OPINION, P8 EDITORIAL COMPANIES, P6 Fadnavis does well on APMC, now to make it work! INTERNATIONAL, P14 M GOVINDA RAO SWADESHI WEAR AFTER KHASHOGGI KILLING Banking supervision & regulation is RBI's remit, the govt must keep out of this Patanjali enters apparel space, aims `1k-cr biz in FY20 SoftBank CEO Son defends Saudi ties as fund boosts profit MUMBAI, TUESDAY, NOVEMBER 6, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL. 58 NO. 262, 24 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: 34,950.92 ▼ 60.73 NIFTY: 10,524.00 ▼ 29.00 NIKKEI 225: 21,898.99 ▼ 344.67 HANG SENG: 25,934.39 ▼ 551.96 `/$: 73.13 ▼ 0.69 `/€: 83.17 ▼ 0.20 BRENT: $73.09 ▲ $0.26 GOLD: `31,739.00 ▲ `174.00 RBI slaps `1-cr fine on Fino Payments Bank THE RESERVE Bank of India on Monday imposed a fine of `1 crore on Fino Payments Bank for opening new accounts despite directions not to do so until further order, reports PTI. The RBI, on October 31, 2018, imposed a penalty of `10 million on FINO Payments Bank, the apex bank said in a release. Curbing fake news in India: FB partners AFP FACEBOOK HAS teamed up with news agency Agence France-Presse (AFP), expanding third-party fact-checking programme in India, as it looks to combat the spread of ‘fake news’ on its platform ahead of general elections in 2019, reports PTI. Facebook, which in April this year had partnered with BOOM, said the move will ‘bolster’ its ongoing efforts to ‘clamp down on manipulated posts’. PSUs to be excluded from ETF basket ■ Gail (India) ■ Engineers India ■ Container Corp To be included ■ MOIL ■ Kundremukh Iron Ore and two more FE BUREAU New Delhi, November 5 AS ITS AMBITIOUS disinvestment plans for this year are being staggered — the latest Coal India offer for sale has mopped up just `5,266 crore against some `15,000 crore targeted and the annual estimate of `80,000 crore is increasingly looking a tall order — the Centre has firmed up a strategy to use the exchange traded fund (ETF) route more aggressively. According to official sources, it will launch a new ETF issue comprising only CPSE stocks in later half of this month, with a target to garner `8,000 crore. If the goal is achieved, the ETF mop-up this time around wouldbehigherthantheprevious pure CPSE ETF (January 2017) which fetched `6,000 crore for the government.The governmentreckonsthatgiven the volatile market conditions and the low appetite for individualstocks,theETFroutemay lure more retail investors. “There are too many holidays (in the first half of this month). The offer will hit the markets later this month whenwe have continuous four days to execute the transactions,”an official told FE. `6,000 cr (June 2018) Initial FFO size of Bharat 22 ETF; got bids worth `14,000 cr, but units worth `8,325 cr sold `8,000 cr November 2017 Initial offer size of Bharat 22 ETF; bids worth `32,000 cr received; `14,500 cr raised by govt `4,500 cr January 2017 Base FFO size of CPSE ETF; bids worth `12,000 cr; `6,000 cr mopped up by govt ILLUSTRATION: SHYAM A CPSE ETF was first launched in March 2014 and it held 10 CPSE stocks, including that of ONGC, IOC and Coal India, among the maharatna CPSEs. Two more tranches of thefundhavesincebeenissued. While `3,000 crore was mobilisedviathefirstCPSEETF issue, the government later sought to make the ETF basket more attractive by including thestocksofprivatecompanies likeAxisBank,ITCandL&T,and this strategy seems to have worked (see chart). In June this year, the government raised `8,325 crore via the furtherfund-offer (FFO) of Bharat-22 ETF that consisted of both CPSEs’andprivatefirms’stocks. So far this fiscal, the government hasraisedaround `15,289 crore via disinvestment. ETFs,which are less volatilecomparedtoindividual stocks, have emerged as a successful tool to disinvestment stocks in the past two years.All the ETF issues in the last two years received overwhelming response, with some getting subscribed over four times. The composition of the stocks in the coming ETF issue would include stocks of CPSEs where government holding is significantly more than 53%. So Engineers India in which government holds only 52.02%, GAIL India (53.46%) and Container Corporation (54.8%), could be excluded. ManganeseoreproducerMOIL and iron-ore miner KIOCL could be among the four new stockstobein,takingthenumberofCPSEsinthebasketto11. PRESS TRUST OF INDIA New Delhi, November 5 GOLD AND JEWELLERY sales are expected to have gone up by up to 15% on the occasion of Dhanteras on Monday as consumer demand revived on reports of a further jump in the yellow metal rates in the coming weeks. The buying during the morning trade remained subdued, but picked up later in the day as eager shoppers indulged in token buying, while some took the delivery of their wedding jewellery. The demand for coins was more than that for jewellery. Even organised players like PC Jewellers and Kalyan Jewellersareexpectedtohaveseen better sales as quality and better designs at competitive prices attracted more footfall. Continued on Page 2 MSME delinquencies at banks as a share of loans in the category (%) Mar 31, ‘17 Mar 