BACK PAGE, P22 BACK PAGE, P22 COMPANIES, P10 OPPORTUNITIES & CHALLENGES FOURTH TIME IN A ROW EYEING PROFITABILITY Kejriwal-led AAP wrests MCD, ends 15-year BJP rule Sitharaman on Forbes' World's 100 Most Powerful Women list Vedantu sacks another 385 employees in fourth round of layoffs NEW DELHI, THURSDAY, DECEMBER 8, 2022 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL XLVIII NO. 240, 26 PAGES, `10.00 (PATNA & 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: 62,410.68 ▼ 215.68 NIFTY: 18,560.50 ▼ 82.25 NIKKEI 225: 27,686.40 ▼ 199.47 HANG SENG: 18,814.82 ▼ 626.36 `/$: 82.48 ▼ 0.13 `/€: 86.41 ▼ 0.29 BRENT: $79.86 ▲ $0.52 GOLD: `53,379 ▼ `28 IN THE NEWS Varde-Arena, NARCL likely key contenders for Srei companies A CONSORTIUM of Varde Partners and Arena Investors, and the National the Asset Reconstruction Company (NARCL) are likely to be the main contenders who could acquire two insolvent Srei firms under the CIRP process, report Rajesh Kurup & Mithun Dasgupta in Mumbai/Kolkata. ■ P10 Key tax remission scheme expanded to cover pharma, steel THE GOVERNMENT has decided to include sectors like steel, pharmaceuticals and chemicals under its flagship tax remission scheme from December 15, but without raising the FY23 budgetary allocation for it, reports Banikinkar Pattanayak in New Delhi. ■ P2 RBI KEEPS DOOR OPEN FOR AT LEAST ONE MORE RATE HIKE Oaktree looks ‘ARJUNA'S EYE' ON INFLATION Further calibrated policy action is warranted to...break core inflation persistence —SHAKTIKANTA DAS, RBI GOVERNOR Govt allows CPSEs to park surplus funds in pvt debt schemes THE FINANCE ministry on Wednesday permitted CPSEs to park their surplus cash in debt schemes of private sector mutual funds too, a move that will widen their investment avenues & help generate higher returns, reports Prasanta Sahu in New Delhi. ■ P2 Zelensky, 'spirit of Ukraine' named Time person of year TIME MAGAZINE on Wednesday named Ukrainian President Volodymyr Zelensky, alongside “the spirit of Ukraine”, its person of the year, awarding him the accolade “for proving that courage can be as contagious as fear”. ■ P21 EXPLAINER CONFIDENTIAL PRE-FILING OF IPO PAPERS PAGE 22 FE S P E C I A L Lava Blaze 5G: Fits perfectly in your pocket Smooth and reasonably fast, this handset has an affordable price tag ■ GADGETS, P7 JOYDEEP GHOSH Mumbai, December 7 of accommodation”. Most experts have been hoping that the MPCwill set the tone for an eventual pause in rate hikes after a token hike in this policy. On the contrary, the MPC hinted at further tightening by saying that “further calibrated monetary policy action is warranted to keep inflation expectations anchored, break core inflation persistence and contain second round effects”. The men- THE RESERVE BANK of India’s (RBI) Monetary Policy Committee (MPC) raised the policy repo rate by 35 basis points to 6.25% on Wednesday — the highest since August 2018.That was on expected lines, but what surprised the markets was the decision to retain the hawkish stance of “withdrawal TARGET MATURITY FUNDS IN LIMELIGHT PAGE 8 tion of sticky core inflation was an addition to the overall stance in the policy meeting. Governor Shaktikanta Das even used a metaphor for keeping a hawk eye on inflation by saying, “we will keep‘Arjuna’s eye’on the evolvinginflationdynamicsandbe readyto act as maybe necessary”. The RBI said while GDP growth remains resilient and inflation is expected to moderate,“thebattleagainstinflation ● Repo rate up 35 bps to 6.25% cut to 6.8% is not over”. That was enough for a near-unanimity among bankers that there will be at least one more rate hike in the February policy, which will take the repo rate to 6.5%. Abheek Barua, chief economist at HDFC Bank, said, “The policy tone was distinctly more hawkish than expected. When a central bank combines its sanguine view on growth with continued concerns on inflation — particularly