Indian Economy & Market August 2017

INDIANINDIAN
ECONOMYECONOMY
&MARKET&MARKETVol. 2 | Issue 2 | August 2017 | ` 70 | www.ienm.in
What, if tempo of tests doesn’t abate
Good to see Jignesh Shah back in action
Crisil must reveal what it CAREs
Time v Timing in the stock market
Try to stay rational like Buffett & Munger
Time to consider commodity as asset class
Analysis: Medicamen Biotech Ltd.
The latest quarter earnings barely show any meaningful
strengthening of the corporate fundamentals. Despite you-
name-it-all schemes by the government in the last three years,
earnings growth doesn’t show up, except in stock prices.
UP, UP&AWAY
A dull start
to the new
fiscal

2 | Indian Economy & Market • August 2017

Indian Economy & Market • August 2017 | 3

CONTENT INDIANINDIAN
ECONOMYECONOMY
&MARKET&MARKET
Vol. 2 | Issue 2 | August 2017 | ` 70/-
RNI Reg. No: MAHENG/2016/71348
ECONOMY
• Bharat-22 exchange traded fund (ETF)
• Sebi instructs listed firms to disclose
loan defaults
• Initiative: GST Explained
• UK business confidence at lowest point
• Robots to replace humans on Wall Street
• Qatar reaches to the WTO
• US dollar will rebound in second half
• StartUp India Hub to fix startup troubles
MARKETS
Knowledge Series:
Annual General Meeting of Berkshire
Hathaway
Company Analysis:
Medicamen Biotech Ltd.
An Interesting and Big Story in Making
LEISURE
• Butalia gets Goethe Medal
• Just move your head right
• Award-winning mathematician dies at 40
• To Give or Not To Give
• Record on Mumbai’s Carter Road
13
23
41
Knowledge Series:
Berkshire’s Acquisition Criteria
Five Questions:
Prem Kumar Malhotra30 46
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COLUMN
10 Letter From New York
Summer in New York
William J. Dean
12 Spotlight
Time to consider commodity
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Sudip Bandyopadhyay
22 Third Point
Time v Timing
Ashok Jainani
42 Side Show
Rajya Sabha is a relic of the past
Krishna Kumar Mishra
44 Bookworm’s Bite
When God could not make His
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P Raja
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PEOPLE VOICES
“I understand that when the studios are spending so much
money they’re afraid to take risks on unknown faces, or
unproven storylines. There’s a comfort zone that exists in
big-budget movies. Maybe there are small cracks happening
but it feels a bit impenetrable at the moment. Also, there’s
a small community of actors who can bring in a high box
ofﬁce and it’s hard to get into that club.”
– Alison Brie, Actor
“Technology is ever changing, so
violence in the online spaces has also
increased. It has become doxing,
sextortion and revenge porn.
It’s massive.”
– Nighat Dad, who is helping Pakistani
women deal with the new phenomenon
of online harassment
“Given the fast-evolving media
space, it is important to realise that
a brand cannot be held together by
a few custodians. The concept of a
custodian ceases to exist and is no
longer restricted to a particular
individual. Each and every
stakeholder of the brand, and most
importantly the consumers, are
brand custodians today.”
– Shivani Suri,
Director – Marketing, eBay India
“I am an American, I happen to
be an Indian-American. I am
very proud of my background,
my roots and my heritage. I am
a huge Springsteen fan... but I
also listen to Bhangra music,
which is a kind of Punjabi
music. I’m very proud of my
Indian heritage which made me
more compassionate and
tolerant towards other people.”
– Preet Bharara, India-born
former top federal prosecutor
in Manhattan
“I don’t really write for anybody else. It’s a very interior
journey. On the other hand, I feel that
writers do make that interior journey out
of a desire to connect. It’s that sort of
unbearable solitude that the writers feel
that I have felt, that I feel in my life, that
has sort of marked me, that drives me to
express myself, and drives me to express
myself in the form of, say, a diary that never
leaves the conﬁnes of my study.”
– Jhumpa Lahiri, the Pulitzer Prize
winning author
el that
urney out
ort of
rs feel
e, that
me to
xpress
that never
e
“Alaska has form of basic income called
the Permanent Fund Dividend (PFD).
Every year, a portion of the oil revenue
the state makes is put into a fund.
Rather than having the government
spend that money, it is returned to
Alaskan residents through a yearly
dividend. Alaska’s PFD is funded by
natural resources, not by raising taxes
and it comes from conservative
principles of smaller government,
rather than progressive principles of a
larger safety net.”
– Mark Zuckerberg, Facebook founder
“Bihar has the highest number
of youths who are our capital.
Bihar cannot develop without
the overall growth of youths.
Youths’ income will rise
manifold if they are given
training for the
development of various
skills and in turn, it will not
only spur development of
Bihar but also contribute in
the nation’s growth.”
– Nitish Kumar,
Bihar Chief Minister
“The tackling of the NPA is a journey
and it is not a destination. I personally
feel in the next 18 months, it will be
tackled. Businessmen and banks will
understand that prolonging things is not
going to help. It will lead to more
responsible lending and borrowing.”
– Rakesh Jhunjhunwala,
Partner, Rare Enterprises

What, if sharp tempo of tests doesn’t abate
Good to see Jignesh Shah back in action
N
orth Korea has turned out to be a
ticking time bomb. The peace
loving nations are facing an
adversary which has a well-
running nuclear programme and is probably
in possession of chemical and biological
weapons of mass destruction. This is the
country that the 2014 Commission
empowered by the UN Human Rights
Council accused of crimes of extermination, murder,
enslavement, rape, forced abortions, persecution on
political, racial and gender grounds, and enforced
disappearance of persons. But North Korea’s hereditary
power makes Kim Jong-un deaf and insensitive to the
impact of accusations and sanctions.
Right from the day one when Kim Jong-un took over
the reigns in December 2011, he has accelerated the
missile development programme. Just weeks after he
tested what he claimed to be the country’s first long-
range intercontinental ballistic missile, he is moving
very fast to make good on his threats to reduce the US
‘to ashes’. North Korea’s mad man is hell bent to
reduce US to ashes.
There are not many options for resolving this crisis.
US wants to make the sanctions even stronger by
putting oil on the list, and moving towards a total
economic and diplomatic quarantine of
the country. But, isn’t it impossible to
obtain the comprehensive sanctions
because China will oppose the move.
China accounts for about 85 percent of
North Korea’s trade.
The other option the world community
has is a peace treaty that could be
supplemented with a number of
confidence-building measures, such as taking steps
towards ending North Korea’s isolation. But Kim
Jong-un’s fear is that if he gave up his weapons of mass
destruction, he would risk suffering the same fate as the
other dictators in Iraq, Libya and Syria.
The history books say that the last conventional war
with North Korea (1950-1953) left over five million
dead after three years of bloodshed, yet there was no
victor. If weapons of mass destruction are used, the
death toll would grow exponentially. The most
worrying factor is China, which is linked to North
Korea via a treaty of mutual aid and cooperation. If
China comes to its friend’s rescue, the World War III
may break out. US defence secretary Jim Mattis said
that it would be a very, very serious war.
Such a scenario can even lead to the extinction of our
species. It is time to take action against Pyongyang.
ITwas nice to see Jignesh Shah back
in action, in Taj Mahal Palace
Hotel, a very familiar surrounding for him
and the old-timers who have been missing
him. It was certainly unlike him when he
refused to clear his position when the
agencies filed 98 cases and arrested him
thrice. He cleared the air saying, “now I’m
forced to reach out to the fourth pillar as
they are now targeting my family and people whom I
have mentored.”
He spoke against the insider-trading charges slapped
by SEBI against 13 members of his family and certain
others. Shah, the promoter of Financial Technologies
(now 63 moons technologies), said the unpublished price
sensitive information was all there in the public domain.
Shah will fight his case as he has been but he has made a
very disturbing claim, which if found to be true, speaks
volumes. Shah clearly blamed former Union Finance
Minister P Chidambaram for his fall from
grace and recent SEBI order. He claimed
there are a group of people in each
government department who still owe
allegiance to the erstwhile UPA-II
government.
In a scathing attack Venkat Chary,
Chairman, 63 moons technologies,
(ex-bureaucrat and former Chairman of
the FMC) said this is the first time in the history a
regulator has passed an ex-parte order to impound
` 125 crore of ‘loss averted’ by a “set of people and
that too by a (SEBI) Member who is retiring next
month... It is absurd that an employee not even
remotely connected to the management is being
charged with insider-trading. Despite passing an
interim order, SEBI has frozen all bank accounts of the
13 people to recover the ‘averted loss’. By arbitrarily
freezing somebody’s bank account, SEBI has
EDITORIAL STRAIGHT TALK

India Special: 17 transfers in 17 years
ITwas nothing new for Roopa
Divakar Moudgil who has been
transferred from her post as DIG Prisons,
a post she took over barely a month ago.
All because she highlighted corruption
and preferential treatment given to
AIADMK general secretary V. K.
Sasikala in Bengaluru central jail. After
all, she has been transferred every year,
sometimes even twice, in her 17- year-long career. In a
letter, addressed to the Prisons DGP, Roopa had listed
several wrongdoings in the jail. According to the letter:
A special kitchen is functioning for Sasikala, which is
in violation of the prescribed rules. The letter also
states that there are rumours of these activities taking
place with the DGP’s knowledge and that ` 2 crore
was allegedly given for this special treatment.
Once crowned Miss Davangere, Roopa is not the
first to get this treatment from her superiors. A few
months back the ‘new and cleaner’ UP
government rewarded DSP Shrestha
Thakur with a posting when she fined an
errant BJP worker on a two-wheeler; and
DIG Sonia Narang was transferred being
the catalyst in bringing to light the scam
in anti-corruption watchdog, Lokayukta.
It is all happening when the Supreme
Court ruling says that a senior officer
who has been granted a fixed tenure cannot be
transferred midway because the political
establishment so desires. The ruling came in the
context of the Kerala government’s decision to
remove IPS officer T.P. Senkumar as DGP before his
two-year term got over. Fiery women police officers
taking on the system and later paying a price for it
doesn’t seem unusual in India. Not many male names
we can recollect – Kiran Bedi heads the list. But this
is India special.
challenged Article 19 of the Constitution, which
protects citizen’s right to live.”
NSEL has already requested the SEBI to resolve the
` 5,600-crore payment crisis in the larger interest of
investors. Besides, NSEL alleged that “Our parent
company is called not fit and proper. Yet, its
impeccable credentials were reaffirmed when the
group’s exchange assets were bought by the world’s
most fit and proper.” And it is true.
Multiple agencies, including SEBI, ED, and the RBI
are probing the irregularities still when Shah says that
the whole situation could have been averted in 2013 if
FMC had tried solving the problem, many share his
opinion. He repeated that FMC’s intention was in fact
to eliminate the company and that the UPA 2
government was against his success and was trying to
help other exchanges. “FMC was working very closely
with P Chidambaram. There should be an investigation
on the role of FMC and P Chidambaram,” said Shah
and also dared Chidabaram, former FMC chairman
Ramesh Abhishek and former additional secretary in
DEA, K P Krishnan, to have a public debate with him
on the issue. The man certainly has the courage and
conviction and truth with him.
P Chidambaram is under attack on another level too.
In a letter to Prime Minister Narendra Modi, BJP
leader Subramanian Swamy has accused the Central
Board of Direct Taxes (CBDT) that instead of directly
registering cases, top officers were trying to save their
former boss P Chidambaram and son by merely
writing letters to 14 countries about their illegally
massed properties. “This writing of letters is a clever
move to delay the case for many years,” pointed out
Swamy. More than a year ago raids conducted by
Income Tax and ED had unearthed illegal properties
of Chidambaram and family members in 14 countries
and 21 undeclared foreign bank accounts.
It is really unfortunate for Indian democracy if what
Swamy says is correct because in the same letter he
writes: “Income Tax Chennai Unit and ED had found
a six page WILL executed by Benami Directors of
Karti, bequeathing their entire properties to Karti, wife
and daughter in consideration of their respect towards
former Finance Minister P Chidambaram! This WIIL
shows that Karti will be the executor. This clearly
shows that making out such a WILL was a clandestine
way for these Directors to function as benamis.”
In India no one gives a penny out of respect, forget
about entire properties.
The government must not ignore these claims.
Jignesh Shah might have fallen from grace, but no one
can deny that this man has created an institution, a
market platform which India badly needed, in the
process created so many jobs. In the age of
StartUpIndia, StandUpIndia if Shah is denied justice,
it would be a dark moment in India’s corporate history.
EDITORIAL STRAIGHT TALK

