NATION, P3 NEWS FEED President Trump says US now has upper hand on China WWW.FINANCIALEXPRESS.COM FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE READ TO LEAD VOL. 58 NO. 185, 14 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 -40 -16 China Japan -24 *China, Japan and Korea Pune, which approved its third Metro line in March, faces pressure for route extensions from its growing population ■ SCIENCE & TECH, P12 Most people are above average? Women, older people and college graduates are likely to underestimate themselves QuickPicks Bank credit jumps 12.44%, deposits increase 8.15% BANK CREDIT grew by 12.44% to `86,13,164 crore in the fortnight to July 20, according to the RBI data, reports PTI. It stood at `76,59,898 crore a year ago. Growth in advances was marginally lower than the increase in the fortnight to July 6, when loans rose by 12.78% to `86,60,069 crore. Deposits rose by 8.15% to `1,14,38,121 crore from `1,05,75,615 crore a year ago. Govt likely to hike import duty on 300 textile products THE CENTRE is likely to hike import duty on about 300 textile products to boost domestic manufacturing and create employment opportunities, sources said, reports PTI. Foreign direct investment norms for the sector may also be relaxed. The duties could be enhanced to 20% from the current level of about 5-10%. PAGE 2 RM to sales 143.3 163.39 152.27 (bps, chg y-o-y) 43.9 -53.03 15.55 14.43 10.22 FY18 Q2 Q3 Q4 Q1 FY19 FY18 FY19 Sample of 585 companies (excluding banks & financials) Fora sample of 585 companies (excluding banks and financials), net sales have risen a strong 21.5% year-on-year; a slower increase in expenditure resulted in the operating profit margin forthe sample expanding by about 44 basis points y- 27 PRASANTA SAHU New Delhi, August 5 WHILETHE CENTRE'S capital expenditure (capex) in the April-June quarter was more than a quarter higher than the year-ago period, the state governmentsseemtohaveapplied brakes on their capex to curb borrowings and remain on the fiscalconsolidationpath.Their revenuespending,however,are almostinlinewiththebudgets. Data reviewed by FE of 14 statesshowthattheiraggregate capex in April-June this fiscal was `30,922 crore,just 11% of the combined annual target and 19% lower than what was achievedintheyear-agoperiod. Incaseofsomestates,thedeceleration of capexwas so steep to negate the demand push in the economy which the Centre is tryingtoimpartviahigherpublic investments. Bihar,forinstance,spentjust `1,371 crore to create new assets in April-June this year, 67%lowerthanintheyear-ago period, as the sluggish tax rev- Growth yoy (%) Centre 19 14 states* *Reviewed by FE enue (it collected less than 4% of the annual target in Q1) forced it to curb spending and resort to higher borrowings. Whilethecompensationmechanismunderthegoodsandservices tax (GST) ensures states’ annual GST revenue growth is at least 14%, many states like Bihar are witnessing much slower growth in their own tax revenue (which, though varies from state to state, is roughly half of the overall tax revenue). Tamil Nadu and Karnataka too had to take an axe to their capex — in Q1, both spent amounts38%lowerthaninthe year-ago period. Unless the states correct the trend, the economic growth could be hit.According to data reviewed by FE, in FY18, 17 states in aggregate had cut capex by a steep 22%, which allowed them to keep theircombined fiscal deficit at a benign 2.64% of theiraggregate gross state domestic product. Under the Fiscal Responsibility and Budget Management Act (FRBM), states have to contain theirfiscal deficit at 3%. TheCentre’sbudgetarycapital expenditure in April-June 2018 stood at `86,988 crore, 27% higher than the same in the year-ago quarter and 29% of the full-year target, indicating the continued heavy reliance on public investments for growth amid scarce evidenceofamuch-awaitedrecoveryin private investments. While the budget estimates unveiled by the states for FY19 indicate a consolidated gross fiscaldeficitof2.6%ofGDP,the RBIinarecentreportcautioned that,“visiblefiscalpressuresare emerging for several states on the expenditure side”,and pinned hopes on the stablisation of the GST “that should boost states’ revenue capacity and support the resumption of fiscal consolidation”. Q2 Q3 Q4 Q1 FY18 FY19 Q2 Q3 Q4 Q1 FY18 FY19 Source: Capitaline o-y driving up the operating profit by 24%.The increase in the ratio of raw materials to sales by 143 basis points is in line with that in the previous three quarters. Continued on Page 2 Continued on Page 2 Battle-ready BJP national president Amit Shah, railway minister Piyush Goyal and Uttar Pradesh chief minister Yogi Adityanath at the inauguration of the Pandit Deen Dayal Upadhyay railway station (previously known as Mughalsarai) on