OPINION, P6 COMPANIES, P5 SUNIL JAIN Believe it or not, AG tells SC it was wrong to cancel 2G licences! INTERNATIONAL, P4 T NANDA KUMAR FUTURE GROWTH PRIVATE ROUTE States like Odisha & Bangla, which have higher costs, will gain least from new MSPs DCM Shriram to invest `1,300 cr to expand sugar, chemical biz Saudi fund in talks to invest in Tesla buyout deal MUMBAI, MONDAY, AUGUST 13, 2018 WWW.FINANCIALEXPRESS.COM FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE READ TO LEAD VOL. 58 NO. 191, 16 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 Q1FY19 Base effect, cost control see India Inc post good numbers space — especially steel — has boosted aggregate numbers. JSW Steel, for instance, reported a near 100% jump in operatingprofitsonmuchbetter realisations. Hindalco’s ebitda (earnings before interest depreciation and tax) rose ‘MSP hike, model APMC Act to help double farmers’ income’ MSP HIKE for crops and adoption of model APMC Act by states would help in doubling farmers' income by 2022, Niti Aayog member Ramesh Chand said, reports PTI. These actions, including fostering competitive markets, are in line with the government's target of doubling farmers' income in five years. "I am confident that if states adopt the measures which have been suggested by the government then we will be in a position of achieve this target at the national level," Chand said. He added the growth in the agriculture sector is close to 5% which is reasonable to achieve the target. PAGE 2 Govt plans pre-determined tariff regime for airports THE GOVERNMENT plans to have a predetermined tariff structure linked to inflation for airports as it seeks to address issues hindering investments in the fast growing Indian aviation sector, a senior official said, reports PTI. Currently, there is a cost-plus tariff structure wherein the rates for an airport are determined every five years, which is known as the concession period. Many more airports are expected to be operational in the coming years, especially with rising air passenger traffic and infrastructure woes at some of the existing major aerodromes. PAGE 3 Sundaram Select Focus IDFC Large Cap 96.65 12.37 17.05 10.66 15.30 Source: Value Research Sample Size: 30 large-cap equity schemes MF schemes that have done well were invested in the banking,IT,NBFCandconsumersectors. For instance, Sundaram Select Focus has invested around 37% of its corpus in banksandfinancestockswitha big weightage for the HDFC Continued on Page 2 Annual rise in discoms' dues to gencos at May-end `17,352 cr Reduction in discoms' losses under UDAY in FY18 Had the extra dues — `13,260 crore — been paid by them in time, the discoms would not have reported the sharp cut in financial losses for FY18.The discoms had posted anannualreductionof`17,352 crore (50%) in their losses by the end of March 2018, under the Ujwal Discom Assurance Yojana (UDAY) scheme. Recently,thepowerministry hastoldtheparliamentarycommittee on energy that delayed payments by discoms is one of thereasonswhythegencos’debt servicing abilities are dented. ANUPAM CHATTERJEE New Delhi, August 12 WHILE THE GOVERNMENT, Reserve Bank of India and the judiciary are grappling with the issue of stressed power projectsworth `2.5 lakh crore, the electricity distribution companies (discoms) are addingtothelatter’swoes.Discoms’unpaidduesto23power producers stood at `44,195 crore at May-end, up 30% from the level a year earlier. In the six months to the end of May,these entities’dues pending for more than 60 days rose 8.4%(CAGR)to`33,650crore. Continued on Page 2 Cap on sugar sales slows cane payments BANIKINKAR PATTANAYAK New Delhi, August 12 CANE ARREARS HAVE droppedataslowpaceafterthe government reintroduced sugarsales quota in June,belying the very objective of the food department’s move to bring back the controls. Data show cane arrears stood at `18,512 crore as of June 30, down only `1,339 crore from `19,851 crore as of June 15. Between June 1 and 15, the drop was just `1,310 crore.However,inthefortnight before the quota system was reintroduced,cane arrears had Decline in cane arrears (` cr) 1,408 May 15-31 Jun 1- 15 1,310 Jun 15-30 1,339 Quota was reintroduced in June Total dues at record levels* (` cr) Jun 30, 2016 Jun 30, 2017 Jun 30, 2018 4,934 4,881 18,512 *At the end of June for any year ● TURBULENCE In the slow lane DGCA to conduct financial audit of troubled Jet Airways PRESS TRUST OF INDIA Mumbai, August 12 AVIATION REGULATOR DGCA is set to conduct a financial audit of the Naresh Goyal-promoted Jet Airways, amid its fiscal conditions underpressureduetothesurgingjetfuelpricesandlowfares, a