Date: 23rd November 2014

Govt Okays `15,750-cr mounted gun purchase

India on Saturday approved the purchase of 814 mounted gun systems for the army at a
cost of `15,750 crore ($2.55 billion), a defence ministry spokesman said. India, already the
worlds largest arms importer, is in the midst of a $100-billion defence upgrade. In October,
the new government approved long-delayed projects worth $13 billion to modernise
hardware and boost the domestic defence industry. In June, the government cleared
defence deals worth $3.5 billion. The Defence Acquisition Council (DAC) today [Saturday]
cleared the acquisition of 155 mm/52 calibre mounted gun systems worth `15,750 crore, a
defence ministry spokesman told reporters after the meeting, chaired by newly appointed
defence minister Manohar Parrikar. The DAC, however, deferred a decision on the joint bid
by Tata Sons and Airbus to replace IAFs Avro transport fleet and also procurement of 106
Swiss Pilatus basic trainer aircraft, seeking more information. Prime Minister Narendra Modi
is accelerating the modernisation plan in an attempt to catch up with neighbour Chinas
rising military air, sea and land power. Indias poorly equipped soldiers often scuffle with
western neighbour Pakistan and brush up against Chinese forces patrolling a disputed
Himalayan border.
Some of the mounted guns will be imported, but most will be made in India in a
collaborative effort between foreign companies and domestic manufacturers. The initial
100 guns would be imported, but the remaining 714 would have to be produced in India,
the official said. According to local media reports, Tata Powers
Strategic Engineering Division unveiled its first mounted gun system on a Tata track in 2012.
Other Indian competitors could be Mahindra Defence, L&T and Bharat Forge. Parrikar also
announced that the DAC would meet more frequently, at least once in a month, to expedite
acquisition proposals, the official said.

China, UPA ... the many factors that led Modi to invite Obama
Prime Minister Narendra Modis decision to invite US president Barack Obama for the 2015
Republic Day celebrations may have surprised many in the world of diplomacy but it was a
well calculated move by Indias politico-bureaucratic establishment. The invite was aimed at
sending a strong message to China that has tested the new dispensation in Delhi through
border transgressions and heightened defence cooperation with a few South Asian nations,
according to officials familiar with the decision. The PM, National Security Adviser AK Doval,
foreign secretary Sujatha Singh and Indian ambassador to the US, S Jaishankar, unanimously
decided to invite Obama in the wake of Beijings muscular ambitions across Asia Pacific, the
officials said. The RSS was also on the same page because of the China factor. A growing
partnership between worlds two largest democracies could provide stability and peace in
the region, officials noted. Modi, during his recent visits to Japan, the US and lastly to

Australia, had emphasized on security partnership in Asia-Pacific. That said, leaders of two
neighbouring countries Nepal and Myanmar were initially considered, officials said.
Since he became PM, Modi has had wide engagements with Kathmandu and Nay Pyi Taw
that tilted the decision in favour of the US.
Date: 24th November 2014

Modis Bullet Train set to Roll out from Dalal Street

Indias stock market is poised for a multi-year bull run as the governments market- friendly
policies may make the country a favourite among global investors, a panel of the countrys
top fund managers, brokers and bankers said at a roundtable organised by ET. Though there
could be some hiccups in 2015 because of stretched valuations and the likely strength in the
dollar against the rupee, investors will do well to hold on to their stocks over the next three
years, they said. However, the likelihood of softening interest rates makes bonds a more
lucrative buy than stocks over the next 12-15 months. While banks, pharma, technology and
logistics companies could outperform the broader market in 2015, long-term gilt mutual
funds would be a good bet in the fixed income segment, said the participants in the
roundtable, held in Mumbai last week. If people want to invest for the short-run,
particularly for less than one year, I think there is a scope for them to be disappointed,
because of the sharp rally in the last one year, said S Naren, chief investment officer, ICICI
Prudential Mutual Fund. There is a possibility that these stocks might correct 10-20% in the
next one year period. So far in 2014, benchmark indices have risen about 33%. In the
broader market, the mid-cap index has advanced 52% and the small-cap index has jumped
73%. Still, there is enough space for markets to advance over the next three to five years.
Right now, we are trading at roughly 16 times (price to earnings or PE ratio). In my opinion,
no bull market has ended before 20-25 PE and we are still at a reasonable distance, said
Prashant Jain, chief investment officer and executive director, HDFC Mutual Fund. I think
the equity outlook is quite good.