By Krishna Kumar Mishra
C
risil Ltd, now 67.05% majority owned by the
Standard & Poor’s group, has made a mysterious
entry into domestic institutions-owned rating
agency CARE Ratings Ltd. It has purchased
26,22,430 equity shares of CARE representing 8.9% of
its equity share capital on an average price of Rs
1,659.79, valuing the transaction at Rs 435.27 crore, in a
block deal from Canara Bank. Certainly, Crisil has paid
a high premium as acquisition price was a 16% premium
to the previous day’s close. By its tactical acquisition,
Crisil is now the second largest shareholder after LIC
(9.8%); FIIs collectively own 38%, while mutual funds
hold 18%. Raising many eyebrows there are enough
hints to make this as the first move before taking control.
Crisil in its official release said that it does not get a
board membership nor will it interfere with the
management and it should be construed as only financial
in nature. But now, Crisil is only a whisker away from
10% threshold under the Companies Act to obtain those
privileges. Crisil’s action could also be moved by its
knowledge that CARE doesn’t have any identifiable
promoter institution and thus could seek the management
seat easily. With such innovative mechanism, Crisil can be
aiming at a dominant position in rating business with
two-thirds of the market share. The gap between Crisil-
CARE combine and ICRA, would be too large to bridge.
Crisil could have an organic expansion to gain higher
margin business at fraction of the cost it paid on which
less than 1% dividend yield must be the last thing for
Crisil management board to reckon. The share of
Crisil must
reveal what it
CAREs
ratings business in Crisil’s total revenue has been falling,
in contrast, CARE Ratings’ revenues are mainly from
the ratings business, of which a large portion is from
bank loan ratings. So this may not be good for
consumers of rating services like mutual funds and
banks that buy the rated bonds.
What could prevent Crisil from launching a formal
and an honest takeover bid for CARE if it seriously
wishes to leverage its cash surplus investment for further
entrench into the industry? A deal of this size and nature
in a highly concentrated market can’t be just for the
books to keep by the accountants.
When contacted by Indian Economy & Market, a
spokesman from Crisil said that the entire lot was sold
by Canara Bank and the announcement was in the
public domain; it had put up a notice giving three days
time to bid and there were other bidders too. He said that
company is only looking for long term growth of sector
and there is no consideration to increase the stake. He
vehemently denied that Crisil has any other plan, rather
it was just an investment, nothing special about it. He
asserted that Crisil is just like any other shareholder.
Fair competition, which is the founding principle of
free markets, would surely be the casualty if the
government, regulatory authority, bonds issuers and
minority shareholders ignore the logical extension of
such a corporate step and pass it as nothing more than a
storm-in-a-tea-cup.
Looking at the nature of complexity of the investment,
Sebi would be failing in its duty if it doesn’t clear the air -
either all is well and no norms have been ignored; or take
corrective measures if it finds anything amiss.
ANCHOR BIG PICTURE

Bharat-22 exchange traded fund (ETF)
The government has launched a
new ETF under the name Bharat
22, which will comprise shares of 22
bluechip stocks, primarily to help it
to sell its equity stakes in state run
firms and also achieve its objective to
raise ` 72,500 crore through
disinvestment in FY18. However, the
product is good for investors who
have a long term horizon while
investing. The government did not
formally announce the date of the
launch of ETF.
The stocks are spread across 6
sectors. The ETF will have a single
company cap of 15 per cent, while
the sectoral cap has been pegged at
22 per cent. Top PSUs stocks which
are part of the Bharat 22 index
include names like ONGC, IOC,
BPCL, Coal India, SBI, National
Aluminium Company, Axis Bank,
Bank of Baroda, REC, Power
Finance Corp., Indian Bank, ITC,
L&T, Bharat Electricals, EIL, NBCC,
Gail India, NHPC, NLC India,
SJVN, Power Grid and NTPC.
It would be the second ETF
launched by the government. The
first was launched in March 2014
which has outperformed the index
by a wide margin. It was up over
almost 22 percent in the past one
year, more than the near-18 percent
rise in the Nifty50 index, and 17%
FMCG, basic materials, energy, as
well as industrial and utilities. There
will be a sectoral capping of 20
percent and a single company stock
cap of 15 percent.
ICICI Prudential AMC will be the
ETF Manager and Asia Index
Private Ltd (JV BSE and S& P
Global) will be the Index Provider.
On all parameters Bharat-22
would be better than other ETFs
which are linked to index, sector or
less diversified given its better
diversity. Its fairly diversified
products represent the performance
of India and Government’s agenda
over the long-term. These companies
are fundamentally sound and may
perform well with the improvement
in the economy.
PSUs were less active historically,
but their inherent profile is changed
after the Modi-led government came
to power. A great deal is due to the
transparency it has brought with
various initiatives. They need to be
re-rated. A perception is in the air
that state-run public sector companies
offer value for money to investors.
ETFs or exchange traded funds are
similar to mutual funds wherein
investors can purchase units, the
value of which will depend on the
rise and fall in line with the
performance of 22 stocks.
Top PSUs stocks which are part
of the Bharat 22 index
ONGC, IOC, BPCL, Coal India, SBI,
National Aluminium Company,
Axis Bank, Bank of Baroda, REC,
Power Finance Corp., Indian Bank,
ITC, L&T, Bharat Electricals, EIL,
NBCC, Gail India, NHPC, NLC India,
SJVN, Power Grid and NTPC.
which is the average of top 3 ETF
linked to the index.
The Finance Minister said
Bharat-22 ETF would comprise 22
companies and will have a
diversified portfolio consisting of
Central Public Sector Enterprise
(CPSE), Public Sector Banks (PSBs)
and will also have some strategic
holding in the Specified
Undertaking of the Unit Trust of
India (SUUTI). The ETF will be a
portfolio of six sectors – finance,
ATone end where the Reserve
Bank of India has refused to
name the defaulters despite a
Supreme Court order making this
information public the Securities and
Exchange Board of India (Sebi) has
asked listed companies to disclose
details on defaults of loan payment
from banks and other financial
intuitions to the public within one
Sebi instructs listed ﬁrms to disclose loan defaults
working day. This directive would
come into force from October 1. The
RBI had identified 12 large accounts
of corporate borrowers involving an
overall amount of over ` 2,00,000
crore, however, it did not reveal the
names. Currently, investors and the
public are in the dark about defaults
by companies and they realize it only
when the valuations go down. Sebi
said the disclosures should be made
to the bourses when the entity has
defaulted in payment of interest/
installment obligations on debt
securities (including commercial
paper), Medium Term Notes, foreign
currency convertible bonds (FCCBs),
loans from banks and financial
institutions, external commercial
borrowings. The companies would
have to inform stock exchanges
about date of default.
MARKETS ANNOUNCEMENTS

S
ummer in New York, a good time for a boat trip and watching a
baseball game. Late afternoon on a Saturday this past July, I emerge
from the subway station at Bowling Green in Lower Manhattan and
walk to the Staten Island Ferry Terminal. I am on my way to watch
two Class A league teams, the Yankees Staten Island, a team of young players
affiliated with the New York Yankees, play the Brooklyn Cyclones, affiliated
with the New York Mets. The Cyclones derive their name from the death-
defying roller coaster ride at Coney Island by the Atlantic Ocean. (Yes, New
York City is a city of islands and the sea, not unlike Bombay.)
As the ferry proceeds through New York Harbor, where the sea - the
Atlantic - and river - the Hudson - meet, I recall my youthful encounters with
the game of baseball. I played on the St. Bernard’s School Second Team in
the 8th grade. The Second Team was made up of boys who failed to make the
First Team. We were the flotsam and jetsam of the athletic department. I was
never any good, lacking as I do, the requisite hand and eye coordination, so
essential to playing baseball and, I assume, cricket. My main concern was to
avoid being hit by a ball rather than hitting the ball. A baseball is a hard, solid
object. Traveling at high speeds, it can inflict bodily harm. As a result, my
batting average rarely surpassed the daily temperature.
Our team played on Randall’s Island in the East River beneath the
Triborough Bridge. I played in center field. Soft grass underfoot, a view of the
city’s downtown skyline, tugs on the river battling strong tidal waters,
airplanes positioning for an approach to LaGuardia, bright colored butterflies
darting about. In such a setting, I had no cares. I could reflect on the joys of
life and dream of great deeds to be undertaken by me in the future. Day-to-
day hassles--Latin / grammar / homework -- melted away.
Baseball is a complex game. So complex, the rule book is many inches
thick. To simplify things, let me turn to the words of the co-founder of St.
Bernard’s, Francis H. Tabor, a gentleman from England, who wrote the
school’s songs, among them, the “Baseball Song.” He succinctly describes the
action on the baseball field, almost making it sound like cricket.
A pitch, a crack, the ball flies back,
A swift dispatch, a clever catch;
Quicken your pace and race for base;
You’re safe! You’re out!
The big game of the baseball season for the Second Team was against
Greenwich Academy. I was in center field as usual, counting cars on the
Triborough Bridge and wondering when the Boston-bound train would cross
the magnificent Hell Gate Bridge. A glorious spring day. I nibbled on fresh
shoots of grass. In the last inning, with my team one run ahead, I heard an
ominous sound, the sharp crack of bat connecting to ball, just as Mr. Tabor
had written. Seeing the ball arch skyward in the direction of center field, my
situation became all too apparent. Catch the ball, be a hero; drop the ball, be
disgraced, with responsibility for the team’s loss.
With the batter rounding first base, the ball reached its zenith and began
a downward descent. Teammates rushed to center field to help me out. Down,
down came the ball. I could do nothing to avoid it. As a self-protective
measure, I placed my open glove in front of my face. Plop into the glove went
the ball. Having plopped in, it decided to pop out, but before the ball hit the
ground, I caught it with my bare hand. My teammates were delirious with joy.
William J. Dean
Writer of best seller book “My New
York: A Life in the City”, served as
chairman of The New York Society
Library (oldest, founded in 1754).
His essays appear on the Op-Ed
pages of “The New York Times”,
“Wall Street Journal”, and
“The Christian Science Monitor”.
He is a lawyer in New York City.
Summer in
New York
NY
COLUMN LETTER FROM NEW YORK

