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Personal Finance Magazine 25 November-8 December 2016 Rs 45


The Tata-Mistry spat has exposed how cronyism, cloak-and-dagger moves, personal ambitions, fears
and pettiness drive people pretending to hold the high standards of ethics and morality. Investors
should be worried

Cover Page_281.indd 1 18-11-2016 18:51:02

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25 Nov-8 Dec 2016

Whats Left of Tata Image?

F or three weeks now, Indian corporate

sector watchers have been following the
Ratan Tata and Cyrus Mistry camps engage in
an increasingly bitter battle of words. While
the Tata camp is pulling all strings to evict
Mr Mistry from all the group companies,
the shareholders of Tata companies face a
long list of problems which need urgent,
and continuous, attention. One of the major
problems highlighted by Mr Mistry, after his
ouster, is the ambiguous governance structure
that the Tata group has created over the years.
This spat also brings to the forefront the

30 Cover Story
innumerable dubious transactions that had
been brushed under the carpet for years. The
Cover Story delves into all these issues. This is
the longest Cover Story we have done. Dont
miss it. Ta-ta Governance?
Suchetas Different Strokes explains how The Tata-Mistry spat has exposed how cronyism, cloak-and-
the new chairman at Tata Sons may end up dagger moves, personal ambitions, fears and pettiness drive
being a mere puppet in the hands of Ratan people pretending to be ethical and moral. Investors should be
Tata and simply be a yes-man. The future of worried, write Sucheta Dalal & Debashis Basu
the group may not be as significant a factor in
the selection as the closeness to Ratan Tata.
In her Crosshairs section, she raises questions
about the expensive public relations and
advertising budgets to maintain a spotless
12 Your Money
Palash Corporation Told To Pay Housing Society
Rs3 Lakh Compensation
image of Mr Tata. She also gives us an insight Peerless Sells Its Mutual Fund Business
into the dubious philanthropy and smear ICICI Bank Home Loan Interest Rates Lowered by 15bps
Builder Arrested for Failing To Surrender Excess Land to
campaigns that have been undertaken under
the Government
Ratan Tatas shrewd planning. Service-Tax Introduced on Music and E-Books Sold on
The Tata-Mistry spat was almost Foreign Portals
overshadowed by the governments
demonetisation of high currency notes. The
mere volumes and numbers involved make it
a gargantuan task. While the raging debates,
serpentine queues at banks and vote bank
politics take centre stage, the government

is left to achieve the goal of weeding out

counterfeit notes and black money from the
economy. As good as the demonetisation
looks for the economy, what remains to be Tata Wars: PR, Plants and Philanthropy
seen is how deftly the government handles its
implementation and smooth transition.
As always, please do write to us with
comments on the published articles and about
what you would like to read.
20 Different Strokes
Tata Sons Head: Will A Yes-Man Be the Fate of the Group?

Debashis Basu Disclaimer: Moneylife has a policy of not allowing its editorial staff to
buy and sell stocks that are written about in the magazine. All personal
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 25 Nov-8 Dec 2016 | 4

Content.indd 2 18-11-2016 18:41:52


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after Demonetisation 58 GST: Many States, One

23 Hot and Cold Stocks

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24 Smart Money INSURANCE

60 Ethics in
the Legal
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Content.indd 4 18-11-2016 18:43:48

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Volume 11, Issue 21
25 November8 December 2016

Debashis Basu
Editor & Publisher

Sucheta Dalal
Managing Editor

Editorial Consultant
Dr Nita Mukherjee

Editorial, Advertisement, RICH GET RICHER!

Circulation & Subscription Office This is with regard to Who Wants To Defeat
315, 3rd Floor, Hind Service Industries
Premises, Off Veer Savarkar Marg, Shivaji
Cancer? by Prof BM Hegde. How true! The
Park, Dadar (W), Mumbai - 400 028 pharma industry wants to make money from
Tel: 022 49205000 death. It is the same as the armaments industry
Fax: 022 49205022
E-mail: making money by the killings fields around the
Mutual Fund investments
globe. are subject to market risks,
read all scheme related
Now, to support the pharma industry, the documents carefully.
E-mail: diagnostic industry is blooming. In this world, the
Subscription e-mail rich get richer by playing on the misery of the poor. Today, Donald Trump wants USA to manufacture Write to
and also export. But who will they sell the products the Editor!

New Delhi
to? It is to the people in the third world countries.
These people provide the market but no have
a prize
DDA Flats, J-3/66, Kalkaji,
New Delhi - 110 019 money to buy. Mr Trump wants to trade only with
countries which would make America great. This is
a clear case of the UGLY AMERICAN.
1st Floor, 13/1, 7th Main Road, Sunil Rebello, by email
1 Cross, Saibabanagar, Srirampuram,

Bengaluru - 560 021

This is with regard to Shareholders Pay for
Kolkata Ratan Tatas M&As and Expansions by
395, Lake Gardens, Kolkata - 700 045 Debashis Basu. This is an excellent article.
Tel: 033 2422 1173/4064 4318
It is well presented and very true. Tatas are
wrongly placed on a very high pedestal. They
Moneylife is printed and published by are basically not successful businessmen!
Debashis Basu on behalf of Sundararaman Gopalakrishnan, online comment
Moneywise Media Pvt Ltd and
published at 315, 3rd Floor,
Hind Service Industries Premises, HISTORY REPEATS ITSELF?
Off Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai - 400 028 This is with regard to Equity Funds: How Much to Expect Over
Editor: Debashis Basu
the Long-term? by Debashis Basu and Mitul Patel. History repeats
itselfagain. Market fall is not related to Donald Trumps victory or
the demonetisation move. This is because markets are trading at high
value without any earnings improvement. I believe that the markets
Total no of pages - 68, Including Covers would trade in the band of 24,500 to 29,000 for some more time. No
need to panic.
V Ganesan, online comment
RNI No: MAHENG/2006/16653

MONEYLIFE | 25 Nov-8 Dec 2016 | 8

Letters.indd 2 18-11-2016 17:11:36

Moneylife Foundation AD.indd 1 23-09-2016 18:30:33

Showing a Mirror
T his is with regard to
SEBIs Investor Advisor
to buy BSE-listed
DHYANI (some
Regulations: Right Step but Not small company)
Mutual Fund investments
Enough by Sucheta Dalal. This was sent by someone are subject to market risks,
read all scheme related
is a wonderful article showing a under the name of documents carefully.
mirror to SEBIof their myopic a reputed research
approach to regulate only
independent financial advisors
company and nave
investors, who bought Congratulations
(IFAs) of mutual funds. it, are all trapped. It Jaswant Aditya Singh
SEBI has not been able to regulate the high and has been more than six
mighty as well as the so-called small tips peddlers months and no trading
(around 6,000 small 5-10-seater call centres based has taken place since CLOCK
in Gujarat and Indore) who have managed to get then. Complaints are
the data of investors opening demat accounts. They pending with SEBI
present themselves as if the contact number has been but lead to no results.
given to them by SEBI. Everyday, nave investors are Jaswant Aditya Singh,
getting cheated by fraudsters. For example, an SMS online comment

Jaswant Aditya Singh

KEEP IT UP! the state police or an

This is with regard to Picking Stocks: Marrying NGO. The police failed
Momentum with Fundamentals by Debashis Basu. I to support later and the
find that the recent articles on this subject in Moneylife Thane Mental Hospital
are simply superb and a class apart from others. They refused to support
are taking the level of knowledge into another orbit. her as there were already many patients with them. I
Keep it up. went to Vandrewale Foundation/rehabilitation centre
Amol Chavan, online comment in Bhiwandi. They said that women patients bring
additional sexual risk challenges. Finally, sadly, I left
FURTHER COVERAGE NEEDED! her on streets again as the family disowned her due to
This is with regard to It Is Training Not Talent that economic reasons. Jai Mauli!
Creates Geniuses by Debashis Basu. Thank you for Mahesh S Bhatt, online comment
providing such a review. It would be helpful if such
topics are covered in detail, like expertise in not only REGULATORS CAUGHT NAPPING
sports skills but also soft skills like time management, This is with regard to Wells Fargos of India neither
presentations, communication, keeping a focus on Get Caught nor Pay a Price by Sucheta Dalal. Cross-
multiple tasks and, lastly, on how to train yourself to selling high commission products to unsuspecting
be always out of comfort levels. customers is a practice that has been rampant in Indian
Amol Chavan, online comment banks for a long time. Life insurance business has
seen a huge volume surge in the past 15 years (post-
INADEQUACY OF REHAB CENTRES privatisation) due to this and thousands of customers
This is with regard to A Foster Home for Mentally ill have lost money on ULIPs (unit-linked insurance
Women. It is sad to see women who give birth to us in plans). But banks have made hefty commissions; the
such a plight. We do not have adequate rehabilitation relationship managers have got fat bonuses and foreign
centres for slow, long-term healing for mental illness jaunts at the expense of insurance companies. The
in Mumbai. I had an awful experience of failing to managers and honchos of insurance companies have
support a 35-year old mentally challenged woman, got good salary increases and bonuses.
when the local court of Bandra failed to allow me to What has any regulator done to undo this damage
take her to the Thane Mental Hospital for certified while it was being inflicted? Zilch. And the curbs
mentally ill patients by stating that this is a job for on mis-selling remain largely in letter but are not

MONEYLIFE | 25 Nov-8 Dec 2016 | 10

Letters.indd 4 18-11-2016 17:14:05


translated in spirit. Caveat emptor is the only dictum hierarchy runs the healthcare system. The pharmacists,
that seems to work in our country while the regulators who are supposed to be drug experts, have never
are caught napping at the wheel. played a role in India. The Indian Medical Council
Subba Rao, online comment is not likely to allow this to happen. There is little
task-sharing (a new buzzword) between the various
THINGS ARE CHANGING healthcare professionals. I have not read the book, so I
This is with regard to Public Sector Banks: No Sign of have no idea if this possibility has been discussed.
a Turnaround Yet by Sucheta Dalal. India had a very robust public health system before
The malaise of bad loans is due to politicians and the revised medical curriculum incorporated public
crony industrialists who have exploited public sector health into the MBBS syllabus. Public
banks for private gains. People who have health is much more than the social
never worked as bankers want to appoint and preventive medicine that is taught
them and tell bankers how to go about in classrooms. It is more inclusive and
their business. IOB (Indian Overseas multidisciplinary.
Bank) is without a CMD (chairman and Indian society looks up to the
managing director). The BBB (Banking doctor with a great deal of awe and
Bureau Board), which is being praised like respect. It is a hangover of the feudal
the messiah that it is, suggested that it had arrogance that rules India even
already selected the candidate. The Bank is today. Indians give great importance
with just one ED (executive director) who to unchallenged authority and are
was transferred from another bank! The willing to donate more than a
appointment of a CA (chartered accountant) crore of rupees to win a backdoor
with links to the ruling party on the board of entry into a medical college. I dont
a public sector bank with full backing from think it makes economic sense. Nor
LIC (Life Insurance Corporation of Indiathe is it driven by passion.
insurer voted against him last year) certainly shows Unnikrishnan Mazhuvancherry, online comment
that things are changing. Is there such a dearth of
talent at SBI (State Bank of India) that the government A SMALL REQUEST
was forced to extend the term of its CMD? This is with regard to It Is Your Money, Your Worry
Kunal Singh, online comment by R Balakrishnan. I tried hard to explain to my
friends about the inadequacy of bank fixed deposits
POOR MEDICAL COLLEGE ADMISSIONS? to beat inflation; but nobody gives a damn about
This is with regard to The Sick Healthcare System it. Luckily, my senior colleagues introduced me to
by Debashis Basu. On the one hand, the authors Moneylife.Trust me, please, the subscription charges
lament that the doctors education comes from the are worth every penny.
pharma companies. On the other, there is a general I never miss R Balakrishnans articles. In fact, I go
tendency among Indian doctors (as a monolithic through the archives to read his articles. One small
political community, not as individuals) to never allow request from me is to publish an article about the ways
any meaningful role for other healthcare professionals, to identify turnaround companies; it will be really
or share the professional space with them, except as helpful.
'subordinates' who take orders. A prestige-based Karthik Bharathi, online comment

Letters: Mumbai 400 028 or faxed to 022- complaints about current 400 028 or call 022-49205000 or
Letters to the Editor can be 49205022. Letters must include subscription and books, write to fax to 022-49205022.
emailed to editor@moneylife. the writers full name, address us at
in or can be posted to: The Editor, and telephone number and may or to Subscription Manager, Unit Advertising: For information and
Moneylife Magazine, Unit No. 316, be edited. No. 316, 3rd Floor, Hind Service rates, email us at
3rd Floor, Hind Service Industries, Subscription Service: Industries, Off Veer Savarkar or call
Off Veer Savarkar Marg, Dadar(W), For new subscription requests, Marg, Dadar (W), Mumbai 91-022-49205000.

11 | 25 Nov-8 Dec 2016 | MONEYLIFE

Letters.indd 5 18-11-2016 17:15:12

Your Money

Palash Corporation Told To Pay Housing convey title and failing to execute
necessary documents is a breach of

Society Rs3 Lakh Compensation statutory obligation, which amounts

to deficiency of service... There are
no adequate reasons why they need

P alash Cooperative Housing

Society (Andheri, Mumbai)
bought flats from Palash
compensation is to be paid with 9%
interest per annum since 2011.
The Forum, after hearing both
more than six years. The obligation
does not end by sending a draft
conveyance copy. It amounts to
Corporation (the builder) in 2007 sides, concluded that the developer unfair trade practice and resulted in
and, in 2009, the housing wrongful loss to the society.
society was formed with The Forum directed the
65 members. The society builder to pay Rs3 lakh to
should have got conveyance Palash Cooperative Housing
of the property, along with Society as compensation
documents of original title, for breach of obligations
within four months, from the and delay in providing
builder. conveyance. It directed Palash
In 2011, the society Corporation to submit the
approached the Mumbai building completion certificate
Suburban District Consumer and occupancy certificate
Forum complaining of within four months and
deficiency in service and all documents of title. The
unfair trade practice by Forum was also of the view
Palash Corporation. In 2016, that the builder has to pay the
the Forum observed that increase of stamp duty from
the society was partly right April 2010 on the conveyance
and must be compensated for the failed to execute conveyance deed deed and directed the firm to pay
harassment it faced due to the delay within a reasonable time. This Rs500 per day, if conveyance is not
in getting the conveyance. The act of nonfeasance by avoiding to executed within four months.


Peerless Sells Its Mutual Fund Business ICICI Bank Home Loan Interest
Rates Lowered by 15bps
K olkata-based Peerless has sold its mutual fund business to the non-bank finance
company Essel Finance Management, for an undisclosed sum, according to
The Telegraph. The acquisition marks I CICI Banks home loan interest rates
have been lowered by 15bps. Women
Mumbai-based Essel Finances entry borrowers will now be able to avail
into mutual funds. Peerless Mutual Fund loans at 9.15% while other borrowers
oers one liquid scheme, four fixed- will have to pay interest rate of 9.20%.
income schemes, one hybrid scheme and The revised rates are applicable for
three equity schemes. home loans up to Rs75 lakh. ICICI Bank
Under the deal, Peerless General has launched a home loan overdraft
Finance and Investment Company Ltd facility for salaried customers under
will sell its entire stake in Peerless Fund which customers can avail loans from
Management Company Ltd (PMFCL) and Peerless Trust Management Company Ltd Rs5 lakh up to Rs1 crore for personal
(PTMCL) to Essel Finance Management. PTMCL is the trustee, while PFMCL is the needs (education, medical treatment)
investment manager of Peerless Mutual Fund. against property.

MONEYLIFE | 25 Nov-8 Dec 2016 | 12

Your Money.indd 2 18-11-2016 17:18:34


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Your Money

Builder Arrested for Failing To Surrender Excess Service-Tax Introduced

Land to the Government on Music and E-Books
Sold on Foreign Portals

haymsunder Agarwal was department of the collectorate and the
arrested while his brother
Murlidhar Agrawal
and architect Anil
municipal corporation for collusion. The
builder was required
to surrender 5% of
D ownloading music or an e-book from an
overseas site, or buying some storage on
a cloud from an overseas service-provider,
Motiramani were booked the land (2,023sqm will entail a service-tax component of 15%,
by Thane city police on or half an acre) to which will be added to the bill, beginning
the complaint of a real the government for 1 December 2016, according to a report in
estate agent for failing building houses for the the Economic Times. Domestic suppliers
to surrender excess economically weaker of movies, which can be downloaded by
land to the government under the sections. The ULC Act was scrapped customers in India, already incur this service-
ULC Act, according to a report in ET some years ago, but some cases where tax. There will be a level-playing field between
Realty. Police have also booked some builders were to surrender land are still domestic and overseas suppliers, once the
ocials of the ULC (Urban Land Ceiling) continuing in the courts. new rule comes into effect.


Quiz no

QUIZ Answer
Correctly! Win
Another quiz to tease your brain. The answers are in a personalised
this very issue. The winner will be chosen by a lucky clock with an Francis F Fernandes

draw from correct entries and answers published in the Mutual Fund investmentnt
investments are quote!
issue dated 5 January 2017. Send in your answers to subject to market risks,
read all scheme related with the Quiz no., name, address & documents carefully.
telephone number before 14 December 2016.
1. Who is responsible for saying, In the business world, the 5. Which poet is responsible for the lines little do we see in
rear view mirror is always clearer than the windshield? nature that is ours we have sold our soul to the devil?
a. Tooey Courtemanche b. Warren Buffett a. Percy Bysshe Shelley b. Henry Wadsworth Longfellow
c. Bill Gates d. Donald Trump c. William Wordsworth d. Hans Peter Durr

2. For evaluating a mutual funds performance, how many 6. Of which company was Raymond Bickson MD and CEO
years of track record should be looked at, ideally? earlier?
a. 3 years b. 5 years a. Indian Hotels Company Ltd b. Tata Steel Limited
c. 10 years d. 15 years c. Tata Motors Limited d. TCS Limited

3. How many mutual fund schemes in the Moneylife sample 7. For FY15-16, how much was the return on capital employed
in the large-cap category have consistently outperformed for Jayant Agro Organics?
the category average in each xx- year period? a. 11% b. 12%
a. Seven b. Eight c. 21% d. 23%
c. Nine d. Ten
8. Which Article of the Constitution of India (read along with
4. Which of the following mobile apps gives India-centric Schedule VII) provides for the division of powers between
news? the Centre and the states?
a. InShorts b. Calm a. Article 250 b. Article 246
c. Instant - Quantified Self d. LookFor c. Article 230 d. Article 225

In all, 11 readers got all the answers right last time.

