OPINION, P6 ECONOMY, P2 SUNIL JAIN #MeToo, Rafale big but eclipse much bigger concerns EXTRA TIME Cheap renewables and AI/BigData are helping resolve conservationdevelopment trade-off BONE OF CONTENTION Jaitley-led finmin extends deadline for filing Sept GST returns to Oct 25 RAJAT KATHURIA INTERNATIONAL, P4 Trump says US to exit nuclear treaty, Russia warns of retaliation MUMBAI, MONDAY, OCTOBER 22, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL. 58 NO. 249, 18 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 Q2 EARNINGS ● INFIGHTING Revenues do well but not enough to offset the much faster increase in raw material costs PRESS TRUST OF INDIA New Delhi, October 21 Future-proofing the internet Quantum computers will break the encryption that protects the internet making fixing anything quite tricky QuickPicks Prices of petrol, diesel cut again THE PRICES of petrol and diesel were cut for the fourth straight day on Sunday on softening international oil prices, providing some relief to consumers battered by two months of relentless rate hikes, reports PTI. Petrol price was cut by 25 paise a litre and diesel by 17 paise, according to the price notification of state-owned oil firms. In Delhi, petrol now costs `81.74 a litre and diesel `75.19 per litre. PAGE 2 IBC: UN model for cross-border cases A HIGH-LEVEL panel is likely to recommend a United Nations model for cross-border insolvency cases under the Insolvency and Bankruptcy Code, according to a senior official, reports PTI. The Insolvency Law Committee is looking into the discussion paper related to having the UN model for cross-border insolvency matters as well as comments received on the paper. 1.57 ` FY16 FY16 FY17 FY18 *Includes returns filed plus TDS deduction of non-filers FY19 E-RETURNS FILED BYindividual taxpayers grew70% annually to 5.4 crore in the AprilAugust period of the current financial year, but the average tax paid by them has come down by 32% to `27,083. In the previous two years (FY18 and FY17), while the growth rate for e-filers for the respective April-August periods were 24% and 39% respectively, the average tax paid had declined marginally from about `44,000 to nearly `40,200 (see chart). Even though first, demonetisation, and later, the goods and services tax (GST) helped addpacetotaxbaseexpansion, 335.64 43,967 2.5 3.1 FY18 SUMIT JHA New Delhi, October 21 46,290 1.8 FY17 FY15 50,667 5.4 40,167 27,083 the rate of growth in personal incometax(PIT)collectionhasn’trisencommensurately.(The numberofindividualtaxpayers rose from 5.9 crore in FY16 to 7.8 crore in FY17 and, taking cuefromavailabledata,thefigurecouldbecloseto10crorein FY18. PIT revenue growth, however, rose from 8.5% in FY16 to 29% and then fell to 19% in FY18). The fact that the average income tax paid by individual taxpayers has come down indicates that mere inclusion of more assessees, who contributelittletothetaxrevenue, won’t immediately serve the purpose of improving the tax-GDPratio. Continued on Page 2 AT MORE THAN `1 lakh crore in 2018-19, business in the used-carmarketcouldbemore than half that done in the new car market. Already,volumes in the preowned car space, at around 3.6 million units is ahead of those in the new passenger vehicles market which reported sales volumesof3.2millionin201718. Not surprisingly, the more popular cars are those in the entrysegment—Alto,WagonR, SwiftandSantro—andaccount foraround60%ofthevolumes. Acombinationofaspiration and easy access to finance is driving the sales of pre-owned cars, and given how much of the business is now transacted in the organised sector, the space is tipped to grow rapidly Popular used cars sold Alto, Wagon R, Swift, Santro 50% 50% Ownership cycle crashes That's nearly of the new car market Entry-level cars most popular 60% to four years Easy finance, warranty fuelling growth of sales in the next fewyears. Ashutosh Pandey, CEO, Mahindra First ChoiceWheels, claims business at his firm is Less PSUs, less imports brisk, growing at around 40-50%. Continued on Page 2 FE BUREAU Private peers beat PSUs in raising output BANIKINKAR PATTANAYAK & SURYA SARATHI RAY New Delhi, October 21 AS THE GOVERNMENT mulls ways to substitute certain commodity imports through higher local production, it will do well to undertake a comprehensive review of the performance of key public-sector units (PSUs) vis-a-vis their private-sector peers over a long period. A