Jewellery, tractor makers to gain from revised GST

Mumbai: The Goods and Services Tax (GST) Council’s decision to lower rates on 66 items brought cheer to a host of companies in the jewellery, cinema and pharmaceutical sectors.
Take jewellery companies. While a lower than expected rate of three per cent on gold was positive, the earlier decision was to have 18 per cent (from two-three per cent) on making jewellery from plain gold. This would have meant price increases by jewellery makers, which could have impacted the volume. Importantly, it would have further widened the price differential between jewellery sold by organised entities like Titan, PC Jeweller and TBZ from counterparts in the unorganised sector.
With this rate now down to five per cent, the organised sector entities can take calibrated price hikes and still gain market share from the others, who will see elevated compliance-related costs with GST implementation.
Multiplex companies such as PVR and Inox Leisure will not be impacted much from the reduced rates (18 per cent versus the 28 per cent decided earlier) on tickets priced below Rs 100, as those in this category constitute less than seven per cent of their revenue. For Mukta Arts, the impact is larger, as the segment constitutes a fifth of their revenue. Analysts say after including the higher tax on food and beverages, as well as the availability of input tax credit, the impact would be neutral to positive for multiplex companies.
The GST rate on inputs used for tractors has been lowered from 28 per cent to 18 per cent, and will lead to savings on working capital and on cash flow, for tractor makers such as Mahindra & Mahindra or Escorts. While they might have to still raise prices of their end-products, this will be much lower. In its next meeting on June 18, the Council could re-look at the rates on hybrid vehicles
Publishing companies such as Navneet Education and S Chand will have to raise the prices of exercise books, text books and drawing books. While the GST rates on these were lowered to 12 per cent (from 18 per cent earlier), this is more than double the five per cent value added tax rate these attract before GST.
In the pharma space, Biocon, Sanofi and other makers of diabetes drugs stand to gain from the lower rate on insulin, to five per cent from the earlier 12 per cent.
While the GST rate on food items such as salt, ketchups and pickles has also been reduced, these segments form a much smaller part of the revenue of listed consumer staples companies like Hindustan Unilever or Nestle India. They don’t disclose actual revenue share from these segments but analysts estimate it at eight to 10 per cent. Thus, the impact for these companies will not be material, reflected in their flattish stock price performance on Monday.
Stocks of most of the beneficiary companies mentioned above were trading in the green at the start of trading but ended flat, while the benchmark Sensex saw a half per cent fall.
As there is an anti-profiteering clause in GST, analysts believe most of the gains could be passed on to end-consumers and not reflect much in the margins of corporate entities, while possibly pushing up volume growth by a bit.

