OPINION, P8 MARKETS, P10 INTERNATIONAL, P14 EDITORIAL DAY AFTER POLICY TRADE WORRY SBI cuts interest rate by 5 bps on home loans up to `30 lakh Trump says he won’t meet Xi before tariff deadline Akshaya Patra’s success shows how welfare spend must evolve Shrinking funding for teacher training is a big worry, training needs to be re-imagined, too NEW DELHI, SATURDAY, FEBRUARY 9, 2019 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 294, 28 PAGES, `10.00 (PATNA `9.00, RAIPUR `10.00) 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: 36,546.48 ▼ 424.61 NIFTY: 10,943.60 ▼ 125.80 NIKKEI 225: 20,333.17 ▼ 418.11 HANG SENG: 27,946.32 ▼ 43.89 `/$: 71.31 ▲ 0.14 `/€: 80.89 ▲ 0.10 BRENT: $62.19 ▲ $0.56 GOLD: `33,043 ▲ `43 DECEPTIVE MARKET ● ANGEL TAX Indices mask poor show by most stocks IN THE NEWS Twitter: We don’t take actions based on political views FACED WITH ALLEGATIONS of being politically biased in India, Twitter said it believes in impartiality and does not take any actions, such as blocking of accounts, based on political views, reports PTI. Twitter, which has been accused by supporters of the ruling BJP of being biased against the right-wing, said "abuse and hateful conduct comes from accounts across the ideological spectrum" and it will continue to take action when rules are broken. RBI slaps fine on Corporation Bank, Allahabad Bank THE RESERVE BANK of India has imposed a cumulative penalty of `3.5 crore on state-owned lenders Corporation Bank and Allahabad Bank for violation of various norms, reports PTI. Corporation bank has already taken necessary preventive measures to avoid such recurrence, the lender said in a regulatory filing on Friday. Details ready on succour to start-ups; order soon Nifty Midcap Index has given up 21.5% since the start of 2018; Nifty Smallcap Index has suffered a bruising 34.8% BANIKINKAR PATTANAYAK New Delhi, February 8 YOOSEF KP Mumbai, February 8 AN UNIMPRESSIVE PROFIT growth in corporate India has left India’s stock markets with very poor breadth. Over the past year, 80% of stocks have posted negative returns and while this is masked bythe rise in the benchmarks,the indices have been driven up bya handful of stocks. Between them, Reliance Industries (RIL),Infosys,HDFC Bank, Tata Consultancy Services (TCS) and HDFC have contributed about 970 points to the Nifty rally of 413 points since January2018,indicating that the remaining stocks have posted negative returns. How weak the broader markets are is clear from the fact that the number of stocks with a market capitalisation of `1,000 crore or more has been continuously falling, having hit the lowest levels in two years. As on Thursday,there were only 727 firms that had a market capitalisation of at least `1,000 crore. This was lower than the 858 companies at the end-December Decline for third straight month Domestic passenger vehicle sales declined for the third month in a row in January, dropping 1.87%, as manufacturers continued to reduce inventory at dealers. 2018 2019 2018 5.18% 54,043 62,543 2019 2.21% Three-wheelers 15,97,572 2018 1.87% 16,84,761 87,591 2,80,125 2019 85,694 2,85,467 2018 Two-wheelers 858 850 821 800 750 720 795 770 742 2019 13.59% Special Feature Volvo will offer a bouquet of plug-in hybrids Whenever we take a major step (say, assembling plug-in hybrid cars in India), we might not make a big impact, but we set an example for others: Richard Snijders ■ Motobahn, P13 QuickPicks FPIs pull out $443 million from bond market in 4 days FOREIGN PORTFOLIO investors (FPIs) have pulled out nearly $443 million from the bond markets between Monday and Thursday, reports Shashank Nayar in Mumbai. This is higher than the total net outflow of $370 million from the bond markets in January. On Friday, the yield on the benchmark closed at 7.52%, up 2 basis points over Thursday's close. PAGE 10 Govt raises limit on disclosure of investment for employees THE CENTRE has increased the monetary limit on disclosure of investment in shares and mutual funds by employees to six months of their basic pay, reports PTI. Now all government employees need to send an intimation if total transactions in shares, securities, debentures, MF schemes and the like exceeds six months' basic pay during the calendar year. PAGE 2 760 767 727 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 2017 FE BUREAU CVs 900 700 Auto sales January (Units) PVs A number of cos with a minimum Mcap of `1,000 cr hit a two-year low 11,900 Nifty50 2018 10,943.60 Stocks that driving the rally 11,200 9,800 2019 Stock price (`) Gain since Jan 2018 (%) RIL 1,277.70 10,500 Infosys HDFC Bank 10,435.55 Feb 7 760.90 2,122.65 38.7 46.0 13.4 TCS 9,100 Jan 1, 2018 Feb 8, 2019 2017, data sourced from Bloomberg showed. The NiftyMidcap Index has given up 21.5% since the start of 2018, and 79% of its constituents have lost value. The Nifty Smallcap Index has suffered a bruising 34.8% since January, and 87% of its members have seen a fall in prices. “Lower oil prices have created a positive environment for India,but we are downbeat on the economic outlook aswe expect the economy to transition from a growth sweet-spot in 2018 to a soft patch in 2019,”economists at Nomura wrote recently.