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CLEARING JAYPEE MESS: STOP MIS-SELLING,

CRUCIAL FOR REALTY PROTECT WHITE MONEY
Personal Finance Magazine 15 September-28 September 2017 Rs 45

Pages 68 (SUBSCRIBER COPY NOT FOR RESALE) www.moneylife.in

STOCKS

Sintex Plastics Shivam Autotech Sobha Sarda Energy & Minerals PCBL

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 ISSUE CONTENTS
15-28 Sep 2017

Bad Loan Law Going Bad?

T o deal with the mounting bad loans that

mainly afflict public sector banks (PSBs),
the government has set up an elaborate
machinery under a new law called Insolvency
and Bankruptcy Code (IBC). As with other
previous legislations, the new law will work
only if crooked corporate debtors, bankers
and insolvency players don’t manage to game
it. Dr Rajendra Ganatra, an IRP (insolvency
resolution professional) with a deep knowledge
of the sector, is concerned that the system is
being subverted by companies and creditors
who are playing the proxy for the borrower.

32 Cover Story
If this remains the trend, the new law may not
help to reduce bad loans.
IBC is a great tool for banks to recover
their money from the builders who are not
paying back. According to one estimate, a NPA Clean-up Off to a Poor Start
massive Rs10 lakh crore is stuck in incomplete The Insolvency and Bankruptcy Code will work only if crooked
realty projects whose developers are at a corporate debtors, bankers and insolvency players don’t game it.
Has the rot already started, asks Dr Rajendra Ganatra. IBC will not
financial standstill. Irresponsible lenders are lead to a drastic improvement in the bad loans situation
now moving to National Company Law
Tribunal to recover their money. But if their
assets are seized and auctioned and banks take
away the money due to them, what happens to
the home-buyers who have borrowed money
from banks and fully paid for their flats, asks
12 Public Interest
– Unfair GST Rates: No Lobby for Ordinary Citizen
– Technology & Social Media as Disaster Management
Sucheta, in her Crosshairs column. Tools
We recently met Deepak Parekh, the
doyen among the financial leaders, and were
surprised to find him deeply concerned about
the rampant mis-selling of mutual fund
schemes and insurance products. This is an
issue on which Moneylife has been making
14 Your Money
– SEBI Likely To Bring in Rules for Merger of Mutual
Fund Schemes
a lot of noise for the past 10 years but the
– Employees’ Fringe Benefits To Be Taxed under GST
regulators are moving one inch at a time. – Deadline for Banks To Set Up Aadhaar Enrolment
Sucheta, in her Different Strokes, points Centres Extended to 30th September
out that while an attack on black money is – SBI MD Says Home-buyers Too Would Have To Bear
laudable, what about stopping the loot of the Brunt of Bankruptcy in Real Estate Sector
– Supreme Court Assures Unitech Buyers–Flat or
white money of middle-class people? SD Israni,
Refund, Your Pick
in his column, explains that consumers have
very little recourse against couriers if an article
is delivered late, lost or damaged. They insert

16
fine print to completely absolve themselves MONEYLIFE

QUIZ
from any liability.
I look forward to your feedback on the two
newly introduced columns and also on what
else you think we should cover.
Disclaimer: Moneylife has a policy of not allowing its editorial staff to
Debashis Basu  buy and sell stocks that are written about in the magazine. All personal
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 15-28 Sep 2017 | 4

Content.indd 2 08-09-2017 18:52:15

Advertisements.indd 3 06-09-2017 14:17:48
 CONTENTS
20 FUND FACTS
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26 Smart Money – G-Sec Yields Down
‘Professional Management’
Is Not a Panacea

40 Stock Watch
CYBER SECURITY

Sintex Plastics: Interest Cost 52 Data Theft in

Organisations and Legal
– Sugarcane for Sound Sleep

Devouring Profits
Issues
LEGALLY SPEAKING

Shivam Autotech: Turning

Around? 60 Postal and Courier
Services Offer Poor
Redress for Service
Sobha: Developing Interest Deficiency

PS
Sarda Energy & Minerals: Will
the Growth Continue?

