INTERNATIONAL, P3 COMPANIES, P4 INTERNATIONAL, P3 OpenAI raises $6.5 bn at over $150-bn valuation China’s Leapmotor halts India EV plans Tesla misses estimates for Q3 deliveries CHENNAI/KOCHI, THURSDAY, OCTOBER 3, 2024 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL NO. XLV 128, 16 PAGES, `12.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 84,266.29* ▼ 33.49 NIFTY: 25,796.90* ▼ 13.95 NIKKEI 225: 37,808.76 ▼ 843.21 HANG SENG: 22,443.73 ▲ 1,310.05 `/$: 83.82* ▼ 0.02 `/€: 93.03* ▲ 0.74 BRENT: $75.80 ▲ $2.24 GOLD: `75,213* ▲ `162 *As on Oct 1 FE S P E C I A L S ‘Broad use cases will help drive AI PC adoption’ Interview with Alex Cho, president, Personal Systems, HP Inc ■ EFE, P9 Can Sebi’s new norms curb risks in F&O? The rules are a step in the right direction, but may not be enough to curb the retail investor frenzy ■ EXPLAINER, P9 SHOBHANA SUBRAMANIAN New Delhi, October 2 75.51 BRENT CRUDE PRICES ■ Brent futures reached ($/barrel) their highest in a month, rising by $2.42 to over $75 Oct 1 (close) An attack on Iran's oil infra may provokeTehran to strike Saudi oil facilities ■ 73.56 Continued on Page 7 ■ Related reports, Page 3 & 7 Oct 2 (at 6.30 pm IST) MFs invest double that of FPIs in H1 Mutual funds pour in `1.92L cr, FPIs `83K cr Source: Bloomberg AS THE BROKING industry braces for another significant change from October 14, firms are busy making back-end adjustments and software updates in preparation for the direct payout of securities, reports Akshata Gorde. The new regulation will have securities directly deposited from the clearing corporations into investors' demat accounts. ■ PAGE 6 Awoman holds her cat at the site of an Israeli airstrike in Beirut, Lebanon, onWednesday Adani gets Maha nod for Dharavi project land ADVAIT PALEPU October 2 VIVEK KUMAR M Mumbai, October 2 WITH STOCK MARKETS giving handsome returns, mutual funds—aided by strong inflows from retail investors— pumped in nearly`2 lakh crore in the first six months of the financial year. In comparison, foreign portfolio investors (FPIs) put in less than `1 lakh crore. Data from the Securities and Exchange Board of India (Sebi) show that equity mutualfundsinvested`1.92lakhcroretill September 27 this fiscal, while FPIs invested `83,289 crore (approximately $9.96 billion) in the same period. Duringthisperiod,benchmarksSensex and Niftyreturned 15% and 16%,respectively. The broader market indices performed even better as the BSE Smallcap index soared 32.4% and the BSE Midcap index rose 25.5%. “Strong flows have been an outcome of very strong fundamentals. Our fiscal deficit, current account situation, forex reserves, health of banks and corporate balance sheets,inflation,and GDPgrowth FLOWING IN Net equity investments (` crore) FPIs Apr 2024 MFs May Jun Jul Aug 49,793 26,073 BROKERAGES RUSH TO IMPLEMENT SHIFT TO DIRECT PAYOUT IRAN'S BIGGEST EVER military blow against Israel on Tuesday and the latter’s threat of retaliation pushed up oil prices more than 3% on Wednesday on mountingconcernsthatWestAsiatensionscould escalate, potentially disrupting crude output from the region. Brentfuturesreachedtheirhighestina month,leaping $2.42,or 3.3%,to $75.98 a barrel.Iran said earlyonWednesdaythat itsmissileattackonIsraelwasoverbarring further provocation, while Israel and the US promised to strike back againstTehran as fears of a wider war intensified.“This could include damaging or obliterating Iran’s oil facilities,”TamasVarga of oil broker PVM told Reuters. Varga noted that a retaliation by Iran or its allies could strike Saudi oil facilities like in 2019 or see the closure of the Strait of Hormuz. “Any of these events would irretrievably send oil prices considerably higher,”he said. 11,678 31,685 ANILAMBANI-LED Reliance Group on Wednesday said it has forayed into the renewable energy sector in Bhutan and signed a pact with Druk Holding, the commercial and investment arm of the Royal Government of Bhutan, reports Raghavendra Kamath. ■ PAGE 5 Mastering the art of getting things done AGENCIES New Delhi, October 2 27,958 25,089 ANILAMBANI'S RELIANCE FORAYS INTO BHUTAN DINESH KHARA, FORMER CHAIRMAN, SBI Fresh push to already high logistics costs; another blow to trade 25,940 28,226 THE CENTRE TRANSFERRED assorted subsidies and sops worth `2.3 lakh crore to beneficiaries via direct benefit transfer (DBT) in H1 of the current fiscal, reflecting the slow pace of government spending due to the polls and late full Budget presentation, reports Prasanta Sahu. ■ PAGE 2 -25,260 48,234 DIRECT BENEFIT TRANSFERS SLOW IN FIRST HALF LIFETIME ACHIEVEMENT AWARD Iran-Israel war shadow looms large over India 32,824 NEWS OIL PRICES UP OVER 3% AS WEST ASIA TENSIONS ESCALATE -6,820 IN THE Sep Source: NSDL, SEBI is in a Goldilocks scenario...This is making it attractive to invest and,not surprisingly, equityreturns have been strong and so are flows,” said Anand Vardarajan, business head at Tata Asset Management. Continued on Page 7 New MPC may not cut rates on Oct 9 THE APPOINTMENT OF three new members to the Reserve Bank of India’s (RBI) monetary policy committee is unlikely to prompt an interest rate cut at next week’s crucial policy meeting, economists said, reports Bloomberg. The government on Tuesday appointed the three new external members to the monetary policy committee, all well-known economists from the academic and finance world,who will join three RBI officials on the committee led by governor Shaktikanta Das. The MPC is scheduled to announce its next rate decision on October 9. ■ Page 6 THE MAHARASHTRA GOVERNMENT has approvedtheacquisitionof256acresofsaltpan land in the north-east of Mumbai in a boost to the Adani Group’s project to redevelop Dharavi,one ofAsia’s largest slums. The salt-pan land will be acquired from the central government and leased to the Dharavi Redevelopment Project, LANDING which is rehabiliA NOD tating the 620■ Acquisition of acre neighbour256 acre salt-pan hood in the heart land in north-east of the financial capital,according Mumbai gets nod toaSeptember30 ■ Land to be release from the bought from the state’s cabinet. Centre & leased The Dharavi to Dharavi project Redevelopment Project, in which the Adani Group holds an 80% stake along with the state government, is implementing the project.The land will be used to build low-cost and affordable housing for residents of Dharavi who will need to be relocated. A surveyofexistingresidentsandbusinessesis being done to determine who would be rehousedinDharaviorberelocated. Some residents of Dharavi are opposed to the project and the ongoing survey,while thestate’slargestoppositionpartyhassaidit willscraptheagreementifvotedintopower in the upcomingpolls. —BLOOMBERG GOING BY HOW he has made one of the toughest jobs in the country look easy,it’s not surprising that Dinesh Khara’s favourite book is Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan. The former State Bank of India (SBI) chairman was always a fan of the management stream, but after earning a degree at the Faculty of Management Studies of the Delhi School of Economics, he decided he would become a banker. Today, even after four years at the corner office of India’s biggest bank,Khara feels he has a lot left in him. In particular,he misses not having spent enough time on data analytics at the bank because of the heavy daily workload, and would love to work with fintechs. The pulls and pressures of running a big bank, especially the frequent travel, can take their toll. But Khara is able to manage with just 5-6 hours of sleep possibly because he rarely misses his morning yoga and meditation routine. But staying fit also means Khara has had to “give up his sweet tooth” and his mother’s besan laddoos. He keeps his diet simple: dal, roti, sabzi and of course, his favourite, rajma chawal. He attributes much of the capability needed to run India’s biggest bank to in-house training or learning on the job. The varied experience across the country’s many branches, he believes,prepares one to deal with all kinds of situations. He recalls his first posting in Jaipur in the days of manual ledgers and the “heavy savings bank counters” where he cut his teeth. In Bahalgarh, Haryana, where the SBI branch was the only pucca building, he had to fight a case to ensure the staff were not evicted from the office. His most challenging stint was in Chhattisgarh’s Raipur at a time when the Naxal movement was at its peak. Continued on Page 7 NFRA seeks to enforce scalable audit system Asks CA body to issue new quality management norms as ‘standards’ MANU KAUSHIK New Delhi, October 2 AFTER INSISTING ON upgraded standards of group audits, the National Financial ReportingAuthority (NFRA) may now put its foot down on a new dynamic system of quality management among audit firms. It has proposed that the Institute of Chartered Accountants of India (ICAI) make the proposed Standards on Quality Management (SQM) for auditors enforceable, rather than keeping them merely advisory in nature. “We are proposing that the SQMs should also be issued as “standards” as these are a critical foundation of audits.Thiswould give them the required force of law so that companies can adhere to the standards strictly and improve audit quality,” NFRA chairman Ajay Bhushan Pandey told FE. The ICAI had earlier floated a paper on SQMs, the modern version of the extant Standard on Quality Control (SQCs), which