the persistence in coreinflation— itsuggests thatit is prepared to continue its fight against inflation and has the space and willingness to raise rates further.” Barua expects the terminal rate to be 6.5%-6.75%. The MPC voted 5:1 for a rate hike with Jayant Verma voting against it. For FY23, the RBI has revised the GDP growth downwards from7%to6.8%,whiletheinflation projection has been retained at 6.7%. While the RBI believes that the worst of inflation is behind, yet it estimates CPI inflation of 5% in Q1FY24 and 5.4% in Q2FY24,much above its mandated level of 4%. As a result of the hike in policy rates, the standing deposit facility (SDF) — the rate at which the RBI lends to banks without collateral — stands at 6% and the marginal standing facility (MSF) — the rate at which banks can borrow from the RBI against approved collaterals — would be 6.50%. DineshKhara,chairman,State Bank of India, said: “A marginal downward revision in growth estimates reveals that the only RATE HIKE MAY HIT DEMAND CREATION: INDIA INC PAGE 9 BANKS CAN USE HIGHER HTM LIMITS TILL FY24 PAGE 8 ● GDPforecast REPO (%) Sep 30, 2022 6 June 8, 2022 5 4 Apr 8, 2022 4 4.9 3 2 Dec 8, 2021 Dec 7, 2022 INFLATION CPI (% y-o-y) 8.0 7.5 7.79 April 30 6.77 July 31 6.71 7.0 6.5 6.0 5.5 5.0 6.01 Jan 31, 2022 Oct 31, 2022 certainty in the current environment is uncertainty. A visible improvement in consumer and business confidence, as per RBI surveysaugurswell forthefuture growth outlook.” Khara said the bankwill calibrateits depositrate hike,if needed. The Sensexwas mostlyrangebound during the day. Continued on Page 2 EDIT: CLOUD OVER GROWTH PAGE 6 COMMENTS PAGES 6, 8 & 9 RAJESH KURUP Mumbai, December 7 OAKTREE CAPITAL,AbidderforRelianceCapital(RCap)asacoreinvestmentcompany,islooking to exit the ongoing resolution process after thecommitteeofcreditors(CoC)turneddownits requests foradditional information. The global asset management firm had soughtRCap’sfinancialresultstillDecember31, 2022,and an extension to the auction date.The firm wants the auction date to be extended to January31,2023,beyondthedateofcompletion of the resolution process. Accordingtothelenders,Oaktree’sdemands are ‘impractical and cannot be fulfilled’. The CoC, at its meeting on Tuesday, had rejected these demands. As per an earlier National Company Law Tribunal (NCLT) order,lenders have to complete the resolution process of RCap by January 31, 2023.This also prevents them from giving an extension to Oaktree Capital. IncaseOaktreedecidesnottocontinuewith the resolution process, there will only be three bidders remaining in the race — the Cosmea-Piramal consortium, Hinduja Group and Torrent Group. The auction process is slated to begin from December19. On Tuesday, RCap’s CoC favoured an e-auctionmodetocompletetheinsolvencyprocessof thedebt-ladenfirm,votingagainstanothersuggestion of a liquidation process. The CoC was of the opinion that the liquidation process would deplete the firm’s value further.Thelendersdiscussedtwooptions—closed cover auction and an e-auction — but RCap’s largest lenders, Life Insurance Corporation of IndiaandEmployees’ProvidentFundOrganisation(EPFO),rejectedtheclosedcoverauctionand voted in favourof e-auction. Under the e-auction, lenders have two options — one to go for ascending auction or descending auction. Under the ascending auction process,which is favoured byLIC and EPFO, who together hold 35% of voting rights in CoC, the base pricewould be fixed at `5,300 crore. Continued on Page 2 Byju’s seeks easier terms on $1.2-bn loan Govt likely to meet non-tax revenue target for FY23 ANTO ANTONY December 7 DEBT WOES ONLINE EDUCATION PROVIDER Byju’s is seeking to restructure its $1.2-billion loan as it struggles with steep losses and cost reduction targets, according to people familiarwith the information. The nation’s most valuable startup,valued at $22 billion, has