ECONOMY, P2 UNFAZED BY CRITICISM VICTORY EXPECTED Medical tourism can help fix Indo-Pak ties — its humanitarian benefits are a big plus Trai’s purpose is not to establish PR, says chairman RS Sharma Japan’s Abe seeks fresh term as party head, record run as PM NEW DELHI, MONDAY, AUGUST 27, 2018 WWW.FINANCIALEXPRESS.COM FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE READ TO LEAD VOL.XLIV NO. 152, 16 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 Continued on Page 2 FLAT FEE Royalties no more a king’s ransom 100 60 2014-15 2015-16 2016-17 87.5 61.9 47.3 80 Return (%) 2017-18 -20 Despite a slow start, the edutech industry is set to become a $1.96-billion industry in India by 2021 -40 ■ eFE, P8 (` cr) Samsung’s innovation edge The consumer electronics brand will launch new smartphones in the mid-segment space this festive season ■ INVESTOR, P9 Buyback to be value-accretive L&T’s move is likely to result in ROE accretion of 100-150 bp over FY19-21F and improve EPS by 4-4.5% over FY20-21F ■ INFRASTRUCTURE, P11 ‘Govt steps to take time to fructify’ Multi-modal logistics parks (MMLPs) are going to be key to the logistics sector’s growth, J Padmanabhan, Crisil, tells FE ■ SCIENCE & TECH, P12 Whirlybirds are go For now, with autonomous operations possible, the difference between choppers and drones is starting to narrow QuickPicks Banks rush to resolve `3.8L-cr NPAs as RBI deadline ends today WITH THE six-month deadline set by the Reserve Bank of India (RBI) to finalise resolution plans for around 70 large stressed accounts worth over `3.8 lakh crore ending on Monday, banks are burning the midnight oil to avoid bankruptcy proceedings against these defaulters who are mostly power producers, reports PTI. Banks prefer the out-of-NCLT resolution. PAGE 2 FPIs now need to fill only 1 form to enter domestic capital market THE GOVERNMENT has introduced a single application form for foreign investors to enter into the domestic capital market as part of the exercise to improve ease of doing business, reports PTI. Earlier, foreign portfolio investors (FPIs) had to file a separate form to register themselves with the market regulator Sebi. PAGE 2 -9.1 The ‘learning’ curve 0 0.5 20 ■ BRANDWAGON, P10 22.4 25.5 40 Maruti Suzuki HUL Nestle India Bata India Castrol Nifty 50 India Nifty MNC index Net sales Royalty & technical fees PBT 2016-2017 7,528 2,22,546 31,572 2017-2018 7,565 2,48,052 3,63,60 FE BUREAU Mumbai, August 26 ROYALTY AND TECHNICAL fees paid out by a clutch of 30 multinational corporations (MNCs) in 2017-18 were flat compared with the outgo in 2016-17 while their profits before tax (PBT) grew 15%. Data sourced from Capitaline showthatasashareoftheirnet sales, royalties at 3% were marginally lower than the 3.3% seen in 2016-17. The amount paid out by these companies in 2017-18 was `7,565 crore,virtually flat compared with the outgo of `7,528 crore in the previous year.Thesampleincludedcompanies such as Maruti Suzuki, HindustanUnilever,Nestle,ABB, Bosch and Colgate Palmolive. Although fund managers have constantly complained about the high royalties that MNCs as have proxy advisory firms, the fact is that the CNX MNCIndexhasnowbeatenthe Niftyin nine of the tenyears to 2017-2018. The MNC benchmark’s performance was particularlyoutstanding in 201617 and 2017-18, when the index rallied more than 25% whereas the Nifty gained a little over 10%. Maruti Suzuki returned a spectacular 62% in 2016-17 and followed it up with a dazzling 47% in the 2017-18. Moreover,HUL gained 46% in 2017-18. Continued on Page 2 Continued on Page 2 Off-budget loans to double to `1.7 lakh crore in FY19 EBRs to soar if NHAI, railways and other PSUs included, will dent sanctity of fisc, crowd out private investors Extra budgetary resources (loans) fully serviced by GoI (` crore) 1,67,000 78,400 FY17 FY18 FY19 (estimate) Entities through which EBR raised 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 PRASANTA SAHU New Delhi, August 26 CAUGHT BETWEEN THE twin goals of treading the fiscal consolidationpathandkeepingthe flagship schemes and other importantwelfareprogrammes adequately funded ahead of next year’s general election,the Centrehaslinedupplanstoraise amassive`1.7lakhcroreviathe extrabudgetaryresources(EBR) route in the current fiscal, up 110% from FY18.These loans, all of which will have to be serviced out of the Budget,will be mobilised through assorted public-sectorentities. 