COMPANIES, P4 COMPANIES, P4 MARKETS, P12 EXPORT DUTY CUT TO HELP SPEED BUMP CONSUMER COSTS TO RISE JSWjoint MD Rao says sentiment cautious for steel sector in FY24 Electric bus firms raise absence of payment assurance in tenders Home loan demand to sustain in near-term: Kotak Bank joint MD WWW.FINANCIALEXPRESS.COM FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE READ TO LEAD VOL XLIV 220, 14 PAGES, `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 UK minister: India FTA likely this year THE INDIA-UK FTA is expected to be clinched this year but it won't involve any boost of free movement visa offers for Indians, British trade minister Kemi Badenoch, who is in charge of the negotiations, has said, reports PTI. FE SPECIALS ■ BRANDWAGON, P9 Wrapping up a fresh bouquet How FnP is working to become a one-stop gifting destination ■ PERSONAL FINANCE, P7 Low volatility funds When selecting such a fund, go for one with lower tracking error ■ eFE, P10 Staying secure in a cybersecurity mesh A new way to minimise risk and protect critical data assets 2,93,901 SURABHI New Delhi, January 22 6,58,110 3,64,209 Over 2 years but <5 years FACED WITH A huge backlog of cases and with an aim to cut downlitigation,theincometax department may offer a fresh dispute resolution (amnesty) scheme for taxpayers. According to sources, the finance ministry is contemplating the move that would allowtaxpayerstoresolvecases stuck in litigation and appeal at various fora. Taxpayers will have the option to pay the disputed tax amount and a penalty of 10-20% to dispose of the case. The move is being thought of at a time when there is a huge backlogof pendingcases, especially at the level of Commissioner of Income Tax (Appeals) due to the pandemic, whenmanyhearingscouldnot take place. The amnesty scheme, if implemented, would help bring immediate additional revenue to the tax authorities, and would come in handy for them in a year when the growth in tax collections is 2,24,433 1,15,916 3,40,349 Over 5 years but <10 years 20,133 12,632 32,765 Source: Budget At the end of Reporting Year 2020-2021 documents RUN-UP TO THE BUDGET expectedto moderate.Itwould also be beneficial to sections of taxpayers as it would reduce their potential tax liabilities besides removing the uncertainties and costs associated with litigation. If the proposal is finalised,an announcement will be made in the Union Budget 2023-24. According to official data, a large number of pending cases are one to two years old. Amount underdispute forover oneyearbutlessthantwoyears, rose to `6.58 trillion by March 31 2021, whereas amount lockedupforovertwoyearsbut less than fiveyears increased to `3.4 trillion. The amount locked up in direct tax disputes had increased from `2.87 trillion in FY14 to `8.83 trillion in FY20, despite a fall in disputed amounts and number of cases between FY16 and FY18, thanks to Income Disclosure Scheme (IDS) announced in BudgetFY16.Thepandemicled toafurtherincreaseinlitigation and amounts locked up. Continued on Page 2 INSIDE PM-KISAN SUPPORT MAY BE HIKED PAGE 2 THE GOVERNMENT HAS zeroed in on dozens of products across sectors — including aviation, electronics, steel and industry — for possible customs duty hike in the Budget for FY24 to curb “nonessential imports” and improve local production,official sources told FE. Products such as private jets and helicopters, select consumer electronics products, plastics, certain iron & steel products, jewellery and leather could witness higher duties. At the same time, the government is also weighing proposals for duty cuts in some cases, especially to ensure smooth imports of raw materials. Continued on Page 2 $219 bn Goods trade deficit until Dec this fiscal, against $191 bn in entire FY22 3-3.5% of GDP Projected CAD in FY23, against 1.2% last fiscal EARNINGS