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APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL XLVIII NO. 82, 14 PAGES, `10.00 (PATNA `10.00, 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 WITH INFLATION SHOWING no signs of abatement, the RBI is likely to increase the benchmark lending rate in quick succession in its forthcoming monetary policy review on Wednesday, a hint for which has already been given by governor Shaktikanta Das, opined experts, reports PTI. FE SPECIALS 17.00 15.00 June 3, 2021 Net profit estimated to grow 23% in FY23 and 15% in FY24 Banks see pick-up in capex loans SANDIP DAS New Delhi, June 5 WITH AN UPTICK in demand for project finance from late last year, bankers believe need for long-term funds should rise by anywhere between 12-15% this year. Bank credit deployed in the infrastructure segment rose 10.2%year-on-yearinApril 2022, with roads, telecommunications and power leading the pack. The outstanding credit to this space, towards the end of Marchwas `12 trillion,according to Reserve Bank of India (RBI). Consequently, banks are now gearing up to meet demand for infrastructure projects in FY23, which they expect will be an even better year for the segment. Much of the demand in the infra segment is coming from large conglomerates in segments like roads, ports, airports, renewable energy, data centres and gas pipelines. Projectswhere finance is being tied up are Mumbai International Airport,Noida JewarInternational Airport,GangaExpressway,hybrid annuity model (HAM) projects where the National Highways Authority of India (NHAI) has sought bids in the last four months, some solar projects and small port projects in Telangana, Odisha and Maharashtra. Rajneesh Karnatak, executive director,Union Bank of India,said the government’s capex push and itsintentiontoachieve60%ofthe capex target by September 2022, suggests strong credit offtake in FY23. The government has bud- Feb 2022 At 16,584, the Nifty now trades at a P/E multiples of 18.4 times one year forward earnings estimates Continued on Page 11 contraction of 2.4% in FY21. Net sales were boosted by the toplines of metals and oil companies, though a fair share of companies in other sectors,reported double digit sales growth. THE GOVERNMENT MAY announce higher-than-usual increases in minimum support prices (MSP) forthe summer-sown crops in 2022-23yearsoon,taking into consideration a sharp rise in costs of farming inputs. The MSP increases this year could roughly be in the range of 520%, the highest since 2018-19 when a new policy of 50% profits over computed cost of production led to MSP hikes for kharif crops in the range of 4.1-28.1%. In the last three years, MSP increaseswereroughlyinthe1-5% range. According to sources, the sharpest MSP hikes this year have been recommended by the Commission of Agriculture Costs and Prices for oilseeds like soyabean and groundnut.Among pulses,tur and moong may also see steep hikes in support prices, as the imports of these items rose last year amid a domestic supply crunch.The government also reckons that higher domestic production of other oilseeds will help reduce palm oil imports. While elevated MSPs,backed by procurement, could potentially boost rural income and purchasing power,thesecanalsoincreaseinflationary pressures further. Wholesale inflation in April rose to 15.08%, highest in at least 17 years. Continued on Page 2 Continued on Page 11 India Inc’s wage bill rises, interest costs fall FE BUREAU New Delhi, June 5 Employee costs (in %) RESULTS REVIEW 12.7 FY22 6.3 4.9 FY21 FY19 9 FY20 10.9 21 9.7 INPUT INFLATION AND a sharp rise in employee expenses notwithstanding, India Inc turned in a strong performance in FY22. While the low base of FY21 did help prop up the numbers, companies clearly responded to the demand from clients and customers. Employee costs jumped 12.7%, the biggest increase in eight years.Much of this was driven by hiring in the IT, BFSI andhealthcarespaces.Atthesametime, theinterestbillfellbyabout3.6%onthe back of a reduction of 7.6% in FY21. This was not surprising becausecorporate India has been de-leveraging over the past severalyears and