sharp jump in the production of certain PSUs like Balco and Hindustan Zinc after their privatisation also holds lessons on how below-par output and government ownership often go hand in hand in India. Aglimpse of segments like steel, iron ore, aluminium, copper and crude oil suggests private companies beat the PSUs fair and square in Steel (m tonne) 2007-08 Iron ore (m tonne) 2017-18 2007-08 3.62 14 15.02 SAIL 16.27 JSW Copper cathode (tonne) Hindustan Copper 44,734 327,667 2007-08 2017-18 Hindalco 25,949 410,000 25.9 ONGC 7.8 18.8 NMDC Sesa Goa * In 2010-11, just before curbs were imposed on mining in key states Aluminium (tonne) Nalco Hindalco 360,457 477,723 2007-08 425,515 12,91,000 2017-18 Before After (FY18) # Output in tonne 2016-17 22.2 25.2 Impact of privatisation Crude oil ( m tonne) 2007-08 29.8 2017-18 2.6 9.4 Cairn Hindustan Zinc ^2001-02; #2000-01 569,000 FY15 Used cars market now worth `90,000 cr 89,164 6.3 Avg income tax paid/ assessee (`) ARUN NAYAL New Delhi, October 21 Aluminium 9.2 Used-car market revs up, already half of new cars 791,000 April-August Individual e-return filers (crore) SECOND LIFE 176,395^ ■ SCIENCE & TECH, P12 2.38 Personal income tax Former Olympic champion Sanya Richards-Ross (left) flags off the Delhi Half Marathon 2018 with South African ex-cricketer Jonty Rhodes and others, in New Delhi on Sunday Balco production. For instance, while JSW’s steel output jumped over four times in the decade through 2017-18, state-run SAIL’s rose only 7.3% (see the chart).The production of certain PSUs even fell over the past decade, in a stark contrast to their private-sector competitors, despite the policy environment clearly favouring the state-run units. Cairn India, for instance, raised its crude oil output by over three times to 9.35 million tonnes between FY08 and FY17, while state-run ONGC’s production dipped 14.3% during this period.This was despite the fact that Cairn was asked to pay 10 percentage points more of its profits to the government if it wanted its lease to be extended so that it could extract more oil. Continued on Page 2 ENTERTAINMENT No cord-cutting for now, but digital viewing is where the action is FE BUREAU Mumbai, October 21 Linear TV ADVERTISING SPENDS ON digital video platforms are tipped to grow by about 50% this year and the momentum should sustain over the next few years. Revenues from the OTT (Over the Top) market are expected to hit $3 billion over the next five years as viewers pick and choose content and watch at theirconvenience. Today,monthlyactivedigital videousersareatabout250mil- TV households (m) FY18 CAGR: TV consumption: 3% FY23E TV watch time e 197 234 TV penetration (%) 66 TV reach (m) (bn mins/day) 160 With most accidents caused by derailment, Indian Railways plans to change configuration of tracks for safer operations Continued on Page 2 140 On track to prevent accidents tivepressureinthesector.Also, the company held back on ad spends which have typically gone up by about 20% in the previous four quarters. Net profits at HeroMotoCorp were down 3.4% y-o-y. Thetwo-wheelermanufacturer reported operating profits or Ebitda(earningsbeforeinterest costdepreciationandamortisation) that were lower by 5% y-o-yfollowingweakgrossmargins which were impacted by input cost pressures. 71 TV daily tune-ins (mins) 677 ■ INFRASTRUCTURE, P11 Source: Capitaline 614 Vedanta’s performance is likely to turn around Q3 onwards owing to volumes; FY20e Ebitda up 2%; ‘Buy’ retained Q1 Q2 FY19 More paying taxes, but lesser amounts Putting their best foot forward Slight miss on operating numbers Q3 Q4 FY18 TAXING TIMES ■ BRANDWAGON, P10 ■ INVESTOR, P9 Q1 Q2 FY19 Capital run Zinc o-yto 16.2%.That’s because of asharpriseincosts;theratioof raw materials to sales went up byas much as 457 basis points y-o-y. The profit after tax, for the sample increased just 3.6%, and excluding RIL, they were down 4.5% y-o-y. To be sure the earnings at HUL were good; however the quality of the earnings growth at the FMCG major was not as good as expected since the pricing component was lower than it has been in the last six to seven quarters. Analysts believe there is some competi- 6.14 Anil Kumble and Microsoft’s Peggy Johnson on how Power Bat’s sensor-based tech can enhance the game of cricket 256.93 9.70 Q3 Q4 FY18 Sample of 49 companies (excluding banks & financials ) 8.27 Power Bat ups cricket experience 3.61 1.89 