source said. The Directorate General of Civil Aviation (DGCA) has alreadyevaluated the financial health of the national carrier Air India recently, besides conducting a special Lack of investments may affect order flow audit of Air Deccan, the source close to the development said. The financial audit of airlines, which has been conducted in the past too,is done to assess their fiscal health and also ensure that they are not compromising on safety due to financial stress. “Wewill conduct the financial audit of Jet Airways from August 27. A similar audit of Air India has been completed,” the source said. The lack of investments by the government or private sector may result in a slowing order book for engineering and construction companies this fiscal, with the June quarter already showing very few signs of a pick-up. Report on Page 3 Continued on Page 2 ROUHAN SHARMA Disorder in orders (` crore) FY19E Growth (%, y-o-y) FY20E FY19E Power generation 55,700 Power transmission 55,300 1,31,500 Railways Irrigation 39,100 Water treatment 27,400 Ports 19,200 Airports 7,000 Hydrocarbons Defence Others Ordering total 1 9 6 1,74,600 26 14 1,50,100 14 14 5 30,100 6 27 41,400 10 5 19,200 10,600 1,08,000 96,000 1,11,900 1,45,400 2,85,400 3,36,100 9,93,600 11,18,300 (Orders placed) FY20E 31 56,000 58,800 1,53,100 Roads 180 51 -11 10 30 13.8 12.5 Source: Bank of America Merrill Lynch dropped by `1,408 crore (between May 15 and endMay) even though sugarprices were lower than in June. Infact,thequotasystemhas onlyconstrictedmills’abilityto cut inventory and clear dues, just when sugar rates began to improve due to the imposition of a minimum sale price. The allocation of a smaller sales quota to mills in Uttar Pradesh — the largest sugar producer thatalsomadeupforover66% of total arrears at the end of June — than those in Maharashtra that accounted for just around6%ofdues,hasfurther exposed flaws in the food department’s policy-making. Continued on Page 2 VIEWERSHIP FIGHT Zee overtakes Star to become No. 1 in regional GEC space MEGHNA SHARMA & ANKITA RAI Mumbai/New Delhi, August 12 IN THE ONGOING tussle for viewership, regional markets are the new battlefield for broadcastnetworks.ZeeEntertainment Enterprises (ZEEL) has overtaken Star India to become the numero uno network in the regional GEC space, as per a report by Kotak Institutional Equities citing BARC India data. The report Q1FY18 Q1FY19 TAMIL TELUGU KANNADA Sun TV STAR Vijay Zee Tamil Star Maa TV Zee Telugu ETV Telugu MARATHI Regional GECs— BARC ratings market share (%) Source: Kotak Institutional Equities report BANGLA Zee Marathi Colors Marathi Star Pravah Star Jalsha 13.6 18.8 QuickPicks 13.38 15.35 Canara Robeco Bluechip Equity States with highest dues (` cr) 6,140 UP Tamil Nadu 4,354 Telangana 4,330 Karnataka 4,055 MP 3,693 Colors Zee Udaya Kannada Kannada TV (Sun) ODIYA Zee Bangla Colors Bangla Sarthak TV 8.4 8.2 Seals’ whiskers provide a model for the latest submarine detectors. They can detect the trails of things long passed by Edel Large Cap 21.63 18.92 15.27 15.56 twins.Again,around45%ofthe portfolio ofAxis Bluechip Fund is is in banks, finance and software companies;as much as 17%ofthecorpusisinvestedin the HDFC twins,shows the fact sheet as on June 2018. Jinesh Gopani, Head (Equities),Axis Mutual Fund picking leaders or probable leaders in a particular space has been the fund's strategy.“Private banks with a big retail presence,select NBFCs,auto,ancillariesandconsumptionhavebeeninourportfolio formanyyears now.Moreover some good picks in the IT spacehavehelped,”Gopanisaid. RahulBaijal,fundManager, Sundaram Select Focus, said post-demonetisation,thefund picked up several consumer and financials stocks that had corrected but whose fundamentals were strong. 25.6 25 Navy seals Axis Bluechip `13,260 cr 35.3 37.8 ■ SCIENCE & TECH, P12 Returns (%) (` cr) 34.4 33.9 Imposition of safeguard duty on import of cells and modules threatens projects bagged aggressively, say developers ` 2 years Power struggle 48.4 47 Solar players fear dark days ahead 1 year Discoms’ dues to gencos rise 30% 24.1 23 ■ INFRASTRUCTURE, P11 130.86 Most mutual fund schemes seen under-performing WITHTHEBROADmarketperforming poorly in 2018 so far and 70% of all stocks with a marketcapitalisationof`1,000 croreormoretradinginthered, most mutual fund schemes are under-performing. Of a sample of 30 large-cap equity schemes only ten have managed to outperform the Value Research average largecap category over a two-year period.Ofthenearly800stocks that command a market capitalisation of over `1,000 crore, morethanathirdhavelostmore