Business News

Congress to elect party president by June 2021

Business News - January 22, 2021 - 8:04pm
NEW DELHI: Braving protest from a section of its leadership, the Congress Working Committee meeting on Friday decided to put off the election of the party chief to June, citing preoccupation with the campaign for the April-May Assembly elections in four states and one union territory.“There will be an elected Congress president in June,”AICC General Secretary organisation KC Venugopal said at a press conference after the CWC meeting. Rahul Gandhi, who quit as party chief after the party's debacle in the 2019 Lok Sabha polls, is widely expected to be seeking a second tenure as party chief.The CWC decision meant two immediate things: the assurance given last August on holding the poll “within six months” is amended; and Sonia Gandhi’s tenure as interim president gets extended by six more months.Sources said a heated argument took place at the CWC meeting over the timing of the organisational polls. Ghulam Nabi Azad, Anand Sharma, Mukul Wasnik - part of the 23 letter-writers who had sought polls and functional reforms - and P Chidambaram demanded immediate elections saying the time had come for the party to change its old style of functioning.With the change-seekers already a minority in the hand-picked CWC, leaders such as Ashok Gehlot, AK Antony, Oommen Chandy, Ambika Soni, Taroq Anwar among others came out in defence of the Gandhis-led party establishment. They said focussing on the upcoming Assembly elections and ongoing farmers agitation were more important, and that those who kept demanding early organisational polls were only causing distraction. Gehlot even asked why they were getting so worked up with the timing of election of the Congress president "when nobody was asking “how Amit shah and Nadda were elected as BJP chiefs”.Rahul Gandhi intervened to tactically play the ‘disinterested party’ saying “let us get over with this", even as he stressed the need for the party to stand by agitating farmers.The CWC also passed resolutions seeking a JPC probe into the controversy involving the purported Whatsapp chats of Republic TV anchor Arnab Goswami and on holding agitational programmes on farmers issue.
Categories: Business News

Pawan Munjal on Hero, Harley and premiumisation

Business News - January 22, 2021 - 8:04pm
By Ruchi BhatiaWe have introduced a lot of premium products in our portfolio recently and going forward we will continue to do that, says Pawan Munjal, MD & CEO, Hero MotoCorp. Is the pent-up demand for two-wheelers over? Are you seeing more sustainable demand?The pent-up demand was one of the reasons why customers were coming in but we have had new customers coming in. We have customers coming in for the reason of not going into public transport, not going into cabs, sharing cabs, not doing ride sharing, wanting personal mobility for themselves. All that has added to the number of customers coming in. And going forward, we will definitely have replacement and new customers coming in and the fact that even now people want personal mobility. Hero has got into an agreement with Harley. What does this partnership mean and what kind of integration will we see in the future?The partnership of Hero and Harley is a great partnership for both Hero and Harley going forward. Hero is moving towards premiumisation. We have introduced a lot of premium products in our portfolio recently and going forward we will continue to do that. The entire partnership Hero and Harley is a big boost and a big help for Hero in that direction. Will we see Hero and Harley both developing products and can we see in future a combined product by the two entities as well for the Indian customers?When I announced the partnership in October, I did talk about distribution of Harley products by Hero and the e licensing arrangement of Harley with Hero where Hero will develop, design and manufacture products for Harley. You did refer to premiumisation of products as well. Is that really what the future is going to be, all about technological innovation as well as premiumisation of products?Hero is focussed on premiumisation of its portfolio. But that is not the only way Hero is going. The utility products will give the volumes -- the Passion, the Splendor, the Glamour. We are not losing focus at all over there. We are going on pushing those products. We are going on increasing our market share in that particular segment. We have a huge focus there as well because in the premium segment, Hero has a small market share today. We want to change that and we are already changing that.
Categories: Business News

Vaccine supply not affected due to fire: SII

Business News - January 22, 2021 - 8:04pm
Pune: The supply of COVID-19 vaccines has not been affected due to the recent fire that broke out at the Serum Institute of India's (SII) facility in Pune, confirmed the company's CEO Adar Poonawalla on Friday."The supply of COVID-19 vaccine will not be affected due to the fire. No actual vaccine was being made at that facility. We were lucky that the incident happened in a different building. The extent of the financial damage is more than Rs 1,000 crores," Poonawalla said while addressing a press conference."The fire has no impact on the production of the Covishield vaccine and no damage has occured to the existing stock either," he added.A fire had broken out at SII's Manjari plant yesterday, where six people were rescued from an under-construction building. Hours later, another fire broke out again in one of the compartments of the building at SII, in Pune.Five people lost their lives in the fire incident.Maharashtra Health Minister Rajesh Tope had said the initial fire was caused by ongoing welding work at the site.The SII had on Thursday announced a compensation of Rs 25 lakhs to the families of the people who died in the fire incident at the company's facility at Manjari.
Categories: Business News

RBI proposes scale-based regulations for shadow banks

Business News - January 22, 2021 - 8:04pm
MUMBAI: The Reserve Bank of India (RBI) has proposed a four-layered structure for regulating non-banking finance companies (NBFCs) aimed at tighter capital, lending and governance norms in order to prevent defaults such as those at Infrastructure Leasing & Financial Services (IL&FS) and Dewan Housing Finance Corp. Ltd (DHFL).Not more than 25-30 large non-bank lenders will be constituents of the upper levels of the pyramid, according to the RBI discussion paper released on Friday. Norms will get more stringent as the NBFCs get bigger toward the apex. Those in the upper tier could include Housing Development Finance Corp. (HDFC), Bajaj Finance, Shriram Capital, Tata Capital and Mahindra & Mahindra Financial Services.The regulator has sought feedback on the proposals before finalising norms. The discussion paper on a revised regulatory framework for NBFCs outlines a “base layer, middle layer, upper layer and a possible top layer.” No NBFC will be classified in this top layer unless the risk perception rises to an acute level. “NBFCs in lower layer will be known as NBFC-Base Layer (NBFC-BL),” the RBI paper said. “NBFCs in middle layer will be known as NBFC-Middle Layer (NBFC-ML). An NBFC in the Upper Layer will be known as NBFC-Upper Layer (NBFC-UL) and will invite a new regulatory superstructure. There is also a Top Layer, which is ideally supposed to be empty.”The paper elaborated on the top layer. “The layer can get populated in case the Reserve Bank takes a view that there has been unsustainable increase in the systemic risk spill-overs from specific NBFCs in the Upper Layer,” it said. “NBFCs in this Layer will be subject to higher capital charge, including Capital Conservation Buffers.”The regulator has also proposed common equity tier-1 capital requirements of 9% for NBFCs in the upper layer as well as similar standard asset provision norms. Both these measures could significantly increase capital requirements, although most large NBFCs are well capitalised.“It is felt that CET 1 could be introduced for NBFC-UL to enhance the quality of regulatory capital,” the RBI paper said. “In order to tune regulatory framework for NBFC-upper layer to greater sensitivity, it is suggested that they are prescribed differential standard asset provisioning on lines of banks.”NBFC entry norms are proposed to be tightened with the minimum net owned funds requirement to increase 10-fold from Rs 2 crore to Rs 20 crore. The RBI paper also proposed harmonising bad asset identification between banks and NBFCs by bringing classification down to 90 days from 180 days.Importantly, the regulator has also proposed mandatory listing requirements for NBFCs in the upper layer on the lines of private banks. The RBI has also proposed increasing the threshold level of systemically important NBFCs to Rs 1,000 crore from the present Rs 500 crore.
Categories: Business News

