OPINION, P8 COMPANIES, P6 PARTNERSHIP ANNOUNCED EDITORIAL Skills-jobs mismatch in manufacturing costs India dear For FY19 BoP outlook, capital flows are a bigger worry than current account deficit INTERNATIONAL, P14 SHARES FALL Salil Parekh-led Infosys forms joint venture with Temasek Tesla rocked by executive departures, Musk internet show NEW DELHI, SATURDAY, SEPTEMBER 8, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 163, 26 PAGES, `10.00 (PATNA `9.00, RAIPUR `10.00) 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 SENSEX: 38,389.82 ▲ 147.01 NIFTY: 11,589.10 ▲ 52.20 NIKKEI 225: 22,307.06 ▼ 180.88 HANG SENG: 26,973.47 ▼ 1.35 `/$: 71.74 ▲ 0.25 `/€: 83.28 ▲ 0.41 BRENT: $76.06 ▼ $0.44 GOLD: `30,402.00 ▼ `133.00 ESSAR STEEL Numetal’s second bid valid, rules NCLAT IN THE NEWS Equity fund inflows slip to 18-month low INFLOWS INTO equity funds in August slipped to an 18month low with the broader stock markets underperforming for eight months now, reports fe Bureau in Mumbai. With 70% of companies with a market capitalisation of `1,000 crore in the red since January 1, investors have had very little to cheer about. Of the 794 companies in this universe, 297 have lost more than 20% of their value while over a fourth of the companies have lost more than 25%. The Nifty MidCap Index has given up 7.4% since the start of the year and 65% of its constituents have lost value. The Nifty Small Cap Index has suffered a bruising 17.3% since January and 81% of its members have seen a fall in prices. Russian firm had severed its ties with Ruia family. The tribunal asked ArcelorMittal to clear its `7,000-cr dues by Sept 11 to become eligible SURYA SARATHI RAY New Delhi, September 7 THE NATIONAL COMPANY Law Appellate Tribunal (NCLAT) on Friday ruled that Russia’s VTB Capital-backed Numetal’ssecondbidforbankrupt Essar Steel is eligible but gave a conditional clearance to Lakshmi Mittal-led ArcelorMittal’s bid. Only if the company cleared `7,000 crore of duesoffirms(UttamGalvaand KSS Petron ) it was previously associated with by September 11,will it qualify to bid. A two-member bench of the NCLAT headed by chairman Justice SJ Mukhopadhaya ruled that the firstround bids were not eligible but NuMetal’s second bid submitted on March 29 after restructuring the shareholding was eligible. It asked ArcelorMittal to clear dues of August 2, 2017: NCLT admits Essar Steel's insolvency case Oct 6: RP invites EoI Feb 12, 2018: ArcelorMittal, Numetal submit bids for Essar Steel March 23: CoC declares both bids ineligible and invites fresh bids March 26: ArcelorMittal moves NCLT challenging rejection of its bid April 2: Last date for submission of second round of bids April 19: NCLT Ahmedabad asks RP, CoC to consider first set of bids April 26: Numetal moves NCLAT April 28: ArcelorMittal moves NCLAT Uttam Galva Steel and KSS Petron bySeptember11 forits bid to be considered eligible. The appellate tribunal also ordered Essar Steel’s committee of creditors to get the highest value by negotiating with eligible bidders expeditiously. “An early decision should be taken by the committee of creditors and on approval of the resolution plan, the resolution professional will place the same immediately before the adjudicating authority who in its turn will pass order. The successful resolution applicant will take steps for executionofitsresolutionplan and deposit the upfront money,” the appellate tribunal said in its 69-page order. Numetal and ArcelorMittal had filed petitions in the NCLAT challenging the disqualification of their first roundofbidsbythecommittee of creditors, saying their promoterswere tied to companies which were bank loan defaulters and so ineligible underSection 29A of the Insolvency and Bankruptcy Code. Boththecompanieshadput in bids in the second round after their offers in the first round were seen as invalid. Numetalfaceddisqualification as its 25% stake was owned by AuroraTrustoftheRuiafamily, the promoters of Essar Steel, while ArcelorMittal’s first bid wasrejectedbecauseofitholding shares in loan-defaulting companies Uttam Galva Steel and KSS Petron. Continued on Page 2 FPI CIRCULAR Special Features A first look at the new electric SUV from Mercedes The EQC 400 SUV is a four-door crossover that seems much relevant to the luxury electric SUV market that Tesla tapped and has everyone else playing catch-up ■ Motobahn, P13 Quarter performance was better than estimated The earnings outlook for Gail (India) has improved further since Q1FY19; FY19-21e EPS