Details of this event were recounted to me decades
later by the captain of the Second Team, now a Wall
Street baron. He tells me that he still has nightmares
about my catch. I inform him that I have never lost a
wink of sleep over the game of baseball.
But to return to the present. The ferry arrives at
Staten Island. I disembark and walk to the ballpark.
There is a long line by the box office. While in line,
I hear a shaky rendition of the “Star-Spangled Banner,”
not an easy anthem to sing. The game is about to start.
I am charmed by the young man at the box office. I ask
him where I should sit. “You want to be behind home
plate where you can see the pitching, hitting and base
running. And there you will have a fine view of the
Manhattan skyline.” “Perfect,” I respond. Ticket price:
$18. I call his attention to my advanced years. Ticket
price reduced to $10. Ten dollars to watch a
doubleheader played by talented young players from a
good seat with a view of the city skyline. The best deal
in an expensive city. And the ferry is free!
On entering the ballpark, a security guard checks my
bag. Next to him, a sign reads, “No outside food or
drink.” He sees my peanut butter sandwich and cherries,
but waves me in. I find Section 9 behind home plate.
Families and teachers occupy the section. Between
nibbles, the young boy sitting next to me places his
cotton candy of spun sugar against my arm. Sticky, but
how can I complain, everyone is being so nice.
I learn from my neighbors that it is the dream of
every player on the field to move up from the Class
A league to a major league team. A sign in the ballpark
captures this well:
Yankee Stadium
Next Stop
15 Miles
Geographically, a mere 15 miles from Staten Island
to the Bronx, the home of the New York Yankees, but
a long and difficult journey for those few who make it.
(In the stands are scouts for professional teams on the
lookout for talent.)
Within New York City’s 304.8 square miles can be
found sophisticated Manhattan and, as I am
experiencing on Staten Island, small town America.
Thus, between game innings, the local crowd is
informed by the ballpark announcer of the students
present at the game who just graduated from Sacred
Heart Academy and the names of birthday and
anniversary celebrants with us in the stands. Cheers for
all. There are three legged and other races. Fans dance
to rock and roll and disco music on the roof tops of
player dugouts while the rest of us sway to the music.
We all rise to sing, “America the Beautiful” -- so much
more singable than the National Anthem -- and “Take
Me Out to the Ball Game.” (My favorite line, “Buy me
some peanuts and crackerjacks....”)
I ask my neighbors about the finer points of baseball.
What is a “balk”? An infield fly? They explain. I ask
about the music being played, since I am mostly into
opera. At times I feel like someone from another
planet, certainly from another age, removed from my
country’s culture. They generously put up with my
questioning.
No one objects to my wearing a Boston Red Sox cap
at the game at a time when the Yankees and Red Sox
are in fierce competition for first place in the American
League (East). I have never understood why I wear a
Boston cap, since I am a New Yorker to the marrow.
Probably just to be a contrarian in a city of Yankee
lovers. (In Boston these things are taken far more
seriously. At Fenway Park,where the Red Sox play, you
wear a Yankee cap at your peril.)
I am enchanted by the view of the city skyline from
my seat. By the setting sun, its light reflecting on the
silver clad Freedom Tower in Lower Manhattan. By
the changing cloud formations. A rainbow appears,
produced by a distant storm. As darkness comes, the
illumination of skyscrapers and East River bridges.
A cooling breeze arrives to refresh us.
The games conclude. I bid my seating companions
farewell and depart, retracing my steps: Ferry boat ride
and then subway. I reach my apartment at 11 p.m. The
conclusion of a seven hour adventure to another island
within my city and another lifestyle.
 Author can be reached at williamjohnsondean@gmail.com
The ballpark of Yankees Staten Island, New York City Harbor, and
in the distance, the New York City Skyline. A night game being
played in the Richmond County Bank Ballpark at St.George.
COLUMN LETTER FROM NEW YORK

Time to consider commodity as an asset class
A
ll economic activities presuppose and predict
a future scenario and seek to benefit from
such development. Thus, whether one is
making investments in the market or taking
up a project, there is an underlying economic
assumption about the future which propels such
decision making. Nobel Prize-winning physicist, Niels
Bohr reminds us that, ‘Prediction is very difficult,
especially about the future.’ Nobody should feel bad
about being unable to predict or forecast accurately. All
that is required is to be better prepared for a range of
possibilities. In her extremely insightful book, Signals,
Dr. Pippa Malmgren explains how everyday signs can
help us navigate the world
turbulence. Perhaps being better
armed with an awareness of the
signals, we may all be better
prepared to balance our hubris and
nemesis and thereby take advantage
of and better manage the diverse
troubles and treasure the world
economy inevitably brings.
For optimising investment or
trading strategies, diversifying
deployment in different asset
classes, is of critical importance.
While Equity, Real Estate, Bonds,
etc. have their own dynamics,
commodity investing or trading
provides a completely
differentiated set of opportunities.
Every commodity is determined
by its own unique demand and
supply dynamics. So, for instance,
the price of oil is determined by factors such as
economic growth, the price of substitutes such as
biofuels, climate changes speculation, and
production or stoppage thereof in the oil producing
nations. The decisions and guidance of the OPEC
also play an important role in driving the price of oil.
The price of gold - another benchmark commodity
- is impacted by very different factors and sometimes
by the same factors but in a completely different
manner. Like oil, growth and stability in major world
economies impacts the price of gold too. However,
ironically, unlike the price of oil, which increases with
economic growth, the price of gold reacts negatively;
it usually soars when there are economic down-cycles
and falls when economic growth picks up.
Then again, while the short term supply of oil can
Sudip Bandyopadhyay
Group Chairman of
Inditrade (JRG) Group of
Companies, sits on the
Boards of a number of
companies. He was MD of
Reliance Securities
(Reliance Money) and on
the Board of several
Reliance ADA Group
companies. Also, former
MD and CEO of
Destimoney, promoted by
New Silk Route.
be easily augmented, the supply of gold cannot. So, a
spike in the demand for gold drives its price up much
faster than a spike in the demand for oil. Usually,
inflation and currency movements can drive the price
of gold, while they are driven by the price of oil.
In a nutshell, tracking one commodity is a
completely different from tracking another. And,
unlike stocks, there are no standard reporting
formats or company and industry ratios (such as PE,
EPS, Debt: Equity, etc.) that can be applied and
studied across commodities, in general, to arrive at
conclusions about valuations and potential price
movements. Each commodity is a unique animal
that plays by its own rules. To succeed in commodity
futures trading, one will need to study, in depth, each
commodity that one chooses to invest in.
While any time is a good time to invest in
commodities futures, one must be very clear about
when one needs to divest. Basic understanding of
the commodities one invests in will guide one with
respect to this too. So, for instance, agricultural
products have very well defined seasons between
sowing and harvesting. Taking a call at any point of
time is determined by how the seasons are expected
to pan out. Other commodities, like metals, which
are more driven by industrial and real estate cycles,
are likely to depend on economic growth and
relevant policy announcements. Knowing what the
triggers for various commodities are is the key. More
importantly, being able to gauge if a trigger will have
the anticipated impact, is what will guide one
regarding whether one must stay invested or let go.
Indian commodity market over the past few years
has become more and more organised. Commodity
futures traded at exchanges are regulated by SEBI,
offer multiple opportunities for trading and hedging.
While the depth of the market is not as great as one
would expect the forthcoming introduction of
Options will bring in more participants. There is also
a possibility of SEBI allowing institutions to
participate in Commodity Futures. All this will
significantly increase the attractiveness of
commodity markets in India. In fact the entire
Commodity value chain in India is becoming more
and more structured and professionalised. Global
players are owning and managing large warehouse
chains and global collateral managers are managing
commodity inventories. Smart investors need to start
looking at commodity as an asset class.
Comment at sudip@inditrade.com
COLUMN SPOTLIGHT

ECONOMY
“Upper classes are a nation’s past;
the middle class is its future.”
– Ayn Rand
Deposits in Jan Dhan accounts have
touched a high of ` 64,564 crore of
which over ` 300 crore came in seven
months of demonetization. There
were 28.9 crore PMJDY accounts
on June 14 this year.
$5.5 trillion
is the number of China’s mobile
payments hit, roughly 50 times the
size of America’s $112 billion
market in 2016, according to
consulting firm iResearch in 2016.
328 million
users Twitter has in a 11 year long
journey. Started as a micro-
blogging website in 2006, it has
become a broadcast medium and
a spark-plug for revolutions.
27%
active Facebook users added in
India in the past six months,
compared with 12% in the US.
India has a “potential audience” of
241 million active users, while the
US has 240 million.
85,000 sellers
have been delisted by Paytm Mall
in an effort to ensure quality
control. The sellers will undergo
strict quality and service audits that
will include their registration
number, shop photos and GST
number, among other things, to list
products on the platform.
$1 billion
the amount Mahindra Group plans
to invest across various business
areas in the US in the next five
years. The conglomerate’s aim is to
double revenue in the US market to
$ 5 billion over the next five years.
` 83,241 crore
is India’s trade deficit for June
2017. In June 2016, it was
` 52,065 crore.
QUICK FACTS 55% of the respondents from
India of the Randstad Workmonitor
Survey said men are chosen over
women for positions for which both
are equally qualified. 61% male and
47% female respondents agreed to
this bias. Globally, 70% respondents
said men are preferred over women
for the same job.
142% Indian banks have seen rise
in default by students who have
taken education loans during the
past few years. It stood ` 6336 crore
at the end of December 2016.
18.96 lakh crore is total assets under
management of mutual fund industry
in June, down 0.40%, whereas
` 12,739 crore was the outflow from
money market segment funds in June.
` 8-10 crore Air India hopes to
save every year by not serving
non-vegetarian in economy classes
on domestic sectors. In 2015-16 the
airline reported a net loss of over
` 3800 crore, and an accumulated
debt of over ` 50,000 crore.
The claims-to-premium ratio for
the Pradhan Mantri Jeevan Jyoti
Bima Yojna (PMJJBY) – a term life
insurance policy - hit an
unsustainable 121% in 2016-17,
the second year of operation.
In 2017 so far foreign investors have
bought ` 54,400 crore worth of
Indian stocks, while domestic mutual
funds and insurance companies have
bought nearly ` 25,000 crore.
The government is working on a
consolidation agenda with a view to
creating 3-4 global-sized banks.
Enthused by the success of SBI merger,
the finance ministry is considering
clearing another such proposal by this
fiscal and the 21 public sector banks
would get consolidated to 10-12 in
the medium term.
The government has collected over
` 1.80 lakh crore in direct tax till
July 15 in the current fiscal, an
increase of 21.4% year-on-year,
belying fears of slowdown in
economic activities. The current
growth rate is higher than the
target rate of 15.32% required to
achieve the Budget Estimate.
The number of cyber crimes pertaining
to credit card, ATM, debit card and
internet banking shows a marginal
increase of 4.4% from 13,083 in
2014–15 to 13,653 in 2016–17.
ECONOMY INDICATORS

