Success in my Habit
Tuesday, May 9, 2017
India's credit profile to improve on fiscal prudence, Moody's says
Govt may soon allow 100% FDI in cash, ATM management companies.
Modi calls for a 'long jump' to give India advanced tag
The PM said the country needed to pull off a “long jump” to be counted among advanced nations on the 75th year of its independence in 2022. Modi said the focus of BJP governments and its allies, whether at the Centre or in states, should be to make the lives of the poor sustainable, ensure social justice and economic equality to workers and peasants.
On social justice, he spoke about efforts to give constitutional status to a National Commission for Socially and Educationally Backward Classes, saying this would benefit all OBCs across religions.
Briefing the media on the PM’s speech, BJP leader and Cabinet minister Nitin Gadkari said Modi underscored how “Muslim sisters” suffered because of ‘triple talaq’.
The government didn’t want conflict or tension within the Muslim community, and its women deserved social justice, Gadkari quoted Modi.
The PM said the cornerstones of his government’s vision would be Jan Dhan, economic empowerment of the poor; Van Dhan, forest-based economy to empower the tribal population and protect the environment; and Jal Dhan, to ensure better irrigation.
He talked about the need to protect the livelihoods of the tribal population, and on ethical exploitation of natural resources.
Odisha is a state the BJP aims to win in 2019. According to the 2011 census, tribals comprised 22 per cent of its population.
The BJP also plans to do better in the northeastern states, which have sizable tribal populations.
On Jal Dhan, Gadkari said the Modi government was the first to allocate Rs 85,000 crore as part of the Pradhan Mantri Krishi Sinchayee Yojana, adding that better water management would reduce agrarian stress, bring prosperity to villages and reduce farmer suicides.
The PM said merely building infrastructure such as roads and hospitals wasn’t enough. Delivery of services in hospitals, schools and state-run transportation was important.
On allegations of rigging of electronic voting machines (EVMs), he asked his party colleagues not to pay heed to “manufactured controversies”. Similar controversies, he said, had been raked up over ‘award wapsi’ and alleged attacks on churches.
Modi asked party leaders to implement the pro-poor vision and achieve the dream of constructing a “new India”. He called upon them to take inspiration from Mahatma Gandhi, who pursued the objective of India’s independence with single-minded focus from 1922.
Party chief Amit Shah said the BJP had an iconic leader in Modi and should leverage it to expand across India.
Monday, May 8, 2017
Under governor Urjit Patel, RBI zooms in on 4% inflation target
More smartphone components to be included under Make in India to boost manufacturing
Economic recovery to gather pace from Q1: Morgan Stanley report
Start-up policy to get makeover
The government is likely to tweak the Start Up India policy within a fortnight to accommodate more innovations, an official aware of the developments told Business Standard. The definition of the policy would be changed as well, making it more liberal for the biotechnology sector in particular, he said. Also, the tweaked policy would mean a second chance for any entity that has faced rejection in the past.
In the biotechnology sector, a start-up could benefit from the policy up to eight years of incorporation, up from the five-year criterion currently. This is because of the relatively long gestation period of the biotech sector, compared to information technology and manufacturing, it is believed.
The move by the Department of Industrial Policy and Promotion (DIPP), the nodal agency for the policy, is expected to create space for more budding entrepreneurs in the country to be eligible for self-certification, relaxed public procurement norms, rebate in patent filing, start-up funding, investment and easier closure compliance. Besides the definition change, the DIPP is likely to allow rejected entities to apply again for tax-exemption benefits. Softening the earlier stance of not considering once-rejected applications again for tax breaks, the DIPP has said such proposals would be reviewed. “The only mandate for acceptance or rejection of proposals is that the idea has to be innovative. The entity may have applied at a premature stage. It may have grown and advanced over time. It cannot be a yardstick for a particular company for all times. They will be allowed to apply again,” said the official. Recent reports suggested that only ~5.66 crore funding has been infused into start-ups under the scheme so far, while the government had planned to set up a ~10,000crore fund of funds for the purpose. Fund manager Small Industrial Development Bank of India, or Sidbi, has to create the full corpus of ~10,000 crore by 2025, of which a ~1,315crore fund has been created so far.
