OPINION, P8 COMPANIES, P7 RENU KOHLI MSPs, trade & fiscal deficits, etc, will test inflation-targeting INTERNATIONAL, P14 EDITORIAL CHEMICALS DEAL TAKING FLIGHT Social security for poor is a good idea, but must be linked to overall subsidies Shroff-led UPL seeks $3-bn loan to buy Ackman-backed firm Enders-led Airbus said to near $29-bn deals with Asian carriers PUNE, TUESDAY, JULY 17, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.IX NO. 111, 22 PAGES, `6.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 36,323.77 ▼ 217.86 NIFTY: 10,936.85 ▼ 82.05 NIKKEI 225: 22,597.35 ▲ 409.39 HANG SENG: 28,539.66 ▲ 14.22 `/$: 68.57 ▼ 0.04 `/€: 80.41 ▼ 0.79 BRENT: $73.21 ▼ $2.12 GOLD: `30,172.00 ▲ `92.00 Other institutions 1.87 To opt for preferential share allotment route; waiver from open-offer rule not ruled out Intra-day (in `, Jul 16) Previous close: 57.3 60 58 56.45 57.3 56 54 FE BUREAU New Delhi, July 16 THE LIFE INSURANCE Corporation of India (LIC) board on Mondayapprovedaplanforthe insurer to raise its stake in the IDBIBankto51%fromthecurrent 7.98%.The deal will likely involve issuance of preferential shares to LIC by the stressed bank, rather than an outright saleofthegovernment’sstakein the bank to LIC, a top official said, confirming its utility in terms of giving additional capital support to the bank. IDBI Bank, which had 52 50 Open Close received capital support of `10,610crorefromthegovernmentlastfiscal,themostbyany public-sector bank (PSB), may get to lay its hands on another around `13,000 crore thanks to the LIC deal. IDBIBankfell1.48%toclose at `56.45 on the BSE on Monday.At current market prices, a 43%stakeinIDBIBankisworth a little over `10,000 crore, but 19.1 2.8 2,251 Devices and operating systems store consumer data on cloud which is located outside the country THETELECOM REGULATORY Authority of India (Trai) on Monday suggested that pending a notification of a general data protection lawbythe government, the existing regulatorylaws applicable to telecom players be made applicable to all entities in the digital ecosystem to strengthen privacy of users’ data. What this means is that the regulatorhas urged the government to notify a policy framework for regulation of devices, operating systems, browsers and applications in the same manner as mobile operators are regulated currently. Simply put, as currently there are regulations and laws whichmandatetelcosastohow they they can store call data 20.6 20.50 23.73 Ebitda margin (%) Currently, Trai regulates only telecom players and not device and operating system makers 100 bps HINDUSTAN UNILEVER’S EARNINGS for the April-June quarter were in line with analysts’ estimates with the net profitonastandalonebasisrising 19.2% to `1,529 crore on domestic volume growth and operational performance, reportsfeBureauinMumbai. Income from operations increased 11.2% to `9,487 crore. Ebitda rose 20.6% to `2,251 crore and margin improved by 183 basis points to 23.73%. Detailed report on Page 7 records of subscribers, Trai wantsthatthegovernmentalso regulates all consumer data stored in the cloud by devices, operating systems, browsers and applications. If the subscriber wants that his data be deletedfromthecloud,thenthe regulation should ensure this. The recommendations by Trai were drawn suo motu after consulting stakeholders Continued on Page 2 6.22 Total QuickPicks ICICI Bank postpones AGM by a month to September 12 ICICI BANK on Monday postponed its annual general meeting (AGM) by over a month to September 12, reports fe Bureau in Mumbai. The AGM was earlier scheduled for August 10. “We wish to draw reference to our letter dated 13th July 2018, indicating the revised Annual General Meeting(AGM) date of 12th September 2018 and the revised dates of book closure between 28th August 2018 and 12th September 2018 (both days inclusive),” the bank said in a regulatory filing, adding the change was necessitated “due to the sequencing of general meeting dates within the listed entities of the ICICI Group”. PAGE 10 WPI inflation spikes to 4-year high of 5.77% in June INFLATION BASED on wholesale prices accelerated to an over four-year high of 5.77% in June on rising prices of vegetables and fuel items, raising the chances of a rate hike by the Reserve Bank of India (RBI) in its monetary policy review next month, reports PTI. The Wholesale Price Index (WPI)-based inflation stood at 4.43% in May and 0.90% in June last year, government data released on Monday showed. Inflation is at the highest level since December 2013, when it was at 5.9%. Retail inflation, which the RBI takes into