The answers to Moneylife Quiz-244 are: 1- d. 2% 2- d. 150
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3- c. Philadelphia 4- b. US$ 100 billion 5- a. Surgeon
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MONEYLIFE | 25 Nov-8 Dec 2016 | 14

Your Money.indd 4 18-11-2016 17:19:38

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News & views with a big dierence

Was this the reason for may have stumbled upon a hot button
issue with Rata Tata: the relationship
Cyrus Mistrys ouster? with C Sivasankaran, promoter of
Ever since Cyrus Mistry was ousted Sterling Infotech, with whom Mr Tata
from the chairmanship of Tata Sons, in a seems to have had a very cosy financial
nasty coup engineered by the 11 directors relationship for more than a decade.
of Tata Sons (two abstained from voting), Documents reviewed by Moneylife
corporate watchers are wondering what show that Mr Mistry had raised the issue
could Mr Mistry have done to completely of Tata Sons dealings with
lose the faith of the board? Tata Sons has Mr Sivasankaran, which seem to have
so far not been able to come up with any explanation. Mr Mistry is resulted in large financial benefits to Mr Sivasankaran (often
tight-lipped. referred to as Siva). Mr Mistry had raised the issue of initiating
However, sources close to the group speculate that Mr Mistry legal action against Mr Sivasankaran

Corporate Governance, Indian Style: ML FOUNDATION

What Cyrus Mistry proposed and
what he got from the Tatas Beware, Annual Information Report is a big weapon
For two weeks, there was no explanation about in the hands of the taxman
why Tata Sons directors ganged up to remove
Cyrus P Mistry as chairman of Tata Sons. Then, Ameet Patel spoke at a
the Tatas alleged that Mr Mistry was drifting seminar-cum-guidance
away from the groups operating companies. session on The AIR
However, documents viewed by Moneylife show a is a big weapon in
completely dierent picture the hands of the tax
ocer organised by
Moneylife Foundation
in Mumbai. He also
How Demonetisation Has Aected spoke about the recent
Rural Areas demonetisation and
The Union government sent shock waves among what it means to tax
not just the hoarders of unaccounted money but reporting of citizens
also among its huge political constituency and
the state governments. The measure may have
precedence but the dimension of the eect has no
precedence EXCLUSIVE VIEWS On issues that matter to you

Demonetisation: Pains of Bank

Highlighting the suering of bank employees
post- demonetisation, the Indian National Bank
Employees Federation (INBEF) has requested
finance minister Arun Jaitley to honour them with Demonetisation: The reset RTI use: Blame it on the
ad-interim relief in their wages and aect a wage and threat of future resets common man
settlement in 2017 Aniruddha M Godbole Vinita Deshmukh

Demonetisation: MFIs hit by cash

crunch in the near term
Micro finance institutions (MFIs) are facing
a severe cash crunch which is hurting their
collections and disbursement. However, it is too
DemonetisationWill Citizens must get involved in
early to conclude that there will be high loan
RBI gear up? the genetically modified crop
defaults or weakening of credit culture in MFIs,
says a research note Dr B Yerram Raju debate Rachana Arora

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Web Content.indd 1 18-11-2016 17:29:03

Exclusive news, the stories behind the
headlines and the truth between the
lines by Sucheta Dalal

Tata Wars: PR, Plants and Philanthropy

hen it comes to fighting for internal control, one learns that Rediffusion-Edelman is being paid a
Ratan Tata finds no use for the much-touted whopping Rs60 crore per annum for PR support to
Tata culture. Values, equity and fair-play Tata Sons as well as the Tata trusts. What exactly does
quickly go for a toss and in come whisper campaigns, this kind of money buy? Quite simple. It ensured that
innuendo and falsehoods, on par with the worst in the the 2G-telecom scandal and the machinations of the
country, lubricated through expensive public relations group, led by Ratan Tata, were soon forgotten. How
(PR) and large advertising budgets. I watched it closely else does one explain the shock and many allusions
in the 1990s while reporting the humiliating removal to damage to the Tata brand that greeted the crude
of Russi Mody, Ajit Kerkar and Darbari Seth and then, sacking of Cyrus Mistry? One must remember that this
again, over the Tata Finance episode when YM Kale, a expensive PR machine is at work again in the Mistry-
highly regarded senior partner at the accounting firm of Tata war and investors need to analyse news reports
AF Ferguson, was ignobly sacked by his firm (in order carefully, to get to the truth.
to retain the Tata business) because his
904-page special audit did not give Tatas the clean chit Tata Sons Guarantees
they expected. A pink paper recently reported that Tata Sons may
The Niira Radia tapes, published by Outlook and no longer guarantee loans, refinancing deals or
Open magazines, among funding requirements of
others (and still available on group companies where
the net), provided the world a Cyrus Mistry refuses to
ringside view into how step down as chairman.
Ms Radia skilfully Unnamed executives were
manipulated the media, quoted as saying, Units
politicians and bureaucrats that dont adhere to the
through a series of trade- values and policies of Tata
offs, loans and land deals Sons cannot be supported
for her corporate clients with the comfort of Tata
(primarily the Tata group assurance, top executives.
and Reliance). Cyrus Mistrys It further says that this
latest riposte to Tata Sons message about guarantees is
(specifically, the belated full- Ties that bind: Ratan Tata inaugurates Nayati Healthcare & likely to be conveyed at the
page advertisement attempting Research in Mathura in February 2016. Nayati's chairperson EGMs (extraordinary general
to explain the disgraceful Niira Radia (right). meetings) convened to oust
boardroom coup to sack Mr Mistry) tells us that Ms Mistry. It further quotes unnamed bankers saying, If
Radias work through Vaishnavi Communications cost Tata Sons decides not to renew guarantees, borrowing
a cool Rs40 crore per annum. costs could jump significantly for group companies and
Even before one digests this huge PR budget, make their loans more costly.

27 Nov-8
Dec 2014
2016 || 14

Crosshair.indd 2 18-11-2016 17:30:46

Almost in tandem, the Tata director on Tata criticism. The 14 Tata trusts, acting under orders of
Chemicals, Bhaskar Bhatt, requested Cyrus Mistry a single person, can do this by way of their collective
to step down as chairman, because of the threat 67% shareholding in Tata Sons.
the company faces on account of loss of confidence At a time when the government has cancelled the
of the promoter Tata Sons in the Chairman of Tata registrations of several NGOs, it is worth noting that
Chemicals. He added to the drama by tendering his the Tata trusts also enjoy tax exemptions from the
resignation; this would have been relevant if he were government. The battle with Cyrus Mistry has exposed
an independent director, rather than a group company the role of ex-Tata executives (NA Soonawala and
head and Tata nominee on the board. There is a nice RK Krishna Kumar) in scrutinising the investments
sequencing to this, with the subsequent event appearing of Tata Sons, calling into question the whole edifice
to confirm the media narrative and reinforcing public of philanthropic activity, not to mention the insider
opinion. trading angle and sharing of price sensitive information
How true is the threat about Tata Sons guarantees? that SEBI is reportedly investigating. One may well ask,
We learn that the only companies where Tata Sons in the context of Nitin Nohrias role in Mr Mistrys
has stuck its neck out by providing a direct guarantee ouster, whether the massive $50-million donation to
of sorts is the controversial TTSL (Tata Teleservices Harvard Business School had a quid pro quo attached?
Limited). There, too, it is against a pledge of shares. Why is such a contribution from tax-exempted trust
In any case, TTSL, like TCS, is a company where Tata funds, leading to a loss of revenue for India?
Sons is in a position to remove The saving grace in this
Mr Mistry as chairman. sorry episode is that a few of the
Sources close to Cyrus Given the aggressive muscle trustees on the Tata Trusts who
Mistry say that, during his flexing by the Tata trusts in the are also independent directors
tenure, bankers were specifically Cyrus Mistry episode, one could of group companies, set a great
told to look at each group well ask whether this much-touted example of good governance.
company on merit. Having said philanthropy has turned into a However, SEBI must ensure
that, they agree that there is an very smart business promotion there is no scope for a repeat
implicit guarantee of Tata Sons, and brand management tool of this situation by telling Tata
and, in the Indian context, it is Sons that trustees of its 14
unimaginable for a Tata group trusts cannot be independent
company to renege on a payment obligation. directors on listed group entities. Proxy advisory firms
However, a sticky issue is Tata Steel, where lenders have also pointed out that as many as 10 independent
have inserted covenants in the loan agreements directors have been on boards well past the tenure
allowing them to pull out the loans if it ceases to be a prescribed by governance regulations.
part of the Tata group. Ironically, from the shareholder
perspective, Mr Mistry is most likely to cut the losses Benefits of Philanthropy
of over 1 million-1.5 million pounds a day on account A February 2015 article by Zaheer Masani (son of
of Corus Steel of the UK and bring the company back the famous Swatantra Party leader Minoo Masani)
in shape. Will bankers be against such a move? points out how Tata UK, was keen to advertise its
Also, would Indian banks really refuse to lend to commitment to corporate social responsibility, with the
Tata Chemicals, Tata Motors, Indian Hotels or even magic letters CSR sprayed across all its publicity.
the debt-laden Tata Steel and another two-dozen listed It was the dominant theme at Tatas inaugural
Tata companies at competitive rates on a stand-alone reception in London.
basis? And yet, we hear that banks are struggling to He writes, Today Tata prefers to forget the
find bankable projects. buccaneering capitalism with which its founder began
his remarkable career. Like most other Indian merchant
Messy Structure princes of his time, he cut his business teeth in the
If anything, the revelations of the past two weeks notorious opium trade with China.
ought to worry Tata Sons about stricter scrutiny by Given the aggressive muscle flexing by the Tata
the Securities and Exchange Board of India (SEBI), the trusts in the Cyrus Mistry episode, one could well
tax authorities and their own investors. The current question whether this much-touted philanthropy has
structure of Tata Sons allows one individual, heading turned into a very smart business promotion and brand
the Tata trusts, to effectively ride roughshod over management tool. Such questions would have been
independent directors and dictate the fate of dozens considered sacrilegious in the past, but they are going
of listed entities and their millions of shareholders. to be raised openly and bluntly, now that the halo
This goes against all norms of good governance and around that Tata name has been severely dented by
most proxy advisory firms have been scathing in their Ratan Tatas own actions.

19 | 25 Nov-8 Dec 2016 | MONEYLIFE

Crosshair.indd 3 18-11-2016 17:31:06


Tata Sons Head: Will A Yes-man

Be the Fate of the Group?

ill Ratan Tatas image survive the shock and about being party to a grossly unfair decision, not even
outrage caused by the brutal and, one would say, when three of the big names had been on the board for
dubious, sacking of Cyrus Mistry as chairman just a couple of months. In some cases, financial incentives
of Tata Sons? The jury is still out on that. I suspect it is and endowments flowing from the Tata charities appear
going to be a long-drawn war with many small battles to have had a powerful influence.
on the way. The question is: What will be Ratan Tatas The dominant view is that Cyrus Mistry was targeted
ultimate legacy and in what shape will he leave Indias for trying to clean up Ratan Tatas legacy of massive debts
most famous corporate group? (steel), messy projects (telecom) and emotional investments
As I write this column, the media narrative is that (the Nano project that had to leave Singur in West Bengal
Cyrus Mistrys sacking was vicious and unfair; but after a public uprising and many deaths and is now an
Ratan Tata will, eventually, get his way because he alone acknowledged financial and marketing disaster). However,
controls the ownership, either directly or indirectly. Right the numbers are stacked against him because of the sheer
now, independent directors of four of the biggest six muscle of Tata Sons shareholding and cross-holdings.
Tata companies (Tata That may or may not be
Motors, Tata Steel, Tata a miscalculation about
Chemicals and Indian Mistrys game plan; but
Hotels Corporation only time will tell. Let us
Limited) have all look at a few facts.
endorsed Cyrus Mistrys First, Cyrus Mistry
leadership; he has been chose to keep a studiously
removed as chairman of low profile (contrary to
TCS Ltd and, in the fifth, the allegations contained
Tata Global Beverages, in Tata Sons nine-page
Mr Mistry alleges that letter about using PR to
he has been removed build his own image)
by similar dubious during his three-year
stratagems as were tenure. He has not given
deployed to oust him any media interviews;
from Tata Sons. so we know very little
That Ratan Tata has about his tenacity, ability
not hesitated to seek the Being a Tata director or a trustee on its many and willingness to fight
removal of Nusli Wadia mega charities has such a big social cache that the long war. But he has
(a childhood friend only the most upright person would allow done rather well so far.
and his biggest ally in Secondly, our Cover
considerations such as fairness and good
consolidating the group Story shows that sensible
governance to jeopardise those posts
in the 1990s) for backing institutional investors
Cyrus Mistry in Tata (retail investors wont
Chemicals appears to have jolted several independent matter because they seldom make the effort to vote) need to
directors of other group companies into being more aligned make a dispassionate assessment about each Tata company;
with Tata Sons thinking. that will happen if the government truly maintains a
Remember, being a Tata director or a trustee on its hands-off policy and foreign investors do what is best
many mega charities has such a big social cache that only for their funds.
a rare person would allow considerations such as fairness A third issue that ought to be the biggest consideration
and good governance to jeopardise that position. The for all investors and the future of the Tata group. Cyrus
reputed directors of Tata Sons showed no compunction Mistry, and his family with an 18.4% holding, is probably

MONEYLIFE | 25 Nov-8 Dec 2016 | 20

DIFFERENT STROKES.indd 2 18-11-2016 17:32:36


as much, or more, concerned about this and Ratan Tatas toe his line; but Ratan will only consider him as the last
next steps, as are institutional investors. Ratan Tata does possible option. Noel Tata holds a 0.5% stake in Tata
not have age on his side and nobody believes he is going Sons and his mother, Simone Tata, holds 0.5%.
to find an effective replacement for Cyrus Mistry in just Then there is Mehli Mistry (a cousin of Cyrus Mistry;
four months. In fact, he may remain fully occupied in but the two families do not get along well) who could
trying to oust Cyrus Mistry and Nusli Wadia from the be a dark horse. He is very close to Ratan Tata and
group in that timeframe. is a frequent companion on his many travels. Mehli
Will the Rata Tata-headed selection committee pick Mistry, and his brother Pheroze Mistry, run a firm called
any of the names being speculated about by the media M Pallonji & Co Pvt Ltd which used to have large shipping
(Indra Nooyi and N Chandrashekaran, among others), and dredging contracts from Tata Power. He maintains
or find an expatriate of high standing (as they have in a very low profile, but is so close to Ratan Tata that it is
Tata Motors) to head the group? I find it hard to believe his family which purchased the flat at Bakhtavar (Colaba,
that any professional manager will accept this otherwise Mumbai) (owned by Forbes, a group company) in which
coveted job, without demanding thick lines to be drawn Ratan Tata lived for decades, in a very curious deal.
between the Tata trusts A third name doing
and Tata Sons and a clear the rounds is that of R
articulation of the extent Venkataramanan (Venkat),
of Mr Tatas personal writ a former executive assistant
over group decisions. to Ratan Tata. So deep
After all, Mr Mistry is Mr Tatas confidence
seems to have been sacked in Venkat that he is the
precisely for pushing those managing trustee of all
boundaries and attempting the powerful Tata trusts,
to cut the groups losses in which, with their combined
Tata Motors and Tata Steel shareholding of 67%,
and set right the unsavoury have full control over
dealings at AirAsia India Tata Sons. According to
with Ratan Tatas close sources, most of the Tata
buddy Sivasankaran in trustees that matter (retired
the loss-making Tata Tata executives who have
Teleservices (TTSL) (where There is a good chance that Mr Tata may put sinecures at the trusts
the group has to pay over in place a puppet, who follows his orders and do the job of vetting
$1billion to DoCoMo). doesnt matter if it is disastrous for the group. investment decisions of
Today, Mr Tata, with Tata Sons) are already used
Elite Parsi circles are already abuzz with
dual control over Tata to reporting, or working
Sons and the powerful Tata
speculation about who it may be in close coordination with
trusts, is single-handedly in Venkat. Further evidence of
charge of the $100-billion business empire. We dont know Venkats standing with Ratan Tata is the fact that he holds
if an eventually legal battle will lead to a court-ordered the critical 1.5% balancing stake in AirAsia India, while
change in Tata Sons equation with the powerful Tata trusts. AirAsia Investments Ltd and Tata Sons hold 49% each.
But, until then, Ratan Tata is back at the steering None of these names is being discussed because they
wheel of this not-so-Nano group. There is a good chance are the best or most competent persons to head Tata
that Mr Tata may put in place a puppet, who follows his Sons. What recommends them to the post is that they are
ordersdoesnt matter if it is disastrous for the group. unlikely to challenge Mr Tatas authority or decisions as
Elite Parsi circles are already abuzz with speculation about Cyrus Mistry did. Eventually, it will be up to shareholders
persons who may meet Mr Tatas approval. of the Tata group companies to decide if any of them is
There is one school of thought that Mr Tata may have a good custodian of their investment and they may vote
to bring in another Tata, his half-brother, Noel Tata. Noel with their feet.
is married to Cyrus Mistrys sister, Aloo; but this is a high
stakes game. His appointment could also blunt the counter- Sucheta Dalal is the managing editor of Moneylife. She was
attack by team Cyrus. Sources, who know the family, say awarded the Padma Shri in 2006 for her outstanding contribution
that Noel is used to being bullied by Ratan and could to journalism. She can be reached at

