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Wednesday, February 26, 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


Aditya Puri denies rift over who'll be the next HDFC Bank boss

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Mumbai: HDFC Bank managing director Aditya Puri said his vision for the successor at the most successful lender in the country is aligned with that of HDFC group companies' elder statesman Deepak Parekh, squelching speculation that they had differences over the succession process."In all fairness, Deepak and I have no differences," Aditya Puri told ET in an interview. "We all want the best person in the organisation. He hasn't even discussed the subject with me… I don't know for how many months. HDFC has a nominee in the search committee. He is a large shareholder. He also wants what is best for the organisation. There is no difference between the board and anybody. We are all looking at the best interests of the bank."Industry is keenly watching the succession at HDFC Bank as Puri, hired by Parekh from Citibank to start HDFC Bank in 1994, steps down in October after creating a behemoth with a market value of Rs 6.5 lakh crore. There's intense speculation on whether his successor would be an internal or an external candidate.Looking for a Set of AttributesBut Puri said that the search committee has engaged headhunting firm Egon Zehnder to look at not only the internal candidates but even an external one if there is exceptional talent."The board gave a set of attributes to them that we would be looking for. We have told them the bank has strong internal candidates, but you can look for exceptional external candidates as well," said Puri without revealing his preference.When asked about the general management philosophy of going with an internal candidate in institutions that are not facing major challenges, Puri said the board acknowledged the contributions of insiders."I believe that this theory (of favouring insiders) has a lot of merit," said Puri. "Obviously, we know whoever is within the organisation. If a lot of them have created a $100 billion franchise they must be competent. The board also acknowledges that we have very strong internal candidates. But, there were some people who felt that we should also look at external candidates so that we won't miss out on anyone.'' Puri said he did not have a veto on the successor, but the board would give weight to his recommendations."I don't have a veto, but I would assume that what I say will have a lot of weight,'' he said.Executive directors Bhavesh Zaveri, Sashidhar Jagdishan and Kaizad Bharucha are the internal candidates. As regards to external candidates, there had been speculation that Piyush Gupta of DBS and Ajay Banga of Mastercard were being considered for the top post at HDFC Bank.CONFLICT OF INTEREST WITH HDB FINResponding to a question on possible conflict of interest between HDFC Bank and its NBFC subsidiary HDB Financial, Puri said the two have no overlap."There is no overlap between the financial services company and HDFC Bank," he said. "HDB takes slightly higher credit risk, they charge higher interest rates, they are compensated by lower cost structure. In the last 13 years no case has come to me that the two of them are fighting."When asked if he would continue as chairman of HDB Financial after retirement from HDFC Bank in October, Puri said he and his successor would jointly decide on the matter.The bank is poised to grow continuing its past success as its leadership team has put in place the relevant technology and created distribution capacity to take advantage of an economy where demand is abundant while supply is lagging, said Puri.The government rolling out the red carpet for sovereign wealth funds in building infrastructure and the Reserve Bank of India easing the liquidity position could revive economic growth above 5%, although investment may have to wait given the low capacity utilisation.Puri, who had delivered earnings growth of 15% or so even during the worst of the slowdowns, said that the government had done its best to kickstart the recovery within the available fiscal space."Everyone recognises that there is a slowdown in the economy, but we see a way out of it," said Puri. "The government has also focussed on agriculture with 14% higher expenditure. They are focussing on improving productivity with better roads, infrastructure, electricity etc. A little improved agri demand and change in interest rates, and very likely GDP will come above 5%."But the key to many of these measures succeeding would depend on the divestment programme. "I just hope that the government focusses and ensures that divestment happens on time," he said.

