OPINION, P6 COMPANIES, P4 PRITHVI HALDEA Independent directors merely a‘good corporate governance’mirage INTERNATIONAL, P8 EDITORIAL STAKE SALE iUPGRADE Vital to get auction model right, Eco Nobel shows; for govt services, focus on social good, not revenues Government moving 'cautiously' on BPCL privatisation Apple unveils iPhone 12 with faster 5G connectivity NEW DELHI, WEDNESDAY, OCTOBER 14, 2020 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL. XLVI NO. 194, 14 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 SENSEX: 40,625.51 ▲ 31.71 NIFTY: 11,934.50 ▲ 3.55 NIKKEI 225: 23,601.78 ▲ 43.09 HANG SENG: 24,649.68 ▲ 530.55 `/$: 73.35 ▼ 0.08 `/€: 86.46 ▲ 0.08 BRENT: $42.36 ▲ $0.64 GOLD: `50,921 ▼ `113 A SPECIAL court in Mumbai on Tuesday remanded Deepak Kochhar, husband of ICICI Bank ex-CEO Chanda Kochhar, in the custody of the Enforcement Directorate (ED) till October 17, reports PTI. ED had arrested him in September under PMLA in the ICICI Bank-Videocon money laundering case. 196 pairs of festival special trains from Oct 20-Nov 30 ANTICIPATING A surge in rail travel during the festive season, the railways has announced 196 pairs of ‘festival special’ trains, which will be operated between October 20 and November 30, reports fe Bureau in New Delhi. Slow start 5,051 Andhra Pradesh 9,018 8,704 Gujarat THE CENTRE ON Tuesday gave the nod for 20 states to raise a total of `68,825 crore among them via open market borrowings to bridge part of their goods and services tax (GST) shortfall in FY21. The move will ratchet up thesupplyofstategovernment bonds at a timewhen there has already been a sustained increase in the cost of market borrowings across the states. However,the Centre will likely facilitateamechanismincoordination with RBI to avoid a spiralling of the borrowing costs of these states underthis special window. The Centre’s move comes a dayaftertheGSTCouncilfailed to arrive at a consensus on how to make good the shortfall in states’ GST revenue from the protected levels. Ten states haverefusedtoaccepteitherof the two borrowing options for states mooted by the Centre, and insisted that the Centre should borrow and transferthemthefullcompen- (` crore) Karnataka FE BUREAU New Delhi, October 13 Borrowing by states to bridge GST shortfall 9,703 20 states decided, eight are yet to pick option Uttar Pradesh Money laundering: Deepak Kochhar sent to ED custody States to borrow `68,825 crore 15,394 BILLIONAIRE ANIL Agarwal’s commodities group will return money raised from banks and bondholders after a plan to delist its Indian unit failed, reports Bloomberg. Vedanta Resources will repay $1.4 billion raised via bonds and another $1.1 billion in loans, with a small amount of interest, as early as this week, according to sources. GST COMPENSATION Maharashtra IN THE NEWS Delisting plan fails, Vedanta to return $2.5 bn Total (including another 15 states) 68,825 sation amount for FY21 in the year itself. The Centre’s decision reflects its resolve to go ahead withitsplan,butitalsoshowsa straining of the Centre-state ties and new power equations emergingattheCouncil,which has until recently functioned with minimal discord. Continued on Page 2 STRESS BUSTER Interest relief to cost govt just `6,500 cr FE BUREAU New Delhi, October 13 A PROPOSED WAIVER of the compounding interest on loans up to `2 crore for the specified borrowers,including individuals and small businesses, during the six-month repayment moratorium will cost the Centre about `6,500 crore,atopgovernmentsource said on Tuesday. Thisindicatestheprudence observed by the Centre in limiting the relief to the mostvulnerablesectionsoftheborrowers, despite persuasive comments from the Supreme Court to broaden the relief net. The government is yet to decide on whether to appeal against the Vodafone arbitration award but it can’t let it go without examination, the source said. Govt not closing the option for another round of stimulus No state has breached even the original 3% (of GSDP) borrowing target in FY21, so they have space for further borrowing Govt yet to decide on Vodafone arbitration appeal but says BITs can’t curb sovereign right over taxation PSU policy, proposal for setting up infra financial company will soon go to the Cabinet Extending the interest relief to “all types of loans for all categories of borrowers” would cause a huge burden of `6 lakh crore on banks, likely wipingoutamajorpartoftheir net worth and even rendering most of them unviable, the government had said in an BATTING FOR more fiscal spending, chief economicadviser(CEA) KrishnamurthyVSubramanian said a boost to infrastructure and employment-related programmes like creation of an urban job guarantee programme would help pep up consumption demand, reports fe Bureau in NewDelhi. The Covid-ravaged economy will likely shrink by a record 9.5% in the current fiscal, Subramanian said