PE investment shoots up 64% to US$ 963 million in May: Thornton

New Delhi: Private equity investment in May jumped 64 per cent in value terms with deals worth USD 963 million, mainly driven by big ticket investments, says a report.
According to assurance, tax and advisory firm Grant Thornton, there were 67 PE deals worth USD 963 million in May this year, while in the same month last year, there were 74 such transactions worth USD 587 million.
For the January-May period, though the number of PE deals declined, but investment values have shown an improvement, indicative of investors beginning to take bigger bets on the Indian economy, more specifically in IT & ITeS and retail and consumer sector.
During the first five months of this year, there were 349 PE deals worth USD 6,402 million, while in January-May period last year, there were 421 such deals worth USD 5,487 million.
The month of May was dominated by investments in startups which contributed to 58 per cent of total investment volumes.
Startups in sectors such as enterprise application and infrastructure, travel, transport and logistics, and FinTech attracted significant attention from investors and constituted over 51 per cent of startup investment volumes.
According to industry reports, May this year witnessed one of the largest FDI in the real estate this year with Xander Group's acquisition of Shriram properties Gateway IT SEZ in Chennai for USD 350 million.
Other sectors such as IT & ITeS, e-commerce and agriculture sectors also attracted large investments of over USD 50 million during the month.
In terms of sector spread, real estate seems to be gaining interest and contributed more than 40 per cent in terms of deal value. The remaining 60 per cent was mostly contributed by the technology sector.
"All eyes seem to be now on GST implementation and its impact on not only trade and economy, but more importantly on investor interest. Since there is now clear visibility on this, we should see good traction in both M&A and PE," Grant Thornton India LLP Partner Prashant Mehra said.
Mehra further noted that with India continuing to be favoured destination among foreign investors, we should hopefully see more in-bound action going forward.

Fruit & vegetable exports to Qatar rise 15% in 2 weeks

Mumbai: India’s exports of fresh fruit and vegetables to Qatar have jumped by 15 per cent in the past two weeks because of an increase in demand, owing to disruptions in supply to the country from Saudi Arabia and other neighbouring nations.
The supply to Qatar has received a boost since early this month after Saudi Arabia, the United Arab Emirates, Egypt, Bahrain, and Yemen severed diplomatic ties with Qatar and blocked access to Doha, Qatar’s capital, by land, sea, and air.
Maldives and Libya later joined the countries that have isolated Qatar. Consequently, importers in Qatar have been buying more from India.
To meet their immediate needs, importers in Doha have started transporting by air. Many cargo airlines have delivered goods in large quantities to Qatar in the past two weeks.
Confirming the development, a senior official of the Agricultural and Processed Food Products Export Development Authority (Apeda) said: “India’s fruit and vegetables exports to Qatar have increased in the last two weeks probably due to halt in their exports from Doha’s neighbouring countries.”
India’s exports of fresh fruits and vegetables are rising for the past three years owing to local producers turning quality-conscious.
Also, Indian exporters have stepped up marketing, which has helped in price competitiveness in overseas markets.
The data compiled by Apeda show India’s exports of fresh fruit and vegetables at Rs 10,369.93 crore in the financial year 2016-17 compared to Rs 8,391.36 crore for the corresponding period last year. In terms of volumes, however, exports jumped to 4.1 million tonnes in FY17 versus 2.4 million tonnes in the previous fiscal year. West Asia contributes a major portion of India’s fruit and vegetables exports. A large quantity exported to West Asia goes to Qatar via other countries. But Doha has started importing from India directly.
The Apeda data show India’s direct exports to Qatar to be Rs 220 crore for FY17, an increase of 14 per cent from the previous year’s level of Rs 193 crore. “While fruit and vegetables exports to Qatar have increased in the past two weeks, the demand has not reached its limit due to Ramadan. Once this festival is over next week, new orders would start pouring in from Qatar,” said Anil Patil, proprietor, Incoexcofarms, a Pune-based fruit exporter.