Better times ahead for India's venture capital market

New Delhi: The last 18-odd months, especially January onwards, haven’t been the best for India’s start-up market. As early stage investors consolidate existing portfolios, the lull in investments, particularly in the critical Series A stage, continues to hurt young start-ups. So far, according to data compiled by Chennai-based researcher Venture Intelligence, about $500 million has been clocked in venture capital investments across 127 deals. Last year, when the funding slowdown started to intensify, $1.5 billion was invested across 450 deals against more than $2 billion across 528 deals in the previous year. However, the past 18-odd months have also been eventful in terms of some broad shifts within the venture capital industry itself. A quick look at those shifts and what they may mean for the start-up market ahead.
1. It is fairly common in the venture capital industry globally for seasoned fund managers to leave established firms and strike out on their own. In India, it is less common, chiefly because the industry itself is barely a decade old. But, that has started to change. Former Helion Venture Partners fund managers Rahul Chowdhri, Alok Goyal and Ritesh Banglani quit to start Stellaris Venture Partners last year. SAIF Partners fund managers Rohit Jain and Mukul Singhal also broke away to start Pravega Ventures around the same time. In May, Mint reported that Rahul Chandra, one of Helion’s founding partners, is starting up on his own with a new $100 million fund called Unitary Helion. All these firms aim to invest in early-stage start-ups, at the seed and Series A stages, primarily in the technology sector. Most of the larger firms have vacated that space over the past 18 months and the new firms think they have an uncontested opportunity to catch the next generation of start-ups early.
2. Seasoned fund managers aren’t the only ones staking out that opportunity. A large contingent of angel investors and successful entrepreneurs are now moving to the next level with their own venture capital firms. There’s Pi Ventures, whose co-founder Manish Singhal is best known for co-founding online angel investment platform LetsVenture.
Then, there’s Ideaspring Capital, co-founded by technology entrepreneur Naganand Doraswamy; Equanimity Investments, founded by angel investor and former Franklin Templeton Investments executive Rajesh Sehgal; and Unicorn India Ventures, which was started by former Mumbai Angels president Anil Joshi and entrepreneur and angel investor Bhaskar Majumdar. Most of the fund managers in this group have either built companies themselves or have extensive operating experience across the corporate sector. Given their backgrounds, they are likely to be far more hands-on as investors than venture capital fund managers in the past.
3. One of the key developments in India’s start-up market over the past decade has been the development of a large, robust angel investor ecosystem. Lately, the ecosystem has undergone some changes. Chiefly, legacy organized angel investor networks, which dominated investing activity in the earlier half of the decade, have had to cede ground to so-called super angels—high-net-worth individuals such as Google’s Rajan Anandan or Tata Sons chairman emeritus Ratan Tata—or online platforms that employ crowdfunding practices like Letsventure. So, it isn’t surprising that these angel networks are now turning into venture capital funds. This April, Indian Angel Network (IAN), the country’s largest legacy organised angel investor network, announced the first close of its $55 million debut fund and will invest in concert with IAN. Networks such as IAN represent a substantial capital pool because of their larger member base and adding separate funds to the mix will bring more money into the system.
4. Finally, established venture capital firms are also looking at newer ways to approach the next phase of early-stage investing here. Last week, Mint reported that Inventus Capital Partners, the Bengaluru-based venture capital firm that counts Silicon Valley angel investor and serial entrepreneur Kanwal Rekhi as a founder, is in the process of raising a separate India-focused fund. The proposed fund is a big shift in strategy for the firm that has until now invested both in India and the US from a common fund. A separate India fund signals that Inventus, which is focused on the technology sector, sees enough depth in the local technology start-up market, despite recent ups and downs, to focus more sharply on India. IDG Ventures India, also a Bengaluru-based venture capital firm that has backed companies such as Myntra and Perfint, recently teamed up with Unilever’s venture capital arm Unilever Ventures and Amazon Web Services to jointly invest anywhere between $500,000 and $5 million in local start-ups. Earlier, the firm had also partnered with accelerator Axilor Ventures to back start-ups and the seed and pre-Series A stages.
The initiatives enable the firm to get a headstart on start-ups that may be ready for Series A funding a couple of years later. Its Bengaluru-based peer Kalaari Capital is trying to do the same through its incubator programme Kstart, while Matrix Partners India in Mumbai runs an outreach programme through co-working and networking spaces. While most of these firms have moved away from seed-stage investing and slowed down on Series A in the last 18 months, such start-ups continue to be on their radar. The early-stage investment slowdown will most likely last a few more quarters before investors return to the market. But, clearly, while the downturn plays out, preparations are already underway for the next phase of investing.
Even when the next phase gets going in right earnest, it may be a while before the investment activity gets to the exuberant levels of the later half of 2014 and 2015. Given how many more venture capital firms are going to be out there soon, that may not be such as a bad thing.
Snigdha Sengupta is a consulting writer with Mint. She contributes stories on venture capital and private equity.

New textile policy may be finalised in next three months

Mumbai: The much-awaited new textile policy is likely to be finalised in the next three months, a senior official said today.
"After consultation is done with stakeholders we have finalised the draft. We are now trying to incorporate international response and output from foreign players at the forthcoming Textiles India-2017 conference, which will serve as input to our textile policy," Textiles Secretary Anant Kumar Singh told reporters at an CII event here.
"There is no harm in having wider consultation. After having inputs, we will process and finalise the policy in next three months period", the officer added.
The policy aims to achieve USD300 billion (over Rs 20 lakh crore) worth of textile exports by 2024-25 and create an additional 35 million jobs.
According to Singh, the Centre is organising Textile India Conclave and Exhibition in Gujarat from June 30 to July 2, for the Indian textile and handicraft sector which will showcase the entire range of textile products from 'fibre to fashion'.
It will be inaugurated by Prime Minister Narendra Modi, added Singh.
The event will have over 1,000 stalls and will witness the presence of over 2,500 discerning international buyers, agents, designers, retail chains from across the world, and 15,000 domestic buyers.
The three day event will include global conference with six themes, to be chaired by concerned Union ministers.
The valedictory session will be presided by Union Finance minister Arun Jaitley.