on Tuesday, as he agreed with the central bank’s latest assessment of themagnitudeofgrowthslump.However,elevatedinflationwillstilldriveupnominalGDP. ■ Report on Page 2 99.6 Nomura India Business Resumption Index 80.9 SUBHADIP SIRCAR October 13 73.4 61.6 68.1 70 60 50 40 Feb 2 Mar 29 Jun 7 Aug 16 Source: Google, Apple, CMIE, Bloomberg & Nomura Global Economics Oct 11 Know the essentials of call and put options Option Buyer Option Seller COMING SOON Aworker sanitises a cinema hall during a demonstration of SOPs to the media, at Malad on Tuesday, as multiplexes await the nod to reopen in Mumbai EXPRESS PHOTO: AMIT CHAKRAVARTY SMALLER PENALTY Special Feature Call and put options are the deals in the stock markets and commodities markets where you get the right to buy or sell respectively, an underlying asset at a later point of time at an agreed upon price ■ Personal Finance, P9 QuickPicks Future Ent defaults on interest payment on debentures FUTURE ENTERPRISES is unable to service its obligations of interest payment on nonconvertible debentures that were due on October 11, according to a stock exchange filing, reports Bloomberg. The company has defaulted on interest payment of `15.14 crore on debentures of `300 crore, according to the filing. The debentures carry a coupon of 10.15% to be paid on a half-yearly basis. Indian economy to contract by 10.3% in FY21, says IMF INDIA’S ECONOMIC growth forecast was slashed further by the International Monetary Fund (IMF) on Tuesday, with the country now facing the biggest contraction of major emerging markets in the wake of the coronavirus pandemic, reports Bloomberg. Gross domestic product (GDP) will shrink 10.3% in the fiscal to March 2021, the Washington-based lender said in its World Economic Outlook, far worse than the 4.5% decline predicted in June. PAGE 2 Shares to be bought back at `400 apiece PRESS TRUST OF INDIA New Delhi, October 13 ITSERVICES MAJOR Wipro on Tuesdayposted a 3.4%decline in consolidated net profit to `2,465.7 crore for the quarter ended September 30, and said its board has approved up to `9,500-crore buyback plan. The Bengaluru-based company,whichhadregisteredanet profit (attributable to equity holders of the company) at `2,552.7 crore in the year-ago period, has priced the buyback programme at `400 pershare. Wipro’s revenue for the September quarter was nearly flat at `15,114.5 crore. In a regulatoryfiling,Wipro said its board has approved a buyback proposal, subject to shareholdersapprovalthrough postalballot,forpurchaseofup to 23.75 crore equity shares at `400persharethataggregates up to `9,500 crore. This is 4.16% of the paidup equity share capital of the company as on September 30, 2020,it added. At `400 apiece, the buyback is 6.4% higher than Tuesday's closing price of `375.5 on BSE. Cut in late payment fee to save discoms `6,000 crore annually ANUPAM CHATTERJEE New Delhi, October 13 THEUNIONPOWERministry’s proposaltoreducelatepayment surcharge for state-run power distribution companies could potentially provide a relief of about `6,000 crore annually to these distressed entities, given theircurrentlevelofoverduesto gencos,analysts said. In the draft Electricity Late Payment Surcharge Rules, 2020, recently released by the Over-dues of discoms to power producers (` crore) 1,30,000 1,19,225 1,10,000 82,204 90,000 70,000 50,000 Sept 2019 Aug 2020 ministry, it has proposed to reducetherateoflatepayment surcharge from the existing 18%, to a graded payment linked to the“bank rate”which is 500 basis points (bps) more than SBI’s marginal cost of funds-based lending rate. Discoms’over-dues — payment default of 45-60 days or more — to power plants increased 52% annually to `1.19lakhcroreatAugustend. Continued on Page 2 10-yr bond yield (%) BORROWINGCOSTS FORthe states fell sharply after the Reserve Bank of India (RBI) recently said it will buy such debtviaopenmarketoperations tohelpfacilitatetheirincreased borrowing requirements. Thecostof10-yearborrowing for states eased to 6.6%6.69% at Tuesday’s sale from the6.84%-6.93%rangeinlast week’s auction, the central bank said in a statement. States sold `19,250 crore of bonds versus plans to sell `17,750 crore of debt,it said. RBI will purchase state bonds on its books as a special case this financial year to impart liquidity and facilitate efficient pricing, governor ShaktikantaDassaidonFriday. The move would improve secondary market liquidity and help compress spreads over sovereign bonds of similar tenors,he said. Average yields on state bonds had already dropped 16 basis points in the last two sessions to 6.57% on Monday, accordingtoClearingCorporation of India index data. Borrowing needs for states are rising as theyface a revenue deficit amid the coronavirus ■ Q2 net profit drops 3.4% to `2,465 cr ■ IT revenues in Q2FY21 at $1.99 bn, up 3.7% q-o-q ■ In Q3FY21, ITrevenues pegged at $2.022.06 