Amid falling rupee, trade war, FPIs have pulled out Rs 356 bn in Oct so far

Foreign investors have pulled out a massive Rs 356 billion (about $5 billion) from the Indian capital markets this month on concerns over rupee depreciation, global trade war tiff and rising crude prices.
The latest outflow is higher than Rs 210 billion worth of net withdrawals seen in entire September. Prior to that, overseas investors had invested a net sum of Rs 74 billion in the capital markets (both equity and debt) in July-August.

According to the latest depository data, foreign portfolio investors (FPIs) sold equities to the tune of Rs 241.86 billion during October 1-26 and bonds worth Rs 114.07 billion, taking the total to Rs 355.93 billion ($4.8 billion).
FPIs have been net sellers almost throughout this year barring a couple of months such as January, March, July and August. In these four months, overseas investors have put funds totalling over Rs 320 billion. However, experts believe in withdrawal of funds in October has shaken the market.
So far this year, FPIs have pulled out a total of Rs 970 billion from the capital markets. This includes over Rs 370 billion from equities and close to Rs 600 billion from the debt markets.
ALSO READ: FPIs dump banks, mutual funds lap up metals in September quarter
According to Rahul Mishra, AVP (Derivatives), Emkay Global Financial Services, macro issues like liquidity crunch created post IL&FS default, Indian currency move and volatility in crude oil price have kept the investors at bay.
"The continued selling pressure from FPI is needed to be looked from the angle of what is happening globally. From the Indian context, the current issues faced by the NBFC (non-banking finance company) is not helping either," R Sreesankar Co-head equities at Prabhudas Lilladher.
Going ahead, market experts said volatility is likely to continue for other reasons too such as US sanctions on Iran, which take effect next month, as Iran is a major source of crude oil for India. Besides, India has some key state elections coming up, which could provide cues to FPIs for next year's central elections.

GST Council met 30 times, took 918 decisions in 2 yrs: FinMin report card

The all-powerful GST Council, chaired by Finance Minister Arun Jaitley, has met 30 times and taken 918 decisions related to laws, rules and rates for the new tax regime within a span of just over two years, the Finance Ministry said Sunday.
The Goods and Services Tax (GST) Council, which comprises state finance ministers and Union Minister of State in charge of Revenue as members, was set up on September 15, 2016, as the country's first 'federal institution'.

"Till date, GST Council has taken 918 decisions related to GST laws, rules, rates, compensation, taxation threshold etc. More than 96 per cent of the decisions have already been implemented through 294 notifications issued by the Central Government," the ministry said in a statement.
The remaining decisions are under various stages of implementation. Almost equal number of corresponding notifications have been issued by each state, it added.
The working of GST Council has ushered in a new phase of cooperative federalism where the Central and state governments work together to take collective decisions on all issues relating to indirect tax regime of the country, it said.
Besides, tax officers of the Centre and states met ahead of the GST Council meetings to enable the council members to fully discuss the issues under consideration.
ALSO READ: How to make taxpayers comply with GST laws? CBIC now has a solution
The Council has held discussions in a "harmonious and collaborative spirit" in the 30 meetings that have taken place so far, it added.
The detailed agenda notes for the 30 GST Council meetings ran into 4,730 pages, while the minutes of the meetings ran into 1,394 pages, the statement said.
After 17 tumultuous years, a nationwide GST was rolled out at the stroke of the midnight hour on July 1, 2017, overhauling India's convoluted indirect taxation system.
The GST, which replaced 17 central and state levies including factory-gate, excise duty, service tax and local sales tax or VAT, is India's biggest tax reform in 70 years of independence and will help modernise Asia's third largest economy.

Essar to deleverage Rs 1.25 trn debt if its Essar Steel offer is accepted

Ruia-family owned Essar Group would deleverage about Rs 1.25 trillion of debt - the largest by any corporate if its offer to repay lenders of Essar Steel in full is accepted, company sources said.
Last week, the Committee of Essar Steel Creditors picked world's largest steelmaker ArcelorMittal's Rs 420 trillion takeover offer over the company promoter's Rs 543.89 billion proposal to pay off all of the lenders' dues.