77,364 (` crore) FCI Nabard FY17 REC/ PFC FY18 FY19* 0 0 NHB/ HUDCO 22,000 FE SPECIALS tion.Already,interest rates are steadilyrising and most banks have upped their loan rates as the rate of growth of deposits has slowed. While the government is expected to step up expenditure on infra projects ahead of the elections, private sectorinvestmentsarelikelyto stay subdued given sub-optimal capacity utilisation. 25,000 THE ECONOMY IS expected to have clocked in a reasonably good 7.5-7.6% growth rate in the three months to June — estimates vary between 7.4% and7.8%.Muchofthisisthanks to a weak base since GDP in Q1FY18 grew at an anaemic 5.6% and some of it due to a pick-upinconstructionactivity. However, the sluggish investments, rising interest rates, a shortage of bank capital, a weak rupee and stagnant exports are likely to see the growth in corporate profitstaperingoffinthecoming quarters. Also, a smaller-thanexpected foodgrains output would push up food prices which together with costlier imports could drive up infla- 52.9 FE BUREAU Mumbai, August 26 FLAGSHIP SCHEMES 2,100 Two-year growth data are mediocre and raise concerns about the strength and sustainability of the ongoing economic recovery 72,000 Jul 2018 Hima Das celebrates winning a silver medal after clocking 50.79 seconds, a national record, in the women's 400 m final at the Asian Games in Jakarta Report on P16 70,000^ 65,000^ Jul 2017 Lightning quick 0 0 HEFA *Estimate; ^from NSSF, others via market borrowings If the debt being raised by the National Highways Authority of India (NHAI) and the ailing MTNL are added (which too are mostlyfinanced out of the Budget as the revenue streams of the entities are not enough to service the loans), the total size of such budget-anchored EBRs could go up to `2.43 lakh crore in FY19 as compared to `1.42 lakh crore in FY18 and `1.14 lakh crore in FY17. Continued on Page 2 Lean streak Jobs grow slowly at Indian companies YOOSEF KP Mumbai, August 26 Employment growth (%) Employment growth in corporate India has fallen off sharply over the last decade, from around 5-6% per annum then to around 2-3% today, Capitaline data show. This is in sharp contrast to the buoyant growth suggested by the addition to those registered with the Employees’ Provident Fund Organisation (EPFO). Capitaline data for 2,424 firms found they employed a little over 6 million persons in FY17, while 1,033 firms in FY07 employed 3.3 million persons. Since not all firms 8 7 6 5 4 3 2 1 0 8.0 6.8 5.8 4.8 3.2 2.1 Firms 692 492 666 2.6 2.0 FY17 14.32 -0.66 0 -5 -1.12 15 30.55 35 (%) 25 FY16 Exports stagnant FY14 Source: RBI, Kotak Institutional Equities 67.50 67.83 68.00 69.91 68.50 69.00 69.50 70.00 `/$ (inverted scale) 70.50 Jun 22, ‘18 Aug 24, ‘18 3.94 One-year MCLR rate (%) 10.0 9.4 Private banks 8.8 8.2 7.6 Public banks 7.0 Jul 2016 Jul 2018 FY13 Source: CEIC and Nomura Global Economics estimates, CMIE MCLR rates have increased Rupee weakening FY11 June Sept Dec March June Sept Dec March June 2016 2016 2016 2017 2017 2017 2017 2018 2018 INDIA HAS TAKEN a “serious note” of reported data misuse of social media platforms and suchtoolswillneverbeallowed to abuse the election process for extraneous means, electronics and information technology (IT) minister Ravi Shankar Prasad has said. According to an official statement,Prasad,speaking at the plenary of the G20 Digital Economy Ministerial meeting in Salata, Argentina, also emphasised that the purity of democratic process should never be compromised and promised that India will take measures to deter and punish those who seek to vitiate the process. “...Prasad also said that India had taken a serious note of reported misuse of social media platform data...such platformswillneverbeallowed to abuse election process for extraneous means...” the release said. The issue of abuse of social media platforms has been underscannerin India overthe last few months and the government has resolved to take tough action to prevent any platform misuse. In fact,the CBI has recently initiatedapreliminaryenquiry against British political consultancyfirm CambridgeAnalytica for alleged illegal personal data harvesting of Indians from Facebook. Meanwhile,speaking at the G-20event,Prasadalsomooted thatapartofrevenuegenerated by digital platforms need to be reinvested in host markets,the official release said. The IT minister said the borderless nature of cyberworldposedlimitlesspotential for trade and commerce but only a safe and secure cyberspace can yield benefits of