account while formulating its monetary policy, hit a five-month high of 5% in June. PAGE 2 Diesel, petrol may get cheaper as international prices fall Monsoon rainfall against LPA* till Monday (%) -7 -27 5.84 5.63 -42 -2 -42 -44 2.76 47.54 Russian President Vladimir Putin presents a football to his US counterpart Donald Trump after their meeting at the presidential palace in Helsinki on Monday ■ P14 (All 6 states) Bihar Getting along, almost Uttar West Chhattisgarh Jharkhand Pradesh Bengal Odisha *Long period average PRABHUDATTA MISHRA New Delhi, July 16 SIX STATES THAT together contributenearlyhalfofIndia’s rice production have received monsoon rains considerably lessthannormaltillMondayin the current kharif crop season, threatening to dent the country’s production of the cereal and its lucrative exports. India’sriceoutputtoucheda record 111.52 million tonnes (mt) in the last (July-June 201718) crop yearwhile the country exported 12.7 mt of rice worth `49,838 crore in financial year 2017-18. The kharif crop accounts for over 86% of rice produced in the country. However, analysts feel that since the rains have picked up over the last couple of days in partsofmostofthesestates,the situationcouldstillbesalvaged. The rainfall deficit in Uttar Pradesh, Bihar and Jharkhand hasbeenabove40%whileWest Bengal has received monsoon showers 27% less than normal inJune1-July16period,according to the India Meteorological Department. Odisha and Chhattisgarh have reported deficits of 7% and 2%, respectively (see chart).According to agriculture ministrydata,sowingofpaddycropwasdown8% at 11.7 million hectares as of July 13 from 12.7 million hectaresintheyear-agoperiod. Continued on Page 2 Merger mania FE BUREAU $74.8-bn deals sealed in H1 The first half of 2018 saw 638 deals for $74.8 billion with an average size of $117 million, the highest H1 values recorded. M&A snapshot 30 25 20 2017 values 47 45 15.1 15 23.8 40 31 32 10 5 2.3 0 Jan 1.41.9 Feb 2017 volume 2018 values ($ bn) 19.1 40 25.7 46 35 28 29 0.9 Apr May 2018 volume (RHS) 39 31 36 29 1.5 2.2 Mar 48 2.1 0.4 0.4 Jun Jul 35 0.9 Aug Sep 40 36 3.8 0.8 60 Oct 3.2 Nov 21 0.3 Dec 20 0 Source: Grant Thornton THE BOMBAY HIGH COURT has ruled that the one-time premium payable for longtermlease(30yearsormore)of land would attract goods and services tax (GST) as it constituted ‘supply’ under the GST Act.Experts said that the order went against the accepted principle of considering longterm leases as“sale of immovableproperty”,whichisoutside the purview of GST. Short-term lease (less than 30years) are anywaysubject to GST and had attracted service tax in the previous regime. In the present case, the petitioners, who are builders and developers, won bids for leasing land from City Industrial and Development CorporationofMaharashtra(CIDCO) in Navi Mumbai and Panvel. But they questioned the GST levyon the one-time lease premium (along with monthly rentals that are taxable) when theallotmentletterwasissued. The revenue department contended that the grant of leases constituted ‘supply’ for a ‘consideration’and was,hence,eligible for GST. “Envisaging GST on onetime lease premium paid for acquisition of leasehold land may trigger yet another controversy questioning the applicability of GST on all transactions of leasehold land deals in the corporate arena,” said Rajat Mohan, partner, AMRG & Associates. Continued on Page 2 MADCAP PLUNGE Midcaps witness a steady collapse in m-cap so far in 2018 FE BUREAU Mumbai, July 16 THE NIFTY MIDCAP has lost 15.8% in 2018 so far, leaving investorswithfairlylargelosses. Some 33 of the stocks have lost 25% each since the beginning of the current calendar year, withVakrangee and PC Jeweller plunging as much as 88% and 80.5%, respectively. Interestingly,ofthe135tradingsessions so far this year,75 days saw the midcapgaugeclosinginthered. TheNiftyMidcap100index fell 2.6% on Monday to hit a near-one-year low of 17,794. Marketbreadthwasfirmlytilted in favourof sellers,as a result of which midcaps bore the brunt. While state-owned lenders suchasBankofIndiaandUnion Bank of India have declined 54.5%and48.4%,respectively, during the period,Canara Bank Nifty Midcap 100 23,000 21,109.8 21,000 Nifty Midcap (100) 17,794 22 78 « DIESELAND petrol buyers can expect falling prices in the days to come, thanks to softening freight-on-board (FOB) prices of the fuels in the international market, reports fe Bureau in New Delhi. Over the past four working days, while the FOB price of petrol has fallen from $83.87 per barrel to $79.31, the FOB price for diesel has softened to $82.72 per barrel