Sunday PTI ● TAKING STOCK Will Hero's Xtreme measures pay off? ARUN NAYAL New Delhi, August 5 OVER THE PAST year or so, HeroMotoCorp has lost some `16,000 crore in marketvalue. Since December 2010, when thetwo-wheelermanufacturer parted ways with Japan’s Honda,thestockhasunder-performed the benchmark. That under-performance could now become starkergiven howanalysts are disappointed with the companylosingmarketsharein the scooter segment and“mar- Hero’s two-wheelers market share (%) Hero MotoCorp Share price on BSE (`) 4,500 4,000 3,721.55 3,500 3,000 36.5 Expanding but is it enough? Q2 Q3 Q4 Q1 36.8 ■ INFRASTRUCTURE, P11 Q1FY19 Capex 39 HDFC”s Q1 numbers are difficult to compare owing to IND-AS; ‘Hold’ maintained with TP revised to `1,930 Net profit (% chg y-o-y) States curb capex amid revenue worries, social sector focus 40.1 A stable operational showing OPM (bps, chg y-o-y) DECELERATION 41.2 ■ INVESTOR, P9 Total 42.8 AMD CTO Mark Papermaster speaks about India’s growing influence as a producer in the hi-tech arena Russia A FAVOURABLE BASE was alwaysexpectedtoboostcorporate India’s June quarter earnings; Q1FY18 was the pre-GST quarter which saw companies staying light on stocks. However,beyondthebumpfromthe weak base, the Q1FY19 results don’t reflect any strong recovery;neithertheincreaseinsales nor the rise in profits is anything to write home about. On the contrary, heightened competition across sectors — from telecom to two-wheelers — is robbing companies of pricing power and they are struggling topassontheincreasedcostsof rawmaterials. 45 India is pivot to hi-tech market CJK* FE BUREAU Mumbai, August 5 44.6 ■ eFE, P8 11 -5 -16 Korea quarter,against supplies in the previous three months, according to a note prepared by the steel ministry. Industry sources said domestic price for HR coil, a keyproduct,at $675 pertonne is higher than the landed cost of imports from these countries. Including 12.5% customs duty and freight, HRC from China is now available to Indian buyers at $672/tonne. Since Japan and Korea enjoy duty reliefs under India’s FreeTradeAgreements with them, the imports from these countrues are 10% cheaper than domestic steel; the post-Trump-tariffs situation has led to imports from these countries to accel- Net sales (% chg y-o-y) Continued on Page 2 0 -20 31 19 15 » Is virality helping Trivago? Trivago needs to build brand stickiness and craft travel experiences in order to rope in loyalists Continued on Page 2 45 35 Data of 14 states reviewed by FE show their Q1FY19 capex 19% lower than year-ago period ■ BRANDWAGON, P10 erate further. Importantly,whilethecombined steel exports by China, JapanandSouthKoreatotheUS dropped 17%, or by 2,41,000 tonnes,intheApril-Juneperiod vis-à-vis the previous quarter, their supplies to India rose by 4,59,000tonnes,up45%from the March quarter. This suggests these Asian steel-makers are diverting supplies to India that were earlier meant for not just the US but other destinations as well, including the EU, that has already initiated plans to put safeguard measures in place to tightened flows of cheapimportsfromAsianrivals to protect domestic industry. 47 40 Heightened competition across sectors is robbing companies of pricing power FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 3,246.1 2,500 2,000 Aug 1, 2017 Aug 3, 2018 ginal presence in the premium motorcycle segment”. Auto sector experts say the imminent pricewarwith Bajaj Auto in the entry segment for motorcycles is bound to hurt. But that’s a relatively small problem. Most sector experts buy the Hero management’s argument that it does not expect to lose market share in the entry and commuter segments because it has strong brands and price discounting is not a sustainable strategy. But they are concerned about Hero’s weak spot — premiumsegment.TheXtreme200 — a 200R motorcycle — currently being launched will be a big test forthe company. Continued on Page 2 SCREEN PRESENCE Television viewership and ownership of TV sets on the rise ANIRBAN ROY CHOUDHURY Mumbai, August 5 TELEVISION OWNERSHIP AND TVviewership have both grown significantly in the last two years, as per Broadcast India, a survey by Broadcast Audience Research Council (BARC) India.The report finds that totalTVhouseholds grew by 7.5%,rising from 183 million households in 2016 to 197 million households in 2018 till date. “My sense is, this number will continue to grow because we have huge headroom. I think the pene- tration will grow to 220-230 million homes in the next few years,” says Girish Menon, partner, KPMG India. The growth rate in TV homes in India is higher than the overall home ownership growth. The total number of homes according to the survey was 286 million in 2016 and it has grown to 298 million this year,securing