digital transformation for the global economy. FY10 0.24 1.8 « « « « « 2.5 2.0 1.5 1.0 0.5 0.0 FY08 (New projects, ` lakh crore) Government Private Chg (%) 16.1 23.3 61.0 37.9 52.7 5.6 138.6 35.2 3.0 PRESS TRUST OF INDIA New Delhi, August 26 FY07 Sharp fall in new government projects « (%) CU, current quarter 40 82 assessment (net), sa, RHS 80 30 78 20 76 10 74 0 72 Capacity -10 70 utilisation -20 68 (CU), sa, LHS -30 66 Jun Jun Jun Jun 2000 2006 2012 2018 Won’t allow misuse of social media, says Prasad « (%) « Enough spare capacity Companies Act: Panel to submit report this week A GOVERNMENT-appointed panel tasked with reviewing the penal provisions under the Companies Act is likely to submit its report to corporate affairs minster Arun Jaitley this week, a senior official told PTI. Headed by corporate affairs secretary Injeti Srinivas, the 10-member committee also had the mandate to examine decriminalisation of certain offences as part of larger efforts to ensure that courts get more time to deal with offences of serious nature under the Act. ● G20 MINISTERIAL Weak macros may hit profit growth « THE MINISTRY of corporate affairs (MCA) has sought details from the crisis-hit Jet Airways about certain issues as well as from its auditors on the postponement of quarterly results, a senior official told PTI. The full-service carrier, whose board is scheduled to consider the financial results for the June quarter on Monday, is exploring ways to reduce costs amid financial woes. A senior ministry official said the Registrar of Companies has asked for details from the airline on certain issues and that the process is going on. EARNINGS IN 2018-19 2.24 1.86 IN THE NEWS MCA seeks details from crisis-hit Jet Airways 5,000 Implementing MSP scheme tough and its benefits limited RAJAT KATHURIA 3,800 15,000 SUNIL JAIN INTERNATIONAL, P4 9,000 21,000 OPINION, P6 1,090 Source: Capitaline report employment data, FE created four sets of time periods with a common sample for each time-period to calculate the jobs growth (see graphic). The average number of employees per firm fell from 3,168 in FY07 to 2,501 in FY17. Continued on Page 2 DIGITAL PAYMENTS UPI transactions now at 43% of those by cards at retail outlets SHRITAMA BOSE Mumbai, August 26 WITHIN TWO YEARS of its launch, the Unified Payments Interface (UPI) is nowclocking transactionsworth 43% of the value of card-based transactions at point of sale (POS) machines; even a year ago, in June 2017, this was just a bit over 4% (see graphic). With National Payments Corporation of India (NPCI) releasing UPI 2.0,aimed primarilyat the retail or PoS market, UPI’s share will go up even faster. During June 2018, the UPI channel recorded 236 million transactions worth `40,834 crore, as against 419 million card-based POS transactions worth `94,199 crore. Add mobile wallets, and the share of non-card digital payments (UPI + wallets) rose even more, to 58.9% in June 2018 as compared to 11.5% in June 2017. Launched in August 2016, UPI is a bank account-to-bank account payment feature that UPI soars 1,05,000 UPI and wallet-spend now equals 60% of that by 90,000 cards at retail outlets (` crore) 94,199 75,000 44,115 60,000 45,000 Cards at point of sale outlets 30,000 3 15,000 0 Mobile wallets 3,074 Aug ‘16 Jan ‘17 40,834 UPI 14,632 Dec ‘17 Jan ’18 Jun’ 18 Note: Money spent via debit and credit cards at retail outlets equalled 35% of that withdrawn from ATMs in June 2018. This was 70% in December 2016, soon after demonetisation, and 15-16% in all of FY16 Source: RBI, NPCI allows money to be transferred usingjustthephonenumberor UPI ID of a user that, in turn, needs to be linked to a bank account. Earlier this month, NPCI launched UPI 2.0, an upgradedversionofitsUPIservice,which,inadditiontoother things,willallowuserstoaccess a digital invoice to help them view and verify a merchant's credentials and ascertain if the invoice has come from the correct merchant. Customers can pay seamlessly once they have verified the amount and other details in the invoice. This feature is aimed specifically at enhancing the security of person-to-merchant (P2M) transactionsandalsotoincrease the adoption of UPI for such transactions. Dilip Asbe, MD and CEO, NPCI, had told FE the updatetothepaymentschannel will push merchant payments. “This is one of the features that take care of the business aspect ofUPItransactionsandwillhelp increase usage,” he said. 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