31, ‘18 3.32 How previous ETFs fared RBI data show defaults by MSMEs rose to 13.08% for PSBs at March-end this year against 12.56% last year 2.5 `8,000 crore To be raised via the 4th tranche of CPSE ETF, if the greenshoe option is exercised Loan losses high in sector, but banks continue to lend 2.61 Govt to rejig fund with 4 new stocks, including MOIL & KIOCL; issue later this month High prices fail to dull gold rush, sales up 15% MSMEs 2.38 Revamped CPSE ETF to bag `8k cr ● DHANTERAS 12.56 13.08 EXCESSIVE COMPETITION at times can result in stress in a particular sector, finance minister Arun Jaitley said on Monday, pointing out that these are challenges of the growing economy, reports PTI. "Excessive competition at times can result in pricing of nature that the sector of the economy itself feels stressed because everybody then tends to follow the leader," he said at an event organised by CCI. DISINVESTMENT 14.23 15.74 IN THE NEWS FM: Excessive competition not always good SHRITAMA BOSE Mumbai, November 5 LENDING TO SMALLER businesses is as fraught with risks as is lending to large companies,goingbythelevelof non-performing assets (NPAs). However, despite this banks havenotpulledbackoncreditto mid-sized and smaller companies.Delinquencies on account of micro, small and medium enterprises (MSME) rose to a high 13.08% for public sector banks(PSBs)attheendofMarch 2018, compared with 12.56% in March 2017, according to data sourced from the Reserve Banks Public Private Foreign under sector banks banks PCA banks Bank of India (RBI). However,outstandingloans to medium industries rose 3.3% year-on-year to `1.05 lakh crore, data released by the RBI on October31 reveals. Again, credit to the micro and small industries, at `3.64 lakh crore as on September28, 2018,was more orless at same levels in the previous year. Irdai proposes changes in linked, non-linked policies The proposed changes such as increase in revival period and reduction in nil surrender value period will make life insurance product structures more flexible and customer-friendly ■ Personal Finance, P13 S&P puts Tata Motors' long-term rating on 'CreditWatch' Tata Motors Intra-day on BSE (`), Nov 5 192 191.40 189.65 Continued on Page 2 190 QuickPicks SBI net profit drops over 40% as its non-interest income falls STATE BANK OF India (SBI) on Monday reported a net profit of `945 crore in the September quarter of FY19, which is over 40% lower on a year-onyear (y-o-y) basis, as its non-interest income fell 26% to `7,814.5 crore, reports fe Bureau in Mumbai. India's largest lender reported a 15.2% y-o-y fall in operating profit in Q2FY19 to `12,344 crore. SBI’s net interest income, meanwhile, rose 12.5% y-o-y to `20,906 crore and the domestic net interest margin, a key measure of profitability, fell seven basis points sequentially to 2.88%. PAGE 10 Services sector activity in Oct sees quickest growth since July THE COUNTRY'S services sector in October expanded at the quickest pace since July, driven by a significant increase in new business orders, which in turn led to robust workforce expansion, a monthly survey said Monday, reports PTI. The seasonally adjusted Nikkei India Services Business Activity Index rose to 52.2 in October, from 50.9 in September. The services PMI was in the expansion territory for the fifth straight month. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction. PAGE 3 Higher gas volumes push up GAIL’s net by 50% in Q2 ON THE back of 14% higher natural gas marketing volumes and an 11% increase in liquefied petroleum gas (LPG) transmission, state-run GAIL (India) reported a 50% jump in net profit to `1,963 crore in the quarter ended September, compared with `1,310 crore in the corresponding quarter of the last financial year, reports fe Bureau in New Delhi. The revenue of the gas marketer increased 55% to `19,641 crore in the quarter under review compared with `12,683 crore in the corresponding period a year ago. PAGE 6 188 TCS set to go on trial over firing Americans Battle-ready BLOOMBERG San Francisco/Bengaluru, November 5 IT OUTSOURCING GIANT Tata Consultancy Services needs to offer a good explanation forwhyengineers hired at its American outposts are 13 times as likely to be fired if they’re not South Asian. The companyis set to go on trial in California over racial discrimination claims by American workers who lost their jobs at TCS offices in the US because they hadn’t been assigned to any of its clients. Thetrialwillcastaspotlight on work-visa programmes companies use to bring overseas workers to the US, a practice US President Donald Trump has criticised in his protectionist push. TCS, Asia’s largest outsourcer, and rival Indianinformationtechnology staffing firms Infosys and Wipro have all been squeezed bytheTrumpadministrationto hiremoreAmericansonUSsoil. Mumbai-based TCS denies Continued on Page 2 ● UNDER SURVEILLANCE RACIAL BIAS? Special Feature The worsening in the quality of MSME credit was even more severe at banks underthe prompt corrective action (PCA) framework. For these lenders, NPAs arising from the MSME portfolio