“In particular, we expect the slowdown to worsen in H1 2019 to around 2,061.40 52.6 HDFC 1,944.65 13.7 6.2% , from a peak of 8.2% in Q2 2018 before staging a recovery to 7.2% in Q4 2019,” they added. Foreign portfolio investors (FPI) have remained net sellers for most of 2018, offloading equities worth $4.2 billion between January 2018 and now. On the other hand, domestic institutional investors (DIIs) bought shares worth whopping $16 billion during the same period. Meaningful earnings growth has eluded corporate India for three years now and private sector investments remain subdued. THE GOVERNMENT IS learnt to have decided to raise the funding limit in start-ups that would be exempted from the so-called angel tax to `25 crore from the current `10 crore, provided they submit an undertaking — along with important financial details — to suggest they are indeed not shell companies and are not used to funnel black money. It has also decided to recognise all companies that are in operation for up to 10 years as start-ups (instead of the current seven years), if they fulfil other criteria on innovation and turnover, sources told FE. Simultaneously, the turnoverlimit forthe start-up tag will be raised to `50 crore from `25 crore at present. Anotification to this effect could be issued anytime soon. The government is also favourablyconsidering allowing the tax exemption to all eligible start-ups overthe past 10 years (from 2009-10 onward), said one of the sources. Continued on Page 2 GST RELIEF State FMs for 5% rate on under construction houses Intend to correct practice of builders not passing on benefit of reduced tax incidence FE BUREAU New Delhi, February 8 A GROUP OF state finance ministers (GoM) on Friday decided to recommend a GST rate cut on all under-construction houses to 5%, from 12% at present,and slashing of GST rate to 3% from 8% on‘affordable housing projects’. However, the rate cuts would be accompanied by denial of input tax credit (ITC) to the builders. The proposed change in the tax structure for under-construction housing projects is intended to correct the practice of builders not passing on the benefit of reduced tax incidence under GST compared to the previous regime to consumers.It could also give a further boost to affordable housing projects, incentivised by the government. The GoM, under Gujarat deputy chief minister Nitin Patel,was set up last month to analyse tax rates and issues Continued on Page 2 denial of ITC `3.85 lakh cr investment planned till 2022 Builders pay almost zero tax but benefits not percolating, say experts being faced by the real estate sectorunderthe GSTregime.A final report on recommendationwould be prepared bynext week after another round of deliberations,sourcessaid.The GoM proposals need to be approved by the GST Council. The approach is similar to the one adopted for restaurants, which saw their GST rates cut to 5% without ITC from 18% by the GST Council after widespread complaints BHAVIK NAIR Mumbai, February 8 AT STAKE India enjoys zero tariffs on $5.6 billion of exports to the US ■ New Delhi is world’s largest beneficiary of Washington’s GSP ■ President Trump has repeatedly called out India for its high tariffs ■ turing to return home as part of his Make America Great Again campaign. The trigger for the latest downturn in trade ties was India’s new rules on e-commerce that restrict the way Amazon.com and Walmartbacked Flipkart do business in a rapidly growing online market set to touch $200 billion by 2027. 3% from 8%; Continued on Page 2 Promoters of Igarashi Motors may exit firm US may do away with zero tariff for India INDIA COULD LOSE a vital US trade concession,underwhich it enjoys zero tariffs on $5.6 billion of exports to the US, amid a widening dispute over its trade and investment policies, people with close knowledge of the matter said. A move to withdraw the Generalised System of Preferences (GSP) from India, the world’s largest beneficiaryof a scheme that has been in force since the 1970s, would be the strongest punitive action against India since President Donald Trump took office in 2017 vowing to reduce the US deficit with large economies. Trump has repeatedly called out India for its high tariffs. Prime Minister Narendra Modi has courted foreign investment as part of his Make-in-India campaign to turn India into a manufacturing hub and deliver jobs to the millions of youth entering the workforce.Trump,forhis part, has pushed for US manufac- GoM reccommends GST cut to that they had raised prices despite the benefit of ITC. Pratik Jain, partner and leader,indirect tax,PwC India, said: “While the intention of the government is to provide relief to the end-customer, fromastructuralstandpoint,it should be ensured that the chain of