UK business confidence at lowest point
The economic consultancy IHS Markit reports that
fragile business sentiment linked to Brexit-related
anxiety, domestic political uncertainty and squeezed
consumer budgets have caused UK business confidence to
drop to its lowest point for almost six years. Meanwhile,
Britain’s economic growth will continue to weaken this
year due to a Brexit-related consumer-spending squeeze
and muted earnings growth. In a recent report IHS
Markit said the “net balance” of UK firms expecting a
rise in business activity over the next 12 months stood at
+35% in June, markedly down from +52% in February
and the lowest reading since October 2011.
Robots to replace humans on Wall Street
It’s clear that the robots are coming for Wall Street’s
jobs. According to a report by McKinsey automated
technologies could have a big impact on 60% of Wall
Street jobs, however, the integration of new technology
doesn’t guarantee big revenue spikes. The report, titled
Cognitive Technologies in Capital Markets, examines the
areas of corporate and investment banking that are
ripe for automation via machine learning, artificial
intelligence, and natural language processing tools.
According to McKinsey, these technologies are
“moving center stage” and could have a sizeable
impact on 60% of bank jobs. This will free up humans
across the banking gamut and could also lead to job
cuts. According to McKinsey, automation isn’t some
magic elixir that will translate into “double-digit uplifts
in revenues.” The report features a chart that breaks
down the degree to which five cognitive technologies
will impact business in the middle and back office.
US dollar will rebound in second half of
2017 as the markets re-price in rate hike
According to JPMorgan Asset Management the
current weakness in the US Dollar may be short
lived, as a pick-up in inflation and expected rate hikes by
the Federal Reserve will support the greenback in the
coming months. The US Dollar tumbled to a 10-month
low last month after the Republican health care bill
aimed at replacing Obamacare failed to get enough
backing to proceed to a debate. The group feels that the
dollar will actually rebound in the second half, and this
is mainly as the markets re-price in interest rate hike.
Some market observers have said that a weaker dollar
can help to boost earnings of S&P 500 companies and
eventually justify their high valuations.
Qatar reaches to the WTO
At the last resort Qatar
has filed a complaint
with the WTO against three
of the four Arab countries
that are isolating it. It had
filed the grievance with the
WTO’s dispute settlement
body alleging that Saudi
Arabia, the United Arab
Emirates and Bahrain are violating laws and conventions
related to trade. The three countries, along with Egypt,
cut diplomatic ties and severed air, land and sea links
with Qatar on June 5, accusing it of supporting
extremists. Qatar denies the charge and sees the boycott
as politically motivated. Qatar has rejected a tough
13-point list of demands from the Arab bloc, arguing
that accepting them would undermine its sovereignty.
Under WTO rules, the parties have 60 days to resolve
their dispute through negotiations.
The Five Cognitive Technologies
Roboticprocessautomation
Machinelearning
Smartworkflows
Naturallanguageprocessing
Cognitiveagents
Overallimpact
Examples being
piloted/applied
Middle
Office
Trade
enrichment,
allocation
Auto-population of
trade details
T+0 activities
(P&L, risk)
Normalization of
market and trade data
Finance Product
Control
FO:BO exception
normalization
Reporting and
analysis
Ad-hoc report creation
and commentary
Operations
Confirmations
Exception handling;
paper confirmations
Settlement/
payments
Auto-correction of SSIs
Collateral and
valuations
Margin calculation;
client communications
Reference data
Cleaning and
normalization of
instrument data
Reconciliations
L1 reconciliation
activities (break fix,
triage)
Custodian and
asset services
Corporate action data
cleaning
Operations
client service
Customised client/
counterparty email
responses
Operations
risk/control
Trade, operator
surveillance
(Source: McKinsey & Company)
Potential impact
Low
Med
High
ECONOMY WORLD

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GST Explained
The new tax regime Goods and Services Tax (GST) will create a
national market, enhance ease of doing business and improve
tax compliance and it will lower the overall tax burden on
consumers. It has subsumed a large number of central and state
taxes into a single tax, paving the way for a common national
market. It is estimated that GST could raise GDP by 1.5-2 per
cent in the long term. Jiten Parmar explains the ﬁner points.
The idea of GST in the country
was floated by the Atal Behari
Vajpayee regime in 2000. The
government had set up an
empowered committee headed by the
then West Bengal Finance Minister,
Asim Dasgupta. Later in 2003,
Kelkar Task Force was set up under
Vijay L Kelkar which prepared a
Report on Roadmap for Fiscal
Consolidation. GST was first
mentioned in the Budget Speech in
the financial year of 2006-07 and an
Empowered Committee of State
Finance Ministers (EC) was set up. In
April, 2008, the EC gave a report
titled “A Model and Roadmap for
Goods and Services Tax (GST) in
India” containing broad
recommendations about the structure
and design of GST. The dual GST
structure was proposed by this
committee in 2010 and after that a
Constitution Amendment Bill was
introduced by the then Finance
Minister Pranab Mukherjee on 22
March, 2011. He was closely involved
in the design and implementation and
had met the Empowered Committee
of state finance ministers, formally
and informally, as many as 16 times.
Many states opposed it, including
the then Gujarat Chief Minister
Narendra Modi, Kerala and
Maharashtra (which had Congress
CMs). The sticking point was
compensation of loss of revenue and
not agreeing to a range of issues.
Modi government showed a will to
implement and brought in a
constitutional amendment bill on
GST. The government negotiated
with different state governments and,
at last, GST Bill was approved by the
Lok Sabha and Rajya Sabha on 8th
September 2016. It became One
Hundred and First Amendment Act.
Subsequently, a GST Council was
formed which has representation
from the Centre and states.
GST Council
The objective of GST Council is to
make recommendations on
everything related to GST including
laws, rules and rates, etc. Union
Finance Minister Arun Jaitley heads
the panel while ministers of finance
or taxation of each state are its
members. Decisions in the Council
are taken by a 75% majority. Centre
and a minimum of 20 States are
required for the majority because
Centre would have one-third
weightage of the total votes cast and
all the States taken together would
have two-thirds of weightage. In fact
Centrer has given its full command
over Excise and Service Tax in favor
of the GST and divested it’s power to
the GST council, which is a very
praiseworthy move. All decisions
have been made unanimously.
GST rates on goods and services
have been classified into broadly four
tax rates: 5 per cent, 12 per cent, 18
per cent and 28 per cent. Some goods
and services have been exempted.
Precious metals like gold will attract a
separate tax rate of 3 per cent. A cess
will be levied over the peak rate of 28
per cent on specified luxury and sin
goods. Alcohol, petroleum products
such as petrol, diesel and aviation
turbine fuel have been kept out of
GST as of now. The GST Council will
take a decision on it at a later date.
Businesses with an annual turnover
of ` 20 lakh (` 10 lakh for special
category states) would be exempt
from GST. A composition scheme (to
pay tax at a flat rate without input
credits) is available to some
businesses having an annual turnover
of up to ` 75 lakh. The composition
scheme is optional. Under GST,
businesses are required to file returns
each month. But the government has
let companies file late returns for the
first two months so that they can
adapt to a new online filing system.
This is the biggest tax reform in the
history of India. It is a game-changer.
Any big change does bring some
disruption, but the transition has
been less disruptive.
Basic Premise
• One nation One Tax. It gives a level
playing field to all. GST is a
destination-based tax as against the
origin-based taxation. The new tax
regime follows a multi-stage
collection mechanism wherein tax
is collected at every stage and the
credit of tax paid (input tax credit)
at the previous stage is available as
ECONOMY INITIATIVE