Essar plans to legally challenge the decision as it believes its offer would ensure 100 per cent recovery for lenders while accepting ArcelorMittal's offer would entail a haircut, sources said.
Sources said Essar Group had so far used $650 million (about Rs 42 billion) from the sale of Aegis US operations, Rs 720 billion from sale of Essar Oil to Russia's Rosneft and partners, Rs 20 billion from sale of Aegis and Rs 24 billion from sale of Equinox to deleverage group debt.
If the offer for Essar Steel is accepted, the deleveraging would total to Rs 1.25 trillion, they said. This is over 85 per cent of total group liabilities.
Essar invested Rs 1.2 trillion -- the highest by any corporate in recent times -- between 2010 and 2015 in building world-class assets in energy, infrastructure, metals and mining, and services sector.
With the completion of its investment and deleveraging programmes, Essar is growing its substantial portfolio of businesses, sources said, adding revenues of Essar portfolio companies presently stand at Rs 800 billion.
Essar, they said, is a leaner, smarter and wiser corporate with a lighter balance sheet.
Insisting that banks that lent to Essar did not lose money, they said loans are being serviced and more than Rs 200 billion has been paid to Essar Steel lenders by way of interest.
The quality of assets created by Essar is attracting aggressive bids from high profile players and will help banks recover their dues without a haircut, they said.
For better management of its portfolio of businesses, Essar has transitioned to a fund-led structure, investing long-term capital into the portfolio companies and holds 100 per cent stake (largest equity holding among peers) in all its investments.
Sources said Essar has brought global investors who have infused over $32 billion in FDI demonstrating the quality of assets it builds and the quality of management they have.
These include stake sale in Vodafone-Essar ($18 billion of value created), stake sale in Aegis in two tranches ($910 million of value created), stake sale of Essar Oil ($12.9 billion of value created) and stake sale of Essar Telecom Tower Ltd ($360 million of value created).
Sources insisted that in each of these cases, the group exited at the right time, on its own terms, at globally compelling valuations. Essar Group, they said, has invested upwards of Rs 2000 billion (of which Rs 1200 billion was invested in 2010-16) in setting up world-class facilities in steel, power, ports and oil and gas.
The assets included 10 million tonnes of integrated steelmaking facility, 20 million tonnes of refining capacity and 3,500-strong petrol pump network (which is now owned by the Nayara Energy), 4,800 MW of power capacity as well as a 465-km transmission network and over 150 million tonnes of ports capacity.

Sanjay Mishra to replace Karnal Singh as Enforcement Directorate chief

IRS officer Sanjay Kumar Mishra was on Saturday appointed the new chief of the Enforcement Directorate in an additional capacity, a government order said.
Mishra, a 1984-batch Indian Revenue Service officer of the Income Tax cadre, has been appointed as the Principal Special Director in the agency and has been entrusted with the additional charge of ED Director for three months.

Mishra will take over from incumbent Karnal Singh whose tenure at the agency ends on Sunday.
Singh, a 1984-batch IPS officer of Union Territories cadre, will complete an over three-year tenure as the ED Director.
Official sources said Mishra, posted as chief commissioner of Income Tax in Delhi at present, has not been empanelled as an additional secretary in the central government and hence has been given the top ED charge in an additional capacity.
He is expected to be empanelled soon and subsequently will head the ED in a regular capacity, they said.
The ED director post is an additional secretary rank post in the Union government.
The ED enforces two major laws in the country to check black money the criminal Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA).

Gemalto issues public apology for a report claiming Aadhaar data breach

Digital security firm Gemalto on Saturday issued a public apology in national newspapers for its report which claimed a breach in the Aadhaar database.
The company withdrew its report which claimed that data breach incidences in India were the second highest globally, in the first half of 2018, on account of a compromise in the Aadhaar database.

The company said it is issuing the public notice to clear the misperceptions against the country's unique identity number project.
"Gemalto published an inaccurate Breach Level Index report and press release that included a news article about an alleged and unverifed Aadhaar data breach," said the notice, titled 'Gemalto apology to the People of India'.
"I, Philippe Vallee, as CEO of Gemalto, extend my sincerest apologies on the grave error on our part for the publication of this erroneous report and press release," it added.
The company is learnt to have issued the apology in all editions of five national dailies.
"We never intended to malign Aadhaar, India's prestigious identity mission project, by unknowingly committing the mistake. We are launching an internal investigation and will take additional appropriate action internally," Vallee said.
In addition to publishing and correcting the facts in the Breach Level Index report on its website, Gemalto said it is placing this advertisement as part of the company's effort to ensure that authentic and accurate information reaches out to the public.
The cyber security firm, in the report released on October 15, had claimed that over 1 billion records were compromised in the Aadhaar breach incident, including name, address and other personally identified information.
In the report, Gemalto claimed that there were 945 data breaches which led to 4.5 billion data records being compromised worldwide in the first half of 2018. Of this, over 1 billion data records were exposed in India.
"Gemalto is deeply regretful for releasing this unverified information in this report and failing to conduct sufficient due diligence prior to publishing the information. We are taking the opportunity to revisit the methodology behind this report and introduce more stringent criteria and validation of entries," the notice said.
The company issued a correction, saying that there were 944 data breaches that led to 3.2 billion data records being compromised worldwide in the first half of 2018.
"... as an organisation providing cybersecurity expertise and solutions, we have not been able to find any evidence of any Aadhaar data being breached. Any inconvenience caused to the people of India by our action is deeply regretted," the notice said.