stood at 15.74% at the end of March 2018, about a150 basis points higher than thelevelayearbeforethat,documentsreviewedbyFEshowed. The government has been concerned that the flow of credit to the MSME sector is being restricted because 11 state-owned lenders are operating under the PCA (prompt corrective action) framework. This has become a contentious issue between the Centre and the RBI and is expected to be discussedatthenextRBIboard meeting on November 19. On its part, the RBI had earlier this year eased norms for recognition of non-performing assets (NPAs) in the MSME segment. UP IN ARMS ■ The case was brought as a class action on behalf of about 1,000 non-South Asians — most of them US citizens ■ Plaintiffs allege TCS favours Indian ex-pats and visa-ready workers from India for US positions ■ TCS denies any unlawful bias, says in court filings that the Caucasian American leading the lawsuit was terminated over 'performance concerns' anyunlawfulbiasinitsUSoperations and says in court filings that the Caucasian American leading the lawsuit was removed from one of its projectsandultimatelyterminated over“performance concerns”. Continued on Page 2 186 Prev. close: 190 184 Prime Minister Narendra Modi with crew members of INS Arihant, a strategic strike nuclear submarine, after it successfully completed its first deterrence patrol. IL&FS fallout FE BUREAU HFC stocks take a beating Non-banking housing finance companies are facing a liquidity stress, and they need to review their funding model for sustainable growth, corporate affairs secretary Injeti Srinivas said on Monday. Defaults at IL&FS have triggered a sharp fall in the Indian stock and debt markets Indiabulls Housing Finance Share price on BSE (`) 900 800 834.30 Dewan Housing Finance Share price on BSE (`) 250 220 788.85 amid fears that the contagion of the crisis could spill over to the broader financial system. Shares in most housing finance companies, including Indiabulls Housing Finance and Dewan Housing Finance Corporation, were trading down on Monday. 219.90 211.80 LIC Housing Finance Share price on BSE (`) 440 430 190 500 Oct 17, 2018 Nov 5, 2018 410 130 600 420.80 420 160 700 433 400 100 Oct 17, 2018 Nov 5, 2018 390 Oct 17, 2018 Nov 5, 2018 Open Close PRESS TRUST OF INDIA New Delhi, November 5 S&P HAS PLACED homegrownautomajorTataMotors’ long-term credit rating on ‘CreditWatch’ with negative implications, reflecting the risk that credit metrics could deteriorate. Themovetoplace‘BB’longterm issuer credit rating on Tata Motors on CreditWatch with negative implication follows interim results which were weaker than expected, dragged down by Jaguar Land Rover,S&Psaid in a statement. “We believe the company is likely to miss our expectation for fiscal 2019 unless it takes swiftcorrectivesteps,”itadded. Last month, Tata Motors reported a consolidated net lossof`1,009croreforthesecond quarter ended September 30,2018,mainlydue to aweak performance byits British arm Jaguar Land Rover (JLR). Continued on Page 2 CRUDE CONTROL Oil up as US imposes sanctions on Iran, Tehran defiant REUTERS London, November 5 OIL PRICES RECOVERED some ground on Monday after five days of heavy losses as the USimposedarangeofpunitive sanctions on Iran, aiming to curb exports by the Islamic Republic, including its sales of fuel. The move is part of a wider effort by US President Donald Trump to curb Iran’s missile and nuclear programmes and diminish its influence in West Asia. Iran said it would continue to sell oil abroad. BenchmarkBrent crude oil was up 80 cents a barrel at $73.63 by 1420 GMT. US light crude was 50 cents higher at $63.64. Both oil benchmarks have lost more than 15% since hitting fouryear highs in early October, as hedge funds have cut bullish betsoncrudetoaone-yearlow. China decries US ban ILLUSTRATION: ROHNIT PHORE CHINA DENOUNCED the new US sanctions targeting Iran as ‘long-arm jurisdiction’ and vowed to continue its bilateral trade with the Islamic republic, reports AFP. "China opposes unilateral sanctions and long-arm jurisdiction," foreign ministry spokeswoman Hua Chunying told a regular press briefing. China, however, was on the list of eight countries given a waiver by the US. US secretary of state Mike Pompeo on said Sundaythe US action would be “the toughest sanctions ever put in place on the Islamic Republic of Iran”. “Imposition of unprecedented financial pressure on Iran should make clear to the Iranian regime that they will face mounting financial isolation and economic stagnation until they fundamentally change their destabilising behaviour,” US treasury secretary Steven Mnuchin said. In response, Iranian Presi- dent Hassan Rouhani said in a speech broadcast on state TV thatIranwouldbreakthesanctions and continue to sell oil. Pompeo said Washington hadgrantedtemporaryexemptions to eight countries allowing them to continue buying Iranianoil,butUSofficialshave said the aim is eventually to stop all Iran’s oil exports. Continued on Page 2 ■ India, China among 8 countries allowed to buy Iranian oil, P12
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