OPINION, P6 ECONOMY, P2 RIGHT TREATMENT Inter-creditor agreement better than JLF system Earnings have a good start in FY19, but mostly because of one-offs TRADE WAR Prabhu: Exports must get priority sector lending tag EDITORIAL INTERNATIONAL, P4 Global auto powers plotting response to Trump’s tariff threats KOLKATA, MONDAY, JULY 30, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XXVII NO. 230, 14 PAGES, `6.00 (NORTH EAST STATES & ANDAMAN `10.00) 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 Q1FY19 RESULTS ● POWER PLAY Profits up, thanks to many one-offs IBA, bank unions meet today to discuss wage hike THE APEX BANKING lobby Indian Banks Association and bank unions will meet on Monday to negotiate on salary hikes for over three dozen banks, reports PTI. Close to 37 banks, including public, private and foreign banks, have mandated to IBA to decide on wage hikes for their employees. ANUPAM CHATTERJEE New Delhi, July 29 FE SPECIALS FY18 FY18 264.71 180.95 166.22 160.24 22.67 16.58 Q2 Q3 Q4 Q1 FY19 FY18 Q2 Q3 Q4 Q1 FY19 Sample of 269 Companies (excluding banks & financials) so buoyant. Businesses in the commodity space are more confident as prices are expected to stay steady. Larsen & Toubro’s margin expansion of 200 basis points y-o-y,as analysts have pointed out,mustbeviewedinthecontext of the low base and also some other factors; in fact margins forthe keyinfrastructure segment fell 30 bps y-o-y in spite of better executions. While revenues were strong, adjusting for one-offs leaves FY18 FY19 Source: Capitaline the firm with a 26% y-o-y rise in reported net profitswhich is a shade below estimates. The goodnewsisthatorderinflows jumped 37% y-o-y during the quarterthoughtheorderbacklog at the end of June was higher by just 3%. And the ordering will continue to be dominated bythe government sector because private companies aren’t spending too much on capex just yet. Continued on Page 2 TAKING STOCK MF schemes fare poorly in narrow market rally Performance of large-cap funds YTD returns (%) HDFC Top 100 Gr Reliance Large Cap Gr ■ BRANDWAGON, P10 OTT & telcos: Growing together -3.22 -2.48 Franklin India Bluechip Gr Tata Large Cap Gr Free Amazon Prime memberships, Netflix subscriptions and live TV are telcos’ new means to retain high value customers -2.45 -1.44 Aditya BSL Frontline Equity Gr -1.27 SBI Bluechip Reg Gr ICICI Pru Bluechip Gr DSP BlackRock Top 100 Equity Reg Gr Ruckus in the Wi-Fi world HSBC Large Cap Equity Gr As Ruckus Networks gears up for the new-age Wi-Fi standard, it keeps an eye on the nascent IoT market in India 3.31 12.26 Axis Bluechip Fund Gr Benchmark 1: S&P BSE 100 India TR INR 4.08 Source: Morningstar A host of negatives make Kotak Mahindra Bank’s stock an expensive bet at current levels; ‘Hold’ maintained ■ INFRASTRUCTURE, P11 FY19 is critical for Sagarmala As many as 160 projects entailing investment of `71,000 cr are lined up for implementation in the ongoing fiscal ■ SCIENCE & TECH, P12 The long hot summer Heat is causing problems across the world. Worryingly, such weather events may not remain unusual QuickPicks Walmart-Flipkart deal: CAIT to protest TRADERS' BODY CAIT on Sunday announced its plans to launch a nationwide stir against the $16-billion Walmart-Flipkart deal, and said protests will be held at the offices of the ED and RBI, reports PTI. CAIT further said it had earlier urged the Competition Commission of India to not pass any order without hearing the submission of the traders' body. Govt staff may go abroad on LTC now CENTRAL GOVERNMENT employees may soon be able to go abroad on leave travel concession, top officials said, reports PTI. A proposal in this regard has been finalised by the personnel ministry, which has asked for comments from other departments concerned such as home, tourism, civil aviation and expenditure “at the earliest possible" time. CHIRAG MADIA Mumbai, July 29 BENCHMARK INDICES ARE at lifetime highs but nearly two dozen large-cap funds have under-performed the markets thisyearwith a dozen turning in negative returns, data from Morningstar shows. As Nilesh Shah, MD, Kotak Mahindra AMC, points out the rallyis concentrated in seven oreight stocks that have pushed up the Sensex. “Most funds are underweight in these stocks,” Shah says, adding that quality is getting PAC