OPINION, P8 MONEY & MARKETS, P11 MARKET FRAUDS UTI could well be the next victim of PSU-isation in India Though the IMF has kept its FY19 growth target unchanged, this has large downside risk TRUMP EFFECT Panel pitches for call interception powers to Tyagi-led Sebi EDITORIAL INTERNATIONAL, P14 Iranian President Rouhani tells N Korea US can’t be trusted MUMBAI, FRIDAY, AUGUST 10, 2018 VOL. 58 NO. 189, 28 PAGES, `7.00 WWW.FINANCIALEXPRESS.COM FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE READ TO LEAD 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: 38,024.37 ▲ 136.81 NIFTY: 11,470.70 ▲ 20.70 NIKKEI 225: 22,598.39 ▼ 45.92 HANG SENG: 28,607.30 ▲ 248.16 `/$: 68.68 ▼ 0.56 `/€: 79.62 ▼ 0.04 BRENT: $72.61 ▲ $0.33 GOLD: `29,486.00 ▲ `68.00 ROBUST FDI FLOWS? When Keyman’s `75cr inflows in 2007 got reported as `7,500cr in 2015! BANIKINKAR PATTANAYAK New Delhi, August 9 ■ In October 2007,Keyman 2.0 0.8 7,500 Keyman Financial Services ■ Foreign investors issued `75 cr 1.0 worth of shares in FY08 20 10,711 Triguna Hospitality Ventures 0 0.0 FY01 Source: DIPP, CSO FY18 ■ Paid-up capital and reserves `553.7 crore reportingofoldercases(including duplicate reporting), a case of past omissions bolstering current inflows”(see graphic). Also,whileFDIinflowshave been rising in absolute numbers, it is more meaningful to juxtapose this with the size of the economy. As a proportion of GDP, while FDI peaked at 3.5% of GDP in FY08, FY18 inflows were a smaller 2.4%, lower than even FY17’s 2.6%. Continued on Page 2 INSOLVENCY PROCESS ● FUND DIVERSION Directs that the bidding process begin again; expressly bars company, parent and promoters from the process FE BUREAU New Delhi, August 9 SC hits reset button on Jaypee Infratech YTD chg (%) 151.74 155.76 Nifty Small-cap Source: Bloomberg 23.8 117.17 112.95 BSE M-cap excluding top 10 Nifty Mid-cap « 34.57 42.80 M-cap of top 10 companies 17.69 16.72 5.95 5.12 2.6 3.6 5.5 14.0 Pulses Total crops -20 improving but has not caught onwith the levels seen lastyear. As things stand today, it is likely that production levels willbeatbestatthesamelevels as last year, unless rainfall progress turns favourable,”the report said. The last kharif season saw record foodgrain output of 138.73 million tonnes. As on August 3,kharif sowing area was down just 1.8% from theyear-ago period,from a wider gap of 7.5% that prevailed a week earlier. Continued on Page 2 Continued on Page 2 All India rainfall deficit stands at 10% as of August 8, while state-wise distribution shows deficiency is high in some states – Gujarat (19%), Jharkhand (24%), West Bengal (18%) and Bihar (15%). -30 -40 -50 Rice July 1, 2018 August 2, 2018 till Thursday at 10% — wider than 6% at the end of July — the analysts said that statewise distribution of rainfall shows that deficiency is high in Gujarat (19%),West Bengal (18%),Bihar(15%) and Jharkhand (24%). Bihar and Jharkhand could be more vulnerable as more than half of the agricultural area in these states are unirrigated. “Overall, rainfall dynamics have deteriorated over the last twoweekswiththeunevenspatial distribution making some states more vulnerable than others. Sowing is steadily CHINESE FABRIC IN BANGLA APPAREL Govt mulls tighter rules for garment imports BANIKINKAR PATTANAYAK New Delhi, August 9 THE GOVERNMENT IS considering a proposal to tighten rules on the origin of imported garments, amid warnings by the industry that Bangladesh — which enjoys duty-free access to the Indian market — is buying cheap fabrics from China in large volumes and dumping garments made out of them here. The textile and garment industry has represented to the ministries of commerce and textiles to make it mandatory for Bangladesh under the South Asian Free Trade Area (Safta) agreement Garment exports falling (% rise, y-o-y) 40 30 But imports from Bangladesh up (% rise, y-o-y) 44 10 0 -10 -20 -30 -40 80 2017-18 20 2018-19* *Apr-May April 2017 12.34 Aug 9, '18 BSE M-cap « FOR THE first time in the history of the Telecom Regulatory Authority of India (Trai), incumbent chairman RS Sharma has been given a two-year extension — technically a reappointment as the Trai Act doesn’t provide for an extension — by the government, reports fe Bureau in New Delhi. Accordingly, Sharma whose three-year tenure ended on Thursday, will now be freshly appointed the new head up to September 30, 2020, when he attains 65 years of age, an official order said. Dec 29, '17 Continued on Page 2 « Govt reappoints RS Sharma as Trai head for two more years THE BROADER MARKET continues to do badlywith just five stocks —Tata ConsultancyServices, Infosys, HDFC Bank, Reliance Industries and ITC — having between them contributedover80%oftheNifty’s gains of 940 points in 2018. Over 70% of all stocks with a marketcapitalisationofatleast `1,000 crore are down since January. Moreover, over a third of these 792 stocks have lost more than 20% of theirvalue. On Thursday, the Nifty50 gained 20.70 points or 0.18% to end the session at a record high of 11,470.70 points. The -10 16.62 IN WHAT would make the income tax (I-T) department less intrusive, it would scrutinise only 0.35% of the returns filed for the last fiscal, down from 1% earlier, reports fe Bureau in New Delhi. While the department would repose faith in taxpayers, the enforcement action would be severe on tax evaders, Central Board of Direct Taxes (CBDT) chairman Sushil Chandra said on Thursday. Of the 0.35% cases picked for scrutiny, 0.15% is for 'limited scrutiny' and 0.20% for 'full scrutiny'. PAGE 3 rally this year has been driven by purchases of local funds that have bought stocks worth nearly $10 billion; foreign portfolio investors (FPIs) have sold shares worth $260.4 million. Despite the spectacular rallyinthebenchmarks,India’s market capitalisation in dollar terms has fallen by about 5% to $2.26 trillion. The Chinese market has seen a bigger erosion in its market capitalisation of nearly23%.Among the top 10 equity markets by market capitalisation, only the US and France have yielded positive returns so far in 2018. YOOSEF KP Mumbai, August 9 PRODUCTION OFRICE,maize and pulses during kharif 2018 may fall marginally from the level seen last summer unless rainfall patterns improve, a groupofanalystsatHDFCBank saidonThursday,butaddedthat a clearer picture would emerge only by August-end. Bajra, groundnutandcottoncropsare among the crops that“are most under stress” compared with lastyear,andvegetable productioninthegrowingregionsmay have a“negative impact”due to rainfall shortage,theyadded. While the India Meteorological Department (IMD) put the monsoon rainfall deficit 0 22.76 I-T to scrutinise only 0.35% of returns, not 1%: CBDT chairman Indices hit records, larger market lags FE BUREAU New Delhi, August 9 Kharif 2018 sowing against last kharif (%) 10.25 17.78 THE RESERVE Bank of India (RBI) is understood to have told the Allahabad High Court that it is not possible to relax its February 12 circular mandating one-day default trigger for resolution of stressed assets exclusively for power projects, reports fe Bureau in New Delhi. Reiterating its earlier stance, lawyers representing the RBI argued on Thursday that the insolvency code already covers all eventualities, and if the government feels, it should issue directions directly to the RBI, sources said. PAGE 2 NEW BENCHMARKS Rice and pulses to see marginal fall, negative impact of rain deficit on vegetables 8.08 No special dispensation for power sector, RBI iterates Aug 9: SC bars JAL/JIL from bidding; RP to invite fresh bids; new CoC to be constituted with home-buyers Report casts cloud on crop output on rainfall pattern 8.48 QuickPicks May 16: SC directs JAL to deposit `1,000 crore for refund to homebuyers KHARIF 2018 10.05 Aug 23: Buyers move SC; say have been left in lurch; want forensic audit ofJIL and JAL to assess the extent of bankruptcy Union minister Arun Jaitley leaves after attending the proceedings in the Rajya Sabha for the first time after undergoing a kidney transplant in May 29.35 Aug 9, 2017: NCLT admits IDBI Bank plea, appointsAnuj Jain as RP, board of directors ofJILsuspended Back in the House 39.3 IN A SETBACK to the beleaguered Jaypee Group, the Supreme Court on Thursday directed that the bidding process for Jaypee Infratech (JIL) could commence afresh under the supervision of the reconstituted committee of creditors (CoC) that includes home-buyers, even as it explicitlybarred the company, its parent Jaiprakash Associates (JAL) and their promoters from participating in the process. The top court also allowed the Reserve Bank of India (RBI) to direct the banks to initiate separate insolvency proceedings against JAL. A bench headed by ChiefJusticeDipakMisra saidthelimitationperiod of 180 days to conclude the insolvency proceedings for JIL will commence from Thursday. The court asked the resolution professional (RP) to invite fresh bids andalsoconsidertheear- nal Company Law Tribunal (NCLT),Allahabad,to deal with the insolvency proceedings against JIL, the bench said: “If it becomes necessary to apply for a further extension of 90 days, we permit the NCLT to pass appropriate orders in accordance with the provisions of the IBC (Insolvency and Bankruptcy Code),” it said, while directing the transferof`750crore,withthe interest accrued thereon, deposited by JAL in the apex Sept 11: court to the NCLT. SC revives NCLT Thanks to the recent order; asks RP to take amendments to the IBC, over JIL; asks JAL to deposit home-buyers are treated `2,000 crore to safeguard flat as financial creditors buyers' interests and hence can be part of the CoC. Sept 5: IDBI Nov 13: SC The court said Bank moves SC summonsJAL that there is no doubt for restoration directors, asks that “JAL/JIL lack the of NCLT order, them to disclose financial capacity and says SC can't personal assets; resources to complete give co back to creates portal the unfinished housing those who for homeprojects. To allow them messed it up buyers to participate in the processofresolutionwill Sept 4: SC stays Jan 8, 2018: RBI render the provisions of NCLT order; moves SC for the Act nugatory.” buyers allowed nod to initiate to file/pursue