Retail inflation cools to 2.18%

New Delhi: Retail inflation for the month of May hit another series-low, coming down to 2.18 per cent. Consumer Price Index-based inflation was 2.99 per cent in April and 5.76 per cent in May last year.
Food prices entered a deflationary zone in May, with the Consumer Food Price Index at minus 1.05 per cent, against 0.61 per cent this April and 7.47 per cent in May last year, official data showed on Monday.
The headline figure of 2.18 per cent is the lowest since the series was introduced with a new base year in January 2015. This is a second month that retail inflation has hit a serieslow. “The decrease can be ascribed to a decline in food prices, owing to falls in the price of cereals, fruit, egg, fish, meat, sugar and spices,” said Madan Sabnavis, chief economist at CARE Ratings. The steepest fall was in pulses, at minus 19.45 per cent, and vegetables at minus 13.44 per cent. The food and beverage category, 46 per cent of the CPI index, showed minus 0.22 per cent for May.
For farmers, the record low means the produce is not fetching even their basic price in the market. Their spreading agitation has been fuelled CPI (General) ¾Rural ¾Urban ¾Combined % by the fact that market rates of major pulses and vegetables have slumped in recent years. According to data provided by the Department of Consumer Affairs, the retail price of urad dal (black gram) is 37.6 per cent less than last year, while masoor dal (red lentil) is 13.7 per cent less. And, below the minimum support price set by the Centre. Though the Centre has stepped in to purchase pulses at market rates from farmers, this is concentrated in a few states and the total purchase has been less than a tenth of the production in 2016-17. Among vegetables, potatoes are selling at 31.1 per cent less than last year in most retail markets; onion is 4.3 per cent weaker. Tomatoes are 45.2 per cent cheaper. “DAP (fertiliser) has gone up from ~1,000 a bag to ~2,300 in one year. How are we to make ends meet?” asks Anil Thakur, a farmer from MP’s Mandsaur.
Sabnavis said while food prices had come down, core inflation “continues to be sticky in the upward direction”. He said food prices could turn around in June and there could be upside risks to inflation. “The Reserve Bank is expected to maintain status quo (on lending rates) until September, as inflation is dependent upon turnaround of the monsoon, increase in house rent allowances, implementation of GST and farm loan waivers. We expect only a 25-basis point cut in October,” he said.
On June 7, the central bank’s Monetary Policy Committee held interest rates where they were for a fourth consecutive time. This drew flak from the finance ministry, with Chief Economic Advisor Arvind Subramanian saying the panel’s inflation model was faulty.