BLOCKCHAIN 66 Loose Ends at

Infosys
54
– Tax Reminder or Threat?
hreat?
PCBL: Perils of Cut & Paste
Improving Financial – Drop CSR Hypocrisyy
Safety with Blockchain
Market Manipulation: Blue
Pearl Texspin
TAX HELPLINE
DEPARTMENTS
Readers’ Response ........... 8
Market Trend: Temporary Blip?
56 Queries at Moneylife
Foundation’s Tax Helpline
Book Review ....................62
Money Facts ....................64

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 Volume 12, Issue 16
15 September–28 September 2017
Debashis Basu
Editor & Publisher
editor@moneylife.in
Sucheta Dalal
Managing Editor
sucheta@moneylife.in
Editorial Consultant
Dr Nita Mukherjee
nitamuk@gmail.com
Editorial, Advertisement,
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315, 3rd Floor, Hind Service Industries
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Moneylife is printed and published by
Debashis Basu on behalf of
Moneywise Media Pvt Ltd and
published at 315, 3rd Floor,
Hind Service Industries Premises,
Off Veer Savarkar Marg, Shivaji Park,
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Editor: Debashis Basu
Total no of pages - 68, Including Covers
RNI No: MAHENG/2006/16653
MONEYLIFE | 15–28 Sep 2017 | 8
Letters.indd 2
CONGRATULATIONS FOR REACHING
300TH ISSUE!
First of all, let me congratulate the entire
Moneylife team for bringing to us the 300th issue
of the magazine. It is really a mature decision
not to publish a bulky issue on this occasion. I
Mutual Fund investments
would like to offer my comments on some of the are subject to market risks,
th read all scheme related
articles in the 300 issue. documents carefully.
Ups and Downs of Infosys: Who is right and
who is wrong, Mr Murthy or Mr Sikka, can have
different perceptions. One of the issues under
dispute is the fat salary. I always wonder whether Write to
the salaries/ packages offered to the top level the Editor!
officials and CEOs in the corporate sector should
be so high! How many of them are really doing
WIN
a prize
some extraordinary work? I think this trend has
come to India from Western countries. Manpower
in most of these countries is very poor which is
not the case with India. We observe that most of
the people in service leave home at a fixed time;
but nobody knows when they will be back; their
earnings are not very high. This class works
under great stress because of job uncertainties.
Whenever there is any cost-cutting, this class
is axed first, but the top brass rarely cuts its
own salary.
I recall the case of a young girl that I read in the beginning
inn
nin
nin
ningg ooff 20
2008.
00808.
8.
Lehman Bros interviewed this young girl at IIM-Ahmedabad
med bad ccampus
dabad ampu
am pus
and then offered a hefty yearly package of Rs1.25 crore! This girl may
be extraordinary; but is it proper to offer such a fat package at such a
young age to a boy or a girl? And, within two months came the news
of the total collapse of Lehman Bros. What happened to this girl?
Nobody knows. 
06-09-2017 14:05:30
 +

Moneylife Foundation AD.indd 1 26-07-2017 11:09:05

 LETTERS

Bank Strike Brings

the
Best Banking Mayhem
letter
D uring the last week of
August 2017, there was
banking mayhem and bank
customer’s funds.
b) A cheque issued
to me by a credible
Mutual Fund investments
are subject to market risks,
read all scheme related
documents carefully.
customers have had to suffer party surprisingly
shabby treatment. Take my
own experiences during this
bounced. When I called
him, he was hopping Congratulations
week with the banks. a) I had issued a cheque to mad that three cheques G Ravishankar
a party who had deposited it on Monday (21st that he had deposited
August). The money was to move from HDFC on Monday had not
YOU WIN A
PERSONALISED
Bank to Corporation Bank. There was no news up yet cleared and the CLOCK
to Thursday. Yes, on Tuesday, there was a bank bank had the cheek
strike. Finally, on Friday morning, when I checked to return to me the
my account, I noticed that my account in HDFC cheque he issued as
Bank had been debited with the value-date of Friday. ‘funds insufficient’.
I promptly checked if the credit had happened There may be tens of
with my counter-party in his account, as it was an thousands of cases
important matter. It has not happened at all until in Mumbai itself G Ravishankar

