imes t conomi c e he t...nishanth.vasudevan @timesgroup.com mumbai: the securities and ex-change...
TRANSCRIPT
The revenue that TCS generated from Tata group firmsrose by 3.5% in FY20 compared to a double-digit rise inthe previous fiscal, reports Anandi Chandrasekhar. ��8
TCS Revenue from Tata Cos up 3.5%SHARP DECLINE IN FY20 CONTRIBUTION
CORONA METER
GL
OB
AL
CO
UN
T
Recovered2.77 Million
6.21 MillionTOTAL CASES
372,067DEATHS
Source: MoHFW, 8am
182,143(+8,380)
TOTAL CASESIN INDIA
Active89,995 (+3,573)Deaths5,164 (+193)Cured86,984 (+4,614)
Samples Tested
Source: ICMR *As of 9am, May 31 ^3-day average
Death Rate
Total Cases
65,168
21,184
18,549
16,343
8,617
3.4%
0.8%
2.2%
6.2%
2.2%
10 Worst-Hit Cities
Mum Thane IndoreKol
ChennaiDel Ahm Pune
JaipurSurat So
urce
: cov
id19
indi
a
ShareIn Total58.43%
38
,44
2
18
,54
9
12
,18
0
7,5
37
ShareIn Total71.3%
States With Most Cases
M’rashtraTamil NaduDelhiGujaratRajasthan
Active Recovered Deaths [% Recovery Rates]
[43.1][56.6]
[43.5]
[56.5]
[66.6]
9,1
23
3,4
86
2.1
k
1.9
k
1.6
k
14
,79
9
4.82%Positive Cases^
3.73 Million
Total*
125,428
In Past24 Hours*
NEW DELHI / GURGAON | 12 PAGES | .̀ 3.00 OR .̀ 7.00 ALONG WITH THE TIMES OF INDIA MONDAY, 1 JUNE 2020
AROUND THE WORLD��11
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Today on
How the virus gave the Maximum Citya big black eye
The lockdown load on transporters
China moves to capture global digitalsupply chains
Mumbai: The Securities and Ex-change Board of India (Sebi) isconsidering an unprecedentedone-time listing window for exis-ting unlisted non-convertible de-bentures to ease stress at variousmutual funds.
Two people familiar with thematter said that mutual fundsholding illiquid, lower-rated se-curities would be able to use thisopportunity to offload them tobuyers. The rise in risk aversionafter the Covid-19 lockdown hadmade it very difficult for funds tosell these securities without in-curring huge losses.
The capital market regulatortold the mutual fund industry
Gives list of 128 suchNCDs; move to helpMFs offload illiquid,lower-rated securities
last week in a letter to ask issuingcompanies whether they are in-terested in listing these NCDs.
There are about 128 such issu-ing companies, the Sebi letter sa-ys, and they include marquee na-mes like Tata Sons, ONGC PetroAdditions, Adani Rail Infra,KKR India Financial Servicesand Hero Solar Energy. Accor-ding to industry estimates, debtmutual fund schemes held unlis-ted NCDs worth `̀41,500 crore onMarch 31.
Email queries to Sebi and Asso-ciation of Mutual Funds in Indiawent unanswered till the time ofgoing to print.
If majority ofthe companiesagree to list, Sebicould permit atwo-month win-dow for trades inthese securitieson the stock ex-changes, said thepeople in the
know cited above.This will be the first time the re-
gulator is permitting existingNCDs to be listed. Rules allow on-ly fresh NCD issuances to be lis-ted on stock exchanges. Manycompanies do not list their NCDsto avoid disclosures linked to lis-ting requirements. They may ag-ree to list if the regulator allowsa one-time relaxation in rules,said industry officials.
Meeting NCD Exposure Cap��6
Risk-takers will have topay a steeper price toparticipate in equity
derivatives market. Tradersbetting on the direction of theindex or a stock without insurancewill have to pay higher upfrontmoney from Monday, reportsNishanth Vasudevan. ��5
Higher Margins forDerivatives Trade
Window of Opportunity
One-time listing windowfor unlisted NCDs could be for two months
Unlisted NCDsheld by MFs are worth`41,500 crore
If Sebi allows listingrules relaxation, issuing cos could list
The move gives MFs another route to selltheir illiquid securities
Sebi has given a list of 128 unlisted NCDs
Most of these are held by Franklin and top MFs
Sebi Mulls One-time ListingWindow for Unlisted NCDs
Growing risk
aversion has
made it hard
for funds to
sell these
NCDs without
incurring
big losses
DEBT MF SCHEMES HELD `̀41,500 CR OF UNLISTED NCDs ON MAR 31
Personal Letters toPallonji Mistry Giveno Legal Right: TataCyrus Mistry’s moveseeking proportionaterepresentation on TataSons board based onthese an afterthought,says Tata confidant
“These letters cannot be called‘commitment’ or ‘agreement’after 15 years,” said the personclose to Tata. Cyrus Mistry hadfiled an application to placethree letters written by RatanTata to Pallonji Mistry, who hadserved on the board of Tata Sonsbetween 1980 and 2004, on the re-cord in support of his claims.
Allegations & Counter Allegations��6
Kala Vijayraghavan & Maulik Vyas
Mumbai: Ratan Tata rejectedclaims that his “personal let-ters of appreciation” to Pallon-ji Mistry, father of Cyrus Mist-ry, can be regarded as evidenceof a quasi partnership or anyvested legal right in Tata Sons.The move by Cyrus Mistry, ous-ted as Tata Sons chairman in2016, to seek “proportionate re-presentation” on the Tata Sonsboard in the Supreme Court,based on these letters, is an af-terthought since he had not do-ne so in the original appeal filedin the National Company LawTribunal (NCLT) in 2016, a Tataconfidant told ET.