Niti Aayog OKs Rs 18,000 cr project to increase train speeds

New Delhi: The ambitious Rs 18,000 crore project for increasing train speeds on the Delhi-Mumbai and Delhi-Howrah rail corridors has got the Niti Aayog's approval, paving the way for being put up for Cabinet clearance.
The mega project is meant to bring about a paradigm shift in rail operations enabling trains to run at 160 km per hour on the busiest routes on the Indian railway network.
Aiming at reducing travel time between the three metropolises, the project envisages fencing off the entire 3,000 kms on both routes, upgradation of signalling system, elimination of all level crossings and installing train protection warning system (TPWS), among other works to make trains run at an increased speed of 160 kmh.
"Any project more than Rs 1,000 crore in worth will have to get the Niti Aayog clearance. So now after getting the Niti Aayog clearance yesterday, the proposal will now be examined by the expanded railway board," said a senior railway ministry official involved with the project.
The expanded railway board is comprised of senior representatives from department of expenditure, department of programme implementation and Niti Aayog, besides the board members.
The Railways will submit the proposal for cabinet clearance after getting the proposal approved by the expanded railway board.
The 1,483-km long New Delhi-Mumbai rail route will also include the Baroda-Ahmedabad sector, and is estimated to cost Rs 11,189 crore.
The 1,525-km long New Delhi-Howrah route, which also includes the Kanpur-Lucknow section, is estimated to cost Rs 6,974 crore.
The work on both sections will be given to a single agency through global bidding for effective implementation of the project.

Daily revision of fuel prices structurally positive for OMCs

New Delhi: The shift to daily revision in prices of petrol and diesel from fortnightly revision starting 16 June is structurally positive for Indian oil marketing companies (OMCs)—Bharat Petroleum Corp. Ltd (BPCL), Hindustan Petroleum Corp. Ltd (HPCL) and Indian Oil Corp. Ltd (IOC). With this, India joins countries such as the US and Australia where fuel prices are revised on a daily basis.
This means OMCs will be able to pass on daily changes in product prices and exchange rate fluctuations without delays.
IOC said daily revision of petrol and diesel prices will set new standards of transparency, encourage the automation drive of petrol pumps and lead to better stock management practices.
However, it will probably be a while before OMCs see benefits in the form of higher marketing margins in their financials. Every Re0.1/litre increase in petrol/diesel price adds 1.9-3.5% to OMC earnings per share, according to Credit Suisse Securities (India) Pvt. Ltd.
It’s also worth remembering here that competition from private sector companies will pose a threat to expansion in marketing margins. Already, OMCs have lost market share in the fuel retailing business to private sector firms in fiscal year 2017 (FY17).
Nevertheless, all three stocks have outperformed the Nifty 50 index in the past year, supported by earnings growth. Even so, valuations aren’t expensive.
Kotak Institutional Equities highlights in a report on 19 June that OMCs may look optically inexpensive trading at 10-12 times price-to-earnings multiples or 6-6.7 times EV/Ebitda for FY19. EV is short for enterprise value and Ebitda stands for earnings before interest, tax, depreciation and amortization.
“However, it may be justified as a significant portion of the business is cyclical and it also requires meaningful amount of capex for upgradation and modernization, let alone to raise capacities,” added Kotak.
Share prices of these stocks did not alter dramatically on Tuesday. Note that Kotak’s earnings estimates are 12-15% below consensus for BPCL and HPCL, and around 2% for IOC.
Some analysts believe that OMC earnings peaked in FY17 and see risks for FY18 earnings. Lack of sizeable one-offs from inventory gains is one reason, says Spark Capital Advisors (India) Pvt. Ltd. Another reason would be rising competition in the auto fuels segment, it added.
The sharp appreciation in the last one year and the above mentioned concerns could well limit meaningful upsides for these OMC stocks. On the brighter side, a better refining margin environment and stronger demand for petroleum products will help boost sentiment for these stocks.

NCAER ups India's GDP growth to 7.6% for FY18

New Delhi: The National Council of Applied Economic Research (NCAER) has revised up its projections for the country's economic growth to 7.6 per cent for the current financial year, compared with the earlier forecast of 7.3 per cent.
Similarly, growth in the country's gross value added was scaled up from 7 per cent to 7.3 per cent for the year.
Surprisingly, the think tank projected the wholesale price index-based (WPI) inflation to be 6.7 per cent for 2017-18. The WPI-based inflation stood at 3.85 per cent in April which further declined to 2.17 per cent in May.
India's economy grew 7.1 per cent in 2016-17, lower than 7.6 per cent against 8 per cent a year ago.
NCAER's projections are shade higher than Economic Survey which projected the GDP growth in the range of 6.75 per cent to 7.5 per cent for the current financial year. However, the World Bank has forecast growth to be just 7.2 per cent for the year.