Sunday evening. So, one of the banks is enjoying like mine—bank

an illegitimate float of three days with customer’s customers bearing
funds. In short, a cheque deposited with the bank on this sort of pain
Monday is getting credited to the other party on next for no fault of
Monday. So, banks will go on strike and rub further theirs.
salt on the wounds by enjoying illegitimate float with G Ravishankar, by email

 Crosshairs: Sucheta Dalal has taken up the issue of
DS Kulkarni Developers in a very balanced manner.
Instead of making any allegations, she has tried to put
forth some facts. The fall of investors in the so-called
‘high returns’ trap is age-old. It appears that even the
well-educated people as well as the wealthy ones do
not want to learn anything from the past reports of
many such cases which appeared in newspapers.
Filing ITR: I am filing the ITR (income-tax return) of
my wife and mine online for the past six years using
MS-Excel platform (I never try the html version). There
is a utility to save this MS-Excel file in .xml format,
before uploading the returns. At the time of filing a
fresh return, I import basic data from the .xml format
of my earlier ITR. After feeding all the required and
relevant details, I calculate the tax and, if anything
has to be paid, I pay it online and upload the .xml
file without any hassle. This whole exercise requires a
bit of practice. One does not need to be techno-savvy
or be an expert in income tax laws, but should know
at least basic provisions of the Income-tax Act. One
should have a fair knowledge of MS-Excel. This is
particularly important, if one’s sources of earnings are
not complicated. One should go for this, at least for
ITR-1 and ITR-2.
Crypto-currency: Yogesh Sapkale’s article on crypto-
currency theft comes out with the finding that a new
avenue is now open for the hackers. I feel that the
anti-social elements are always miles ahead in any
new technology. Every effort to fill up the loopholes
makes the hackers find out new loopholes. This is an
unending war on the technology front.
Yazdi Tantra, as usual, has brought to the readers new
features and new apps. SD Israni’s article “Consumers
must know when to appeal” is an eye-opener.
Abhay Datar, by email
CONSOLIDATION NEEDED AMONG
COOPERATIVE BANKS?
This is with regard to “Cooperative Banks: Outright
Loot” by Sucheta Dalal (Moneylife, 14 September
2017). This article gives a broad picture of the messy
situation in which cooperative banks have landed.
There are multiple categories of cooperatives doing 

MONEYLIFE | 15–28 Sep 2017 | 10

Letters.indd 4 06-09-2017 14:06:01

 LETTERS

 ‘banking’ in India and a multiplicity of regulatory and
supervisory arrangements for these institutions. In
1966, certain provisions of Banking Regulation Act,
1949 (BR Act) were made applicable to cooperative
societies through an amendment to the BR Act. Since
then, we have three categories of cooperative banks,
state cooperative banks, district cooperative banks and
primary (urban) cooperative banks.
While district cooperative banks (DCBs) are, in a
sense, federations of primary cooperatives in districts,
and state cooperative banks (SCBs) are apex
banks at state level for DCBs,
primary (urban) cooperative banks
are mini commercial banks working
in the cooperative sector. While SCBs
and DCBs are regulated/ supervised
by RBI (Reserve Bank of India)/
NABARD, primary (urban) cooperative
banks are regulated/ supervised by
RBI. All cooperatives are under the
administrative control of respective state
governments.
During demonetisation days, we have
seen the problems faced by cooperatives
which were short-circuiting legal
provisions using political clout and state
government support. Kerala has initiated a process
of consolidating all cooperative banks (except urban
cooperative banks) and having one large Kerala Bank.
If the experiment succeeds, it will be another ‘Kerala
model’ worth emulating by other states.
MG Warrier, online comment
WHY DID INFOSYS GO PUBLIC WITH ITS
PROBLEMS?
This is with regard to “What’s going on in Infosys” by
Sucheta Dalal (Moneylife, 14 September 2017). It is
most unfortunate that the private matter of a company
become public. The acts of wrongdoing of a company
have internal (by board) or legal recourse. Then, why
should the seniors of the company go public? The
goodwill of a company is adversely affected when
internal matters are made external ones. Who was at
fault and why has this kind of situation come up? It
is a matter of investigation by the board of directors
and corrective legal measures can be taken. Now, an
older executive of Infosys, Nandan Nilekani, has come
back to take charge. Hope, this matter is closed forever
and the company will do better in all aspects under his
leadership!
M Kumar, online comment
BYGONES IN MEDICAL
PROFESSION?
This is with regard to “Produce Evidence
To Prove Medical Negligence” by
SD Israni. It is a very informative
write-up. I have observed many of my
acquaintances, who have lost their near
and dear ones by the sheer negligence of
the medical professionals, letting off the
guilty. They generally blame their own
fate and support their view by claiming
that the incident of negligence has to be
ignored, as it will not serve the purpose
of the dead coming back to life.
Srinivas Shenoy, online comment
INFORMATIVE ARTICLE
This is with regard to “Your Friendly Bankster” by
Sucheta Dalal and Debashis Basu. What an informative
article and I have experienced such mis-selling. PNB
Metlife proposed to sell me their traditional insurance
product called Endowment Savings Plan Plus saying
it will fetch returns of 7% as reversionary bonus.
However, when I checked their website for previous
results, it was a mere 2.13% and, when I countered
the agent with this information, he simply hung up.
He wanted me to first buy the policy and, in case I
don’t like it, return it in 15 days in which case also the
insurance company would get some selling benefit.
Ravi Kalia, online comment