The Supreme Court decidedFriday to hear the cross-appealfiled by Cyrus Mistry over theruling of the National CompanyLaw Appellate Tribunal(NCLAT) along with the plea fi-led by Tata Sons challenging theDecember 2019 order of the tri-bunal in the apex court. In its ap-peal, the Mistry camp has so-ught proportional representa-tion on the board of Tata Sonson the basis of the 18.4% stakeheld by the family-owned Sha-poorji Pallonji Group. The Su-preme Court has directed bothparties to complete pleadingswithin four weeks.
There was no response to que-ries sent to the offices of RatanTata and Cyrus Mistry.
TATA-MISTRY TUSSLE IN SC
Swoosh, Pipe, Z, L & W… Shapeof Our Future
Predicting recoverygraphs, economistsadd cool shapes toplain vanilla V or U trajectories
shapes, including in India.The Swoosh shape signifies that
there will be sharp plunge, a long-ish stay below the trend line ofgrowth and a gradual climb up.HDFC’s Abheek Barua thinks In-dia is headed for Swoosh shape.But chief economic advisor KVSubramanian bets on a nice V —contraction, then sharp recovery.
Barua bats forSwoosh by argu-ing that “lack ofcoordinationamong states, la-bour shortageand income de-clines” will hitboth demandand supply .
Subramaniansees a V by fin-
ding a parallel in economic his-tory. As he had told ET in an in-terview: “The Spanish flu is areasonable proxy... and becausethere was a V-shaped recovery, Ithink it is reasonable to say thatwe can expect the same.”
All Eyes on Virus Containment��6
New Delhi: Economists just lo-ve graphs — and those graphshave never been as cool. As prac-titioners of the dismal scienceplot possible recovery paths ofCovid-hit economies, they haveadded new shapes to plain vanil-la V or U trajectories.
There’s the Swoosh, a recoverypattern that looks like Nike’s fa-mous logo. There’s the smokingpipe graph. There’s a W, Z and anL. Entirely predictably, becausethey can never agree on anythingthat’s important, different econo-mists are championing different
POST-COVID SCENARIO
What’s in a ShapeFrom Nike’s swoosh to smoking pipes, experts use interesting shapes to describe India’s economic recovery
Nike swoosh 1 Sharp plunge 2 Short stay at the bottom 3 Gradual climb
V-shaped1 Steep decline in 1 quarter 2 Strongrecovery in the next quarter
Smoking pipe 1 Broad-based decline 2 Recoveryspanning 2-3 quarters
W-shaped 1 Sharp fall followed by recovery 2 Recovery falters 3 Strong recovery again
Economists
warn against
an L-shaped
recovery
where initial
fall in growth
rate doesn’t
return to
trendline
A Tale of 3 LettersCyrus Mistry has filed a plea in SC to place onrecord three letters, writtenby Ratan Tata to Pallonji Mistry during the many years of their business association, in support of his claims. Ratan Tata has opposed this.
FIRST LETTER OF MAR 1991Our common agreement and mutual faith will
foster a true and lasting relationship… in the best interest of Tata Sons...
SECOND LETTER OF MAY 2004...your continued presence on the board of
Tata Sons, during the period of IPO of TCS would be of great value to me personallyand to the public perception…
THIRD LETTER OF JAN 2005Even though you are stepping down at this
time, I will continue to keep you informed of the events in Tata Sons, and I hope you will permit me, from time to time, to seek your counsel…
Our Political Bureau
New Delhi | Mumbai | Guwa-hati | Hyderabad: State govern-ments issued fresh guidelines al-lowing the resumption of a num-ber of activities including mallsand market areas, a day after theCentre issued a blueprint for res-tarting economic activities out-side containment zones. Most ofthe directives were in line withthe Ministry of Home Affairs(MHA) guidelines on reopeningthe economy, with Maharashtra
dubbing its initiative MissionBegin Again.
Restrictions will remain in forcein containment zones and the mu-nicipal corporation areas ofMumbai Metropolitan Region, Pu-ne, Nagpur and Aurangabad. Inphase 1of the easing starting June3, individuals in these areas will beallowed to exercise in open publicspaces including beaches, playg-rounds, gardens and promenadesbetween 5 am and 7 pm. From June5, all markets, market areas andshops, except malls and marketcomplexes, will be allowed to func-tion on an odd-even basis from 9am to 5 pm. The movement of indi-viduals will be prohibited between9 pm and 5 am except for essentialactivities, according to the Maha-rashtra guidelines.
Uttar Pradesh will restrict entryof people from Delhi containmentzones.
