Innholdsfortegnelse for 25-Mar-2018 i Business Today

Over the past year and a half, the Indian banking system – especially the public sector banking bit – has been in the news for all the wrong reasons. The non-performing assets (NPAs) of many public sector banks (PSBs) have been rising inexorably. At the end of September 2017, the public sector bank NPAs stood at ₹7.34 lakh crore while private sector bank NPAs had touched ₹1.03 lakh crore. As many of the NPAs headed to the National Companies Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code (IBC), it was apparent that banks would need to take steep haircuts on their loans, and would get back a fraction of what they were owed at the end of the resolution process. In February this year, the Nirav Modi affair…

IN SPITE of remaining conservative with pay hikes, Indian companies have started rewarding top performers handsomely at an average of 15.4 per cent, says Aon India’s Salary Increase Survey – an analysis of data across 1000-plus companies from more than 20 industries. It projects overall salary increase for 2018 at 9.4 per cent. Anandorup Ghose, Partner at Aon India Consulting, says India will not see a double-digit pay hike in the next few years. In fact, it is likely to go down further. “Last year, when India was coming out of demonetisation and GST was coming in, the industry projected salary increase at 9.5 per cent. This year, when GDP and inflation are both expected to grow significantly, the salary increase has remained the same,” he says. However, focus on…

U.S. ECONOMY GROWS 2.5% IN FOURTH QUARTER U.S. economic growth for the final three months of 2017 stood at 2.5 per cent, slightly below the 2.6 per cent expected, according to the Commerce Department. For the entire year, GDP rose to 2.3 per cent, a significant jump from 1.5 per cent in 2016. Earlier, economists forecast that it would hit the Trump administration’s 3 per cent annual growth target, especially after Fed Chair Jerome Powell’s upbeat speech before lawmakers. SPOTIFY FILES FOR $1 BN IPO In an unusual move, the Swedish music-streaming giant has decided to go public without any bank underwriters, which allows the market to set the opening share price. The company, with more than 71 million paying subscribers as of Dec 2017, aims to raise up to…

STATE BANK OF INDIA (SBI), the country's largest bank with assets of close to ₹27 lakh crore, is more than three times the size of the second largest bank, HDFC Bank. This shows a very skewed banking system. The market capitalisation of HDFC Bank, at ₹4.95 lakh crore is almost equal to that of all the public sector banks (PSBs) put together, including SBI. This raises a serious issue of capital efficiency and performance of PSBs. The take home package of a private bank CEO is anywhere between ₹6 crore to ₹12 crore annually. Its multiple times the package of PSB honchos of equal size or bigger. The uneven compensation package acts as a disincentive for PSB staffers. Such puzzling statistics from the Indian banking industry are endless, raising questions which…

Paul Krugman once said that whenever banking became exciting and interesting, it got out of hand and jeopardised the entire economy. This seems true if one looks at the 2008 global financial crisis. That’s true for India too. So, when most Indian banks, chasing high growth, were rushing to give loans to infrastructure and capital goods companies during the 2004/08 boom period, the Uday Kotak-promoted bank stayed away. “We did not participate in the greed. We have been wary of assets that are not adequately collateralised,” says Joint Managing Director Dipak Gupta. The net non-performing assets of 1.26 per cent, among the lowest, reflect prudent lending practices. “It’s not an easy choice. You are sacrificing growth and return in the hope that it will pay off over a period,” he…

One of India’ oldest private banks, Kerala-based Dhanlaxmi Bank, faced legacy issues, management change and modernisation pangs in the last decade. It pressed through changes after outsider CEO Amitabh Chaturvedi and a new board took charge. When the economy went into a downturn in 2012, it halted branch expansion, hurting the loan book. Chaturvedi left around the same time. The bank was in losses from 2011/12 till 2015/16, barring a small profit in 2012/13. Its fortune eroded in the south after the name change from Dhanalakshmi Bank to Dhanlaxmi Bank – an attempt to become acceptable to customers in North India. The bank showed signs of recovery in 2016/17, with net profit of ₹12.38 crore against net loss of ₹209.45 crore in 2015/16. Gross nonperforming assets (NPAs) stood at 4.78…