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in or can be posted to: The Editor,
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11 | 15–28 Sep 2017 | MONEYLIFE

Letters.indd 5 06-09-2017 14:06:33

 Public Interest
Unfair GST Rates: No Lobby
for Ordinary Citizen
W
hile industry has been
in direct touch with the
government to lobby for
concessions in the Goods and
Services Tax (GST), there is no
lobby for the ordinary, tax-paying,
and aspirational citizen of India. In
most democracies, it is the elected
representatives who take up such
issues, but middle-class Indians are
not relevant to politicians, mainly
because we are not an organised
vote bank. The consequence is that
we are paying more for many things.
For several years now, banks, which
earn a fat spread on our money
(difference between their lending
rate and deposit rate paid to us),
have begun to fleece us on every
service that ought to be covered by
the income they earn on our money.
Technology & Social Media as Disaster Management Tools
W hen the skies opened up on
29th August and brought
Mumbai to a grinding halt, the only
wing of the government that earned
the gratitude of ordinary people
was the Mumbai police. The traffic
cops were at every trouble spot, in
their fluorescent yellow rainwear,
patiently guiding people, helping
them navigate flooded streets or
even helping to push a stalled vehicle
to the side, to clear the roads. Like
the people of Mumbai, the traffic
police invariably do a brilliant job
of managing large crowds during
planned events (the annual Ganesh
immersion day, Ambedkar Jayanti
or various public rallies). But their
performance, this time, was also
attributed to two other factors—the
MONEYLIFE | 15-28 Sep 2017 | 12
Public Interest.indd 2
This includes cheque-leaves, ATM
transactions beyond three, cash
deposit charges, debit card fee, SMS
fee, minimum average balance and
many more.
Now, for want of a lobby, our
interest is being neglected when it
comes to GST as well. We learn
from social media that consumers
are being charged anywhere between
18% to 28% GST for repairs of
microwaves, refrigerators, washing
machines, etc. Since repairs of home
appliances are not tax-deductible,
the temptation to ditch formal
service companies and move to cash
payments to informal technicians
will be high. A sensible government
would have kept GST on repairs
at 5%.
Large cooperative housing
electronic eye that was providing
feedback to the control room from
over 4,700 CCTV (close circuit
television) cameras in 1,510 locations
across the city, combined with
the excellence
nce of its social
media handledle
(@MumbaiPolice)
iPolice) which
continually relayed feedback
to and fromm the control
room to people
eople who tagged
it with messages
ssages of
distress.
Wouldn’t
it be
wonderful to
amplify thee
benefits of
technologyy
and
societies (CHSs) are also up in
arms about the 18% GST and the
accompanying paper work. Some
argue that services to members,
by a voluntary committee, cannot
be considered a service at all. But
this issue has not received much
attention, probably because there
is no powerful body to represent
the cause of affluent middle-class
Indians living in CHSs, especially
the larger ones. Remember, CHSs
with revenue of up to Rs10 lakh (in
any financial year) are exempt from
service tax; this further divides those
affected by GST.
Mumbai activist Kamlakar
Shenoy has raised another important
issue about how GST affects
ordinary people. In a letter to the
prime minister, he has pointed out
that there should be no distinction
between air-conditioned (AC) and
non-AC restaurants for levy of GST.
Today, AC restaurants have to pay
18% GST, while non-AC ones pay 
social media for better policing
and other situations? Dr Pradnya
Saravade, additional director general,
Maharashtra police, a already has
interesting ideas
put out some inte
about what can be done. She
says, “There aare reports of
the good pres
presence of the city
police on the roads
r through
the night and their
t work in
keeping the traffic
traf situation
in control,
control despite very
movement of
slow mo
vehicles through
vehicle
waist-deep
waist waters
at many
m places.
The sensitivity and
responsiveness
res
of the Mumbai
Police
P Twitter 
07-09-2017 21:17:18
  12%. In fact, GST on fine dining