But government officials indicated that the pace of approval had picked up. The inter-ministerial board (IMB) approved about 12 start-ups for tax exemption benefits from the 62 considered in the latest meeting on May 1. In all of 2016-17, only 10 start-ups got approval for a tax break from the 142 applications considered. The IMB includes officials from the DIPP, Department of Science and Technology, and Department of Biotechnology. Now, the Ministry of Electronics and Information Technology has also been included in the IMB.
Only those start-ups incorporated since April 1, 2016, are eligible to be considered for tax breaks from income-tax on profits and capital gains tax. The eligible start-ups can avail a three-year tax holiday in a block of seven years now, against five years announced last year. The condition was relaxed in this year’s Budget announced on February 1 to ease financial burden on startups and their founders.
A start-up is an entity, incorporated or registered in India not prior to five years, with an annual turnover not exceeding ~25 crore in any preceding fiscal year and working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.
Commerce and Industry Minister Smt. Nirmala Sitharaman has said that mid-term review of Foreign Trade Policy would be completed early to synchronise its roll out with GST
Commerce Secretary Ms Rita Teaotia, Chairman RIS Shri Hardeep Singh Puri and DGFT Shri Ajay Bhalla also participated in discussions. The event was attended by the trade policy experts from the industry, academia, Research and Government .
Major suggestions discussed during the deliberations related to promoting Rupee Trade, facilitating not only exports but also imports and reducing cost of credit. Participant recommended harnessing the high foreign exchange earnings and large employment generation potential of services related to the Tourism, Education and Health sector. Such services fall under the WTO category of the Mode 2 Services, also called the ‘Consumption Abroad’ category. It was emphasised that promotion of mode2 in services sector shall contribute in domestic economic development and job creation.
Concerns were also raised on issues relating to GST and its impact on export. Minister said that Department of Commerce has already taken up these issues with Department of Revenue, and assured that it will again take up theses issues With DoR for placing it before GST council to find a solution.
Critical role of Logistics sector for export competitiveness was also discussed;, reducing the cost of credit in promoting exports, export basket diversification, strategy for promoting value added exports, agriculture exports and services exports were also deliberated.
It may be noted that while announcing the five year FTP, 2015-2020 on 01.04.2015, Hon’ble Commerce & Industry Minister had announced that the policy would be reviewed on mid-term basis. The exercise has been initiated by Department of commerce in January 2017. DGFT has held consultation with a cross section of stakeholders.- Exporters, Traders, Export promotion Councils, Commodity Boards, Various Ministries of the Central Govt., State Governments, foreign missions of India and Industry Bodies- in this regard.
Thursday, May 4, 2017
MakeMyTrip raises US$ 330 million from Ctrip.com, Naspers, others
MakeMyTrip said in a statement on Wednesday that it had entered into a definitive share purchase agreement with unnamed investors for ordinary shares worth $165 million (it plans to issue 4.58 million shares at $36 apiece).
The company added that it plans to issue 916,000 ordinary shares to Ctrip at $36 per share, and 3.66 million Class B convertible ordinary shares at the same price to MIH Internet SEA Pte, a subsidiary of Naspers.
The shares issued to Naspers will be convertible into ordinary shares of the company on a one-to-one basis, MakeMyTrip said.
The fresh capital infusion comes after MakeMyTrip, one of India’s first consumer Internet companies, which is also listed on NASDAQ, bought rival Ibibo Group’s travel business in India in an all-stock deal in October 2016 for about $720 million.
The move created the country’s largest online travel firm which, according to a note by Morgan Stanley, is worth $1.8 billion.
The money will come in handy for MakeMyTrip which is seeing increasing competition in its ticketing business from rivals including Yatra and Cleartrip, as well hospitality start-ups including the SoftBank-backed OYO Rooms (Oravel Stays Pvt. Ltd).
Over the years, MakeMyTrip has also started focusing on tours and hotel bookings that have higher profit margins than ticketing.