raised by 1-3%; valuations are modest; ‘Buy’ retained with TP of `450 ■ Investor, P13 QuickPicks Union Bank fined `1 crore over delay in fraud detection,reporting THE RESERVE Bank of India has imposed a `1 crore penalty on Union Bank of India for failing to detect and report fraud on time, reports PTI. "This is to inform that Reserve Bank has imposed a penalty of `10 million on the bank for delay in detection and reporting of fraud. The penalty has been imposed in exercise of powers vested in RBI under ...Banking Regulation Act," Union Bank said in a regulatory filing on Friday. Ford India recalls 7,249 EcoSports for software update FORD INDIA on Friday said that it has decided to recall 7,249 petrol EcoSport vehicles, made between November 2017 and March 2018, to update powertrain software, reports fe Bureau in Chennai. The company said that it is voluntarily inspecting the vehicles to update the software. Customers will receive a notification via an email or a letter. They can also visit the field service action section on Ford India’s website. PAGE 7 HDFC Bank raises MCLRs by 20 basis points HDFC BANK, the country's largest private sector lender by assets, raised its marginal cost of fundsbased lending rates (MCLRs) by 20 basis points (bps) across tenures, reports fe Bureau in Mumbai. Its one-year MCLR now stands at 8.6%. MCLRs for other tenures range between 8.25% and 8.9%. The revised rates came into effect on Friday. The bank follows State Bank of India, ICICI Bank and Bank of Baroda in hiking lending rates. PAGE 10 Finmin tells Sebi to gauge market impact BANIKINKAR PATTANAYAK New Delhi, September 7 THE FINANCE MINISTRY is learnt to have impressed upon the Securities and Exchange Board of India (Sebi) to keep in mind the potential impact on broaderfinancialmarketstability,apart from views of various stakeholders,while reviewing its April 10 circular on the beneficial ownership of foreign portfolio investors (FPIs). “There is already some turmoil in the financial markets, primarily due to external factors. The rupee volatility has caused enough anxiety, althoughtheIndiancurrencyis still performing much better thanmanypeers.Thespill-over effectofaglobaltradewarcan’t beruledout.Sodespitethegood intentions behind the circular, Sebi may also see the potential impact on market stability and the timing of a step,” said an official source aware of the development. The final call, however, will be Sebi’s, as the regulator is “experienced and wise enough to handle such issues”,the source told FE. Sebi on Wednesday said it would review the matter once it receives the recommendations of the HR Khan committee, which has already heard various stakeholders. It has also consulted the finance TREADING WITH CARE ■ Sebi could assess broader fallout of its circular on currency market as well ■ Finance ministry officials, however, rule out much risk to macro stability from falling rupee, trade war ministry. “Based on these inputs, Sebi would review the matterandshortlytakeaholisticview,”theregulatorhassaid. Earlierthisweek,AssetManagers Roundtable of India (AMRI), an investor lobby group,warned that Sebi’s new KYCnormsinthecircularcould lead to capital outflows of $75 billionandhitthedomesticcurrencyandstocks.Therupeehas weakened 6.3% against the dollar in the past three months and over 12.5% since January, and the FPIs have already turned net sellers of stocks in 2018 from net buyers lastyear. Continued on Page 2 Mobility roadmap Prime Minister Narendra Modi during the Global Mobility Summit organised by the NITI Aayog at New Delhi’s Vigyan Bhawan on Friday Report on Page 2 EXPRESS PHOTO BY RENUKA PURI UNDER LENS ● Q1 CAD AT 2.4% Explain India business model: NCLAT to Walmart-Flipkart Apex regulator’s move brings to focus alleged FDI rule violation by e-commerce players via ‘discounts’ QUESTIONS STAY ■ 'Discounts' offered by FE BUREAU New Delhi, September 7 THE NATIONAL COMPANY LawAppellateTribunal(NCLAT) has asked Walmart and local ecommerce platform Flipkart, whichhasjustbeenacquiredby the US-based retail biggie, to explaintheirbusinessmodelsin India.The move is important as the so-called ‘deep discounts’, offered by foreign-funded ecommercecompaniesinalleged violation of the FDI rules, continuetobeanirritantforpolicymakers.Ambiguity persists on howeffectivelysuch‘non-compliance’is being handled by the enforcement agencies. The NCLAT,which is also an foreign-funded e-commerce firms in alleged violation of FDI rules continue to be irritant for