OPINION, P8 COMMODITIES, P12 IMPENDING US SANCTIONS India’s #MeToo shows institutional redressal has failed IPCC sounds warning on global warming, world leaders must get the US to act DATA COLLECTION CLAIMS Two Indian refiners have contracted Iranian crude for Nov: Pradhan EDITORIAL INTERNATIONAL, P14 Google wins dismissal of privacy case filed by iPhone users PUNE, TUESDAY, OCTOBER 9, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.IX NO. 181, 16 PAGES, `6.00 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: 34,474.38 ▲ 97.39 NIFTY: 10,348.05 ▲ 31.60 NIKKEI 225: 23,783.72 ▼ 191.90 HANG SENG: 26,202.57 ▼ 370 `/$: 74.07 ▼ 0.30 `/€: 84.98 ▼ 0.07 BRENT: $82.89 ▼ $1.27 GOLD: `31,156 ▼ `60 IN THE NEWS Deadline for filing ITR, audit report now till Oct 31 Q2FY19 EARNINGS SEASON THE GOVERNMENT ON Monday extended the deadline till October 31 for filing income tax return and audit report for FY18, reports PTI. This is the second extension granted by the Central Board of Direct Taxes (CBDT) for return filing by those assessees whose books of accounts have to be audited. On September 25, the CBDT extended the deadline for submission of tax return and audit report till October 15 from September 30. Late festive season, unfavourable base to keep earnings subdued despite a boost for IT and pharma from weaker rupee FE BUREAU Mumbai, October 8 WITH EARNINGS GROWTH in the three months to September expected to be subdued, the consensus forecasts of a 25% increase in earnings in 2018-19 are beginning to look increasingly optimistic. A delayed festive season and an unfavourable base will keep India Inc’s earnings subdued in the three months to September despite a boost for IT and pharmaceuticals from the weaker rupee. “We expect the net income of the BSE 30 Index to increase 2% year-on-year and that of Nifty 50 Index to increase 3% y-o-y,” analysts at Kotak Institutional Equities (KIE) wrote onMonday.Foritsbroaderuniverse of stocks, the earnings growth could be flat,theysaid. Given that investments remain sluggish and that much of the capital expendi- Another dull quarter Automobiles Banks Revenue growth will be muted on a y-o-y basis due toa delay in the festive season in FY19 versus FY18 Banks to report ~90% decline in earnings on the back of higher provisions for bad loans and investment depreciation Consumer Energy Continued strength in urban & rural consumption. Overall, volume growth will be healthy, except the CSD channel Strong net income growth for upstream companies on higher realisations, weaker rupee and high other income IT Telecom Seasonally strong quarter for IT firms. Sequential revenue growth will be higher compared to the June quarter Higher sequential revenue pressure for the incumbents; Q2 is typically a dull quarter for the segment Source: Kotak Institutional Equities estimates ture bythe private sectoris primarily for maintenance, the key engineering sector is unlikely to report exciting numbers.One could,however, see a pick-up in execution, hitherto slow on account of various factors, especially the rollout of the GSTin July2017. In a seasonally strong quarter, technology firms will gain from the weaker rupee. How- ever, revenues from the automobile sector will be muted partly because the festival seasonsetsinlaterthisyear.Moreover,marginscouldbecrimped because not all manufacturers have been able to take price increaseinahighlycompetitive environment.Bankswill report yet another quarter of weak numbers partly because their investment portfolios have ● CEO PAY 40,000 GMR settles share dispute with private equity investors GMR INFRASTRUCTURE on Monday said that it has settled an ongoing arbitration with its private equity (PE) investors, including SBI Macquarie and Standard Chartered, giving them a 5.86% equity in GMR Airport and a cash payment of `3,560 crore, reports fe Bureau in Mumbai. PE investors --SBI Macquarie, Standard Chartered Private Equity, JM Financial Old Lane, among others, — had invested `1,478 crore in the form of compulsorily convertible preference shares in GMR Airports in FY11 and FY12. Arbitration proceedings were administered by the Singapore International Arbitration Centre. PAGE 6 Centre plans five gold bond issues between Oct and Feb THE GOVERNMENT has decided to step up issuance of sovereign gold bonds and will accept applications from interested investors each month between October and February, reports fe Bureau in New Delhi. The Centre aims to shift a portion of investment demand towards "paper gold" to trim physical purchases and contain their damaging impact on trade balance. Since their introduction in late 2015, the gold bonds were never issued with such high frequency. The last tranche of such bonds was issued only in April. 10,875 FY12 FY18 204.6 150 -10,000 100 -15,000 50 -20,000 0 108 200 -5,000 80,000 250 109.9 120,000 5,000 0 160,000 0 QuickPicks Net profit (RHS) Remuneration of Ravi Parthasarathy (` mn) 187,988 200,000 88.9 (` million) Total income (LHS) 72.8 While you cannot avoid securities transaction tax on short term capital gains, there are slabs and sections under which you can reinvest long-term capital gains to save on tax ■ Personal Finance, P13 IL&FS loss balloons, Ravi Parthasarathy pay up 89% 87.9 Know how you can save tax on capital gains 92.6 Special Feature -18,869 NATIONAL HOUSING BANK (NHB) on Monday increased its refinance window for the housing finance companies (HFCs) by 25% for 2018-19, reports fe Bureau in New Delhi. The HFCs have been facing a liquidity crunch in the aftermath of defaults by the beleaguered IL&FS. “Keeping in view the current scenario, NHB has decided to hike the refinance limit to `30,000 crore. Now, eligible HFCs & other entities will have increased availability of funds,” it said in a statement. Nothing to write home about 3,475 NHB enhances refinancing to HFCs by 25% ● LIQUID FUNDS SURYA SARATHI RAY & ROUHAN SHARMA New