21 | 25 Nov-8 Dec 2016 | MONEYLIFE

DIFFERENT STROKES.indd 3 18-11-2016 17:32:49


Choosing Better Performers

nlike stocks, where it is possible to take a call on 4th quartile of individual three-year periods. Clearly, we
the valuation and cash flows to set a target for cannot blindly use past performance as an indicator of
expected future return, it is difficult to figure out future performance. Many even rely on point-to-point
how a mutual fund (MF) scheme will do in the future. returns which are more arbitrary and dangerous.
The only way to judge MF performance is to look at past A possible solution would be to judge the scheme over
returns. However, the greatest investor of all time, Warren a long period like 10-year rolling periods. From January
Buffett says In the business world, the rear view mirror 2000 to end-December 2015, we had seven such periods.
is always clearer than the windshield. Does this apply We compared the average returns of the schemes over the
to MFs as well? 10-year periods with the average returns by that category,
We looked at three-year returns for various MF schemes namely, large-cap and multi-cap, in the same period. If the
for the period September 2007 to September 2016 and scheme underperformed the category average, we gave it
divided them into four quartiles. What we concluded was a score of 0 and, if the scheme outperformed the category
that the top quartile schemes in the period 2007-2010 average, we gave it a score of 1. We then arrived at the
moved to either the 2nd, 3rd or 4th quartile in the second number of times the schemes under- or out-performed.
period 2010-2013. Many schemes from the 2nd, 3rd and 4th The results are given in the table below.
quartile in the period 2010-2013 moved to the 1st quartile We get a reasonable basis to narrow down the list of the
in the period 2013-2016. There were all possible variations well-performing schemes. From the table, you can see that
in ranking based on performance in the 1st, 2nd, 3rd and the underperformers have been constantly underperforming
the category average and the outperformers have constantly
outperformed the category average. Now, we can quickly
shortlist the constant outperformers and analyse them, to
Large-cap Performers
increase the probability of picking better-quality schemes.
Scheme Outperformance over
Category Average
JM Equity 0%
Multi-cap Performers
Taurus Bonanza 0%
Scheme Outperformance over
HDFC Large Cap 0% Category Average
LIC MF Growth 0% Birla Sun Life India Opportunities 0%
UTI Top 100 0% Birla Sun Life Advantage 0%
Sundaram Select Focus 0% LIC MF Equity 0%
UTI Mastershare 14% Principal Growth 0%
Sundaram Growth 14% Franklin India Opportunities 0%
HSBC Equity 25% Sahara Growth 0%
UTI Equity 43% ICICI Prudential Top 100 43%
Taurus Starshare 57% ICICI Prudential Dynamic Plan 100%
SBI Magnum Equity 57% Templeton India Growth 71%
Kotak 50 71% SBI Magnum Multiplier 71%
Reliance Vision 86% ICICI Prudential Multicap 86%
SBI Contra 100% Tata Ethical 86%
Tata Large Cap 100% Tata Equity Opportunities 100%
Franklin India Bluechip 100% DSP BlackRock Opportunities 100%
HDFC Growth 100% Birla Sun Life Equity 100%
HDFC Top 200 100% HDFC Capital Builder 100%
HDFC Equity 100% Reliance Growth 100%
Birla Sun Life Frontline Equity 100% Franklin India Prima Plus 100%

MONEYLIFE | 25 Nov-8 Dec 2016 | 22

Fund Pointer.indd 2 18-11-2016 17:34:43


Hot and Cold Stocks of Mutual Funds in October 2016

In October, ICICI Prudential Value Discovery purchased Wipro worth Rs424.51 crore and sold
Bank of Baroda worth Rs277.66 crore. Motilal Oswal MOSt Focused Multicap 35 purchased RBL
Bank shares worth Rs105.62 crore and sold Infosys shares worth Rs297.35 crore. ICICI Prudential
Dynamic Plan purchased Bharti Airtel shares worth Rs133.64 crore. Mutual Funds also preferred
Axis Bank and SBI. HDFC Equity sold BPCL shares worth Rs125.42 crore.

Top Bought Companies Top Sold Companies

Company Name Value Company Name Value
(Rs Crore) (Rs Crore)
Wipro 453.11 Bank of Baroda (345.68)
Axis Bank 384.63 Bharat Petroleum Corporation (251.93)
State Bank of India 351.43 Punjab National Bank (245.96)
Gail (India) 304.32 Infosys (240.83)
Jubilant Life Sciences 280.47 Reliance Industries (141.74)
Tata Motors 265.73 Tata Consultancy Services (139.56)
Aurobindo Pharma 247.43 Crompton Greaves Consumer Electricals (125.67)
ICICI Bank 221.10 Divis Laboratories (119.15)
ITC 205.37 Yes Bank (107.20)
Bharti Airtel 203.04 Sun T V Network (99.77)
HDFC Mutual Fund
ICICI Bank 169.31 Bharat Petroleum Corporation (233.27)
Reliance Industries 140.50 Sun T V Network (103.77)
Cairn India 64.05 Maruti Suzuki India (88.42)
Dish TV India 51.96 Coal India (71.84)
Oil & Natural Gas Corpn 36.07 Cognizant Technology Solutions Corp (65.71)
ICICI Prudential Mutual Fund
Wipro 481.11 Bank of Baroda (277.66)
Axis Bank 414.17 Reliance Industries (262.29)
Bharti Airtel 194.59 Punjab National Bank (261.82)
Larsen & Toubro 155.87 Divis Laboratories (106.23)
Infosys 153.81 Bajaj Finserv (101.08)
Reliance Mutual Fund
Mahindra & Mahindra 124.45 HDFC Bank (101.16)
NCC 109.58 Tata Consultancy Services (97.76)
Kotak Mahindra Bank 75.83 Larsen & Toubro (78.16)
ITC 69.30 Crompton Greaves Consumer Electricals (50.49)
Gail (India) 48.78 Tata Motors (50.27)
Franklin Templeton Mutual Fund
Tech Mahindra 101.84 TVS Motor Company (48.53)
Hindustan Unilever 62.13 Indian Oil Corporation (18.44)
Ashoka Buildcon 60.21 Oil & Natural Gas Corpn (17.48)
Mahindra & Mahindra 53.05 Housing Development Finance Corporation (16.30)
Info Edge 45.74 Tata Consultancy Services (16.23)

23 | 25 Nov-8 Dec 2016 | MONEYLIFE

Fund Facts.indd 2 18-11-2016 17:37:49


Can American Voters Impact

Indian Earnings?

he noise around the stock markets is a constant. changes in economic policies. Public debate generally
If we look at it logically, earnings ought to be the spurs politicians on to similar paths. Yes, posturing does
only factor that impacts stock prices. However, if cost us sometimes. One thing that all experts maintain
everyone realises this, so many media channels, talking is that the inflow of foreign investments is going to be
heads and experts would be out of their jobs. Thus, every impacted. Well, irrespective of who comes to power, it is
sneeze by a promoter, every price move in a commodity Indias economic outlook and politics that will decide the
or any event taking place anywhere in the world becomes quantum of inflows. Capital is like free-flowing water. It
a reason to react. finds its own level.
Thus, elections (state elections, national elections and, Some point out to our pharmaceuticals companies as
this year, even the US presidential election) become a big being the likely victim, or beneficiary, of retaliatory action
thing. By the time you read this, either Trump or Hillary from the US. I do not think it is a political issue. And, if
would have been elected. If I go back to history, I have things were in order, why should Indian companies be
hardly seen any real impact on Indian corporate earnings worried? Penalties, or embargoes, are imposed only after
by the choice of American voters. Yes, one of them wants they are caught with some wrongdoing. Thus, it is not a
to change the healthcare system. And how will that impact question of political intolerance or vendetta.
our Indian companies earnings? I am not knowledgeable The bigger issue to me is that, as the social inequality
enough to figure it out; but, looks to me like debating deepens and growth slows down, more and more countries
points rather than actionable points. are becoming protectionist. Nationalism has become a
Every government runs on patronage from the industry. matter of survival for the politicians. Higher protectionism
Politicians need money to fight battles. Business provides means a shrinking global trade and slower growth of
that. Thus, irrespective of who becomes the ruler, things economies. As I see it, the US cannot clamp down too
do not change much. For instance,
instan it is now fashionable much on others. They have so much at stake in global trade
to say that the present government
g is close to an and investments, including companies that are domiciled
Ambani or an Adani. Well, W these businessmen outside the US borders, to escape their tax net, that they
thrived even when the present government was have no option but to keep trade open. Yes, they will
nowhere near New De Delhi. become hostile in terms of regulatory enforcements, etc.
What it has m meant is that, as capitalism Thus, I do not see any impairment in the earning power
deepens its hold,
ho the income and wealth of Indian companies over the long term. Whoever occupies
disparities increase. This leads to the White House will have to focus on bigger issues about
another set of problems which the their own economy, healthcare and domestic issues rather
politicians are forced to address than plan vendetta on a handful of pharmaceuticals
social justice
justice. Globally, I am definitely companies.
seeing the emergence
eme of a society where However, markets will react to the noise and pockets
a Robin Hood kind of attitude is being of opportunities will be created. India has less to fear from
justified by saying
say that the haves owe it global trade, thanks to its reluctance to open up. It is like a
to the have-nots.
ha This leaves the perverse kind of a blessing in disguise. Probably, oil prices
politician in a position where he
politic have a larger impact on our economy than anything else.
has to please the vote bank Whether pharmaceuticals or IT (information technology),
as w well as the note bank. the business models are still valid.
In India, we see subsidies At this juncture, valuations in the market are stretched.
and freebies as a right. In
an So, this is a good excuse for some pullback. In this pullback,
the more advanced nations, it is possible that corrections could be excessive on the
it is social security and downside also. Be on the look-out for opportunities.
I do not see major The author can be reached at

MONEYLIFE | 25 Nov-8 Dec 2016 | 24

column_Balakrishnan.indd 2 18-11-2016 17:39:46


Bank FD Rates Down after Demonetisation

he governments move to with unaccounted cash, possibly than three years, the rate is 8.25%.
demonetise Rs1,000 and with back-dated FD receipts. It Recently launched Bandhan Bank
Rs500 currency notes, to will be difficult to do the same also offers an attractive rate of
curb black money from the system, with government or private banks. 8.25% for two-year FDs. With the
will also lead to lowering of bank Cooperative banks operate locally possibility of further reduction in
fixed deposit (FD) rates. Banks with a handful of branches for rates by the Reserve Bank of India
have been sending SMSes urging local banking needs. They are also in future, bank FD customers will
customers to visit their braches to backed by politicians. continue to face a decline in FD
deposit cash. The cash deposited HDFC Bank has reduced the rates.
by customers will lead to less cash interest rate on one-year fixed For two- and three-year bank
in customers hand and improved deposits by 25 basis points (bps), FDs, ICICI Bank and Axis Bank
offer 7.25% while HDFC Bank
has reduced it to 7%. Among
government banks, Bank of
Baroda is offering 7.30% while
Punjab National Bank (PNB) and
SBI are offering 7.05% and 7%,
respectively, for two-year FDs. Bank
of Barodas three-year FD rate is
7.25% while PNBs and SBIs FD
rate for the same term is 7.05% and
CASA (current and savings account) to 7%, which is slightly lower than 6.5%, respectively. Even though
money for the bank. It can lead to the 7.05% offered by one-year interest is taxable as per the tax slab
lowering of consumption demand FD of State Bank of India (SBI). A of the investor, bank FDs remain
and, possibly, drop in bank FD good option for a better rate is RBL a popular investment option of
rates. Bank (formerly Ratnakar Bank) Indians. With falling interest rates
Moreover, there have been which offers interest rate of 8% on in the last couple of years, senior
reports of sharp increase in deposits deposits of up to Rs1 crore for one citizens and others customers, who
with cooperative banks and credit year to less than two years. For a depend on FD interest, will continue
societies. It was for opening FDs longer duration, of two years to less to face declining interest income.

G-Sec Yields Down to demonetise Rs1,000 and Rs500 on G-Sec yields will become clear in
currency notes on inflation and also the coming days.

T he 10-year benchmark G-Sec

yield, which sets the tone of the
fixed-income market, has decreased
Issuer Maturity
Next Last Yield
Coupon (%)
ISIN Rating

by 7bps in the last fortnight to end at Hindalco 9.55% 25 Apr-22 25 Apr-17 8.28 INE038A07258 CRISIL AA+
6.72% on 12th November.
Aditya Birla Fin 9.62% 26 Oct-17 26 Oct-17 7.80 INE860H07623 CARE AA+
The impact of governments move
LIC Hsg Fin 8.50% 05 Jan-21 05 Jan-17 7.77 INE115A07IO9 CRISIL AAA
NSE data as of last trade date of 11 November 2016
G-Sec Maturity Yield to Tata Capital Fin Services
Date Maturity 02 Aug-18 02 Aug-17 8 INE306N07II9 CRISIL AA+
02 June-2028 7.07 Reliance Ports & Terminals 28 Oct-26 28 Oct-17 7.94 INE941D07158 CRISIL AAA
19 December-2034 7.05 Ltd 7.95%
Tata Power 9.32% 17 Nov-17 17 Nov-17 7.56 INE245A08059 CARE AA
09 September-2035 7.03
G-Sec yields on 15 November 2016 BSE data as of last trade date of 11 November 2016

25 | 25 Nov-8 Dec 2016 | MONEYLIFE

Fixed Income.indd 1 18-11-2016 17:44:40

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MSSN GB (Insurance 1-3 ).indd 3 29-07-2016 16:42:29

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Fine Print Regulatory and Development

Authority of India (IRDAI) seeking
Will Air Pollution Raise Health

Delhi HC Seeks IRDAIs

Response on HIV/AIDS Cover
their reply by 17 January 2017. The
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MONEYLIFE | 25 Nov-8 Dec 2016 | 28

Insurance.indd 2 18-11-2016 17:46:57


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Open chest coronary artery bypass
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insurance trends show an increase that many channel development it is not based on the drivers
in the number of claims due to associates (CDAs) were not record. Insurance companies
respiratory problems, especially imparting training and there was no may introduce Telematics to
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model, year of manufacture and
on-board diagnostics (OBD) and
can relay data on the quality of
driving and usage of cars to the
outsourcing norms and other location of the vehicle. Unlike in the insurer.

29 | 25 Nov-8 Dec 2016 | MONEYLIFE

Insurance.indd 3 18-11-2016 17:47:22

The Tata-Mistry spat has exposed how cronyism, cloak-and-dagger moves, personal
ambitions, fears and pettiness drive people pretending to be ethical and moral.
Investors should be worried, write Sucheta Dalal & Debashis Basu

n 24th October, 2.30pm, the directors trip abroad. These eminent people had got together to
of Tata Sons met at the Bombay House, sack their chairman, Cyrus Mistry, for non-performance.
the headquarters of the Tata group. With that one action, the Tata image, already sullied by
At the meeting were: Ratan N Tata, the Tata Finance, Niira Radia and 2G telecom episodes in
Vijay Singh, Nitin Nohria, Ronen Sen, the past 15 years, accompanied by rampant destruction
Venu Srinivasan, Ajay Piramal, Amit Chandra, Farida of shareholder value in various Tata companies, sank to
Khambata and Ishaat Hussain. Mr Nohria and Ms a new low. Here is why.
Khambata had flown in especially for the meeting which No papers had been circulated about Mr Mistrys
was going to be attended by Ratan Tata personally; Mr non-performance.
Hussain, an old Tata hand, had just returned from a No discussions had been held at the Tata Sons board

MONEYLIFE | 25 Nov-8 Dec 2016 | 30

Cover Story.indd 2 18-11-2016 17:50:07


earlier about Mr Mistrys non-performance. committee that deals with the appointment and removal
There was no item on the agenda for removing the of the chairman. The change also saw the definition of
chairman. quorum of the selection committee tweaked to benefit
Ratan Tata and Nitin Nohria walked into Mr Tata trusts.
Mistrys room exactly one minute before the 2.30pm For three weeks now, Indian corporate sector
board meeting and said, We have come to tell you watchers have been following the Ratan Tata and Cyrus
that we are moving a resolution to have you replaced Mistry camps engage in an increasingly bitter battle of
as chairman at this meeting. He was asked to resign words that has exposed how the mightiest of Indian
gracefully, but Mr Mistry refused. corporates actually works: cronyism, cloak-and-dagger
For three of the directors, Ajay Piramal, Venu moves, personal ambition, fears and sheer pettiness.
Srinivasan and Amit Chandra (brother-in-law of Nitin Central to the issue is how the Tata group functions.
Nohria), this was only their second meeting, having Ousted chairman Cyrus Mistry has released two letters
joined the board just a couple of months earlier. How that raise enough doubts about the much-vaunted Tata
much did they know about the operations of the culture of fair play. His letters also raise questions on the
group, which had over Rs672,000 cores in sales and independence of the independent directors of Tata Sons
seven large operating companies, to agree to such a and their conduct on all the boards of Tata companies.
drastic change at the top so quickly? At the heart of it is the ambiguous governance structure
Four months before he was ousted, the remuneration that the Tata group has created over the years, of which
committee of the Tata Sons board had not only lauded little was known outside.
Cyrus Mistrys performance but also recommended a There are three levels of power. At the apex are
substantial salary increase which he did not accept. various Tata trusts which control Tata Sons with a
The same committee had expressed appreciation 66% stake. Then comes Tata Sons which has stakes in
of Mr Mistrys multifaceted initiatives aimed at various operating companies but has plenty of outside
preserving and promoting cohesive functioning of the directors. Finally, there are the operating companies.
group in accordance with its distinctive values. To add to the confusion, there are old hands like
Of the board members, only Ratan Tata had shares K Krishna Kumar, Ishaat Hussain, Noshir Soonawala
in Tata Sons (0.8%). They kicked out someone whose and others who wear multiple hats and switch roles as
family, the Shapoorji Pallonji group (SP group), directors, trustees and consultants as required. Finally,
controls an 18.4% stake. looming over all of this is Ratan Tata who pulls all the
Only two directorsIshaat Hussain and Farida strings. According to a corporate governance framework
Khambattaabstained; even they did not have the drawn up by Mr Mistrys team, reviewed by Moneylife,
courage to object. there has to be clarity on demarcation of roles, speed/
Almost two decades after he got rid of the Tata responsiveness of decision making, clarity on delegation
stalwarts like Russi Modi (Tata ( Steel),
), of responsibilities
Darbari Sheth (Tata a Chemicals and Tata
Tea) and Ajit Kerkar ar (Indian Hotels) in Ratan Tata: The real issue ffor shareholders of
a humiliating manner, er, Ratan Tatas steel the various Tata companies
companie is the continuing
knuckles have comee out again. He had power without clear-cut accountability
ac of 78-
inducted the three new independent year old Ratan Tata. In 2012,
2012 when the selection
directors two monthss prior for precisely committee picked Mr Mistry to be the Tata Sons
this day. And they obliged. The move advised Cyrus Mistry to
chairman, he famously advis
was planned well in n advance. In 2012, Be your own man. Mr Mistry, M despite being
just after Mr Mistry ry was appointed the an insider for nearly a decade
decad (he has been on
chairman, Ratan Tata ata got Tata the Tata Sons board sinsince 2006), failed to
Sons to change Article
rticle read that Ratan Tata never
118 of the Articles of really wanted to give up
Association which power.
pow He also failed
gave the directors to understand that
nominated by he was not meant to
Tata trusts tinker
tin with the legacy,
greater powers however
ho wobbly, that
in the selection Ratan
Ra Tata has left