interest rates too have been at multi-year lows. With production not having been ramped up to full capacity until later in the year,working capital requirements, too, were lower. Somecompaniesalsoaccessedtheoverseas markets where interest rates were softer. Revenues, for a universe of 3,367 companies,went up by29% to `107.05 trillion but this came on the back of a replies given by representatives of the chairman of the ADA Group have been reflected by the IT sleuths in the final assessment order Govt likely to hike MSP by 5-20% for summer crops FY24 the economy is expected to boost demand EARNINGSESTIMATESFORtheNifty50 in FY23 have been left more or less unchanged post the Q4FY22 earnings season. For FY24, earnings estimates have been downgraded very slightly as most sectors are expected to farewell. As such,net profit forNifty50 is now estimated to grow 23% in FY23 and 15% in FY24. In both years, financials will contribute a chunky 37% to the incremental earnings. Analysts said the recovery in the economy,which seems to be picking up pace, is expected to boost demand for sectors such as automobiles. Economists expect India’s GDP to grow at anywhere between 6.8%-7.4% in the current year. The PMI services index ■ It is understood that grew at its highest in eleven years in May.The energy and metals sectors are also expected to do reasonablywell this year though the export curbs and the higher cost of inputs could hurt steelmakers. Analysts at Jefferies noted that margins had declined at a reduced pace but cautioned that theworst of commodity price impact may lie ahead. FY23 ■ Analysts said the recovery in YOOSEF KP Mumbai, June 5 The BMAorder is understood to detail Ambani’s Beneficial Ownership of entities in two offshore havens Analysts at Jefferies cautioned that the worst of commodity price impact may lie ahead FY22 Source: Bloomberg, Credit Suisse estimates, company data FY18 Experts hint at rate hike ahead of MPC meeting 19.00 9.1 THE GOVERNMENT HAS no plan to impose an additional tax on profits of upstream oil companies, which have benefited from the rise in global oil prices because of the trade-parity pricing they follow, reports fe Bureau in New Delhi. The UK and Hungary have recently imposed extra levies on oil companies in the form of the so-called “windfall tax”, in a bid to generate more fiscal resources, leading to speculation that India may follow suit. 20.88 FY17 No plan to impose windfall tax on oil companies 21.00 50 (% y-o-y) 45 18.40 40 35 30 25 20 Implied Nifty 15 EPS growth (consensus) 10 June 3, 2022 Jan 2020 11.2 AS ITWORKS out a national logistics policy, the commerce & industry ministry is weighing a proposal to roll out an index to gauge the country’s logistics costs, reports Banikinkar Pattanayak in New Delhi. The move assumes significance, as there has been no official estimate of logistics costs in India, and one of the key objectives of the new policy is to bring down such costs. FY23/24 Nifty EPS forecast +23%/+15% Nifty one-year forward PE (x) 23.00 RITU SARIN New Delhi, June 5 ALLEGING DETECTION OF undeclared offshore assets and investments, the Mumbai unit of the Income Tax Investigation Wing passed a final order in March 2022 againstAnilAmbani, chairman of the Reliance (ADA) Group, under the 2015 Black Money Act (BMA). The Black Money Act order was filed following the issuance of notices to the industrialist on aweb of alleged undeclared offshore assets, the first in 2019.The order lists offshore entities and details of transactionsinlinkedbankaccounts adding up to over`800 crore. This figure, sources said, was calculated on the basis of the current rupee-dollar exchange rate. Questions sent to Anil Ambani went unanswered. In February 2020,Ambani had declared to a UK court that he was "bankrupt" and his net worth was "zero." The BMA order is understood to detail Anil Ambani’s BeneficialOwnershipofentitiesintwo offshore havens,the Bahamas and the British Virgin Islands. In the Bahamas, he set up the Diamond Trust in 2006 with an FY16 Govt mulls index to gauge logistics costs Banks to drive Nifty profits FY15 AFTER A GAP of about nine years, India and the EU will