a set-off at the next stage of the
transaction. This helps to eliminate
“tax on tax” or the cascading
impact of tax.
• The biggest game changer in GST
is input tax credit, where credits of
input taxes paid at each stage of
production or service delivery can
be availed in the succeeding stages
of value addition. This means that
the end consumer will thus only
bear the GST charged by the last
point in the supply chain, with
set-off benefits at all the earlier
stages. For example, a
manufacturer’s total tax on output
comes to ` 5,000 while tax paid on
input (purchases) is ` 3,000. In this
case, the manufacturer needs to
deposit only ` 2,000 (` 5,000 -
` 3,000) as tax, after claiming input
tax credit of ` 3,000, thus reducing
the overall incidence of tax on the
final product.
• The system makes it difficult to
evade taxes. If overall taxes go up
(indirect and direct), two things can
happen - either taxes will come
down, or more money will be spent
on infrastructure, welfare of the
poor, etc. It gives the honest a
chance to compete which is always
good for the society and the
country. When honesty and
integrity gets rewarded, the nation
goes on a completely different
growth trajectory. To ensure that
manufacturers and service
providers pass on the benefit to the
final customer, the government has
included an anti-profiteering clause
in GST. Under this, it becomes
mandatory to pass on the benefit of
tax reduction due to input tax credit
to the final customer. Anti-
profiteering clause in GST is a
deterrent which is not intended to
be used unless forced to.
• The GST to be levied by the Centre
would be called Central GST
(CGST) and that to be levied by the
States (including Union territories
with legislature) would be called
State GST (SGST). An Integrated
GST (IGST) would be levied on
inter-state supply (including stock
transfers) of goods or services. This
would be collected by the Centre.
Import of goods would be treated
as inter-state supplies and would be
subject to IGST in addition to the
applicable customs duties. Exports
will be treated as zero-rated
supplies, which means no tax will
be payable on exports of goods or
services. However, exporters can
claim input tax credit.
• To ensure a single interface, all
administrative control of 90% of
taxpayers having turnover below
` 1.5 crore would vest with state tax
administration while 10% with the
central tax administration. Further,
all administrative control over
taxpayers having turnover above
` 1.5 crore will be divided equally
between central and state tax
administrations. States will be
compensated for any revenue loss
from GST implementation for five
years.
• Cost of the logistics also comes
down. As check posts, entry posts,
octroi posts, etc. go, and movement
of goods become faster. This does
bring down the price of the goods.
GST benefits the industry through
better cash flows and better
working capital management.
• Removal of cascading effect. Since
current system had different taxes,
it was difficult to claim credit for
one tax against the other. For
example, under the previous tax
regime, the service tax paid on
input services cannot be set off
against output VAT. Under GST
that will be possible.
In fact, it is far simpler than what
people think about it, but there are
many who are full of questions like-
According to a trader: “First we
had 6% and now we have 18% on a
particular item”.
The answer to it is that there was a
12% excise on it at the manufacturing
stage. Which got lost during the
chain, but is built into the price. The
6% is VAT and a 12 % excise is built
into the price. Somewhere in the
chain, someone was not able to take
credit of the 12% excise. With GST, it
will be 18% from manufacturer stage
to end-consumer and all people in the
chain from manufacturer onwards
will be able to get 18% set off and
only pay tax on incremental value-
add. Far simpler and efficient, and in
fact, will mean lower taxes.
Another says: “Service tax was
15%, now GST is 18%. This will
increase prices”.
In many services, service provider
could not take credit of many inputs
which had VAT, etc. Now he will be
able to take credit of all his input GST
and hence should bring down the cost
of the service by about 3% and make
it neutral for the end-consumer.
Many oppose the fact that if GST
paid by them is not paid by their
supplier, then they will have to bear it.
Which is a valid grievance. But one
must understand, that this is status
quo as per previous VAT rules.
Previously too, if your supplier did
not pay VAT, you had to pay it. In
fact, in many cases, you came to
know about this after a year or more.
And then you had to pay the VAT,
interest and penalty. Now you will
know in a month. Your loss will be
limited to just the GST amount. And
also, a system is planned for ratings.
So, you can check rating of your
supplier before doing business.
Since GST makes it difficult to
evade taxes, unfortunately that is a
major reason for the discomfort, for
many. But those who wanted to do
proper business are very happy as
they now have a level playing field
against the people who were bending
the system to their advantage.
(Author is a Real Estate Developer)
ECONOMY INITIATIVE

StartUp India Hub to fix startup troubles
T
he Central government has launched Startup India Virtual Hub, which is an online platform for all
stakeholders of the entrepreneurial ecosystem in India to discover, connect and engage with each other. It
claims to be a one-stop resource platform for all stakeholders, including startups, venture investors, mentors,
academia, incubators and accelerators. The portal has listed about 167 schemes that hold various benefits for
startups. Some of these include - Technology Development Program, Software Technology Park scheme, Support for
International Patent Protection, Electronic Development Fund Policy, Bank Credit Facilitation and Performance &
Credit Rating Scheme. The government is also planning to launch the virtual hub in six other languages. The Hub
attempts to solve the problem of information asymmetry and lack of access to knowledge, tools, & experts, especially
in the nascent ecosystems across Tier II and III towns. The call centre operated by the virtual hub has received more
than 60,000 queries from entrepreneurs and about 67% of these queries have come in from tier-II and tier-III cities.
Social networking platform
VoxWeb raises $1 mn
Mumbai-based social networking
platform VoxWeb has raised ` 6.45
crore in its third round of external
funding from a clutch of individual
investors. VoxWeb is focussed on
designing and developing
refreshingly new products to add a
new dimension to social media
consumption around the world. The
flagship product of the company,
speaking pictures, allows users to
capture and share moments through
photographs with voice-over options.
At present, it is available both on iOS
and Android platforms. It also
facilitates creating selfies that can
speak upon touching, called ‘Voxies’.
Julia Computing bags grant
Developer of an open source
computing language for data,
analytics, algorithmic trading,
machine learning and artificial
intelligence, Julia Computing has
been granted ` 5.8 crore by New
York-based not-for-profit institution
Alfred P. Sloan Foundation. The
startup will use the grant for the
development of open source
programming language Julia. Julia
Computing was founded in 2015 by
the creators of the Julia language.
The company claims Julia’s
adoption is growing rapidly in
finance, insurance, energy, robotics,
genomics and aerospace, among
other fields.
Vayana Network raises $4 mn
Digital trade financing network
Vayana Network Services has
raised ` 26 crore from IDG
Ventures India Advisors and Jungle
Ventures. Pune-based Vayana had
raised its first external round of
funding led by Reliance Industrial
Investments and Holdings Ltd. The
company plans offering several
value-added services for clients to
help them take advantage of the
trade data. Vayana allows buyers
and sellers to get their trade
transactions reconciled, filed and
financed. The company claims to
be India’s largest technology-based
third-party B2B trade financing
platform.
Happenings
Sourav Ganguly invests in
video streaming startup
Former cricketer Sourav
Ganguly has made an
investment in Flickstree, a
video streaming platform.
The Mumbai-based
Flickstree calls itself a
tech-entertainment company and curates free-to-
watch content from social networks, media sites,
and blogs. Besides, Ganguly will also help
Flickstree build its brand and create awareness
around the platform. The company presently has
75,000 monthly active users and 5,000-6,000 daily
active users.
Intellect Design Arena and ecommerce major Infibeam
bag contract for government marketplace
A consortium led by Chennai-based financial technology
firm Intellect Design Arena and ecommerce major Infibeam
has emerged the lowest bidder to run the online platform
from where the Government of India purchases goods and
services. The five-year contract is estimated to be worth
around ` 1,000 crore. The scaled-up version of the portal
will take care of the procurement needs of central and state
governments, ranging from big ticket items such as laptops
and air conditioners to furniture and daily use items such
as stationery, as well as services like taxis and florists. The
finance ministry had amended the General Financial Rules
to make it compulsory for all government departments to
procure items and services from this portal.
ECONOMY STARTUP INDIA

Weddingz.in acquires WedCraze
Online marketplace for wedding venues and vendors
weddingz.in has acquired Mumbai-based WedCraze, which
creates private social platforms for weddings. The acquisition
will enable Weddingz.in to have a presence in the social space
for weddings. The app acts as a single platform for all
information and updates for a wedding where it connects the
couple to guests, makes guest-management easier for the
planner. Wedding planners can invite guests, create
personalised e-invites, share details of the events, upload and
share pictures with everyone in their private social platform.
Weddingz.in is a technology-enabled wedding planning
platform that simplifies the process of finding and booking
services at best prices. It is present in 12 cities, including
Delhi, Bengaluru and Goa.
Increff bags $2 mn from Sequoia
Bangalore-based NextSCM Solutions, which offers end-to-end
supply chain technology solutions to fashion brands and
retailers, has raised ` 13 crore in a seed round of funding led by
Sequoia Capital. The startup offers a supply chain management
platform that broadly includes verticals like tech-led
merchandising and pricing, design intelligence, fulfillment
technology and services. Besides, it helps in mobilising working
capital for inventory financing to its customers and also provides
centralised cataloguing and listing services.
TripAdvisor enters Indian market
TripAdvisor-backed restaurant reservation app Eatigo has
entered the Indian market with the acquisition of Pune-based
Ressy Technology’s Ressy app that provides last-minute deals
and discounts at restaurants. With the acquisition, the
Bangkok-headquartered company will start operations in
Mumbai and Pune. Eatigo connects empty tables at
Ola ‘s car leasing biz gets another ` 100 crore
Cab aggregator Ola has put ` 100 crore in its car
leasing business. Ola Fleet Technologies, which runs
the company’s car leasing business, was set up in
2015 to help drivers own their cars in partnership
with banks and auto manufacturing companies. Ola
had announced an initial plan of pumping ` 5,000
crore for this business over the years.
India-Israel Global Innovation Challenge
India and Israel are joining forces in order to
address some of the world’s most pressing
innovation challenges. Startup India and the
Israel Innovation Authority are calling on
Indian and Israeli early-stage start-ups,
research teams and companies, to submit
their solutions to challenges in agriculture,
water or digital health. The most promising proposals will win
cross-border mentorship and incubation/acceleration prizes; an
opportunity to participate in an exclusive co-creation summit in
India with industry leaders, experts and potential partners; a
bilateral market access seminar in Israel; an opportunity to pilot
with leading partners in India. Technologies must have at least
initial validation, but must not yet be commercialized in India.
Some Important Deals
• Paras Healthcare Pvt. Ltd, which runs a chain of
hospitals in North India under the Paras
Hospitals brand, has raised ` 275 crore from
private equity firm Creador Advisors India Pvt.
Ltd. The company is planning to add 1,000
beds over the next three to four years.
• Motilal Oswal Real Estate, the property
investment arm of Motilal Oswal Private Equity
Advisors, has committed to invest ` 120 crore in
a residential project of ATS Infrastructure. The
capital has gone to ATS Grandstand, a 1.7
million sq ft residential development in
Gurgaon, NCR. The PE firm has made this
investment from its two funds – India Realty
Excellence Fund II and III.
• Warburg Pincus has invested ` 645 crore in
Mumbai-based rooftop solar projects developer
CleanMax Enviro Energy Solutions. The
investment in CleanMax is the seventh
transaction for the PE firm in India within 12
months and takes the total amount it has
committed in these companies to $1.14 billion.
• Specialty chemicals maker Camlin Fine
Sciences has acquired a 51% stake in Chinese
chemical firm Ningbo Wanglong Flavors and
Fragrances Company for ` 40.5 crore in cash.
Camlin bought the stake along with its Italian
unit CFS Europe SpA. This deal will help Camlin
become the world’s third-largest producer of
vanillin, which is used by food and flavour
companies as well as perfume manufacturers to
enhance fragrance. Ningbo Wanglong makes
flavour and fragrance products. Camlin was
founded in 1931.

