OPINION, P8 MONEY & MARKETS, P10 L CHAKRABORTY An interest-rate defence of ` is a bad idea, junk it NEW GUIDELINES BILLIONAIRE MOVE No reason to panic over `, vital to ensure policy strategies don't hit foreign investor sentiment SUNIL JAIN INTERNATIONAL, P14 Tyagi-led Sebi eases IPO norms, revises buyback rules Salesforce co-founder Benioff buys Time for $190 million MUMBAI, TUESDAY, SEPTEMBER 18, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL. 58 NO. 221, 20 PAGES, `7.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 37,585.51 ▼ 505.13 NIFTY: 11,377.75 ▼ 137.45 NIKKEI 225*: 23,094.67 ▲ 273.35 HANG SENG: 26,932.85 ▼ 353.56 `/$: 72.51 ▼ 0.65 `/€: 84.54 ▼ 0.50 BRENT: $78.75 ▲ $0.66 GOLD: `30,614 ▲ `56 CONSOLIDATION Govt to merge Dena, BoB & Vijaya banks Combined entity to be the country’s third-largest lender, other two strong enough to absorb Dena’s PCA shock Arun Jaitley, finance minister tion to create the country’s third-largest lender. The decision comes as a relief for Dena Bank, which is one of the 11 stressed public-sectors banks HOW THEY STACK UP SBI Amalgamated entity Vs All PSBs Provision coverage ratio 67.5% vs 63.7% 5.71% vs 12.13% 48.94% vs 53.92% IN A major relief to pharma majors GlaxoSmithKline and Piramal Healthcare, the Supreme Court on Monday lifted the ban on manufacture and sale of Saridon, Piriton expectorant and Dart, reports Indu Bhan in New Delhi. The three popular brands were part of the list of 328 fixed dose combination drugs that were banned by the health ministry last week. PAGE 7 Spot power price at 8-year high of `14.08 per unit SPOT POWER prices on Monday touched an over eight-year high of `14.08 per unit in the day ahead market at the Indian Energy Exchange, mainly driven by higher demand, reports PTI. The previous high was recorded at `13.90 per unit in April 2010. In May, the price of spot power price had touched about a five-year high of `11.41 per unit after starved captive power producers started buying power at exchanges. PAGE 2 8.92 Steel, iron & products Base metals* 27.3 Total imports 7.35 6.33 Fertilisers 217.66 % chg (y-o-y) 18 3.55 *Aluminium, copper, zinc, lead, nickel, tin etc 24.3 26.2 39.1 Source: Ministry of commerce Non-oil items that saw sharp increases* (%, y-o-y) 44.2 43 35.9 34.4 32.2 Electric machinery Machine tools Ship, boat, floating objects Ferrous scrap etc Aluminium *Import value of over $1 billion (April-July 2018) Barrels and blessings A Hindu priest performs rituals in front of weapons belonging to Tripura State Rifles during the 'Vishwakarma Puja' in Agartala on Monday PTI Auto fuels FE BUREAU Prices seem to start impacting demand 2013-14 2014-15 2015-16 2016-17 Avg price of diesel (`/litre) [LHS] 76.07 80 2017-18 46.42 60 67.46 9 6 40 0 Dec ‘17 stretched and that there is the event risk of elections.Further, domestic inflows have slowed for four consecutive months. “Funds could potentially see lowerequityinflowsastheyield gapbetweenequities/bondshas fallen to 10-yearlows,” itwrote. While the benchmarks been holding up, more-thanhalf of the companies with a market capitalisation of `1,000 crore (789 companies) have lost over 10% of their value since January 1. Continued on Page 2 2008-09 2010-11 2012-13 BasednearGeneva,theWEF is known for the annual powwow of wealthy individuals, politicians and business leaders that it organises in Davos, Switzerland. Its report, The Future of Jobs 2018, foresees robots swiftly replacing humans in the accounting, clientmanagement,industrial, postal and secretarial sectors. Jobs that require “human skills”such as sales,marketing and customer service should see demand increase mean- WEAK PULSE ■ Moong MSP for kharif 2018 was fixed at `6,975/quintal, up 25% from a year ago. Continued on Page 2 Continued on Page 2 2016-17 4.9 7.47 3.42 9.04 2014-15 2018-19* 0 *April-August Machines will do more tasks than humans by 2025: WEF estimated.“By2025morethan half of all current workplace tasks will be performed by machines as opposed to 29% today,”astatementbytheSwiss non-profit organisation said. Simultaneously, rapid changes in machines and algorithms,or computer processes that are designed to solve problems, “could create 133 million newroles in place of 75 million that will be displaced between now and 2022”, the group forecast. EARLY MARKET TRENDS as the kharif 2018 crop has started arriving confirm the fears that the price support schemes unveiled by the central government could cost the exchequer much more than conservative estimates and outlays. According to data gathered by FE, farmers in Gulbarga, Karnataka, are now selling their fresh harvest of moong crop at 33-35% below the minimum support price (MSP). New tur crop in the while,along with e-commerce and social media. A major challenge will be to retrainworkers,whowillthemselves be pressed to update skills especially in the areas of “creativity,criticalthinkingand persuasion”,the studyfound. Itsurveyedpersonneldirectorsandseniorexecutivesfrom a broad range of companies around the world that account for 70% of global output. 