likely resume the much-awaited negotiations for a proposed free trade agreement (FTA) from June 27, as both the sides eye a deal by next fiscal, reports Banikinkar Pattanayak in New Delhi. Before the negotiations begin, commerce and industry minister Piyush Goyal may visit Brussels later this month to set the stage for the talks, a source said. ‘Bankrupt’Anil Ambani has `800-crore offshore assets: Black Money Act order ESTIMATES UNCHANGED POST Q4 FY14 IN THE NEWS India, EU to resume FTA talks from June 27 Interest (in %) FY14 FY15 FY16 FY17 FY18 2.5 6.1 13.8 16.8 FY19 FY20 FY21 FY22 22.9 9.2 9 -7.6 -3.7 Sample of 3,367 companies Source: Capitaline ■The order lists offshore entities and details of transactions in linked bank accounts adding up to over In 2015, The ‘Swiss Leaks’ investigation revealed that Ambani was among the 1,100 Indians who had an account in HSBC’s Geneva branch. His balance in account for 2006-07: $ 26.6 million. `800 crore ■ In Feb 2020, Ambani had declared to a UK court that he was ‘bankrupt’ “underlying” offshore company, Dreamwork Holdings. Following requests sent by the CBDT to the Bahamas through the Foreign Tax and Tax Research (FTTR) division, theexistenceofalinkedSwissbank account -- in the Zurich branch of UBS Bank -- came to light. Another undeclared offshore company, incorporated by Anil Ambani in 2010 in the BVI, is North Atlantic Trading Unlimited. This company was found to have a linked bank account with the Bank of Cyprus.This entitywas among 18 entities linked to Anil SHRITAMA BOSE Mumbai, June 5 Ambani in the recently published “Pandora Papers” investigation listed by The Indian Express but, evidently, was one already on the radar of the IT authorities. Whatisbeingdescribedas“substantial” transactions have been detected in these foreign bank accountswithnochargesontheoffshore assets.The final assessment order has been passed in the Anil AmbanicaseunderSection10(3)of the BMA 2015, under which an assessingofficerpassesafinalorder after taking into account all gathered “accounts, documents or evidence.” It is understood that replies given by representatives of the chairman of the ADA Group have been reflected by the IT sleuths in the final assessment order. Earlier,the chairman,Reliance ADA Group, was named in more than one offshore investigation by the International Consortium of Investigative Journalists (ICIJ) in partnership with The Indian Express and other media groups. In 2015, The “Swiss Leaks” investigation revealed that Anil Ambani was among the 1,100 Indians who had an account in HSBC’sGenevabranch.Hisbalance in the HSBC account for the year 2006-07: $ 26.6 million. Borrowing curbs eased for high-debt states PRASANTA SAHU New Delhi, June 5 geted `7.5 trillion as capital expenditure for FY23. “We are looking at all sectors and projects and we are taking a share wherever the project is viable and the promoter is strong. There are also some refinance transactions happening in some thermal,renewable and road projects where there is demand for refinance after cash flows have commenced,”Karnatak said. THE CENTRE HAS decided to lift a virtual freeze on fresh market borrowings by states with large offBudget liabilities. It will, however, strike off at least 25 basis points (bps) from the net base borrowing ceiling (NBC) of 3.5% of gross state domestic product (GSDP) of these states in FY23. The off-Budget liabilitieswill be counted only from FY22 onwards. The balance debt,so estimated,will be brought above the line over the three years to FY26 in equal tranches. In an earlier directive to states, the Centre had said theirentire offBudgetliabilitiesofFY21andFY22 willbeadjustedagainsttheNBCfor FY23. If implemented, this policy would have severely restricted the plansofsomestateslikeTelangana, Punjab and Kerala to raise funds through state development loans (SDLs) in the current financialyear and thereby their capital expenditures. The Centre's stance has already led to some delay in approvals of annual SDL limits of states,which are usuallyin place in April in any financial year. Thetighteningoftheregulation on states'borrowings bythe Centre is in view of the