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Monday, March 2, 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


Airtel claims it is being charged more than what is due as AGR

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NEW DELHI: Bharti Airtel's own assessment of adjusted gross revenue (AGR) dues is nearly a third of the government's as it has taken into account certain deductions the telecom department had initially refused and also duplicated entries, among other discrepancies, a person familiar with the matter said."Certain deductions haven't been allowed by the DoT (Department of Telecommunications) owing to the absence of certain documents… telcos were informed that in such a scenario, the department would go ahead and add those to revenue for the time being but would allow deductions once companies furnish the requisite documents," the person told ET. The department's refusal to consider these had inflated the bill by as much as seven-eight times over some years, he said.The required documents have now been submitted, and telcos such as Airtel and Tata Teleservices hope the DoT would lower its assessed AGR liabilities comprising licence fees, spectrum usage charge (SUC), interest and penalties, the person added. Licence fees and SUC are paid on the basis of a telco's AGR.But as things stand, since the interest and penalty have been compounded by the government by taking such "disputed" heads into account, the DoT's figures have increased manifold in comparison to the company's estimates, the person said.Another person said the biggest discrepancy for both Airtel and Tata Teleservices was because the DoT had not permitted some deductions on interconnect usage charge in the absence of certain documents.The people said the original liability — as calculated by both the DoT and Airtel — had been amplified several times due to the high interest rates and calculations spread over several years. So for example, while dues for 2006-2007 as calculated by the DoT had grown 7-8 times the original liabilities, Airtel's self-assessed dues, despite the amplification over the years, was still far lower. This is due to variance in the principal arrears for 2006-2007 owing to the discrepancies in calculating AGR, they said.The difference between the original liability and the final one though varies, depending on how old the issue is and the rate of interest applicable for those years. Typically, older the base year, the wider the gap between the original liability and the final one."Besides, penalty on the original amount is as much as 50%," the first person added.Airtel has self-assessed its AGR dues at Rs 13,004 crore, compared with nearly Rs 40,000 crore as calculated by the DoT. Tata Teleservices' own estimate is Rs 2,197 crore against the government's demand of nearly Rs 15,000 crore. Both Airtel and Tata Teleservices have paid their dues in full, as per their selfassessment.Airtel did not respond to ET's queries. Tata Teleservices and the DoT couldn't be immediately reached for comment.In fact, Airtel on Saturday also paid Rs 5,000 crore as "ad-hoc payment", subject to refund at a later stage after the DoT reconciles its own estimates with that of the telco.Vodafone Idea, which has so far paid Rs 3,500 crore towards its AGR dues, has estimated its liabilities at around Rs 23,000 crore, of which Rs 7,000 crore is the principal. This compared with DoT's Rs 57,000-crore estimate. 74450179 As reported by ET on February 28, in certain cases, the controller of communications accounts (CCA) of the DoT had not permitted certain deductions, citing inadequate supporting documents such as invoices.Also, the CCA had not taken a consistent stand across circles on the interpretation of certain DoT circulars.This has resulted in anomalies such as double addition of revenue in some circles, while in other circles, amounts running into hundreds of crores have been added to the revenue without any explanation, ET had reported.Telcos are likely to go to the Telecom Disputes Settlement and Appellate Tribunal if the DoT is not convinced and continues to press for more than the self-assessed dues of the telecom operators, industry executives had said.

Mark Mobius sees a Covid-19 chance for India

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Which are the asset classes one should look at when global markets are in panic mode?Dividend-paying companies that look like they will continue to pay dividends, and gold.Are you looking at increasing your allocation to Indian equities in wake of fewer confirmed coronavirus cases here?Yes, India looks good not only because of low incidence of virus thus far but also because of the desire of manufacturers around the world wanting to diversify away from China as a source of parts and raw materials. It is very important, therefore, for the Indian government to open its doors widely to such industries for investment in India.How concerned are you about the impact of Covid-19 on global growth? Is the panic in world markets justified?To some extent, the panic over coronavirus is justified simply because of the uncertainty that has developed around its spread and the vulnerability that people feel. The result is a kind of freezing of the economic system where people don't want to travel, don't want to go to work, etc. More importantly, the fact that the virus began in China and has had its greatest incidence in China is critical since China is such an important source of raw materials and parts for the entire global industrial system.China is now the world's largest manufacturing centre and companies all over the world depend on Chinese raw materials and parts. For example, the global pharmaceutical industry depends on raw materials from China. The US automobile industry depends on Chinese auto parts, etc. So there definitely will be an impact on global growth. How much? I would estimate a half a percent but it could be higher.Do you see a large stimulus from China or any major action by central banks to combat the impact of the coronavirus outbreak?Yes, central banks around the world will be called upon to take action but the question now is: What action can they take? In Europe, it would be like pushing on a string since interest rates are already in negative territory and even in the US, interest rates are already quite low. One solution might be for central banks to make direct transfers of cash into the bank accounts of individuals.