Input Tax Credit must be paid on towers: TAIPA

Business News - January 22, 2021 - 8:04pm
New Delhi: India’s telecom tower body has urged the telecom department and finance ministry for inclusion of towers in the definition of items eligible to avail input tax credit under the GST Act."Currently, the telecom infrastructure providers can not avail of the Input Tax credit against GST paid by them on telecom towers, which acts as an impediment to make further investments,” said T.R.Dua, Director-General, Tower and Infrastructure Providers Association (TAIPA).“Although under the Central Goods and Services Tax Act, 2017 (“CGST Act”), GST credit is available for plant and machinery, but Telecommunication towers have been specifically excluded from the definition of plant and machinery provided in Explanation to Section 17 of the CGST Act. It would be pertinent to note that the draft GST bill had envisaged provision of the input tax credit on telecom towers; however, this provision was removed in the GST Act, 2017," he said.As per TAIPA estimates, due to the non-availability of Input Tax Credit, the industry has to incur a loss of Rs 1.25 Lakh -1.5 Lakh per tower. “Thus, during the last 4-5 years, the Industry has already lost Rs 2500 Cr of ITC so far. Going forward, the demand for telecom towers is likely to cross 50,000 towers on account of 5G, etc, which will lead to an additional loss of Rs 625 Cr to the Industry,” the body said.The apex body has written to Ms. Aprajita Sharma, DDG(BPF), Department of Telecommunications (DoT) for urgent support and intervention regarding the issue of non-availability of Input tax credit on telecom towers, it said.Further, this issue had been taken up by TAIPA during the recent meeting with the Secretary, telecom on 6th January 2021, so that it can be taken up with Finance Ministry prior to the finalization of Annual Budget, which will be finalized very soon. The telecom towers were specifically exempted from the definition of plant and machinery under section 17(5)(d) of GST Act, 2017 which deprived infrastructure providers from availing the Input Tax credit against GST paid on telecom towers.“Hence, the industry has been requesting for the inclusion of telecom tower under the definition of Plant and Machinery so that Input Tax Credit can be made available on telecom towers, since the last 4-5 years.”
Categories: Business News

Budget 2021 should focus on three 'R's: Relief, recovery and reforms

Business News - January 22, 2021 - 8:04pm
The Indian economy is in the midst of a better than expected economic recovery. GDP contraction in FY21 is likely to be around 7 per cent, much lower than the 10 per cent contraction feared earlier. Leading indicators like electricity consumption, freight, PMI and crucial data like GST collections and automobile sales point to a V-shaped recovery. Low interest rates have turned out to be a major tailwind for sectors like construction and automobiles. The setting is perfect for a ‘budget like never before’ as finance minister Nirmala Sitharaman has indicated. Will the FM deliver what she has promised? The FY22 budget should be, ideally, crafted on 3 Rs: Relief, Recovery and Reforms.ReliefEven though the economy is recovering impressively, there is pain in the MSME sector, which calls for relief. The Emergency Credit Line Guarantee Scheme (ECLGS) for the sector should be continued for one more year. Badly impacted segments like travel and tourism needs timely relief. Covid severely impacted urban employment much more than rural employment. We don’t have an urban counterpart to MGNREGS. The best way to create more urban jobs is to give a fillip to construction. The budget can provide more incentives to housing and construction. RecoveryThe most impressive aspect of the ongoing recovery is that it has been achieved with fiscal prudence. The strategy of allowing monetary policy to do the heavy lifting while keeping the fiscal stimulus modest has turned out to be a brilliant move. The government is now in a position to go for a one-time big fiscal stimulus focusing on spending on vaccination, infrastructure and recapitalization of banks. Expenditure on vaccination has the potential to become a major fiscal boost since it will facilitate fast return to normalcy.ReformsImpressive GDP growth of around 11 per cent, assisted by the base effect, is likely in FY22. Nominal GDP growth would be around 16 per cent. But, if the high growth rate is to sustain beyond FY22, we need reforms. The ongoing farmers agitation is proof of how difficult it is to implement reforms in India. But the government should persist and send out a clear message that it is serious on the reform agenda. Bold announcements on privatizations are the need of the hour. Abundant liquidity and historically low interest rates in the developed world is manifesting as huge FPI flows into India. Disinvestment will be easily absorbed in this buoyant market driven primarily by liquidity. The FM should seize this tail wind to sail through privatization. We need more reforms to accelerate investment. Land acquisition continues to be problematic. Electricity charges for manufacturing are high, thanks to subsidization of power to farmers. This should change. Don’t tinker with tax ratesThe government doesn’t have the fiscal space to give tax sops. This is not the time to tinker with tax rates. The present corporate and personal income tax rates should continue. More importantly, the FM should resist the temptation of imposing the rumored one-time Covid Tax. Taxation of capital gains and dividends also need not be tinkered this year.In a recent press meet, the FM had said, “we shall be the engine of global growth, for which we need to build capabilities we don't have yet. India needs to be a part of the value chain." Businesses moving away from China will be a major trend, going forward. Countries like Vietnam and Bangladesh are at the forefront of exploiting this opportunity. India should build capabilities to be part of the global supply chain to gain from this megatrend.
Categories: Business News

Probal Sen on what to expect from Reliance in Q3

Business News - January 22, 2021 - 5:04pm
Structurally the refining business continues to be tepid and one would be interested in what the company says about their outlook, says Probal Sen, Senior V-P, Research, Centrum Broking. What is your take on Reliance Industries?On a sequential basis, a couple of things are moving in its favour. The retail business will continue to move towards normalcy post Covid. Some part of that journey started in Q2 itself but I think that momentum will continue. My sense is that EBIT or margins or earnings from the retail segment will go up maybe 20% on a quarter-on-quarter basis. The other significant aspect is that the petrochemical business seems to be on a much stronger track than it has been over the last six to nine months. Reliance with its sourcing and offtake flexibility has managed to keep volumes at a decent level. Margins have suffered and what is happening now is that the domestic market is coming back and as a result, margins in the domestic market for Reliance’s petchem business are definitely 10-15% higher than what they would be if they were to export a larger volume, which has happened in the last couple of quarters. So even petchem margins probably would be 12-13% higher Q-o-Q. Jio probably is more of a steady state story with 6-7 million subscribers, similar to the run rate that was there last quarter. Another 2-3% improvement in ARPUs will get it closer to 150 but we need to note that some part of this ARPU improvement could be because of FTTA subscribers and are now part of the overall revenue. The company has not started bifurcating the voice revenue and the fibre revenue as of now, we will see what they start doing from this quarter but my sense is that the ARPU improvement is more due to the higher ARPU inherent in the fibre business which makes a difference rather than any improvement in the voice ARPU at least in this quarter. On an overall basis, against the Rs 18,000-19,000 odd crore of EBITDA, we expect them to clear Rs 21,000 crore for this quarter which is still 5- 6% lower on a YoY basis and is primarily driven by the fact that refining remains the one worry where one expects the GRMs to continue to be tepid at $6 kind of a mark and therefore much much lower than the $8-9 that one was still seeing even a year ago. That is the one segment where one would look forward to the management commentary on the outlook in terms of when it can recover but the rest of the other businesses are likely to show a strong momentum. The lower interest cost will be a crucial monitorable after all the cash that has flowed into the company over the last year or so. Now people will look at every quarter to see how much of the debt is actually being retired or paid-off and what kind of an impact that is having on the interest costs and hence the profitability of the company. This is an important driver and now it would be seen every quarter whether the promise of the higher cash flow being generated gets reflected in the leverage being retired or reduced as soon as possible so that they can get to the zero net debt number. Effectively, they have already done it but in the books it will probably take another six to nine months to fully reflect. That will be the interesting driver to look at over the next couple of quarters. A lot of different factors are at play. From a market standpoint, do you feel that the attention will be more focussed on the old economy business this time?Yes, what is ironic is for the last two years, we have been completely forgetting the OTC business which is still at the end of the day 40-45% of your EBITDA. The story about retail and Jio is well known and the recovery does seem to be taking hold. Jio never really went away and the growth has slowed down a bit. It is understandable that on a higher base, retail is coming back strongly. Petchem starting to recover is a big positive. The only worry remains that the refining business where globally reports indicate that 2-2.5 million barrels a day of refining capacity should go off line. Parts of it have already gone offline over the last few months and the rest will happen over the next 12-18 months give or take. The supply additions continue to run ahead and demand growth is not that exciting at least based on the estimates that we see with respect to the Covid recovery. It is probably another 12-18 months before we see the demand for ATF globally getting back to near normal levels and the same holds true for transportation fuel demand which is 40% of global demand products anyways. That remains a little bit of a worry. People will also look at one small aspect that I forgot to mention -- the kind of spot LNG price increase that one has seen in the last month or two should reflect on or support the GRMs. If it continues over the next few months because the petcoke gasify starts to make serious money, if the comparable LNG prices are more than $7.5, given the kind of slopes that we are seeing for LNG prices, running the petcoke gasifier at a higher level and cutting down on your LNG imports should be something that one would see. That is a support factor but structurally the refining business continues to be tepid and one would be interested to see what the company says about their outlook and it will be important to look at just cash flows and earnings over the next six to nine months.
Categories: Business News