hotels was reduced from 28% to
18%, while this helped five-star
hotels, it is still too high for ordinary
AC hotels. “Why can’t an ordinary
person enjoy AC comfort for 30
minutes while satisfying his hunger
AC restaurants
attract 18% GST.
Incredibly, even
business-class
tickets in airlines,
a true luxury, are
taxed at 12% while
economy-class
tickets attract 5%
without being burdened with a hefty
tax?” asks Mr Shenoy. He points
out that an AC is hardly a luxury in
hot and humid Indian cities. More
importantly, Mr Shenoy points out
that the government has made no
 handle during the entire ordeal was
really good and has been much
appreciated by the users. What
does this episode of natural disaster
teach us to do better next time?
”She suggests that images captured
by over 4,700 cameras should be
linked @MumbaiPolice Twitter handle
so that live information can be
communicated to people even faster.
Dr Saravade also suggests
integrating Google maps with the
CCTV network, to get more accurate
information. But Google maps are
already highly accurate. We know at
least one instance, of an IT executive
travelling from Bandra-Kurla starting
at 2pm that day reached Pune by
6pm by faithfully following the roads
suggested by Google maps, although
it was completely different from the
normal, most direct route to Pune
used by him every week. On the other
Public Interest.indd 3
such distinction between AC and
non-AC barber shops, hospitals,
or those selling shoes, clothes,
medicine, gold or anything else.
Even ATMs for withdrawing money
are invariably air-conditioned. So
why this distinction only for eating
houses?
We certainly think Mr Shenoy
has a point in demanding uniform
GST, at least at the lowest end
applicable today. Several activists
who we spoke to concurred with
hand, his colleague, who started half
an hour later, took over seven hours
to reach Prabhadevi, by not relying
on Google maps and getting further
stuck in traffic by experimenting with
different routes. Incidentally, traffic
updates from @MumbaiPolice on
the closing and, later, the opening,
of the Worli sea-link as well as trains
was a huge help to people. Pushing
information faster to the social media
handle by linking CCTV cameras
would certainly be a big disaster
management tool. Communicating
information captured by CCTV
cameras to policemen on the ground
would also help them guide people
and help divert traffic away from
trouble spots and clogged routes.
The fact that most people
have mobiles and their networks
performed admirably was also an
important factor this time.
the view. Tax expert, Nikhil Vadia,
says that a uniform 12% rate for all
restaurants seems fair, since they get
input tax credit and no longer pay
the 6% service charge applicable
earlier. Also, there is a 5% GST
available for small restaurants with a
turnover of up to Rs75 lakh in most
states—the distinction of AC and
non-AC must, however, go.
Dr VG Patel, chairman of the
Consumer Education & Research
Centre of Ahmedabad, a leading
consumer organisation, also agrees
that this issue should be pursued
at least to the limited point that
“AC facilities at any place for any
service or business should not be
treated as luxury or meant for higher
income group and, hence, must not
be charged higher GST… on that
account.” Incredibly, even business-
class tickets in airlines, a true luxury,
are taxed at 12% while economy-
class tickets attract 5%. Let’s hope
the government listens. 
Dr Saravade also suggests posting
GIS map-based visual information
on the police website “to display
information on food/water/shelter
sites across the city.” While citizens
did an admirable job of circulating
such information on WhatsApp
and Twitter, an official source for
updates would be more credible and
reassuring, she says.
Dr Saravade also suggests a
larger deployment of electronic
information boards across the city
which could be used for information
on traffic, trains/buses as well as
food and shelter with appropriate
hashtags. Dr Saravade, correctly,
says people look to the government
for credible information in times
of disaster and technology now
provides “that single-point authentic
source for coordinating an effective
response.” 
13 | 15-28 Sep 2017 | MONEYLIFE
07-09-2017 21:17:46
 Your Money
MUTUAL FUNDS TAX