CITIBANK Launched ‘Hello’ engagement platform for HNIs in 2017, developed by the winner of the CitiMobile challenge Provided clients flexibility in interacting with RMs using chats, calls & video conferencing 40% of the mobile app active client base on Hello 1,300-plus transactions with total value of $24 million YES BANK Unique services developed with fintechs like mobile SKDs, payment APIs for instant refunds, pay to self service, etc Partnered with Cashless Technologies for providing offline payment solutions to small retail merchants through UPI-based QR codes; 10,000-plus merchants on-board Became highest contributor to UPI volumes through partnerships with Fintechs (40% share) AXIS BANK In house incubator, a team of 10 Axis Bank employees work on creation of prototype solutions Co-working space run in collaboration with Amazon web services Focus on API…

On Valentine’s Day, Paytm’s Founder and CEO Vijay Shekhar Sharma sent out two tweets that didn’t hint at much love for multinationals operating in India. “India must welcome global tech companies and must not let them colonise our Internet. Their ambitions and intentions are clear in last few weeks!” “After failing to win war against India’s open Internet with cheap tricks of free basics, Facebook is again in play. Killing beautiful open UPI system with its custom close garden implementation.” WhatsApp, owned by Facebook, and India’s most popular messaging platform with about 250 million monthly active users, is testing a payments feature that leverages the United Payments Interface (UPI), a realtime payments system that enables digital transactions between banks. WhatsApp is enabling payments between contacts within the chat app. Sharma’s…

IT’S AN ABSOLUTE nobrainer that one should keep the smartphone away while interacting with someone, but it’s still a common practice. Somehow, people convince themselves that a glance or two at that all-important phone screen won’t be noticed. But they are mistaken. If being liked by others is important, either personally or at work, it would be helpful to put the phone on silent mode before a focussed interaction with someone or a meeting. Set up your phone so you have easy access to a mute button and avoid being pinged prominently by notifications on everything from Marks & Spencer’s announcement of an end of season sale or your latest phone bill. If there’s someone important you can’t afford to lose touch with even for a few moments, put that…

Watches THE FINEST HOUR Two years after its return to the Girard-Perregaux collection, the Laureato is writing a new chapter with the introduction of an enriched range of chronographs. In this natural and eagerly awaited extension of an eminently sporting chic collection, the Laureato once again demonstrates the strength and relevance of the design of this iconic watch born in 1975. Entirely clad in steel or pink gold, available with a 42 -or 38-mm case and interpreted in three dial colours, the Laureato Chronograph is an exceptionally versatile watch. An everyday wear, the watch is equally at ease in smart or informal attire. Girard-Perregaux is a Swiss luxury watch manufacturer that traces its origins to 1791 and is part of the Kering Group. Handicraft RUSTIC CHARM Jaipur Rugs, which works…

DIGITAL PAYMENT WhatsApp Pay For Android Users The new WhatsApp Pay feature, which allows users to send and receive money, has been rolled out for Android users. The beta version has been launched for a limited number of users and will cater to a million people. The payment feature is based on the Unified Payment Interface, or UPI, which is currently offered by 71 banks. To transfer money via UPI, users are not required to disclose account numbers or bank details. All transactions can be done using one’s phone number or the virtual payment address (VPA). With WhatsApp Pay, one can transfer money instantly from one bank account to another via a smartphone. LEGISLATION Bill to Ban Unregulated Deposit Schemes To safeguard the savings of small investors, the Union Cabinet,…

Come March and there will be a flurry of new fund offers from asset management companies in the country. Most of them will not be for regular equity-oriented mutual funds but what are called fixed maturity plans or FMPs -- close-ended debt schemes whose money is invested in fixed-income securities for a specific tenure. “Coupon rates are going up and, hence, FMPs have become attractive. Debt yields have also been going up. On the other hand, fixed deposit rates are not likely to move up until the Reserve Bank of India increases the rates. The only way to benefit from these rising yields is by investing in debt funds. The AA papers can earn up to 100 bps (1 per cent) more than government securities,” says Vidya Bala, Head of…