policymakers ■ While clearing the Walmart-Flipkart deal, CCI had said Flipkart's discounting practice or preference to select e-tailers was not specific to it ■ The DIPP formulates and notifies FDI policies, including those on e-commerce, violation dealt under FEMA appellate authority over the Competition Commission of India (CCI), has asked Walmart InternationalHoldingstofileits replybeforeitbySeptember20, 2018. It has also asked traders’ body CAIT, which has filed an appeal before NCLAT challenging the go-ahead by the CCI on Walmart’s $16 billion acquisitionofFlipkart,tofileitsunderstanding over the retail major’s business model in India. “Before going into the merit oftheappeal,weintendtoknow the manner in which WalMart InternationalHoldings,Inc.and Flipkart Private Ltd do their business in the relevant market in India,” said an NCLAT bench headed by chairman Justice SJ Mukhopadhaya. India’sFDIpolicybarse-tailers from influencing pricing of productssoldontheirplatforms bygivingdiscountsthemselves. Fortheirpart,ecommerce players have maintained that they haven’t violated any FDI rule andthatdiscountsarenotgiven by them but by the sellers on theirplatform. Continued on Page 2 Walmart pays $2.5-billion withholding tax: P2 Rupee recovers FE BUREAU Seven-day falling streak halts The rupee on Friday staged a turnaround to close higher by 26 paise at 71.73 against the US dollar, snapping its seven-session losing streak. The yield on the benchmark bond edged down to 8.03% from 8.06% `/$ 10-year bond yield (%) 62.00 63.68 8.130 64.50 7.875 7.337 67.00 71.74 8.029 7.620 69.50 7.365 72.00 7.110 74.50 (inverted scale) Jan 1, ‘18 Sep 7, ‘18 6.855 Jan 1, ‘18 Sep 7, ‘18 Portfolio outflows, LoU ban hit capital account FE BUREAU New Delhi, September 7 INDIA’S CURRENTACCOUNT deficit (CAD) stood at $15.8 billion, or 2.4% of the gross domestic product (GDP),in the April-June period of this fiscal, nearly the same level (2.5% of GDP) as in theyear-ago quarter. However, strong portfolio outflows,especiallyofthedebtvariety, and robust repayment of long-term buyer-supplier credit, resulted in depletion of the country’s forex reserves to CAD (% of GDP) 3.0 2.5 2.5 2.4 2.0 1.5 1.0 0.5 0 1.1 0.6 0.4 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY17 FY18 FY19 the tune of $11.34 billion in Q1FY19, while the year-ago quarter had seen accretion of a similaramount to the reserves. According to the balance of payments(BoP)datareleasedby theReserveBankofIndiaonFriday,netportfolioinflowsturned negative (-$8.1 billion) in Q1FY19,with foreign investors pulling out $6.36 billion from the Indian debt market during theperiodonanetbasis.Consequent to the RBI bar on banks issuing letters of undertaking (LoUs)followingtheNiravModi fraud,therewas a large net outflows of $10 billion in the buyers’credit of over180 days. Continued on Page 2 LAUNCH PRECURSOR Suzuki Motor to start road-testing e-vehicles in India next month PRESS TRUST OF INDIA New Delhi, September 7 JAPANESE AUTO MAJOR Suzuki Motor Corporation plans to start road tests of its electric vehicles (EVs) in India nextmonthasaprecursortoan EVlaunchin2020,itschairman Osamu Suzuki said on Friday. Suzukisaidthecompanyhas decidedtolaunchanEVinIndia around 2020 in cooperation withToyotaMotorCorporation. It will commence produc- tion of lithium-ion batteries, used in electric vehicles, at its Gujarat plant in 2020. “I am pleased to announce today that we will start road running tests using a fleet of 50 EV prototype vehicles in India from next month for developing safe and easy-touse EVforIndian customers in line with Indian climatic and traffic conditions,” Osamu Suzuki said at the Global Mobility Summit in New Delhi. To increase the penetration of EVs in India, it is obvious that it cannot be done without sufficient charging infrastructure development,he noted. “In this regard,we look forward to proactive leadership from the Government of India,”Suzuki said. HesaidthatinIndiathereis a significant numberof people whoareeagerlywaitingtohave their own car. It is said that EVs will be around 30% of vehicles in 2030, which means a huge chunkofthepopulationwould still be using non-EVs at that time,Suzuki said. “In order to answer to the need of better lifestyle and meetingexpectationsofIndian customers, as well as resolving environmental challenges at the same time, I think it would beessentialtopromotenotonly EVs but also hybrid and CNG vehicles,”he noted. Continued on Page 2
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