aren’t mandatory in nature.The draft SQMs, broadly modelled on similar ones in the advanced economies,including the US,take into account new realities in audit practice, CALLING FORA SHIFT ■ The new standards on quality management (SQMs) for auditors are currently advisory in nature ■ Draft SQMs broadly modelled on similar ones in advanced economies, including US ■ They lay more emphasis on risk assessment, and envisage scalable audit systems ■ NFRAsays the new SQMs are a critical foundation of audits, and be made mandatory lay increased emphasis on risk assessment, and envisage tailor-made,scalable audit systems. The shift from SQC to SQM has been taking place globally over the last few years. The NFRA’s stance is consistent with its focus on raising the bar for the audit community, as was indicated in its revised Standards on Auditing 600 (SA 600),which are aimed at improving the qualityof group audits. Continued on Page 7 CRV TO RETURN $275 MN IT HAS NOT YET SPENT FROM ITS STARTUP FUND TO INVESTORS A Silicon Valley-based VC firm does something rare: Give money back ERIN GRIFFITH San Francisco, October 2 VENTURE CAPITAL FIRMS raise money — lots of it — and invest it in startups in hopes of generating big returns. One thing they rarely do is give the moneyback.Yet that iswhat CRV, one of the industry’s oldest firms,isplanning.Thefirmwilltellits investorsthisweekthatitwillreturn the $275 million that it has not yet investedfromits$500-millionSelect fund,whichisdesignedtobackmore mature startups. Thereason,fourofthefirm’spartners said in a joint interview, is that market conditions have changed for theworse.Thevaluationsforstartups aretoohighrelativetotheirpotential forapayoff,the partners said. CRV’s decision is part of a reset thatishappeningaroundtheventure capitalindustryafterthego-goyears of the pandemic.In 2020 and 2021, manystartupsandinvestmentfirms raisedoutsizefunding,expectingthe boom to keep going. In the years since, the tech exuberance faded, and many start-ups cutstafforshutdown.Themarketfor initial public offerings and acquisitions — the main ways venture capitalfirmsearnareturnontheirinvestments — has also been dismal. Venture capital has always experienced booms and busts, but now, the boom and bust seem to be happening at the same time.While IPOs havebeeninfrequentandithasbeen hard to make strong returns,there is a frenzy to put money behind new artificialintelligence ideas. It is a paradox that explains why Four BOOM & BUST of the firm’s partners said market conditions have changed for the worse ■ CRV has not yet spent $275 ■ Valuations for startups are too high relative to their potential for a payoff, they said million from its $500-mn Select fund, meant to invest in startups CRV is ploughing ahead with a fund for very new startups and pulling back on investing in the laterrounds of more established outfits. In 2022, CRV raised a $1-billion ■ This is the second time the VC firm has cut its fund size fund for young start-ups and $500 millionfortheSelectfund,itssecond fund for more mature companies. The firm said it needed more money to accommodate the bigger invest- ment rounds,higher valuations and the frequencyof fundraising. Butoverthepastyear,CRV’spartners realised that they were passing on lots of investment opportunities forolder,morematurecompaniesfor its Select fund. The reason was the mathnolongerworked.CRVdoesnot plan to raise anotherSelect fund. In order to generate the kind of returns that CRV’s investors expected,manystart-ups—farmore than ever before — would have to wind up being worth $10 billion or more.“The data just doesn’t support that,” said Saar Gur, a partner at the firm.“There aren’t many really big foundationalcompaniesandbigoutcomes.” If CRV kept investing at currentprices,Gursaid,itwouldwindup with lowerreturns.So instead of settlingforworseperformance,thefirm decided to cut the fund. CRVwillcontinueinvestingoutof its $1-billion main fund and is roughlytwo-thirdsinvested.Thefirm has signaled to its investors that its next fund is likelyto be smaller. CRV was founded as Charles RiverVenturesin1970withthepurposeofinvestingincompaniesbuilt using research coming out of the MassachusettsInstituteofTechnology.ThefirmopenedanofficeinSilicon Valley in 1999, changed its name to CRV in 2014 and moved fully to theWest Coast in 2021. This is the second time the firm has cut its fund size. In 2002, after the dot-com bubble broke, CRV slashed its $1.2-billion fund to just $450million.Otherfirms,including MohrDavidowVenturesandKleiner Perkins, made similar moves that year in an admission that the hype hadsurpassedrealityformanyearly internet startups. Continued on Page 7 CHENNAI/KOCHI