Reopening Schools and Colleges��6
States Issue Guidelines on Opening upMOST DIRECTIVES IN LINE WITH MHA NORMS
Power Finance Corpand REC Ltd havedecided to offer
10-year loans to state distribu-tion utilities at 9.5% under the.̀ 90,000-crore liquidity infusionpackage as the government mayconsider relaxing working capitalborrowing limits of discoms,reports Sarita Singh. ��5
PFC, REC to OfferLoans @9.5% toState Discoms
BDR Pharmaceuticalshas signed a con-tract-manufacturing
deal with Cipla Ltd. for rem-desivir, a patented product ofUS firm Gilead Sciences ap-proved to treat Covid-19 pa-tients, reports Teena Thacker.BDR, however, doesn’t have alicensing pact with Gilead. ��9
BDR Enters intoDeal with Cipla toMake Remdesivir
MAHARASHTRA
KARNATAKA
UP
Curbs in containment zones and municipal areas of Mumbai, Pune, Nagpur & AurangabadFrom June 3, people can exercise in open public spaces between 5 am and 7 pmFrom June 5, shops, except in malls and market complexes, can open on odd-even basis
100% workforce, staggered timings in govt officesMarkets open,9 am to 9 pmSalons get green light
Lockdown in containment zones till June 30Places of worship, hotels, restaurants and shopping malls to open from June 8
Haryana and Delhi expected to issue revised guidelines
More opening up of activities within Gurgaon and Faridabad likely
WEST BENGALCurbs in containment zones until June 15Places of worship to open from June 1Shopping malls, restaurants and hotels can reopen on June 8
Maha allows relaxationsin 3 phases; UP restrictsentry for those fromDelhi containment zonesinto Noida, Ghaziabad
Private diagnostic centres and hospital labs have seen a 50% jumpin the number of requests for RT-PCR tests within a day of newguidelines for opening up lockdown, reports Nidhi Sharma. ��9
50% Jump in Covid Test RequestsSPIKE IN DEMAND FOR TESTS FOLLOWING NEW MHA GUIDELINES
Mumbai: As the lockdown easesacross the country, India could befaced with a shortage of privatesecurity guards, the Central Asso-ciation of Private Security In-
dustry (CAPSI) said. The industryemployed 9 million people beforeCovid-19 struck but as retail out-lets, malls, restaurants and movietheatres downed shutters, manyreturned to their villages.
“We are preparing for post-Coro-na security challenges. There is a35-40% shortage of private securi-
ty guards pan-India,” said KunwarVikram Singh, chairman of CAP-SI, which has 23,000 security agen-cies as members.
The first wave of demand iscoming from corporates, factories,hospitals, construction sites andvacant properties. In factories andoffices, demand for trained guards
at entry-exit points and otherspaces has doubled due to manda-tory Covid-related checks.
The security industry has alwaysbeen understaffed due to unequaland low wages. Currently, securityguards get paid .̀ 5,000-16,000 amonth depending on minimumwage rules in various states.
“The need for Covid-trainedpeople will put a strain on theindustry already reeling undermanpower shortage,” said AnilPuri, CMD, AP Securitas.
CAPSI’s Singh said, “Even in thepre-Covid times there was person-nel shortage. Now, with many pe-ople returning to their villages, thedemand-supply gap will widen.”
To be sure, many guards, nativesof Uttar Pradesh, Bihar, Jhark-hand, Madhya Pradesh and NorthEast, visit their villages at this timeof the year to participate in har-vest-related work.
Cash Crunch��6
India Unlocked But No One to Stand GuardExodus during lockdown, need for Covid-trained people to put strain on private security industry
INDIA BATS FORFLEXIBILITY IN IPRPACTS FOR ACCESSTO ESSENTIALMEDICINES
��PAGE 7
The government haspulled out a 2014proposal to provide
identification numbers to theunorganised sector workers afterfacing criticism for not doingmuch for migrant labour hit hardby lockdown, reports YogimaSharma. This number will beseeded with Aadhaar. ��7
UnorganisedWorkers mayGet ID Numbers
EMPTY CABINS
9 million people employed in pre-Covid times
35-40% personnel shortage expectedas lockdown eases
23,000 private security agencies operating in India under industry body CAPSI
FIRST WAVE OF DEMAND FROM
Corporate officesFactoriesConstruction sitesVacant propertiesLocal police departments
1
2
3
4
5
MORE DEMAND EXPECTED FROMOPENING OF
Retail outletsMallsRestaurantsMovie theatres
1
2
3
4
Liquor sales at standalone stores & home delivery allowed
But bars not permitted toopen under MHA guidelines
Dine-in timingscurtailed to 9 pm
Over half of dine-inbusiness in high-endrestaurants happens after 9 pm
Loss of AppetiteKey markets Delhi-NCR & Mumbai with several containmentzones may see limited business
SHORTAGE OF MIGRANT LABOUR, CURBS ON PUBLIC TRANSPORT FOR STAFF TRAVEL AMONG CONCERNS
PUREPOLITICS
With ‘Unlock 1.0’ begin-ning from Monday,Prime Minister Na-rendra Modi in his MannKi Baat address said amajor segment of the
economy was opening up and indus-try was returning to normalcy. ThePM, however, cautioned people toremain extra careful as Covid-19continued to be a threat.��2
Modi Says EconomyOpening up, IndustryReturning to Normalcy
As the standoff withIndian troops wasunderway in EasternLadakh since early May,China constructed a newpermanent road along
the LAC that gives it access to a moun-tain area believed to be rich in naturaldeposits. Completed in barely threeweeks, the road is close to India’sGogra post. Manu Pubby reports.��3
Amid Standoff, ChinaBuilt Road to MineralRich Area Along LAC
National Register ofCitizens (NRC) author-ities in Assam may startissuing rejection slips tothose left out of thefinal register published
last year only after the NRC is notifiedby the Registrar General of India,reports Bikash Singh. The process ofissuance of rejection slips was slatedto start from March this year.��2
Rejection Slips to beDelayed as Assam’sNRC Yet to be Notified
Acyclone is likely to hit coasts ofMaharashtra and Gujarat on June 3,according to a forecast by the IndiaMeteorological Department, causingfurther trouble to the two states thatare already struggling to rein in therising number of Covid-19 cases,reports Shashwat Mohanty. ��7
Cyclone Likely to HitGujarat, MaharashtraCoasts on June 3: IMD
Illustration: ANIRBAN BORA
Illustration: ANIRBAN BORA
Ratna Bhushan, Varuni Khosla & Anumeha Chaturvedi
New Delhi: Thinking of grab-bing a chilled beer at your favouri-te bar come June 8?