bn H1 free cash flows, as share of net income, at 160.7% ■ Board okays up to `9,500-cr buyback plan ■ Shares to be bought at `400 apiece ■ At `400 apiece, price is 6.4% above Tuesday's closing price of `375.5 Wipro expects its revenue from ITservices business to be in the range of $2,022-2,062 million for the December quarter, translating to a sequential growth of 1.53.5%. Its IT services segment revenue in the September quarter was at $1,992.4 million — an increase of 3.7% quarter-on-quarter. Continued on Page 2 ● COVID-19 Borrowing costs for states ease after RBI support steps Business resumption is showing signs of stalling again in October. The labour market remains weak with the participation rate inching down further (to 40.6% from 40.8% in the previous week) and unemployment rate still high at 7.7%. 80 Wipro approves `9,500-cr buyback SHARP DROP FE BUREAU 90 Continued on Page 2 CEA bats for more fiscal spending Activity shows signs of stalling 100 affidavit in the apex court. The court is likely to pronounce its order on Tuesday. The government has alreadysaid it sees no possibilityof giving anyfurtherbroadbased debt relief. CASHING IN Intra-day, Oct 13 5.92 5.918 J&J pauses vaccine trials after unexplained illness REUTERS October 13 pandemic.A shortfall in compensationfromtheCentralgovernmentduetolowergoodsand services tax (GST) collections is addingtotheirwoes.Thespread of 10-year state debt over similar sovereign debt had widened to a four-month high of 88 bps at the October 6 sale,according to CARE Ratings. JOHNSON & JOHNSON has paused clinical trials of its coronavirusvaccine candidate due to an unexplained illness ina studyparticipant,delaying one of the highest profile efforts to contain the global pandemic. The move comes around a month after AstraZeneca also suspended trials of its experimental coronavirus vaccine — which uses a similar technology — due to a participant falling ill. J&J said on Monday the illness was being reviewed by an independent data and safety monitoringboardaswellasthe US group’s clinical and safety physicians. The company, which reports quarterly financial results on Tuesday morning, said such pauses are normal in big trials, which can include tens of thousands of people. It added the voluntary “study pause” in giving doses of the vaccine candidate was different from a “regulatory hold” imposed by health authorities. Continued on Page 2 Continued on Page 2 5.91 5.904 5.90 5.89 5.88 5.87 Previous close: 5.898 Open Close ■ Cost of 10-year borrowing for states eased to be around 6.6%-6.69% at Tuesday’s sale from the 6.84%-6.93% range in last week’s auction ■ States sold `19,250 crore of bonds versus plans to sell `17,750 crore of debt, RBI statement said SMALL IS BEAUTIFUL Maruti’s Alto unstoppable, clocks 40 lakh units in 20 years FE BUREAU New Delhi, October 13 DESPITE A HOST of mid-size, premium compact sedans, SUVs (not to speak of luxury cars) of all brands now available in the market,India’stryst withsmallcarsseemstobestill going strong. Anyone having any doubt can just check the track record of Alto from the stable of Maruti Suzuki,whose reputation as an old war horse remains undiminished. The company on Tuesday said the entry-level car has crossed the 40-lakh sales milestone since its launch 20 years ago. The only other car which comes nearAlto is Maruti 800 — the car was once so popular that it never had a name and was known by its cubic capacity — which had sold 28 lakh unitswhenitwasphasedoutin January2014 due to upgraded emission norms. In that sense, Alto can appropriately be termed “a worthy successor of the successful Maruti 800”, to quote India was 200 2000- introduced to launch the Alto for the lau first time 2004 2008 10 lakh Altos bought by proud customers A BS-VI compliant Alto was launched 2019 Alto becomes the no.1 car of India 2012 2016 Sales crossed 20 lakhs and the new Alto 800 was Introduced Alto crossed 30 lakh sales 2020 Alt is now Alto 40-lakh families strong MarutiSuzukiIndiachairman, RC Bhargava. If one goes out of Maruti stable,the onlyothervehicle to be this successful was also a small car — Santro from Hyundai Motor India. Santro, launched in 1998,sold 13 lakh units before it was phased out in 2014. A new Santro was launched by Hyundai in August 2018. Alto was launched in 2000 and by 2004 it had already become India’s No. 1 selling car. By 2008, the car had sold New Delhi 10 lakh units and touched the 20-lakh mark in 2012, followed by 30 lakh in 2016. Jagdish Khattar, who was Maruti’s managing director when Alto was launched, says since India is in the process of motorisation,thebaseneedsto be broadened and therefore despite biggercars available in the market, the demand for small cars will always be there as therewould be a large number of first-time buyers. Continued on Page 2
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