OPINION, P8 COMPANIES, P6 EDITORIAL Before Ayushman Bharat, fix ailing public health system INTERNATIONAL, P14 RENU KOHLI CUTTING DEBT STRONG REMARKS Government must create fiscal space by pruning the Food Security Act Singhania-led Raymond looks to sell Thane land Trump thinks stock market would crash if he's impeached NEW DELHI, FRIDAY, AUGUST 24, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM VOL.XLIV NO. 150, 20 PAGES, `6.00 (PATNA `6.00, RAIPUR `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 READ TO LEAD SENSEX: 38,336.76 ▲ 51.01 NIFTY: 11,582.75 ▲ 11.85 NIKKEI 225: 22,410.82 ▲ 48.27 HANG SENG: 27,790.46 ▼ 137.12 `/$: 70.11 ▼ 0.29 `/€: 81.22 ▼ 0.72 BRENT: $74.32 ▼ $0.46 GOLD: `29,530 ▲ `1.00 EXPRESS PHOTO: AMIT MEHRA BOARD’S NOD L&T to buy back shares for `9k cr Six crore shares to be bought back via tender route at maximum price of `1,500 apiece FE BUREAU Mumbai, August 23 LARSENANDTOUBRO (L&T), which has cash and liquid assets of `17,425 crore and a consolidated debt of `1.08 lakh crore, has announced it will buy back shares for `9,000 crore at a maximum price per share of `1,500. Expectedly, the buyback announcement made last Saturday boosted the L&T stock which was under-performing until Friday, having lost 1.3% since January. On Thursday, the stock closed at `1,352.50 on the BSE, up 2.3% over Tuesday’s close of `1,322.15. The Street was expecting a somewhat smaller spend of around `7,000 crore. At `9,000 crore,the buybackwill push up the consolidated gross leverage to around 2X. Moreover, analysts say it IN THE NEWS Markets scale new highs BENCHMARKS DEFIED GRAVITY for the fourth straight session on Thursday, reports PTI. While the Sensex jumped 51 points to a fresh closing peak of 38,336.76, the Nifty rose 11.85 points to record 11,582.75. Persistent buying by investors offset concerns related to the rupee and global trade. Categories of shareholders (%) As on August 17, 2018 Financial Institutions/ SUUTI 22.94 Foreign Institutional Investors 18.6 Foreign Nationals/NRI/OCBs etc 0.97 Shares underlying GDRs 1.89 Mutual Funds 14.69 Bodies Corporate 6.69 Directors & Relatives 0.11 L&T Employees Welfare Foundation 12.28 General Public 21.83 could affect the quantum of dividends, though not materially. The company, they believe, is looking to reach a return on equity (RoE) of 18% by FY21. Analysts said the buyback is the fallout of limited investment opportunities and strong cash — flows coming in from the core engineering & construction (E&C) business. The management is hoping to realise a fair bit of cash from the sale of the E&A business. The company has been selling non-core businesses and has raised around `4,500 crore over the last 24 months.Analysts say L&T may do more buybacks since it has $2.1 billion in asset sales lined up in FY20, which also may be returned to shareholders. Some of the key non-core assets divested byL&Tinclude the Kattupalli port for `1,950 crore and the general insurance business for `551 crore. L&T also realised funds from the initial public offerings of the ITand technologyservices business and put five of its roads into an InvIT. L&T had reported a sharp 36% year-on-year jump in consolidated net profits to `1,215 crore for April-June 2018, while the net sales for the quarter rose 18% y-o-y to `28,300 crore. MARKET VALUATION ‘Over the top is far from being mainstream in India’ Reliance first to cross `8 lakh cr Vuclip’s Arun Prakash speaks about the OTT scenario in India, the company’s strategy for its video on demand platform Viu and its growth plans ■ BrandWagon, P13 How long-term investors can navigate volatile markets Long-term investors should not react too much to price movements when the markets are volatile as it will harm their portfolios in the long-run ■ Personal Finance, P13 QuickPicks Draft e-comm policy ignites turf war between ministries THE RECOMMENDATIONS of a task force, headed by the then commerce secretary, on e-commerce seem to have stoked a turf war, reports fe Bureau in New Delhi. Not just some of the task force’s proposals, but even its delegation of work to other departments to implement its suggested policy changes has irked ministries and departments. The PMO could involve the Niti Aayog or the Cabinet secretariat, instead of the commerce ministry, to monitor the rollout of the policy. PAGE 2 Sebi calls for reduction in TER, more competition in MF sector IN A move that might see investors pay lower charges, Sebi is looking to bring down the total expense ratio of mutual funds, reports fe Bureau in Mumbai. Fund houses currently charge anywhere between 1.5-2.5% for equity schemes and 12.25% for debt schemes. The market regulator has also asked the mutual fund industry