Mobile data consumption rose 142% in last 3 yrs: Kant

New Delhi: Mobile data consumption per subscriber in India has risen by 142 per cent in the last three years, NITI Aayog CEO Amitabh Kant today said.
"Significant progress in digital access: During 2014-17, India has seen a 142 per cent year-on-year increase in mobile data consumption per subscriber," Kant said in a tweet.
He further said, "during 2014-17, India has seen a 17X increase in online banking transactions per internet user & a 200X increase in digital wallet transaction." PTI BKS

Return on equity of Sensex firms hits three-year high in FY17

Mumbai: Return on equity (RoE) of Sensex companies rose to a three-year high of 11.27% in 2016-17, while return on capital employed (RoCE) hit a five-year high of 15.1%, data showed.
The 10-year data, sourced from Capitaline, does not include banks, financial companies and energy companies.
RoE measures a company’s profitability by showing how much profit a company generates with shareholders’ money. RoCE measures the efficiency with which a company employs its capital.
Analysts said RoE recovered due to various factors including falling cost of debt. In FY17, cyclicals also had seen a bit of recovery and overall consumption improved.
Pankaj Pandey, head of research at ICICI Securities Ltd, said RoE expansion was led by last fiscal’s higher demand, recovery in cyclicals and decent profits. He expects RoE to improve further this year, led by Sensex earnings per share (EPS) of 18.5%.“Due to decline in cost of capital and fall in inflation expected in FY18, RoE is likely to improve with increase in profitability of companies. Overall, domestic and consumption-oriented firms should do well. Capex recovery is also seen in this fiscal,” Pandey said.
Automobile and consumer goods companies saw an increase in RoE while technology, pharma, metals and FMCG saw a sharp fall.
RoE of auto companies stood at 233.7%, improving in the last two years after it had started falling from FY11. However, in the last 10 years, its best RoE was at 725.26% in FY08. Consumer goods sector RoE recovered to 9.33% in FY17, from a decline of -0.36% in FY15. For this sector, RoE has been declining since FY08. RoCE for consumer goods in FY17 is at 19.84%, up from 13.19% from the previous year.
Siddhartha Khemka, head, equity research (wealth) at Centrum Broking Ltd said, “RoE expansion is led by improvement in margins in a few sectors due to low material cost, coupled with the increase in capacity utilisation.”
IT and pharma companies did not see any improvement in RoE and RoCE. After a recovery in FY14, RoE for IT companies fell to 17.30% in FY17. In the last 10 years, its best RoE was at 24.39% in FY08. Its RoCE, too, fell to 22.05% in FY17 from 25.64% in FY16. After clocking 18.03% in FY15, RoE in the pharma sector has slipped, touching 16.04% in FY17. In the past 10 years, the sector’s best RoE was in FY11 at 35.29%. RoCE of pharma companies also fell to 17.08% from 19.53% in the last fiscal.
Meanwhile, Ambit Capital Pvt. Ltd said in a 15 June report that the smallest stocks in the BSE500 (ex-BFSI) universe have the worst performance in terms of RoCE and RoE ratios. However, these stocks have seen the sharpest price to earnings (PE) re-rating over the last six years.
“Both for Indian midcaps and largecaps, the actual quarterly earnings have kept disappointing consensus expectations – even the ones built at the end of relevant quarter. When one considers the percentage of stocks in these indices with negative earnings surprise has remained consistently upwards of 50% throughout the last 12 quarters. Further, this number looks to be increasing again for the midcap space,” the brokerage firm said.
However, there is widespread optimism in the markets which is driving the momentum. Analysts still believe that earnings recovery will pick up and see healthy growth in FY18. Emkay Global Financial Services Ltd expects steady-state earnings growth to be around 10% which is somewhat higher than the 10-year average of 4.5% and flat growth of the past three years. It sees consensus earnings growth estimate for FY18 at over 20%, but implementation of GST in July may bring forth inventory correction across various sectors, thereby slowing sales growth temporarily, while recent modest appreciation in Indian rupee could also impact near term outlook on earnings.
Stating that, “this could be the beginning of a new growth cycle”, Ridham Desai, managing director and Sheela Rathi, equity strategist, Morgan Stanley said in 6 June note, “We watch for a turn in earnings revisions in the coming months as earnings surprise positively. Relative to US equities, this is about as attractive as Indian stocks have been in a while. India’s own price to book is at historical average. Versus emerging markets, India looks rich but then RoE is gapping higher.”

