemultiples.“The re-rating of a small quality corner of the market hastobefiniteandcannothold up the index indefinitely,” strategists at Bank of Merrill Lynchwroterecently.TheNifty hasgained1.5%sincethestart of the year. Atabroaderlevel,morethan three-fourthsofthestocksthat comprisetheBSE500or392of FE SPECIALS Vakrangee -84.87 Kwality -80.31 32.6 Reliance Naval & Engineering -75.84 HCC -73.46 23.8 Infosys HDFC 13.8 PC Jeweller 9.8 -70.36 *Close as on June 28, 2018 NARROWING THE FIELD ■ Just five stocks — ■ More than three-fourths Infosys, TCS, HDFC Bank, HDFC and KMB — have accounted for two–thirds of the gross up-move of the Nifty of the stocks that comprise the BSE 500 or 392 of them are in the red and about one-third are down more than 20% them are in the red and about one third are down more than 20%.Themarketcapitalisation of the BSE may be up around 4.5% since January but again that is thanks to the performance of a fewstocks. “This concentration of performance is troubling,” the strategistswroterecently.They added an improvement in the Nifty’s breadth would require not just absolute earnings growth but also outperformance vis a vis earnings estimates. Continued on Page 2 SUMMER FARES Airlines sweat it out, travellers save ARUN NAYAL New Delhi, July 1 HDFC Bank’s USP is retail base The asset-liability gap is tighter than ever, auguring well for NIMs; Target Price revised to `2,465 from `2,360 Cruising along on course The December 2019 deadline is likely to be missed. There are no more hurdles ahead ■ SCIENCE & TECH, P12 A new antibacterial coating Chinese scientists are experimenting with copper-coated clothing, since the metal has proven antibacterial effects 7,884 7,736 -7 3 Source: Yatra.com QuickPicks Models in high demand, Maruti Suzuki June sales up 45.5% y-o-y MARUTI SUZUKI reported a 45.5% year-on-year jump in June volumes on the back of a weak base in June 2017, reports fe Bureau in Mumbai. A host of companies had de-stocked volumes ahead of GST rollout. Good demand for models Swift, Ignis, Baleno, Dzire and Celerio drove sales. Tata Motors also reported a 63% y-o-y growth in PVs and a 50% y-o-y increase in CVs. PAGE 5 Tax dept finally sells Mallya’s luxury jet for a paltry `35 cr AFTER AT least four aborted attempts since March 2016, the service tax authorities have finally managed to get a buyer for the confiscated luxury jet ofVijay Mallya, with a Florida-based Aviation Management Sales emerging the highest bidder for `34.8 crore ($5.05 million) last Friday, a source told PTI. PAGE 5 58,455 E-commerce 35,933 Based on MSP equal to 1.5 times A2 + FL cost except for wheat where it is already 2.1 times — a 5% rise in wheat MSP is assumed instead crore if the fall was 10% and `169,553 crore if the fall was 30%. The Icrier analysis, however, was based only on the ANUSHREE BHATTACHARYYA Investors bet on food-tech and grocery The significantly smaller investments in Indian e-commerce in the JanuaryJune period are the result of a fairly big drop in funding in the e-retailing and fintech spaces. Food-tech seems to have become popular once again, after a big shake-out, as has the online grocery space. The number of companies that received funds fell to 411 from 571. Investors prefer mature businesses; entrepreneurs just starting out have been less fortunate. This has been exemplified more than anywhere else in Walmart’s Flipkart buy. No. of companies Jan-Jun ‘17 Jan-Jun ‘18 100 80 60 40 20 0 Fund received Jan-Jun ‘17 Jan-Jun ‘18 (RHS) 2.0 1.6 1.2 0.8 0.4 0 No. of companies 550 that received funds 400 Jan-Jun 2017 5.57 In $ billion Jan-June 2018 (till date) 3.59 Jan-Jun 2018 Source: Tracxn Technologies R-DEL BL ■ INFRASTRUCTURE, P11 8,800 8,668 ■ INVESTOR, P9 -2 Continued on Page 2 Paddy Cotton Wheat Gram 6,792 6,296 Tech Mahindra’s Makers Lab is an R&D hub for co-innovation of futuristic solutions with customers, partners and start-ups THE GOVERNMENT’S PLAN to raise MSPs for crops to 1.5 times the A2+FL costs is likely tocostaround`1,75,000crore in a full year (see graphic) if market prices are lower than the MSP by 20%. The exceptionally high cost of this plan, it is likely, was the reason for the delay in the announcement of this season’s MSP as the government was trying to work on ways to finance