Wishlist: What MSMEs expect from Budget 2021

Business News - January 22, 2021 - 5:04pm
Every year, the Union Budget is keenly followed by the industry which sends their wish list to the Finance Minister sector by sector, seeking sops and stimulus. This year is no different, except the extent of assistance that will be required as industries struggle to put one of the worst years behind it.The Covid-19 pandemic, evidently, sent economies across the globe into a tailspin. While governments tried to offer immediate relief, it was clear that recovery was going to take time. The MSMEs industry suffered a triple whammy when Prime Minister Narendra Modi announced a stringent nationwide lockdown in March 2020-demand was hit, the global supply chain was disrupted, and India witnessed a massive reverse migration among its laborers.The government jumped into action with a series of stimulus announcements intending to boost demand and supply. The ambitious Atmanirbhar Bharat Abhiyaan, aimed at giving an impetus to the domestic industry, was especially welcomed by the MSME sector, which was hit hardest by the pandemic lockdown. But the sector needs more sustained assistance to get back on its feet.On the macro levelWhile the MSME sector is looking for specific announcements regarding financial aid and stimulus, there is no doubt that the big picture needs to be clear before any such assistance to work. This means an overall economic recovery is essential, and policymakers need to curb inflation, the fiscal deficit with runaway prices.The good news is that retail inflation has slowed on the back of falling vegetable prices and festival and pent-up demand. However, growth in capital goods and consumer goods contracted, showing that recovery is still in its nascent stage and has not taken deep root. Therefore, all eyes will be on the finance minister to see if she will offer significant measures to support growth.Boost ExportsMSMEs contribute over 40% to the Indian export basket. The government should focus on sustainable methods to increase the sector’s contribution to global trade. The Finance Minister could extend the Production-linked Incentive (PLI) scheme beyond ten sectors to encompass more export-oriented sectors. The government should also consider rationalizing duty and tariff rates, promote research and development, help small industries with tech upgradations plans. This, in return, could help Indian MSMEs improve their competitiveness in the international market.On the financial frontA long-standing issue for MSMEs has been the availability of credit. The government has taken steps over the years to provide easier access to funds for MSME players, but it has never been enough. With fintech and digital payments becoming more accepted, the government could announce some support for creating a digital payments framework, which will offer MSMEs far easier access to credit and financial services.Last year, the government announced a stimulus package for MSMEs, which included a moratorium on loans for three months and some tax relaxations. Given that the damage done by the pandemic-induced lockdown is deep and long-lasting, the government may look at extending these relaxations into the new financial year.Because of the trifecta of demand slowdown, supply chain breakdown, and labor shortage, MSMEs are also finding it impossible to get their operating cycles back on track. This means that working capital requirements will change, and their assets and liabilities may need to be reassessed. By easing up the financial system to allow for easier access to credit, the finance ministry can offer MSMEs a helping hand.The other specific area MSMEs hope will be addressed is mainstream existing bill discounting platforms such as TReDS (trade receivables discounting system).Labour force issuesWhen the lockdown was announced last year, the significant immediate impact seemed to be on the workforce-specifically, on migrant workers who felt they would be better off in their home towns and began moving back. The result was a massive reverse migration- with workers walking thousands of kilometers with their families. Most of the workers who migrated back home were employed in small units as construction laborers, loaders, drivers, etc. With them accommodating back to their villages, MSMEs were left with huge gaps in the workforce. The Finance Ministry could formalize some employment benefits to such workers, making it possible and beneficial to return to their jobs.Overall, the MSME sector seeks recognition from the government for its special status and its unique problems. While some of the issues dogging the sector are long-standing, the pandemic and subsequent lockdown have exacerbated most of its problems. The government has understood the impact of the lockdown on this sector. However, it is time for more help than temporary sops. Perhaps Budget 2021-22 will have long-term, sustainable solutions to offer.(The writer is Co-Founder, CEO, Drip Capital)
Categories: Business News

Over 10 lakh vaccinated against Covid in India

Business News - January 22, 2021 - 5:04pm
New Delhi: Nearly 10.5 lakh beneficiaries have received anti-coronavirus shots under the countrywide COVID-19 vaccination exercise as on date, the Union Health Ministry said on Friday. In a span of 24 hours, 2,37,050 people were vaccinated across 4,049 sessions. A total of 18,167 sessions have been conducted so far. On the testing front too, India continues to register growing numbers, the ministry said. The expansion in testing infrastructure has given a boost in India's fight against the global pandemic. The cumulative testing has crossed 19 crore, it underlined. A total of 8,00,242 samples were tested for COVID-19 in a span of 24 hours which has increased India's total cumulative tests to 19,01,48,024. "Comprehensive and widespread testing on a sustained basis has resulted in bringing down the positivity rate. The cumulative Positivity Rate stands at 5.59 per cent as of today," the ministry said. Steadily following the trend set over the past weeks, India's active caseload has fallen to 1.78 per cent of the total cases. India's Active Caseload presently stands at 1,88,688. A total of 18,002 new recoveries were registered in a span of 24 hours. This has led to a net decline of 3,620 cases from the total COVID-19 active caseload in a day. The total recovered cases have surged to 10,283,708 pushing the growing gap between the recovered and the active cases to 1,00,95,020 ( 54.5 times). The ministry said that 84.70 per cent of the new recovered cases are contributed by ten states and UTs. Kerala saw 6,229 persons recovering from COVID. Maharashtra and Karnataka reported 3,980 and 815 new recoveries, respectively. A total of 14,545 new positive cases were registered in a span of 24 hours. Eight states and UTs have contributed 84.14 per cent of the new cases. Kerala reported 6,334 cases in a span of 24 hours. Maharashtra recorded 2,886 new cases, while Karnataka registered 674 daily cases. Over 82 per cent of the 163 case fatalities that have been reported in the past 24 hours are from nine states and UTs. Maharashtra has reported the maximum new daily deaths with 52 deaths. Kerala also saw a fatality count of 21.
Categories: Business News