31 | 25 Nov-8 Dec 2016 | MONEYLIFE

Cover Story.indd 3 18-11-2016 17:52:22

Sir Dorabji Tata Trust

Sir Dorabji Tata Trust

R Venkataramanan, NA Soonawala,
RK Krishna Kumar, Dr Amrita Patel,
VR Mehta, Venu Srinivasan Lady Tata Memorial Trust
R Venkataramanan, FK Kavarana,
Dr PB Desai, SN Batliwala, Dr M Chandy
JRD Tata Trust
R Venkataramanan, NA Soonawala

Jamsetji Tata Trust

R Venkataramanan, NA Soonawala,
RK Krishna Kumar, Amit Chandra
Tata Social Welfare Trust
R Venkataramanan, RK Krishna Kumar
JN Tata Endowment Trust
R Venkataramanan, SN Batliwala,
Prof SM Chitre
Tata Education Trust
R Venkataramanan, RK Krishna Kumar
The JRD and Thelma J Tata Trust
R Venkataramanan, Dr Suma Chitnis,
Dr Armaity Desai, FN Petit
RD Tata Trust
R Venkataramanan, RK Krishna Kumar

Sir Ratan Tata Trust

Sir Ratan Tata Trust

R Venkataramanan, NA Soonawala,
JN Tata, KB Dadiseth, RK Krishna Kumar,
Tata Education and Development SK Bharucha, NM Munjee, Amit Chandra
R Venkataramanan, RK Krishna
Kumar, Amit Chandra, JN Mistry Navajbai Ratan Tata Trust
R Venkataramanan, NA Soonawala,
Amit Chandra, JN Mistry
Bai Hirabai JN Tata Navsari
Charitable Institution
NA Soonawala, JN Tata, KB Dadiseth,
RK Krishna Kumar, SK Bharucha, Sarvajanik Seva Trust
NM Munjee R Venkataramanan, JN Tata

Jointly these trusts hold 66% in

Shapoorji Pallonj holds 18.40% Tata Sons Tata companies hold 8.87%
Others hold 6.73%

MONEYLIFE | 25 Nov-8 Dec 2016 | 32

Cover Story.indd 4 18-11-2016 17:53:48

Tata Sons

Non-executive Independent Directors

Executive Director
Non - independent Directors Ronen Sen, Ajay Piramal,
Ishaat Hussain
Ratan Tata, Cyrus Mistry, Vijay Singh, Farida Khambata
Nitin Nohria, Amit Chandra, Ralf Speth,
N Chandrasekharan,
Venu Srinivasan


Tata Global Tata Steel TCS Tata Motors Indian Hotels Tata Power Teleservices

22.63% 29.75% 73.26% 26.98% 28.01% 31.05% 36.17%

him. had ignored during JRD Tatas time, has turned into a
Mr Tata claims never to have meddled in Tata Sons wily player. His main strength is his public persona. He
but Mr Mistry narrates some shocking incidents of has crafted his reputation so phenomenally well, says
remote controlling by Mr Tata. He has alleged that Tata an insider. He is paranoid about it. He gets detailed
Sons directors, Nitin Nohria and Vijay Singh, once left information everyday about what has appeared in the
a board meeting in progress, keeping the board waiting media about him. The group used to spend Rs40 crore
for almost an hour, to obtain instructions from Ratan a year on Niira Radias firm Vaishnavi Communications
Tata on a decision. Clearly, Mr for lobbying, burnishing the Tata
Tata does not seem to believe in image and fixing things in Delhi.
the independence of independent His main strength is his public Now, it spends Rs60 crore on
directors even though the persona. He has crafted his Arun Nanda of Rediffusion and
Tatas have built a great public reputation so phenomenally well, Edelman PR. The latter employs
perception of fairness and values. says an insider. He is paranoid about 1,500 people on the ground, the
Mr Tatas strategy, now, is to it. He gets detailed information bulk of who are deployed for the
make life difficult for Mr Mistry everyday about what has appeared Tatas. Then there are lawyers
and take him out of all equations. in the media about him and lobbyists in Delhi who used
He would like to tell Mr Mistry to draw massive fees from the
that he has no locus standi in operating companies. I had to
the group, says a person close to Mr Mistry. He was a ease out several hangers-on who are prone to flaunt their
director at Ratan Tatas pleasure. Actually, he made this proximity to power, confided Mr Mistry to someone
very clear earlier. When Pallonji Mistry, Cyruss father, close to him.
stepped down from the Tata Sons board, Ratan Tata
promised to induct Cyrus or his brother, Shapoor, on the Tata Trustees: Mr Tata controls the group through 14
board. But he did not do it for a year. He was sending a Tata charitable trusts which hold 66% of the groups
signal. He wanted to tell the Mistrys that they may have holding company, Tata Sons Ltd. But Ratan Tata is the
a 18.5% stake but zero rights. chairman of the trusts and so he controls the group.
Over the years, Ratan Tata, whom the Tata satraps He appoints other trustees who hardly have any say.

33 | 25 Nov-8 Dec 2016 | MONEYLIFE

Cover Story.indd 5 18-11-2016 17:54:03


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Siva, Siva! Possible Reasons behind Ratan Tatas Vicious Action

A s speculation about the reason for Cyrus Mistrys
ignominious ouster increases, there is a view that
Mr Mistry touched a raw nerve by seeking legal action
This put-option became active in April 2014. Under the
agreement, all those who had sold shares to DoCoMo
got claims from Tatas in proportion to the shares sold.
against Chennai-based businessman C Sivasankaran Siva was to bear the burden of DoCoMos claim in
(Siva) who has struck a close friendship with Ratan proportion to the 20.74 million shares he sold.
Tataa friendship that could compromise Tata groups Meanwhile, Tata Sons has deposited the full amount
interests. Documents reviewed by Moneylife show that on behalf of all the parties, including Siva, with the
Mr Mistry was pushing to recover Rs694 crore that Siva court. Mr Mistry was trying to recover Sivas share of
owes to the group but is unwilling to repay. the claim amount to protect the interests of the Tata
Here is what happened. Siva had got a preferential group. In September 2016, Mr Mistry briefed the board
allotment of shares of Tata Teleservices Ltd (TTSL) that Siva was not responding
onding to the Tata Sons demand
through Sterling Infotech Ltd (now known as Siva that he pay up and the board agreed
Industries & Holdings Ltd) at a favourable price in 2005 to take legal action. However,
which meant an instant benefit of Rs468 crore. Siva did within days, it was Sivaiva who
not have the money to pay. He easily got a loan from sent a legal notice to Tata
Standard Chartered Bank against a virtual guarantee Sons, TTSL and DoCoMo,oCoMo,
by Tata Sons Ltd. Further, Kalimati Investments, a alleging oppression and
subsidiary of Tata Steel, was made to advance Rs132 mismanagement of TTSL.
TSL. Did
crore to Siva as an inter-corporate loan. All this was Siva know of what transpired
spired at
based on the closeness that Siva and Ratan Tata seem to the Tata Sons board meeting of
have shared. 15 September 2016? Did d someone
NTT DoCoMo, of Japan, made a huge investment leak the boards decision
on to Siva
in TTSL in 2009. Of this, 6% came from existing and allow him to strikee before the
shareholders. Siva was among them; he sold 40% of Tata Sons board could act? The
his shares to DoCoMo. This gave Siva a hefty profit close relationship between
of Rs209 crore, or a return of 594%, in less than three Ratan Tata and Siva, the
years. However, the deal with DoCoMo had a put- huge sums involved, the he
option clause wherein DoCoMo had the option to sell its sudden backtracking
TTSL shares back to the Tatas, under certain conditions. of Tata Sons board in n

Many are indebted to Mr Tata for making them trustees. longer period. When Ratan Tata was the chairman,
Being on a Tata trust can change a person; I have seen it Pallonji Mistry used to raise the issue of increasing
myself, says someone close to the group; it is considered dividend. Mr Tata only sneered at him. The dividend
a great distinction. How many of them have the courage that the SP group earned was just about Rs60 crore
to tell Mr Tata that the way the group is dealing with there was no increase. The 2025 Vision plan formulated
Mr Mistry is downright ugly? by Mr Mistry, in fact, had a discussion on dividend policy.
The bigger issue is that many trustees may not Today, the dividend paid by Tata Sons is only 10%. It was
understand the deep trouble the Tata businesses are in. to increase gradually to 15% and then plateau, as per the
When the Tata-Mistry spat started, VR Mehta, a trustee plan. Also, under Mr Mistry, dividend has actually gone
of the Sir Dorabji Tata Trust was chosen to speak for the up compared to what it was under Ratan Tatas regime.
trustees. He claimed that, under Mr Mistrys watch, the However, Mr Mehta did not let these facts come in the
Tata group was dependent on only two companies, Tata way of his opinions.
Consultancy Services(TCS) and Jaguar Land Rover(JLR). Mr Mehtas understanding is that if there is a choice
Dividends to the trusts from Tata Sons had gone down between strengthening the operating companies by
and it affected the philanthropic activities of the trusts conserving cash or declaring dividends, one should give
which was unacceptable. preference to declaring dividends to the holding company.
The facts are a little different. The SP group has been He seemed clueless about the fact that the pie has to get
just as concerned about dividends, more so for an even bigger for each persons share of it to increase. If the

MONEYLIFE | 25 Nov-8 Dec 2016 | 36

Cover Story.indd 6 18-11-2016 17:54:35


initiating legal proceedings against Siva, and the timing of Nitin Nohria, as representatives of the Tata trusts.
of Mr Mistrys ouster, seem curiously connected. Interestingly, Keki Dadiseth, who sided with Mr Mistry
Siva has a deep and longstanding relationship as a director of Indian Hotels (IHCL), is a director in
with Ratan Tata. Siva may have been paid nearly Piramal Enterprises. Also, Deepak Parekh who supported
Rs600 crore between early 2003 and mid-2008 Mr Mistry in IHCL, and Nitin Nohria are directors
towards services relating to procurement and vendor in Piramal Realty. Immediately after Cyrus
management by TTSL and its listed subsidiary Tata Mistry was sacked, Ralf Speth, heading JLR, and
Teleservices Maharashtra Ltd. Also, the Tata group N Chandrashekharan, of TCS Ltd, have joined the board.
has forked out Rs330 crore to purchase Dishnet DSL, Nitin Nohria plays a key role as Mr Tatas confidante
a Siva group company in 2004, at a huge valuation. although he lacks understanding of Indian companies
The second reason for Mr Mistry being targeted and the Tata ethos, says an insider. He has often asked
is probably the AirAsia scam. Sources close to whether India has any Chapter 11 provision (of the US)
Mr Mistry suspect that, maybe, he was getting too under which Tata Teleservices can file for bankruptcy.
close to things that may land on the doorstep of Mr Mistry had to tell him even if there were, we cannot
Mr Tata. Mr Mistry had ordered an audit into the go down that road. Can you imagine what would
Rs22 crore payment to unknown parties that was be the perception about the Tatas; and, if we do that,
flagged off by Ernst & Young (EY). Mr Mistry what would be the impact on our borrowing cost?
appointed Deloitte as the forensic auditor. Deloitte Mr Nohria is the dean of Harvard Business School (HBS).
established bogus payments (for work not done). Coincidentally, six years ago, the Tata group pledged a
One of the payments was connected to a company $50-million gift to HBS, the largest donation it has ever
called Link Media which got Rs12 crore. Link Media received from an international donor.
is literally a bogus company. It was supposed to be All the Tata Sons directors, barring one (Farida
a ground-handling agent. Finally, it appears that R Khambata), supported Ratan Tatas decision to oust
Venkatraman, a confidante of Ratan Tata, his former Cyrus Mistry. All of them also appear to have supported
executive assistant and now a trustee on every single Ratan Tatas decision to sack Nusli Wadia for siding
of the Tata Trusts, is on the board of AirAsia and also with Mr Mistry on various Tata boards. Till today, the
has a 1.5% stake. Venkat earns a whopping salary of Tatas have not produced any evidence that Mr Mistry
over Rs3.5 crore, if you add up earnings of all trusts. was acting against the interest of the group, despite
The Deloitte report came out in October 2016. But publishing a full-page advertisement in the newspapers
the Tatas have chosen to take no action. to explain their action. The lack of independent voice in
Tata Sons board should be a major red flag for investors.

Tata Companies: The least discussed, of course, are the

Tata operating companies like Tata Consultancy Services,
group is dependent on just two companies, shouldnt Tata Motors, Tata Chemicals, Tata Steel and so on.
the blame be laid on Ratan Tata, the man who ran the Institutional investors have invested in these companies
business empire for 16 years between 1996 and 2012, with very different objectives from those of the Tata
and left his debt-laden legacy for his successor to handle? trusts. They want dividends and price appreciation. They
want to see steps being taken to turn around the many
Tata Sons: Next in the hierarchy comes Tata Sons. businesses that are wobbling. This was what Mr Mistry
Since Mr Mistrys appointment in 2012, the board has was working towards. Removing him from the boards of
undergone many changes. Until recently, it was a small operating companies throws their future into jeopardy.
board of five persons, apart from Ratan Tata and Cyrus From the view of the Tata trusts, it is these companies
Mistry. It included Ratan Tata loyalists like the Harvard that generate the surplus that is distributed as dividend
Business School dean Nitin Nohria and old Tata hand to Tata Sons which allows the Tata trusts to spend on do-
and finance man Ishaat Hussain. Then there were former gooding. Even if they had cash to declare dividend, they
defence secretary, Vijay Singh, and Ronen Sen, former had to see whether cash could be distributed as dividend
Indian envoy to US, as Tata Trusts representatives. or needed to be ploughed back into business expansion.
In August, the board was expanded to bring This constant conflict in goals poses a major challenge to
in industrialists Venu Srinivasan (TVS group) and the growth of the group.
Ajay Piramal along with Amit Chandra, managing Mr Mistry is the chairman of group companies
director of Bain Capital in India and brother-in-law like Tata Steel, Tata Motors, Tata Global Beverages

37 | 25 Nov-8 Dec 2016 | MONEYLIFE

Cover Story.indd 7 18-11-2016 18:03:50



The Tatas under Ratan Tata have a long history of getting carried away with new
projects, acquisitions and people. In any other organisation, a manager would have had
to pay a price for any one of these. But nothing ever seems to touch the Tatas Teflon-
coated image. Indeed, Mr Tata is accusing Mr Mistry of non-performance when he is
infact cleaning up Tatas mess. And he is being supported by some of the biggest names
of the Indian corporate sector.

Pre-1991: Mess at Nelco, which survived mainly on orders secured from Tata group companies.
1999: Tata Tetley: Grossly overpaid acquisition that took years to digest.
2003: Dishnet DSL: Grossly overpaid acquisition from friend Sivasankaran that turned worthless in a year.
2001: A 500-crore Tata Finance scam authored by Mr Tatas blue-eyed boy Dilip Pendse.
2002: AF Ferguson being forced to withdraw its report on Tata Finance because it implicated many Tata
stalwarts. YM Kale, a professional of highest integrity, forced by his own partners to resign in the most shameful
2003-2008: Various hotel acquisitions that inflicted huge losses and had to be written off.
2004: Backdoor entry into telecom.
2007: Corus, a grossly overpaid acquisition. Mounting losses
2007: Loan of Rs1700 crore by Tata Realty to Unitech, facilitated by Niira Radia. The money was allegedly used
by Unitech to pay, for 2G licences.
2008: Ambitious Nano project that has lost more than Rs1,000 crore and will have to be shut down.
2008: Tata Sons bought one-third stake in Piaggio Aero, an Italian aircraft company, because of the close
relation between Ratan Tata and the promoter of Piaggio Aero. Tata Sons exited the company at a loss of
Rs1,150 crore.
2010: Voltas: Land held on lease by Voltas was sold to Dr Shanmuganathan, a Malaysian, for roughly one-
eighth of its estimated value. The agent to negotiate this deal used to be employed by a firm owned by
Rajathi Ammal (Karunanidhis wife).
2011: 2G Scam. Sychophantic letter to Mr Karunanidhi, lavishing praise on A Raja, then telecom minister.
2014: Side-agreement with DoCoMo which has landed Tata Teleservices in a $1.16-bn soup
2016: AirAsia: A forensic investigation revealed fraudulent transactions of Rs22 crore involving non-existent
entities in India and Singapore by the AirAsia and Tata alliance.

