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Monday, January 6, 2020

economic news of india - world economic news - economics news for students - indian economy news

economic news of india - world economic news - economics news for students - indian economy news


All or nothing? It's Hobson's choice for Anil Ambani's lenders

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MUMBAI: Lenders to bankrupt Reliance Communications (RCom) are unlikely to agree to the current bids and will push for a better deal with more upfront cash, said people familiar with the matter. The committee of creditors (CoC) is weighing whether to pick up equity in RCom and its two arms or sell the parent and its units separately to extract maximum value, these people said.Reliance Jio Infocomm, Bharti Airtel, UV Asset Reconstruction Co and private equity firm Varde Partners have bid for either part or all the assets of RCom and its two units — Reliance Telecom Infrastructure, which had licences to provide services in eight regions, and its tower arm Reliance Infratel.But the bids have offered very little upfront cash or are unworkable in the current form, said bankers. They said UV Asset Reconstruction Co has offered to pay Rs 12,760 crore, staggered over 12 years, with only Rs 5 crore upfront cash for creditors. 73131148 Varde Partners, meanwhile, has offered to create a special purpose vehicle for each asset with management fee.Bharti Airtel's take-it-or-leave-it offer comes with many riders, and has not enthused the lenders either."The bidders think banks are desperate to sell, so they will pay us trash rates. But we know the value of the assets. Our estimates suggest the land and other infrastructure alone could be worth Rs 15,000 crore. We will not agree to the offers currently on the table," said one of the persons.Jio has bid Rs 3,600 crore, but wants only the towers. Bankers are hoping this bid could be combined with UV Asset Reconstruction Co's offer, but at a higher amount."There are various ways we could do it (asset sale), but all efforts are to get a better deal. We can consider selling the three companies separately, or UV Asset Reconstruction Co may be asked to increase the upfront cash payment. We have already agreed on a scoring model for the deal that the bidders know about. We could find the best bidder, and then run a Swiss challenge," said a second person familiar with the discussions.Discussions are on with Deloitte, the resolution professional for RCom and its two units. The CoC has been meeting every few days to take stock.Emails sent to Deloitte and RCom remained unanswered as of press time Monday."Negotiations are on and the CoC is open to picking an equity stake in the company, especially for bids that do not involve a high upfront payment.Making high upfront payment may be tough when there are legal tussles, which is why equity is important, in case the assets are sold later at a higher value," said a person aware of the developments.A senior executive working with one of the bidders said that besides monetary aspects, the CoC also had queries related to various compliance issues.The CoC expects to raise at least Rs 14,000 crore from the sale of the telco's assets, including spectrum, fibre and towers, based on the bids received. At that level, the haircut would be about 70% for financial lenders that have filed claims of Rs 49,000 crore against RCom and its units Reliance Telecom and Reliance Infratel.THE ASSETSAssets put up for sale include airwaves in the 850 MHz band in 14 of India's 22 telecom circles, about 43,000 telecom towers, some fibre and data centres.The spectrum is the most valuable asset. The bankruptcy court had, in a separate insolvency proceeding for Aircel, ruled that the CoC can sell airwaves, rejecting a telecom department plea. The government wanted the spectrum to be returned to it due to unpaid dues, saying it was the owner of the airwaves. The department of telecom is expected to challenge the National Company Law Tribunal order soon.At the time of its bankruptcy filing, RCom had debt of Rs 46,000 crore, making it one of India's biggest insolvencies. As many as 53 financial creditors, including local and foreign banks, nonbanking financial companies and funds, have claimed Rs 57,382 crore, of which Rs 49,224 crore has been accepted by the resolution professional.Top Indian financial lenders include State Bank of India (with a verified exposure of over Rs 4,800 crore), followed by Bank of Baroda (Rs 2,500 crore), Syndicate Bank (Rs 1,225 crore) and Punjab National Bank (Rs 1,127 crore). Top overseas lenders include China Development Bank (Rs 9,900 crore), Exim Bank of China (over Rs 3,356 crore) and Standard Chartered Bank (Mumbai and London, Rs 2,100 crore).