a 4.2% growth. TV homes grew by 7.5% in the same period. Rural India dominates TV ownership growth — in 2016, it had 99 million television households; that number is 109 million currently, secur- Market wise TV penetration (in %) 52 55 93 95 91 91 87 88 79 81 64 66 FE SPECIALS 60 20 FOREIGN PAYMENT FIRMS could keep copies of customer data in India while retaining offshore storage operations, the government said, as a way to resolve a row with MasterCard, Visa and American Express overthe localisation of such information. AdecisionbytheRBIinApril that all payments data should, within six months, be stored only in the country for“unfettered supervisory access” has ledtofuriouslobbyingbyglobal firms that worry it would cost them millions of dollars. Economic affairs secretary SC Garg said keeping data copies in the country had emerged as a possible solution during a meetingwith officials from the RBI and executives from the payment firms.“One of the options which emerged in that meeting was maybe mirrorcopiesmightbeapotential solution,”Garg said. HesaidtheRBIhadtotakea finaldecisionbutkeepingmirror images of the data in India would mean all the customer information would be available to local authorities. 67 `30,922 cr INDIA SEEMS TO have turned a favourite dumping ground for steel makers from not just ChinabutalsoJapanandSouth Korea,whicharedivertingsupplies from the US and the European Union in massive volumestobeattheimpactofa global tariff war initiated by the Trump administration. Official data suggest steel supplies from China, the world's largest steel producer, surged to 3,62,000 tonnes in the April-June period, up as much as 67% sequentially from 2,17,000 tonnes in the previous quarter,even though our overall merchandise imports from the secondlargest economy faltered. Similarly, steel imports from Japan and Korea jumped 47% and 35%,respectively,to 3,74,000 tonnes and 7,46,000 tonnes in the June 80 Supplies to US Supplies to India » THE UIDAI ON Sunday said vested interests misused Google's "inadvertent" act around its old helpline number to create fear and tarnish the image ofAadhaar, reports PTI. It emphasised that a number stored in the contact list cannot steal data from a mobile phone. The UIDAI added that rumour mongers attempted to tarnish the image ofAadhaar for a Google's inadvertent act that led to appearance of its old helpline number 1800 300 1947 in the contact list of several mobile phone users. Last week, a French security expert who describes himself as the "worst nightmare" of the UIDAI, in a tweet had raised alarm on presence of a UIDAI contact number in contact list of mobile phone users without their consent. SURYA SARATHI RAY & BANIKINKAR PATTANAYAK New Delhi, August 5 % rise in volume, q-o-q (Apr-Jun 2018 vs Jan-Mar 2018) `86,988 cr IN THE NEWS UIDAI stresses contact number cannot steal data Steel trade Modest show despite help from a weak base 23.4 Imports from China jump 67%, Japan 47% and Korea 35% q-o-q in Q1FY19 REUTERS New Delhi, August 5 India becoming steel dumping ground Only-in-India rule may ease for foreign payment firms Q1FY19 EARNINGS 49.13 75.61 ● DATA STORAGE 21.55 TRUMP TARIFF FALLOUT 154.41 MUMBAI, MONDAY, AUGUST 6, 2018 15.84 IBC rules need to be changed to disallow late bids from being entertained by courts 10.85 Challenging RIL’s arbitration verdict is a bad idea TARIFF TRIGGER Facebook’s Brown: Video-only Watch to be destination for news EDITORIAL INTERNATIONAL, P4 14.28 OPINION, P6 Rural Mega cities 10-75 lakh 2016 2018 1-10 lakh <1 lakh All India Source: Broadcast India Survey ing a 10% growth. Menon believes that there are macroeconomic factors driving the growth of TV penetration in the rural market.“The income level among the poor has increased andwith this,TVhas reached a position where it becomes a necessity as well as an aspiration because everybody else has it,”he opines. The urban market,which is somewhat saturated now, grew by 4% over the last two years. The growth in rural TV ownership contributed to 13% growth in viewership while the urban TV owners-hip growth corresponded to 10% growth in overall TV viewership. The total advertising pie is estimated to be `69,346 crore in CY2018, according to GroupM’sThisYearNextYear- report, of which 18% is estimated to be spent on digital, 45% on TV, 26.6% on print and the remaining 10.4% on other mediums such as OOH, radio and cinema. “Television is a great product at a great price. It is tough to find so much content available at such an affordable price,” says Ashish Pherwani, partner,media and entertainment, EY India. “In some cases it is free; for example,the DD Freedish.So, I believe the demand will continue to grow.” Continued on Page 2
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