appointed an adviser to discuss tweaksincovenantsofthetermloan Bwithcreditors,thepeoplesaid,asking not to be named as the information is not public. Discussions on more lenient terms,including lower coupon and more time to repay, are continuingandnofinaldecisionhas beenreached,oneofthepeoplesaid, without providing furtherdetails. Byju’s is among the crop of startups that thrived on the country’s growing mobile connections and overseas investments until its blistering growth trajectory was cut short by excessive cash burn. Creditorsaregettingconcernedaboutthe 100 Byju’s dollar loan trading at discount as investors worried about losses High: 99.125 95 90 85 80 75 70 65 Cents on dollar Dec 2021 Low: 64.50 Nov2022 Source: Bloomberg company’sabilitytorepayandmany have sold down the loans,theysaid. The three-month Libor has surgedmorethan21 timesthisyear, making the loan costlierforthe Bengaluru-headquarteredfirm.Themarginontheloanwasraisedbyanadditional 50 basis points this year after its parent company,Think & Learn ■ Adviser appointed to discuss tweaks in covenants of term loan B with creditors ■ Talks on for more lenient terms, including lower coupon and more time to repay ■ In Oct, the startup helmed by Byju Raveendran said it would shed 2,500 workers Pvt,failedtogetrated,thepeoplesaid. The loan, priced at 550 points over Libor in November last year, is one of the largest unrated term loan B offerings ever from a new-age economy company worldwide and received strong demand from investorsincludingsovereignwealth funds, Madhur Agarwal, managing directoratJPMorganChase&Co,one of the deal’s bookrunners,said then. Theloanistradingat80centson the dollar on Wednesday after touching a record low of 64.5 cents in September, according to data compiled by Bloomberg. A representative for Byju’s declined to comment on whether it’s in talks with lenders over the loan terms. The closely-held startup with 150 million users has been battling multiple headwinds, including a truncated fund raising, regulatory pressure and a much-delayed filing of audited financial statements that disclosed a 13-fold jump in losses for the year ended March 2021 — the latest period for which its financial accounts are available. In October, Byju’s said it would shed 2,500 workers — about 5% of its total workforce — and lower its marketingandsalescosts,asitraces to become profitable by March. Continued on Page 2 Startup M&A wave may spill over to new year WITH 230 MERGER and acquisition (M&A) deals in 2022 so far, India’s tech startup segment continues to witness consolidation. With about a month to go, the number of transactions is slightly behind the 242 reported in 2021. But experts believe the funding winter could push many more of the smaller startups to sell out to larger peers. While many of them haverevampedtheircoststructures by opting for retrenchment to improve the cash runway, many startups are bracing for down rounds next year. Investors active in the startup space indicate that 2023 could see more consolidation as more small to mid-stage startups may find it harder to raise cash on favourable 5.9 4 SECTOR SEES 230 DEALS SO FAR IN 2022 SALMAN SH & TUSHAR GOENKA Bengaluru, December 7 6.25 7 to exit race for RCap assets EXIT TRENDS Acquisitions 2020 107 8 10 7 164 133 ■ Some are also bracing for down rounds next year as the funding winter continues 114 2021 242 2022 230 startups have revamped their cost structures by opting for retrenchment IPOs 2018 156 2019 123 ■ Many small 16 11 258 241 Source: Tracxn data on M&A deals terms. Manu Rikhye, partner, Merak Ventures, said the funding crunch of 2022 will drive more M&A activity next year as both founders and investors mayrush to protect existing valuations. “Investors and founders are already anticipating 2023 to be an even tougher year and may proactively look for deals because the longeryouwait,thehigherthevalue