Investing: Be defensive but take an educated risk

Business News - January 22, 2021 - 5:04pm
You may have an optimistic view but your portfolio should not reflect that optimism. It should still be defensive so that if you get a really bad pitch going forward, you should be able to defend it, says Samit Vartak, Founding Partner and Chief Investment Officer, SageOne Investment Advisors. Can you make sense of this market madness?What I have learnt is that a lot of investors try to think of markets in terms of how physics works. With physics, you can predict the movements of planets and the sun for centuries. But that is not how markets work. Markets probably can be compared with how neurons work because there are too many market participants and how the other participant reacts, makes a lot of difference. Take for example Covid. The impact of Covid would have been completely different if the central banks did not come in with fiscal stimuli. You cannot just think of a stock market and what is going to be the impact of Covid on the economy and how the markets are going to react just considering those couple of inputs. We do not know what actions are going to be taken. There are too many moving parts for us to be able to forecast that. So we try to put it into simple formulas which really work. Who would have thought that with economies going down by 30-35% and the worst pandemic in a century, the markets would be way above what they were before the Covid started? It is a humbling experience for most who think they are way smarter than the market but it is way more complex than just thinking of a few variables and trying to predict. Given that the bent of the economy has changed, assumptions have changed, the pent-up demand is looking like a sustainable and a structural demand, have you changed your portfolio orientation?One of the biggest changes which happened was in terms of the quality of the balance sheet. I was just looking at the balance sheet of the non-large companies, which are not in the top 100. We are at the best net debt to equity ratio of below 0.4 times which I have never seen at least in this century. The interest cover last quarter was at 7 times and for this quarter will be even better. You look at cash flow as a percentage of net profits. They are at the best point in time and you would be surprised by the number of companies which have become debt free and a lot of these companies are sitting on at least 30-35% unutilised capacity. Going forward, the operating leverage can kick in big time because there is capacity to take care of the demand that would come in. You would not need much credit. Today good companies are getting short-term commercial papers (CPs) at 3.5-4%. So a lot of things have changed. Just compare this with three, three-and-a-half years ago when we were in the previous bull market for the midcap and small caps. We were at all-time high PE multiples. But the banking cleanup, the repercussions of bad banks falling had just started. A lot of fraudulent companies came out and we had accidents after accidents over the next three-and-a-half years. Today we are sitting on a very clean balance sheet and the power of a clean balance sheet and a clean system is immense. I do not think we can predict that. So, it is a very different situation. Accordingly, one’s portfolio has to change. Earnings growth will come into companies which are sitting on huge unutilised capacity and where there is demand pick up and the operating leverage which is something we cannot even predict. A lot of fund managers, economists talk about the profits of corporate India versus the GDP. The ratio used to be 3% or 2.5% in 2002-2003. It went up to 8% in 2007-2008. Again last year, we had reached the same levels of 2%. I am pretty sure that with the clean up of the cost structure, the interest costs being what they are, profitability can go up. It can go up 4X. We cannot just look at it from a valuation perspective and where we are and just compare it with those couple of variables with previous instances. We got to look at a lot of other inputs and that is how we can make a much educated forecast of where we could be. I am going to quote Sir John Templeton here and he said that the most dangerous words in the stock market is that this time it is different. There is nothing called different. If we are trading above historical benchmarks which means markets are expensive and if you buy markets at these levels, the future returns are not great.No absolutely. What is not different each time is the sentiments of the investor. In terms of sentiments, it is good to see that people are sceptical about this market. There is a lot of scepticism. Smartest investors are sitting on the sidelines with higher levels of cash. But after all valuation is something which is going to be the defining factor of what the returns are going to be going forward and that is why, the main thing is how do you build your portfolio. There is no point in going all out and going for a hope trade. Even in this kind of environment where the economic situation seems to be easier compared to three years ago, you will need to be disciplined and strict in picking your portfolios. Three years ago, in terms of valuation, the situation was worse.The midcap and smallcap valuations had reached 32-33 times trailing multiple, today we are at maybe 22-23 times so we are still 50% away from what we had reached in say December 20017. But even with that kind of cushion it is better to go for companies which are already delivering. No point in going for turnaround stories and hope trade. Maybe if you get it right, you will make way more money but what if it goes wrong? It may not be different and those words are absolutely right. We may go in a similar kind of cycle to 2017. So you may have an optimistic view but your portfolio should not reflect that optimism. It should still be defensive so that if you get a really bad pitch going forward, you should be able to defend it. Play it in a very defensive manner but take an educated risk. What should be an ideal portfolio? How would you break it up thematically or otherwise to ensure that it was relatively insulated?Yes, so my definition of defensives is look at companies which deliver during tough times. For example, companies in structural steel pipes where the industry was not doing well but some companies doubled their earnings in the last three years. That is what defensive means, when a batsman is technically strong and can play on a bad pitch. I am an aggressive batsman, my run rate is always going to be high; so I am going to look for companies which will deliver higher growth and within that universe, go with companies which delivered in tough times. Going forward, the industries which may do well and which have been doing pretty well could be export-oriented, manufacturing-oriented. There are going to be a lot of manufacturing activities and for that a lot of building materials will be needed. Over the last year to year-and-a- half, with the PLI scheme and incentives for manufacturing till 2023, construction plus real estate is peaking up. Infrastructure will also peak up. Within the building material basket, one does not need to go with pure commodities. Go with commodities like metals. Pure commodities are very cyclical where one has to time exit. Metal companies on the other hand, will be a little more structural as they were doing well in the bad cycle. But if there is a good cycle, they will do even better and will probably give a similar kind of upside. The kind of fund flows we have attracted over the last few months seem to suggest that over the next year or so, India could be in a relatively sweeter spot amongst the EM basket. Would you agree?The power of a clean corporate balance sheet is immense. We will see the benefit of it over the next 2-3 years. That is something which sets India apart from other emerging markets. At the same time, the banking system is very clean compared to what it was three years, four, five or 10 years ago. That is also going to help. Plus Indian government really never went out and doled out fiscal stimulus. It was mainly schemes which were doling out loans and so it was not free money which was given out. We are in a much fundamentally strong position and with Biden coming in and Democrats controlling both the houses, it is highly possible that with the tax rates in the US, a lot of money which had flown into the US market will come out and go into the emerging markets. Where in the emerging markets is as big an opportunity as India because it is a large economy plus there are triggers with things like PLI where the government is showing more proactiveness and hopefully will go for divestments. So a lot of incrementally positive things could happen which may not happen in a lot of emerging markets. I would not be surprised if within even the emerging market space, we outperform and so I am pretty positive but as I said there has to be defensive nature in that which will benefit but if it does not really play out, you should not be sitting on things which will just collapse. Where is it that you personally find valuation comfort in the market right now?There is not much of valuation comfort in the top 100 or 200 companies. They are trading at historical highs even if you adjust for the March and June quarters. The median valuation of the top 100 companies is way above 40. It is at 42-43 times which we have never seen. The highest we had reached in the previous cycle was 32-33 times. We are almost 30% above and even if you adjust for those couple of quarters, maybe that 42 would come down to 38-39 but still way above. But beyond the top 200 stocks, there is a huge valuation comfort compared to the largecaps. Plus I feel that a lot of those companies have paid their debt which we have never seen in the last 20 years and that is a big incremental change. A lot of weaker companies have been shaken out and at the same time the unorganised space may not have been able to sustain the Covid shock as well as GST. Many of those companies are out of business and that business will be taken over by maybe the midcap and small cap companies. So even in if the PE multiple is way higher in the mid and smallcap space compared to the large caps, I feel the operating leverage can kick in with incremental demand coming in. Even they are sitting on 30-35% unutilised capacity with debt free balance sheet and that is where the opportunity is. Would you say that you are prudent in aligning your portfolio towards mid and small caps for the foreseeable future?he core for any returns is going to be earnings growth. So align your portfolio to earnings growth. By earnings growth I mean you got to target something which is the earnings have to double in the next three to four years, which definitely is extremely difficult to find in the large caps. So if you find something in the large caps, go for it but what you look for should not be based on market cap but on earnings growth and at the same time valuation has to be reasonable. You cannot be paying 100 or 150 times for such growth because it seems a lot of that growth is already priced in and if you go wrong in your estimates, then you are definitely relying a lot on luck. You are not prepared for accidents and so you are not definitely positioning your portfolio with a defensive batsman. I think that is how I would look at it. Once earnings growth is met, only then look at valuations. You can overpay a little bit. There is no harm in overpaying to get a quality batsman but do not go down the quality curve. You like industrials, data companies and select names which will benefit because of speciality chemicals. What is happening in the chemical industry? Also, what could be a new theme or a new idea?I am stuck with the same kind of themes because I never really went for defensive themes like complete pharma or IT or consumer-oriented companies. I stuck with companies which probably should not have been doing well in a difficult environment but they did well. So definitely, they passed the stress test with flying colours and when you are given a little better environment, they should do well. So, I have not really made too many changes in the portfolio. Whatever themes you got wrong, during a bull market you get a chance to get out of them. Those are the only exits I am doing right now and then getting back into similar kinds of themes. I am fine paying a little bit higher valuation but I do not want to sit on businesses which are weak. HDFC Bank, Asian Paints and TCS are great companies but expensive stocks. I buy the valuation argument but when growth is so strong, how can one skip them?No, absolutely not. The point I am trying to make is that their growth could be high but what is the benchmark for their growth? If India’s nominal GDP growth is going to be 10-11% and if you get 15-16% growth in these companies, you will find these companies offer way superior growth opportunities. What I am talking about is way higher than that. I am talking about doubling in three years or in the worst case scenario, in four years. Those opportunities do not exist in these megacaps. So, it is just a matter of what kind of growth you are looking for. For someone looking for 15-16% kind of a return, these are great businesses and especially for FIIs, these kinds of growth numbers are something that they do not get anywhere else in such large companies and such large leaders. So depending on what an investor is looking for, those are attractive opportunities.
Categories: Business News