Voda Idea needs 15 yrs to fix the mess it's in

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Mumbai: Vodafone Idea has called on the government to allow it to pay adjusted gross revenue (AGR) dues over 15 years. The telecom company has also asked for a tax refund, cuts in licence fees and spectrum usage charges (SUC) and the establishment of a floor for tariffs among measures to help remain viable.In a letter to the Department of Telecommunications, the finance ministry and Niti Ayog, the telco, which has over 300 million subscribers, said it needs help from the government to stay in business. The letter was sent a day ahead of a meeting of Digital Communications Commission (DCC) – the highest decision-making body of DoT – which may discuss some steps on providing relief to stressed telcos such as Vodafone Idea.In its letter, the operator sought a goods and services tax (GST) refund of Rs 8,000 crore, which can be adjusted against its AGR dues, and the option of paying the remaining amount in a staggered manner — over 15 years — after an initial moratorium of three years. 74325473 The telco has to pay statutory dues of about Rs 57,000 crore, as per DoT's estimates, but has so far paid only Rs 3,500 crore. Its own estimates peg dues at around Rs 23,000 crore, of which Rs 7,000 crore is the principal amount. Experts don't expect the cash-strapped telco to cough up even the lower amount.The operator, formed after a merger of Vodafone India and Idea Cellular, has warned of shutting shop unless it gets some relief on its AGR dues.Vodafone Idea's letter also calls for a reduction in licence fees and SUC. Telcos annually pay 8% of AGR as licence fees; Vodafone Idea wants it reduced to 3%. The industry has been long calling for a reduction in SUC as well, which is paid at 3-5% of AGR. The telco wants it brought down to 1%.ET has reported that the government is considering deferring licence fee and SUC payments for a substantial period to help free up cash flows at telcos, besides setting up a stress fund to offer loans on easy terms. The operator also highlighted to the government that a floor for tariffs will help double the sector's revenue. Vodafone Idea didn't respond to ET's emailed queries.

The great Indian dividend festival is on

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Companies are rushing to pay dividends to shareholders before the new budget proposal, which makes dividend income taxable up to 43 per cent in the hands of the recipient, takes effect from April.So far, 204 companies have announced dividends since February 1, compared with 90 during the similar period in 2019 and 98 in 2018. The boards of 32 more companies are meeting in the next three days to decide on the dividend.The Bajaj Auto board on February 21 declared an interim dividend of 1,200 per cent or Rs 120 per share. The company in 2019 and 2018 had declared a dividend in the month of May.Shree Cement on February 14 announced an interim dividend of 1,100 per cent compared to 250 per cent interim dividend announced in January 2019 or 200 per cent in January 2018. Symphony has declared a special dividend of 900 per cent on February 7. Divis Laboratories has approved a dividend of 800 per cent on February 12. The company in the past three years announced dividend in the month of May.At present, shareholders in the country need not pay any tax on income from dividends from domestic companies for up to Rs 10 lakh while they are taxed 10 per cent for dividend income beyond Rs 10 lakh. After the abolition of dividend distribution tax (DDT), the recipient of dividend will have to pay according to their respective tax slabs, which are as high as 43 per cent.Most promoter owners hold equity individually or in trusts, and are in the upper tax bracket. So, they will now have to pay 43 per cent tax on dividend from April 1. "Shareholders of companies with high promoter holding can expect a flurry of dividend announcements before March 31," said Vijay Bhushan, president, Association of National Exchanges of Members of India (ANMI).Balkrishna Industries has announced an interim dividend of 800 per cent on February 14, compared to 100 per cent dividend declared in February 2019 and 75 per cent in February 2018. 74327748 A similar rush to pay interim dividend was witnessed in 2002, when the then finance minister Yashwant Sinha had proposed to make dividends taxable in the hands of the shareholders. Even in March 2007 after the presentation of the 2007-08 Budget when then finance minister P Chidambaram proposed an increase in dividend distribution tax (DDT) to 15 per cent from 12.5 per cent, a record 300 listed companies announced their plans to pay interim dividends before the next financial year.Budget 2020 has proposed to abolish DDT on dividends paid by corporates and transfer the tax burden completely in the hands of the recipient.