3 3.51 20 BOT SERIOUSLY ROBOTS WILL HANDLE 52% of current work tasks by 2025, almost twice as manyas now,a World Economic Forum (WEF) study said on Monday. The sharp increase could alsoseeanetgainin“newroles” for humans, who will have to revampskillstokeeppacewith the “seismic shift” in how we work with machines and computer programmes, the forum Dec ‘03 Source: FactSet, I/B/E/S, MSCI, Goldman Sachs Global Investment Research state is also beginning to be sold at considerably below the MSP, market sources told FE. In Maharashtra too,mandi prices of moong are ruling at 32% below the MSP.Fresh tur prices in the state are also starting to get sold at considerably below MSP. The moong MSP for kharif 2018 is fixed at `6,975 per quintal, up 25% from the year-ago level. Rolling out a package — PM-AASHA — of price deficiency support schemes for agriculture crops,the government recently announced an extra Budget outlay of `15,000 crore for procurement of non-National Food SecurityAct (NFSA) crops during the June 2018-July 2019 crop year. It also enhanced the government guarantee for Nafed to undertake procurement of pulses and oilseeds by `16,550 crore to `45,450 crore this fiscal. 32.82 0.79 Though not very consistent, high prices seem to destroy and lower ones stimulate demand for auto fuels in the country to an extent. The price elasticity of demand appears to be comparatively higher for diesel (fully decontrolled in October 2014) than petrol (decontrolled in June 2010) 12 Source: RBI AGENCE FRANCE-PRESSE Paris, September 17 6x ■ New moong crop at 32-35% below MSP in key centres in K'taka and Maharashtra, tur too being sold far below its MSP Growth in consumption of the two auto fuels (%) [RHS] Avg price of petrol (`/litre) Continued on Page 2 6.37 3,08,747 2012-13 Average PRABHUDATTA MISRA New Delhi, September 17 Consequently, the aggregate financial liabilities of households increased everyyear. The leveraging trends reflect the aspirational lifestyles of consumers who are accessing cheap loans to buyproducts.Forexample,the share of cars at Maruti Suzuki bought bybuyers taking a loan for the purchase has risen steadily to 81% in 2017-18 from a much smaller 68% in 2011-12. Apart from the change in attitude,bywhichborrowingis no longer considered to be undesirable,the availability of affordable loans has also pushed up the leverage of households. Bank advances Total financial liabilities (` crore) -1SD Early kharif crop prices far below support price levels Households' liabilities ` 10x ● LOW PROCUREMENT 7.37 THE INDEBTEDNESS OF Indian households nearly doubled in the year to March 2018,with their financial liabilities rising 80% to `6.74 lakh crore.Advances by banks to households soared 71.5% to `4.3 lakh crore, reversing a four-year-long trend of declines in households’ bank borrowings, data released by the Reserve Bank of India (RBI) revealed. Households may have borrowed less from banks between 2012-13 and 201617, but they accessed credit from non-banks whose loans to households rose anywhere between 3% and 9% annually. ArcelorMittal withdraws letter targeting Vedanta in Essar bid SC lifts ban on manufacture, sale of Saridon, 3 other drugs Chemicals +1SD (19x, 1.3SD) 22x 14x WITH MACRO HEADWINDS gathering speed and the rupee remainingweak,theSensexon Monday plunged 505.13 points even as Goldman Sachs downgraded India to market weight from overweight. “Webelievetherisk/reward for Indian equities is less favourable at current levels and we lower our investment view from overweight to market weight,” the investment banking firm wrote. The investment bank noted that while earnings seem to be improving, it sees multiple macro headwinds for the marketintheneartermgivenmoderating sequential growth, tighterfinancialconditions,risingoilprices,worseningcurrent account deficit and a volatile rupee.It believes valuations are 27.9 11 7.54 SHRITAMA BOSE Mumbai, September17 QuickPicks