from $87.73. The immediate effect was evident on Monday when the retail diesel price in New Delhi fell by 14 paise to `68.47 per litre and that of petrol fell by 11 paise to `76.84 per litre. PAGE 12 15.1 Continued on Page 2 SUMIT JHA New Delhi, July 16 Rice-growing states face big rain deficit Share (%) in all-India rice production 11.99 and forwarded to the department of telecommunications. Analysts are a little sceptical as to howTraiwill be able to achieve this purpose because the storage on cloud happens outside the country by most device makers and operating systems and they do not have servers within the country. HC ruling upsets status quo YTD fall (%) 15.8 « Equities are more volatile than fixed income securities. However, over a longer period of time, equity provides higher returns and capital appreciation ■ Personal Finance, P13 Therefore, how the government can regulate such data is not clear ● GST ON LAND LEASE « Asset allocation key to achieving investment goals Trai has not suggested localisation of data which would have meant servers are located within the country For making data protection law, the govt has appointed Srikrishna panel which is yet to submit its report CLOUDY OUTLOOK Special Feature ` IDBI Bank 1,866 4.19 THE MISSING LINK FE BUREAU New Delhi, July 16 « THE COUNSEL for Jaiprakash Associates (JAL) on Monday told the Supreme Court that it will deposit postdated cheques worth `600 crore with the registrar, subject to the company being granted prior approval to dispose of its cement assets including its cement plant in Rewa, Madhya Pradesh, reports Indu Bhan in New Delhi. Non-institutions Ebitda « JAL offers `600 cr in deposits, with a condition 7.98 « THE INTERNATIONAL Monetary Fund (IMF) on Monday projected a growth rate of 7.3% in 2018 and 7.5% in 2019 for India against 6.7% in 2017, making it the fastestgrowing country among major economies, reports PTI. However, the latest growth rate projection for India is slightly less — 0.1% in 2018 and 0.3% in 2019 — than its April projections. LIC Revenue Net profit « IN THE NEWS IMF projects 7.3% growth rate for India in 2018 Q1FY19 9,356 85.96 9,094 Govt of India (` cr) Q1FY18 Chg (%) y-o-y Wants cloud storage under govt regulation; analysts say difficult as servers are overseas « IDBI Bank shareholding (%) LICmayhavetopayapremium. The Insurance Regulatory and Development Authority of India had,on June 30,approved thedeal,givingLICspecialrelaxation from its 15% holding cap for insurers in a single firm. WhilereportshadsuggestedLIC might make an open offer to existing IDBI Bank shareholders, economic affairs secretary Subhash Chandra Garg said whethersuch an offerwould be made or not was “immaterial” heregiventhelowpublicshareholding(‘non-institutions’hold just 4.2% in the bank).“It (public shareholding) is only about 5%. And the pricing formula may not be attractive. But LIC willgothroughthatprocessand if necessarytheywill make that open offer,” he said. Securities and Exchange Board of India (Sebi) chairman AjayTyagi recentlysaid the regulator hasn’t yet received any proposal from LIC about the open offer. Under Sebi’s takeover code, an acquirer has to makeanopenoffertotheexisting shareholders of the target company on acquiring shares/ votingrightsof25%ormoreso thattheygetanexitroute.Butit is possible that Sebi will choose to give a waiver to LIC; ONGC wasexemptedlastyearfromthe requirement of an open offer after it acquired the Centre’s 51.11% stake in the state-run oil retailer HPCL, as the deal involved two governmentowned companies. Telecom regulator bats for stronger data privacy rules HUL results largely in line with expectations 1,529 LIC to take majority stake in IDBI Bank TRAI’S TWIST ● FIRST QUARTER 1,283 GETS BOARD NOD 19,000 17,000 Jan 1, ‘18 July 16, ‘18 32 companies have lost more than 25% of value in YTD saw its shares coming off by 38.6%. Other public sector companies such as NBCC, MRPL,EngineersIndia,Housing andUrbanDevelopmentCorporation (HUDCO) and National Aluminiumalsodeclinedinthe range of 33% to 50.2%. MorganStanleybelievesthat despite the recent drawdown the mid-cap valuations are still looking stretched. “Indian stocks are jostling weak emerg- ingmarkets,risingrates,higher oil prices, an election year and relatively rich mid-cap valuations,” the brokerage said in a note to investors on Monday. The recent PSU debutant — HUDCO,which listed at a 21% premium—haslostallthegains sincelistingandtradesbelowits issue price of `60. Continued on Page 2 Related reports on Page 11
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