GDP growth in Q3 likely to stay flat at 4.5%: Economists

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NEW DELHI: India's economy is likely to have grown at the same pace as in the third quarter at 4.5%, most independent economists said, though others expect growth to be a tad faster, based on a slight pickup in agriculture and government spending."Our composite leading indicator (index of 33 major leading indicators) suggests that gross domestic product growth to remain flat at 4.5% as in Q3 of FY20," said Soumya Kanti Ghosh, group chief economic adviser, State Bank of India.India's economic growth slipped to a 26-quarter low of 4.5% in July-September from 5% in the first quarter.The statistics office lowered the FY19 GDP growth rate to 6.1% from the provisional estimate of 6.8% and has forecast 5% growth in FY20, its slowest pace in 11 years. The Economic Survey 2020 sees a recovery to 6-6.5% in FY21. "We were earlier anticipating a downward revision in FY20 growth rate from 5% to 4.6%," Ghosh said.This downward revision, as per Ghosh, will have statistical benefits as it could push up FY20 GDP to 4.7%. "There is not much improvement. We have retained our full year GDP target at 4.7%," said Upasna Bhardwaj, economist at Kotak Mahindra Bank.Manufacturing activity is likely to remain pressured and unlikely to better the 6.4% growth in the corresponding period the year ago. Falling growth seen in sales of commercial vehicles, railway freight traffic and cargo handled by civil aviation has also contributed to the projection being significantly lower. "There is no joy in the GDP story. Consumption could be slightly better because of PM-KISAN but there is no systematic improvement anywhere," said IDFC First Bank chief economist Indranil Pan. 74327430 The Reserve Bank of India has cut policy rates by 135 bps since February, 2019, and the government reduced corporate rate tax to 22% in order to attract investment and boost growth.Despite these steps, indicators available till the quarter ended December, 2019, are not particularly robust, said Madan Sabnavis, chief economist at CARE Ratings."The sharp decline in October and November seems to have been reversed in December," said Devendra Kumar Pant, chief economist at India Ratings.

Bankruptcy & Insolvency: ED seeks 2 more weeks from NCLT to intervene in Sterling Case

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Mumbai: The Enforcement Directorate (ED) has sought permission from the dedicated bankruptcy court to intervene in the insolvency resolution pleas against Sterling group companies Sterling International Enterprises and Sterling SEZ & Infrastructure.ED on Wednesday sought more time from the Mumbai bench of the National Company Law Tribunal (NCLT) to file its response challenging the Sterling promoters' move to pay the lenders to the two group companies to withdraw the insolvency resolution plea and take back control of the firms.A division bench of tribunal, presided over by judicial member Bhaskara Pantula Moha and technical member Shyam Babu Gautam, allowed ED two weeks' time to file its response in the matter, and adjourned the matter to March 23.Sterling group is accused of defaulting on and diverting loans of about Rs 15,000 crore, and central agencies ED, Central Bureau of Investigation (CBI) and the income-tax department are looking into the dealings of its promoters Chetan and Nitin Sandesara.The Sandesaras are currently absconding and are believed to be in Africa."Our primary contention is that as per the National Company Law Appellate Tribunal (NCLAT) order in the Sterling Biotech (case), which had clarified that the promoters of the company can't pay from the proceed of crime and the proceedings against the promoters will continue under the Prevention of Money Laundering Act (PMLA)," Nitesh Rana, an advocate representing ED, told NCLT on Wednesday.The appellate tribunal had in August last year allowed the promoters to take control of Sterling Biotech after making full payment to the lenders, setting aside an NCLT order to liquidate the company.The Sandesaras are now looking to do the same with Sterling International and Sterling SEZ.More than 90% of lenders to the biotech firm had approved the settlement offer of around ?3,945 crore against total dues of over ?8,100 crore and withdrawal of the insolvency case under Section 12 (A) of the Insolvency and Bankruptcy Code (IBC).However, in its order, the appellate tribunal observed, "In so far asset of the corporate debtor (Sterling Biotech) is concerned, if it (the resolution offer) is based on the proceeds of the crime, it is always open to the Enforcement Directorate to seize the assets of the corporate debtor and act in accordance with the Prevention of Money Laundering Act, 2002 (PMLA)."In June last year, ED had attached properties of over Rs 9,700 crore owned by the Sandesaras.