Narendra Modi to meet Donald Trump to set forth vision to expand India-US ties

Washington: The maiden meeting between US President Donald Trump and Prime Minister Narendra Modi would “set forth a vision” to expand the US-India partnership in an ambitious way, the White House has said.
The leaders of the world’s two largest democracies, home to 1.6 billion people, will meet on 26 June to discuss a gamut of bilateral issues including terrorism and India’s concerns over possible changes in H1B visa rules. “I think you can expect the two of them to set forth a vision that will expand the US-India partnership in an ambitious and worthy way of both countries’ people,” White House press secretary Sean Spicer told reporters at his daily news conference.
Spicer said the two leaders were expected to set forth a “common vision” on expanding the US-India partnership. He cited fighting terrorism, promoting economic growth and reforms and expanding security cooperation in the Indo-Pacific region as shared priorities. “President Trump and Prime Minister Modi will look to outline a common vision for the United States-India partnership that is worthy of their 1.6 billion citizens,” Spicer said.
Trump invited Modi to Washington after the latter rang him in January to congratulate the new president on his inauguration. “The president and the prime minister have had a number of positive phone conversations, and expect to further that discussion ... whether it’s economic growth and reforms, fighting terrorism, expanding our cooperation as major defence partners,” Spicer said in response to a question.
The bilateral talks appear to be no bed of roses as they come amid thorny issues like US’s plans to reduce the number of H1B visa slots that are mainly used by Indian IT workers, and its withdrawal from the historic climate accord. The White House said that the US-India trade has grown six-fold since 2000, from $19 billion to $115 billion in 2016, despite the recent hiccups over the H1B visa issue.
“US energy and technologies, including natural gas, are helping to build Prime Minister Modi’s vision for a new India and creating thousands of US jobs in the process,” Spicer said. Notably, Modi’s US visit, which would begin on 25 June, comes in the backdrop of Trump’s announcement to withdraw the US from the historic Paris climate agreement signed by over 190 other countries.
In his announcement of the decision for which he received a global condemnation, Trump had blamed India and China for the US withdrawal. “India makes its participation contingent on receiving billions and billions of dollars from developed countries,” he had said. Strongly rejecting Trump’s contention, India said it signed the Paris deal not under duress or for lure of money but due to its commitment to protect the environment.
During his visit to France this month, Modi even said that India would “go above and beyond” the Paris deal to protect climate for the future generations. Apart from ways to enhance trade and business cooperation, Modi and Trump are expected to discuss defence ties.

LIC sets record on claims front, settles 99.92% cases

Mumbai: The Life Insurance Corporation (LIC) has pulled off a record claim performance by settling 99.92 per cent of death claims in 2016-17 as against industry average of 95 per cent.
The insurance behemoth is keen to push the boundary further, looking to settle 99 per cent claims on a monthly basis too in future.
"LIC has settled 99.92 per cent of death claims in 2016-17, which is undoubtedly one of the best performances not only in the country, but in the world," an LIC source told PTI here.
According to industry body Life Insurance Council, there are a total of 24 players, including LIC, active in the life insurance space and the industry average of death claim settlement stands at around 95 per cent.
"One of the fundamental reasons for the strong brand of LIC is our service delivery and... our claim settlement operations in particular," the source said, adding that "we would expect that not only we continue to focus on this area, but further strengthen it by settling 99 per cent claims on month on month basis".
Till date, LIC has had nearly 11 lakh such cases outstanding and expects that each and every case needs to be followed up to its logical end.
According to the source, the customer relationship management (CRM) department of LIC has been asked to ensure claim particular sheet is prepared for every outstanding case and regular monitoring is done.
LIC, the source said, is making further efforts in the CRM space, where the corporation would like to see visible and perceptible changes in the quality of response to customers, turnaround time in attending to customer complaints or queries, courteous attitude and business etiquette of officials dealing with customers.
According to the source, prompt handling of queries by the SMS-based helpline has brought down the number of complaints drastically and it would revive the helpdesk in each branch so that customer is attended to promptly.
"Further, to provide instant service, we need to ensure our customers are empowered to use e-services. Their mobile numbers, e-mails and NEFT details are registered as early as possible to provide instant services," the source added.
As for information technology, LIC's immediate focus is to ensure comprehensive cyber security for data, software as well as hardware. This is all the more relevant in the wake of the Wannacry malware attack that hit computers across globe.
The corporation may go for a net addition of 69,000 agents, potentially taking its agency strength to 11,31,181 at the end of March 2017.