it; the plan is now likely to be announced later this week. A calculation by Ashok Gulati, Tirtha Chatterjee and Siraj Hussain at Icrier a few months ago put the cost at `113,035 crore, assuming the market price of crops was lower than the MSP by 20%; the figure was `56,518 AA-DEL Making businesses future-ready -2 6,979 7,158 ■ eFE, P8 DEL-H Games on the go Availability of affordable data has come in as a booster for the mobile gaming industry. But monetisation is still a challenge DEL-BO ■ BRANDWAGON, P10 Airlines, though, have felt the heatwiththehigherseatcapacityraisingthecompetitionand HOLIDAYMAKERS HAVE lowering occupancies. While madehaythissummer,cashing more passengers have flown to in on lower fares pretty much their destinations, this time all across the country. around — near 12 million in May this year compared with 10.2 million in May 2017 — airlines are likely to reap (in `) lower yields; fares in May and Jun ‘17 June have been lower by about 4-8% than in the comparable Jun ‘18 period of 2017. The double whammycomesfromhigher fuel costs, up % change DEL-M by about 29% year-onyear (y-o-y). Tomakeup,airlines have increased prices Booking dates: for tickets bought 0-15 25 May '17 & '18 daysbeforetravelperiod. “For travel booked a month -DEL YD in advance, fares are still low due to competition and more seats,” Balu Ramachandran, head, air and DELdistribution, Cleartrip,said. Online travel porTravel dates: 30 days from tal Yatra.com shows date of booking return fares on busy sectors like Delhi-DEL M Bengaluru, Delhi-Chennai and Delhi-Hyderabad were lower during May and June in 2018 for travellers booking 30 days ahead. PRABHUDATTA MISHRA New Delhi, July 1 9,821 Top losers of BSE 500 (%) 36.4 Kotak Mahindra Bank HDFC Bank 392 companies in the red Jun 28, ‘18 TCS 34,64,068 Total: `173,965 crore if market price 20% less than MSP 18,359 Jan 1, ‘18 AS MANY AS 1,313 “listed” entities that have failed to file their annual reports for two yearsfacetheprospectofbeing struck off the registrarof companies’ (RoC) database. The move is a continuation of the ministry of corporate affairs’ (MCA) efforts toweed out shell companies. A senior ministry official observed that while the companies were categorised as “listed”,in realitymost of them were not. Consequently, their status will be altered from “listed” to “unlisted” before they are struck off. “They might have sought permission from the MCA to file draft prospectuses for initial public offerings (IPOs) but did not complete the process. That is why they are categorised as ‘listed’,” the official explained. E-comm Jun 28, ‘18 10,200 9,800 33,14,447 Chg: 1,49,621.88 10,600 Top Nifty50 gainers (%) FE BUREAU Mumbai, July 1 Jan 1, ‘18 (` cr) AI 10,435.55 10,589.1 Cost of MSP plan Media 11,000 SURYA SARATHI RAY New Delhi, July 1 BSE mcap Food 11,400 Acreage-based cash transfers better, do not distort prices Grocery THE PRICE of aviation turbine fuel (ATF) was on Sunday cut by 2.7% as falling international rates brought rates down from a four-year high, reports PTI. ATF or jet fuel prices were cut by `1,942 per kilolitre, or 2.7%, to `68,086 per kl in Delhi, according to state-owned oil firms. The reduction comes on the back of two successive monthly hikes. Nifty 50 MSP scheme could cost govt over `1,75,000 crore One year, one tax Finance minister Piyush Goyal addresses a gathering at an event to celebrate one year of GST, in New Delhi on Sunday EXPRESS PHOTO: RENUKA PURI Continued on Page 2 marketable surplus, an assumption that may not hold when the government is promising an MSP for crops and saying it will compensate farmers at this price if the crop is not procured. In which case, it makes sense for farmers to bring in all theirproduce to sell to the government and buy back what they need for consumption from the market later, when prices have fallen. Madhya Pradesh’s Bhavantar saw an increase in market arrivals as farmers realised they could get a better deal, though 100% arrivals maynot happen for a fewyears. The analysis does not take sugarcane into account since, though its MSP — fair and remunerative price (FRP), in jargon — is two times A2+FL costs, cane is mandatorily purchased bysugarmills.Horticulture crops are not included in the proposed MSP scheme