to promote direct plans — plans that investors buy without a distributor being involved — as these have not yet picked up in a big way. PAGE 10 Govt imposes standard EC conditions for 25 sectors THE CENTRE has imposed standard conditions for as many as 25 sectors, seeking environment clearance (EC) for expansion of existing projects or new projects, reports PTI. The governmentconstituted green panel — Expert Appraisal Committee — assesses the projects and makes recommendations, based on which the environment ministry grants the final EC. The 25 sectors include iron, steel, cement, coal, petroleum refineries industry, paper and pulp industries, among others. Twin deficits, slow investments key challenges FE BUREAU New Delhi, August 23 Back in block Union finance minister Arun Jaitley outside the North Block in New Delhi on Thursday FE BUREAU (` lakh crore) 8.05 8.8 Aug 23, 2018 Reliance Industries — the biggest driver of Nifty 50 in 2018 — surpassed the `8-lakhcrore mark in terms of market capitalisation and became the first Indian company to do so. The stock surged 1.8% on Thursday to hit a fresh lifetime high of `1,269.45 on the NSE. At Thursday’s close, the m-cap of RIL stood at `8.05 lakh crore, which is `25,380 crore higher than that of Tata Consultancy Services –- the second-largest company by market valuation. 7.6 Jan 1, 2018 6.4 5.2 Reliance Industries Air India likely to get `980 cr next week OIL IS WELL ■ Oil giant to buy strategic stake in local group Sabic for $70 bn ■ If IPO revived, deal will allow to achieve some of Saudi’s aims for jumbo share sale ■ Difference would be the origin of the cash: Rather than equity investors, it would come from bank loans and bond investors THE FINANCE MINISTRY will be releasing `980 crore to Loss cash-strapped Air India as (FY17): part of the supplemen5,765 tary grant sought by crore Total debt: the civil aviation ministry, an official told *Figures as on March 31, 2017 FE. This grant, which will help the airline in clearing some of its The demand for an loan repayments additional grant was predue to banks and sented before Parliament durvendors,islikelyto ing the recently concluded be released next Monsoon session.While it was week,the official approved bythe Lok Sabha,the added. Rajya Sabha could not take it AircraftReportedly, up. Since it is a money Bill, the related the carrieris sepRajya Sabha’s assent is not a debt: arately raising a `17,314 must but the grant can onlybe short-term loan made 14 days after the concrore of `1,500 crore clusion of the session; from Bank of Baroda. this period ends on The state-run airline August 24. owes around `1,800 Since Air India was crore to its vendors in need of funds, it had which includes lessors sought an interim help Working and banks. from the finance mincapital In the FY19 Budget, istry in the form of loans: thegovernmenthadset `500crore,pendingthe aside a grant of `650 `31,467 approval of the Budcrore crore for the carrier. getary grant. However, A supplementary officials said since the grant is made when the initial grant will be made next week, grant approved by Parliament the demand for interim relief falls short. The additional stands superseded. grant needs to be presented and passed by Parliament. Continued on Page 2 `48,781 crore 4.0 Saudi Aramco puts IPO on hold to focus on giant chemicals deal SAUDI ARABIA HAS formally put the initial public offering ofitsgiantoilcompanyonhold while Aramco focuses on buying a strategic stake in local petrochemical group Sabic for as much as $70 billion. While the Sabic deal will delay the IPO, it doesn’t mean it’s cancelled, people familiar with the matter said, asking nottobeidentifiedbecausethe information is private. Khalid al-Falih,the Saudi energyminister,said onThursdaythat the SUPPLEMENTARY GRANT ARUN NAYAL New Delhi, August 23 5.77 SHELVED FOR NOW BLOOMBERG Kuwait/London, August 23 ARUN JAITLEY, WHO underwent a kidney transplant surgery in May,resumed charge as theministeroffinanceandcorporate affairs on Thursday and reviewed the state of the economy with senior officials. Jaitley’s return to the North Block coincidedwithMoody’srevising up its 2018 India growth forecast by 20 basis points,from its prediction in May,to 7.5%.The globalratingagencyrecognised the economy’s resilience to weatherexternalshocks,suchas elevated oil prices. His return comes at a time when the economy is facing renewedchallenges,despiteits inherent strength to absorb shocks.A spurt in trade deficit and the depreciation of the rupee that would inflate costs ofimportsfurtherhavethreatened to worsen the current account deficit (CAD) in the currentfiscal.ForecastsofCAD vary between 2.5% and 2.7% for the current fiscal, up