NTPC just stole Gautam Adani's thunder

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NEW DELHI: NTPC has outbid the Adani Group for the Avantha Group's 600 MW Jhabua power plant in Madhya Pradesh, with a Rs 1,900-crore offer that was two and-a-half times more than the rival bid, people in the know said.State-run NTPC's offer is also the highest on a per-megawatt basis so far to buy out a stressed asset in the power sector. The thermal power producer undergoing bankruptcy proceedings owes more than Rs 5,000 crore to lenders, who could recover 38% of their loans if they accept the NTPC offer.Experts said this could encourage banks to approach the National Company Law Tribunal (NCLT) for debt resolution, as the valuation was better than other recent deals happened for stressed power assets outside the bankruptcy court. Currently, banks go to the NCLT as a last resort, after exhausting all resolution options due to fear of large haircuts. 73131035 The people said Jhabua received a good bid as it was an operational project built with equipment from Bharat Heavy Electricals, but stressed due to lack of working capital.NTPC's bid values the unit at Rs 3.2 crore per MW against the construction cost of Rs 6 crore for new projects.Adani Power had valued it at about Rs 750 crore, or Rs 1.25 crore per MW, the people said.NTPC and Adani Power did not respond to emails seeking comment until press time Monday.Shares of NTPC closed 0.34% down at Rs 118.90 on Monday on the BSE, while those of Adani Power ended 4.9% down at Rs 60.15.This is the first time that the staterun power producer has bid for any stressed project. It had earlier decided against buying any stressed projects outside the Insolvency and Bankruptcy Code (IBC).Its offer was better than the deals for power plants done outside the IBC, including Adani Power's buyout of the GMR Chhattisgarh plant and Resurgent Power's acquisition of Jaiprakash Associates' Prayagraj Power Generation unit.Adani Power had won GMR Infrastructure's 1,370 MW coal-based power plant in Chhattisgarh, by offering to take over its debt at Rs 3,530 crore, or Rs 2.58 crore per MW. It paid a nominal Rs 1 for the equity component.Tata Power-backed Resurgent Power paid about Rs 6,000 crore, or a little over Rs 3 crore per MW, for the 1,980 MW PPGCL power plant in Uttar Pradesh. Hong Kong-based Agritrade Resources bought SKS Power's 1,200 MW Binjkote power plant for Rs 2,170 crore, valuing it at Rs 1.8 crore per MW.The Jhabua plant faced land acquisition and funding issues leading to time and cost overruns.Banks and financial institutions are trying to close resolution proceedings for at least five stressed power plants including Essar Power Mahan, RKM Power-Gen and Suzlon Energy, even as the January first week deadline as per the central bank's Prudential Framework for resolution of stressed assets has passed.The lenders aim to close the deals for these projects outside the IBC by March this year.

Mideast tension shows up at petrol pumps

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NEW DELHI: Local rates of petrol and diesel, already at a 13-month high, are poised to rise further as crude oil advanced another 2% to inch closer to $71a barrel on Monday. Oil futures climbed to $70.74 as traders weighed every aggressive comment from both US and Iran that kept pushing up probabilities of a wider conflict in the world's largest oil producing and exporting region, and bolstering fears of a supply disruption.What added to the market's worry was US President Donald Trump's threat to impose heavy sanctions against Iraq if American troops were forced to leave OPEC's second-biggest producer. 73131584 Trump's warnings to strike "in a disproportionate manner," and attack 52 sites if Iran were to retaliate against the killing of its general, and Iran's threat to "settle scores with the US" kept the market unsettled through the day.Local prices of petrol and diesel advanced on Monday, in line with international fuel rates, and can soon become a headache for the government already facing the challenge of reviving an economy in the middle of a slowdown.On Monday, petrol retailed for Rs 75.69 a litre in Delhi and Rs 81.28 a litre in Mumbai. Diesel was at Rs 68.68 in Delhi and Rs 72.02 in Mumbai. Since Friday, petrol and diesel prices are up 34 paise and 43 paise a litre, respectively.Fuel prices had already been rising in response to the decision by key oil producers, including OPEC members and Russia, to extend output cut until March — in two months, petrol and diesel rates have risen by Rs 3.09 and Rs 2.93 a litre, respectively, in Delhi.State oil companies use 15-days' moving average of global fuel rates for local pricing. The current surge in international rates will show up over the fortnight, a state oil company executive said.