According to industry executives and experts, air ticket bookings offer a gross margin of 5-7% as against 10-20% hotel bookings offer.
According to an investor presentation by MakeMyTrip in April, the firm’s air ticketing transactions grew 28% in 2015-16 and tours and hotel bookings by 126% the same year. Net revenue in the air ticketing business grew 14% year-on-year; that in the tours and hotels business rose 45%.
A senior executive at MakeMyTrip said the company would invest in its hotels business and in redBus, the bus ticketing platform it acquired from Ibibo.
“As we penetrate deeper into tier II/III cities, budget hotels and homestays will be important,” said Rajesh Magow, co-founder and chief executive officer, India, at MakeMytrip, adding that this segment would drive growth. For MakeMyTrip, the premium hotel segment “is also important” because it helps the cause of consumer loyalty, Magow added.
MakeMyTrip’s revenues are currently split almost equally between ticketing and tours and hotel bookings, he said.
MakeMyTrip also plans to use the funds to expand overseas, especially in South-East and West Asia, and strengthen its business-to-business vertical to cater to small and medium enterprises, before rolling out the product for larger corporate entities.
“We are building a product which is a user-friendly tool to enable travel booking. This will be ready in 3-4 weeks. We will begin with SMEs as there are no massive structures and procurement processes (in them),” said Magow.
According to industry experts, the fresh capital will give the company ammunition to expand its lead over competitors.
“This capital is meant to grow the combined entity in an accelerated pace. The focus on hotels is understandable as this is an unsolved problem,” said Rutvik Doshi, director at Inventus (India) Advisors. “A large number of hotels do not have proper administrative or accounting processes and not even marketing capabilities. Getting the long tail of hotels online, especially the ones in smaller cities and towns, will require immense capital and effort.”
A ton of energy going into India: Tim Cook
At the analyst call after the second quarter earnings early Wednesday (India time), Chief Executive Tim Cook said, “We’re very optimistic about our future in this remarkable country with its very large, young, and tech-savvy population, fast-growing economy, and improving 4G network infrastructure.” Cook said in his opening address that revenue in India grew by strong double digits during the quarter ended April 1, setting a record.
Chief Financial Officer Luca Maestri quantified the “strong double-digit” growth for India — over 20 per cent. The company achieved double-digit growth in the US, Canada, Australia, Germany, the Netherlands, Turkey, Russia and Mexico, Maestri said. “Our growth rates were even higher, over 20 per cent in many other markets, including Brazil, Scandinavia, the Middle East, Central and Eastern Europe, India, Korea and Thailand.”
Globally, Apple sold 50.76 million iPhones in its second quarter financial year, down from 51.19 million a year earlier during the corresponding period. In India, around 2.5 million iPhones are estimated to have been sold between October 2015 and September 2016.
While the talk on India revolved around high growth (mainly of iPhones) and 4G network access, top executives remained tight-lipped on the regulatory hurdles Apple faces in the country as well as on the company plans in this geography.
For instance, when Simona K Jankowski of Goldman Sachs asked Cook if it was reasonable to assume that Apple would sell 10 million to 20 million iPhones in India next year, keeping in mind the growth and 4G roll-out, the chief executive officer spoke of having “a ton of energy going into the country on a number of fronts”. According to the transcript of the analyst call available at Seeking Alpha website, Cook said, “We’ve been investing quite a bit… it is the third-largest smartphone market in the world today behind China and the US… So, we believe, particularly now that the 4G infrastructure is going in the country and is continuing to be expanded, there’s a huge opportunity for Apple there. So that and the demographics of the country is why we’re putting so much energy there.”
To another question from Jim Suva of Citigroup Global Markets on Apple’s road map for India and whether it needed to work more with the government to set up stores and production units as well as to improve sales further, Cook agreed that the company was “underpenetrated there”. The company is “bringing all the things that we brought to bear in other markets that we’ve eventually done well in, and that’s from channel to stores to our ecosystem and so forth,” Cook added. He referred to India’s growth rates in relation to iPhone sales as “really good by most people’s expectations”, but said, “maybe not mine as much”. Cook’s meeting with Prime Minister Narendra Modi last year in New Delhi had centred on the promise that India market held, and the country has delivered in terms of consumer response.