report could spell big trouble for Tata Trusts Date on which 12AA registration revoked will determine tax liability of Trusts FE BUREAU New Delhi, July 29 A REPORT BY the Public Accounts Committee (PAC) just tabled in Parliament, has recommended the charitable registration of Tata Trusts’ — under Section 12AA of the Income Tax (IT) Act — be cancelled since they do not conform to the norms of investments or expenditure. If the Trustslosesits12AAstatus,the tax implications will be significant, and the date on which this happens will decide the extent of the tax liability. The PAC says,“the Committee is aghast to note that the Trusts is investing money in prohibited modes of invest- BREACH OF TRUST? ■ Trusts can’t hold pvt firms’ shares, 85% of income has to be spent on charity ■ Trusts held TCS equity & invested in Tata Sons preference capital ■ If it loses Section 12AA status, it has to pay tax Continued on Page 2 ■ Tax liability rises if Sec 115TD applies, so date of revocation of Section 12AA status is key ment despite the law which strictlyprohibitingPublicCharitableTrustsfromholdingsuch assetspost1973...theCommittee is again perturbed to find thatTataTrustshasbeenclaiming dividend income which forms the majority of its income, is exempt from the requirement of applying 85% of Trust income towards charitable purpose.” This matter is also under ` ` ` ` litigation in the Bombay High Court where the I-T department has sought to cancel the Tata Trusts licence. Tata Trusts has argued that it had, in any case, surrendered its 12AAregistration in March, 2015itselfandhad,infact,filed itsreturnsfor2015-16without claiming the tax benefits available underthe trust law. Private power companies cry foul on the plan to allow NTPC to charge tariffs on cost-plus basis even for brownfield expansion projects Rajasthan opposes penalty for gratuitous load shedding, targets and time-lines set for discoms to clinch long-term PPAs Continued on Page 2 Cash burn continues to be a way of life 2.87 ■ INVESTOR, P9 Core income a disappointment TAX LIABILITY E-COMMERCE -0.99 -0.98 ■ eFE, P8 A new look The newly refurbished Bombay House, the headquarters of the Tata Group, was inaugurated after a year-long renovation project on the occasion of JRD Tata's birth anniversary, in Mumbai on Sunday EXPRESS PHOTO: GANESH SHIRSEKAR -4.46 Q2 Q3 Q4 Q1 FY19 (bps, chg y-o-y) 10.03 54.03 26.81 24.16 Q2 Q3 Q4 Q1 STAKEHOLDERS, INCLUDING STATE-OWNED power distribution companies (discoms) and private power producers, have objected to keyamendments to theElectrictyTariffPolicy,2016. Thiscouldmakeitmoredifficult for the Centre to impart higher efficiencytotheactivitiesinthe sectorand reduce costs. According to official sources, the Rajasthan government has written to the ministry, opposing the penalty proposed for gratuitous load shedding and arguing against the targets and time-lines set for discoms to have long-term power purchase agreements (PPAs) and comply with renewable purchase obligations. Ontheirpart,privatepower companies have expressed reservations about the plan to allowstate-run powerproducers like NTPC to charge tariffs on a cost-plus basis even for their under-construction (expansion) projects. The private-sector players feel that the risk-free regime for statesector generators would encouragetheirexpansionand hit the demand forpowerto be made available through the competitive bidding route. RM to sales (% chg y-o-y) -78.15 WHILE THE HEADLINE numbers suggest earnings season has got off to a good start the headline numbers mask the favourable base effect, the many one-offs and several accounting changes.Nonetheless, corporate India has done reasonably well in the three months to June rebounding smartly— as the increasedvolumes show — from the weak Q1FY18 which was the preGST quarter. None of the performances have been extraordinary but management commentary isn’t pessimistic, though it is cautious.That’s not surprising given the heightened competition in sectors such as telecom and two-wheelers and the virtual absence of the private sector in capacity addition. Also, raw material costs remain high and it’s not easy to pass these on to consumers at a time when demand is not 15.89 FE BUREAU Mumbai, July 29 Net profit OPM (bps, chg y-o-y) 15.55 Net sales (% chg y-o-y) 