India may be planning to cut spending to curb deficit

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NEW DELHI: The government is likely to cut spending for the current fiscal year by as much as Rs 2 lakh crore ($27.82 billion) as it faces one of the biggest tax shortfalls in recent years, three government sources said.Asia's third largest economy, which is growing at its slowest pace in over six years because of lack of private investment, could be hurt further if the government cuts spending.But with a revenue shortfall of about Rs 2.5 lakh crore, the government has little choice to keep its deficit within "acceptable limits", the first official, who did not want to be named, told Reuters.The government has spent about 65% of the total expenditure target of Rs 27.86 lakh crore till November but reduced the pace of spending in October and November, according to government data. A 2 lakh crore-rupee reduction would be about a 7% cut in total spending planned for the year.In October and November, government spending increased by Rs 1.6 lakh crore, nearly half the Rs 3.1 lakh crore it spent in September. The fiscal year starts April 1 and ends March 31.Lack of demand and weak corporate earnings growth in the economy led to lagging tax collections this year. Analysts said growth will be hurt."When the private investment has slowed so much, this will definitely drag down growth further," said Rupa Rege Nitusure, chief economist at L&T Financial.India's economic growth slowed for six consecutive quarters to 4.5% in July-September, despite a 135-basis-point cut in interest rates by the central bank since February 2019.Now, even the Reserve Bank of India seems to have become more worried about inflation rising. It kept its key lending rate on hold on December 5, even though it slashed its growth forecast for the current fiscal to 5%, which would be the lowest in a decade.Even a surprise corporate tax rate cut announced by Finance Minister Nirmala Sitharaman earlier this year failed to spur private investment in the economy.The government is likely to keep the fiscal deficit under 3.8% of gross domestic product, sources said, while letting it slip from its earlier set target of 3.3% for the year.The government is likely to announce additional borrowing of Rs 3,000 crore to Rs 5,000 crore for the current year to match the revised fiscal deficit, two sources in the government said.

Manipal-TPG in Rs 2k cr deal talks for Columbia Asia’s India assets

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Mumbai: A consortium of Manipal Hospitals and TPG Capital Management has emerged as the front runner to acquire Seattlebased healthcare chain Columbia Asia's Indian hospital assets in a Rs 2,000 crore deal, said people with knowledge of the matter.Manipal-TPG — among the final shortlisted bidders — has entered into exclusive talks with Columbia Asia management and the transaction is expected to be concluded by the fiscal year-end."Negotiations are advancing faster and we hope to conclude it by March," said one of the people cited above. Morgan Stanley is running a formal sales process to find a buyer, the people said.ET first reported the potential transaction on October 11.Others in the race included BR Shetty-owned BRS Ventures Investment Ltd, General Atlanticbacked KIMS Hospital Hyderabad, private equity funds Blackstone and Bain Capital. Manipal and TPG declined to comment.The stake sale is part of Columbia Asia management's decision to exit Asia operations. 73131385 Interestingly, TPG was part of the consortium — along with Malaysian conglomerate Hong Leong— that bought rest of the Asia operations of the Seattle-based chain. It paid $1.2 billion for 17 hospitals in Malaysia, Indonesia and Vietnam.Columbia Asia has 11 facilities in the country with a total bed strength of around 1,200 with another 200 beds under construction.It has six hospitals in Karnataka and one each in Maharashtra, West Bengal, Uttar Pradesh, Punjab and Delhi.The deal will make Manipal one of the top healthcare chains in the country. It now owns 10 multi-speciality hospitals, five teaching hospitals and several fertility clinics. It's present in Bengaluru, Mangalore, Vijayawada and Goa with a bed strength of around 6,000, its website showed.After losing out in the race for Fortis Hospitals, Manipal had been engaged in discussions for multiple buyouts in the sector.Backed by private equity groups Temasek and TPG, Manipal Hospitals was in final discussions to acquire about 82% stake in Medanta-The Medicity, owned by renowned heart surgeon Naresh Trehan, at a valuation of ?5,800 crore ($820 million). However, the deal fell through late last year.Manipal was also engaged in negotiations to acquire other assets such as Hyderabad-based hospital chain Star Hospitals and Kolkatabased AMRI Hospitals Ltd.Texas-based TPG is one of the most aggressive investors in the Indian healthcare space.In 2017, it created Asian Healthcare Holdings (AHH), a platform to invest in healthcare assets. Separately, it invested $146 million in Manipal in 2015. TPG Capital, the buyout arm of private equity firm TPG Group, holds a 25% stake in Manipal Health Enterprises while the Singapore government's investment arm Temasek Holdings Pte Ltd holds 18%.