Templeton deviated from rules in the e-voting process: Observer

Business News - January 22, 2021 - 5:04pm
In a big revelation, TS Krishnamurthy, the SEBI-appointed observer to monitor the e-voting conducted by Franklin Templeton Mutual Fund (FTMF) has pointed out grey areas in the e-voting process. The 14-page report filed by the observer in the Supreme Court suggests that, “There were significant variations in e-voting process followed by FTMF vis-à-vis that prescribed under the Companies Act.” ET Mutual Funds has a copy of the report. Earlier, FTII had said that over 96% investors had voted in favour of the winding up process that took place from December 26-28, 2020. “There were many grey areas in the procedure adopted, which raised doubts and apprehensions in the investor minds. Even FTMF did not have a clear idea about the procedures. This is because an exercise of this kind was done for the first time without clear guidelines,” the observer said in the report. In the report, Krishnamurthy has pointed out that the procedure was alleged to create an impression that FTMF was pushing investors for “Yes” votes since that was in green colour and “No” was in red. This point was raised citing a complaint from a unit-holder. About 38 per cent of unit-holders participated ‘on an overall basis’ in the e-voting, the report said. The observer’s report also highlighted that emails that were sent to 6,560 unit-holders had bounced and SMS delivery to 1,766 unit-holders failed and their emails too were not available. The email addresses of 10,548 unit-holders were not available. FTMF had also warned unitholders in their notices about the consequences of voting "No." Regarding the ‘deviation’ from the Company’s act, the report pointed out that each unit-holder was given only one vote irrespective of the number of units held as on cut-off date and this is a deviation from the Company’s Act. In simple words, this means that unit-holders having bigger corpuses and those with very less money in the scheme were put on the same pedestal. The unit holders were given only one vote irrespective of the number of units they held as on cut-off date. The report further flags that, “FTMF decided to conduct the e-voting on the basis of one-PAN one-vote for those who had PAN. For those who did not have a PAN “the voting was one unit one vote”. Hence, approval was based on a “simple” majority in FTMF e-voting.” The observer has also raised questions on the cut-off date set by the company. As per the Company’s Act, the cut-off date for eligible voters cannot be earlier than seven days before the date of meeting. “If the rule had been applied, since the meeting was on December 29, the cut-off date could not have been earlier than December 22,” said the observer. However, the cut-off dates provided in this case did not go by the rules. The cut-off date had to consider unit-holders whose names appeared in the register as on April 23, 2020, the date on which the winding-up was announced. But, according to the Observer report, Franklin Templeton Mutual Fund provided voting rights to unit-holders who purchased units through off-market deals up to December 3, 2020. “The rationale for this deviation on the guidelines on cut-off date was not clear”, the report said. Regarding Karvy Fintech’s appointed for providing the e-voting platform. The observer has said that, “no specific approval for KFin’s appointment was recorded by the board.”
Categories: Business News

PMC Bank case: ED searches 5 locations in Mum

Business News - January 22, 2021 - 5:04pm
NEW DELHI: The Enforcement Directorate on Friday raided some premises linked to a Maharashtra MLA in connection with its money laundering probe in the alleged Rs 4,300 crore PMC Bank fraud case, official sources said.They said at least five premises linked to Viva Group, promoted by Bahujan Vikas Agadhi (BVA) party chief and MLA Hitendra Thakur, are being searched in the Vasai-Virar area of Palghar district adjoining state capital Mumbai.Some premises in Mumbai are also being covered, sources said.Purported fund diversions by the HDIL, an accused company in the case, and by some others to the Viva Group are under the scanner of the agency and the raids are aimed at collecting more evidence to prove this alleged link, they said.Thakur's party had pledged the support of its 3 MLAs, that includes his legislator son Kshitij Thakur from Nalasopara assembly seat and Rajesh Patil (from the Boisar seat), to the Maha Vikas Aghadi (MVA) government led by Shiv Sena chief and Maharashtra chief minister Uddhav Thackeray.The NCP and Congress are also part of the MVA.The ED had earlier questioned Varsha Raut, the wife of Shiv Sena MP Sanjay Raut, for alleged transfer of Rs 55 lakh suspect funds as "interest free loan" into her account by Madhuri Raut, the wife of another accused in the case Pravin Raut.It had filed a criminal case of money laundering to probe the alleged loan fraud in the Punjab and Maharashtra Co-operative (PMC) Bank in October, 2019 against Housing Development Infrastructure Ltd (HDIL), its promoters Rakesh Kumar Wadhawan, his son Sarang Wadhawan, its former chairman Waryam Singh and ex-managing director Joy Thomas.It took cognisance of a Mumbai Police economic offences wing FIR against them that charged them with causing "wrongful loss, prima facie to the tune of Rs 4,355 crore to PMC Bank, and corresponding gains to themselves".
Categories: Business News

HDFC Bank submits plan of action to RBI, hopes to fix outage issue in 3 months

Business News - January 22, 2021 - 5:04pm
New Delhi: The country's largest private sector lender HDFC Bank has submitted a detailed plan of action to the RBI to address repeated service disruption issues due to outage and hopes to improve its technology platform in three months. Progress is being made on the plan of action provided to the RBI and the bank has taken this positively as it will raise the standard, according to a senior official of HDFC Bank. The action plan will take 10-12 weeks for implementation, and further timeframe will depend on the RBI's inspection. Based on the satisfaction level, the regulator will lift the ban, the official said at an analysts meet. Last month, the Reserve Bank of India (RBI) temporarily barred HDFC Bank from launching new digital banking initiatives and issuing new credit cards after taking a serious view of service outages at the lender over the last two years. "RBI has issued an order dated December 2, 2020, to HDFC Bank Ltd with regard to certain incidents of outages in the internet banking/ mobile banking/ payment utilities of the bank over the past two years, including the recent outages in the bank's internet banking and payment system on November 21, 2020, due to a power failure in the primary data centre," HDFC Bank had said in a regulatory filing. The bank has been penalised for two major outages, one in November 2018 and the other in December 2019. Taking a stern view of the repeated outages, RBI Governor Shaktikanta had said the regulator had some concerns about certain deficiencies and it was necessary that the HDFC Bank strengthens its IT systems before expanding further. "... we cannot have thousands and lakhs of customers who are using digital banking to be in any kind of difficulty for hours together and especially when we are ourselves giving so much emphasis on digital banking. Public confidence in digital banking has to be maintained," Das had said in December. HDFC Bank, the largest lender by assets in the private sector, has been classified as a systemically important entity by the RBI in the past. It is also the largest issuer of credit cards and has a significant share in the payment processing segment. The bank is the largest issuer of credit cards and had 1.49 crore customers as of September 2020 while on the debit cards front, it had 3.38 crore customers. Earlier, HDFC Bank's Managing Director and Chief Executive Officer Shashidhar Jagdishan had apologised to customers and promised to work on the deficiencies.
Categories: Business News