restaurants with customers and
offers them time-based discounts at
its partner outlets. The company
has over 2,000 restaurants on its
platform across Hong Kong,
Singapore, Thailand, the
Philippines, and Malaysia. Eatigo
charges a license fee from its
partner outlets for the service.
Hike Messenger acquires Pulse
Hike Messenger Ltd. has acquired
InstaLively Livestreaming owned
social networking app Pulse. The
company was taken over by Hike.
The social networking app, which
was launched in December 2015,
enables users to stay connected with
their college and school
communities. Hike Messenger,
founded in 2012 by Bharti
Enterprises chairman Sunil Mittal’s
son Kavin Bharti Mittal, is part of a
joint-venture initiative between
Bharti and Japan’s SoftBank Group
Corp. Hike, which had recently
launched an in-app payment wallet,
seeks to gain early-mover advantage
over rival WhatsApp. With Hike 5.0,
users can recharge their phones and
pay post-paid bills from within the
Hike platform.
Zeta backs ZingHR
Mumbai-based fintech startup Zeta
has made an equity investment in
cloud services provider ZingHR,
which is operated by Cnergyis
Infotech India. Zeta picked up less
than 9% stake in ZingHR. With the
latest funding, ZingHR will expand
operations and build technology.
ZingHR leverages technologies such
as machine learning in recruitment,
HR analytics, geo-fencing, geo-
tagging and Aadhaar-based digital
on-boarding. It claims to serve over
6 lakh employees through 400 clients
across India, the Middle East and
Singapore. ZingHR will now offer
Zeta’s digital employee benefits
solutions to its customers.
“Online education sector to
witness 8x growth in 5 years”
FoodTech seems to have lost steam while FinTech, EduTech and
HealthTech continue to be strong. What is the trend you are
observing in upcoming startups in recent times?
Foodtech was never clearly defined. The focus has moved to food enabled
tech, towards consumer products. Energy, clean/green ventures & Agri-
tech are upcoming and we’ll see some breakthroughs soon. Space tech is
another field that entrepreneurs can now look into. If you go by the
numbers, the Indian Fintech market is forecasted to touch $2.4 billion by
2020. This could be one of the reasons that more than 400 unique investors
invested in Fintech between 2015-2017. The Indian E-tailing market too is
hot on the investors’ radar and could reach $28 billion by 2019-20. Lesser
known sectors like logistics have witnessed $774 mn funding in 2015-17.
The sector, which will contribute to nation building is Online Education.
This sector is projected to witness approx 8x growth in the next five years.
The Indus Entrepreneurs (TiE), Mumbai’s seventh annual programme “SmashUp
7.0” was held on Saturday 22 July, 2017 in Mumbai. SmashUp is the flagship
programme of TiE that brings together aspiring startups and angel investors to
exchange ideas, peer learning from successful entrepreneurs and helps ideas
mature into action plans and build successful companies. On the sidelines of
this annual event, Anand Desai, Managing Partner of leading law firm DSK
Legal and President, TiE Mumbai shared his thoughts on the evolving
startups landscape in the country and TiE’s mentoring role in it. TiE, founded in
1992 by a group of successful entrepreneurs, is a non-profit global community.

Do you think the Startup India has lost steam?
There have been some failures which discouraged
startup activity, but there are pockets within the Central
government working on this as well, including SIDBI
& DIPP. SIDBI has already launched a startup portal
which we have partnered with, that connects
entrepreneurs from all over India with our mentors and
investors. DIPP is also working on a platform that we
have partnered with, but they are still in early
development. The present government has devised to
help startups flourish in all sectors. In all, over 50+
start-up schemes have been launched, which includes
the Atal Innovation Mission, Tinkering Labs, Patent
Protection, Venture Capital Assistance, Software
Technology Park, etc. Apart from the Central
Government initiatives, 15 of the 32 Indian states have
also come up with their own startup policies and
initiatives. One of the early movers here was Rajasthan,
which mobilised INR 500Cr angel and VC fund for
startups. The introduction of GST will help create
opportunities and ease up doing business in India.
Several entrepreneurs are setting up companies
outside the country. What steps you suggest the
government should take?
Depending on the economic status, imperatives, etc.
I feel we need to have a more conducive ongoing
constructive interaction between the public sector and
the private sector to make substantial advances in
easing up doing business in India as compliance in
India is still far more than many other countries,
funding appropriate ventures after giving opportunity
to demonstrate innovation and merit etc. I am
confident it will happen and that TiE will play a
significant part in this journey.
How is the TiE Angels program unfolding?
Lets’s look at the landscape of Indian Tech Startup
funding in H1 of 2017. As per the latest Inc42 report,
over $5.56 billion was invested across 452 deals during
January-June 2017. While in Q1 2017 about $1.46
billion was invested across 207 startups, Q2 witnesses
216 deals amounting to $4.1 billion in funding. In line
with these encouraging numbers, we have met around
50 startups till date through the TiE Mumbai platform,
with a few in advanced discussions.
How TiE plans to raise the quality of mentoring?
I believe if charter members see more value in TiE
amongst themselves, they will give more time for
mentoring. I also believe we need to manage
expectations between the two as to what the aim of
mentoring is, and what the process will be. Most
entrepreneurs are looking for money and markets, and
few are focused on the processes of building a
sustainable organisation. TiE Mumbai has been
awarded the TiE Global Summit this year. We also
became the first chapter in India to announce TiE
Angels and also starting a series of Angel Investor
Education programs. Besides the - 6 to +3 years (idea
stage to early success startups) our focus is also on
those startups who have raised series A, B ++.
How was your journey so far?
It has been fascinating to meet charter members from
various parts of the world, attend TiECon Silicon
Valley and explore the innovations, and the investor’s
mindset, as also interact with some of the TiE
founders. Silicon Valley seems to have vibrations that
foster innovation, and I have been hoping we can build
more of that in Mumbai. It’s also fantastic to be part of
the high energy level one experiences at TiE events like
TiECon Mumbai, which is our flagship annual event,
and Smashup which is with young, enthusiastic
entrepreneurs in a very informal setting. One area I feel
we must do more of is government interaction as
TiE – one organizations although we are organized by
chapters, and social entrepreneurship which we have
started with events like the eBay cup. We need to also
increase the activities of our SIGs and have members
increasingly leverage the TiE global network. GES
being in India in November 2017 under the auspices of
Hon’ble Prime Minister will draw greater attention to
India as a destination for entrepreneurs.
How do you take time out for other commitments?
Some sayings stick in one’s mind. One of them that has
stuck in mine is that “a successful person is never short
of time or money” I believe we can all find time if we
are passionate about the various activities we
undertake. Staying fit is one of my constant concerns.
A description I heard which is attributed to Brian
Dyson, CEO of Coca Cola, and which I believe in is
that we have five balls to juggle, and shouldn’t let any
of them fall out of our control – health, family, work,
friends/recreation, spiritual quest.
What is your advice to young entrepreneurs?
There is no substitute for focused hard work. And hard
work pays!

Time v Timing
T
he legendary 1940s technician Garfield
Drew said “stocks don’t sell for what
they are worth, but for what people think
they are worth.” Market gurus, for
decades have been debating whether it is the time
in the market that determine your returns, or
timing that ultimately counts what you take out
from the market. This dispute gave rise to the
whole new field of technical analysis that studies
price beside time, eventually giving precedence to
timing instead of time in the
market. We are taught to buy it
and bury it for the long term, and
incredibly believe it, despite long
periods of contrary and painful
experiences. The emphasis being
on the length of time you can
hold your hand in fire, that is an
investment is held in one’s
account, rather than its
‘appropriateness’, or the ‘price’
paid for the same. In reality,
these are the very attributes that
determine the extent of returns
one can expect from an investment decision.
Market experts do not tire, and business channels
continuously beam on air, day and night, telling
you stories of how a single “buy-and-hold”
investment in one’s lifetime made up for all their
life’s goals like buying a house, or child’s marriage.
Because of “buy and forget” syndrome, they do not
discuss their failed bets that remained buried in
their locker; value evaporated with the passing
years and remained just a piece of paper which was
not even worth its weight. For one Infosys or
Microsoft, there are dozens of companies that have
vanished, and do not even figure in the daily
quotations list. Quite similar to a diver who goes
deep down in the seas in search for pearls, but
returns with empty shells.
“Time is money,” we are told since childhood
with the underlying message that we must care
equally for both, as our forefathers believed that
time, if used with proper care, could be converted
into capital. But, market experts’ believe that an
Ashok Jainani
Market Strategist,
Author of well acclaimed
book “Market Myths” and
our Consulting Editor
investment would automatically grow along with
the passage of time. Time would simply do
wonders and convert even trash into cash, as if
nothing else mattered in the mad money markets.
Time is a great healer. In stock markets, it’s a
great multiplier, the advisors assert. At a time and
given price, a stock could be a screaming buy. The
same stock at the same price, but at a different
time, could be a hell of a sell idea. One month,
January 2011, washed away more than full year
gains of 2010. It took just twenty-eight days to
erase the work of the previous 252 days in the
index. Bear in mind, we trade price, not time.
Prices are what are traded, on which bets are
accepted on the roulette, not days. But the seers
tell you to wait for years.
Earning returns in excess of those offered by the
government on its tickets can only be achieved by
taking risk, that is timing. Peter Stanyer in The
Economist Guide to Investment Strategy says “Part
of the problem is that many investors can be
seduced by the belief (peddled by self styled gurus),
that they have found a low-risk way (time in the
market) of performing surprisingly well. But, even
surprisingly good investment performance
invariably involves risk.”
Look at the chart of Coca-Cola Co, adored by
many old seers on the Wall Street. Its stock priced
US$44 in 1998. Over the next twelve years to 2011,
it halved to $20, and now trades at $44 again. If
you sat for 20 years, your kids will be able to call
the bluff of those oracles. You may not because of
Pavlovian conditioning.
Is it that simple to put money into risky assets,
and sit quietly, to make more money on it?
Markets, companies and their stock prices, as
everything else in life on this earth, are dynamic
and keep evolving, every day. Most people are
given this dose of being passive investors in such
a dynamic ever changing market place where
prices fluctuate, so do companies’ futures and
people’s fortunes.
It’s a temporary, though sometimes prolonged,
phenomenon in the stock markets when ordinary
investors win. The next bear market usually wipes
them out, if they live long enough. This is the
truth, regardless of street philosophy that the
market eventually goes up to new highs. This very
perception is false, because what ultimately
counts is the time and price when you enter into
a trade.
Comment at ashokjainani@gmail.com
Market speaks the truth; crowd speaks
with a forked tongue
COLUMN THIRD POINT