Gujarat diamantaire gifts 600 cars, FDs as Diwali bonus to employees

Diamond merchant Savjibhai Dholakia, whose lavish Diwali gifting is among the corporate world's most talked about events, this year gave away 600 cars, fixed deposits and insurance policies to 1,700 "diamond artists and engineers" working at his firm.
The ceremony this year, held at Dholakia's Harikrishna Exports here Thursday, had Prime Minister Narendra Modi address the employees through video-conferencing.
It was titled the "Skill India Incentive Ceremony".
In a statement, the company said, "As a part of its loyalty bonus programme, the company gave incentives to around 1,700 diamond artists and diamond engineers in the form of cars and fixed deposits."
It added that the firm had also given life insurance ranging from Rs 5 million to Rs 10 million to the employees.
Each car gifted this year costs between Rs 4-4.5 lakh, the cumulative cost of 600 cars adding up to around Rs 2.7 million.
An employee had to pay around Rs 40,000 as down payment for the car, while the company will bear rest of the cost.
While the firm did not bestow gifts last year, in 2016 it gave employees 400 flats and 1,260 cars.
In 2015, the Diwali gifting count stood at 491 cars and 200 houses as employee incentives.
Dholakia said that he wanted each of his 5000-odd employees to have a car and a house and the annual Diwali gifting is a way to achieve this target.
Beneficiaries are selected through a software-based system after they qualify for the company's loyalty bonus programme, he added.
"We at Hari Krishna Exports believe that employees are the base to a strong and long-running organisation. We truly value and admire the hard work of our employees and we wanted to express our gratitude towards their proficiency and enthusiasm," Dholakia said.
"The ceremony will encourage and motivate our employees to work with the same synergy in the future," he said, adding that such bonuses will make employees "become serious in their work."

Incidentally, the firm in September this year had given high-end SUVs to three senior employees, who had completed 25 years with the firm, for being "pillars of the company".
"It benefits the company, the employee's family, society and, in turn, the country. And more than anything, it gives me immense pleasure," he said.
"I could not sleep at night when I got my first car. God has given us wealth to give happiness to others," he said at the firm's Skill India Incentive Ceremony Thursday.
Dholakia's advice to those who got these cars was "maintain discipline and drive the car with respect".

Crude impact: Integrated model may aid RIL growth, despite refining woes

Reliance Industries Ltd, which operates the world's largest single-location refinery, is facing certain difficulties. While the gross margin of its refining business hit a multi-year low, the petcoke gasification plan is stuck with a ‘scaling up’ hurdle.
Also, part of its margin upside prospects hinges on timely implementation of new regulations for bunker fuel.

For the September 2018 ended quarter, RIL reported a gross refining margin (GRM) of $9.5 per barrel. The company last reported a single digit GRM in the December 2014 ended quarter.
“A tight crude market has reduced RIL’s competitive advantage of sourcing difficult-to-process cargoes as the premium on these items has come off,” analysts at JP Morgan wrote in a recent note on the company.
The benchmark Singapore refining margins, to which RIL enjoys a premium, has also been under pressure. “Singapore refining margins have been particularly weak this month as gasoline cracks slumped in line with weakness in the US and Europe but should improve over the next couple of months as demand picks up seasonally,” said Platts Analytics, a provider of energy and commodities information.
A lot also depends on how crude oil prices move from here on, as well as demand from customers.
Rahul Prithiani, director with CRISIL Research, said the rise in crude oil prices will have a further impact. “Rise in crude oil prices is expected to impact GRMs of refiners if high crude oil prices can't be passed on to end consumers. Moreover, sluggish growth in demand for petroleum products alongside supply glut in the Asian market is expected to put further pressure on the GRMs of Indian refiners.”
The JP Morgan analysts note that in the current scenario, IMO 2020 and the gasifier are extremely important for RIL’s FY20-21 earnings and de-leveraging.
However, there are some uncertainties on both counts. Closer home, RIL at present, is facing concerns on the scale-up of its ambitious petcoke gasification project. The company informed analysts that there have been technical challenges in the continuous synchronised operations of petcoke gasifiers.
The company hopes the problem will be over by March next year. The project, once fully operational, is expected to add $2 per barrel as GRMs for the company.
Both RIL’s management and analysts expect the IMO regulations to further add to RIL’s earnings.
chart The JP Morgan report hopes IMO 2020-related earnings before interest, taxation, depreciation and ammortisation (Ebitda) addition will be at Rs 32 billion and Rs 59 billion in FY2020 and FY2021, respectively. But delay in implementation of these regulations could curtail the expected upside.
The United States is reported to have proposed certain changes to the implementation of these rules. However, not everyone is concerned on what stand the US takes.
“The global refining industry and the shipping industry have invested good amount of resources to comply with the new regulations on time. They have been preparing for it for a few years now. Companies will aim to comply, although the level of implementation may vary from country to country,” said Sambit Mohanty, senior Asia oil editor at S&P Global Platts.
However, not everyone is worried but is hopeful RIL’s integrated model will save the day.
“If one was to look at the company’s earnings between 2009 and 2015, it is clear that RIL managed to expand earnings (now in the range of Rs 300 billion or above in the last three years), either through good refining performance or through petrochemicals. RIL’s integrated model helps it ride commodity uncertainties and that should continue,” said an oil and gas analyst, who did not wish to be identified.
Moreover, on a consolidated basis, consumer businesses such as telecom (digital services) and retail have started to deliver.