GST credit is not broken.Perhaps,abetterapproach would be to reduce prevailing GST rate on residential property,say,bringing the effective tax rate down to 8% from 12%, while continuing the benefit of input tax credit.” He added that loss of ITC could lead to increase in the base price, which could raise the hackles of consumers, and realtors may even end up facing investigation of profiteering as has beenwitnessedwith some restaurants. Currently, GST is levied at 12% on payments made for under-construction property or ready-to-move-in flats (18% GST less abatement of one-third towards the value of land) where completion certificate has not been issued at the time of sale. However, GST is not levied on buyers of real estate properties for which completion certificate has been issued as they are subjected to only stamp duty. STAKE SALE WIDENING RIFT SANJEEV MIGLANI & NEHA DASGUPTA New Delhi, February 8 Affordable housing project Holy dip Union minister and senior BJP leader Nitin Gadkari arrives at Sangam to take a holy dip during Kumbh Mela, in Prayagraj on Friday Continued on Page 2 PROMOTERS OF IGARASHI Motors India are understood to be looking to exit the firm and have initiated discussions with bothstrategicplayersasalsoprivateequityfunds,personsclose to the development indicated. The persons indicated the promoters have had initial talks with funds like Carlyle, Apax Partners, AION Capital and Advent as also strategic players like Samvardhana Motherson, Varroc Engineering and Kirloskar Electric. The promoters have a combined stake of 75% and the market capitalisation of the company at the close of trade on Friday was `1,502.78 crore. While all the promoters are understoodtobelookingtosell theirrespective stakes,it is also possibleIgarashiElectricWorks might be willing to buy out the otherstakeholders,thepersons said.“The market price is not reflectivegiventhelowfloating stock and small trading volumes in the stock,” an investmentbankerexplained,adding that the sale price could be higherthanthemarketprice,at around `650-750 per share. In 2017-18, the company reported revenues of `458.44 croreandanetprofitof`66.27 crore.According toBloomberg, thegrossdebtofthefirmstood at `49.59 crore as of Septem- POTENTIAL DEAL ■ Igarashi Motors India promoters hold 75% stake in firm ■ Promoters believed to be in talks with funds like Carlyle, Apax Partners, AION Capital and Advent for stake sale ■ Promoters also likely in discussions with strategic players like Samvardhana Motherson, Varroc Engineering and Kirloskar Electric ■ Igarashi Motors India's market cap as on Friday stood at `1,502.78 cr ■ Firm offers small DC brush motors, geared motors, flat and round type motors, motor parts ber 2018. An e-mail sent to the company requesting a comment remained unanswered. At the end of December, 2018, 42.83% of Igarashi equity capital was held byAgile Electric Sub Assembly,which is the holding company. Igarashi Electric Works, Japan holds 3.07% directly and also holds a 55.21% stake inAgile Electric. Continued on Page 2 WAR OF WORDS Amazon CEO Bezos accuses US tabloid of blackmail, extortion MATT DAY, SPENCER SOPER & EDVARD PETTERSSON Seattle/Los Angeles, February 8 AMAZON.COM CHIEF EXECUTIVE officer Jeff Bezos accused the National Enquirer and its publisherDavid Pecker of extortion and blackmail, stepping up a war of words between the world’s richest man and a confidant of US President Donald Trump. The magazine, owned by American Media, published an expose on Bezos’s relationship with former TV anchor Lauren Sanchez, and Bezos has hired investigators to find out if the storywas politically motivated. He owns the Washington Post, which has written critical stories about Trump, who counts Pecker as a close ally. In a surprising move on Thursday, Bezos said the National Enquirer threatened to publish more details and revealing photos if the executive didn’t stop the probe. His statement online included vivid descriptions of the images. “Rather than capitulate to extortion and blackmail, I’ve decidedtopublishexactlywhat they sent me, despite the personal cost and embarrassment theythreaten,”Bezoswroteina post on Medium.“Anypersonal embarrassment AMI could cause me takes a back seat because there’s a much more important matter involved here. If in my position I can’t stand up to this kind of extor- tion,how manypeople can?” Bezos also suggested that theWashingtonPost’scoverage of the killing of Saudi journalist Jamal Khashoggi may have motivated the National Enquirer’s investigation.“For reasonsstilltobebetterunderstood,theSaudiangleseemsto hit a particularly sensitive nerve,”the billionaire wrote. A spokesman for AMI didn’t respond to a request for comment. Continued on Page 2
The Financial Express (FE) is a business paper that’s closest to the people who are in the business of business. From business policies to market trends to new developments, The Financial Express comes packed with incisive news on every relevant issue.