It’s SSG vs Cerberus as Altico takeover reaches last lap

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MUMBAI: Offers from SSG and Cerberus have been selected for a final vote after lenders of Altico met on Monday and shortlisted the two as the key contenders to take over the troubled real estate financier, said people directly involved in the process.SSG's final offer after multiple revisions is an upfront cash payment of Rs 2,700 crore and a one year employment guarantee for the management team.Cerberus has offered Rs 2,600 crore in immediate cash payments and Rs 450 crore in security receipts, a kind of debt instrument backed by financial assets, to be paid when able.Lenders vote on the proposals on March 12. SBI Capital, which is managing sale process along with EY, did not immediately reply to ET's queries. Cerberus and SSG declined to comment."The plan by the incumbent management team has not found favour, though it will also be voted on," said a person with direct knowledge of the matter.SSG made a second proposal — Rs 2,150 crore upfront payment plus Rs 1,500-1,750 crore of security receipts. It also suggested Altico's bad loans be moved to an asset reconstruction company chosen by the lenders. But this won't be taken up for voting.Lenders analysed the revised offers on Monday in the presence of advisors such as SBI Capital, which also made a presentation on the competing bids followed by detailed pitches by each of the three bidders. ET reported on February 24 that the credit meeting will finalise the shortlist. The lenders were keen on bids that offered to run the company instead of shutting it down over a period of time."Even people working in the company have conveyed their intention to continue working for the real estate financier as they exuded confidence to rebuild it," said an executive involved in the process.The Clearwater-backed Altico management had suggested 100% repayment of the principal amount with outstanding interest being paid back at 10% over 5.75 years. But this hinged on Clearwater taking control of Altico as part of the resolution process. In this formula, existing shareholders would agree to pay Rs 630 crore by March 2021, which will be counted as year one. In years two and five, the management will make fresh equity infusions to keep the business viable, ET had reported.74328049 Alternatively, the shareholders suggested that some lenders could get repaid before 5.75 years but only if they agreed to a 30% haircut. They will get 70 cents to the dollar at the same coupon.With lenders working closely on the restructuring plan, a successful resolution could establish a benchmark in India's shadow banking space.Altico owes about Rs 4,000 crore to State Bank of India, Deutsche Bank, Bank of Baroda, Yes Bank, Union Bank, Mashreq Bank and IFC, besides NBFCs and mutual funds including Aditya Birla Finance, Bajaj Finance and L&T Finance.74328052 "Potential buyers are quoting lower valuations as all such companies have stopped business. That is why it is important keep any such indebted company as a going concern, which help fetches a higher valuation," said an advisor working on one of the debt resolution plans for cash-strapped nonbanking finance companies (NBFCs).The real estate lender faced a liquidity crunch in September and defaulted on Rs 138 crore of debt repayments.

