ECONOMY, P2 BAD LOANS GUN VIOLENCE A real tribute to Sardar Patel would be real agri reform to give farmers a better deal Finmin expects recoveries to exceed `1.80 lakh cr in FY19 Trump offers call for unity after Pittsburgh shooting claims 11 lives NEW DELHI, MONDAY, OCTOBER 29, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 206, 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 SALES OF CARS AND BIKES ● GST COMPLIANCE It’s a dull Diwali ■ Diwali sales tipped to be dull PRESS TRUST OF INDIA New Delhi, October 28 The rise of digital lending What’s spurring the growth of fintech start-ups in India and will the possible entry of Google and WhatsApp pose a threat? ■ eFE, P8 IoT: Making Indian cities smart With cheaper data plans and higher mobile penetration, more services will be provided through cloud sourcing ■ PERSONAL FINANCE, P9 Need for personal accident cover On death, payout would be 100% of the sum insured; for permanent/partial disability, up to 75% of the sum assured ■ INFRASTRUCTURE, P11 Govt spend alone won’t suffice While the headroom for growth is huge, what’s missing is a concerted push to revive private investment in sector ■ SCIENCE & TECH, P12 Pies in the sky Fast food via drone: As operators have gained experience, some regulators, such as Iceland's, have begun to relax rules QuickPicks IL&FS crisis: Govt plans mega data platform to flag frauds STUNG BY the IL&FS crisis, the government is considering linking critical economic data bases to create a mega platform for financial sector regulators as well as investigative agencies, reports Banikinkar Pattanayak in New Delhi. The Centre seeks to better equip them to ring alarm bells on frauds on time and respond swiftly. PAGE 2 WTO sets up disputes panel on India-US case on export subsidy THE WORLD Trade Organisation's dispute settlement body has set up a panel to examine the US complaint against certain export-subsidy measures by India, reports PTI. In March, the US dragged India to the WTO's dispute settlement mechanism over export subsidies, saying that these incentives were harming the American companies. PAGE 3 PRASANTA SAHU New Delhi, October 28 IN WHAT WOULD improve the liquidity conditions of micro, small and medium enterprises (MSMEs),the government will soon put in a place a system under which banks will release 90% of these firms’receivables on the basis of receipts of purchases from their clientele among CPSE/state-run undertakings. The plan, according to official sources, would be implemented in a decentralised manner,so the decisions could be taken by even the middlelevel bank management. Continued on Page 2 No small matter 49%: Share of MSMEs in India's annual exports 11 crore : People employed in MSME sector, highest after agriculture `8.86 lakh cr: Outstanding bank loans to MSMEs at end-FY18 8.3%: Gross NPAS of bank loans to MSMEs Of 99 PMKSY projects see little progress in command area development 15 Of 39 projects (where progress report is available with agri ministry) see no development of command area; another 12 achieve less than 50% development PRABHUDATTA MISHRA New Delhi, October 28 WHILETHE MINISTRYofwater resources says 33 irrigation projects among the 99 implemented on a priority basis under the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) are ‘complete’ citing reports from state governments, data gathered by FE showthatinasmanyas74projects,there has been absolutely noprogressintheconstruction of field channels and drains (command area development). Without theselast-milefacilities,theirrigationpotentialcreatedcan’tbetappedbyfarmers, so the funds spent on the projectsvirtuallygo towaste. When Prime Minister Narendra Modi launched PMKSY in July 2015 and set the target to complete the 99 projects by December 2019, `77,595 cr* Total estimated cost to complete 99 irrigation projects by Dec 2019 under PMKSY *of which `29,000 cr for command area development the total costwas estimated at `77,595 crore, including `29,000 crore for command area development. (Among the PMKSY projects, the largest is Sardar Sarovar in Gujarat with an estimated cost of `31,522 crore). Currently, only 49% of the agricultural land in the country is irrigated. According to a progress report of 39 projects (along with the command area) with the agriculture ministry reviewed by FE (in the case of all but one of the remaining projects, it has little information as the states haven’t shared the project reportswith it),even among these projects, command area development hasn’t started at all in case of 15, while in another 12, the development is less than 50%. FE BUREAU Mumbai, October 28 Continued on Page 2 OPM (bps, chg y-o-y) Q3 Q4 Q1 Q2 