SEBI Likely To Bring in Rules for Employees’ Fringe

Benefits To Be Taxed
Merger of Mutual Fund Schemes under GST
S EBI (Securities and Exchange Board
of India) intends to introduce rules
that will force mutual funds (MFs) to
proposed by SEBI are implemented.
In India, 42 asset managers
handle more than Rs19.5 lakh crore T he Goods and Services Tax (GST)
will be applicable on any non-
merge schemes in the same investment across 2,000 MF schemes. SEBI has monetary fringe benefit an employee
category, driving long-pending maintained that the number is high gets from his employer, the government
consolidation in an industry that has and is causing confusion among said. Monetary compensation paid to
hitherto ignored informal requests for investors who have to choose between employees is not considered supply and
ending the surfeit of plans. too many similar will not attract GST, the Central Board of
If a fund house products. Excise and Customs (CBEC) said in the
has two equity latest round of clarifications issued in
schemes with the form of frequently asked questions
mandates to (FAQs). The monetary income will,
invest in large- however, continue to attract income-
cap stocks, the tax. “The compensation to employees
asset manager in the form of money is not a supply.
will have to However, fringe benefits are a supply of
merge the goods or services and are liable to tax
investment if not exempted,” the CBEC said. Fringe
products, benefits are transactions in furtherance
once the new of business. “Even if supplied without
rules consideration, the same are deemed
supply” and will attract GST, it said. On
rental income, CBEC said GST will not be
BANKING
levied on the rental income of less than
Deadline for Banks To Set Up Aadhaar Enrolment Rs20 lakh in a year.

Centres Extended to 30th September

REAL ESTATE

P ublic sector and private banks have got a month’s extension to establish Aadhaar
enrolment centres within their premises. The Unique Identification Authority of
India (UIDAI) said that, on the requests of the banks, it has extended the deadline
up to 30 September 2017. The extension has come with the condition of “financial
disincentives for every uncovered
branch per month,” if banks don’t
meet the criteria of establishing
Aadhaar centres in at least 10% of
their branches.
H ome-buyers and lenders will have to
UIDAI said that to ensure
compliance of its directives issued
on 14 July 2017 and in accordance
with the Aadhaar (Enrolment &
Update) Regulations 2016, a financial
disincentive of Rs20,000 per uncovered branch shall be levied on the bank for failing
to adhere to the target of setting up of enrolment and update centres in 10% of its
branches by 30 September 2017.
SBI MD Says Home-buyers
Too Would Have To Bear the
Brunt of Bankruptcy in Real
Estate Sector
bear losses in bankruptcy cases in
the real estate sector, India’s largest bank
SBI (State Bank of India) said. The Bank’s
managing director (national banking group),
Rajnish Kumar, said no one should expect
recovery of their full investment in cases
of losses. Mr Kumar was speaking at the
annual convention of National Real Estate
Development Council, a builders’ lobby
group.

MONEYLIFE | 15-28 Sep 2017 | 14

Your Money.indd 2 08-09-2017 16:38:02

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 Your Money
BANKING

Supreme Court Assures Unitech Buyers–Flat or Refund, Your Pick

T he Supreme Court (SC) assured flat-
buyers in Unitech schemes that it will
ensure relief according to their choice—
getting the money back or allotment
of a flat, according to a report in the
Economic Times. The SC repeatedly
referred to flat-buyers as ‘investors’
and sternly told incarcerated Unitech
managing director, Sanjay Chandra,
that grant of interim bail will depend
on his giving possession of 125 flats in
housing projects in Noida and Gurgaon with the Court Rs5 crore more within ‘Burgundy’ and ‘Amber’ (Noida)—to
to investors on ‘as is where is’ basis. a week. SC asked Unitech to allot 125 establish its bona fides. This has to
The Court placed another condition for flats, which are nearing completion in be done within a week after verifying
interim bail—Mr Chandra must deposit three projects—‘Vistas’ (Gurugram) and authenticity of payments by flat-buyers.