Myntra Seeks Bigger Discounts from Vendors

Myntra, recently acquired by Flipkart, is seeking bigger discounts from retailers and brands
by virtue of its increased sway in the fashion e-commerce space, in a move thats being
likened by vendors to Amazons pressure on book publishers.
Brands that were already giving higher margins to Myntra said the No. 1 online fashion
retailer is asking apparel makers for more. Earlier margins varied between 28% to 32%.
Now they have increased it outright to 36-38% and some weaker players are even asked to
give 40% margins, said a retail consultant who works with many brands.
Several apparel, footwear, fashion and lifestyle vendors ET spoke with echoed this. Most of
them say margins at brick and mortar franchises are generally pegged at 30-35%. Companies
said online retailers are engaged in a difficult balancing act of offering deep discounts to

consumers on the one hand and trying to make a profit on the other hand. In the process,
vendors get squeezed further, they said. A lot of manufacturers are hooked to the volume
drug. Now Myntra is saying give us bigger discounts otherwise we wont do volumes from
you or even block your products, said the head of a large apparel brand asking not to be
named. For more and more companies, their businesses are dependent on them. It earlier
happened to small electronic manufacturers from e-commerce companies.
Now, fashion apparel companies are getting hammered. A Myntra spokesperson declined
to comment. Manish Mandhana, joint managing director of Mandhana Industries, which
markets Salman Khans Being Human lifestyle brand, said online retailers are focusing not
just on acquiring customers but also turning profitable. They have realised that they have
become the largest selling platform, said Mandhana, adding that almost 15% of Being
Humans revenue currently comes from e-commerce sites and almost half of this from
Myntra alone. So obviously they are pressurising (retailers) and they themselves are under
pressure as e-commerce companies are burning cash by giving discounts. In order to save
some margins for themselves they are pushing brands to give better margins.
A chief executive at a foreign label that sells brands on various online platforms including
Flipkart, Myntra and Jabong among others said the e-commerce companies need to achieve
profitability by creating efficiencies in their supply chain, besides reducing their skyrocketing
marketing and staff costs and not by asking for more discounts from brands. We also retail
our products on global ecommerce sites such as Zalando and Asos but we dont see such
kind of margin demands there, he said. Globally, these kind of margins are not there. This
is in India they are asking for such crazy margins.
J.Suresh, chief executive of Arvind Lifestyle Brands, which sells labels including US Polo
Association and Nautica among others on Myntra, said the ecommerce company did not
approach him for bigger margins. We are only concerned they dont undervalue our brands
by discounting. We ensure that doesnt happen and it is part of our agreement, he said. In
the US, Amazon.com has been accused by some vendors publishers of using its clout to put
pressure on them. The consultant cited above said the acquisition of Myntra by the
countrys largest ecommerce company Flipkart could lead to a similar situation in India as
well. We give higher margins to Myntra to begin with. We give around 37-38% including
tax, said the owner of a small brand that sells on the site.
Date: 25th November 2014

Modi Govts Reforms Agenda in Trouble as Oppn Gangs Up

Along-awaited Bill to raise foreign investment limit in the insurance sector can now be taken
up for parliamentary clearance only towards the middle of December, presaging hitches for
the governments wider economic legislative agenda for the winter session. The Narendra
Modi-led NDA government has pitched its hopes on getting three crucial legislations a Bill

to raise the FDI limit in insurance to 49%, amending the land acquisition law to make it more
pro-industry and introducing the GSTBill aimed at unifying and harmonising indirect taxes
across the nation approved during the winter session, but at the end of the first day on
Monday, these appeared increasingly likely to get mired in an Opposition-created
quicksand, especially in the Rajya Sabha.
In the first sign the government could lose precious legislative time during this session that
began on Monday, political sources told ET that the select committee examining the
insurance legislation to suggest changes would seek a two-week extension to the original
deadline of Friday, November 28. Senior BJP member Chandan Mitra, who heads the Rajya
Sabha committee that is examining the Bill, is expected to move a motion in the House soon
to get its consent for extending the panels time until December 12. This would mean the
Bill, which, after being cleared by the Rajya Sabha, will need to be re-cleared by Lok Sabha,
can at the earliest be taken up only in the second half of the session. Last week, the
Congress leadership had told ET that the panel would need an extension.