Maruti, Honda drive industry growth in FY18

New Delhi: Domestic sales of passenger vehicles (cars, vans and utility vehicles) and two-wheelers witnessed a healthy growth rate of about 12 per cent and 10 per cent, respectively, in the first two months of the financial year 2017-18. However, this is not the real growth of the industry, as it was dominated by just two companies — Maruti Suzuki in the case of passenger vehicles (PV) and Honda in two-wheelers. Both the companies are controlled by Japanese auto majors — Suzuki and Honda, respectively.
If one looks at the performance of the PV industry minus Maruti Suzuki, the growth rate comes down to sub-five per cent from 12 per cent. Maruti grew at 19 per cent in April-May 2017, pushing the industry’s growth. Maruti’s growth helped it reach a market share of almost 52 per cent during this period, for the first time in over a decade. Three products of the company — Baleno, Brezza and Dzire — enjoy a waiting period of at least two months.
The second-biggest player, Hyundai, saw a volume growth of less than four per cent. M&M, which stood third, witnessed a volume decline of over six per cent. A few other players, all with a market share of five per cent or lower, were able to show double-digit growth but on a small base. These included Honda Cars, Tata Motors, Toyota, Ford, and Nissan.
The story is identical in the two-wheeler segment. After a weak phase post demonetisation, the industry clocked a 9.6 per cent growth rate in domestic sales in the April-May period. But, if we were to look at the industry’s growth minus Honda Motorcycle and Scooter India (HMSI), this rate comes down to below three per cent. HMSI, riding on the rising popularity of scooters, witnessed its domestic sales grow by 28 per cent in April-May. Market leader Hero MotoCorp’s domestic sales registered less than three per cent growth, while TVS Motor, the third-biggest player, grew at 10 per cent.
HMSI, the second-biggest player, sold over a million units in the first two months. “This growth is coming on back of demand for both scooters and motorcycle models,” said Y S Guleria, senior vice president (sales and marketing), HMSI.
HMSI’s scooter sales grew 32 per cent, against the industry’s 24 per cent, while motorcycle sales surged 21 per cent as compared to a four per cent growth rate in the industry. Accordingly, HMSI expanded its market share to 31.5 per cent from 27 per cent during April-May last year. Guleria said the company had set an “aggressive” target, to grow domestic sales by 20 per cent in FY18. HMSI’s growth made India the largest contributor to Honda’s global two-wheeler business by volume last year. India sales contributed 28 per cent to Honda’s volume.
Abdul Majeed, partner at PwC India and a sector expert, said both Maruti Suzuki and HMSI had managed to sustain a high double-digit growth by creating successful mass products and backing them with an extensive sales and service network.