The company is bringing all the things to the India market, Cook said. But when and how are among the questions that have kept industry watchers glued to the scene. Business Standard spoke to people close to the company and analysts to piece things together on Apple’s likely India road map for setting up fully-owned stores, starting manufacturing in the country, stepping up assembly lines, selling Apple-certified pre-owned phones and opting for the e-commerce route.
Store plan can wait
Even as Apple had proposed early in 2016 to set up fully-owned stores in India, 30 per cent local sourcing norm as part of the single brand retail foreign direct investment policy (FDI) policy has kept the plan on hold. A senior official at the Department of Industrial Policy and Promotion (DIPP) told this newspaper recently, “There’s been no retail proposal from Apple for a long time.”
Sources in the know said that the company was clear that compliance with the sourcing clause was not feasible. Case-to-case approval for niche cutting-edge companies was among the solutions devised by bureaucrats so that a company such as Apple could be spared from mandatory local sourcing. But definition of cutting-edge has been in the making for at least a year. Even as the government subsequently decided that a company manufacturing substantially in India would not have to comply with sourcing norms for owning retail outlets, the mathematics is still not working out for Apple, a source said.
There’s no show-stopper time frame for opening stores in India, a person familiar with the workings of the tech major said. Currently, there are franchisee stores in the country. “Apple could wait for long, till it has the right environment to set up stores as these are iconic destinations the world over. Typically, the company would not look at more than two to three stores in five to 10 years.” He cited global numbers to explain that Apple has no flagship store in many countries, including in Singapore. Dubai recently opened one. There are 495 stores in 18 countries, with maximum in the US, followed by Canada. China is high in the pecking order, too, with 40 stores, but Belgium, Mexico, Macau have only one each; the UAE, Netherlands and Sweden have three each; Turkey and Brazil have two each.
Make in India
However, the narrative has shifted to manufacturing in India now, at least from the government side. But for Apple, manufacturing will not take off till it makes business sense for the company’s component suppliers and the vendor universe, another source associated with production pointed out. Apple had asked for 15 years of Customs duty waiver, to be able to import components such as iPhone kits and other equipment needed for smartphone manufacturing, without incurring a high cost.
Anyway, now the GST (goods and services tax) regime will subsume those duties, a senior official in the finance ministry said, adding, “Nobody can do anything about tax concessions now.” He was replying to a query on the government rejecting Apple’s duty-waiver proposal. It would mean the company would continue to wait for the right time to start manufacturing in India, quite like having its stores.
Assembly line
Assembling in India is one route that is on. In fact, Wistron Corp - No. 92 & 93 Industrial Suburb II Stage, Yeshwanthpur, Bengaluru, India — stands out in the list of top 200 suppliers of Apple on the official website. It is the only one name associated with India to begin assembling of iPhones. To begin with, Taiwanese original design manufacturer Wistron will assemble iPhoneSE in the Karnataka plant. Last-mile work is in progress and things should start in about two months, a source at Wistron indicated.
However, it is the other Taiwanese firm - electronics contract manufacturer Foxconn - that caught public attention with its mega $5-billion now-on now-off investment proposal for Maharashtra. Sources close to the development said even as Foxconn is a big supplier for Apple worldwide, there’s nothing in India yet to connect the two. But, in the coming months or years, things could change and Foxconn could possibly start manufacturing for Apple even in India, they pointed out.
Other plans
Starting online stores is among its plans, and buying iPhones online could be a possibility in the future for Indian shoppers, one of the sources quoted above said. Then there are two more pieces in the Apple jigsaw — sale of Apple-certified pre-owned phones in India and the concept of phased manufacturing that the Ministry of Electronics and Information Technology recently floated. The proposal to bring pre-owned phones into India was rejected by the government and the company has not returned with any revised plan on that. Phased manufacturing is something that Apple top bosses may be discussing already with the government, at least to figure out what it exactly means.
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