PE investments in auto parts up 607% in the first five months of 2017

Chennai: Private equity investment in the automobile component sector rose 607 per cent to $90.2 million in the first five months of this calendar year, over the same period last year.
Merger and acquisition (M&A) deals in the sector were up 170 per cent to $254.8 million.
According to VCCEdge data, three deals alone attracted around $90 mn this year. These included Piramal Finance's investment of $42.5 million in RSB Transmissions India and $44.9 million in IndoShell Mould. SAIF Partners India invested around $2.8 million in Fiem Industries.
Khushru Jijina, managing director at Piramal Finance, said: "The auto components space has been on our radar as a focus area for a while."
The industry has grown at a 15 per cent compounded annual rate over the past decade, significantly higher than the original equipment makers themselves. Both RSB and IndoShell have long-standing relationships with major OEMs. Sector experts say the components industry is projected to clock $50 billion in revenue by 2018-19, up from $39 billion in 2016-17.
"We look forward to more such transactions as we further scale up our investment focus towards this sector," said Jijina.
The automotive retail space has attracted one investment so far this year. Banyan Tree Growth Capital invested $14 million in Popular Vehicles and Services.
In the M&A space, there have been 11 deals worth $245.8 mn so far this year, against $94.4 mn across seven deals in the comparable period a year before. These include JTEKT Corporation's $125.3 million acquisition of a 51.12 per cent stake in Sona Koya Steering in February and a $66.1 million investment for a 34.04 per cent stake in Agile Electric Sub Assembly, for which the investor is not known.
The only outbound M&A was Hi-Tech Gears' $43.7 million investment for the entire equity of Teutech Industries.
Peugeot SA has invested $11.95 million in Hindustan Motors' Ambassador brand for 100 per cent stake. There was a $5 million investment by Meidoh Co in Sterling Tools.
The automotive retail sector saw two M&A deals but no value was disclosed. These were Smarton India's investment in Volta Motors and SAIC Motor HK Investment's for 100 per cent stake in General Motors India's Halol unit.

GST Council reduces rates of 66 products

New Delhi: With two weeks to go for the goods and services tax (GST) roll-out, the GST Council on Sunday reduced the rates for 66 items and expanded the scope of the composition scheme for the benefit of small traders, manufacturers, and restaurateurs. The composition scheme is a presumptive taxation scheme allowing small traders, manufacturers and restaurants to pay a 1-5 per cent GST rate on sales without tax credits.
Insulin, pickles, printers, agarbattis, school bags, and cashew nuts are among the 66. Those were among 133 items whose rates were reviewed following industry representation. However, the GST rates for telecom services, marbles, granite, spectacles, among others, were retained, which drew flak from the respective sectors.
Union Finance Minister Arun Jaitley, who is the head of the Council, said in certain cases the rate fitment committee went beyond the equalisation principle of maintaining the current tax incidence.
“There are certain items that were historically taxed at a higher rate, but the Council felt that the burden needed to be reduced,” said Jaitley.

The finance minister said the average of all the rates decided by the Council was significantly lower than the present tax incidence.
On the question about any further revision of rates, he said the fitment committee and the GST Council had gone into all the cases in depth and the rates had been decided after discussion.
“These broadly are the final rates... Just because somebody raising an issue does not mean you have to grant it,” he said.
On the automakers’ pitch for a lower rate for hybrid cars, Jaitley said the facts presented by the industry were not correct. “If necessary, it will come up for discussion,” Jaitley said.
The current level of tax on hybrid cars stands at 30.3 per cent, as against 43 per cent (28 per cent plus 15 per cent cess) decided by the Council.
Providing relief to small entities under the GST, the composition scheme has now been expanded to traders, manufacturers, and restaurants with an annual turnover of Rs 75 lakh as against Rs 50 lakh decided earlier.
The scheme allows traders, manufacturers, and restaurants who satisfy the turnover criterion to pay a fixed rate at 1 per cent, 2 per cent, and 5 per cent, respectively, and they will have reduced procedural requirements.
All goods and services under the GST regime have been broadly placed in five tax slabs — 0, 5, 12, 18, and 28 per cent.
The GST on insulin, cashew nuts and agarbattis has been lowered to 5 per cent from 12 per cent proposed earlier. The rate for school bags, printers, and tractors will attract an 18 per cent rate against 28 per cent decided in the earlier meeting. The rate for children's exercise books has been slashed to nil from 12 per cent proposed earlier.
The GST rate for movie tickets under Rs 100 has been slashed to 18 per cent, while tickets priced above Rs 100 will be taxed at 28 per cent. Kitchen use items like pickles, mustard sauce, and morabba will attract 12 per cent as against 18 per cent proposed earlier.
MS Mani of Deloitte Haskins and Sells said the reduction indicated many consumer items might see a price reduction or at least an equivalence of prices after the GST is introduced.
"This will erase fears of an inflationary spiral due to the GST and may see prices stabilising and benefit consumers," said Mani.
The Council will meet again on June 18 to take up residual issues including e-way bill and the rates for lottery.
"There has been an attempt to address the inverted duty structure in a few cases like tractors and textiles by reducing the rates on parts and job work services," said Pratik Jain of PwC India.
Uday Pimprikar, Tax Partner, EY, said: “The telecom sector's ask of a lower tax rate was ignored by the GST Council. The 18 per cent rate imposed on the sector would increase the tax incidence. It is now important that the government engages with the industry to provide certainty and support for a smooth transition into GST.”
Six states are yet to pass the state GST (SGST) Bill in their respective state assemblies.