Taxation Shubham Agarwal: I am a salaried person aged 26 and earning ₹6 lakh a year. How can I reduce my income tax liability and plan for my retirement? Ashish Shanker, Head, Investment Advisory, Motilal Oswal Private Wealth Management, replies: ELSS funds are a good option for income tax purposes as they offer tax savings, capital growth and relatively lower lock-in periods. You can invest in ICICI Prudential Long Term Equity Fund (Tax Saving)-Growth or Reliance Tax Saver-Growth fund. Also, contribute to the National Pension System (it offers an equity-debt mix but has higher lock-in period), buy term insurance and/or medical insurance to protect self and family or get a home loan where you can claim a tax deduction on the principal portion of the loan. All these will significantly reduce…

PERSPECTIVES RBI Plans to Stop Aadhaar Misuse, But Will It Work? The central bank's decision may affect payments banks which piggyback on their telecom arms to acquire customers businesstoday.in/rbi-aadhaar If PNB Would Have Heeded RBI's Advice PNB – as an LoU issuing authority – is now in the soup as it has to honour all the financial obligations as Nirav Modi is absconding businesstoday.in/pnbscam-nirav.modi Why Indian Pharma Needs to Track Amazon's Plans in Health Care As Amazon is looking at the high margin business of retail pharmacy, this may change the ecosystem businesstoday.in/pharma-amazon Can Reliance Turn Around Krishna-Godavari Assets with ₹40,000-crore Investment? RIL is also looking at options to optimise the existing offshore infrastructure facilities in KG basin to reduce costs businesstoday.in/ril-kg.basin NEWS Doubts on Emissions Linger, But Mercedes Committed…

In the recently concluded investor summit in Lucknow, Yogi Adityanath-led Uttar Pradesh government has signed ₹4.28 lakh crore worth Memorandum of Understandings (MoUs) – equal to the state’s budget for 2018/19. India’s business barons promised investments in telecom and IT, manufacturing and infrastructure. The same league had promised huge investments in Maharashtra (₹12.10 lakh crore), West Bengal (₹2.19 lakh crore) and Andhra Pradesh (₹4.39 lakh crore), earlier. The trend of investment summits began when Narendra Modi was Gujarat’s CM and promoted ‘Vibrant Gujarat’ as an opportunity for the business community to garner investment support in a bullish economy where private firms were desperate for locations to start their plants. The result – high net realisation of MoUs at around 60 per cent; that has now fallen to 20-30 per cent…

THE LAUNCH OF THE NATIONAL Health Protection Scheme (NHPS) to cover 10 crore poor and vulnerable families – about 50 crore beneficiaries – had arguably been a high point of Finance Minister Arun Jaitley’s Budget speech this year. Concerns were raised about how the government would operationalise it as health is a state subject. Officials in the know have told Business Today that the process is on track. The Health Ministry recently organised a national consultation on the NHPS. Apparently, “all states are on board and want to join. Six working groups have been formed, and most of the guidelines will be emanating from their suggestions.” Once the scheme gets Cabinet nod, operational guidelines will be issued. As the scheme is for next year, what will follow is issuing model…

DIGITAL PAYMENTS SPACE IN INDIA EXPECTED TO REACH $1 TRILLION BY FY 2023 Facebook-owned WhatsApp’s announcement to enter the digital payments space in India has created a flutter. Several top executives, including Paytm’s founder Vijay Shekhar Sharma, took to Twitter to express concerns about the messaging platform’s foray into this space. Their apprehensions, though, are not unfounded. WhatsApp is the most popular instant messaging app in the country with over 200 million monthly active users. Undoubtedly, its entry in the digital payments space would offer users a very convenient option to transact online. Paytm claims to have around 280 million users in the country, but it is not clear how many of them are active. According to a recent Credit Suisse report on the digital payments space in India, Google’s…

IN AN environment where the private sector is hardly investing, Yes Bank, a largely corporate focused bank, has been judged as the fastest-growing mid-sized bank in the BT-KPMG Best Bank Survey for 2016/17. Industry analysts feel Yes Bank treads where its peers fear to go. “Yes Bank has created a niche for itself in underwriting certain structured transactions where it earns good fee income. Second, it has a strong risk monitoring and credit underwriting team that is able to identify early warning signals and ensure timely action before a portfolio goes sour,” says Rohan Mandora, banking analyst at Equirus Securities.” The bank, with a balance sheet of over ₹2.15 lakh crore, has been growing at a rapid pace. Loans and advances have been rising at 34 per cent a year…