from 1.9% a year earlier.Collections of goods and services tax have been less than anticipated and the impact of a cut in the indirect tax rates on a host of items Continued on Page 2 Special Features JAITLEY BACK AS FM governmentwascommittedto theAramco IPO“at a time of its own choosing when conditions are optimum”. The statement came after Reuters reported on Wednesday that Riyadh had called off thedomesticandinternational listings, citing people it didn’t identify.EveniftheIPOiseventually revived, the AramcoSabic deal will allow the kingdom to achieve some of the original aims Crown Prince MohammedbinSalmansetfor the jumbo share sale. Continued on Page 2 Jaitley’s return coincides with Moody’s revising up 2018 India growth forecast to 7.5% It recognises India’s resilience to weather external shocks, such as elevated oil prices Jaitley to face renewed challenges, despite economy’s inherent strength to absorb shocks in July is yet to pan out. Public sectorbankscontinuetostruggle with stressed assets, although their losses are down 73.5%intheJunequarterfrom the previous three months. Although the Centre has reiterated its commitment to the fiscal consolidation path and meeting this year’s deficit targetof3.3%ofGDP(lastyear it allowed a slippage from the originaltargetof3.2%andsettled for a higher 3.5%), it seems a daunting challenge. Continued on Page 2 ● PRIVACY CONCERN WhatsApp rejects India's traceability demand PRESS TRUST OF INDIA New Delhi, August 23 WHATSAPP HAS REJECTED India’s demand for a solution to track the origin of messages on its platform, saying building traceability would undermine end-to-end encryption and affect privacy protection for users. Emphasising that people use its platform for all kinds of “sensitive conversations”, the Facebook-owned company said the focus is on educating people about misinformation. The government has been pushing WhatsApp to find a technology solution to trace the origin of messages,a move it believes can help curb horrific crimes like mob-lynching emanating from fake news. “Buildingtraceabilitywould undermineend-to-endencryption and the private nature of WhatsApp,creating the potential for serious misuse. WhatsApp will not weaken the privacy protections we provide,” a WhatsApp spokesperson said. Over the past few months, WhatsApp has drawn flak over its use in spreading fake news that have incited incidents of mob-lynching invarious parts of the country. Continued on Page 2 PANEL REPORT Too little 5G spectrum in India at very high price, needs correction FE BUREAU New Delhi, August 23 WHILE THE DEPARTMENT of telecommunicationshasidentified 200 MHz spectrum in the 3400-3600 band,which is for5G services and earmarked auctioning 175 MHz,with the balance 25 MHz to be reserved forusebyISRO,anexpertpanel on 5G road map appointed by it, finds this amount to be scarce. It also finds the cost of spectrum high in the country and wants the government to set this right. The report, which was released on Thursday, has noted in regard to the availabilityof 5G spectrum,“India’s quantum of spectrum allocation needs a big fillip. For example,total licensed mobile spectrum is about 220 MHz compared to 608 MHz in the USA and 353 MHz in the UK. Further, the cost of spectrum, relative to per capita GDP, is much higher than most countries. Both these factors drive up infrastructure costs.Also,in recent years, the high cost of spectrumhasleftlargequanti- India 5G spectrum crunch in India? 220 MHz For telecom use: 175 MHz USA 608 MHz UK 353 MHz ties of unsold spectrum. It is important that India corrects these anomalies in 5G.” The Telecom Regulatory Authorityof India (Trai),which earlier this month recommended reserve price for the next round of spectrum auc- tions across bands, has fixed a reserve price for 5G band at `492 crore per MHz. This means that for a pan-India minimum block of 20 MHz, operatorswill have to shell out `9,840 crore, a price which is seen as steep by the industry considering that in the South Korean auctions for this band amonthago,thepriceperMHz was just `130 crore. Thereporthasalsosaidthat 5G networks will need new business models and bring higher risks to service providers, so the government should offer a comprehensive supportpackage.“Oneexample of support can be to designate 5G networks as essential infrastructure and allow telecom service providers access to capitalatlowercost.Anotherexample is to formulate a policy for public-private partnerships in innovative but high-risk 5G deployment.Yetanotherexample is to provide economic viability gap grants for rural deployments using unutilised USOfunds,”thereporthassaid. Continued on Page 2
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