Maruti hasn't given up on its small car love

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MUMBAI: Maruti Suzuki is developing two car models that will be priced below Rs 5 lakh, expanding its offerings in the entry-level segment where competition is easing with the introduction of new safety and emission regulations.In the works are an all-new 800cc car and another model to be powered by a 1-litre engine, said people in the know. The local unit of Japan's Suzuki Motor currently sells the Alto with an 800cc engine and the Celerio with a 1-litre option.Managing director Kenichi Ayukawa confirmed that the company was working on an 800cc car among multiple models, but didn't talk specifically about the second car.The challenge in developing a small car is keeping the cost low, he said. "We have to comply with new regulations on safety and emission which spike the cost by 10% on entry level and makes it challenging," he told ET, adding: "We have to still find a solution on the same."The nation's largest carmaker is developing the products when Hyundai Motor India and Tata Motors have given up on the entrylevel space, as they believe increased cost to comply with new regulations would make these mini cars non-viable.The market for the minicar segment is shrinking too — it now accounts for less than 8% of India's automobile market compared with 25% in 2010. But Maruti Suzuki feels it will remain sizeable, being the stepping stone for the millions who aspire to graduate from two-wheelers to four wheelers. Its rival in this segment is Renault with the Kwid.Entry cars are largely a hinterland phenomenon and Maruti understands that game very well, said automotive forecasting firm IHS Markit's associate director, Gaurav Vangaal.The sub-Rs 5 lakh segment would continue to maintain sales of almost half a million units annually over the next two to three years, driven mostly by new launches from Maruti Suzuki, he said.The first of the two new cars is expected to hit the roads by the end of 2020, said the people in the know.74450325 Spike in PricesTo be strapped with a 1-litre engine, the compact car, code-named YNC, will likely replace the existing Celerio, which is now available with both 1-litre and 1.2-litre engines. The new 800cc car, code-named Y0M, will be launched by the festive season of 2021. The company is likely to take a decision on whether to continue with the Alto closer towards the 2021 launch of the 800cc car. India is a large country with diverse needs and in rural areas, high priced vehicles are not in demand, Ayukawa said. A spike in entry car prices by about 10-15% in the last 12-18 months on account of new insurance, safety and emission regulations has had a negative impact on the segment. Between April 2019 and January 2020, or the first 10 months of the ongoing fiscal year, the mini car market shrank over 40% to 2.45 lakh units. Maruti Suzuki wants to ensure that its products remain affordable even in the new regulatory regime and it keep the over 50% market share, and that is why it is developing the new cars in the entry segment, said an industry executive.