When most foreign banks were busy cleaning up their books, Bank of America was soaring to greater heights, and eating into competitors’ market shares. From being No 3 in the BT-KPMG Best Banks study last year (after Barclays and JP Morgan Chase), Bank of America has emerged as the Best Foreign Bank in India for 2016/17. In terms of balance sheet size, Bank of America is at ₹34,000-crore plus, while the size of its peers Citibank, HSBC and Standard Chartered is over ₹1,30,000 crore. Some are also broad-based in terms of their product offerings. Kaku Nakhate, President & India Country Head, Bank of America, says consistency has been pivotal for the bank’s success. Servicing top Indian corporates and working towards attracting MNCs to India to help them invest or expand…

Everything about the State Bank of India (SBI) has been mammoth-sized. The country’s largest commercial bank – in terms of assets, deposits, profits, branches and employees – is now replicating the same in the financial inclusion space, too. Under the Business Correspondent (BC) model, an alternative low-cost banking service channel to cater to both urban and rural customers, SBI has installed over 52,340 customer service points across the country to provide products and services such as savings, term deposits, micro loans, remittances and loan repayments. It is with good reason that the bank has been adjudged the winner in the financial inclusion category of the BT-KPMG Best Banks study. We asked Mrutyunjay Mahapatra, Deputy Managing Director and Chief Information Officer at SBI, what sets the bank apart. “There is no…

It is the country’s fourth largest private employer – after Tata Consultancy Services, Reliance Industries and Cognizant – with 241,000 people on its rolls. In just about a decade, it operates in nine countries and has a market cap of more than ₹15,000 crore, which has ballooned so rapidly that an investment of ₹245 in the company in 2013 would now be worth ₹8,500. It had revenues of ₹4,157 crore in 2016/17, growing at a compound annual growth rate (CAGR) of 45 per cent in the last five years, while net profit has risen even faster at a CAGR of 69 per cent. And yet this is a company most people are unlikely to have even heard of. Its name is Quess Corp and it is India’s largest staffing company,…

Edited excerpts follow. Q: How do you balance the desire for financial returns with the need to invest strategically? A: We are very selective about what industries we invest in, and within each one we have well-defined themes that are highly strategic for GE’s businesses. Just by operating within those constraints, we’re addressing our strategic mandate. But you can’t focus only on strategic fit. Anyone in corporate venture capital who says they don’t also focus on financial goals won’t be around very long. Q: What do you do to help portfolio companies succeed? A: We are very hands-on, unlike a lot of corporate venture capital firms, which really just write a check and hope something comes of it. We work with our portfolio companies to adapt their product or service…

BE CAUTIOUS ABOUT THE PERMISSIONS AN APP SEEKS AT THE TIME OF INSTALLATION Convenience comes at a price. Although online banking has made our trips to the bank infrequent, it has put our money and data at a huge risk. More than 25,800 fraud cases related to credit/ debit cards and Internet banking were reported in 2017 (up to December 21), according to the Reserve Bank of India. With the mushrooming of payments apps, users are increasingly becoming vulnerable to phishing and malware attacks. Shocking as it is, not even the established banks are insulated. Quick Heal Security Labs detected an Android malware that has been targeting over 232 banking apps including those of SBI, HDFC Bank and ICICI Bank. “Most consumers are confident that they’re safe online, but hackers…

CALL IT ‘new-age hygiene’, but it is high time you should be more concerned about keeping your electronic gadgets clean. Viruses and bacteria are now lurking all over the workplace, thanks to our talk-and-eat-on-the-go lifestyle, and these microbes are all-pervasive. You not only find them on mobile phones, landline mouthpieces and computer keyboards but almost everywhere – be it your work desk or the restroom door handle. Of course, there are plenty of infrared tools available for cleaning your gadgets. But it still boils down to the good old practice of washing your hands thoroughly, keeping the hand sanitiser nearby and not using your mobile phone in the washroom. You may need to do more, though. The reason: A 24x7 work regime requires building the biggest armoury against microbes via…