than 20% since January2018. The under-performance seems to have taken a toll on investor sentiment because in July, the inflows into equity schemes at `9,452 crore,were at their lowest in four months. Notsurprisingly,mostofthe ● QUOTA EFFECT 50% loss reduction in FY18 achieved by them largely by delaying payments to producers LARGE-CAP FUNDS The top 5 ADDING TO STRESS 5.1 8.3 Reviving gas production and rising prices portend well for ONGC’s prospects; valuations are undemanding; retain ‘Buy’ Continued on Page 2 A file photo of Indian-origin British author VS Naipaul. The Trinidad-born Nobel laureate, known for his critical commentary on colonialism, religion and politics, died at the age of 85 Report on Page 16 24.3 26.8 Above par operational showing by about 18% y-o-y. These numbers, analysts say, are expected to moderate in the coming quarters. For a sample of 1,054 companies (excluding banks and financials), net sales have jumped a smart 20% plusyear- Remembering Naipaul 32.1 41 ■ INVESTOR, P9 165.20 Source: Capitaline 22.2 27.8 The $45-billion Chinese IT firm looks to replicate the success of its PC business in the smartphone arena here 26.06 Sample of 1054 companies (excluding banks & financials) 55.7 44.8 Lenovo readies mega India push -9.89 Q2 Q3 Q4 Q1 FY18 FY19 13.6 20.1 ■ eFE, P8 123.90 3.24 Q2 Q3 Q4 Q1 FY18 FY19 13.4 17.2 In their next phase of growth, mobile payment players are diversifying to provide short term credit to boost revenues (bps, chg y-o-y) 16.9 21.4 From m-wallet to digital lender 15.92 78.16 11.12 -26.49 14.41 14.76 20.43 Q2 Q3 Q4 Q1 FY18 FY19 CHIRAG MADIA Mumbai, August 12 ■ BRANDWAGON, P10 (% chg y-o-y) on-year.With total expenditure going up by a slower 19%, the operating profit margin has expanded by nearly 80 basis points y-o-y to push up the ebitda by 26%. With interest, depreciation and tax all rising only moderately,net profits for the sample too are up a good 26% y-o-y.Althoughrawmaterial prices remain elevated, the bigger volumes—and in a few instances price hikes — have been partly able to absorb the increased costs.The ratio of raw materials rose just 97 basis points y-o-y, the smallest increaseinatleastfourquarters. While consumption demandisseeingaclearuptick with the effects of demonetisation and GST fading away, the investment cycle isn’t turning just as yet. While Larsen and Toubro’s (L&T) order inflows in Q1FY19 were up a strong 37% y-o-y, the order book at the end of June was up just 3%. 16 18.6 FE SPECIALS Q2 Q3 Q4 Q1 FY18 FY19 RM to sales 57.5 46.8 WHILE A FAVOURABLE base has helped India Inc report a reasonably good set of results for the three months to June, much of the improvement in the numbers is also the result ofcompaniescontainingcosts. Better volumes have allowed companies to extract better operating leverage but keen competition is robbing them of pricing power and elevated raw material costs will continue to pressure margins.The turnaround in the metals (bps, chg y-o-y) Net profit 54.4 47.7 FE BUREAU Mumbai, August 12 (% chg y-o-y) OPM -226.76 AFTER TRAI CHIEF'S Aadhaar dare ignited a debate on public display of the 12-digit number, the UIDAI is planning a user outreach to sensitise people about the dos and don'ts of sharing their biometric identifier, reports PTI. The authority intends to equate the Aadhaar number with other personal information (such as PAN, bank account and credit card number) to caution users against placing their personal details in the public domain, particularly on digital platforms like Twitter and Facebook. Net sales 10.91 IN THE NEWS Aadhaar breach: UIDAI plans public outreach While companies reported good volumes, lack of pricing power and rising input cost remain cause of concern Tarang TV Odisha TV goes on to highlight that some of the reasons for this could be the continued strength of Zee Tamil despite competitor Star Vijay’s popular show Bigg Boss Tamil2,inadditiontoZeeKannada gaining 200 bps,narrowing the gapwith market leader Colors Kannada. Furthermore,ZeeNetwork’s weighted viewership share in July,2018 stood at 27.5%. On the back of Zee Tamil, Zee Kannada and Zee Bangla, coupled with the soon to be launched Malayalam GEC, Zee’s share in the regional GEC space is expected to be further amped up. Inaddition,thebroadcaster is also augmenting its overall regional movie portfolio. It already has a Telugu movie channel while it is also expected to launch Kannada and Tamil movie channels. ZEEL attributes the success to in-house content creation and a focus on consumer insights. Continued on Page 2
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