Well, it’s not going to happen sosoon.
Restaurants and cafes say reope-ning will not be easy despite thehome ministry’s revised guideli-nes under its Unlock 1.0 road map.
For one, restobars — which dri-ve business especially late in theevenings — have been excludedfrom the list.
Shortage of migrant labour —which forms a significant chunkof the restaurant industry work-force — and the fact that timingsfor dine-in have been curtailed to9 pm will also make the going to-ugh, they argue.
Plus, Delhi and Mumbai — thetwo big markets in terms of busi-ness volumes and footfalls — conti-nue to be red zones and hence willsee limited business, with manyareas under containment or opera-ting with severe restrictions.
In fact, Maharashtra on Sundayprohibited the reopening of ho-tels and restaurants from June 1to June 30.
Grim Picture��9
Non-starters for Restaurants: Baron Pubs, Dine-in Timing CurbsCafes, eateries may notreopen soon as industryawaits clarity fromstates, faces labour woes
� Malls Focus on SafetyMalls across the country aregearing up to open with strin-gent safety measures. ��9
CCI NG 3.7 Product: ETDelhiBS PubDate: 01-06-2020 Zone: DelhiCapital Edition: 2 Page: ETDCFP User: saurabh.gupta3 Time: 06-01-2020 00:38 Color: CMYK
6 �THE ECONOMIC TIMES | NEW DELHI / GURGAON | MONDAY | 1 JUNE 2020 | WWW.ECONOMICTIMES.COMSmart Investing
We are witnessing strong market breadth and con-solidation breakout in many sectoral indices from last few sessions, indicating broad-based buying interest. Momentum oscillator RSI is also placed positively on daily chart and may continue the up move in coming days, too. Going forward, the resistance for Nifty is placed at 9,730 and then 9,889 levels, while support is inching higher between 9,375 and 9300 zones.
Day Trading Guide Motilal Oswal Fin Services
CHANDAN TAPARIA, Derivatives & Technical AnalystTech Picks
BAJAJ AUTOGiven a small triangle breakout and respecting to its rising support trend line
LAST CLOSE `2,710 STOP LOSS `2,625
DR REDDY’SGiven the recent highest daily close with con-solidation breakout in all the time frame
LAST CLOSE `4,071 STOP LOSS `3,980
ICICI BANKNegated lower top-lower bottom on weekly scale with positive crossover on mechanical indicator
LAST CLOSE `332 STOP LOSS `322
L&TConsolidation breakout above 900 zones by surpassing its 50-DEMA
LAST CLOSE `932 STOP LOSS `909
BUYTARGET
`353
BUYTARGET
`2,880
BUYTARGET
`4,250
BUYTARGET
`980
rural demand is the driving factor.The Street estimates 10-15% volumedecline in FY21for scooters.
The company’s margins could comeunder pressure due to lower utilisa-tion and rising competition in themotorcycle segment. TVS Motor has
an operating profit of `̀3,870 per vehi-cle in the March 2020 quarter, the wea-kest among peers. Another headwindis the incremental cost due to BS-VIemission norms, which in a fragiledemand environment would be to-ugh to absorb. Then there is the thre-at of price wars to gain market share.
TVS Motor’s market share has drop-ped 100 bps to 13.8% in two-wheelers inFY20 due to rising competition andweak moped demand. Operating mar-gins stood at 7% in the March 2020 qu-arter versus Bajaj Auto’s 18.4%.
TVS had a hedge against domesticcyclical troubles in its export busi-ness. While domestic volumes fell23%, exports rose 10%. This, too, mayfalter due to the pandemic-induceddisruptions. The Street is pricing a15% drop in export volumes for FY21.
Volume Growth Trends(Fig in lakh)0.93
1.090.990.910.920.890.820.63
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
FY20
FY19
ET Intelligence Group: TVS MotorCompany is expected to face severalheadwinds in volume growth in bothdomestic and overseas markets inFY21, which is likely to erode signifi-cantly its premium valuations.
The stock is currently trading at 22times one-year forward earnings, a21% premium to its long-term avera-ge, making it the second most expen-sive two-wheeler stock after EicherMotors. The company is seen as a pro-xy play on growing demand for scoo-ters and its premium price-earningsis on account of improving export bu-siness share and scope of a sizeableimprovement in operating margins.
These three factors — scooter de-
mand, rising exports and operatingmargins — which buoyed the stock co-uld be on the wane in the near-term. Inaddition, the company’s weaker ba-lance sheet compared to its peers du-ring the current downcycle may furt-her weigh down the high valuations.
The scooter segment, TVS Motor’smainstay, makes up nearly one-thirdof domestic volumes. This is expec-ted to see a higher demand contrac-tion in the overall two-wheeler space.Domestic volumes fell 18% in FY20broadly in-line with the industry, butit could maintain its share due to the21% growth in sales of its premiummodel Ntorq. The scooter segmenthas been primarily driven by urbandemand, which is likely to fall for thethird year in a row. Recovery could ta-ke longer than motorcycles, where
TRIPLE WHAMMY Demand for scooters, its mainstay, is set to take a hit while exports facepressure due to Covid and already weak operating margins may undergo further stress
TVS Motor may Lose PremiumEdge in Face of Multiple Bumps
turday showed that with a capitaladequacy of 13.31% and net NPA of4.19% the bank has met two of thethree parameters to get out of PCA.It made a profit of `̀135 crore in thequarter ended March 2020 from aloss of `̀4,918 crore a year ago, large-ly due to a ̀̀ 1,511 crore of write-backin NPA provisions.