MONEYLIFE | 25 Nov-8 Dec 2016 | 38

Cover Story.indd 8 18-11-2016 17:56:31


and IHCL. Of these, the IHCL directors have shown Sons and Tata trusts, because that would concentrate
solidarity with Mr Mistry. He continues to be the too much of power in the hands of one person. There is a
chairman of Tata Motors, Tata Chemicals and Tata veto power of 30% with the Tata trusts. Trust nominees
Steel, although Ratan Tata would like him to be thrown have to be independent. They are making the board of
out of every Tata company. TCS has replaced Mr Mistry Tata Sons impotent.
with Ishaat Hussain, a Tata Sons director on the board 3. The third is the issue of compliance with the market
of TCS. Tata Beverages has passed a resolution removing regulators insider trading and corporate governance
him as chairman which, Mr Mistry charges, is illegal. norms. Information moves through various layers in the
Independent directors of these companies are in a state group rather freely. Tata companies share information
of shock. Tata Power is the only major Tata company with their boards and upwards to Tata Sons directors. But,
whose board is yet to meet. We still cant believe that for strategic issues, Mr Soonawala and Ishaat Hussain
Ratan Tata is doing this, says an insider. are often consulted. One of the two said at a meeting: I
am asking for these details in my individual capacity. I
A New Governance Structure am not asking as a trustee. If SEBI investigates whether
Can this clumsy three-tier structure, fortified with there is scope for price-sensitive information passing on
hangers-on, consultants and lobbyists, continue? It has to Tata Sons, Tata trustees and consultants even before
not worked well so far, especially since the group has no the board of the operating companies has approved
clear-cut succession plan. Indeed, it could be a disaster, them, the group would have a tough time explaining.
especially since the same person could head the Tata There is no clearly laid down policy and system today.
trusts and Tata Sons. There are three issues thrown up Realising all this, Mr Mistry had started working
by the Tata-Mistry spat. on a new corporate governance framework. He
1. A governance structure that protects the groups wanted to create a fair and transparent governance
interests, especially since Mr Tata structure with the lines of power
has now invited ace dealmakers to and accountability clearly drawn.
the Tata Sons board. Mr Mistrys If SEBI investigates whether There were elaborate discussions
fi ght is not to get back at the helm with various stakeholders and a
there is scope for price-
of the Tata group, says a source. plan was prepared in 2015. He
His objective now is to ensure
sensitive information passing has been telling the Tata Sons
that the companies should stay in
on to Tata Sons, Tata trustees board lets decide once and for
the right hands and be provided and consultants even before all. Lets not keep flipping and
with the right governance. The the board of the operating flopping. Minutes of the meeting
Shapoorji Pallonji Mistry family companies has approved them, would show that Mr Mistry was
have been shareholders in Tata the group may have a tough pushing for this. We were taking
Sons for over 80 years and Cyrus time explaining legal opinions officially. Darius
Mistry is keen that the leadership Khambatta (legal counsel) was
of the group should not pass into supposed to attend one of these
wrong hands. I dont want the group to be controlled meetings. There are records to show, says a member of
by a coterie that has had nothing to do with the group Mr Mistrys team. He attempted to have it discussed in
and has ulterior motives, Mr Mistry is said to have the board meetings thrice but, curiously, the board did
confided, to people close to him. not find time for it. As the Tata-Mistry spat gets uglier,
This is logical. A fact that is often forgotten is that, especially since Mr Mistry feels humiliated and wants his
while Ratan Tata is acting like the typical lala in deciding reputation restored, this poor governance structure may
who should be on the boards, he has an insignificant 0.8% come to the attention of investors and regulators.
stake in Tata Sons, compared to 18.5% of the family of As against this, the Tatas would want to keep their
Cyrus Mistry. Of course, Mr Tata would want the Mistry reputation intact. There are people in Bombay House
family to disappear. According to our information, Ajay who are masters at scripting the narrative by playing
Piramal, Nitin Nohria and Amit Chandra have met the ethics and fair play card, using the media effectively
international investors with the intention to buy out Mr and starting whisper campaigns. Investors have to stay
Mistrys stake. focused on a simple fact. Who will do the enormous
2. What ought to be the governance structure for the clean-up that almost all companies need if, Mr Mistry is
group? According to sources, Mr Mistry always believed removed from everywhere? That task is onerous. Take a
that a single person should not be the chairman of Tata look at the part two of our Cover Story.

39 | 25 Nov-8 Dec 2016 | MONEYLIFE

Cover Story.indd 9 18-11-2016 17:59:20


Tata Shareholders: Tough Time Ahead

he day after getting fired as a Tata Sons chairman, Meanwhile, a recent forensic investigation in AirAsia
Cyrus Mistry hit back with a five-page reply that revealed fraudulent transactions of Rs22 crore involving
exposed how parts of the group were in deep non-existent parties in India and Singapore. This episode
trouble. Why did the Tatas take 15 days to come back is now the subject of a lawsuit and is unlikely to die
with a rejoinder? Because of a surprising weakness in down soon because it seems to be connected with people
Indias largest business group: only Ratan Tata, the very close to Ratan Tata. If this spat between Ratan Tata
interim chairman of Tata Sons, can decide on the and Cyrus Mistry drags on, what can Tata shareholders
public position of the group, according a person close expect? We have summarised below what various Tata
to the situation. He was busy and travelling during this group companies are facing and what shareholders can
period. He found time only two weeks later to review expect from each of them.
and approve the statement.
Does this centralised power structure give a clue to Tata Steel: A Pension Fund with a Steel Plant
the shareholders about the decision-making they can Problems: Anglo-Dutch steel giant, Corus, was one
expect, as Mr Tata seeks to remove Mr Mistry from of Ratan Tatas prized acquisitions, but he paid a
various Tata group companies? After all, shareholders horrendously expensive price for it, ignoring the fact
of Tata companies face a long list of problems that that this commodity business is at a cyclical peak.
need urgent and continuous attention, starting with Indeed, it is a fitting case study for management students
the expensive foreign acquisitions that have gone sour, about how Mr Tata got carried by the bidding process
leaving the group with a large debt overhang. There and snatched the company at a 30% higher price than
are also the highly capital-intensive domestic businesses what was being offered by the Brazilian rival. This kind
that are haemorrhaging money, like the Nano project deal-making machismo saddled the company with huge
and the telecom businesses. Between 2011 and 2015, debt not only for the assets purchased but also for the
capital employed in IHCL (Indian Hotels Corporation pension fund liability which is running at 15 billion;
Limited, Tata Motors, Tata Steel (Europe), Tata Power wags called Corus, a pension fund, with a steel business
(Mundra) and Tata Teleservices (Maharashtra) Ltd because it pays the pension of 130,000 British employees
(TTSL), rose from Rs132,000 crore to Rs196,000 crore, when 12 out of 13 employees do not contribute to it.
which is more than the Rs174,000 crore net worth of the But Mr Tata has never displayed what is called a buyers
group. A realistic assessment of the fair value of these remorse about this scandalous acquisition, nor has he
businesses could potentially result in a write-down over been questioned about it.
time of about Rs118,000 crore, wrote Mr Mistry, in a Over the next four years after its acquisition,
letter to the Tata Sons board. Ratan Tata failed to rev revive Corus and Mr Mistry,
Mr Mistry had done a dispassionate onate after exploring various options,
o decided to exit the
analysis of these hobbled businesses nesses business with minimum damage. From
and launched a systematic clean- lean- 2009 till date, the company has
up. Why was this unacceptablee to provided for impairment losses
Mr Tata? Both, the overseas seas of about Rs28,000 crore. In his
acquisitions and large-scale domesticstic letter to the Tata Sons board,
expansion that have turned into o a Mr Mistry has hinted at potential
major drag, were the outcome of impairment losses in excess of
Ratan Tatas ambitious strategy gy Rs60,000 crorehigher than
between 1999 and 2010. Mr the cost of acquisition. The
Mistrys moves amounted to o letter
let also alleges aggressive
undoing his strategy, however accounting
ac by capitalising a
flawed. Then there are the egoistic substantial
su portion of product
new forays that are bleeding, too, development
de costs creating a
and need to be addressed. Tatas as have future
fu liability. As the asset is
invested in AirAsia and Singapore re Airlines (Vistara), over-valued
ov since inception,
which have a slim hope of ever ver making money. economic benefits fromfro the asset do not match the

MONEYLIFE | 25 Nov-8 Dec 2016 | 40

Cover Story.indd 10 18-11-2016 18:07:49


value carried on its books. Mr Mistry wanted to shut it down but Mr Tatas
Mr Mistrys Solutions: Mr Mistry has speeded up the emotional attachment has held back this crucial decision.
implementation of the Kalinganagar (Odisha) steel plant Possible Solutions: To make a turnaround, Mr Mistry
of Tata Steel. He also toured China to understand the had apparently outlined four areas for immediate
dynamics of the steel business because China is the main attentioncost, quality and productivity; improving
player in steel todayit is the biggest producer as well as customer experience; regular introduction of new
consumer. He concluded that the steel business enjoyed products; and sprucing up the brand image. He also
a super-cycle in 2003-2008 and the current downturn is suggested refreshing the design of vehicles, bringing in
not just a normal correction. Many excesses of the boom a new platform, improving supplier performance and
period are still to be wrung out. He pursued a merger closer collaboration between the Indian passenger car
of Tata Steels European steel unit with Thyssenkrupp division and JLR. He had played a hands-on role until the
AG. In October, Tata Steel reaffirmed that talks are appointment of Guenter Butschek as CEO and managing
progressing with Thyssenkrupp. Combining forces director after a longish
would have enabled Tata, Europes second-biggest gap, after which
steelmaker, and third-ranked Thyssenkrupp, to better had stepped
use the facilities and cut costs. back. A
It is here that lenders have inserted covenants in the
loan agreements allowing them to pull the loans if Tata
Steel ceases to be a part of the Tata group. This creates
a piquant situation because Ratan Tata has reportedly
assured British unions that he will not sell Corus, now
that he is back in the saddle. On the other hand, if the
company turns independent, or Cyrus Mistry remains
the chairman, he is more likely to take a practical
decision to pare assets and cut the debt. Remember,
Indian shareholders are paying for a loss of 1 million-1.5 key factor
million pounds a day on account of Corus. was to rebuild
What Happens Now: It is a very emotional decision to employee confidence after
get rid of the English white elephant for the Anglophile the Nano fiasco. The Tata Motors team was banking on
Ratan Tata who loves the adulation he gets as one of the a good reception for Hexa, an SUV to be launched in
largest employers in UK. Media reports say that he is January 2017, whose digital promotions have apparently
keen to hang on to it but does he have much commercial shown a lot of public interest. Mr Mistry has also put
choice? The more he delays the decision to get rid of it, together a joint working team with JLR to allow the
the more uncertain will be Tata Steels future and the Indian operations to benefit from the British experience.
less money the company will have for its expansions, What Happens Now: Tata Motors has strong leaders for
including the Kalinganagar plant. both, the domestic operation (Guenter Butschek) and for
JLR (Ralf Speth). However, it needs to have a far better
Tata Motors: Small Card, Big Problems product portfolio for its domestic business (commercial
Problems: One successful move of Ratan Tata was the vehicles and passenger cars). This is not in the offing over
acquisition of Jaguar Landrover (JLR), which has saved the next year or so. The September 2016 quarter results
the group. Before this acquisition, Tata Motors was a have been poor. In August, the management agreed to
commercial vehicles company, which had diversified slow down investment in the development of a new
into passenger cars, that was losing money. Sources close Nano and focus on a two-seater sports car, in addition to
to Mr Mistry say that Tata Motors is under-reporting funding the development of the Hexa and Nexon SUVs
expenses. It has followed an aggressive accounting and the Kite 5 sedan. None of this solves Tata Motors
policy to capitalise a substantial portion of the product current problems.
development expenses, creating a future liability. They
also say that Nano was intended to be a car below Rs1 India Hotels: Checking Out
lakh; but the costs were always above this. This product Problem: Between 2003 and 2014, Ratan Tatas
has consistently lost money, peaking at Rs1,000 crore. favourite, Raymond Bickson, ran IHCL and almost ran
Profi ts are nowhere visible. The Nano plan makes it to the ground by a rash of investments across the world
3,000 cars from an installed capacity of 100,000. at fancy prices. Mr Bickson earned a compensation

41 | 25 Nov-8 Dec 2016 | MONEYLIFE

Cover Story.indd 11 18-11-2016 18:08:12


of over Rs10 crore a year even as the company was brands may be axed and all its hotels branded under the
incurring losses. IHCL had housed the Searock property broader Taj label.
at Bandra (Mumbai) in an off-balance sheet structure, What Happens Now: If Mr Mistry is removed from
alleges Mr Mistry. This artificially reduced its actual IHCL, Mr Tata would most likely fire Mr Sarna almost
immediately and hire someone who would change the
course of this group in accordance with his wishes. This
will, most likely, involve postponing tough decisions. If
so, the stock price will languish.

Tata Teleservices: Out of Range

Problems: The telecom business was supposed to be a
sunrise sector in mid-2000 and Tatas entered it through
the backdoor, like the Ambanis. However, over the
years, poor management quality and the 2G licensing
scandal ensured that the business never reached a critical
mass. It is haemorrhaging heavily. Besides, the Tatas
had assured DoCoMo that they would buy back their
shares at a predetermined price. This has now become
a legal tangle, with an international arbitration decision
going against the Tatas. DoCoMo has tried to enforce
liabilities. Pierre in New York is another worry. IHCL the award but the Reserve Bank of India is refusing to let
veterans say that the group had reviewed Pierre in the Tatas remit the money because the buyback agreement
past but dropped it, after discovering that it has a set violates Indian laws. DoCoMo has approached the Delhi
of permanent residents who simply cannot be shifted, High Court where the Tatas have deposited $1.17 billion
making a much needed renovation of the entire property in good faith. Tata Teleservices revenue is stagnating,
(to make it viable) impossible. Mr Tatas team clearly did profitability is declining and investments are slowing.
not bother to take a close look. This was the worst business Mr Mistry had inherited
Mr Mistrys Solution: Sources close to Mr Mistry say from Rata Tata. A shutdown, or a fire sale, would cost
that he was on course to charting a turnaround at anywhere between $4 billion-$5 billion. TTSL is also the
IHCL. In the process of unravelling some of the bad company where
investments, IHCL had to write-down nearly its entire the group has
net worth over three years which impaired its ability to several messy
pay dividends. Mr Mistrys restructuring included selling dealings with
off several foreign properties, like the Taj Boston and its C Sivasankaran,
holdings in Orient Hotels, which were the outcome of a close friend of
euphoric acquisitions during the boom years, under the Mr Tata.
Tata-Bickson regime. Mr Mistrys
In 2014, Mr Mistry brought in Rakesh Sarna, as Solution: Mr
the managing director and CEO, who was the group Mistry, initially,
president Americas for Hyatt Hotels Corporation. The wanted to exit
recent quarters results show that the debt is reducing and the telecom
the operating profitability is improving. The strategy of business because of its utterly bleak
divesting loss-making overseas ventures and better cost prospects. There have been conversations with potential
control is beginning to pay off. That is probably why bidders for a possible sale; but nothing worked out.
the independent directors of IHCL endorsed Mr Mistrys TTSL board then requested Rs10,000 crore from Tata
leadership and unanimously expressed full confidence in Sons for investment but there has been no decision on
him. Introduction of new customer loyalty programmes, this. He also wanted to initiate legal to recover dues from
cutting food & beverage expenses, developing a Sivasankaran.
centralised system for resource allocation and enabling What Happens Now: Increasing competition, and the
direct room booking through hotel websites, to save messy investments of the past, will make it tough for
on commissions paid to third-party agents, are the key anyone to turn around this company. If Tata Sons does
initiatives being taken up. Vivanta and Gateway budget not put in fresh money, TTSLs future seems bleak.