Sebi Tightens Screws on Shady Fund Inflows

As the market touches a new high, capital market regulator Sebi is clamping down on
dubious inflow from loosely regulated, offshore entities, particularly those located in the
Gulf. According to a Sebi communiqu on Sunday evening, foreign funds investing on behalf
of unknown investors and through opaque structures will now find it difficult to play on
Dalal Street. The move, said some of the stock advisors, could impact the equity market.
These entities, often perceived as vehicles for round-tripping of funds and money
laundering, can no longer subscribe to participatory notes (PNs) to trade in Indian stocks.
PNs are offshore derivative instruments to trade on underlying Indian shares and are
preferred by investors that are not registered with Sebi. While this is a convenient
investment route for many genuine foreign investors, it is suspected that PNs are misused
by resident Indians to carry out round-tripping transactions. The directive comes amidst the
governments statement to clamp down on black money and a growing buzz that a
substantial part of undisclosed funds in Swiss bank accounts of Indians have been moved to
shell entities in the Gulf. The regulator on Monday said foreign portfolio investors or FPI can
issue PNs only to investors and funds that are regulated and incorporated in a jurisdiction
where the securities regulator and the central bank are part of apex international
organisations that lay down best global practices. Besides, such PN holders cannot be
residents of countries that figure in the list of countries that are yet to comply with antimoney laundering rules.

Date: 26th November 2014

Rajan Says Better Banking Practices Can Lower Rates

RBI Governor Raghuram Rajan has said bad behaviour by some unscrupulous npromoters
was harming all industry and greater scruples would possibly do more to bring down
borrowing costs for entrepreneurs than monetary policy actions. His statement comes at a
time when there is a rising clamour from industry for rate cuts by the central bank when it
meets next week. However, the RBI is unlikely to cut rates, according to the result of an ET
poll of bank economists. Moreover, while batting for lower cost of capital, Finance Minister
Arun Jaitley also emphasised that the final decision has to be that of the RBI. Indian
entrepreneurs should stump up more equity if they are keen on bank loans in the future,
and the industry lobby group should bury thoughts of regulatory forbearance to address
rising loan defaults, Rajan said on Tuesday. Some promoters find ways to take out the
equity as soon as the project gets going, so there really is no cushion when bad times hit,
he told the audience at the Verghese Kurien memorial lecture at IRMA, Anand. Lenders
should insist on more real equity up front, and monitor the project closely to ensure it stays
in. Promoters should not try and finance mega projects with tiny slivers of equity. Fixing
legal loopholes in the financial system, which helps unscrupulous promoters game the
system, will do a lot more to bring down borrowing costs than monetary policy actions,
Rajan said. This can be done by introducing monetary incentives for the members of Debt
Recovery Tribunals that bring down the duration of hearings of cases, a limit on number of
stays that courts can grant against recovery of loans, making appeals against DRT orders
costly as well as introduce a whole new bankruptcy regime. These steps, he said, could
change the economic landscape. I am not worried as much about losses stemming from
business risk as I am about the sharing of those losses because, ultimately, one
consequence of skewed and unfair sharing is to make credit costlier and less available,
Rajan said. Regulatory forbearance, which is a euphemism for regulators collaborating with
banks to hide problems and push them into the future, is a bad idea. The RBI opposes
forbearance that simply pushes problems into future.

CIL, ONGC Stake Sale: Govt Seeks Bidders List

In an unusual move, the government has asked investment bankers managing stake sales in
Coal India and ONGC to provide the names of potential buyers, and indicate how much
theyre likely to bid known in the trade as the shadow book before kicking off its
asset-sale programme. The government is looking to raise 38,000 crore, or 87%, of the
amount budgeted from disinvestment in the period between early to mid-December, before
the year-end holiday season, and the first week of January, according to people aware of
developments. Coal India is Indias largest coal miner and ONGC is the countrys largest
hydrocarbons explorer. The department of disinvestment has made this unusual demand
to have more clarity on the demand side from the institutional investors, as they are

planning to complete these two transactions in December itself, said a top banker. The
government hasnt raised any money from share sales until now and doesnt want to leave
it until the very end of the fiscal year. Bankers are confident to complete one transaction,
most probably Coal India, in December that will bolster the mood, said another banker
with knowledge of developments. The second transaction of ONGC may happen in
December or spill over to January. Investment bankers for the stake sales have met likely
buyers during road shows to gauge their appetite.
Date: 27th November 2014