It is only on the RoA that the LIC-ow-ned lender does not qualify. Thebank’s RoA at the end of March 2020was -4.26% versus -4.68% a year earli-er which means it still has two conse-cutive years of negative RoA.IDBIBank officials argue that RoA is anannual calculation and should notstop the RBI from delaying a changein its status.
However, analysts said the bank's re-covery is still a work in progress. “De-fault risks have increased post the Co-vid-19 crisis and this bank has had ahistory of NPAs. Though most of ithas been provided for with 27% grossNPAs a turnaround is very difficult tobelieve at this stage,” said an analystwith a foreign brokerage.
Looking Up Q4 RESULTS
Net Profi tof `135 crfrom loss of `4,918 cron-year
Capital Adequacy: 13.31%
Net NPA: 4.19%
RoA: -4.26%in FY20 from -4.68% in FY19
NIM: 3.80%from 2.26%on-year
FINANCIAL RATIOS a lot healthier than other lenders that came out of PCA,says deputy MD Khatanhar, making a case for removal of restrictions
IDBI Turns in a Profit, Hopes forQuick Exit from Corrective Action
Mumbai: IDBI Bank is getting closerto exiting the Reserve Bank of India’s(RBI) restrictive prompt correctiveaction (PCA) framework after postingaprofit for the first time in 13 quarters.
Though the profit was due to writeback of provisions, the bank mainta-ins that its financial ratios are a lotmore healthy and it deserves to comeout of PCA soon.
“Some other banks were broughtout of PCA despite not making pro-fits. We have now delivered on all pa-rameters and are even profitable. It isonly return on assets (RoA) where wehave to improve. But we will write toRBI pleading our case to releasedfrom the PCA restrictions,” said Su-resh Khatanhar, deputy managingdirector at IDBI Bank. He was refer-ring to the RBI removing Bank of In-dia, Bank of Maharashtra, OrientalBank of Commerce, Allahabad Bankand Corporation Bank last year aftercapital infusion by the government.
LEGAL NOTICE Want Sebi to issue directions tothe fund house until regulations are framed
Investors DemandReopening of SchemesFranklin is Winding Up
Mumbai: Investors in FranklinTempleton’s debt schemes thatare in the process of being wo-und up have sent a legal notice tomarket regulator Securities andExchange Board of India (Sebi)demanding necessary direc-tions to be issued to FranklinTempleton Trustee Services(FTTS) to re-open the schemesuntil the regulatory frameworkhas been put in place.
Investors have also demandedthat Sebi should appoint an ad-ministrator to take over Frank-lin Templeton Asset Manage-ment Company (FTAMC) andFTTS and evolve a mechanismfor ensuring timely payment ofthe dues of the unitholders.
Several Delhi-based investorsincluding Kaj Associates LLP,Ultra Walls and Floors LLP, Sa-nyam Jain and Sarika Mittalamong others through their ad-vocate Puneet Jain in a legal no-tice said that Sebi should directFTTS to seek approval of theunitholders to wind up theschemes as required under Se-bi regulations and only after itis granted should a fresh mee-ting be called to deliberate andapprove further steps in theprocess of winding up.
They also demanded that thefund house be debarred fromfunctioning for any of the sixschemes as they are in default,
and to restrain Kotak Mahind-ra Bank or any other agency ap-pointed by the fund house fromacting in any manner for win-ding up.
Investors have accused Sebi of“deliberately turning a blind eyeto patent and blatant violations”by Franklin Templeton AMC inmanaging its debt funds whichhas resulted in unprecedented clo-sure of six of them.
“My clients have been compel-led and constrained to issue thepresent notice due to a completeapathy of the Sebi to look after in-
vestors’ interestand is in fact hasbeen bending overbackwards to em-bank and insulateFT from actionsby investorswhen as a regula-tor, with omnibuspowers, it oughtto have acted pre-emptively aga-inst it with pro-mptitude,” saidthe legal notice.
“It is strangethat despite kno-
wing that FT had actually de-faulted, but instead of actingagainst FT and stopping it fromoperating other schemes, Sebihas extended a long rope whichhas been misused by it to de-fraud more investors” the noticesaid. An email query sent to Sebidid not elicit any response untilpress time.
Investorshave alsodemandedthat Sebiappoint anadministratorto take overthe AMC andensure timelypayments
Local Banks toTrade Rupee inOverseas NDF “It also opens up window for RBI todirectly intervene at the source ofvolatility in offshore through localbanks,” he said.
The differential between offshoreand onshore forwards rates was asmuch as one rupee across one-two-three month contracts in March,when India first imposed a lock-down and the rupee plummeted tonew record lows against the dollar.
The offshore one-month for-wards rate is trading at a 25-26paise premium over the spot ex-change rate, about five paisehigher than the onshore one-month forwards, dealers said.
On April 16, the rupee fall peakedat 76.87 a dollar, its all-time low.
“RBI intervenes in the domesticmarket to check the rupee’s sharplosses,” said Anindya Banerjee,currency analyst at Kotak Securi-ties. “But it could do little in theNDF market, where speculatingbets surge amid volatility.”