MONEYLIFE | 25 Nov-8 Dec 2016 | 42

Cover Story.indd 12 18-11-2016 18:08:45


Tata Power: Blackouts facilities. Domestic acquisitions are a part of Tata

Problems: Sources close to the Mistry camp allege that Powers plan to nearly double its global power capacity
Tata Power bid aggressively for a project in Mundra, to 20,000MW by 2025. Of that, 30%-40% will come
based on low-priced Indonesian coal. As regulations from unconventional sources, including hydropower,
changed, the losses in 2013-14 amounted to Rs1,500 rather than coal. The management is studying the design
crore. Given that Mundra constitutes Rs18,000 crore of of ships, with a view to transporting compressed natural
capital employed (40% of the overall companys capital gas from the Middle East to India for power generation
employed), this substantially depresses the return on or to distribute directly to end-users. It also expects
capital for Tata Power and carries the risk of considerable to complete the first phase of a $420-million 180MW
hydropower joint venture in Georgia, in the first quarter
of 2017.
What Happens Now: All these ambitious expansions
need a strong and stable management. This is a highly
capital-intensive business with low returns. Mr Mistry
would have steered the company to slightly higher
returns. In any case, as with most utilities, shareholders
are unlikely to make money from this stock over the long
It would require deft handling, experience and
commitment to get out of the mess the companies find
themselves in. Then there is the overpowering presence
of Rata Tata who may not want his legacy undone. In
companies where independent directors have stood firm
and supported Cyrus Mistry, based on his plans and
performance, Ratan Tata seems hell bent on removing the
future impairment. Tata Power responded to Mr Mistrys directors one by one. That he has already set in motion
allegations by saying that its annual reports and financial the process of removing Nusli Wadia, a close friend
statements published presented a true and fair view and ally in the past, has sent shock waves through the
of the state of affairs of the company and disclosed all group and its directors. The message is, that Mr Tata is
material facts as required under applicable laws. intolerant of independence and anyone who is not 100%
One of the major contentions in the current spat with him is conniving with Mr Mistry. In fact, the notice
revolves around the Tata Power-Welspun deal under from Tata Sons to remove Mr Wadia as an independent
which Tata Power acquired Welspuns renewable energy director, accuses him of conducting himself as an
assets. The Tata group has charged Mr Mistry with interested party, in a manner designed to cause harm to
keeping them in the dark by about the acquisition. They the Tata group. The action is a signal to Tata employee
added that members of the Tata Sons board first heard of directors to display their loyalty in no uncertain terms
the acquisition through reports in the media. Mr Mistry, like Bhaskar Bhat and Harish Bhat have done at Tata
however, is understood to have provided credible proof Chemicals and Tata Global Beverages , respectively and
that the board, along with Mr Tata, had been apprised will impact the decisions of independent directors as well.
and involved in the process from the beginning. However, Nusli Wadia, is a doughty fighter and corporate
Mr Mistrys Solutions: The company is seeking to grow watchers believe that Mr Tata has needlessly started
its renewable portfolio in India and in select international another dangerous battle. In any case, as a shareholder,
markets through organic and inorganic opportunities. you would rather have your board concentrate on
With the acquisition of Welspun Renewable Energy, growing the company than involving themselves in
and its project pipeline, Tata Power Renewable Energy ugly spats. Research inputs by Namrata Patel
Ltd (TPREL) the portfolio of Tata Power has grown ------------------------------------------------------------------------
to about 2,400MW (megawatts), making it the largest End Note: We have been told by one of the Tata Sons directors
renewable energy company in India. The solar project at none of the directors is commenting on any issue relating to the
Anantapuram (Andhra Pradesh) will also add 100MW of matter. The 9-page Tata letter, published in the newspapers, has
clean energy. Tata Power plans to expand its capacity by been the basis for the Tata version. We have already reached out
acquiring some of the countrys numerous underutilised to Debasis Ray, Tata groups spokesperson, as and when required,
stranded plants, instead of investing in expensive new for inputs.

43 | 25 Nov-8 Dec 2016 | MONEYLIFE

Cover Story.indd 13 18-11-2016 18:09:48

StockWatch Stocks and sectors that catch our eye

K P R Mi l l s Coimbatore.
KPR Mills has a yarn division with production
Strong & Steady Growth capacity of 90,000MT, a fabric division with
production capacity of 27,000MT, a fabric processing

PR Mills has vertically integrated division with 9,000MT capacity and garment
manufacturing capacities in India and manufacturing facility with a capacity of 95 million
produces yarn, knitted grey & dyed fabric garments per year. All of these manufacturing facilities
and readymade garments. It also has three active are based in Tamil Nadu; only the sugar manufacturing
subsidiaries, Quantum and Co-gen plant
Knits Private Limited, KPR are based in Bijapur
Sugar Mills and Jahnvi (Karnataka). It also has
Motors Private Limited. windmills with energy
Quantum Knits production capacity of
manufactures readymade 61.92MW which supplies
garments mainly for around 60% of power
exports. KPR Sugar has requirements of the textiles
a capacity for crushing unit.
5000 tonnes day (TCD). The garmenting
This subsidiary also has capacity is undergoing
a production facility of another expansion by 36
Co-gen, producing 30MW million, taking the total
of energy. The third subsidiary, Jahnvi Motors Private capacity to 95 million garments per year, with a capital
Limited, is a retailer of Audi cars and has an outlet in expenditure of Rs150 crore and will go on stream
soon. Another capital expenditure, of Rs120 crore, is
Performance Gets Rewarded planned to increase the fabric processing capacity from
25MT to 50MT per day for FY16-17. This will be
Adjusted closing Price in Rs
funded from internal accruals and bank finance. KPR
Mills has also managed to reduce its debt:equity ratio
to 0.98 for FY15-16 from 1.12 in FY14-15.
1,200 KPR has had large cash flows for two years but
the expansion spree that the company has undertaken,
1,000 has again affected the free cash flows which stood at
negative Rs2.15 crore for FY15-16.
800 Some 36% of the total sales are achieved through
exports, mainly of readymade garments. KPR Mills has
reported strong results for the September 2016 quarter.
Nov-15 May-16 Nov-16 Sales went up by 24%, to Rs755.39 crore (Rs609.59
crore), and net profit growth was 56%, to Rs81.19

Disclaimer: None of the stock information presented constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general in nature that does not take into
account your individual circumstances, financial situation or needs Although information has been obtained from and is based on sources we believe to be reliable, we do not guarantee its accuracy and the
information may be incomplete or condensed. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice. Past performance is no indication of future
results. Investors must do their own research before acting on them. Data Source: Centre for Monitoring Indian Economys Prowess database.

Those who have subscribed to the stockletters should only follow the stocks recommended there.

MONEYLIFE | 25 Nov-8 Dec 2016 | 44

StockWatch.indd 2 18-11-2016 18:12:06


crore (Rs52.18 crore). It has achieved an average sales

Investments Are Paying Off growth of 19.62% and net profit growth of 62.08%
for the past five years.
Rs Cr
The RoCE (return on capital employed) for
FY15-16 stood at 14% and RoNW (return on net
200 worth) stood at 19%. The stock is trading at a price-
Free Cash Flows
160 to-earnings ratio (P/E) of 16.93 and has cash earnings
per share of 96.11. The market-cap to sales ratio stood
at 1.49 and market-cap to operating profit ratio stood
80 at 8.07.
The promoters hold 74.96% of the total capital.
The stock rose from its 52-week low of Rs620 on
0 17 February 2016 to its 52-week high of Rs1,274 on
-40 27 September 2016. It was trading at Rs1,129.95 on
11-12 12-13 13-14 14-15 15-16 11 November 2016 and may be worth looking at, for
the long run.

A da ni P o r t s and S p e c ial E c onom ic Z ones Adani has 19 subsidiaries, four step-down subsidiaries,
two joint ventures and one associate company. After
Port of Call having made capital investments for several years in
creating modern facilities, it is time for the company

dani Ports and Special Economic Zone (Adani) to reap the benefits. For the quarter ended September
is an integration of three verticals, namely, 2016, revenues were up 18%, to Rs2,183.05 crore
ports, logistics (Rs1842.30 crore),
and special economic and net profit shot up
zones (SEZ). It has 68.26% to Rs1,095.89
a pan-India presence crore (Rs651.32
and owns and operates crore), over the same
ports and terminals at period last year. The
nine locations across operating profit for
the Indian coastline. the quarter was up by
Its flagship port, 23%.
Mundra Port in the Last year, Adanis
Gulf of Kutch, is the RoCE (return on
largest commercial capital employed)
port in the country. was 14% and RoNW

Strong Results Continuous Investments

Adjusted closing Price in Rs Rs Cr
330 450


Free Cash Flows



150 -4,300
Nov-15 May-16 Nov-16 11-12 12-13 13-14 14-15 15-16

45 | 25 Nov-8 Dec 2016 | MONEYLIFE

StockWatch.indd 3 18-11-2016 18:12:34


(return on net worth) was 22%. The stock is trading 6.6MMT (million metric tonnes). For the year ended
at sales to market-capitalisation ratio of 7.95 and March 2016, cash from operations was Rs2,578
operating profit to market-capitalisation ratio of 12.45. crore while it needed to make investment of Rs4,665
The debt:equity ratio stands at 1.53 for FY15-16, not a crore and had to borrow an additional Rs2,447 crore.
lot lower than 1.59 for FY14-15. This leaves no free cash flow for the shareholders.
The problem with the business is that it still Nevertheless, it is a good stock to track, since the
requires massive capital investments which have to be business has little competition.
funded by borrowings. For instance, work is under way The promoters hold 58.94% while foreign
to expand the Adani International Container Terminal institutional investors hold 17.14% and domestic
(AICTPL) in Mundra. Construction is due to be institutions hold 14.95%. The stock price rose from its
completed next year when the Terminal will be capable 52-week low of Rs165.96 on 12 February 2016 to its
of handling 18,000TEU (twenty-foot equivalent 52-week high of Rs317 on 25 October 2016. The stock
unit) container vessels, with a cumulative capacity of was trading at 276.50 on 11 November 2016.

K a j a r i a C e ram ic s
Slower Growth & Demonetisation Impact
Double Whammy Adjusted closing Price in Rs

iles market leader, Kajaria Ceramics, has
captured over 10% of the market share and has 675
achieved an average sales growth of 21.09%
and average net profit growth of 31.49% over the


Nov-15 May-16 Nov-16

to demonetisation. One of the largest sources of black

money transactions is real estate, Kajarias main market
Our sense is that the effect of demonetisation would
be temporary. Users will have to buy tiles and Kajarias
past five years. On 19 October 2016, the stock rose products are preferred. Besides, Kajaria Ceramics
to its 52-week high of Rs740 from its 52-week low of earns 70% of its revenues from retail sales; the rest
Rs423.05 on 18 November 2015, on expectations of 30% comes from government orders and from major
continued great performance. But, for the September builders. Retail buyers will, ultimately, have to buy tiles
quarter, Kajarias revenues were Rs630.09 (Rs609.5) by cheque or cards. Even the cash economy is not fully
barely rising by 3.38%, while operating profits were eliminated. The government has already issued Rs2,000
Rs126.72(Rs118.62) up just 6.83%, and net profits notes. The cost to the customer could increase because
of Rs63.62 crore (Rs59.08 crore) rose only 7.68%. of the GST (goods & services tax) that will be levied
As a result, the stock had already gone down to under on the purchase by cheque or other methods.
Rs600. The real worry for Kajaria is that even normal
Then the government announced the demonetisation growth had come down to a crawl. The September
of Rs500 and Rs1,000 currency notes on the evening of quarter growth in sales and profit was in single digits.
8th November. By 11th November, the stock was down The next quarter will be bad because of the current
to around Rs500. This plunge was because of investors disruption. The real picture will emerge in the March
assumption that Kajarias revenues will go down due 2017 quarter.

MONEYLIFE | 25 Nov-8 Dec 2016 | 46

StockWatch.indd 4 18-11-2016 18:17:37


A s a h i I ndia Gl as s
Expansions Paying Off
Transparently Better Rs Cr

sahi India Glass Limited (Asahi) has reported
a 10% rise in revenues for the September 2016
60 Free Cash Flows
quarter, to Rs615.97 crore (Rs561.814 crore),
and a huge 63% rise in net profit, to Rs33.35 crore
(Rs20.52 crore). The operating profit was up 26%, 10
to Rs118.14 crore (Rs93.8 crore). Asahi had made
net losses for three continuous years, from FY11-12
to FY13-14, and made net profit of Rs42.02 crore

11-12 12-13 13-14 14-15 15-16

for automobiles has been the major reason for its

net losses. These losses were exacerbated because of
high-cost debt raised to fund expansion. Also, the
rising prices of oil in FY13-14 put a lot of pressure on
operating margins of the glass manufacturer.
In the past year, Asahi has been able to reduce the
net debt by Rs100 crore bringing down the debt:equity
ratio to 3.72 from 5.04 for FY14-15. This reduction in
financing costs, benefit of lower oil prices and demand
growth had helped Asahi return to the growth path. In
FY15-16, it commissioned new capacities for laminated
glass of 0.7 million windscreens per annum, doubling
the capacity of glass encapsulation and enhancing
in FY14-15, followed by net profit of Rs86.95 crore production of door glass by 20%.
in FY15-16. What is the reason for this dramatically For FY15-16, Asahis RoCE (return on capital
improved performance in the September quarter? employed) was 17% and RoNW (return on net worth)
The company derives more than 70% of its was 25%. However, the stock is expensive. The
revenue from the automobile sector; sluggish demand market-cap to sales ratio is 2.02 and market-cap to
operating profit ratio is 11.02. The share is trading at a
price-to-earnings (P/E) ratio of 44.82. Asahi announced
Growth in Place an interim dividend of 60% on 25 October 2016 after
Adjusted closing Price in Rs nine years.
The promoters hold 54.31% of the total shares as
of September 2016 and the public holds 45.59%. The
share price rose from its 52-week low of Rs135 on 22
180 March 2016 to its 52-week high of Rs210 on
8 November 2016. The stock was trading at 191.90 on
160 11 November 2016.
Asahi is a joint venture between Asahi Glass Co
Ltd (AGC) of Japan and Maruti Suzuki India Limited
(MSIL). It sells four kinds of glasses: automotive glass,
architectural glass, consumer glass and solar glass, from
10 manufacturing units and three warehouses-cum-sub-
Nov-15 May-16 Nov-16
assembly units. Asahi commands 76.57% share of the
Indian passenger-car glass market.

47 | 25 Nov-8 Dec 2016 | MONEYLIFE

StockWatch.indd 5 18-11-2016 18:18:45


K E C I n t e r n at ional
Can It Now Surprise?
Infrastructure Business Adjusted closing Price in Rs
Doing Better

EC Internationals profit grew 130% y-o-y,
to Rs65 crore, driven by strong operational
performance, though revenue during the
September 2016 quarter increased only 3%, to
Rs2,121 crore y-o-y, on slow growth in transmission 110

& distribution segment and lower cable business.

KEC has secured new orders of Rs686 crore in 90
transmission & distribution, railways and cable Nov-15 May-16 Nov-16
businesses. Consolidated earnings before interest,
tax and depreciation (EBITDA) grew by 22% y-o-y,
to Rs185 crore, and margin expanded by 140 basis Growth in Pockets
points, to 9%, in the September quarter. Transmission Business Verticals Q2 FY16-17 Q2 FY15-16 Growth
& distribution business, which contributed 84% to (Rs crore) (Rs crore) (y-o-y)
revenue, grew by 3% y-o-y, to Rs1,790 crore, and Transmission & 1,790 1,731 3.4%
infrastructure segment showed a whopping 55% Distribution
growth; but cables business declined 19% in the - SAE 261 201 29.9%
September quarter. The company has reduced its debt Infrastructure 85 55 54.5%
by Rs317 crore, to Rs3,640 crore, in the September - Railways 66 34 94.1%
quarter ,compared with Rs3,957 crore at the end of
- Water 19 21 -9.5%
March 2016.
Cables 228 283 -19.4%
Throwing light on the first half performance
and outlook, going forward, Rajeev Aggarwal, chief Solar 26 0.5
financial officer, said that revenue growth in first half Inter SBU (8) (3)
of the financial year was muted due to low commodity Total Net Sales 2,121 2,066 2.7%

four projects in Saudi Arabia, where working capital

was released.
The margins are improving because of two factors.
One, the SAE Towers business has shown impressive
performance. Secondly, in the infrastructure business,
particularly servicing the railways, it turned around
and posted a positive profit before tax.
The companys transmission & distribution business
has secured orders of Rs859 crore in India, Africa
and the Americas. The cable business of the company
has bagged an order of Rs105 crore. The companys
railway business has secured an overhead electrification
order of Rs120 crore in the north-western region in
India. Also, the solar business has received orders
prices. He added: With the kind of orders we have got of Rs108 crore for providing turnkey engineering,
in the first six months, we are expecting that we will be procurement, and construction solutions for solar
able to achieve the 10% growth guidance that we have power projects with single-axis tracker. The company
given. KEC is focusing on faster execution of projects. continues to diversify its customer base to include state
Last year, the company completed seven projects ahead electricity boards and developers of public-private
of schedule. This year, they have been able to complete partnership projects.

MONEYLIFE | 25 Nov-8 Dec 2016 | 48

StockWatch.indd 6 18-11-2016 18:19:05



Medicamen Biotech (Rs244) FY11-12 from Rs9.81 crore in FY10-11.


M edicamen Biotech is a
pharmaceuticals company
and has been in this line of business
The total borrowings stood at Rs19.45
crore for FY15-16. Medicamen says
that debt has been taken for capacity
since December 1993. It claims to 260 expansion and for research and
have two formulations plants at development; however, no significant
Bhiwadi (Rajasthan) and Haridwar 175 3619% outcome can be seen. Meanwhile, the
(Uttarakhand). The company earns stock jumped an enormous 3619%,
40.8% of its revenue through exports. 90
from Rs6.72 on 6 January 2014 to
For the past five years, the Rs249.95 on 16 November 2016. The
company has shown no growth in sales promoters held 45.51% of the total
or profits. Total sales for Jan-14 May-15 Nov-16
shares as of September 20161.69%
FY11-12 were Rs100.53 crore and lower than the promoter holding as of
have declined to Rs67.28 crore for September 2015. The price-to-earnings
FY15-16. For FY11-12 and FY12-13, it negligible, at Rs9 lakh, Rs44 lakh and (P/E) ratio stands at a ridiculous
reported net losses of Rs83 lakh and Rs48 lakh, for FY13-14, FY14-15 and 101.89. Why is the stock price rising,
Rs4.93 crore, respectively. In the past FY15-16, respectively. Total borrowings despite no growth in sales and profits?
three years, the net profits have been by Medicamen rose to Rs13.69 crore in Will the regulator find out?