SEASON HAS got off to a dismal start with most companies reporting weak numbers even as top software players have fared reasonably well. Net profits,for a sample of 165 companies (excluding banksandfinancials)weredown 8% year-on-year in Q3FY23 as firmscontinuedtograpplewith highcostsandonlyamodestrise inrevenues. Demand has clearly taperedoffpostthefestiveseason and has been hurt byinflation. At the same time, managements are reluctant to cut pricesciting the recentspikein commodity prices. Although raw material pressures eased significantly compared with previous quarters, the growth inrevenuesduringtheDecember quarter was far more muted leading to a 186 bps fall y-o-y in operating profit margins (OPM). The ratio of rawmaterials to saleswentupbyjust33bpsy-oyinQ3,amuchsmallerincrease thanthe470bpsinQ2and717 bps in Q1. However, a more muted rise in revenues, at only 16%y-o-yputpressureonmargins. In Q2, revenues had Operating profit (% chg, y-o-y) 39.2 28.5 31.3 Q4 Q1 FY22 15.8 Q2 FY23 17.6 15.9 Q4 FY22 0.75.1 FY22 Q1 Q2 Q3 FY23 Q3 Tax Q1 FY23 Q2 Net profit (% chg y-o-y) 3.9 Q4 Q1 Q2 Q3 FY22 FY23 21 5.6 -9.3 -7.9 Q4 Q1 Q2 Q3 FY22 FY23 Q4 Q1 Q2 Q3 FY22 FY23 Sample of 165 companies (excluding banks & financials) increased by28.5%y-o-ywhile inQ1,theyhadgrownby39%yo-y.Assuch,marginswereunder pressureacrosscompanies.HindustanUnilever’sgrossmargins were down 464 points y-o-y. Operating profit margins fell 180 bps y-o-y despite smaller A&Pspends,down 120 bpsy-oy,andemployeecosts.AtAvenue Supermarts,theyweredown60 bps y-o-y despite the seasonality boost while at Hindustan Zinc, operating profit margins fell 760 bps. Demand for discretionary productshasbeenweakpostthe festiveseason,partlyduetohigh inflation and partly because Source: Capitaline pent-up demand is fading. Moreover,withinthestaplescategory, high-end products are doing better.At HUL,for example, revenues grew a smart 16.2% y-o-y largely driven by price increases of 11% y-o-y while volumes registered a growthof5%y-o-y. At Asian Paints,volumes in Q3wereflatandsalesofdomestic decorative paints too were flat y-o-y. While some of this was due to an early festive season and prolonged monsoons, consumers have been downtrading. Continued on Page 12 Secondary sales by PE,VCs halve in 2022 to $4.6 bn RAJESH KURUP & TUSHAR GOENKA Mumbai/Bengaluru, January 22 RIDING ON A rise in public offerings and direct sales,secondary sales by financial sponsors have been steadily rising since 2019 and recorded $4.6 billion in calendar year 2022 (CY22). However, this is nearly half of the $10.65 billion secondarysales recorded in CY21. The total exits by the financial sponsors – private equity and venture capital firms – stood at $16.4 billion in CY22while itwas $35.5 billion in the previous year. The secondary sales as a percentage of total exits was at 21% in CY18 and CY19 each, 23% in CY20 and 30% in CY21. However, it fell to 28% in CY22, according to Kotak Investment Banking data. “The reason why India is seeing interest among global PE and VC funds is because the country India has been able to give exits to investors. Exits, not just secondary sales, have picked up signifi- EXIT ROUTE Total exits ($ bn) 35.5 CY21 Total 16.4 CY22 51.9 Secondary sale exits ($ bn) (in %) 10.65 30 CY21 4.59 CY22 Total 15.24 28 Source: Kotak Investment Banking cantly over CY20 with a total exit value recorded close to $52 billion combined in CY21 and CY22. In CY21, the exits were primarily driven by IPOs and in CY22 it has been via secondary sale,” Pankaj Kalra, senior executive director at Kotak Mahin- dra (UK) said. “Exit helps to garner more investment and inflows, and in the current year too we see India being able to give decent exits to investors,” Kalra added. A secondary sale is when a PE firm sells its stake to another PE firm,while exits