RCom lenders push for better deal from bidders

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MUMBAI: Lenders to bankrupt Reliance Communications (RCom) are unlikely to agree to the current bids and will push for a better deal with more upfront cash, said people familiar with the matter. The committee of creditors (CoC) is weighing whether to pick up equity in RCom and its two arms or sell the parent and its units separately to extract maximum value, these people said.Reliance Jio Infocomm, Bharti Airtel, UV Asset Reconstruction Co and private equity firm Varde Partners have bid for either part or all the assets of RCom and its two units — Reliance Telecom Infrastructure, which had licences to provide services in eight regions, and its tower arm Reliance Infratel.But the bids have offered very little upfront cash or are unworkable in the current form, said bankers. They said UV Asset Reconstruction Co has offered to pay Rs 12,760 crore, staggered over 12 years, with only Rs 5 crore upfront cash for creditors. 73131148 Varde Partners, meanwhile, has offered to create a special purpose vehicle for each asset with management fee.Bharti Airtel's take-it-or-leave-it offer comes with many riders, and has not enthused the lenders either."The bidders think banks are desperate to sell, so they will pay us trash rates. But we know the value of the assets. Our estimates suggest the land and other infrastructure alone could be worth Rs 15,000 crore. We will not agree to the offers currently on the table," said one of the persons.Jio has bid Rs 3,600 crore, but wants only the towers. Bankers are hoping this bid could be combined with UV Asset Reconstruction Co's offer, but at a higher amount."There are various ways we could do it (asset sale), but all efforts are to get a better deal. We can consider selling the three companies separately, or UV Asset Reconstruction Co may be asked to increase the upfront cash payment. We have already agreed on a scoring model for the deal that the bidders know about. We could find the best bidder, and then run a Swiss challenge," said a second person familiar with the discussions.Discussions are on with Deloitte, the resolution professional for RCom and its two units. The CoC has been meeting every few days to take stock.Emails sent to Deloitte and RCom remained unanswered as of press time Monday."Negotiations are on and the CoC is open to picking an equity stake in the company, especially for bids that do not involve a high upfront payment.Making high upfront payment may be tough when there are legal tussles, which is why equity is important, in case the assets are sold later at a higher value," said a person aware of the developments.A senior executive working with one of the bidders said that besides monetary aspects, the CoC also had queries related to various compliance issues.The CoC expects to raise at least Rs 14,000 crore from the sale of the telco's assets, including spectrum, fibre and towers, based on the bids received. At that level, the haircut would be about 70% for financial lenders that have filed claims of Rs 49,000 crore against RCom and its units Reliance Telecom and Reliance Infratel.THE ASSETSAssets put up for sale include airwaves in the 850 MHz band in 14 of India's 22 telecom circles, about 43,000 telecom towers, some fibre and data centres.The spectrum is the most valuable asset. The bankruptcy court had, in a separate insolvency proceeding for Aircel, ruled that the CoC can sell airwaves, rejecting a telecom department plea. The government wanted the spectrum to be returned to it due to unpaid dues, saying it was the owner of the airwaves. The department of telecom is expected to challenge the National Company Law Tribunal order soon.At the time of its bankruptcy filing, RCom had debt of Rs 46,000 crore, making it one of India's biggest insolvencies. As many as 53 financial creditors, including local and foreign banks, nonbanking financial companies and funds, have claimed Rs 57,382 crore, of which Rs 49,224 crore has been accepted by the resolution professional.Top Indian financial lenders include State Bank of India (with a verified exposure of over Rs 4,800 crore), followed by Bank of Baroda (Rs 2,500 crore), Syndicate Bank (Rs 1,225 crore) and Punjab National Bank (Rs 1,127 crore). Top overseas lenders include China Development Bank (Rs 9,900 crore), Exim Bank of China (over Rs 3,356 crore) and Standard Chartered Bank (Mumbai and London, Rs 2,100 crore).