Demonetisation: An mind as I kept reading different reports

and opinions on demonetisation which
Unknown, Unknown are products of chores: columnists have
to comment and broking houses have to

Tchange. It could be at the global level (financial

here are times when we are confronted with a major come out with interpretations. Unfortunately,
they are contradictory and, often, superficial. Sometimes,
crisis of 2008 or tech boom of the pastast 20 years) or the best answer to a m monumental change is I dont
at the national level (liberalisation off 1991). know; bu
but, we, as human beings, find it
Demonetisation is such a change. It is an difficult to admit it.
unknown, unknown. Nations are One thing we were more
far more complex entities than certain about, and we had
stocks. We dont even get the repeated
re ad nauseam for the
correct data to arrive at a sense of past
pas few months: the market was
what is happeningunlike corporatee expensive.
expe Most experts then preferred
performance. Nations are not run in the most to focus
foc on earnings trough, arguing
efficient manner; political expediency cy comes in the way. that a long period of slow earnings would
Corporate change is easier to deal with. You re-do the be followed
follo by earnings growthwhich
expected earnings. You re-do the valuation. Then, you would make high valuation go away magically. We
either buy the stock or wait for a lower valuation. were sceptical, preferring to believe that the current
When a major economic change is positive, it is overvaluation would be resolved by lower stock prices.
easy to forget data and get euphoric. There is a lot of What now? Remember, nobody really knows the impact
excitement in the aireven among sensible people of taking 86% of currency notes out of circulation from
which can mislead. If it is negative, it is easy to slip into an essentially cash economy. Wait and watch.
too much pessimism. These are thoughts that came to Debashis Basu

49 | 25 Nov-8 Dec 2016 | MONEYLIFE

StockWatch.indd 7 18-11-2016 18:19:21

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Supported By

the assessment year (AY) as 2015-

16 instead of 2016-17. After that,

At Moneylife Foundations
I received an intimation of interest
and penalty regarding late filing of
return from the I-T department.
Please guide me on how to rectify
my mistake and avoid all interest
and penalty.
Tax Helpline Subodh Shahs Reply: In your
case, I am assuming that the
Ask tax-related questions at Its free return filed by you was within the
normal time limit
of Section 139(1).
Exemptions on Home property was acquired/ The best option
Loan constructed, deduction
is allowable in five equal
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I have a self-occupied property

for which I have paid Rs60,000
towards housing loan interest
instalments commencing from
the financial year in which
the acquisition/construction is
assessing officer (AO)
with an application stating the
error and requesting him to make
during this financial year. With my completed. the necessary change in the system.
wife, I jointly purchased a second A certificate has to be obtained There is no direct online remedy.
property and paid Rs4 lakh towards from the person to whom interest
stamp duty and registration charges is payable on the capital borrowed Confirmation for Tax
in July 2016. We will not get specifying the amount of interest Paid in IDS
possession of the second property payable for purpose of acquisition/
before 31 March 2017. Could you
please clarify our queries:
1) Can I avail tax benefit on the
construction of the property.
2. The maximum benefit
available under Section 80C is
F rom the press release of the
Central Board of Direct Taxes
(CBDT) dated 15 September 2016,
interest amount (Rs60,000) paid by restricted to Rs1.50 lakh per year it appears that the declarant cannot
me for my first property? per person. In respect of jointly- obtain the challan status of the
2) Can both of us (my wife and I) owned property, each co-owner taxpayer for tax paid under
avail tax benefit under Section 80C can claim separate deduction for IDS-2016 using online tax
for stamp duty and registration payments made by him/ her. The accounting system (OLTAS) if the
amount (Rs4 lakh) paid by us, stamp duty and registration charges tax has been paid using challan No.
even though we will not get the are also eligible for deduction under ITNS-286. In such a case, how will
possession in this financial year? Section 80C. However, there is a the declarant satisfy himself or get
Ameet Patels Reply: 1. Yes. view that these are allowable only a confirmation that the tax paid by
Deduction of a maximum of Rs2 in the year in which possession is him through an authorised bank
lakh is available in received. If the year of incurring has been duly transferred to the
respect of interest the expense and the year in which Central government account before
on borrowed capital possession is received are different, he submits Form-3 to the concerned
for acquisition/ there is a possibility that the jurisdictional commissioner of
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to fulfilment of certain respect of these expenses. In any Nikhil Vadias Reply: For your
conditions mentioned below: case, the upper limit of Rs1.50 lakh purpose, the challan
The construction/acquisition has to be borne in mind. from the bank
should be completed within giving the challan
three years from the end of the Wrong Assessment Year identification
financial year in which the loan number (CIN)
is taken;
For interest paid up to the
financial year in which the
W hile filing my income-tax
(I-T) return (ITR) for
FY2015-16, I mistakenly mentioned
should be sufficient.
This is done by the CBDT to
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MONEYLIFE | 25 Nov-8 Dec 2016 | 52

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Tax Helpline.indd 1 29-07-2016 17:49:42


LookFor: Get Spotted in a Sea CALM: Take a Break for a

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T his is one of the dumbest apps you could have, but

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M editate, sleep and relax, with this wonderful app.
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you launch the app, you select anywhere, anytime. It has seven
a colour and then, the screen guided meditation sessions for
flashes that colour over and whenever you need a break.
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Planning where to meet relax. You will be surprised at
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youre meeting them in a bar, version helps with anxiety release,
a movie theatre or any other large, crowded location? compassion and confidence. The more you practise Calm,
Or maybe on the road at night. Just launch LookFor and the better you get at it; it is just like exercise for the mind!
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Instant-Quantified Self: Track InShorts: All the News in Just

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S o how do you quantify yourself? With the help of your

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This smart app on your phone helps you track your athletic news, in short. It is a unique app which condenses each
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Googles health-tracking platform for developers, and pulls
in data from various connected fitness-tracking apps. In Yazdi Tantra is a chartered accountant
addition, the app presents the data in a number of charts by training, computer consultant by
and graphs, so you can make better sense of your time profession, entrepreneur-developer by
and, perhaps, how its being wasted. hobby and trainer in his leisure time.
He is currently the vice-chairman of
With weekly reports, for trends and actionable insights
Zoroastrian Co-operative Bank Ltd
on your activities, all of Instants data is private and remains and has been running a medium-sized computer
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MONEYLIFE | 25 Nov-8 Dec 2016 | 54

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Drug Money In my previous piece, I have described how the cancer

industry works. It is not for nothing that thinkers like
Nobel Laureate Linus Pauling and many others have called

his world is a wonder. In the quantum worldview, cancer research, and even cancer charity, a fraud! The next
the world runs on energyboth occult and overt. biggest medical money-spinners are the recent addition of
But the world remains an enigma and what we see so many hi-tech vaccines. There seems to be a vaccine for
here is not the reality. What we see is Adi Shankaras maya every illness now. Thanks to the manufacturing techniques
which Nobel Laureate Hans Peter Durr calls Wirklichkiet, and the additives and preservatives, many vaccines are
a drama, in German. capable of creating new diseases like autism. A recent BBC
In reality, what runs the world is money, muscle and documentary shows the dangers of doctors prescribing
brain power. Of the three, the first, money power, is the most too many medicines and doing so many unnecessary tests
dominant. Up until money came into this world, humankind that they are damaging human health, to a great extent.
was altruistic (homo-altruisticus); ever since money came Medicalising death is another big money spinner. The
here, altruism went out through the window and greed last 10 days of the dying contribute to 90% of the corporate
took charge and humankind hospital profits in the ICCU
became mans greatest enemy (intensive cardiac care units).
(homo-economicus). William One must read Atul Gawandes
Wordsworth put it so beautifully wonderful book Being Mortal,
in his poem, The World is too to gauge the level to which
much with us, thus: little do corporate medicine has sunk,
we see in nature that is ours to make money using death as
we have sold our soul to the a tool. When Breath Becomes
devil. Air is another poignant book by
The Innu community study a young brilliant neurosurgeon
in the Innu land, off the coast at Stanford who suffered at the
of Saskatchewan in Canada, hands of cancer specialists!
showed how the Innus, who Way back in 1823, James
were ignorant of the ways Wakeley, a young physician
of this world until Canadian member of the House of
economic system invaded them Commons, investigated to
in 1732, led an egalitarian find that the London doctors,
society without any illness or of those days, were a bunch
unhappiness. With money, came of corrupt, incompetent,
disease and misery. nepotistic fools who were like an abscess on the patients
The most powerful money clout in the world is that body. Being a passionate doctor, he started the prestigious
of the drugs and device lobby which is worth trillions medical science journal and named it The Lancet denoting
of dollars and is thrice as powerful as the oil lobby. The that this lancet should teach London doctors some science
November US presidential election was controlled by the and help drain the pus from the abscess that they had
drug lobby. The documentary film SICKO, by Michel become. Recently, the present editor of that journal,
Moore, shows how every single US congressman and Richard Horton, appointed a medical historian to find
senator is under the thumb of the prescription drug barons. out its impact on the medical profession after nearly 185
They, and their indirect bosses, who pose to the world as years. The reports essence was that doctors have now
philanthropists, are, in fact, real cut-throat businessmen transformed themselves into a huge corporate monstrosity
who live on human misery called illnesses. If that is so in eating into mankinds health all over the globe! God save
the most enlightened country like the USA, one can only mankind from these greedy monsters.
imagine the state of affairs in other countries!
Let us throw some light on how this powerful lobby
tries to medicalise the whole of mankind, to keep its coffers Professor Dr BM Hegde, a Padma
filled. I call that the sickness industry, the most lucrative Bhushan awardee in 2010, is an MD,
one at that. They have even devised a new sub-set called PhD, FRCP (London, Edinburgh,
Glasgow & Dublin), FACC and FAMS.
screening industry which tries to make every human being He can be reached at
a patient when he/she comes for a check-up.

MONEYLIFE | 25 Nov-8 Dec 2016 | 56

BM Hegde.indd 2 18-11-2016 18:30:30




J ains in India do not

eat after sundown.
AROUND THE WORLD I had a bitter experience
once in Delhi. I was to
talk on the present state
Animal studies did show of education in India and,
that time-restricted feeding did help authenticity. Modernity is not in that context, I had mentioned
reduce body weight and make the getting information from the West Allan Blooms book Closing of
animal healthier. Now, for the first and calling it the best, as most of us the American Mind. The chair of
time, human studies performed in India are but RNIs (resident the meeting was Dr Karan Singh
carefully did show that eating the non-Indians)! Modernity in every who got up to condemn me in no
last meal very early (in the study, culture should come from its uncertain terms as he said that
they finished the last meal at 2pm) antiquity. he enjoys rock music and thus it
will reduce weight in the obese cannot be bad! A good example of
without any reduction in total SEXUAL ORGASM AND ITS a really closed mind!
calorie intake! SCIENCE
I followed this principle of the
Jains some years ago and have
found that my weight does not go
A dam Safron, PhD, of the
Weinberg College of Arts and
Sciences at Northwestern University
up even if I overeat, as long as I give in Evanston ( IL, USA), notes that
a longish gap after the last meal the majority of research relating
of the day and the following days to the orgasm has focused on its
breakfast. evolutionary functions.
Although I do not know how The idea that sexual
this works, I think, one of the experiences can be like trance
possible hypotheses is that you states is, in some ways, ancient.
do intermittent fasting Turns out this idea is supported by
daily! Fasting is good modern understandings of science.
for health; but periodic In theory, this could change the way
fasting, which had people view their sexuality. Sex is a
been studied for its source of pleasurable sensations and
health benefits, I emotional connection, but beyond
feel, ranks that, its actually an altered state of
lower consciousness, feels Adam. This book is a classic, written
than In addition, his research found by a professor of social philosophy
daily that the way the brain reacts to at the University of Chicago. He
rhythmic sexual stimulation is refers in that book to his research
fasting comparable to the way it responds which showed that rock music
by giving to rhythmic music and dance. He of the 1960s was the cause of a
a big gap wasnt expecting to find that sexual wave of suicides and divorce in the
after the activity was so similar to music USA of the 1990s onwards. Rock
days and dance, not just in the nature is an African word that signifies
last of the experiences, but also in that sexual intercourse, the rhythm of
meal. evolutionarily, rhythm-keeping both being one and the same. He
We ability may serve as a test of fitness gives graphic details of how that
can learn for potential mates. destroyed the emotional bondage
a lot from Rhythmic sexual stimulation in marriage, which should be the
our ancient if intense enough and if it lasts bedrock of a happy marriage, and
habits but long enoughcan boost neural might even have led to suicide in
we need to oscillations at correlating later life! In retrospect, that makes
research, to frequencies, a process called neural good sense with the new findings of
check their entrainment-sexual trance. the science of sexual orgasm.

57 | 25 Nov-8 Dec 2016 | MONEYLIFE

BM Hegde.indd 3 18-11-2016 18:31:36


GST: Many States, One Market?

he Constitution of India, Article 246, read along with of the 15th Lok Sabha. Thereafter, in December 2014, the
Schedule VII, provides for the division of powers Constitution (122nd Amendment) Bill, 2014, was introduced
between the Centre and the states. Central sales in the Lok Sabha.
tax, excise duty, MODVAT (modified value added tax) After due legislative process, the new Bill finally saw
and service-tax are imposed by the Central government, the light of the day after being passed by both the houses of
while each state has its own set of taxes including sales Parliament on 8 August 2016, including certain amendments
tax, VAT (value added tax) and several other local taxes. passed by the Rajya Sabha. However, the Bill, being in the
To add to the complexity, rates vary across states. Apart nature of a Constitutional amendment, had to be ratified by
from making the taxation process complex and cumbersome at least 50% of states. This was achieved within 23 days,
for businessmen, precious national time is lost in logistics, with some deft manoeuvring by the Central government
adding to the cost. The problem with the existing system of and effective liaison with other parties.
indirect taxation is that taxes are levied at various stages The president of India gave his assent to the
right from the stage of procurement of raw materials, to Constitutional Amendment Bill on 8 September 2016
intermediate stage, to manufacturing of finished goods. which, thereafter, became GST Constitutional Amendment
The second stage comes when the goods are on the way Act, 2016, thereby paving the way for the enactment of
to the market to reach the consumer. The impact of all GST law. What seemed highly improbable is now slated
these taxes has a cascading effect on the final price, as, to be a reality with the proposed target of implementing
at every stage, tax gets levied on the price which includes GST being 1 April 2017. When this sees the light of day,
taxes paid earlier. it will be perhaps be the biggest tax reform the country
To deal with this, goods & services tax (GST) law has has seen since Independence.
now come into effect. Consumers should note that the Though, ideally, there should be one or two rates, India
proposed GST will be value added tax and it will be levied has its own peculiar problems to be addressed by taking
across goods & services by the Centre as also the states. the states into confidence. So, now five different slabs of
It is expected that such a move will help broaden the tax tax have been announced. Beginning with 0% for essential
base and increase tax compliance. The other major benefit products like food grains, it is 4%, 12% and 18% for
is the expected reduction in economic distortions. various other products and services, and 28% plus cess
Interestingly, enacting the GST law is, unlike most of the for luxury goods and sin goods. This has been a major
other laws which parliament or the state legislature enact; step towards implementation of the new tax regime which
it has entailed amendment to the Constitution of India. will roll out with effect from 1 April 2017. All products as
However, it has not been smooth sailing for GST, as can well as services will be impacted by the new tax regime.
be seen from the fact that it started with the Constitution The million-rupee question posed by an ordinary
(115th Amendment) Bill, 2011, was introduced in Parliament consumer is: How will he/she benefit from the imposition
to enable the levy of GST, but it lapsed with the dissolution of GST? There is a possibility that certain products will
become cheaper, while others may become costlier in the
near term. Governments efforts are
on to minimise the adverse
impact of the new taxes; in
the long run, it is expected
that the entire economy
will benefit from the new
tax regime and, eventually,
benefit the consumers at

SD Israni is a corporate lawyer & Fellow

of ICSI. Email:

MONEYLIFE | 25 Nov-8 Dec 2016 | 58

Legally Speaking.indd 2 18-11-2016 18:33:29

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MSSN Handholding.indd 1 29-07-2016 16:08:23


Ethics in the Legal Profession

nasty joke, on the net, asked the question: What appointed after being on the other side; but in new
is the difference between a lawyer and a leech? matters involving the same litigants. Ethically, we
Said it had something to do with Draculan personally believe that it must be avoided. When the
haemel-imbibing practices. Two out of three, maybe 99 stakes are high, fees astronomical, and the future rosy
out of 100, will applaud. One can almost hear sighs of with well-heeled clients, elasticity becomes the key. A
happiness. Is it true? Are lawyers a law unto themselves? little bending here, a curvature there, all excuses, not
Is there is no code of conduct? And, if so, can it be explanations, may seek justification. The dividing line,
enforced? Please refer to a statute called The Advocates between the legally correct and the morally justified,
Act, 1961. It is free and on the net. becomes blurred.
Knowledge of the law will suffice, to avoid outright The law is more strict for judges; rightly so. As
confrontation, if not acrimony. We try and bring you an advocate, he may have litigated, or represented,
such applications of the law. a person. As a judge he cannot take up that persons
Ten years ago, freshly minted, we had a lawyer matters. He recuses himself. This applies not only
as a client in a crime matter, of the short-fuse, to professional practice, but extends to family
impatient type. The accused were octogenarians, relations, even friendships. If one finds any sort of
stationed far away. Our man had wanted them bonding, he may ask for another bench. Not on
brought to Mumbai. The foursome, reduced some shaky advice, like the judge not being
to a trio following one natural to your advocates liking. Avoid ill-
departure, had resisted the move. founded collision with the bench. If a
We now entered the fray, only to be judge is assigned a matter, he has the
confronted by a fearsome defence jurisdiction and, more importantly,
attorney. We had few cards to play. he must exercise it. We are not there
The opposing lawyer had to compare janma-patrikas.
represented our client previously. In our matter, the accused
We protested at his presence in this appointed a new counsel. He
case. The lawyer countered that failed to turn up and we got the
this was a different matter. We tareek-pe-tareek treatment
submitted that the parties were and a lot of flak from our
the same and so was the cause, horse-mounted client, wanting
rather similar. full gallop. After three months
You be the judge. Whom and adjournments, we put our
would you favour, us or the foot down. The oppositions
other lawyer? junior lawyer was warned to
The lawyer put forward produce the counsel within one
two more appeals. One, that he hour. He did.
would not get his fees and, two, his replacement would With the counsel came the first, now recused,
be tougher than he. Scare tactics were but water on a advocate, advising him at every instance. Wrong move.
ducks back. We continued to resist; especially when it No lawyer can argue with incessant prompting. We
came to our knowledge that the new, proposed advocate picked on just one point, crucial, and won the day,
had previously played a counsellors role. forcing the other side to settle. Yet, after all these years,
You be the judge. one question remains unanswered. Was it correct on
Though the matter was resolved peacefully, we had their part?
made a point. A lawyer, having represented a person, You be the judge. And let us know.
cannot then plead for the opponent. That is the law.
Whatever a client says to his advocate is privileged.
It cannot be used to the detriment of his client. Point Bapoo Malcolm is a practising lawyer in
taken; but our matter did not end there, as we will see Mumbai. Please email your comments to
The question that usually arises when lawyers are

MONEYLIFE | 25 Nov-8 Dec 2016 | 60

You Be the Judge.indd 2 18-11-2016 18:34:59


THE During discussions that night, Subba Rao called

R Sinha, chief general manager (vigilance). They
discussed the course of action and then planned
to go to the Chairman, Maneck N Goiporias
house. But they were told that Goiporia was out
eeting somebody and would return only after
10 pm.
m. It was then that Khemani and Subba Rao
decided that Sitaraman should be called back.
Theyy even sent somebody over to the branch
and broke
roke open Sitaramans drawer. It was a
sperate move. There was nothing there...