Delhi/Mumbai, October 8 DEFAULTING INFRASTRUCTURE FIRM IL&FS swung from a small `142-crore profit in FY17toalossof`1,887crorein FY18 but thanks to the largesse FY12 FY14 FY16 FY18 of former LIC chairman — who headed IL&FS’s remuneration committee — chairman Ravi Parthasarathysawan89%hike in his pay, from `10.8 crore in FY17 to `20.5 crore in FY18. Continued on Page 2 IL&FS under-reported assets by about `50k crore, Page 6 Rupee FE BUREAU Plunging to new lows A stronger dollar and continuing capital outflows pressured the currency which closed at 74.07 `/$ 73.72 Intra-day, Oct 8 73.96 73.82 (Inverted scale) 74.07 73.92 74.02 74.12 Open Close NOBEL ECONOMICS PRIZE US duo win for thinking on climate, innovation BLOOMBERG Oslo/Washington, October 8 WILLIAMDNORDHAUSofYale UniversityandPaulMRomerof the Stern School of Business in New York were awarded the 2018 Nobel Prize in Economics fortheirworkoncombiningkey questions surrounding climate change and innovation with economic growth. The two “have designed methodsforaddressingsomeof ourtime’smostbasicandpressingquestionsabouthowwecre- William D Nordhaus (left) and Paul Romer ate long-term sustained and sustainable economic growth”, the academy said on Monday. They have“significantly broadened the scope of economic analysisbyconstructingmodels that explain how the market economy interacts with nature and knowledge”,it said. Nordhaus, 77, began working on environmental issues in the early 1970s and has been trying to measure the economic costs of global warming eversince.Tohelpinthateffort, he constructed integrated economicandscientificcomputer models to determine the most efficient ways to cope with climate change. Continued on Page 2 UN for $2.4-trn fossil fuel shift THE WORLD MUST invest $2.4 trillion in clean energy every year through 2035 and cut the use of coal-fired power to almost nothing by 2050 to avoid catastrophic damage from climate change, according to the United Nations. Report on Page 14 Liquidity scare leads to `2.11L-cr pullout been badly hit by the sharp increase in yields during the quarter. Moreover, provisions forloanlosseswilleatintoprofits.The cement sector is tipped tobesomethingofamixedbag. While the industryreported avolume increase of 13%y-o-y in July and August — on a low base — the increase was in a rangeof7-20%.Similarly,since notallmanufacturerswereable to take a price increase,the rise in operating profits would vary widely; only those firms that were able to take care of the higher costs of pet coke will report good margins.The consumer space should report a good increase in volumes and operating profits since companies have been able to pass on thehigherinputcosts.Pharmaceutical firms are expected to put up a modest show on the back of an unfavourable base — in Q2FY18,the companies had restocked post the GSTrollout. Telecom service providers have seen another rough quarter with pre-paid consumers down-trading and post-paid consumers continuing to repricetheirpackages.Evenotherwise, Q2 is typically a dull quarter and the popularity of RJio’s Monsoon Hungama exchange scheme would have hurt incumbents who are alreadyreelingfromtariffwars. OUTFLOWS FROM LIQUID schemes in September were a whopping `2.11 lakh crore— the largest monthly withdrawals seen in at least five years.InDecember2017,companies had withdrawn `1.38 lakh crore from the liquid scheme. The redemptions by companies and banks were fuelled by a liquidity scare in thewakeofthenear-collapseof infrastructurefinancierIL&FS. Moreover,the sale of non-convertible debentures (NCDs) of DHFL by DSP Mutual Fund, at yields that were much higher than expected, left the money marketsjittery.Liquidschemes invest in debt and moneymarket instruments with maturities of up to 91 days. Meanwhile, the average monthly inflows into equity schemes in H1FY19 fell to `10,080 crore from `14,200 crorein2017-18.Equityfunds (which includes equity, ELSS and arbitrage funds) saw inflows of `11,251 crore in September; this is higher than the `5,923 crore in August which was an 18-month low. Continued on Page 2 Detailed report on Page 10 CHIRAG MADIA Mumbai, October 8 FLIPKART PURCHASE I-T asks Walmart to explain tax decision 34 among 44 sellers of e-tailer’s shares sought cover under Section 9 (1) to avoid capital gains tax SUMIT JHA New Delhi, October 8 WITH ALL BUT ten of the 44 entities that sold their Flipkart sharestoWalmartusingaprovisioninIndia’sIncomeTaxActto avoid paying capital gains tax,a concerned tax department has asked the US-based retail giant to explain what discretionary methodologywas employed by itinmeetingitslegalobligation to withhold tax while making payments to these firms. Official sources told FE that Walmart paid only about `7,450 crore to the tax department as “withholding tax” by the September 7 deadline; this wasevenasthedeal’ssizewasa massive $16 billion and longterm capital gains by foreign entities are taxed at 20% here, unless protected by certain bilateral tax treaties. FE has learnt that Walmart didnotwithholdtaxesfromthe 34 entities by resorting to Section 9 of the I-T Act.According totheexplanation7underSection 9 (1), no income would LEGITIMATE OR EVASION? ■ Law carves out exemptions for foreign residents with <5% share ■ Nearly 3 dozen foreign residents sold <5% Flipkart shares to Walmart ■ US-based retailer hasn't withheld tax while making payments to them ■ Taxman is curious if big investors held multiple small holdings in the e-tailer to save tax accrue to a non-resident from transfer of any share,“if such company(which)directlyowns the assets situated in India...neither holds the right of management or control in relation to such company or entity, nor holds voting power or share capital or interest exceeding 5% of the total voting powerortotal share capital ortotalinterest,asthecasemay be,of such companyor entity”. Continued on Page 2
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