FY18 FY19 Net profit (% chg y-o-y) RM to sales (bps, chg y-o-y) Q3 Q4 Q1 Q2 FY18 FY19 Q3 Q4 Q1 Q2 FY18 FY19 Q3 Q4 Q1 Q2 FY18 FY19 Sample of 236 companies (excluding banks & financials) umes and very few have been able to take price hikes to pass on the increase in rawmaterial costs. At Maruti Suzuki,the gross margin mayhave improved by 70 basis points y-o-y but there was a one-time benefit from 268.92 Net sales (% chg y-o-y) 267.10 “WE HAVETAKEN price hikes in Q2 but there are limitations in a competitive market,there is a strong down-trading”.This observation by Rajiv Bajaj, managing director,BajajAuto, sums up the business environment today. It’s a tough market in which demand is modest, the competition intense and raw material costs high. Most management teams,like the one at Asian Paints, say domestic demand remains challenging. Indeed, that is clearly reflected in the performance of India Inc so farin the September earnings quarter which has been very ordinary. Most companies have either missed estimates or reported results in line with expectations; there have been virtually no big surprises. If Reliance Industries and TCS are excluded from the sample of 236 companies, the increase in revenues would be just 14% while the net profits would fall 4.6%. Companies have found it difficult to push through vol- 113.04 74 India Inc reels under input costs, margins pressured 15.64 Fast-tracked irrigation projects go a-begging EARNINGS SEASON 3.25 ■ BRANDWAGON, P10 Banks to clear 90% of CPSEs' dues on receipt of purchase Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe depart for Tokyo by express train Kaiji, in Yamanashi, Japan, on Sunday. Report on Page 2 -285.90 SPECIALS Tokyo bonhomie -13.91 PMKSY ILLUSTRATION: SHYAM KUMAR PRASAD 38.41 ● NEW MSME PACKAGE demand down by 20-30% compared to 2017 festive season 38.91 Continued on Page 2 ■ Dealers say 25.07 Continued on Page 2 ■ Customers enquiring but not buying due to sharp increase in prices 24.71 GOING BY THE very muted demand for cars and bikes,it’s going to be a dull Diwali. Demand is all but fizzling out according to dealers who say sales during the Navratri period has been down by1020%.How subdued the sentiment is clear from the observations of RC Bhargava, chairman, Maruti Suzuki India,late lastweek.“The market doesn’t seem to be showing any kind of buoyancy which is expected during the festival season.The sentiment is not bright,” Bhargava said. One big reason for the poor consumer sentiment is the crash in the stock markets and this has hit urban demand badly. Puneet Anand, senior GM (marketing), Hyundai India, says car sales could well be lowerthan the last festival season. “Car sales may not be as good as last Diwali from an 17.56 bookings weren’t converting into sales. Rajiv Bajaj, managing director, Bajaj Auto, said on a television channel last week the growth in two-wheelers was clearly softening even as the festive season had got underway.Bajaj said therewas some talk of a fall in demand, with some players expected to clock in smaller volumes than usual, though his firm he asserted was doing well. Sales of motorcycles and cars have been dented by the new third-party insurance norms and also the rise in fuel prices.Also,the liquidityshortage,some dealers said,had led to a rise in the cost of loans. KRITIKAARORA & ARUN NAYAL New Delhi/Mumbai, October 28 14.73 industry perspective,” Anand told FE. Down south, the management at TVS Motors was equally circumspect. Sales so far this festive season, they said, had been very modest. The Hero MotoCorp management too indicated that first few days of the festive season witnessed a flattish growth. “The mood is probably the worst in many years, at least fiveyears.The last timewe saw a similar mood was in 2013 when the economy wasn’t doing well,“Ashish Kale,president,FederationofAutomobile Dealers Associations (Fada), said.Kale said the usual festive fervourwas missing. “It feels like any other month,” he said, adding that SOON, GST OFFICERS will study the behavioural pattern of certain taxpayers to nudge them to comply with tax laws, inadeparturefromthecurrent practice of focussing only on deterrent action to check evasion.TheCentralBoardofIndirect Taxes and Customs (CBIC) has set up a ‘Nudge Team’ to formulate a strategyon studying behavioural patterns of taxpayers and use segmented approach to encourage them to pay taxes,an official said. The plan is based on‘behavioural interventions’ or ‘nondeterrence approach’ adopted by countries like the UK, AustraliaandMexicotoframepoliciesandincreasetaxcollections. “The departmentwill segregate taxpayers into different categories like ‘disengaged’, ‘resisters’,‘triers’ and ‘supporters’,”theofficialsaid,addingthat incasesofnon-wilfuldefaulters, the tax department would adopt a soft approach to persuade them to comply by sending them personalised emails reminding them about the default in tax payment cycle. Source: Capitaline R&D services which was over 100 basis points. The company’s revenues rose by just about 3.5% y-o-y in Q2FY19 even though volumes were strong. Continued on Page 2 Mutual funds Not mutually beneficial CLOSE TO 65% of a total 380 mutual fund equity schemes have posted negative returns in the last one year, reports Chirag Madia in Mumbai. A number of the worstperforming funds are infra sector funds with HSBC Infrastructure Fund reporting a negative return of 30.7%, data from Value Research showed. -35 Continued on Page 2 Return as on October 15, 2018 -30 -25 -20 -15 -10 -5 30.66 1-year return (%) HSBC Infrastructure Equity 24.12 SBI PSU 21.80 20.95 20.95 19.61 ` % 0 HDFC Infrastructure Sundaram Small Cap Aditya Birla Sun Life Infrastructure Invesco India PSU Equity 18.48 IDFC Infrastructure 18.46 HSBC Small Cap Equity 17.85 Aditya Birla Sun Life Pure Value 17.31 Aditya Birla Sun Life Small Cap Source: Value Research REAL ESTATE Home buying likely to be a subdued affair this festive season KRITIKAARORA & SHUBHRATANDON Mumbai, October 28 FOR THE SIXTH year in a row home buying could turn out to be a low-key affair this festive season even though developersaretryingeverytricktowoo consumers. There is some interest but whether the prices, freebies and discounts are enough to convert the queries into transactions is hard to tell. The smaller number of unit launches and the high inventories — much of it incomplete — suggests the sentiment is subdued. Indeed, big-bang launches and large scale bookings,symbolic of the festive season, are athingofthepast.ArvindNandan, ED (research), Knight Frank India, told FE the momentum,this time,is marginal.“The launches have been better but while demand was expected to pick up in the festive season,that has not materialised meaningfully as yet,” Nandan said. NCR MMR Top-3 cities With over 89% of inventory under-construction, large developers are less vulnerable to pricing pressures (Break-up of inventory as of August 2018, mn sq. ft) Completed project Under-construction project Top-50 Others 228.4 FE ■ Also, loans have become costlier due to shortage of liquidity 123.5 JSW STEEL ON Sunday said it will pump in $150 million (approximately `1,000 crore) in the first tranche to set up its new steel facility in Texas, US, reports PTI. This is part of the $500-million investment commitment made by the Sajjan Jindal-led company. wheeler prices up due to insurance premium, rise in crude prices 35.5 JSW Steel to invest $150 m in Texas unit in 1st tranche ■ PV, two- 179.3 138.6 389.7 THE RUIA FAMILY-OWNED Essar Group would deleverage about `1.25 lakh crore of debt, reports PTI. This would be the largest by any corporate if its offer to repay lenders of Essar Steel in full is accepted. Last week, ArcelorMittal's `42,000-crore bid was picked over the Ruias’ `54,389-crore offer to pay off all of the lenders' dues. during Navratri down by 10-20% 9.9 19.7 IN THE NEWS Ruias to deleverage `1.25L-crore debt if Essar bid accepted ■ Sales 22.8 20.3 55 Demand is all but fizzling out say dealers; sales during the Navratri period have been down by10-20% CBIC to focus on behavioural patterns of taxpayers 176.34 UPI-based payments could eclipse those by cards by 2020 A GULATI & R JUNEJA 15.54 SUNIL JAIN INTERNATIONAL, P4 14.17 OPINION, P6 Top-50 Others Note: (a) We have taken Top-50 developers by size of outstanding inventory, though if there are less than 50 organised developers in a city the number of Top-50 is accordingly restricted. Source: PropEquity, Kotak Institutional Equities But builders are keeping their fingers crossed since 2018 is the first year after two years of disruptions — demonetisation and RERA and GST.The management at Sobha believes that the transitional challenges may be behind us and that demand is picking up across all regions and segments. However,estimatessuggest that a total of over618 million sq ft of under-construction inventory is available with the developers in top three cities. The amount of completed inventory is in the range of 75 million sq ft,according to analysts at Kotak Institutional Equities.“We highlight that at current levels of sales, the extant inventory will take as much as 50 months to absorb. However, if incremental sales are directed towards completed inventory alone, then the current inventory can be absorbed within 5-6 months,” they said. Continued on Page 2
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