Q1 Q2 FY19 Q3 Q4 FY18 (crore)* ■ eFE, P8 457.27 19.17 18.44 4.33 113.48 38.11 34.53 25.01 Q1 Q2 FY19 Overall direct tax base From donning new identities to launching premium offerings, legacy footwear brands are stepping up their game (bps, chg y-o-y) 935 FE SPECIALS Q3 Q4 FY18 RM to sales (% chg y-o-y) 836 A `35,000-CRORE plan has been drawn up for electrification of all railway lines across the country, Railway Board member Ghanshyam Singh told PTI on Sunday. Electric energy was cheaper and the railways saved `13,500 crore per annum by using it instead of diesel on several routes, he said. It was Prime Minister Narendra Modi and railway minister Piyush Goyal’s dream to carry out electrification of all lines through indigenous sources. Net profit OPM (bps, chg y-o-y) -332.39 IN THE NEWS Railways to spend `35,000 crore to electrify all lines THE SEPTEMBER QUARTER earnings season has got off to a disappointing start with many more misses than hits including those from Reliance Industries, UltraTech Cement and HeroMotocorp. While IT majors Infosys andTCS turned in fairly good numbers, some of the smallerplayers didn’t do as well. Hindustan Unilever reported a middling quarter. Rising costs are pressuring the profitability at a host of companies. At cement major UltraTech, profits fell year-onyear in the three months to September as rising energy andlogisticscost,coupledwith rupee depreciation, drove up expenses by 14% y-o-y. For a sample of 49 companies (excluding banks and financials) revenues have risen 38.1%; excluding RIL, revenuesrosejustunder20%.RIL accounts for 56% of the total revenues of the sample. Operating profit margins for the quarter fell 332 basis points y- Net sales (% chg y-o-y) 17.24 FE BUREAU Mumbai, October 21 IN AN UNPRECEDENTED move, the CBI has booked its second in command, Rakesh Asthana, on the allegations of receiving bribe from an accused probed by him in a case linked to meat exporter Moin Qureshi — a charge levelled bythe official against CBI director Alok Verma in his complaint to the Cabinet secretary two months ago. The CBI registered the case — FIR RC 13(A) of 2018 — against CBI special director Asthana on October 15 on the basis of a complaint from SatishSana,facingprobeinthe 2017 case allegedly involving Qureshi, alleging the official had allegedly helped him to get a clean chit. The CBI has also arrested Manoj Prasad, believed to be a middleman,when he returned from Dubaion October16.The agency has, however, maintained a silence on the issue. It is alleged by Sana that PrasadandhisbrotherSomesh had taken money to arrange a clean chit to him. Gujarat-cadre IPS officer Asthana, who is heading the special investigating team (SIT) handling crucial cases suchasAgustaWestlandcopter scam and loan fraud by Vijay Mallya. The team is also probing the Moin Qureshi case. In an exhaustive letter to the Cabinet secretary on August 24,Asthana had given a list of 10 instances of alleged corruption by Verma in which it was alleged that Sana paid the CBI chief `2 crore to get clean chit in the case, government sources said. This complaint was referred to the Central VigilanceCommission(CVC)which is probing the matter, the sources added. ILLUSTRATION: SHYAMKUMAR PRASAD Margins pressured as input costs soar CBI files FIR against its No. 2 over graft charges Avg time spent (mins) 228 236 Key players: Zee, Star, TV18, Sony and Sun Source: BARC, Company, Kotak Institutional Equities lion and daily active users at 180-200 million. That’s way smaller than the TV universe of 836 million people. But Kotak Institutional Equities analysts say the gap will narrow. Digital video,theysaid,isnotfarbehind in terms of scale and reach in the top 10 cities compared with a singleTVchannel. That will pull in the advertisers and digital video advertising will swell to $2.2 billion in five years or by 2023.Once it becomes possible to measure digital viewership just as television viewership is measured, TV will start losing the advertising share at a faster pace.Also, even though Indian consumers are loathe to payfor content subscription,revenues are expected to hit close to $1 billion. It’s not as though they willgiveuponTV—therewon’t bethekindofcord-cuttingseen intheWest.That’sbecausevideo services cost more than Pay-TV bundles,priced at about `250300 and offerlots ofvariety. Continued on Page 2
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