Long road for Tesla in India with infrastructure, supply chain woes

Business News - January 22, 2021 - 5:04pm
Tesla Inc is gearing up for an India launch but the U.S. electric carmaker is likely to remain a niche player for years, catering only to the rich and affluent in the world's second-most populous nation. India's fledgling electric vehicle (EV) market accounted for only 5,000 out of a total 2.4 million cars sold in the country last year. A lack of local production of components and batteries, negligible charging infrastructure and the high cost of EVs mean there have been few takers in the price-conscious market. It's also difficult to see how Tesla's sought-after and expensive autonomous driving features will work on India's congested roads. Ammar Master, a forecaster at consultancy LMC Automotive, said he expects Tesla to annually sell only 50-100 of its Model 3 electric sedans in India, at least in the first five years. "As a country, India is still not so environmentally conscious to pay that much of a premium," Master said. "It always comes down to the price point. There will be some high net-worth individuals like movie stars and top business executives who will look at it for the brand value. But then, how many buyers are there?" The world's most valuable automobile manufacturer registered a local company in India earlier this month, a step towards its entry in the country, expected to be as early as mid-2021. Tesla plans to import and sell the Model 3 in India for around $65,000-$75,000 - roughly double the price in the U.S. market, sources familiar with the plans said. This means it will compete in India's even smaller luxury EV segment that has recently started seeing interest from the likes of Jaguar Land Rover (JLR) and Daimler's Mercedes Benz. The Mercedes Benz EQC, India's first luxury EV launched in October for $136,000, and has since sold 31 units, according to auto researcher JATO Dynamics. British luxury carmarker JLR, owned by India's Tata Motors, plans to launch its I-PACE EV before March. It sells in the United States for around $70,000. Although India's road infrastructure has improved in recent years, traffic discipline - like lane driving - is still rudimentary. Auto analysts say that means many of Tesla's features like the automatic lane changing function will be tough to deploy on crowded Indian streets. Stray animals, including cattle, and potholes on the road are a further problem. "Most of Tesla's high technology features will be redundant and users will not get the bang for the buck despite paying premium prices", said Ravi Bhatia, president for India at JATO Dynamics. LOCAL PRODUCTIONRohan Patel, a senior public policy executive at Tesla in the United States, is among those leading efforts around its India launch, the sources familiar with the plans said. The EV giant is looking to hire 15-20 people mainly for sales and marketing, one source said. Tesla and Patel did not respond to a request for comment. India has some of the world's most polluted cities and wants more clean cars on its roads, but the federal government still does not have a comprehensive policy like China which mandates carmakers to invest in the segment. One reason is that auto manufacturers have pushed back saying there is no demand for EVs in India as costs of components like batteries remain high, and push up prices. And Tesla CEO Elon Musk has himself expressed concern about India's high import taxes on cars. In contrast to India, China sold 1.25 million new energy passenger vehicles, including EVs, in 2020 out of total sales of 20 million. Tesla is a major player in China, which last year accounted for more than a third of the carmaker's global sales, according to JATO Dynamics, and where it also has a factory. Daniel Ives of U.S.-based Wedbush Securities said however that within 7-8 years, India could account for 5% of Tesla's total sales. The key to success, however, will be local manufacturing, he said. "It is a matter of when, not if, they build out a factory in India," said Ives, adding that building out a local supply chain will be a multi-year effort. "India is a potential sweet spot and Tesla does not want to be late to the game."
Categories: Business News

Rahul Bhasin on the big IPO line up in 2021

Business News - January 22, 2021 - 2:03pm
By Tamanna InamdarPeople look for stuff which are transformational and which are going to change the way markets work, human beings work, businesses work and this gives opportunity to a lot of younger companies, says Rahul Bhasin, Founder & Managing Partner, Baring Private Equity Partners.Why do you think all these companies are heading for IPOs as an option for funding and is it really going to be a good bet for Indian investors?One has to look at the things in a larger context and to my mind, one of the big things which has happened in the last 12 odd months given the pandemic is that a lot of people have printed a lot of money. A lot of US dollars, Japanese Yen and Indian rupees have been issued which have inflated the prices of assets. In an inverse way, it has effectively reduced the cost of capital. If the cost of capital gets reduced significantly, then discounting the rate of the future reduces. Therefore, one is more likely to pay up for things which could play out over the next 3-6 years as you are not necessarily looking for immediate cash flows. The difference in discounting rate makes the payoffs further down the road more attractive. People look for stuff which are transformational and which are going to change the way markets work, human beings work, businesses work and you discount them back to play. This gives opportunity to a lot of younger companies -- which I call transformational companies -- to address and access the capital markets. A lot of them will succeed. The ratios of companies which will or would be much higher in the segment but the ones that do well will give extraordinary returns to the investors.
Categories: Business News

Rabi sowing hits new record of 67.5M hectares

Business News - January 22, 2021 - 2:03pm
New Delhi: With crop sowing completed across 67.5 million hectares, the country has achieved highest ever crop area since independence. This is 2.86% more than last year raising hopes of a yet another record output. The coverage of wheat has also touched the highest level - 3.13% more than last year. The paddy acreage has also gone up sharply by 15.24% from last year but significantly down by more than 28% as compared to average area during this time. “This may be a reflection of government’s commitment for continuing minimum support price (MSP) system. Farmers are inclined more towards growing wheat and paddy due to assured procurement for centre-run food security scheme. The acreage will go up more before sowing ends on January 29, specially paddy, ” said a senior agriculture ministry official.As per the latest sowing data, the areas under pulses and oilseeds have also gone up by 2.61% and 5.34% respectively from last year. “Mustard has registered a record acreage this year - up by 7.34% from last year. Higher areas have been reported from Rajasthan, Haryana, Jharkhand and Madhya Pradesh. The increase in pulses area indicates a better output this year, reducing dependence on imports,” the official said. The water storage in 128 key reservoirs in the country is 22% more than 10-year average while the rainfall during this month is 76% more than normal rains received during this time. “There is abundant water availability for irrigation. Low temperature with morning dew is helping wheat and mustard crops in northern India. We expect the conducive conditions for healthy growth of crops to continue for next few weeks,” the official said. The government has set a target of producing over 300 million tonnes of foodgrains, with rabi season crops contributing 151.65 million tonnes. “This year, we hope better foodgrain production in the rabi season from last year’s record output of 153.27 million tonnes, agriculture minister Narendra Singh Tomar had said.
Categories: Business News

No extra chance for UPSC aspirants

Business News - January 22, 2021 - 2:03pm
New Delhi: The Centre on Friday told the Supreme Court that it was not in favour of granting one more opportunity to those civil services aspirants who could not appear in their last attempt in the exams conducted by the UPSC last year due to the pandemic situation. A bench headed by Justice A M Khanwilkar took note of the submissions of Additional Solicitor General S V Raju, appearing on behalf of the Department of Personnel and Training (DoPT), that the government was not ready to give one more chance to the civil services aspirants who could not appear in 2020 due to the COVID-19 situation. "We are not ready to give one more chance. Give me the time to file an affidavit... yesterday night I received instruction that we are not agreeable," the law officer told the bench which also comprised justices B R Gavai and Krishna Murai. The bench has now posted the plea of a civil services aspirant Rachna for hearing on January 25 and asked the Centre to file an affidavit during the period and serve it to the parties. Earlier, Solicitor General Tushar Mehta had told the bench that the government was considering the issue of granting one more opportunity to such civil services aspirants.
Categories: Business News