Great Indian dividend festival’s on before new tax rules kick in

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Companies are rushing to pay dividends to shareholders before the new budget proposal, which makes dividend income taxable up to 43 per cent in the hands of the recipient, takes effect from April.So far, 204 companies have announced dividends since February 1, compared with 90 during the similar period in 2019 and 98 in 2018. The boards of 32 more companies are meeting in the next three days to decide on the dividend.The Bajaj Auto board on February 21 declared an interim dividend of 1,200 per cent or Rs 120 per share. The company in 2019 and 2018 had declared a dividend in the month of May.Shree Cement on February 14 announced an interim dividend of 1,100 per cent compared to 250 per cent interim dividend announced in January 2019 or 200 per cent in January 2018. Symphony has declared a special dividend of 900 per cent on February 7. Divis Laboratories has approved a dividend of 800 per cent on February 12. The company in the past three years announced dividend in the month of May.At present, shareholders in the country need not pay any tax on income from dividends from domestic companies for up to Rs 10 lakh while they are taxed 10 per cent for dividend income beyond Rs 10 lakh. After the abolition of dividend distribution tax (DDT), the recipient of dividend will have to pay according to their respective tax slabs, which are as high as 43 per cent.Most promoter owners hold equity individually or in trusts, and are in the upper tax bracket. So, they will now have to pay 43 per cent tax on dividend from April 1. "Shareholders of companies with high promoter holding can expect a flurry of dividend announcements before March 31," said Vijay Bhushan, president, Association of National Exchanges of Members of India (ANMI).Balkrishna Industries has announced an interim dividend of 800 per cent on February 14, compared to 100 per cent dividend declared in February 2019 and 75 per cent in February 2018. 74327748 A similar rush to pay interim dividend was witnessed in 2002, when the then finance minister Yashwant Sinha had proposed to make dividends taxable in the hands of the shareholders. Even in March 2007 after the presentation of the 2007-08 Budget when then finance minister P Chidambaram proposed an increase in dividend distribution tax (DDT) to 15 per cent from 12.5 per cent, a record 300 listed companies announced their plans to pay interim dividends before the next financial year.Budget 2020 has proposed to abolish DDT on dividends paid by corporates and transfer the tax burden completely in the hands of the recipient.

This isn’t vanilla correction; Nifty can fall to 11,100: Gautam Shah

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What crucial levels are you watching out for Nifty Bank? The morning started off flat but now we are starting to see a further weakness set.The market does not look good. It has been on a weak footing. The foundation of what is happening right now was laid six months back. Many of the technical charts that we follow have been negative for a while now. The technical indicators have not been in sync with the price action but because the Nifty had such a great run on account of a handful of stocks, we never questioned the technical indicators till Nifty hit 12,300-12,400 levels.In light of the developments of the past week, it does seem that this is not a plain vanilla correction. It is a short term downtrend wherein the markets will continue to make a series of lower tops and lower bottoms and this can continue for many weeks and maybe even many months.The market participants are used to seeing indices correct or turn around to go back to making new highs. This might not happen right now because when you look at the momentum on the way down, and the volumes, some of the larger stocks are clocking in bad days. And this is an indication that there is a big shift happening.The markets are also going through collateral damage given what is happening around the world. This is going to get a lot worse before it gets better. The first pointer to work with is the budget day low of around 11,620. You could see some stopover demand there but we believe that eventually this market is headed towards that zone of 11,300 to 11,350 and maybe even to 11,100 and this has been our working view for the last one month. All rallies will find a lot of resistance, so the upside is clearly capped to the 11,900 area. And because there are too many sectors participating on the way down, Bank Nifty which was an outperformer in the last couple of days is only now sitting up for the largest decline. We would not be surprised if Bank Nifty loses about 10 per cent from these levels.What about capital goods and autos? We have seen quite a bearish trend building up in autos particularly. Do you see it worsening?I would be more bearish on capital goods, the reason being in the good times when Nifty got close to levels of 12,400 level, the stocks from this sector did not participate. And now as the markets are going through a difficult phase, capital goods is clearly one of the biggest underperformers. Larsen & Toubro is a great example because it did absolutely nothing in the last three months. Many of the top capital good stocks are setting up for a much bigger breakdown that could lead to 10 per cent to 15 per cent downside for the index and for most of the stocks.Autos, well they had a lovely run. They moved up 30 per cent from the lows of last August, September but the manner in which some of them have just come off in the last 10 days that does not look heartening at all. In this environment, the weak is getting weaker, and the cheap is getting cheaper and this trend will continue on for the next many weeks. We will have to really review in the last week of March but at least for the next four to six weeks, capital goods, FMCG, auto, metals, banking are a complete avoid and the only two spaces that we like are IT and healthcare. We believe one can hide is chemicals and insurance too. So, these four pockets will outperform but everything else in the market looks quite bleak.What is your outlook specifically on the Nifty Bank in terms of important levels? Do you believe there is more correction in sight and what is the view on individual private sector bank stock as well as PSU banks?In the banking space, for the last year, year and a half just one stock – HDFC Bank acted like Pied Piper. So, when this stock did well, the Bank Nifty did well and because the Bank Nifty did well it helped Nifty.Some of these top-performing stocks of the last 18 months may witness some downside and if that were to happen, then the Bank Nifty will take a hit. We are working with an immediate target of about 29,700 which was around the budget day low, and once that gets violated we would not be surprised if Bank Nifty goes down to 28,900 and eventually 28,000.A possible 2,000 point fall on the Bank Nifty is likely and some of the top names in the space, apart from ICICI Bank which has broken out of a 10-year consolidation, look weak.PSU banking is in terrible shape; most stocks are making 52-week lows and there are no signs of bottoming out. We have recommended our subscribers to stay away from this space because you really do not know where this is going to end in terms of its downtrend.