The skyscraper that houses BSE hadnt yet

come up. There used to be a trading ring, where
brokers and jobbers struck deals, located in the
adjacent three-storied structure. The ring was a
The authors have excellent credentials for attempting reserved area, open only to jobbers and brokers.
this book, which takes the subject head-on which is its Harshad was just an onlooker. But he had a
endearing quality. INDIA TODAY burning desire to get in and do deals. He cajoled
the doorman and stepped in to watch how the
Written in a racy style, the book weaves together
world of the stocks spun on its invisible axis.
the main players and the not-so-well-known sub-
That afternoon a new chapter began in the life of
scams The authors have done a commendable
Harshad Mehta. A totally unfamiliar world that
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This book brings out all the details that a lay and
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Scam Ad.indd 1 21-10-2016 18:07:06



Taxmen and Demonetisation

essages spread over social media or He also explained the system used by income-tax (I-T)
WhatsApp may be entertaining or department to collect information on all types of financial
informative sometimes; but, when it comes
to tax matters, believe in, and disseminate,
information only from official sources, says Ameet Patel,
a practising chartered accountant (CA) for the past three
decades. He was speaking at a seminar-cum-guidance
session on The AIR is a big weapon in the hands of the
tax officer organised by Moneylife Foundation in Mumbai
and supported by Capital First.
Most households in the country would have a few
high denomination notes which are now no longer legal
tender. What to do with these notes? There are two
aspects involved, namely, depositing the money into the
bank or exchanging it for new notes; and the income-tax
implications, he said to a packed audience. transactions, including bank deposits, investments or
However, Mr Patel cautioned, do not rush or take buying property.
hasty decisions based on some posts on social media, To keep a watch on high-value transactions undertaken
WhatsApp or email messages. Please consult an honest
tax consultant or
chartered accountant Who Has To File an FTRA?
and take his guidance The REGISTRAR or SUB-REGISTRAR appointed under Section
about these things. 6 of the Registration Act, 1908;
While explaining The registering authority empowered to register MOTOR
the seriousness of VEHICLES under Chapter IV of the Motor Vehicles Act, 1988;
the government in The POST MASTER GENERAL as referred to in clause (j) of
Section 2 of the Indian Post Office Act, 1898;
weeding out black
The COLLECTOR referred to in clause (g) of Section 3 of the Right
money, he gave
to Fair Compensation and Transparency in Land Acquisition,
the various tax Rehabilitation and Resettlement Act, 2013;
implications for The recognised STOCK EXCHANGE referred to in clause (f ) of
individuals in various Section 2 of the Securities Contracts (Regulation) Act, 1956;
tax slabs.

MONEYLIFE | 25 Nov-8 Dec 2016 | 62

Event.indd 2 18-11-2016 18:36:47


What Is Reported to the Tax debenture issued by that company).

Receipt from any person of an amount aggregating
Dept Rs10 lakh or more for acquiring shares (including share
Payment in cash for purchase of bank drafts or pay application money) issued by the company.
orders or banker's cheque of Rs10 lakh or more. Buy-back of shares from any person (other than the
Payments in cash aggregating Rs10 lakh or more for shares bought in the open market) for an amount or
purchase of pre-paid instruments issued by RBI. value aggregating Rs10 lakh or more.
Cash deposits or cash withdrawals (including through Receipt from any person of an amount aggregating
bearers cheque) aggregating Rs50 lakh or more, in or Rs10 lakh or more for acquiring units of one or more
from one or more current account of a person. schemes of a mutual fund (other than the amount
Cash deposits aggregating Rs10 lakh or more in a received on account of transfer from one scheme to
financial year, in one or more accounts (other than a another scheme of that mutual fund).
current account and time deposit) of a person. Receipt from any person for sale of foreign currency
One or more time deposits (other than a time deposit including any credit of such currency to foreign
made through renewal of another time deposit) of a exchange card or expense in such currency through
person aggregating Rs10 lakh or more. a debit or credit card or through issue of travellers
Payments made by any person of an amount cheque or draft or any other instrument of an amount
aggregating 1) Rs1 lakh or more in cash; and 2) Rs10 aggregating Rs10 lakh or more.
lakh or more by any other mode, against bills raised Purchase or sale by any person of immovable property
in respect of one or more credit cards issued to that for Rs30 lakh or more or valued by the stamp valuation
person. authority referred to in Section 50C of the Act at Rs30
Receipt from any person of an amount aggregating lakh or more.
Rs10 lakh or more for acquiring bonds or debentures Receipt of cash payment exceeding Rs2 lakh for sale, by
issued by the company or institution (other than the any person, of goods or services of any nature (other
amount received on account of renewal of the bond or than those specified).

Central Information Branch (CIB), he explained how

Matching of Cash Deposited CIB aids the widening of tax base through identification
With current years books / income of stop filers and non-filers and the deepening of tax base
by providing information for proper selection of cases
With earlier years income
for scrutiny assessments through collection, collation of
With other factors (debtors aging; seasonal sales information from internal as well as external sources and
pattern, TCS returns (for scrap sales), etc its dissemination to assessing officers (AOs) and other
IS IT REALLY CURRENT YEARS INCOME? This users in I-T department.
So, the ITO has two tools with which he can confront
question is supremely important
a taxpayer with massive dose of information from the AIR
or FTRA and CIB, Mr Patel said. He further added that
by the taxpayer, the income-tax law has framed the concept the ITO has information about the filers name, type and
of statement of financial transaction or reportable account quantum of transaction and the source of income and
(FTRA) which was previously called Annual Information misreporting or non-reporting of any could spell trouble
Report (AIR), Mr Patel said. for an assessee.
He touched upon the entities that are required to file Mr Patel then went on to explain how the AIR and CIB
an FTRA. He cited the nature and value of transactions would impact assesees in two different scenarios, where the
for which various entities, like banks, post-offices, non- return is filed and where the return is not filed. He gave
banking finance companies (NBFCs), companies and examples of assesees who have got notices from the IT
mutual funds, must file an FTRA. He emphasised the need department and on whom scrutiny has been initiated. He
for individuals to disclose income and details to his/her also explained how responses to notices by the department
CA, as the chances of scrutiny, based on details provided can be given online. The intelligence and efficiency of the
by third parties can get a person into trouble. officers was highlighted and he emphasised the need to
Touching upon the importance to know about the be alert with disclosures by assesees.

63 | 25 Nov-8 Dec 2016 | MONEYLIFE

Event.indd 3 18-11-2016 18:37:19



The Sensex and the Nifty fell 4% each during the fortnight Foreigners: Foreign institutional investors were net
ended 16 November 2016. ML Large-cap Index, ML Mega- sellers of stocks during the fortnight (Rs8,234.78
cap Index and ML Mid-cap Index declined 6%, 7% and 9%, crore). They sold shares worth Rs48,303.18 crore.

Share Prices Index, May 2016=100 -220



-1,825 FII Net Investments

(Rs Crore)
7 Nov-16 16 Nov-16

100 Indians: Domestic institutional investors were net

buyers of stocks (Rs5,133.62 crore). They bought
shares worth Rs26,221.31 crore.
90 2,345
May-16 Aug-16 Nov-16

ML Large-cap ML Small-cap Nifty ML Micro-cap 1,730

ML Mid-cap ML Mega-cap Sensex DII Net Investments
(Rs Crore)

Index 04 Nov 16 Nov +/-

Sensex 27,274.15 26,298.69 -4%
Nifty 8,433.75 8,111.60 -4%
ML Large-cap Index 115.95 108.51 -6% 7 Nov-16 16 Nov-16

ML Mega-cap Index 119.00 110.57 -7%

ML Mid-cap Index 125.05 113.78 -9%
ML Micro-cap Index 114.13 103.51 -9%
ML Small-cap Index 116.48 105.07 -10%
Mega-cap Gainers/Losers 04 Nov 16 Nov Change 16,900

Bank of Baroda 142.55 173.40 22%

Berger Paints India 259.75 198.65 -24%

Large-cap Gainers/Losers 04 Nov 16 Nov Change

May-16 Aug-16 Nov-16
Corporation Bank 40.10 47.85 19%

Godfrey Phillips India 1,391.00 951.95 -32% Nikkei, NASDAQ Composite, S&P 500 and
Mid-cap Gainers/Losers 04 Nov 16 Nov Change
Shanghai Composite advanced 6%, 5%, 4% and
3%, respectively.
Garware-Wall Ropes 525.60 597.10 14%

Signet Industries 37.30 23.80 -36% Index 04 Nov 16 Nov +/-

Nikkei 16,905 17,862 6%
Small-cap Gainers/Losers 04 Nov 16 Nov Change
NASDAQ Composite 5,046 5,295 5%
Dynemic Products 91.65 108.75 19% S&P 500 2,085 2,177 4%
Prakash Constrowell 15.60 9.55 -39% Shanghai Composite 3,125 3,205 3%
FTSE 6,693 6,750 1%
Micro-cap Gainers/Losers 04 Nov 16 Nov Change
Korean Composite 1,982 1,980 0%
Eskay K'N'It (India) 0.34 0.38 12%
Taiwan Weighted 9,068 8,962 -1%
Ansal Housing & Construction 25.70 16.30 -37% Bovespa 61,598 60,759 -1%

(All Prices in Rs) Hang Seng 22,643 22,281 -2%

MONEYLIFE | 25 Nov-8 Dec 2016 | 64

* 20 O 16 ** 1 N 16
Money Fact.indd 2 18-11-2016 18:39:03

Whats H T

Shares of public sector banks were in demand during the fortnight. Bank of
Baroda, Corporation Bank, Indian Bank and State Bank of India advanced
Shares of banks rose 2%, while
shares of oil & gas companies
22%, 19%, 17% and 14%, respectively. Punjab National Bank rose 13%. ended flat. Shares of telecom
services companies and energy
Companies 04 Nov 16 Nov +/- companies dipped 1% each. Stocks
of real estate companies and paints
ML Bank Index Bank of Baroda 142.55 173.40 22%
companies declined 17% and 13%,
130 Corporation Bank 40.10 47.85 19% respectively. Stocks of cement
Indian Bank 207.05 243.10 17% companies declined 14%.
Vijaya Bank 41.05 48.15 17%
State Bank of India 242.85 277.20 14% ML Sectoral Trends

Banks 2% Real Estate -17%

Bank of India 106.45 121.20 14%
Oil & Gas 0% Garments -14%
110 St Bank of Mysore 519.15 589.80 14%
Telecom Services -1% Cement -14%
St Bk of Travancore 520.10 589.25 13%
Energy -1% Building Material -14%
St Bk of Bikaner 663.65 751.35 13%
100 Odds -1% Paints -13%
PNB 131.65 148.80 13%
May-16 Aug-16 Nov-16
All Prices in Rs


Whats N T Combined inflation for urban and

rural areas declined, to 4.20%
Real estate companies were punished. Ansal Housing & Construction, in October 2016, from 4.39%
Anant Raj, BL Kashyap & Sons, Ansal Buildwell and DLF declined 37%, in September 2016. Inflation
27%, 24%, 23% and 22%, respectively. in urban areas declined to
3.54% in October, from 3.64%
Companies 04 Nov 16 Nov +/- in September. Food inflation in
ML Real Estate Index urban areas declined significantly,
Ansal Housing 25.70 16.30 -37%

Anant Raj 50.40 36.85 -27% 120

Significant Decline
BL Kashyap & Sons 24.75 18.75 -24%
Lancor Holdings 30.45 23.20 -24%
Annual Change
Ansal Buildwell 71.05 55.05 -23% 5.00%

DLF 139.70 108.60 -22%

Peninsula Land 18.95 14.80 -22% 100
Kolte Patil Dev 122.55 95.75 -22% 4.00%
Arihant Foundations 61.00 47.85 -22%
90 3.50%
HDIL 73.40 58.10 -21%
Apr-16 Aug-16 Nov-16 Oct-15 Apr-16 Oct-16
All Prices in Rs

to 2.79% in October, from 3.19%

BULK DEALS in September. In urban areas,
prices of vegetables declined by
Date Company Buyer Seller Rs Cr 6.45% since last year. Prices of
08 Nov-16 Mindtree Rekha Nemish Shah Amrit Petroleums Pvt 155.49
fuel & power increased by 0.17%
in October, compared to a year
07 Nov-16 Lloyds Metals and Energy Lloyds Metals and Minerals Uttam Exports Pvt 6.86 ago. Inflation for housing fell
10 Nov-16 Suyog Telematics LTS Investment Fund Ivory Consultants Pvt 2.85 marginally to 5.15%. In October
08 Nov-16 Apoorva Leasing Fin Times Capital Services Pvt Sri Endrash Investment & Finance 1.19
2016, inflation for clothing
fell marginally to 3.78%; for
09 Nov-16 Vama Industries GK Properties Pvt Nitin Siddamsetty 0.47
miscellaneous items, too, inflation
07 Nov-16 Aarey Drugs Pharma Nomura Singapore Antara India Evergreen Fund 0.47 moved up to 3.78% compared to
16 Nov-16 Mitsu Chem Plast Aryaman Broking Jhaveri Trading and Investment Pvt 0.29
3.70% in September 2016.

65 | 25 Nov-8 Dec 2016 | MONEYLIFE

Money Fact.indd 3 18-11-2016 18:39:21


Investing in Educational Opportunities

for Gifted Poor Children
t is the dream of all parents that their child should Since 2015, Dakshana has been offering one-year
pursue a professional course in engineering or medicine, scholarships to help underprivileged students from state
after passing the entrance examination. Yet, how many government schools, after class 12, to prepare for the
are able to achieve this, even if their child is gifted? This JEE or medical entrance exams. During the year, all costs
is where Dakshana Foundation comes in, to help gifted incurred for coaching, boarding and lodging, cost of books
children from economically backward families. and cost of application forms, for each student, are borne
Noor and Sadika, from a tiny village near Kargil in by Dakshana. The programme is absolutely free for
Jammu & Kashmir, are examples. From a village with no beneficiaries, says Sharmila Pai. The Foundation now
electricity or hospital within a radius of 15km, the two has 400 Dakshana scholars undergoing training which is
girls were given a one-year scholarship to study at Pune fully funded by Dakshana at six locations across India.
and prepare for their medical entrance exams. They are Dakshanas track-record of results has been
the first from their village to be sent for further studies excellent. A total 1,100 of 2,044 Dakshana-sponsored
anywhere beyond Delhi and underprivileged scholars,
will be the first to attend have been accepted by
medical college next year. IITs and another 800
Dakshana Foundation to NITs; an aggregate
was established by Mohnish acceptance rate of 51% at
Pabrai, investor and hedge IIT-JEE over the past eight
fund manager, who made years, says Sharmila Pai,
news in 2007, when he chief operating officer of
won a bid to have lunch Dakshana Foundation.
with Warren Buffett. That Dakshana is
money went to charity. headquartered at Kadus
A year earlier, Mr Pabrai Village, Pune. The entire
had set up Dakshana with operation is headed by an
the objective of alleviating army veteran, colonel Ram
poverty through education. Kumar Sharma, who has
Dakshanas mission is to fought the three wars for
focus on investing in the delivery of world-class education India. At 76 years, colonel Sharma runs Dakshana like a
opportunities for exceptionally gifted children from young, vibrant CEO of a multinational conglomerate. He
impoverished rural backgrounds in India. brings with him the vast experience of managing a large
The inspiration for setting up Dakshana, for Mr Pabrai operation with ease and success. Fondly known as Dadaji
and his wife, Harina Kapoor, was the Ramanujan School of by the scholars at all Dakshana Centres of Excellence,
Mathematics at Patna (Bihar), founded by Anand Kumar, colonel Sharma is a philanthropist in the true sense as
33, a local mathematician, and Abhayanand, 52, Patnas he works full-time for Dakshana for a remuneration of
deputy director-general of police and a lover of physics. one rupee a year.
In 2006, Dakshana signed a memorandum of Dakshanas team comprises mainly its alumni who
understanding with the ministry of human resources and have been beneficiaries and have graduated as engineers
development to prepare deserving, but disadvantaged, but have decided to come back and serve Dakshana as
students from the 595+ Jawahar Navodaya Vidyalayas Fellows. Heading the team is commander Arun Mishra
across India for the IIT entrance exams. (chief administrative officer) with 20
Dakshana does this by offering a two- years experience in the Indian Navy.
year scholarship to selected students He runs the Dakshana administration as
after they complete class 10, while they DAKSHANA FOUNDATION a ship that is sailing smoothly towards
are studying for their class 11th and Kadus, Taluka Khed, success. All donations to Dakshana
12th of the Central Board of Secondary Pune, Maharashtra are exempt under Section 80-G of the
Education course. Telephone +91.20.2685.3485 Income-tax Act.
Fax +91.20.2685.5344
MONEYLIFE | 25 Nov-8 Dec 2016 | 66

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