“The United States have developed a new
weapon that destroys people but it leaves
buildings standing. It’s called the stock market.”
– Jay Leno
01
India:
• Nikkei India Manufacturing
PMI
United States:
• Markit US Manufacturing
PMI
Japan:
• Nikkei Japan Manufacturing
PMI
• Vehicle Sales Growth
China:
• Caixin China Manufacturing
PMI
European Union:
• Markit Eurozone
Manufacturing PMI
31
India:
• Fiscal Deficit Data
• Q1FY18 GDP Data
United States:
• Personal Income
• Initial Jobless Claims
Japan:
• Industrial Production
29
Japan:
• Jobless Rate
25
India:
• Eight Infrastructure Industries
Data
Japan:
• CPI Inflation
24
United States:
09
India:
• Local Car Sales
10
India:
• Trade Balance
United States:
11
India:
• Industrial Production Data
United States:
• CPI Inflation
14
India:
• CPI Inflation
• WPI Inflation
17
United States:
• Industrial Production Data
• Capacity Utilization
Japan:
• Trade Balance
02
India:
• RBI Monetary Policy
Japan:
• Consumer Confidence Index
03
India:
• Nikkei India Services PMI
• Nikkei India Composite PMI
United States:
• Markit US Services PMI
• Markit US Composite PMI
Japan:
• Nikkei Japan Services PMI
• Nikkei Japan Composite PMI
China:
• Caixin China Services PMI
• Caixin China Composite PMI
04
United States:
• Unemployment Rate
• Change in Nonfarm Payrolls
August: Market Diary
Stocks of 331 companies to be
traded in a special category
Although a formal announcement is still
awaited, in an effort to identify shell
companies the Securities and Exchange Board of
India (SEBI) has said that it has identified 331
companies that should be traded in a special
category. The stocks of these companies will be
traded only once a month. Once the directive
from the regulator is effective, anyone selling
these stocks will get the proceeds only after five
months. The list of these 331 stocks largely
comprises mining and infrastructure companies.
The regulator has also asked the exchanges to
conduct an independent audit of these companies,
and if necessary, a forensic audit to be conducted
as well. In a move to discourage traders to bet on
them the margin money on the trades carried out
on these stocks would be more than 200 percent.
Trading hours may be extended
for the derivatives market
In a move to enhance the international
competitiveness of the domestic
market, the Sebi is looking to extend the
trading hours for the derivatives market.
If trading in index futures could be kept
open even after the cash market closes,
it would provide investors with a tool to
price in news flow that come after market hours.
Currently, a lot of foreign investors use global platforms
such as the Singapore Stock Exchange (SGX) and the
Chicago Mercantile Exchange (CME) which offer almost
round-the-clock trading in some Indian contracts for
trading or hedging their underlying exposure to Indian
stocks. Since allowing derivatives trading in 2000, the
trading timings of both futures and options (F&O) and
cash market have remained linked. SEBI has undertaken a
review of the equity derivatives market and floated a
discussion paper on this matter, recently.
“A rich man is nothing but a poor man with money.”
MARKETS INDICATORS
MARKETS

June QTR Results
UP, UP
& AWAYA dull start to the new ﬁscal
The higher it goes, the further up it could go. Till it can’t any
farther before it stops. And then the great normalisation process,
a painful experience begins, unfortunate, but repeatedly for retail
investors. The latest quarter earnings barely show any meaningful
strengthening of the corporate fundamentals. Despite you-name-
it-all schemes by the government in the last three years, earnings
growth doesn’t show up, except in stock prices.
The stock market is currently driven more by liquidity
than justiﬁed by fundamentals. But it is vulnerable
to a shock, and so caution is advisable, for the moment.
MARKETS COVER STORY

India Inc Performance (` Cr)
(Source: Ace Equity, data 475 companies as on 31 July 2017)
Qtr End Jun’17 Qtr End Mar’17 Qtr End Jun’16
Sales 6,25,544 6,56,690 5,79,548
Operating Proﬁt 1,73,227 1,84,686 1,64,835
Interest 1,00,783 97,903 98,352
Depreciation 25,338 25,906 23,187
PAT 70,950 68,996 68,935
By Krishna Kumar Mishra
S
tock markets are exhibiting contrast, they haven’t ever
probably in the recent past. Stocks were never so expensive
since 2007 peak before the global financial crisis misled them
and earnings growth was never so pathetic to justify ratings on
the record multiples. Despite farm loan waivers and you-name-it-all
schemes by the government in the last three years, growth just doesn’t
show up, except in stock prices. Which means all the change that is
there is in the price alone and barely in the corporate sales and
earnings. Be under no illusion: the rapid growth in stock prices and
indexes has got way, way ahead of the reality of the underlying
earnings, at least according to the known investment principles taught
by popular business education.
The latest quarter earnings data show little indication of any
meaningful change in the corporate fundamentals. India Inc earnings
in the latest quarter ended June 2017 rose an average 7.93% to ` 6.255
tn over a year ago period from ` 5.795 tn for the sample 475
companies, including major and mini ones, that have reported results
up to July 31, 2017. The net profit, for the same sample 475
companies, crawled 2.92% to ` 70,950 crore in the latest quarter over
the same three-months period previous year. The aggregate earnings
per share (EPS) for the BSE-200 companies, representing nearly 85%
of the total market capitalsation, has not moved much over the last
four years since the new political dispensation took over the
government at the Centre. But the stock indexes and market
capitalisation have both risen 40-50%. The market action shows that
it’s not following the fundamentals. No way to justify the current high
multiples in the prices of risky assets.
There is another indicator that shows Indian corporates in
aggregate are not efficient in use of capital since they require more
capital to do the same amount of sales during fiscal year 2017 over
2016. Total debt of 950 companies, as of March 2017 has risen to
` 28.295 tn from ` 27.511 tn as at March 2016. There can indeed be
no greater truth exhibited by the latest quarterly earnings than the
fact that the past performance is no guarantee it can be repeated or
sustained without a doubt. The results might have been good in the
past, but can be bad in future.
Sales
Operating Pro
Interest
Depreciation
PAT
capital to do th
2016. Total deb
` 28.295 tn fro
no greater trut
fact that the pa
sustained with
past, but can b
MARKETS COVER STORY

The rate of the quarterly increase in mutual fund folios
has been the highest in the last quarter between April
and June 2017. Retail MF folios have risen dramatically
between September 2014 and June 2017 during which
time the Sensex has given an absolute return of 16.1%
(averaging 5.6% per year). Compare this to the situation
between September 2009 and September 2014, when the
Sensex rose 55.5% (or 9.2% per year) and retail MF
folios fell by a fifth from 4.69 crore folios as of
September 2009 to 3.8 crore folios as of end September
2014. “These profits were not enough to lead to an
increase in interest of the retail investors in committing
money to equity mutual funds. This, for the simple
reason that they were nursing previous losses made by
investing in equities, after the stock market crash of
2008-2009,” author of three popular books writes in his
column Vivek Kaul’s Diary.
A fund manager who did not wish to be named has an
interesting take. In his opinion, it is the domestic mutual
funds which are driving the stock markets to new highs
and the lowering of savings bank interest rates will
exacerbate this trend and may drive the market to record
some more points. He may be right since FD interest
rates lower than inflation, individual investors may be
diverting a part of this money into the equity market. As
it looks most of this is routed through mutual funds.
Another analyst who didn’t want to be named says
“The current earnings slump is not cyclical; but it’s
structural. Consequent to necessary structural changes
- overhauling the tax code, gutting useless regulations by
bringing Insolvency & Bankruptcy Code - being
implemented by the central government, the earnings
growth might return post FY2018-19.”
The economy is throwing one bad number after
another. The core sector growth slowed to just 0.4%, a
19-months low in June. The eight infrastructure sectors
of coal, crude oil, natural gas, refinery products,
fertilisers, steel, cement and electricity constitute 40.27%
of the total industrial production. The muted core sector
Mutual Fund Folios
No. of Folios No. of Retail Folios(Mn)
66
57
48
39
30
Mar’08 Mar’11 Sep’13 Jun’15 Sep’16 Jun’17
(Source: Centre for Monitoring Indian Economy)
Growth only in the Price
(Source: Ace Equity)
128
120
112
104
96
88
80
(` Tn)
BSE Total Mkt CapBSE200 EPS
(`)
180
175
170
165
160
155
150
Jun’14 Jun’15 Jun’16 Jun’17
While the big indexes are hitting serial record highs,
there’s one important index, however, that’s continually
scraping record lows. The NSE India Volatility Index -
the VIX that measures volatility in the short term, but is
usually thought of by investors as a powerful broad-
market “fear index.” Going by the same, it seems the
market has no fear right now, as it braves new highs with
essentially low or No volatility. And that may have got
some investors concerned that any sensibility has gone
right out of the window, replaced by classic “irrational
exuberance” of the retail investors.
In equity markets, by its very nature, there is a
frightening cost of low growth and lower profit margins
that is reflected in lower multiples. Analysts over the last
three years have been consistently forecasting impressive
earnings growth that refuses to show up in corporate
earnings numbers. So the passive investors, exchange
traded funds (ETFs) and mutual funds (MFs) lately have
been pouring some oil into the fire as they attract record
inflows and new customers.
The irony and tragedy of the stock market investing is
that retail investors need a lot of validation before
committing their money on the fire. Since no one can
know for sure, the markets might continue to rise and all
the investors who come in late might also get to party.
Till it lasts.
The aggregate earnings per share (EPS)
for the BSE-200 companies, representing
nearly 85% of the total market
capitalsation, has not moved much over
the last four. But the stock indexes and
market capitalisation have both risen
40-50%. The market action shows that
it’s not following the fundamentals.
MARKETS COVER STORY