Investors can shift to value buys from overpriced names: S Naren

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It is tough to predict how the geopolitical situation will pan out, but higher crude oil prices could be negative for India, said S Naren, executive director, ICICI Prudential Asset Management. In a press meet on Monday, Naren said investors can make lump sum investments in smallcaps, which are undervalued after the recent sell-off. Edited excerpts:How will the geopolitical tensions between Iran and US impact India?It is tough to predict how the geopolitical situation will pan out. However, crude oil going up is negative for India. If the situation deteriorates further from here, it will impact equity markets, the rupee and also the fixed income markets.In 2019, only the top 10-15 stocks rose, while midcaps and smallcaps remained weak. Will this continue?For the top 10 stocks, the market cap has risen 43% from February 2018 to December 2019 while for stocks ranked 251 and below, the market capitalisation has fallen by 52%. Incidentally, in 2007, investors believed that roads were a requirement and cars were not essential. That era is known as the infrastructure boom days. Currently, investors believe that cars are a requirement but roads are not, which again may prove to be a folly in the days ahead. As an investor, it is important to remember that the current rally is very narrow in nature. The Indian economy and the resultant market is more than the top 10 companies which currently seem to be shouldering the up-move. Historically, it has been seen that with time such concentrated rally moves become broad-based in a gradual manner. So, it is essential for investors to look beyond the overpriced quality names and over a period, shift to value-oriented names.What has changed in the smallcap space?In mid- December, our market cap model has suggested that the share of smallcaps in the overall market cap has fallen to 8%, which is similar to 2013 levels. This is after having risen to as high as 18% in 2017. Smallcaps are currently offering a better margin of safety in terms of risk spread over large caps. Our models are decisively turning more positive on smallcaps.It is suggesting lump sum as well as staggered investments in smallcap funds with a 3-4 year view. In the last two years, smallcaps have corrected by 40% and have underperformed significantly compared to largecaps. I look at economic cycles. Today, credit growth is at the bottom. When credit growth is at a bottom that is the time to take risk. You take risk in an undervalued asset class. An undervalued asset class is the smallcap segment. So, you are investing in an undervalued asset class at the bottom of the economic cycle. Over 3-5 years, we feel that smallcaps would outperform large caps.What are you telling your investors?Earnings growth has not come in a big way in the last five years. Quality and mega-caps are two asset classes that have peaked. Further, given that the recovery in domestic macros is likely to be protracted it is very likely that the markets may tend to be volatile in the interim. Add to this mix, global factors such as the rise in crude oil prices, geopolitical tensions, all of which tend to be unpredictable and are factors which can further cause markets to remain volatile. Given this setting, for a retail investor, it is imperative to be mindful of asset allocation. While in the short run the benefits of asset allocation may not be visible, it is only over the long term that one tends to appreciate the impact asset allocation has on portfolio gains.Valuations of several PSU stocks are low. Is there value in these set of stocks?While valuations of several PSU stocks are attractive, they have not recovered because there is a fear of disinvestment in the March quarter. If that does not happen, PSUs could turn attractive.