in general include that through buyback, secondary sales and strategic sale. The top secondary sale in CY22 included exits by Baring Asia, AION Capital, General Atlantic, Fairfax Holdings, Goldman Sachs and Apax Partners among others. “Under the current trend seen in most IPOs, the major chunk of capital raised is in the form of offer for sale (OFS) or secondary stake sale by existing investors including promoters,cashing out in the buoyant markets and creating liquidity in their hands instead of strengthening the balance sheet of the business they are invested in,”Mahesh Singhi, founder & MD at investment banking firm Singhi Advisors said. Continued on Page 2 FOCUS ON EXPANDING MARKET SHARE FOR NOW Jio’s growth slows with no tariff hikes Arpu (`) 24,892 4,881 24,275 4,530 Q1FY23 Net profit 4,729 Q4FY22 Revenue 23,467 (` crore) 22,261 IN THE ABSENCE of tariff hikes and lesser addition of subscribers, Reliance Jio's revenues and average revenue per user (Arpu) is growing at a slower pace, if the last three quarter's performance is taken into account. In the October-December quarter, Jio Platforms’ -Reliance Jio’s parent company -- revenue from operations rose 2.5% q-o-q to `24,892 crore, compared to a 3.4% growth in the July-September quarter, 5.4% growth in the April-June quarter, and 8.1% growth in the January-March quarter last year. Bulk of the CHANGE IN STRATEGY 4,313 JATIN GROVER New Delhi, January 22 Q2FY23 Q3FY23 167.6 175.7 177.2 178.2 Q4FY22 Q1FY23 Q2FY23 Q3FY23 revenues of Jio Platforms comes from its telecom services arm,Reliance Jio. The company’s net profit also witnessed a similar trend largelydue to aweak growth in the revenues and increase in depreciation due to recently acquired spectrum and increase in network expenses Q3 RM to sales 25.2 -2.9 Q4 (bps, chg y-o-y) (% chg y-o-y) 9 OPM (bps, chg y-o-y) -185.8 Over 1 year but <2 years FE BUREAU New Delhi, January 22 Net sales (% chg, y-o-y) -441.4 Taxes on Income excluding corp tax (` crore) Corporation tax HIGH COSTS WEIGH ON QUARTER -366.9 BANIKINKAR PATTANAYAK New Delhi, January 22 DISPUTED AMOUNTS Demand tapers off after festive season, IT firms fare better 33.3 OIL MINISTER HARDEEP Singh Puri on Sunday hoped petrol prices will be reduced no sooner state-owned oil companies recoup past losses, reports PTI. Stateowned Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) have for the past 15 months not revised petrol and diesel prices in line with the cost. The losses incurred are now being recouped after oil prices slid. ■ PAGE 3 Move amid a spurt in amounts locked up in disputes Q3 earnings season off to a sombre start 469.5 Price cut if OMCs recoup losses: Puri Budget may unveil fresh I-T amnesty Customs duty hike on many items likely 716.5 AS CHATGPT BECOMES a household topic of discussion, it also raises serious cybersecurity concerns like attackers using the chatbot to write phishing emails and codes, reports Ayushman Baruah. Security experts have expressed unease and optimism, in equal measures, on the potential risks associated with ChatGPT. ■ PAGE 5 TO ACT AS REVENUE BOOSTER -217.8 IN THE NEWS ChatGPT raises cybersecurity concerns 426.3 KOCHI, MONDAY, JANUARY 23, 2023 owing to 5G rollout. In the October-December quarter, Jio Platforms net profit rose 3.2% q-o-q to `4,881 crore, compared to a 4.4% growth in July-September quarter, 5% growth in April-June quarter,and 13.6% growth in the January-March quarter of last year. “The growth has to come from the tariff hikes.The January-March quarter last year saw growth because of the last tariff hikesin November2021. It seems that Jiowants to focus on expanding its market share at present and is therefore not considering a tariff hike,” a Mumbai-based analyst said. Continued on Page 2 KOCHI
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