Internet users to double to 829 mn by 2021: Report

Mumbai: Internet users in the country will double by 2021 to 829 million users from 373 million users in 2016, driven by digital transformation according to a recent report.
This means roughly 59 per cent of the Indian population will use the internet. Also, there would be two billion networked devices in 2021 up from 1.4 billion in 2016.
Overall IP traffic is expected to grow 4-fold during the same period of five years at a compounded annual growth rate of 30 per cent, the Cisco Visual Networking Index (VNI) Complete Forecast said.
"Combining device capabilities with faster, higher bandwidth and more intelligent networks is leading to wide doption of high bandwidth data, video and advanced multimedia applications that contribute to increased mobile and Wi-Fi traffic," said Sanjay Kaul, Managing Director, Service Provider Business, Cisco India SAARC.
"The need for optimised bandwidth management, network automation, end to end security and ultimately network monetisation through cost efficient data production is fuelling the growth of network automation, mass market 4G deployments and adoption, soon to be followed with 4.5G and 5G," Kaul added.
The report further explained that mobile to mobile (M2M) connections will represent 22 per cent of the total two billion devices and connections and will account for five percent of IP traffic by 2021.
Advancements in IoT applications such as smart meters, package tracking, digital health monitors and a host of other next-generation M2M services is driving this incremental growth.
Video will continue to dominate IP traffic and overall Internet traffic growth representing 76 per cent of all Internet traffic in 2021, up from 57 percent in 2016, the report noted.
India will reach 84 billion Internet video minutes per month by 2021, which is one hundred and sixty thousand years of video per month, or about thirty two thousand video minutes every second, it explained.

Govt aims to make India "food factory" of the world: Badal

New Delhi: Food Processing Minister Harsimrat Kaur Badal today said the government wants to make India a "food factory" of the world and is fully committed to provide transparent environment to investors.
Laying the foundation stone for a mega food park being developed by KINFRA at Palakkad in Kerala, Badal said the government has made food processing a major thrust area of 'Make in India' initiative.
"The present government is fully committed to providing an environment that is smooth, transparent and easy for investors wanting to start an enterprise in India in a bid to make the country a resilient food economy and 'Food Factory' of the world," Badal said.
The food park is being set up on 78.68 acres at a cost of Rs 119.02 crore.
"Giving a big push to the infrastructure development for food processing in the state of Kerala, foundation stone of two mega food parks are being developed by Kerala Industrial Infrastructure Development Corporation (KINFRA) at Palakkad and other by Kerala State Industrial Development Corporation (KSIDC) at Alappuzha has been laid today," a statement from the ministry of food processing said today.
The foundation stone for the food park being developed by KSIDC at Alappuzha was laid by Chief Minister of Kerala Pinarayi Vijayan, it said. This is being set up on 68.18 acre of land at the cost of Rs 129.15 crore.
"Government of India is providing financial assistance of Rs 50 crore to each of the projects," the statement added.
Each of the mega food parks will leverage an additional investment of about Rs 250 crore in 25-30 food processing units in the park and generate a turnover of about Rs 450-500 crore annually, Badal said.
"Each of the Parks will also provide direct and indirect employment to 5,000 people and benefit about 25,000 farmers in the Central Processing Centre (CPC) and Primary Processing Centres (PPC) catchment areas," the statement added.
Minister for Food Processing Industries said that the modern infrastructure for food processing created at the food parks will benefit the farmers, growers, processors and consumers of Kerala and prove to be a big boost to the growth of the food processing sector in Kerala.