View: Don't jump in to buy now, wait for Dalal Street to stabilise

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Geopolitical tension directly hits India's fisc. The oil prices have already shot up and if the tension persists, it may go up even further which does not at all augur well for Indian markets, economy and the fisc, says Sudip Bandyopadhyay, Group Chairman, Inditrade Capital. Excerpts from an interview with ETNOW. Today thanks to geopolitical concerns, we are looking at a sub-12,000 print on the index with an 800-point slump on the Sensex. How worried are you? Does this open the door for further cuts for the markets given that it is not going to be the most promising of quarterly earnings for us?The Indian markets have moved up quite a bit and there was definitely some correction in the offing. This geopolitical tension provided that kind of window and we have seen sharp corrections today. Also remember that the geopolitical tension directly hits India's fisc. The oil prices have already shot up and if the tension persists, it may go up even further which does not at all augur well for Indian markets, economy and the fisc. So, obviously there is going to be incremental pressure. The risk-off mood of the global investor is getting depicted across the globe and we will have to wait for the US market to open. But the fact remains that Indian markets have shown the initial crack and further cracks may be expected depending on the global mood, unless the escalation gets contained very soon. The bigger casualty today was the banks, especially the PSBs. Now the concern with the creme a la crème was also that reflation is something that the market is not really pricing in. The stocks have given you fabulous returns in the year gone by and continue to trade at high PE multiples. Some are going to fall under their own weight. We have already seen that play out in HDFC Bank and Bajaj Finance. Is it wise to profit take from some of these names?If somebody has a very short-term timeframe, then it definitely will be wiser to selectively book profit. Of course, you have to keep watching the market and when there is an opportunity, you can book profits. I do not see the stocks moving very quickly to higher levels in a hurry, So, you can book profits but in the overall banking and financial services space we continue to remain positive. Remember what is happening today and what is going to happen for the next few days is on back of geopolitical unusual event. We cannot predict these kind of events. What we can predict is the banking and financial services sector is coming out of a major correction and we have seen part of that correction play out in the last calendar year. Another part of the correction will definitely get played out in 2020. Would HDFC Bank and Kotak Banks of the world keep moving up? My answer is no. They will not give you that kind of growth what they had given in 2018 and 2019. What will move up and what will give you growth in 2020 will probably be the corporate facing banks like ICICI Bank, Axis Bank and SBI even from current levels, leave aside the geopolitical tension related correction. They will over 6 to 12 months, give the investor handsome returns. So, should you go and buy today, tomorrow or day after? I would say wait and watch. They should not jump into the market right now. Let us see where things settle. Even if you are able to buy at the bottom, it does not matter, probably buy when the market starts moving up.

Netas open wallets for social media ads as polls loom

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BENGALURU: With just over a month for the Delhi Assembly elections and contentious laws and policies polarising the electorate, political advertising and content spends on social media are expected to rise this year despite several restrictions placed on them by social media platforms, experts said.While micro-blogging platform Twitter banned political advertising in October, Google curbed ways in which political parties can micro target their campaigns in November. Chinese ByteDance-owned short-video platform TikTok does not allow political advertising at all.Still, this is unlikely to dampen spending on social media advertising in the country, the experts said. "Political advertising spends won't go down in 2020. They have tasted blood. There will just be a qualitative tweaking of expenses," said brand consultant Harish Bijoor. "They will always find a loophole to thwart any restrictions placed by platforms on political ads. Earlier, political ads focused on short periods of time, on a campaign. Two months became six, and now it is year-round," he said.According to Facebook's political advertising transparency report, political parties spent Rs 74.88 lakh targetting Delhi in the last 90 days.Paltu Aadmi Party — a mock-page advertising against incumbent Delhi chief minister Arvind Kejriwal was the top spender during the period, followed by Bharatiya Janata Party's (BJP's) official account.Another page 'My Delhi, My Pride', advertising in support of Aam Aadmi Party (AAP), was the third-highest spender. Delhi elections will be held on February 8. "Political parties are finding organic ways of advertising by paying influencers or creating online communities. Spending will definitely not come down," said Naresh Arora, director of DesignBoxed, which managed Indian National Congress' campaign in the recent Haryana Assembly elections and earlier handled the party's social media campaign during the general elections. "Creating and distributing content is very expensive. Some political parties even pay people for posting tweets on their behalf," he added. Spending to create content for social media is not directly correlated with elections, though, and will be driven by government policies as political parties plan various outreach programmes on social media, Arora said.The advertising spends are usually higher than what is disclosed by social media platforms, experts said. Money spent on creating and distributing content through thousands of surrogates — on WhatsApp, Twitter and other platforms organically — usually leave no money trail, they pointed out. For example, political parties and affiliates officially spent about ?72 crore to advertise on Facebook, Google and Twitter in 2019, according to advertising transparency reports released by the US-based technology companies. However, the amount is believed to be at least 3-4 times more than the official figure.Political parties will increasingly use influencers to spread their message, since audiences on social media are persuaded by people-to-people communication, said Karthik Srinivasan, an independent communications consultant."Political parties are more likely to spend money on social media only for hot-button issues that they need wide reach for," he said.