Digital economy can reach US$ 4 trn in 4 yrs: Tech sector to govt

New Delhi: Surpassing the government's expectations to make India USD 1-trillion digital economy by 2022, technology companies today said it has potential to grow up to USD 4 trillion during the period.
IT Minister Ravi Shankar Prasad, who chaired a meeting with industry captains to chalk out a growth plan, said the government will formulate a new set of strategies to support growth including a new electronics policy, software product policy and a framework for data security and protection.
"There was unanimity among all the participants that USD 1-trillion digital economy is an understatement. India has the immense potential to go to USD 2 to 3 to 4 trillion digital economy potential," Law and IT Minister Ravi Shankar Prasad told reporters after meeting with top industry leaders.
The meeting was attended by top experts such as Nasscom President R Chandrashekhar, Google India's Rajan Anandan, Wipro's Rishad Premji, Indian Cellular Association National President Pankaj Mohindroo, NIIT Chairman Rajendra Pawar and Hike Messenger CEO Kavin Bharti Mittal, among others.
Notable absentees from the event included Flipkart co- founder Sachin Bansal and Paytm founder Vijay Shekhar Sharma.
The government has projected that Indian digital economy will become USD 1 trillion by 2022 from around USD 450 billion digital economy at present.
As of now, the Indian electronics market is estimated to be around USD 100 billion, IT sector USD 150 billion, telecom USD 150 billion, e-commerce USD 30-40 billion and rest is estimated to be size of shared economy like taxi hailing services, start-ups etc.
"One participant said that BPO alone has potential to reach USD 1 trillion potential. One participant said that electronics manufacturing itself has the potential to reach that in coming in 3-4 years. I asked them specifically that is this the hope shared by all. All of them said we share this," Prasad said.
The Ministry of Electronics and IT has projected IT and ITeS sector to grow to USD 350 billion by 2025 from USD 160 billion, while electronics sector is poised to touch USD 300 billion by the same time (from USD 100 billion currently).
Telecom and e-commerce are projected to grow to USD 150 billion each, while sharing economy and digital skilling each presents a USD 30 billion opportunity.
Digital payments, cyber security and Internet of Things -- all of which are expanding at a significant pace -- are expected to touch USD 50 billion, USD 35 billion and USD 20 billion, respectively.
It was also projected that the digital economy will generate 30 million employment opportunities by 2024-25, which is double than the current scenario.
The ministry has identified digital payments, Make In India, Start-Up India, Skill India among the key drivers of the digital economy.
Highlighting the potential of the "new economy" with avenues like digital payments and e-commerce, Prasad said the focus needs to be on creating technology that is affordable, developmental and digitally inclusive.
Prasad said that deliberations at the meeting had also brought out the need to promote an ecosystem to facilitate more start ups in areas like education, agriculture and healthcare.
"I have decided that we will have a coordinated action with Health, Agriculture and HRD Ministries to promote an ecosystem to facilitate more startups in these areas," he said.
Prasad added that the idea of setting up special innovative zones for start-ups will be explored and a framework for startup cluster policy will be developed.
Besides, digital skilling has a lot of potential as India has a rich talent pool that can be used to meet global demand in emerging technologies like artificial intelligence.
"We need to re-skill and re-purpose ourselves. We have a list of different skills, where we need people... If you re- skill yourself in blockchain or AI, there is no shortage of jobs globally," Tech Mahindra Managing Director and CEO CP Gurnani said.
Citing a Nasscom report, Prasad said that in the last three years, almost six lakh people have been employed in the IT sector, while in 2016-17, the number of people employed was around 1.7 lakh. About 2.5-3 million new jobs are expected to be created by 2025.
He refuted reports of job losses by Indian IT firms, terming them as "motivated".
"There has been a lot of debate, and by any standards of economy, this talk of job decline in the IT sector is motivated," he said.
In terms of challenges, the participants had pointed out the need for setting up a dispute resolution mechanism and liberal regulatory norms.

Relaxation in return filing procedure for first two months of GST implementation

New Delhi: With the objective of ensuring smooth rollout of GST and taking into account the concerns expressed by the trade and industry regarding filing of the returns in GST regime, it has been decided that, for the first two months of GST implementation, the tax would be payable based on a simple return (Form GSTR-3B) containing summary of outward and inward supplies which will be submitted before 20th of the succeeding month. However, the invoice-wise details in regular GSTR – 1 would have to be filed for the month of July and August, 2017 as per the timelines given below –
Month GSTR – 3B GSTR - 1 GSTR – 2 (auto populated from GSTR-1)
July, 2017 20th August 1st – 5th September* 6th – 10th September
August, 2017 20th September 16th – 20th September 21st – 25th September
Facility for uploading of outward supplies for July, 2017 will be available from 15th July, 2017.
No late fees and penalty would be levied for the interim period. This is intended to provide a sense of comfort to the taxpayers and give them an elbow room to attune themselves with the requirements of the changed system. This not only underlines the government’s commitment towards ensuring that all the stakeholders are on board but also provides an opportunity to the taxpayers to be ready for this historic reform.