rising yields on SDLs and the ratehike cycle started bythe Reserve Bank of India,which could raise the cost of general government borrowings. Continued on Page 11 Continued on Page 2 ■ Bank credit deployed in the infrastructure segment rose 10.2% year-on-year in April 2022, with roads, telecommunications and power leading the pack ■ Banks are gearing up to meet demand for infra projects in FY23,which they expect will be an even better year for the segment ■ Much ofthe demand in infra is coming in segments like roads, ports, airports, renewable energy, data centres SHARE RISES TO 23% FROM 2-3% A DECADE AGO ■ BRANDWAGON, P9 Widening the net Edtech firms bet on upskilling programmes and hybrid models ■ PERSONAL FINANCE, P7 Buy participating policies now Opting for participating policies will ensure protection as well as returns ■ STARTUPS, P4 Fast EV charging on the doorstep Hopcharge is making EV charging simple by offering on-demand services Traffic jams, affordability boost sales of automatic cars VIKRAM CHAUDHARY New Delhi, June 5 WHEN KANSHI RAM,a retired serviceman, wanted to buy a new car, he chose the Wagon R VXi 1.0-litre AGS variant over the ZXi 1.2-litre MT. He paid `31,400 more for fewer incabin features and a smaller engine,but the convenience he got with an automatic gearbox was worth the deal — he didn’t havetoconstantlychangegears drivingintraffic,somethinghe had gotten old and tired doing. The AGS is short for auto gear shift, Maruti Suzuki’s automated manual transmission (AMT) technology — a kind of automatic gearbox. Auto industry analysts FE spoke to said that while automatic cars formed 2-3% of the market in India during the start of last decade,their share has now risen to about 23%. Affordability, choice and traffic jams, they argued, are key reasons for this uptake. According to the Traffic Index 2020 by TomTom, the global location technology specialist, Mumbai was the second-most congested cityin the world, followed by Bengaluru at sixth, Delhi eighth and Pune 16th; the Traffic Index 2021 ranked Mumbai fifth, Bengaluru 10th, Delhi 11th and Pune 21st. Gaurav Vangaal, associate director,LightVehicle Forecasting,S&PGlobalMobility,toldFE CHANGING GEARS ■ Every carmaker today offers an automatic gearbox Sales percentage of automatic gearbox cars to total car sales (%) FY11 FY19 Popularity of automatic gearbox rising due to traffic jams 2-3* 15.3 FY20 16.6 FY21 ■ Hyundai has five automatic gearbox options ■ Every model sold by Maruti has an automatic choice Price gap between manual and automatic cars has reduced 18 FY22 22.6 *FY11 data is approximate Source: Companies that Indian buyers have started valuing convenience features such as an automatic gearbox overflashyonessuchasabetter music system or alloy wheels, even in sub-`10 lakh cars. “Because of traffic jams, driving convenience has emergedasamajorbuyingfac- tor; an automatic car is more convenient to drive than a manual in traffic,” he said.“A substantial percentage of women buyers and senior citizens prefer automatic cars for the same reason.” What has helped is the number of gearbox options available in the market,giving buyers a choice. Forexample,HyundaiIndia offersfiveautomaticoptions— AMT, iMT (intelligent manual transmission), AT (automatic transmission), IVT (intelligent variable transmission) and DCT (dual-clutch transmission).Butthebiggestreasonfor this shift is affordability. Prior to 2014,an automatic gearbox car was at least `1 lakh more expensive than a manual. New Delhi In 2014, Maruti Suzuki launched the CelerioAGS — the price gapwas about `45,000 — nudging the buyertowards this technology. Today, Maruti Suzukiofferssevenmodelswith AGS — Wagon R,Celerio,Swift, Ignis, S-Presso, Baleno and Dzire. It also offers five models with AT — Ertiga,Vitara Brezza, Ciaz,XL6 and S-Cross. “In the Celerio, 22% sales are of the AGS variant, in the Wagon R it is 7%, in the Ignis 15%, in the S-Presso 21%, in the Ciaz 24% and in the XL6 it is 16%,” Shashank Srivastava, seniorexecutive director,Marketing & Sales, Maruti Suzuki India,told FE (FY22 data). Continued on Page 2
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