Get ready to pay more for consumer products

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NEW DELHI | KOLKATA: Several consumer products from soaps to shoes to smartphones and appliances will cost more soon as several companies plan to pass on the custom duty hikes announced in the Union budget to consumers.Apple on Monday increased prices of some iPhone models such as iPhone 11 Pro, 11 Pro Max and iPhone 8 by Rs 600 to Rs 1,300 to offset the proposed increase in duties while sportswear brand Puma India will increase prices by 10% from April."Till then, we will continue to have the same price because for the products that have already been imported we have not paid additional duties," said Abhishek Ganguly, managing director of Puma India that imports almost 70% of its products, mostly shoes. Prices of air conditioners, washing machines and refrigerators will go up by 3-6% from this month due to 2.5% increase in basic custom duty on their compressors and motors of ACs, as well as due to increase in component and logistics costs in the wake of Covid-19 crisis in China, manufacturers said.74450103 Finance minister Nirmala Sitharaman had in her budget speech last month announced doubling of custom duty on shoes to 20% along with higher import duty on various other products including butter, cheese, fans, food grinders, irons, room heaters, tea and coffee makers, kitchenware and hair dryers. Godrej Consumer Products has hiked soap prices by 5%, while soft drinks-maker PepsiCo has selectively increased the prices of some items.For example, the 750-ml soft drinks that carried maximum retail price of Rs 38 in Uttar Pradesh now cost Rs 40, and the price of 1.25-litre packs in Karnataka has gone up from Rs 60 to Rs 65. "We continue to observe market dynamics and consumer preferences from time to time," a PepsiCo India spokesperson said. "Depending on the insights we receive, we take decisions on our pricing strategy that may vary from one region to another."Others FMCG companies such as Parle Products and Nestle said they are keeping a close watch on raw materials with inflationary pressures. "The trend of higher commodity prices witnessed in recent quarters is likely to continue in the near future," Nestle chairman Suresh Narayanan said in a post-earnings call last month. Over the past three months, commodities including wheat, edible oils and sugar have become costlier by anywhere between 10% and 20%. Parle Products marketing head Mayank Shah said, "If the inflationary trend continues, we will need to consider price hikes."WOODLAND, ADIDAS PUT OFF HIKESome footwear companies such as Woodland, Adidas and Asics plan to put off the price increase by a few months because they have either already imported products in the old custom duties or have committed price to distributors or franchisees keeping in mind the previous 10% duty."This season there will be no change in the pricing since we have already sourced the products to our distributors and we cannot change the price," said Harkirat Singh, managing director of Woodland. "But next season — that starts in September — it will get affected. The products we import now will come with the new duties and we will quote the distributors our new prices." Adidas said it would increase prices by 5-6% from June on a small range of products. Asics, too, could hike prices by 5-10% from June as it imports about half of its shoes, a person close to the Japanese footwear and sports equipment company said. Asics said its spokesperson is not available for comments.A telecom industry executive said the net import duty impact for smartphones has gone up by 2% since the budget fine print withdrew the exemption on social welfare surcharge, which was earlier available on basic custom duty on mobile phones. The surcharge is 10% of the basic custom duty, which is 20% for smartphones. This has forced Apple to hike prices of some models. The iPhone 8 64 GB now costs Rs 40,500 against Rs 39,900 earlier, while the price of iPhone 11Pro 64 GB has gone up to Rs 1,01,200 from Rs 99,900 and that of iPhone 11Pro Max 64 GB to Rs 1,11,200 from Rs 1,09,900. Prices have gone up for these models across memory variants.Apple has, however, decided to absorb the duty hike in the case of iPhone 11 since it does not want to impact its demand. Locally-made models iPhone XR and iPhone 7, too, have escaped the price hike. Around 75% of iPhones sold in India are imported by the company.

Slowdown hasn’t affected sales growth: James Quincey, Coca-Cola Chairman

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MUMBAI: Coca-Cola Co chairman James Quincey said the economic slowdown hadn't affected growth in India, which remains a "super-attractive market" for the beverages giant."We see India as a super-attractive market. We are not overtly concerned about one quarter up or down in India or any other markets in the world. Our experience is, if we stick to our investment plans going into the future, we drive the growth," said Quincey, 55, who joined Coca-Cola in 1996 and took over as CEO three years ago.The 128-year-old company has been trying to speed up the development of healthier alternatives as consumers shift from fizzy drinks to low- and no-sugar options and drinks globally.However, it said the carbonated drinks market continued to expand in India — its fifth-largest market by volume — helped by a host of reasons including smaller pack sizes and low-calorie variants.In the last calendar year, Coca-Cola sold over a billion unit cases in India and expects to double that in the next five years. The company said India could become its third-largest market but didn't specify any timeline.Quincey said protests and riots in parts of India could disrupt consumption growth, but said he is hopeful the strife will be resolved democratically in the country that's its fifth-largest market by volume."If there are disruptions in the functioning of any society, it's always going to be some degree of a problem for all businesses. I think the scale (of the recent violence) was such that it was. India is a vibrant democracy and all of us hope things get resolved in an appropriately democratic fashion," Quincey said in reply to ET's question on the impact of unrest and whether its growth outlook will be revised."We see a lot of long-term potential in India and one of the reasons is it's a democratic country. Every country has arguments about issues and they need to be seen in the process which is available," Quincey said.The recent protests and violence over the Citizenship Amendment Act (CAA) come as India's fast-moving consumer goods (FMCG) market slowed to 6.6% growth in the December quarter from 15.7% a year ago.The Atlanta-headquartered company, with net revenue of $37.3 billion in 2019, had earlier committed to invest Rs 11,000 crore in India to create an agriculture-focused ecosystem, food-processing units and sourcing that will help it introduce innovative fruit-based products by 2022. The company said it will compete the investment ahead of time. The beverages firm, which also sells Thums Up and Sprite, controls half the market for mango drinks with Maaza.Two months ago, bottling subsidiary Hindustan Coca-Cola Beverages (HCCB) announced that it was divesting operations in north India to existing bottlers. These generated profit of $73 million, or about Rs 500 crore, according to its latest annual report.