Shell Tax Relief Signals Govts Silken Touch

India is unlikely to appeal against a decision by the Bombay High Court in the Shell transfer
pricing case as the Narendra Modi government looks to send out a strong signal that its
abiding by a pledge to put in place a non-adversarial tax regime and restore the countrys
appeal as a destination for investors around the world. We are awaiting the attorney
generals opinion in the matter a call would accordingly be taken, a top finance ministry
official told ET. The Bombay High Court order in the case is very clear. An appeal against
the ruling would have to be filed in the Supreme Court.
Sections within the finance ministry, including the tax department, have veered around to
the view that the government should not pursue the matter after the high court verdict,
which questioned the rationale of the Rs 18,000-crore transfer pricing order slapped on the
Anglo- Dutch multinational. Many officials in the tax department had reservations about the
transfer pricing order when it was first passed in 2013. Avoiding an appeal would provide
clarity to tax authorities and also shield many other companies from such demands. Taking a
step in this direction, the Central Board of Direct Taxes has already directed income tax field
offices to ensure that appeals are only filed if cases have merit and not merely based on the
tax effect involved.
Adverse comments by tribunals and courts against frivolous appeals have also been
highlighted in the communiqu to officials. The order against Shell had evoked strong
reactions from domestic and international investors, with some dubbing it tax terrorism, a
term that came to be identified with the previous UPA regime. The new government is
committed to turning this around as it looks to make India a destination for much-needed
investment thats required to fuel growth. Unsustainable demands wont get you taxes,
finance minister Arun Jaitley had said soon after the Bombay High Court verdict at a media
event. Unsustainable demands in the books can show you in good glory, but eventually
those taxes will be blocked in some judicial court proceedings... They would have only
earned us a bad name as an investment destination.Experts concur with this view and
cautioned that appealing against the Bombay High Court judgement would be detrimental
to business sentiment. This judgement brings much needed relief to global investors and
will in still confidence about the improving business climate in India. However, in case CBDT

decides to pursue an appeal with the Hble Supreme Court, the relief can be short lived,
said Suresh Surana, founder, RSM Astute Consulting Group. Shell India had issued shares to
parent Shell Gas BV at Rs 10 apiece in the 2008-09 financial year. The tax department
contested this valuation and estimated it at Rs 183 per share. The difference resulting from
the revaluation of shares was treated as income in the hands of Shell India. The Bombay
High Court struck down the income tax departments order saying the issue of shares by
Shell India did not result in income in its hands and the difference in the purported valuation
as derived by the transfer pricing officer is not covered by regulations in India and is
therefore not subject to tax.

Jack Ma Wants to Father Many India Investments

Jack Ma, founder & executive chairman of Alibaba Group Holding, the worlds biggest online
commerce company pledged to invest more in India, during a short visit to Asias thirdlargest economy. Speaking at an industry event on Wednesday, Chinas richest man called
upon both countries to step up efforts to work together and improve the lives of their
billion-strong populace. We will invest more in India and work with Indian entrepreneurs
and technologists to improve the relationship of the two nations and to improve the lives of
human beings, the 50- year-old billionaire said.
Ma, in a separate interaction with ET, confirmed that he was meeting a number of
entrepreneurs in the country. Yes, I am meeting some businessmen, and will be back in
India soon, he said, a statement that broadly indicates future long-term financial and
strategic partnerships with the countrys mobile and consumer Internet companies that
have now begun to consistently crack valuations of Rs 1,000 crore and more. A company
that brought ecommerce to doorsteps of Chinese consumers holds many lessons for Indian
ecommerce ventures which are relatively new to the game and have a long way to go, said
R Chandrashekhar, president of Nasscom, India's apex information technology and services
association.
While Ma stopped short of actually naming ventures of interest, the statement comes at a
time Amazon, the Jeff Bezosled online retailing behemoth, has also targeted India as one of
its key markets outside the US, and committed a spend of $2 billion on its Indian unit, as it
looks to dominate the countrys ecommerce industry that is expected to touch $9 billion
over the next two years, according to industry estimates. They (Alibaba) will disrupt the
market.
Look at what Amazon, and later, Uber did. That is exactly what Alibaba will do. Lot of noise
and immensely deep pockets, pointed out Avinash Raghava, co-founder and fellow at
technology think-tank iSpirt. This is Mas first official visit to India, apart from a personal trip
undertaken a few years ago, and comes two months after the founder steered the company
through the worlds biggest initial public offering, raising a staggering $25 billion in the
process, making it the largest public market debut in history. The diminutive Ma, who wore

a simple black blazer but did not sport a tie, stood apart from his fellow Chinese delegates,
who were more formally dressed for the occasion. He also pointed out the large volume of
transactions conducted by small and medium sellers from India, who were participating on
Alibabas platforms. Sellers from India are ranked just behind Chinese traders. Our platform
was never designed for them (Indian SMEs), but their capabilities in taking advantage of
opportunities are fantastic, and we have to build platforms to ensure more of them use it,
Ma said.
The Alibaba executive chairman, who has a net worth of over $24 billion post the
September IPO on the New York Stock Exchange, also said there were 4.3 lakh Chinese
consumers currently buying products, varying from chocolates to tea and spices, from
Indian sellers on the platform. Over the next three years, one of the key strategies for
Alibaba is to globalise and to make sure that we can help more small businesses around the
globe, use our services to do businesses, Ma, a former English language teacher, said.