How indirect tax can provide a roadmap to recovery

Business News - January 22, 2021 - 2:03pm
The Union Budget 2021 promises to be unique in many ways. Apart from the fact that it will be a budget amid a full-blown pandemic, it will perhaps also present challenges that no previous Finance Minister has encountered in the history of the country. Along with managing the Budget deficit, the government will have to balance the asks of multiple sectors, including health, tourism and infrastructure. As the Finance Minister navigates through the myriad challenges, revival of demand and investment, tax reliefs and schemes to provide impetus to domestic manufacture and exports, feature prominently on India Inc’s wish list. Government’s revenues have been hit hard by the pandemic with both direct and indirect taxes suffering. But there is still an opportunity to help economic revival through export facilitation measures. The pandemic has also forced countries to revisit their supply chains and shift focus from being import reliant to in-country manufacturers. This outlook favours India and presents an opportunity for the government to catapult the country into a global manufacturing hub. The “Atmanirbhar Bharat Abhiyan” launched by the Prime Minister in 2020 echoes this sentiment and could be exactly what India needs to boost its manufacturing sector and help the country play a pivotal role in global supply chains in the near future. The Product Linked Incentive (PLI) scheme rolled out under the Atmanirbhar Bharat Abhiyan in April 2020 covered mobile manufacturing, manufacturing of bulk drugs and medical devices. Following the positive response received on the scheme, in November 2020, it was expanded to cover ten new sectors including electronic products, automobiles, telecom and networking products, textiles, food products etc. The details around the schemes for these sectors are still awaited and it is hoped that the budget announcements would provide some clarity on this. There are also talks about extending the Phased Manufacturing Program (PMP) which initially led to a series of investments by mobile phone manufacturers to other sectors, especially the consumer durables sector which has been severely impacted by the pandemic. All these initiatives will help further investments in infrastructure and connectivity which are critical if India is to draw more FDI at the regional level. The focus of the Budget is likely to sustain focus on duty concessions on capital investments and to expand benefits provided in key sectors such as electronics, automobile, telecommunication, etc., particularly in the SME and MSME sectors.The government also recently introduced the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme from January 1, 2021, which is set to replace the Merchandise Exports from India scheme. A committee under the chairmanship of the Union Secretary is expected to give its report shortly, based on which the final rates for refund would be notified. This scheme is expected to set the tone for the next decade for exports from India.Electronic ICT products are covered under the Information Technology Agreement (ITA) and attract a BCD of 0%. This puts domestic manufacturing at a disadvantage and there is therefore a need to extend benefits offered to the export sector, to domestic manufacturers of ITA products as well. There is a need to review this issue and this Budget could consider providing a level playing field to domestic manufacturers’ vis-à-vis importers. Industry has also been waiting for a scheme to permit manufacturing operations for both domestic supply as well as exports from the same facility, without foregoing the duty exemption claimed on procurement of raw materials/ capital goods. The recently revamped and expanded ‘manufacturing under bond’ scheme addresses exactly this. While the government has been issuing clarifications on several aspects of the scheme, it is expected that the upcoming Budget would formalise some of these to alleviate industry apprehensions and popularise the scheme amongst exporters. Another area that needs consideration is a relook at some of the recent measures aimed at encouraging ease of doing business in India. The adoption of the Faceless Assessment program by Indian Customs under the Turant Customs framework showed great promise in improving India’s ranking in ease of doing business and was a step forward in the move toward paperless clearances. However, contrary to expectation, companies have been facing delays in clearance of goods owing to on-ground challenges. There is a need to undertake joint sessions for importers as well as Customs officials in order to heighten awareness and help resolve the issues faced by importers.India’s journey in boosting the manufacturing sector has been challenging but the timing coupled with the global scenario offer a unique opportunity to push forward policy reforms that will help aid the manufacturing sector. It is hoped that the Budget would not only focus on increasing manufacturing footprint in India but also bolster higher value addition and a rise in R&D investment. (The writer is National Leader & Indirect Tax Partner, Deloitte Touche Tohmatsu India LLP)
Categories: Business News

CBI files case against Cambridge Analytica

Business News - January 22, 2021 - 2:03pm
New Delhi: The Central Bureau of Investigation (CBI) has booked UK based M/s Cambridge Analytica and Global Science Research Limited for "dishonesty and fraudulently" collecting and harvesting "unauthorised" data of 335 Indian users and 5.62 "additional" users of Facebook who were in their "friend's network" with the help of an App. An FIR has been registered after over two years of preliminary enquiry by the CBI. A preliminary enquiry was launched by the CBI in September 2018. The Ministry of Information and Technology, in 2018, had obtained legal opinion from an Additional Solicitor General who had suggested for a preliminary enquiry by the CBI.According to CBI's FIR in its response to the Ministry, Facebook had reported that data of potentially 5.62 lakh Indian users might have been illegally harvested. M/s Cambridge Analytica replied that they had received data from Global Science Research Limited UK pertaining to US citizens only. M/s Cambridge Analytica had not responded to Ministry of Information and Technology's further correspondences. The agency's FIR says that it's enquiry found out that Dr Aleksandr Kogan, founder and Director of Global Research Science Limited had created an App "thisisyourdigitallife". "As per the platform policy of Facebook, the App was authorised to collect certain specific data of the users for academic and research purposes. The App however illegally collected additional unauthorised data of the users", says the FIR. The data includes demographic information, pages liked on Facebook, contents of private messages etc. Facebook conveyed that 335 users in India had installed this App. They have estimated that data of approximately 5.62 lakh additional users who were part of the friend's network of these 335 users have also been unauthorisedly harvested by the App. The FIR further reads that during the preliminary enquiry, though 335 App users were contacted by the enquiry officer, six of them responded and were examined. "They unanimously stated that they were misled by the App and were unaware of the fact that their personal and friend's data was harvested. They also stated that they would not have used the App if they knew it would do so", reads CBI's FIR. The FIR adds that M/s Global Science Research Limited,UK entered into a criminal conspiracy with M/s Cambridge Analytica, UK during 2015 and right to use the illegally, harvested databases was given to Cambridge Analytica, UK for commercial purposes.It further says Facebook had collected written certificates from Dr Aleksandr Kogan, Global Science Research Limited UK and Cambridge Analytica, UK during 2016-17 declaring that all such data obtained by them through the App was accounted for and destroyed. "This fact confirms that Global Research Science Limited UK illegally harvested databases and provided the same to Cambridge Analytica Limited UK for commercial purposes. However enquiry could not authenticate the veracity of claims of Global Research Science Limited and Cambridge Analytica, UK that they had destroyed the said databases", states the FIR. It further alleges "thus enquiry prima facie confirmed that M/s Global Science Research Limited UK dishonesty and fraudulently accessed the data of the users of the App and their Facebook friends and illegally harvested it using the App "thisisyourdigitallife". Further, in pursuance of the criminal conspiracy, M/s Global Science Research Limited UK have the right to use the illegally harvested databases to M/s Cambridge Analytica UK for commercial gains". Data mining and analysis firm Cambridge Analytica earlier faced allegations that it used personal information harvested from 87 million Facebook accounts to help Donald Trump win the 2016 US presidential election. It was in August, 2018 that the agency had received the letter from Ministry of Electronics & Information Technology (MEITy) seeking an independent probe against data mining and analysis firm Cambridge Analytica.On July 25, 2018 the Ministry had written to the agency.The company is at the heart of the case involving alleged breach of Facebook user data seeking information about its clients in India and whether it had harvested their user profiles.Responding on the issue of “action on misuse of social media and fake news”, Minister for Law and Justice and IT Ravi Shankar Prasad had said that it has “entrusted the issue to be investigated by the CBI for possible violation of Information Technology Act, 2000 and IPC”.It revealed that Cambridge Analytica also did not respond to a subsequent notice by the government. “Therefore, it is suspected that Cambridge Analytica may have been involved in illegally obtaining data of Indians which could be misused”, it had told the Parliament in 2018.It added it has come to the attention of the Government of India that a number of disturbing instances causing loss of innocent lives have taken place in various parts of the country. These are deeply painful and regrettable, as well as a matter of deep concern for the Government. The Government has taken prompt action. The first incident was reports of breach of data at Facebook wherein it was reported that data of a number of their users had been compromised by Cambridge Analytica. Immediately, notices were issued to the two companies and their response sought.It had further said “Facebook responded that they will streamline their internal processes regarding handling of personal data. They stated that the case of Cambridge Analytica it was a case of breach of trust. They promised to take various other steps to ensure that such breaches do not recur. Cambridge Analytica on the other hand gave an initial response that data of Indians was not breached but this was not in conformity with what was reported by Facebook”.Earlier in March, 2018 the government had issued notice to Cambridge Analytica asking for the names of entities that have engaged it in allegedly utilising data of Indians from the breach in Facebook database. 74557901 72416133
Categories: Business News