Trading of NDFs has almost dou-bled over the past three years, con-tributing significantly to the sub-stantial increase in the trading offorwards recorded in the 2019, showa Triennial Survey by Bank of In-ternational Settlement (BIS). Thekey currencies behind the NDFsurge include the Korean won, Bra-zilian real, Indian rupee and NewTaiwan dollar. Daily average vol-ume was about $250 billion inApril last year compared to esti-mated $100 billion in 2013. “Giventhat NDF volume and depth will in-crease, we need to wait and see howeffectively the offshore activity inrupee derivative migrates to on-shore market,” said Prasanna.
Onshoring of offshore marketproved fruitful for the Chines yuan.At the beginning of the decade,CNH, the Chinese currency tradedin Hong Kong, was introduced to theoffshore NDF market. Consequent-ly, it narrowed arbitrage opportuni-ties adding relative stability.
��From ET Markets Page 1
ImprovingFinances BodeWell for Lupin
However, the real impact of Co-vid on operations could reflectin the current quarter’s per-formance.
Divestment of its Japanesebusiness and undertaking of asecond impairment of Gavis –its ambitious American acqui-sition made in 2015 – has streng-thened the balance sheet. Thedebt-equity ratio at the end ofFY20 stands at 0.12. The compa-ny has significantly improvedits manufacturing compliancerecord with the USFDA, securi-ng a clearance of all the five fac-tories that were inspected bythe drug regulator in this calen-dar year. It is readying its key fa-cilities at Somerset (US), Goaand Indore for the FDA’s re-in-spection this year. The compa-ny has invested in foreign talentto head its key business func-tions, along with bringing itsformer CFO back in charge.Cost control, improving oper-ational efficiencies, and reduc-ing working capital level andoverall debt are the key focus onthe finance side.
Even as the Lupin stock closednearly 2% low following its Q4results, investors may well be-come hopeful of a recovery inits fortunes from here on. Ka-mal Sharma, the company’svice chairman, said in the earn-ings call, “FY20 has been a yearof settling a lot of overhang,which had been in the system,and we are in a much strongerposition to take the companyahead now.”
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funds a breathing space. The Franklincrisis broke out on April 24 after theglobal asset management firm deci-ded to wind up six debt schemes due torising redemptions and inability tofind a market for its lower-rated paper.Franklin also halted payments to in-vestors from these funds.
Industry officials said majority ofthese unlisted NCDs are held byFranklin and other top seven mutualfunds. “There is a better chance of mu-tual funds being able to sell illiquiddebt if foreign funds and HNIs see va-lue in some of the long-term papers,”said the chief executive of a mid-sizedmutual fund.
Sebi and RBI have been on high alert
after the Franklin episode came to thefore. To contain its effect on the indust-ry—mainly credit risk schemes—theRBI late in April allowed mutualfunds to borrow from banks by kee-ping securities that are of investmentgrade as collateral. Though many inthe industry have not utilised the cen-tral bank’s liquidity window in a bigway, industry officials claim the movehas infused confidence.
The mutual fund industry’s troubles,however, may be far from over. Fundmanagers agree that the stressed com-panies, which have issued bonds todebt schemes, may struggle to repaymoney on time due to the recent losseson account of the lockdown.
Meeting NCD Exposure CapA short-term listing window couldhelp mutual funds meet the regula-tor’s October 2019 circular that man-dated the industry to cap exposure toNCDs at 10% of the scheme’s corpus.This step had dried up demand forNCDs among mutual funds.
Franklin Templeton’s global chiefJennifer Johnson had partly blamedthe rule for the winding up of its sixdebt schemes, a comment which invi-ted Sebi’s wrath forcing Franklin to la-ter apologise.
Sebi on April 28 extended the deadli-ne for complying with these exposurecaps to December 31 giving mutual
��From Page 1ugh Cyrus Mistry.
“It was only after the procee-dings commenced that Tata Sonsillegally removed Mistry as a di-rector. In 2017, after the NCLAThad granted a waiver in favour ofthe Mistry family, and when pro-ceedings resumed before theNCLT, the prayer for ‘proportio-nate representation’ was intro-duced to remedy the illegality ef-fected by Tata Sons,” the personsaid.
“The Articles of Association ofTata Sons also don’t state that theminority shareholders should beoppressed. The Tata Trusts havebeen held guilty of violating theArticles of Association whenthey illegally removed Mistry,”the person said. The CompaniesAct under Section 242 (2) empo-wers the grant of any relief as ameans to bring to an end the opp-ressive conduct and can extend torewriting the Articles of the com-pany to ensure equitable relief,the person said.
Executives close to Mistry saidthe Tata companies were notpart of Tata Sons until the rightsissue of Tata Sons in 1995.
“There were only two sharehol-der groups--the Tata Group re-presented by Tata Trusts and theSP Group. The rights issue wasrequired to help increase theshareholding of Tata Sons in Ta-ta Group companies,” said oneof them. “It is important to notethat the Tata Trusts could notsubscribe to the shares of TataSons as they are legally prohibi-ted from owning shares as men-tioned above. It was only with theconsent of the SP Group that theTata Companies were allowed tobecome members of Tata Sons,so that the effective sharehol-ding of the Tata Group did notget diluted.”
The Tata side’s contention re-flects “a deterioration in stan-dards and values that Tata cla-ims to uphold,” said the personclose to Mistry.
“In fact, one of the letters thatTata wrote to Pallonji Mistry sta-tes, ‘Our common agreementand mutual faith will foster atrue and lasting relationship
without any misunderstanding-and in the best interest of TataSons as a company. Our standingtogether will also be a matter ofstrength… In ending, let me re-iterate that I will never do anyt-hing consciously to hurt you oryour family’.”
In June 2016, the nominationsand remuneration committee ofTata Sons had given Cyrus Mist-ry a glowing performance feed-back, which was endorsed by thefull board of Tata Sons, said theperson close to him.