ARCELORMITTAL, WHICH is locked in a threeway fight for the acquisition of Essar Steel, first wrote a letter to the resolution professional targeting rival bidder Vedanta over its alleged violation of environmental law and human rights but withdrew the letter a day later, reports fe Bureau in Mumbai. ArcelorMittal withdrew the letter saying, "an internal draft of such letter was inadvertently shared". PAGE 6 Coal 53.8 30.8 19.05 Machinery India is trading at 19X 12-mo forward P/E which is 1.3 sd above historical mean since 2004 26x Forward P/E 18x FE BUREAU Mumbai, September 17 14.5 24.04 Electronics 9.68 ICICI Securities estimated to register 16/21% revenue/earnings CAGR over FY18-21e; coverage initiated with ‘Buy’ and TP of `425; valuations are attractive ■ Investor, P13 58.92 Petroleum 8.56 Growth outlook for the company is attractive % Change (y-o-y) (April-August 2018 ($ bn) ILLUSTRATION: SHYAM If the downgrade is for short-term instruments, you need not worry too much; if it is for long-term bonds, then check the percentage of your fund’s assets invested in bonds ■ Personal Finance, P13 Imports Downgrades to market weight from overweight citing macro headwinds Household debt almost doubles 4,30,427 Know how downgrades impact debt funds Goldman cuts India weight FOR THE GOVERNMENT'S plans to curb “non-essential imports” to have a timely impact on the apparently rising trade and current account deficits, it has to follow a highly targeted approach. While oil imports, which exert pressure on both the deficits the most, can't be regulated and coal imports too can't be tightened overnight, the items that could bring the biggest difference to the import bill quickly include electronic goods and certain “iron and steel items” like steel scrap. Even though gold imports have been in AprilAugust, fewer entities may be allowed to import it. 2017-18 READING 6,73,922 Special Features A LESS ROSY VIEW Needed, targeted import curbs Continued on Page 2 3,76,832 Cost-to-income ratio 3,30,425 Net NPA ratio 10,63,167 8.4 10,45,650 5.8 1.6 1 PNB 5,502 2,129 1,858 9,489 Total business (` cr) 3,58,679 BoB Vijaya Bank Dena Bank Mergerd entity OIL REGULATOR PNGRB on Monday declared the final list of winners of city gas retailing licences, reports PTI. Gautam Adani's group, state-owned Indian Oil, Bharat Petroleum and Torrent Gas emerged as the big winners. Deposit (` lakh cr) 2,82,443 R Branches 14.8 ICICI Bank 5.7 15,14,434 11 10.3 2.8 1.7 HDFC Bank BOB+Vijaya+ Dena Adani, IOC, BPCL, Torrent winners of CGD licences 9.27 10.35 8.15 9.32 14,82,422 5.4 4.1 BoB Vijaya Bank Dena Bank Mergerd entity Total business (` lakh cr) Tier-1 Capital (%) 47,37,985 Net NPAs (%) 3,02,336 ` 3,74,701 AN INTER-MINISTERIAL PANELheadedbyfinanceminister Arun Jaitley on Monday askedstate-runBankofBaroda (BoB), Vijaya Bank and Dena Bank to consider amalgama- 2,50,904 VOLKSWAGEN IS RECALLING an unspecified number of Polo GT, Vento and Jetta models in India manufactured between April 1, 2015 and March 31, 2017, reports PTI. The company said the recall was for making “necessary updates” for Polo GT 1.5 and Vento 1.5 with manual transmission. Details of the number of units affected by the recall could not be ascertained. 3,91,089 FE BUREAU New Delhi, September 17 2,74,787 IN THE NEWS VW recalls Polo GT, Vento and Jetta in India (PSBs) on the central bank’s watch list andwhich also faces restrictions on lending until it fixes its poor finances. Thegovernmentexpectsthe two relatively strong banks — BoB andVijaya Bank —will easily absorb potential shock of amalgamatingwithaweakone. Thelatestmoveispartofthe government’s efforts as part of its banking sector reforms to create a few but strong banks withmuchlargerbalancesheets tosupporttherisingappetitefor creditofthefast-growingeconomyand enable optimum utilisation of resources. The merged entity has a combined business of `14.8 lakh crore, deposits of `8.4 lakh crore, gross advances of `6.4 lakh crore, and 85,675 employees, based on the position as on June 30.The boards of these three banks are expected to meet in the next two weeks to consider the proposal andwork out modalities. BoB managing director PS Jayakumarsaidtheamalgamationprocessmaytakefourtosix months to complete, although no time frame has been fixed for it. Dena Bank MD Sankara Narayanan told a TV channel that the merged entity will be offered growth capital beyond what is required to meet regulatoryneeds. (*Prv close)
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