How Sensex & Nifty will look a few years down

Business News - January 22, 2021 - 2:03pm
It’s alright if you want to enter the market at these highs, Afterall, you have to start somewhere and if you are underweight at this point of time, today is as good a day to start, says Dipan Mehta, Founder & Director, Elixir Equities. The markets have cooled off but 21st January 2021 is going to go down in history books for reaching 50,000 on the Sensex. You have been an old hand at the Bombay Stock Exchange. Tell us some of the anecdotes that you recall of the previous years.I entered the market in 1990 and every time a major event has happened in my life, I remember where the Sensex was. When I got married, it was at 3500 and now we are at 50,000. The best is just about to begin for the market and the country as a whole. It is a great landmark and it is truly rewarding for investors who have been in the market for the last 20-30 years. Huge wealth has been created. Do not go just by what the actual Nifty and Sensex returns have been. By investing in midcap stocks and select businesses with quality management, one has made a tiny fortune for the last 20-30 years. Now with the entire complexion of the economy changing, new generation businesses getting listed and the extremely low interest rates and high level of retail interest coming in, one could see very good times ahead for the stock market. Of course, there will be ups and downs and corrections but my belief in investing in equity for the long term has not only fructified but also got stronger with this particular milestone. There are many who did not even participate in the rally from the March lows and have not seen as many gains as they could have had they either stayed invested or bought the March decline. How would you advise millennials if they want to enter the markets at these highs.Do not wait, that is what I would say. The highs and the bottoms will be there. You may have started your investing journey at the top, as did I, but if you have the capability to gradually divert your savings into equities at various points of time and do it with a degree of consistency and discipline and not make sharp moves like selling off the full portfolio or mortgage house and buy shares, then over a 5-10-15-20 year period there are still great scope to create wealth in this particular market. You have to start somewhere and if you are underweight at this point of time, today is as good a day to start. Buy the nice quality company, make sure that you have got a good balance as far as sector-wise weightages are concerned and then every time you see a correction or have extra savings to deploy, start deploying it in good quality equity and just do basic risk management. Over a 5-10-15 year period, it will become a really huge chunk of your savings and that itself provides a great deal of security and financial comfort and let’s you take decisions which you cannot otherwise take, if you do not have this kind of financial fallback. Right now financials have a 35-40% weightage. Which sector do you see having this kind of weightage on the index going forward over the next few years?Well that is an interesting question and very relevant as well for a long- term investor with a 5-10 year view. It is difficult to answer at this point of time but insurance is certainly one sector which will get more and more mainstream and it may get higher weightages within the Sensex and the Nifty. There is a LIC listing also and that may have most weightage as far as insurance is concerned. Also I see some of the new age digital businesses which are yet to be listed but may be listed like Flipkart or Zomato or some of the others unicorns which are looking at getting listed and may be even Nykaa. Those are the ones which the market will fancy. I am not certain that a 40% weightage for banks is really sustainable going forward. Those are peak weightages and there may be corrective outperformance in banks per se but as a sector, I do not see a significantly higher weightage than what it is at present. New age businesses will come into focus and gain further traction and further proportion of the Sensex and Nifty weights. For those who have not participated in this market, what should be a good entry point? Would you judge it by percentage or would you judge it by Sensex level?I think we have got historical parameters to value stocks but there are certain key differentiators. One, interest rates are at all- time low; two, the kind of FII wave that we are seeing and the kind of money that is going out from developed markets into emerging markets, will gather more momentum as we go ahead. Markets can be overvalued far longer than you can avoid investing in them. So at some point of time, if you are waiting on the sidelines you will throw in the towel and invest because that is what the market does. It tends to lure you eventually and it is alright to say that we are high at this point of time and you may make a mistake investing at these levels as well, but if you have enough liquidity, if you have sources of savings coming up, then you can cover a mistake or two by investing at the top. As such nobody gets this right and I started my journey investing at the highs but thereafter, you average as the market goes along and if you buy selectively good quality companies then you are fine. But just because the market has reached a new peak and because valuations are on the higher side, I do not think that there will be a correction. Corrections happen with bad news and when structural changes take place. Corrections also happen when a risk-off trade globally starts taking shape and when you see that happen, one cannot predict. So there is lesser risk in remaining invested than trying to time the markets. So, one does not really know whether these are the right levels to invest or not, all that one can say is that at least on the horizon, nothing negative is happening. If you are more or less overly invested and well invested, then maybe you could have a slightly contrarian play and take some money off the market at this point of time, book some profits that may be sensible, be in cash and that certainly is a strategy which works but it is a far more difficult decision if you are on the sidelines and you have a huge chunk of cash to invest. But these are all theoretical. In my circle, with our clients and the people we interact with, most investors are more or less fully invested or they may be looking at investing their incremental savings into it. So I do not know how many investors are still there who are sitting on a lot of cash and who want to invest. Even the trading volumes have been on the higher side and at these levels of the market, I would say that is not a question which many investors or traders are asking. The question they are asking is if it is a good level to book some profits or to remain invested as there is always a sense of fear at such elevated levels. What is your view on Tata Motors?A lot of investors and traders are getting very excited on Tata Motors and it may be due to their electrical vehicles endeavour -- be it in partnership model or by themselves or through technology from their subsidiary company JLR. Within the entire auto industry, Tata Motors is best placed in terms of access to technology, in terms of preparedness for the EV revolution and that is why it is getting that kind of a premium valuation at this point of time. Better volume numbers from JLR are suddenly helping the stock and the management’s target to reduce their debt seems more and more likely. Also, the domestic market has performed well for Tata Motors but most importantly, it is the buzz around them launching new electric vehicles or a partnership or technology coming in from JLR, which has captured the imagination of investors and traders at this point of time. Tata Motors tends to have spectacular rallies. It is a cyclical business and the levels from where it has moved up, were extremely attractive. It has been a huge underperformer versus the market and it is seeing a catch up at this point of time. But these kinds of stocks are very difficult to get a handle on from an investment perspective. The momentum is good and it is great for traders or for some investors to get into the stock even at this point of time or maybe even at a correction and then ride this particular momentum on any positive news from the company in terms of a tie up or a launch of electric vehicle or transfer of technology or anything on those parameters. In that case, the stock could trade even higher because there is a huge disruption taking place in the auto industry and most of us sitting here in India are just not able to participate in that. What about Bajaj Finance earnings?I was present at the conference call and the management was very upbeat. What struck me is that this year whatever problems has been there will write itself off completely. Going forward, after Q4, the NPA provisioning will be normalised. They will pick up in terms of new clientele and will start to lend more aggressively. They have been structural changes as far as the cost structure is concerned and they will benefit from a better cost to income ratio going forward. If we give the management relaxation for one year -- this particular year has been extremely difficult for the company and the sector as a whole -- FY22 onwards you will see the company going back to their 35-40% type of bottom line growth rate. It is a great secular story and premium valuations are completely justified. In a post Covid world, a lot of consolidation has taken place in the banks and NBFCs and Bajaj Finance will benefit from that. Also, they have made great moves as far as low interest costs are concerned and many other positives are going for the company as some value gets built into the payment gateway which they are about to launch. That will be an added positive. I need to disclose that we and our clients are invested in Bajaj Finance and to that extent, my views could be a bit prejudiced. Nonetheless, it is a great story to invest in for a 3-5-year period.
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