Principles By Ray Dalio Simon & Schuster Price: ₹592 Pages: 999 IT IS SAID THAT EXPERIENCE is inevitable; but learning is optional. To be able to learn, we have to be very deliberate in pursuing and facing the truth, which is not always easy. When we seek feedback from fair and objective colleagues on our actions, we may receive criticism; but we still need to ask for clear and honest assessment of our behaviour. Since all these tend to cause intellectual and emotional pain, we may choose to avoid such exploration. That’s why learning from experience is easier said than done. On the other hand, Ray Dalio, founder of the largest hedge fund in the world that manages $160 billion, and author of the book Principles is a person who…

The eighth leg of the 22nd edition of the LLOYD Business Today Pro-Am of Champions teed off at the Bombay Presidency Golf Club on Friday, February 9, 2018. The BPGC is the most prestigious golf club in Mumbai and in 2009, the course underwent extensive redesign and modifications. It is a demanding course with a large member community that is largely golf-focussed. Played on the Stableford format with Double Peoria handicap system, the bright afternoon witnessed some top-notch golfing action with the players competing for both individual and team prizes. The day’s action culminated with the prize-distribution ceremony, followed by dinner. The winning team also earned a place in the Pro-Am National finals, to be held in Delhi. The winning team comprises Ajay Chauhan, Parle Products Pvt. Ltd; Shankar Narayan;…

The new tax regime has given insurance policies an edge over equity mutual funds. People planning for long-term goals will find them lucrative as there will be no long-term capital gain (LTCG) tax on their proceeds. But that is just one part of the story. In a freewheeling chat, Pankaj Razdan, MD and CEO of Aditya Birla Sun Life Insurance (ABSLI), and Deputy Chief Executive of Aditya Birla Capital, tells Teena Jain Kaushal what other factors will shape the life insurance industry in CY2018. Q: The life insurance industry saw more than 25 per cent growth in 2017, largely fuelled by ULIP sales in a buoyant stock market. What is your take on it? A: The growth was certainly a positive outcome, but ULIPs (unit-linked insurance policies that are tax-free)…

* As of Dec'17 end Returns as on 15th February'18 Equity and Bond funds are ranked on the basis of 5-year performance Fixed income funds are ranked on the basis of 3-year performance AUM filter of minimum ₹500Cr applied in all the categories All portfolio-related data is as of January'18 end, unless specified Returns of time-period more than 1 year are annualised Source: Morningstar…

Punjab National Bank’s haste in announcing the Nirav Modi episode as a $1.77 billion scam—instead of the current outstanding $751 million (₹4887 crore)—may have caused serious collateral damage to itself and the consortia of three dozen banks that did business with Modi and his uncle Mehul Choksi. By including all the Letters of Undertaking ever issued to Nirav Modi’s companies, PNB may have covered its flanks but inadvertently suggested Modi had run away with $1.77 billion (since raised to $1.97 billion). CBI’s FIR instead said Modi’s outstanding against LoUs is only around half of that -₹4,887 crore. With that error of judgement, PNB may have risked not just its funds in the hands of Nirav Modi and Mehul Choksi’s companies but also that of other banks’ outstanding loans to their…

FLOODED WITH COMPLAINTS of excess billing, the National Pharmaceutical Pricing Authority (NPPA) analysed the bills generated by four private hospitals in and around Delhi for treatment costs in some specific cases. It found that the hospitals were the major beneficiaries of inflated retail prices of medicines, consumables, devices and diagnostic services. Thus began the renewed call for price caps and regulatory oversight over healthcare bills. Although the NPPA study’s sample size was probably too small to generalise its findings, it was sufficient to rekindle the debate on affordable and accessible healthcare. Of course, the government will have to recognise that an overarching price cap alone cannot solve the problem. Price control or not, hospitals will charge at will unless there is enough competition to bring down their charges.…

23 THE STAMP ACT RIDDLE WHAT: National Seminar on the Indian Stamp Act WHEN: March 23, New Delhi WHAT TO LOOK FOR: The NDA government intends reforming the stamp duty regime on financial securities transactions. ASSOCHAM is organising a seminar to discuss and examine various issues relating to the Stamp Duty Act. It aims to invite views and suggestions from stakeholders for consideration by the government. 26 JOINING HANDS WHAT: The Global Industry Associations’ Summit WHEN: March 26, New Delhi WHAT TO LOOK FOR: If industry associations and umbrella organisations across sectors join forces, it can go a long way in crafting a shared understanding of roles and responsibilities of different development actors. The CII event would attract associations from around the globe across government, industry, institutions and social sectors.…