THEN & NOW: THINGS ARE NOT AS ROSY
Dec’07 Jul’17
Trailing P/E Nifty 50 27.62% 25.69%
Trailing P/B Nifty 50 6.39% 3.51%
MCap/GDP Ratio (Mar’17) 149% 80%
Past Returns of Nifty 50 (CAGR)
Last 1 Year Return 54.8% 16.56%
Last 2 Years Return 47.1% 8.66%
Last 3 Years Return 43.4% 9.27%
Nifty 50 Past Earnings per Share Growth (CAGR)
Last 1 Year (YoY) 20.4% 5.47%
Last 2 Years (YoY) 27.9% 5.59%
Last 3 Years (YoY) 21.3% 0.87%
Macro Indicators
Capacity Utilisation (Mar’17) 91.7% 72.6%
Credit Growth (Jun’16 to Jun’17) 23.3% 4.4%
RoE Nifty 50 25.5% 13.37%
Net FII (12 M Trailing ` Cr) 80,915 47,302
IIP (Twelve Months Trailing) 15.58% 4.3%
as of May 2017
GDP Growth 9.6%
(Oct-Dec’07)
6.1%
(Jan-Mar’17)
10-Year Government Bond Yield
India 7.79% 6.47%
USA 4.02% 2.29%
Japan 1.51% 0.08%
Europe 4.31% 0.55%
China 4.46% 3.65%
Source: NSE, BSE, RBI; P/E: Price to Earnings Ratio; P/B: Price to Book
Ratio; CAGR: Compound Annualised Growth Rate; YoY: Year on Year;
RoE: Return on Equity; FII: Foreign Institutional Investors; IIP: Index of
Industrial Production; GDP: Gross Domestic Product.
could further dent industrial growth that was
placed at 1.7% in May. Even the Purchasing
managers index (PMI) fell to 8 year low to hit 47.9
(50 is equilibrium; a reading below 50 is considered
an economic weakness). Global agencies declare a
recession in any country where PMI stays below 50
for two consecutive quarters. Staying below 50
PMI must be avoided at all costs to maintain
country sovereign ratings, cost of overseas funds
and currency strength. Falling PMI also impacts
job generation and salary hikes adversely.
Losing earnings stream
Indian companies reported a slow growth
momentum in June quarter earnings as destocking
of inventory ahead of the implementation of the
Goods and Services Tax (GST) took a toll on
many companies. Several companies offered heavy
discounts which dented their profit margins. The
sample companies reported 7.93% growth in
aggregate revenues over the year-ago period, while
their combined net profit grew just 2.92% in the
quarter ended June 30, 2017.
Sectoral analysis
Q1 results have been a mixed bag so far, as the
numbers from IT and pharma counters have been
mostly depressing! Aggressive customer acquisition
strategies of Reliance Jio expectedly have
negatively impacted the performance of the
incumbent telecom players. While the sector’s
aggregate revenue declined by 11.72% to ` 23,912
crore from ` 27,088 crore in the same period last
year, the industry reported an aggregate net loss of
` 555 crore, compared to an aggregate net profit of
` 1,805 crore in the first quarter of 2016-17.
Among major listed players, Idea Cellular has been
worst hit reporting a net loss of ` 922.8 crore
compared to a net profit of ` 160.4 crore in
1QFY17. Bharti Airtel, however, reported some
profit, though it crashed 80% y-o-y. The telecom
industry’s pain will continue for some more time.
Pharmaceutical companies are also floating in a
similar boat with the sector’s aggregate revenues
slipping 16.91% to ` 14,178 crore, while the
industry reported an aggregate net profit of ` 1,408
crore (down 61.6% y-o-y), compared to an
aggregate net profit of ` 1,805 crore in 1QFY17.
This is mainly due to the absence of significant
approvals, pricing pressure in the US, INR
appreciation against the USD and EUR as well as
inventory destocking in domestic market ahead of
the implementation of the Goods and Services Tax (GST).
Among the sectors that did well, Metals & Mining need a
special mention. Aggregate revenue of this industry jumped
28.47% to ` 36,720 crore, and net profit rising to ` 2,315
crore (up 41.61% y-o-y), compared to an aggregate net profit
of ` 1,634 crore in 1QFY17. Aluminium, steel, zinc, lead and
copper prices jumped 17-21% in 1QFY18 over the year-ago
period.
Among the banking industry, while private sector banks
reported revenue growth of 7.91% to ` 69,363 crore and net
profit surge of 10.92% y-o-y to ` 11,297 crore in 1QFY18.
Public sector banks reported a revenue drop of 1.17% to
` 44,578 crore and net loss of ` 563 crore in the quarter
ended June 30, 2017.
MARKETS COVER STORY

However, the situation is not likely to improve in near
future, at least. As most of the public sector banks have
put a virtual freeze on fresh lending fearing bad loans,
fresh investments by the corporate sector in the
financial year 2016-17 grew at the slowest pace.
According to a report, in FY 2017 the combined capital
expenditure by the top 1,000 non-financial firms, in
terms of revenue, was up by just 5.8% – the previous
low of capital expenditure growth was recorded in
1992. Fresh investments, worth ` 2.07 lakh crore, by
the top 1,000 companies in the last fiscal was down
from ` 2.9 lakh crore in FY16 and an all-time high of
` 5.7 lakh crore in FY14. The data show the capex
growth registered by private sector companies is also
the slowest in 12 years. The incremental capex by listed
private companies was ` 2.15 lakh crore in 2016 which
nearly halved to ` 1.1 lakh crore in the last financial
year. The amount is a third of a record high reached in
2012 and the lowest in 10 years. This decline was also
because of poor demand in the economy.
The verdict is out
India Inc’s performance in the first quarter of the new
fiscal is not good. High interest rates and a slowdown in
economic activity were clearly reflected in the quarterly
results of capital-intensive sectors such as capital goods,
infrastructure and engineering. Higher rates have
brought the capital investment cycle to a grinding halt,
the overall economic slowdown is visible in slow growth
or even shrinkage in the order books of companies.
The situation looks grim
According to Centre for Monitoring Indian Economy
(CMIE) India’s real GDP (at 2011-12 market prices)
growth is expected to remain almost flat at 7.2% in
2017-18, as compared to the 7.1% growth clocked in
2016-17. Good rainfall and disbursement of 7th pay
commission rewards would likely give a positive push to
Public Sector banks wrote off
` 2.49 trillion of loans in five years
Quoting RBI data the finance ministry said that
Public sector banks have “written off” nearly ` 2.5
trillion loans in the last five financial years. As
many as 27 public sector banks, including SBI and
its five associates, in 2016-17 have written off
` 81,683 crore, the highest in the last five fiscals.
The amount was 41% higher than that in the
previous fiscal. SBI and its erstwhile associates
alone have written off ` 27,574 crore in 2016-17.
The written off amount by PSU banks soared from
` 27,231 crore in 2012-13 to ` 57,586 in 2015-16
and further to ` 81,683 crore in 2016-17. During
2013-14, write off figure was ` 34,409 crore, which
rose to ` 49,018 crore in the subsequent fiscal. So,
the cumulative amount written off in the last five
fiscals ending March 2017 was ` 2,49,927 crore.
Punjab National Bank has written off ` 9,205
crore, followed by Bank of India (` 7,346 crore)
and Canara Bank (` 5,545 crore) in 2016-17. Bank
of Baroda has written off ` 4,348 crore, followed
by Corporation Bank (` 3,574 crore), Indian
Overseas Bank (` 3,066 crore) and IDBI Bank
(` 2,868 crore). The gross NPAs of public sector
banks were 12.47% of gross advances as on
31 March 2017.
Analysts over the last three years have
been consistently forecasting impressive
earnings growth that refuses to show up
in corporate earnings numbers. So the
passive investors, exchange traded
funds (ETFs) and mutual funds (MFs)
lately have been pouring some oil into
the fire as they attract record inflows
and new customers.
the economy, while weakness in investment demand,
fiscal consolidation and widening of current account
deficit would act as dampeners.
Consumption demand is expected to grow by 8% in
2017-18. This will be lower than the 8.7 per cent growth
registered in 2016-17. The growth in government
expenditure is expected to decelerate sharply from a
robust 20.8% to 12.1% in 2017-18. The growth in
investment demand is expected to improve a tad in
2017-18 owing to the government’s focus on
infrastructure spending. India’s current account deficit,
which was shrinking for the last four years, is set to
widen in 2017-18. A rise in gold imports, higher average
unit value of POL imports and weakness in dollar
earnings of the Information Technology (IT) sector are
likely to result in a deterioration of goods and services
trade balance. CMIE predicts the economy to show a
mild pick-up in the next fiscal year 2018-19, recording a
7.5% growth in real GDP.
MARKETS COVER STORY

ITwas the fourth time Reliance Industries in its history announced one additional RIL
share for every RIL share shareholders hold in a 1:1 bonus issue. RIL reported net
profit in FY17 of ` 29,901 crore. FY17 marked the close of a five-year long capital
expenditure cycle of ` 3.3 lakh crore, of which ` 2 lakh crore was pumped into Jio and the
remaining went to the energy and materials businesses.
Company’s fortieth annual general meeting was in many ways unique. First time since the company went public in
1977, its market capitalization rose from ` 10 crore to ` 5 lakh crore. Secondly, refining and marketing of crude oil
and petrochemicals, the flaghip business was mentioned in passing as the meeting was dominated by the Jio. RIL is
yet to reveal separate financial earnings for Reliance Jio Infocomm.
Escorts net profit up 33.4%
Escorts has reported a 33.41 % increase
in net profit at ` 62.64 crore for the
quarter ended June 30. The company
had posted a net profit of ` 46.95 crore
during the same period a year ago. Total
income from operations stood at ` 1,183.65 crore against
` 1,058.24 crore in the April-June quarter of the
previous fiscal, up 11.85%. The company witnessed a 7.3
% increase in tractor sales and construction equipment
volume was up 20% during the quarter.
Infosys Ltd. profit up
Infosys Ltd. posted a consolidated net
profit of ` 34.83 billion for the first
quarter of 2017-18 and its profit has risen 1.4%
compared to the first quarter of 2016-17. Infosys also
said that it expected its revenue to grow between 7.1 and
9.1% for the present financial year. For the April-June
quarter, firm’s revenue abroad came in at $2.65 billion,
growing 6% from 2016. Net profit stood at $541 million,
compared to $511 million in the same period in 2016-17.
It added eight clients in the $100 million-plus category
during the quarter.
L&T profit surges 46%
Improvement in the capital
cycle pushed the Q1
consolidated net profit of
L&T by 46%. The company’s profit increased from
` 610 crore in Q1 FY-17 to ` 893 crore for the quarter
ended June 30, 2017. L&T’s gross revenue has increased
by 10% to ` 23,990 crore compared to the same quarter
of the previous year. However, there was a substantial
decline in order inflows by 11% to ` 26,350 crore against
` 29,700 crore a year ago. Among the segments that have
not been doing well for L&T is power which registered a
marginal growth of 2% over the corresponding quarter
of the previous fiscal.
Info Edge net profit jumps 45%
Info Edge has reported over
45% increase in standalone net
profit to ` 63.56 crore for the
first quarter. It had posted a net
profit of ` 43.78 crore in the
corresponding quarter of previous fiscal. The
company’s total income stood at ` 248.85 crore in the
quarter, up 12.14% from ` 221.91 crore in the previous
quarter. Apart from Naukri.com, Info Edge also runs
matrimonial portal Jeevansathi.com, real estate portal
99acres.com and an education website Shiksha.com.
Avenue Supermarts net jumps 48%
Operating at present 132
stores in Maharashtra,
Gujarat, Andhra Pradesh,
Karnataka, Tamil Nadu,
Madhya Pradesh, Rajasthan, and NCR, Avenue
Supermarts, which runs the D-Mart supermarket chain,
has posted a 47.6% jump in its net profit at ` 174.77
crore for the quarter ended June 30. The company had
reported a net profit of ` 118.44 crore in the
corresponding quarter a year ago. Its total income stood
at ` 3,598 crore, up 35.7%.
Nestle India profit up 10%
Nestle India Ltd., has reported a
9.7% increase in net profit for the
June quarter, which stood at
` 263.43 crore, against ` 240.22
crore a year ago. Domestic sales
rose 8.8%, while overall sales,
including exports, rose by 7.3% to
` 2,469.06 crore from ` 2,301.11
crore a year ago. Nestle India’s exports fell 12% during
the quarter. During the quarter, expenses rose 9.4% due
to the increase in commodity prices, reflecting in an
8.4% rise in material cost.
1:1 bonus share for RIL investors
MARKETS ON THE STREET

Indian Economy & Market August 2017

Indian Economy & Market August 2017

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