Indian EV industry looks for a way around Covid-19

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BENGALURU | MUMBAI: India's fledgling electric vehicle (EV) industry may see growth stall on a shortage of lithium-ion cells and critical electronic components, as the Covid-19 virus outbreak continues to impact supply chains in China and East Asian countries.The automobile sector in India is forecasting a 10% slowdown in sales due to raw material shortages because of the outbreak, but the hit on the EV sector is expected to be higher since it relies heavily on imported cells and other electronics. Tata Motors, Bajaj Auto, TVS, Mahindra & Mahindra, Ather Energy and Hero Electric are evaluating options to mitigate the impact, industry executives and analysts told ET. "EV makers have been doing a good job of localising components and traditional companies have localised heavily…but the most important piece, the cells, are still being imported," said an auto industry executive on condition of anonymity since he is not authorised to speak to the media.Most EV makers manufacture lithium-ion battery packs in-house but import the cells directly from large suppliers such as Samsung, LG, Panasonic and a slew of Chinese manufacturers due to a lack of manufacturing capacity in the country.Some established EV makers have a supply runway of a couple of months for imported components. Others are looking at alternative suppliers for components. "While components can be taken care of to some extent, at least in the short run as manufacturers usually keep 2-3 months' stocks, batteries and battery cells, on the other hand, are imported in small batches since they come with a limited warranty," said Sohinder Gill, CEO of Hero Electric. "Manufacturers do not maintain large inventories (of cells)."Startups that cannot procure large quantities of cells and electronics components have already run out of stock, people in the know told ET. Although their customer orders are small, they are unable to plan launches and service existing orders."The impact is not very direct because we've localised almost everything in the last 12 months, but there's an indirect impact because raw materials, cells and lots of passive components in electronics come from China, S. Korea and Taiwan," said Tarun Mehta, CEO of Ather Energy, a startup servicing the high-end EV scooter market.Ather, which launched its improved 450X model targeting cities beyond Bengaluru and Chennai, has a supply runway of about two months, he added. Bajaj launched its Chetak scooter, TVS introduced its iQube and Tata Motors unveiled its Nexon EV in first two months of this year. "...we are consistently monitoring developments…and exploring suppliers in other regions and are looking to localise within India," a TVS spokesperson said, albeit not specifically about its EV outlook.Bajaj Auto and Tata Motors did not respond to emailed queries, while Mahindra and Mahindra could not be reached for comment. To be sure, EV sales in India are still tiny compared to internal combustion engine-powered vehicles.

SBI Card IPO: HNIs may have to pay extra for borrowed funds

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Non-bank lenders are raising cash so that high-networth individuals (HNIs) seeking to buy into one of India's biggest initial share sales can bid aggressively. But they may have to pay more – perhaps 15 per cent by way of interest – to deploy borrowed funds into the ongoing IPO of SBI Cards.Domestic institutions have issued commercial papers (CP) worth more than Rs 80,000 crore to fund SBI Cards and Payments Services IPO at an interest rate of 11-13 per cent. That means HNIs will have to pay interest in the range 13-15 per cent since there is a mark-up over and above the cost of raising funds at local institutions.Funding costs have climbed due to the ongoing equity-markets crisis following the spread of the Covid-19 epidemic around the world. While HNIs make money from the listing premium, the lenders will make a neat profit with 2-3 per cent spread, according to market participants. The grey market premium for the SBI Cards IPO, however, fell to Rs 180 on Monday from a high of Rs 380 last week.Bajaj Finance, Kotak Mahindra Capital, JM Financial, IIFL Wealth Finance, Edelweiss Finance, ECL Finance, Aditya Birla Finance and Sharekhan BNP Paribas are among the firms raising nearly Rs 75,000 crore by issuing commercial papers maturing in 9-14 days. These instruments will have an interest rate of 11-13 per cent, said market participants."One AAA-rated firm raised about Rs 25,000 crore at an interest rate of 11.5 per cent initially to fund the SBI Cards IPO, which led to the increase in cost for all others with 11.5 per cent benchmark," said the CEO at an NBFC.The SBI Card IPO garnered more than 7.5 lakh applications on the first day, with the issue getting subscribed 35 per cent.The IPO, which opened on Monday for subscription, will close on March 5. The company plans to raise up to Rs 10,341 crore by selling 137.1 million shares at the upper end of the Rs 750-755 price band. The lot size has been decided at 19 shares, meaning one will have to shell out at least Rs 14,250 to bid for the issue.This category includes all other investors other than those who fall under the retail and qualified institutional buyer categories.The company has set aside 18.3 million shares for the HNI category, which is defined by a minimum application threshold of Rs 2 lakh. If this category is fully subscribed, it will help raise Rs 1,384 crore.The huge success of the last two IPOs – IRCTC and CSB Bank – was due to domestic brokerages and NBFCs aggressively extending IPO funding to HNIs at attractive interest rates, brokers said. While the HNI portion in IRCTC was subscribed 354 times, it was 165 times in CSB Bank issue, which closed on November 26.Out of the 15 IPOs, only three – Affle India, IRCTC and CSB Bank — were financed by NBFCs. In 2018, only three of the 24 IPOs saw demand for IPO finance."Both HNIs and NBFCs involved in the IPO funding are aware of the grey market premium and number of times the issue would be subscribed. Accordingly, they calculate the cost of the application and net gain on listing," said Arun Kejriwal, CEO, KRIS Research & Advisory. "The lower interest rate of 7-8 per cent annually excludes the interest they are getting from the money blocked in the Asba account."IPO scrips below Rs 250 will have a price band after 10 am on listing day and any IPO above Rs 250 crore will have a 20 per cent price band. Also, IPOs below Rs 250 crore will have to go through a 10-day period where they will be trade for trade (T2T), which means that scrips can be traded only if one has shares in his/her account.