Seven years ago, Vishwavir Ahuja, Managing Director and CEO of RBL Bank, raised ₹750 crore capital to relaunch the Kolhapur-based Ratnakar Bank as RBL Bank. The bank had a net worth of ₹340 crore then. Ahuja has raised capital six times in the past seven years. This includes ₹1,680 crore raised in mid-2017. “In our new avatar, we have grown loan book from ₹1,200 crore to ₹37,000 crore, the balance sheet from ₹2,000 crore to ₹55,000 crore, at a CAGR of 60 per cent,” says the banker, who left his job in Bank of America in 2010 to build up the ‘local bank’ known for lending to local traders. Ahuja took over at a time when Indian banking was facing turbulence. Aftershocks of the global financial meltdown, slow GDP growth, slowdown…

The Indian banking sector has become slightly fragile and marginal with the rising non-performing assets (NPAs) and decreasing credit base. The Indian government aims to create a banking system on a par with the top global systems – one that can assist global business dynamics and most importantly, one that is strong, competitive and reliable. In other words, an ideal banking system is one that enjoys depositors’ trust and investors’ reliance. To evolve into such a system will require improving conditions around weak corporate governance, poor assets quality, insider abuses, weak capital base, unprofitable operations and overdependence on public funds. Against this backdrop, the consolidation of public sector banks, or PSBs, is being indicated as a future step by experts and governors of this field. In a country of about…

Denmark-headquartered Novozymes is one of the world’s largest biotech companies and the global leader in industrial enzymes, used in things ranging from laundry detergent and dishwashing soap to baking and brewing. Novozymes, which posted a revenue of $2 billion-plus in 2016, has a client list in India that includes Hindustan Unilever, Nestle, P&G and Colgate. During a recent visit to India, the company’s CEO, Peder Holk Nielson, discussed market opportunities and competition with Venkatesha Babu. Edited excerpts: Q: With presence in five major segments – household care, food and beverages, bioenergy, agriculture and feed, and biopharma – how have you been faring? PEDER HOLK NIELSON: India is an exciting arena for us, not just from a market perspective but also because we do significant research here. Though China and the…

Today, an entire industry has emerged around probiotics that aims to restore the necessary balance of bacteria in the human body. Different formulations are available in the market but not all of them produce the desired result. Read the labels carefully to check for storage temperature and see if it is stable throughout the shelf life. One cannot rule out cases where there are not enough bacteria present, or they may fail to reach the gut where they need to act. M. Ratna Sudha, Founder of Hyderabad based probiotics firm Unique Biotech, says now the focus is on psychobiotics. It is all about dealing with psychological conditions with the help of bacteria functions. Researchers are studying the bacteria that bring about biochemical signalling and produce neuroactive substances. These can act…

The Subtle Art of Not Giving a F*ck By Mark Manson Harper Collins Price: ₹499 Thinking, Fast and Slow By Daniel Kahneman Penguin Price: ₹499 Elon Musk: How the Billionaire CEO of Spacex and Tesla is Shaping Our Future By Ashlee Vance Virgin Books Price: ₹699 I Do What I Do By Raghuram G. Rajan HarperBusiness Price: ₹699 Principles: Life and Work By Ray Dalio Simon & Schuster Price: ₹999 *Top books by sales for Feb 1 2-26, 2018; Includes only books released after Jan 1, 2015; Information provided by amazon.in…

Rising bond yields and the resulting treasury losses are telling on profitability of banks. Yield on the benchmark 10-year government securities (G-sec) surged 67 basis points (bps) during the third quarter due to fiscal worries. To be sure, these are mark-to-market, or MTM, losses on investment portfolios that can be reversed if the yields correct. But experts think there is a larger concern. “Banks are not actively participating in the market. This is driving up yields,” says Dwijendra Srivastava, who oversees around ₹18,000 crore in various debt schemes as Chief Investment Officer, Debt, Sundaram Asset Management Company. “What will work well now is accrual strategy, staying with shorter duration papers to contain the risk of capital erosion and staying with high quality paper.” Once Bitten, Twice Shy The one-side movement…