insolvency Continued on Page 2 cases in proceedings consumer fora against JAL lier or the revised bids submitted by the three shortlisted bidders — the Adani Group, Singapore-based Cube Highways and Infrastructure and Lakshdeep Investments (the highest bidder). The CoC had on May 8 rejected the highest bid (`7,350 crore), saying it was too low. While allowing the Natio- A DAY BEFORE the National Company Law Appellate Tribunal (NCLAT) pronounces its judgment on the petition of Neeraj Singal,the erstwhile promoter and managing director of Bhushan Steel, challenging the eligibility of Tata Steel to bid for his bankrupt company, the Serious Fraud Investigation Office (SFIO) arrested him for allegedly siphoning off funds worth over `2,000 crore. This is the first time that the SFIO has arrested a person for fraudulent activities. The investigation body under the ministry of corporate affairs (MCA) got powers to arrest people for violations of companies law last year. Singal was arrested in the national capital and has been sent to judicial custody till August 14, an MCA statement said. This is not Singal’s first brushwith the law.In 2014 he was arrested by the Central Bureau of Investigation in connection with a `50-lakh bribery case involving the then chairman and managing director of Syndicate Bank, SK Jain. In May, Bhushan Steel was taken over by Tata Steel following the corporate insolvency resolution process. According to a finance ministry tweet, Singal is “accused to be guilty of siphoning off funds of over `2,000 crore from the loans availed by Bhushan Steel using more than 80 companies”. The companies were used for fraudulent activities of rotation of funds through bogus loans and advances, and investments,among others, said the tweet. In another tweet, the ministrysaid fraudulent activities contributed to the company becoming insolvent. 0.55 FE BUREAU New Delhi, August 9 Bhushan’s Singal arrested by SFIO 1.5 The Swedish furniture giant’s main agenda is to be affordable which is, ironically, also its biggest challenge ■ BrandWagon, P13 40 12.4 IKEA’s India bet 60 15,000 Serene Senior Living ■ MCA filings show no such 3.0 inflows. Firm’s paid-up capital only `1.5 crore in FY16 31.7 Special Feature 2.4 INSTANCES SUCH AS these aboundinastudyofIndia’sforeign direct investment (FDI) by KS Chalapati Rao and Biswajit Dhar of Institute for Studies in IndustrialDevelopment.While the authors refuse to comment on whether all errors in India’s FDI overstate it — some examples of big understatement are given — this means India’s FDI data will probably be viewed with as much scepticism as its GDP data; a final view on whether the FDI numbers are overstated or understated will requiredetailedanalysisofeach inflowinto the country. Thoughtheofficialnarrative is that the rising FDI is a sign that Make-in-India has got a leg-up because of friendly investmentpolicies,theauthors say “a good portion of the increased (FDI) inflows during 2016-17 may be attributed to FY16 FDI (` cr) 8.0 THE NATIONAL Green Tribunal (NGT) on Thursday allowed mining major Vedanta to access the administrative unit inside its Sterlite copper plant at Thoothukudi in Tamil Nadu, reports PTI. A bench headed by chairperson AK Goel, however, said the company would not have access to its production unit and directed the district magistrate to ensure this. Figures a bit iffy % of GDP 4.0 $ billion « NGT: Vedanta can access Sterlite admin unit in TN 80 « RULING NDA nominee and JD(U) member Harivansh was on Thursday elected the deputy chairman of the Rajya Sabha, securing 125 votes against 105 polled by Opposition candidate BK Hariprasad, reports PTI. The post was lying vacant since the retirement of PJ Kurien on July 1. The entire House congratulated him, with Prime Minister Narendra Modi saying in a lighter vein: "Ab sub kuch Hari bharose”. FDI not so robust « IN THE NEWS NDA’s Harivansh elected deputy chairman of RS Financial Services issued `75 crore of shares to a foreign investor.Eight years later,this was reported as inflows of `7,500 crore in India’s FDI statistics. ■ Serene Senior Living was reported as having received $2.3 billion from the US in FY16.Its filings don’t reflect these inflows,don’t talk of projects in India and its paid-up capital was just `1.5 crore in FY16. June 2018 Source: Ministry of commerce to use either their own or Indian yarn and fabric in their garments to be able to supply to India at zero duty, said Confederation of Indian Textile Industry chair- man Sanjay K Jain. “The proposal is under consideration,” said a senior government official. But a decision is yet to be taken, the official said, adding, though, that tweaking rules undertrade agreements is not so easy and it needs more deliberations. Senior textile and garment industry executives have now cautioned that the move to double import duties on close to 400 products to 20% could fail to yield desired results, unless the rules of origin are made more stringent under the Safta agreement. Continued on Page 2
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