India wants fair share of $100 billion global taxes from Google, Facebook

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MUMBAI: India is pushing for a major change at Organisation for Economic Cooperation and Development (OECD) on methodology at determining taxability in every jurisdiction hoping to tap a larger share of tax from multinationals such as Google, Facebook, Amazon and Netflix.OECD recently said that income tax collections of major digital companies could go up by around $100 billion if new tax regulations are formed and adopted by all countries.With a hope of getting larger chunk of $100 billion in global taxes to be paid by digital companies, India is pushing that number of users should determine taxes payable by digital majors in a country. The OECD under its Base Erosion and Profit Shifting (BEPS) initiative has come up with a number — $ 100 billion — in additional taxes digital majors need to pay globally."There are companies generating billions of dollars in revenue from India but manage to pay abysmal amount in taxes. All we want is that these companies cough up what's only India's fair share," said an official aware of the development. He added that the government has been pushing for this and would be submitting its proposals to the OECD soon.OECD is set to weigh in if a country has a right to tax the company based on intellectual property registered in the country or based on the number of users. India is strongly pushing for the latter as that could mean the global majors may have to pay more tax, said people in the know. Additionally, OECD is also asking these companies to pay at least 12.5% tax in each country-- another win for India; as most companies merely pay about 6% (equalisation levy) on part of their revenues.Companies such as Google, Facebook and Amazon have created structures whereby they end up paying no taxes in India as profits are swiftly moved to tax havens such as Ireland and Cayman Islands through creative holding structures."As per the Pillar 1 and Pillar 2 framework of the OECD, several MNCs could witness an increase in their Indian tax liability because they will start paying taxes in countries like India which are market economies even if the MNCs don't have a large local presence in India. It is expected that developing countries will benefit more than the advanced countries. Pillar 2 will reduce the tax rate differential between various countries and will therefore discourage MNCs to shift profits to low tax countries. This could benefit countries like India which are impacted by such shifting of profits," said Rajesh H Gandhi, partner, Deloitte India.Pillar 1 and 2 approaches under the OECD mainly refer to the tax structuring undertaken by multinationals to create investment companies in tax havens to escape taxes.Tax experts say that India has already prepared its ground work for accepting the OECD's guidelines by introducing the basic framework on "significant economic presence" or digital permanent establishment (PE) in 2018. The government in this year's budget said that it's waiting for the OECD guidelines before introducing domestic regulations.Industry experts said that India could see a huge chunk of the increase in taxes from next financial year if the OECD guidelines are accepted by 130 member countries.

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