14.28 THE CENTRE IS likely to unveil a major policy next month outlining a road map to build a robust defence production industry, reports PTI. The policy can make India one of the top five manufacturers of military equipment and platforms in the next 10 years. Sources said the final touches are being given to the policy before it is placed before the Cabinet for approval. Weak base, one-offs and accounting changes make the numbers look better than they really are 10.17 IN THE NEWS Defence: Policy in Aug to make India manufacturing hub Discoms, pvt gencos object to new tariff plans a disproportionatelyhigh premium today. “The defensive nature of these stocks and quality of governance have attracted investors to these companies despite very high valuations,” he explains. While the Sensex has gained 9.63% in 2018 so far, the broader Nifty has put on 7.1%. To be sure, seven months is not a long-enough time to assess the performance of schemes, as Swati Kulkarni, executive V-P, UTI MF, rightly contends. Continued on Page 2 WHILEANECDOTALAND empirical evidence both confirm online shopping is becoming more popular, e-commerce businesses continue to bleed because consumers need to be pamperedwith discounts,report Anushree Bhattacharyya in NewDelhi.The manyrounds of sales that e-retailers launch during theyearare a sign it is not easyto convince consumers to buy.Sowhile revenues are going up,eretailers are reining in spends on advertising,expenses on employees and othercosts so as to ensure not too much cash is burned. For a clutch of 12 companies—across verticals— losses went up by about 6% in 2016-17 even though revenues increased.Industry experts say the losses could be as high for 2017-18 since discounts were as attractive. While the bigger players in each of the segments will grow,smaller businesses may fall by the wayside.There has been some consolidation but more is on the way says Sreedhar Prasad,partner, KPMG.Indeed,companies are chalking up new strategies and schemes to stay ahead of the competition. Meanwhile,investments in e-commerce and start-ups fell 35.5% to $3.59 billion between January-June; Fintech attracted 50% less at $908 million while e-commerce investments reduced by as much as 624% to just $627million. Revenue growth (%) Amazon Flipkart 829 39 189 6 466 Grofers 107 Urban Ladder Pepperfry 146 34 137 Ola Quikr 310 101 Swiggy Bigbasket ` crore 3,680 4,831 2,306 1,639 1,778 1,260 2,253 15 Zomato FY16 FY17 3,257 43 Paytm Shopclues Revenue Loss FY17 buy 70 1,198 1,381 102 3 70 30 383 333 177 60 137 205 225 268 284 319 95 128 99 301 182 156 155 129 3,148 3,802 Source: MCA, Tofler, Paper.VC TAX TRAIL Does the govt get the GST you pay? Use free apps to find out SUMIT JHA New Delhi, July 29 IF YOU ARE wondering as a consumer if the goods and services tax (GST) paid on the last meal at an eatery or whether the tax charged on groceryitems recentlybought are actually being deposited with the government, then you don’t have to look further than a host of free mobile applications. For instance, take the recently launched‘GSTVerify’ android app, which has been developed by B Raghu Kiran,a joint commissioner of GST in Hyderabad.Besides being simple and light on the phone memory,this app allows a consumerto enterthe GSTidentification number (GSTIN) of businesses,which are available on the receipts. The app then throws up information about the GST compliance of the business — as in the accompanying image where the tax- payer Olive Bar and Kitchen is classified as ‘regular’. Of course, this particular app doesn’t provide granular details of monthly returnfiling status of the business concerned. A fancier app ‘Peridot’, launched by IRIS Business Services,which is empanelled by GST Network (GSTN) to function as a GST Suvidha Provider (GSP), is equipped with optical character recognition.The app, therefore, lets a consumer scan the bill, which automatically picks up the GSTIN numberand throws up relevant details. As the image show, the app not only validates the GSTIN but also shows detailed status of return-filing (both GSTR-3B and GSTR-1) of the taxpayer. An executive at IRIS Business told FE that its app had identifiedarestaurantinDelhi which was using a fake GSTIN. Continued on Page 2
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