Mark Mobius sees a Covid-19 chance for India

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Which are the asset classes one should look at when global markets are in panic mode?Dividend-paying companies that look like they will continue to pay dividends, and gold.Are you looking at increasing your allocation to Indian equities in wake of fewer confirmed coronavirus cases here?Yes, India looks good not only because of low incidence of virus thus far but also because of the desire of manufacturers around the world wanting to diversify away from China as a source of parts and raw materials. It is very important, therefore, for the Indian government to open its doors widely to such industries for investment in India.How concerned are you about the impact of Covid-19 on global growth? Is the panic in world markets justified?To some extent, the panic over coronavirus is justified simply because of the uncertainty that has developed around its spread and the vulnerability that people feel. The result is a kind of freezing of the economic system where people don't want to travel, don't want to go to work, etc. More importantly, the fact that the virus began in China and has had its greatest incidence in China is critical since China is such an important source of raw materials and parts for the entire global industrial system.China is now the world's largest manufacturing centre and companies all over the world depend on Chinese raw materials and parts. For example, the global pharmaceutical industry depends on raw materials from China. The US automobile industry depends on Chinese auto parts, etc. So there definitely will be an impact on global growth. How much? I would estimate a half a percent but it could be higher.Do you see a large stimulus from China or any major action by central banks to combat the impact of the coronavirus outbreak?Yes, central banks around the world will be called upon to take action but the question now is: What action can they take? In Europe, it would be like pushing on a string since interest rates are already in negative territory and even in the US, interest rates are already quite low. One solution might be for central banks to make direct transfers of cash into the bank accounts of individuals.

Different metric for digital: Cognizant

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BENGALURU: Cognizant has given different financial metrics to its digital business so that it can compete better in the market and become a suitable place to house its digital acquisitions, the IT services provider's digital business unit chief told ET.The Teaneck, New Jersey-based company is structured into three units — digital business, digital operations and digital systems and technology. The digital business unit houses its cloud and Software as a Service (SaaS) acquisitions and a slew of other units such as interactive, which is focused on marketing technology. "The operating rhythm and financial model of the digital business is different. The clock-speed of the business is four to five times faster than the normal business. You have to be able to have an operating model where you can assemble teams quickly and be agile," Malcolm Frank, the president of Cognizant Digital Business, told ET."That flows through the whole P&L (profit and loss statement). The utilisation model is different, the gross margin models are different, how we source talent is different and you can make up for it with the bill rates," Frank added.Digital contributes more than 30% to Cognizant's revenue and is growing at over 20% year on year. Digital is a key area for Cognizant under CEO Brian Humphries. Since Humphries took over last April, the company has begun a process of cutting thousands of jobs and has removed or let go a significant number of senior level talent as it begins to flatten its hierarchy.Frank said the company was beginning to recover from earlier distractions, such as complying with activist hedge fund Elliott Management's demands. "The soul of Cognizant is being client-first and we are just getting back to that. We are pivoting to a digital portfolio and have a set of services that are relevant to what clients need," Frank said.The company also looks at acquisitions differently now. Humphries has previously likened acquisitions to puppies given as Christmas gifts, which then become hard to manage a few months later.

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