“To date, there has been no proofor any evidence provided to showthe grounds on which the boardclaims to have lost confidence.This is further reinforced by Ta-ta’s own admission that it was theTata Trusts that claimed to havelost confidence in Mistry… It is ti-me to transparently disclose thegovernance at the trusts.”
NCLAT RULINGThe NCLAT had ruled that thefacts bear out acts of oppressionand prejudicial conduct againstminority shareholders and gran-ted them relief, the person said.
Both the Tata Group and theMistry side had challenged theDecember ruling of the NationalCompany Law Appellate Tribu-nal (NCLAT) in the apex court.The Supreme Court had in Janu-ary stayed the NCLAT order re-instating Cyrus Mistry as execu-tive chairman of Tata Sons andrestoring his directorships inthe holding company as well asthree group companies.
Suruchi Suri, partner at Suri &Company, said the case will de-termine whether relief could ha-ve been given to Cyrus Mistry bythe NCLAT without strikingdown the Articles of Associationof Tata Sons.
“The ruling will set a precedentin any event since the law has notbeen tested in this kind of an im-pact on minority shareholdersas yet,” Suri said. “Several com-panies where minority share-holders don't have any represen-tations on the board currentlywould be keenly watching thiscase for future reference."
Allegations & Counter AllegationsThe first letter was an informalone written in 1991, soon after Ra-tan Tata took over as chairmanof Tata Sons. The second waswritten in May 2004 when Tataasked Mistry to continue as di-rector of Tata Sons to ensurecontinuity in the midst of theongoing Tata Consultancy Servi-ces (TCS) share sale. The thirdwas an informal one in January2005 that Tata wrote to thank theelder Mistry after he steppeddown as director for his “supportand confidence.”
“If this relief (proportionate re-presentation) were to be grantedto the Mistry family, the SupremeCourt will have to rewrite the com-pany’s Articles of Association,”the person close to Tata said.
Chairman emeritus Ratan Tatahas also refuted claims regar-ding a Tata bloc and non-Tatabloc made by Cyrus Mistry interms of shareholder represen-tation. “There is nothing called aTata bloc,” the person close to Ta-ta said. The Tata Trusts are pub-lic charitable trusts, the Tata fa-mily owns less than 3% and theTata companies are independentlegal entities, the person said.
This person also said that Cy-rus Mistry’s argument that hisappointment was “inextricablylinked” to his status as a share-holder was flawed.
“Cyrus Mistry’s appointmentas chairman was a professionaldecision of the company’s boardwhich he accepted,” he said.“The decision of the board as-king him to step down from thatposition in 2016 should also be vi-ewed as a professional decisionwhen the board members, collec-tively, lost their confidence inhim to lead the Tata Group.”
MISTRY STANCEHowever, officials close to CyrusMistry said when the two invest-ment firms of the Mistry family-—CIPL and SIPL—filed a peti-tion citing mismanagement andoppression of minority share-holders in December 2016, theyhad board representation thro-
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All Eyes on VirusContainment
May be the smokin’ hot graphof post-Covid recovery is theone that looks like those old-fas-hioned tobacco pipes. NR Bha-numurthy, professor at the Na-tional Institute of Public Fi-nance and Policy, says that’sour near future. A pipe graph isa V graph with a longer tail —the recovery isn’t one that hap-pens quickly over one quarterbut over two-three quarters.
Mind you, the pipe is differentfrom the Swoosh, because in thelatter the economy bears the pa-in for longer. And of course U isdifferent from both. U happenswhen the base of V gets exten-ded, and growth stays bad long-er, but unlike in Swoosh or pipe,the recovery is sharp.
As DK Joshi, chief economistat CRISIL, explains: “If you as-sume the virus is contained byJune-July, then you will get a V-shaped recovery, but if that doesnot happen and recovery againfalters then its shape willchange — and we will get an U.”
If you don’t get a V, though,pray for an U or a Swoosh or apipe — because a W is scarier. Ifthe infection returns in full for-ce, forcing more stringent lock-downs, and economy shut-downs, growth will plunge af-ter initial recovery, and onlythen recover.
Aditi Nayar, principal econo-mist, ICRA, bets on a V but saysa “second wave of infections-…could result in a W-shapedeconomic cycle.”
Bottom line? Pray for a Z andpray harder we never get an L.
A Z-shaped recovery is when apost-lockdown spending surgeis so fierce that growth is liftedabove trendline and then after aparty settles down to trend.
An L-shaped trajectory iswhen after the initial fall ingrowth rate doesn’t return totrendline, the economy nevergets its mojo back.
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Higher Margins for Unhedged Bets
HIGHER VOLATILITY = MORE MARGINSThe higher upfront margins for theso-called naked positions under thenew framework are because of theclimb in volatility. “The jump in up-front margins is mainly because ofthe higher volatility in the pastthree months,” said Nithin Kamath,founder of online brokerage Zerod-ha. “The calculation of the new mar-gin structure is based on volatility.”
Since February 19 — when thespread of coronavirus triggered thestock market turmoil —- the Volatil-
LOWER COSTS FOR HEDGED TRADESThe new upfront margins would,however, benefit traders usingcombinations of equity futuresand options to create strategiesthat would limit losses. Such trad-ing bets are usually done by sophis-ticated traders with deep knowl-edge of the intricacies of the deriv-atives markets.
“We will see a new breed of optionstraders because hedged tradingstrategies will become cheaper by50-70%,” said Kamath.