either. Continued on Page 2 ■ MSP hike to hit exports badly, Page 2 ● GST Collections increase to `95,610 cr in May FE BUREAU New Delhi, July 1 REVENUE COLLECTIONS FOR May from the goods and services tax (GST) have come in at `95,610 crore, of which `31,645 crore will flow into centralkittyand`36,683crore will go to the states. Collections for April were `94,016 crore while the average for the last fiscal stood at just below `90,000 crore. The higher-than-average mop-up has been attributed to theeffectivenessofthee-waybill system and other enforcement action.Nonetheless,financesecretary Hasmukh Adhia cautioned that the trend was still below`1lakhcrore.Responding to the industry request that the list of items in the 28% list be pruned,Adhiapointedoutitwas lowerthanthe`50,000croreper month required to meet the 2018-19budgetarytarget. Speakingattheone-year-ofGST celebrations via video conferencing,ArunJaitley,whousheredinGSTasfinanceminister, said GST’s impact was already visible in direct tax collections; grossadvancetaxcollectionsfor personalincometaxhadgrown by 44% y-o-y for theApril-June periodwhile the corresponding rise for corporate income tax was 17%.“Indirect tax collectionsfortheGSTbasketofcommodities have grown by 11.2% while the buoyancy is at 1.2, which is unheard of forindirect taxes,” he said. Continued on Page 2 ONE YEAR OF GST Tax stabilises, but only a structural overhaul to yield dividends SUMIT JHA New Delhi, July 1 ONE YEAR SINCE the goods and services tax’s (GST) rather haphazardJuly2017introduction, it has been nearly totally assimilated by the industry and consumers,who nowhave much less to cavil about than during the initial months, but the indirect tax’s structure still leaves much scope for simplification. Also, it has barely become evasion-proof. Little wonder then that GST’s presumed economic gains are yet to be fullyvisible. >`1 lakh cr Monthly (Centre-state) revenue required to meet targets `48,000 cr Compensation amounts released to states till April-end `22,000 cr Centre's monthly GST revenue shortfall (against FY19 target) GST collections GSTR-3B' Compliance' improving but far from ideal (Amount in ` crore) 120,000 93,590 94,016 90,000 60,000 30,000 0 ` July 2017 Eligible taxpayers (in lakh, RHS) Returns filed till due date (by 20th of subsequent month) (%, LHS) Returns filed till June 23 (%, LHS) 100 125 100 ` ` ` April, 2018 75 96.6 57.5 50 25 0 80 67.7 60 61.6 July 2017 91.2 Falling rates: ATF prices down 2.7% For the breadth to widen, earnings must beat estimates; a handful of stocks cannot hold up the Nifty forever Over 1,000 companies may lose registration Online cab India’s stock markets have bad breadth THE DEADLINE for the linking of PAN and Aadhaar has been extended to March 31 next year, a CBDT order issued late on Saturday said, reports PTI. This is the fifth time the government has extended the deadline for individuals to link their permanent account number (PAN) to their biometric ID (Aadhaar). READ TO LEAD FARM RELIEF ● CRACKDOWN Fintech BRUSH WITH EARNINGS IN THE NEWS Link Aadhaar, PAN till March ’19 WWW.FINANCIALEXPRESS.COM 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 66.7 VOL. 58 NO. 155, 14 PAGES, `7.00 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE May 2018 40 20 0 Instead of a single-rate or two-rate system conceived by most analysts — including chief economic adviserArvind Subramanian — India’s GST is levied at multiple (>7) rates (withcessesuponthepeakrate for some demerit/‘luxury’ goods) and its aggregate rate is not as benign as they would have liked. While policymakers are at pains to spot evidence of GST’s higher revenue buoyancy and highlightthe‘financeability’of states’ considerable revenue shortfall,the budget managers are deeply worried over a yawning gap (`22,000 crore per month or 44%) between the Centre’s GST target for FY19 and the revenue being mobilised. Of course, there has been a steadyincreasein‘compliance’ (definedintermsofreturnsfiling, nil-tax claim/payment of some tax,whether or not full). About 1.12 crore businesses are now registered for GST including 63.8 lakh who have migrated from the previous regime (new registrations are over 48 lakh). Continued on Page 3
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