erosion will be,”Rikhye added. Smaller startups, especially in the consumerspace,have ended up becoming acquisition targets for largerunicorns like Byju's,Vedantu, CRED, Zomato and others. Larger corporates such as the Tatas, Reliance, TransUnion,Asian Paints and Aditya Birla have also cashed in on the distress to snap up weaker players. Most of these acquisitions have provided meaningful exits to venture capital (VC) and private equity investors. According to startup tracking platform Tracxn, angel investment firm LetsVenture made around 8 exits in CY2022, VC firm Sequoia Capital made 7, and angel fund Indian Angel Network made another 7 exits. Large corporates, including Jio and Aditya Birla Capital,made 6 and 4 exits,respectively, Tracxn data showed. Between 2018 and 2020, the number of M&A deals remained below 164, exceeding the 200mark only in 2021 and 2022. In CY2022, grocery delivery app Blinkit received the highest acquisition price of $568 million paid by Zomato. Thesecond mostvaluedacquisition during the year was that of Bengaluru-based compliance management platform Fintellix by TransUnion for $515 million, while the third most valued acquisitionwas reportedlymade by US-based Thrasio when it paid $507million toacquireGurugrambased consumer durable brand Lifelong Online. Continued on Page 2 PRASANTA SAHU New Delhi, December 7 THE CENTRE WILL likely meet itsnon-taxrevenuetargetof`2.7trillion in the current financial year as dividends from the central public sector enterprises (CPSEs) and stateowned banks and financial institutions would bridge the shortfalls in surplus transfer from the Reserve BankofIndia(RBI)andtelecomspectrum receipts,sources told FE. The Centre’s FY23 dividend revenue receipts from the CPSEs may exceedthetargetbyatleast`10,000 crore, despite the heavy underrecoveries from auto fuel sales incurred by the state-run oil marketingcompanies.Higherdividends from banks and financial institutions like LIC, too, are expected to come in handyfor the Centre. The Centre is likely to exceed the gross tax revenue target by a wide margin of up to `4 trillion this fiscal, while a significant shortfall is expected in the other non-borrowed inflows,namelycapital receipts (disinvestment).A shortfall of `20,000 crore is likely in surplus transfers from RBI in the current fiscal,while estimates suggest telecom receipts (spectrumandlicencefees)couldfall short of the `52,806-crore target by about `14,000crore in FY23. In April-October,the Centre garnered `1.8 trillion or 66.3% of the FY23 non-tax revenue target. So far inFY23,dividendsfromCPSEsstood at `34,051 crore or 85% of the fullyeartarget of `40,000crore. Prodded by the government to reward shareholders, oil explorer ONGC and Coal India,which gained from high commodity prices, have stepped up dividends substantially. ONGC has paid `7,409 crore to the government in dividends so far in FY23,7%morethan`6,916crorefor the whole of FY22. Similarly, Coal IndiadividendpaymentstotheCentreat`7,336croresofarinFY23,too, have surpassed `7,132 crore it paid New Delhi CENTRE’S NON-TAX REVENUE (` trillion) 3.5 3.3 2.7 2.4 FY19 2.1 FY20 FY21 FY22 FY23BE Non-tax revenues `2.7 trn `1.8 trn Target for FY23 Collected in April-October Dividend receipts from CPSEs `40,000 cr `34,000 cr Target for FY23 Collections so far RUN-UP TO THE BUDGET in thewhole of FY22. TheCentrehadgarnered`59,000 crore in dividends from CPSEs in FY22, 28% more than the target of `46,000 crore fortheyear,thanks to a sharp rise in prices of commodities like metals, mining and petroleum, which boosted the profits of these firms.However,thecombinedlossof threestate-runretailers—IOC,BPCL and HPCL — for the first half of the current financial year was a whopping `21,201 crore due to losses from petrol and diesel prices freeze. This would result in a reduction in dividends byIOCand BPCLin FY23. Continued on Page 2