The benefit of lower margins willnot be available for basic trades orones where an investor buys futuresor options as a hedge against hisshare portfolio.
ity Index, a measure of near-termrisks in the market, surged from 14to 83.6 on March 25. VIX has dippedto 30 on Friday on account of the re-newed stability in the market butthe current average levels are stillabove the historical averages.
Brokers said once the volatility re-verts to long-term averages, themargins would also fall but the de-cline would be gradual.
“One thing that will change isthere won’t be sharp spikes or fallsin margin requirements in the newsystem because of the higher PSR,”said Kamath.
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PCA is triggered when a bank’s ca-pital adequacy ratio falls below10.25%, net NPAs are above 6% andRoA is negative for two consecutiveyears. Banks under PCA have to con-serve capital and face restrictions ondividend payments, branch expan-sion, management compensationand credit growth. IDBI has been un-der PCA since May 2017.
The fourth quarter released on Sa-
will open while following physicaldistancing guidelines and other pre-cautions. Government offices willfunction at full strength. Bihar saidcontainment zones will remain shutuntil June 30 under the state disastermanagement act.
Haryana and Delhi are also expectedto issue revised guidelines. The Chan-digarh administration has imposed anight curfew from 9 pm to 5 am.
In Karnataka, guidelines on lock-down measures will remain in forcein until June 30 in containment zo-nes. Religious places and places ofworship, hotels, restaurants andother hospitality services and shop-ping malls will be permitted to openfrom June 8.
Telangana extended the lockdownin containment zones until June 30while announcing relaxations in allother areas. Telangana chief mini-ster K Chandrashekar Rao has in-structed officials to implement thelockdown strictly in containment zo-nes. Shops can stay open until 8 pmand the night curfew will run from 9pm to 5 am daily. It has decided to re-move restrictions on inter-state tra-vel. Jammu and Kashmir has exten-ded lockdown measures until June 8.
The Union home secretary hadwritten to state chief secretaries onSaturday seeking their feedback onthe reopening of schools and colle-ges in the third phase from July 1on-
wards. The MHA asked states to con-sult all stakeholders in the educa-tion sector on the reopening of scho-ols and colleges and send feedback tothe Centre to enable it to take a deci-sion on the schedule for re-startingacademic activities.
Maharashtra has allowed relaxa-tions in three phases. In the first pha-se, outdoor activities such as cyc-ling, walking and jogging have beenpermitted from June 3 between 5 amand 7pm. No group activities will beallowed. Electricians, plumbers, ga-rages and workshops have been allo-wed to function in the first phase. Es-sential goods shops and ecommercewill be permitted to function. Go-vernment offices will function withup to 15% staffing.
In the second phase, markets andshops in Mumbai will be allowed toopen from June 5. Shops will be allowedto open on an odd-even basis — alterna-ting between those on the left and rightside of any road. The rule will not beapplicable to markets complexes andmalls, which remain shut.
Under the third phase from June 8,private offices have been permitted tostart work with 10% attendance ex-cept in containment zones, even inMMR, Pune and other Covid-19 affec-ted districts. Taxis and autoricks-haws have been allowed to operate foressential services. However, they willnot be allowed in containment zones.
Reopening Schools and Colleges “There will be prohibition on entryof people from containment zones/hotspot areas in Delhi to GautamBuddh Nagar and Ghaziabad,” saidadditional chief secretary, home,Awanish Awasthi. “All governmentoffices will operate with 100% work-force. Staggered timings will be fol-lowed — 9 am to 5 pm, 10 am to 6 pmand 11am to 7 pm.”
He added that all markets will re-main open from 9 am to 9 pm. Super-markets will be allowed to open withdistancing and other precautionarymeasures. Weekly markets will be al-lowed in rural areas. Salons and be-auty parlours will be allowed to openas long as distancing is maintained.Staff should wear face shields andgloves. The Uttar Pradesh guideli-nes allow state transport buses tooperate on the condition that pas-sengers don’t exceed the seating ca-pacity.
West Bengal and Madhya Pradeshextended lockdown measures untilJune 15 in containment zones. InWest Bengal, places of worship willopen from June 1. Not more than 10people will be allowed in gatheringswhile shopping malls, restaurantsand hotels can reopen on June 8.
The Rajasthan Government has is-sued guidelines for June 1-30. Shops,beauty parlours, community parks
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Cash Crunch
But there has been an exoduson top of that due to the lock-down. “As the economy opensup, there will be a demand formore security guards,” saidShibu Issac, another CAPSI of-ficial.
Any large mall will need abo-ut 350-400 guards in the par-king area and at entry-exit po-ints. “With the lockdown, the-se places were functioningwith barely 20-30 people,” saidVishwanath V Katti, MD ofBengaluru-based GuardwellPrime Services.
Corporate demand has incre-ased from earlier levels.
“Companies with two guardsearlier would now need threeor four because of Covidchecks,” Issac said.
“A lot of unmanned factoriesare facing security issues,” Pu-ri said. “When these reopen,there will be need for guards.”
State police departments arealso seeking support from pri-vate security guards to helpwith crisis management. “TheKarnataka state governmentrecently sought help of theKarnataka Security ServicesAssociation (KSSA), which ga-ve 1,000 guards to the police de-partment,” said Katti.
Industry experts are concer-ned about a possible rise in so-cial unrest as job losses lead tosnatching, theft and street vio-lence. “Social unrest is a bigchallenge we have to take careof,” said Singh.
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CCI NG 3.7 Product: ETDelhiBS PubDate: 01-06-2020 Zone: DelhiCapital Edition: 1 Page: ETDCEDIT User: saurabh.gupta3 Time: 05-31-2020 23:57 Color: CMYK