Moneylife

MONEYLIFE
Quiz no

267
QUIZ Answer
Correctly! Win
Another quiz to tease your brain. The answers are in a personalised
sed
this very issue. The winner will be chosen by a lucky clock with an Raykumar Panyam

investmentnt
draw from correct entries and answers published in the Mutual Fund
investments are quote!
issue dated 26th October 2017. Send in your answers to subject to market risks,
read all scheme related
quiz@moneylife.in with the Quiz no., name, address & documents carefully.
telephone number before 4 October 2017.
1. Of all mutual fund (MF) schemes that have declared 5. Of the MF schemes in the Moneylife study that have paid
dividend between September 2016 and August 2017, what dividend, what is the maximum increase in the scheme’s
is the highest dividend as a percentage of the scheme’s net NAV?
asset value (NAV)? a. 19.10% b. 21.39%
a. 37% b. 36% c. 31.26% d. 13.46%
c. 32% d. 16%
6. How many of the 207 open-ended equity MF schemes
2. Which of the following advantages do MF schemes that pay (under dividend option) have not paid out any dividend in
dividends lose out on? the past one year?
a. Capital growth b. Arbitrage opportunities a. 50 b. 60
c. Hedging d. Investing in debt c. 75 d. 100

3. Who is the author of Advice & Dissent: My Life in Public 7. When was the Indian Post Office Act enacted?
Service? a. 1857 b. 1898
a. Dr YV Reddy b. Dr Raghuram Rajan c. 1947 d. 1975
c. Dr D Subbarao d. S Venkitaraman
8. How many countries are covered by Google Maps?
4. Which hacker group unleashed the WannaCry ransomware? a. 100 countries b. 150 countries
a. Federal Bureau of Investigation b. Shadow Brokers c. 190 countries d. 220 countries
c. Alpha Bay d. Charles Ponzi

The answers to Moneylife Quiz-265 are: • 1-a. Securities’ value

In all, 10 readers got all the answers right last time. rises • 2-d. August 2017 • 3-d. Interest rates will fall sharply
The winner of Quiz-265 is Raykumar Panyam from boosting the equity market • 4-b. 153,000 ether • 5-b. 1 August
Hyderabad. Congrats! You win a personalised clock 2017• 6-a. Gary Anderson • 7-b. Video-calling over Internet • 8-a.
with an investment quote! a particular way or method of doing something

MONEYLIFE | 15-28 Sep 2017 | 16

Your Money.indd 4 08-09-2017 16:38:35

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 www.moneylife.in
News & views with a big difference
NDTV wants to ban
mobile phones at its
AGM
New Delhi Television Ltd (NDTV), which
projects itself as the champion of free
speech and public causes, has decided to
bar its shareholders, who are
co-owners, from carrying mobile phones,
bags and other accessories at its annual
general meeting (AGM) scheduled for
21 September 2017 at Delhi. This is,
probably, the first time that a listed
company wants to go to such extremes
to prevent deliberations at the board
meeting from being known to the outside
world, including potential investors. This
will be a bad precedent, which will be
quickly adopted by most companies,
especially those who have a lot to hide.
Normally, the media is allowed to attend
AGMs; it is not clear whether NDTV, a
media house, will bar the media from
attending, or from carrying their mobiles,
recorders and cameras to the meeting.
So far, mobile phones are only barred at
meetings where senior politicians, facing
a security threat, are in attendance and it
causes great irritation. Is NDTV also trying
to discourage investors from attending?

How to use RTI for income-tax
refunds
Although income-tax refunds are now processed
faster, several taxpayers are awaiting refunds or
resolution of other tax-related issues. There are
simple and effective ways to resolve issues by
following systematic process, making a cogent
application and persistent follow up, explained
Rajesh Gada, chartered accountant (CA) and
a certified financial planner (CFP). He was
speaking at a daily clinic organised by Moneylife
Foundation
RERA effect: Builder refunds over
Rs26 lakh to buyer for failing to
hand over possession of a flat
The Maharashtra Real Estate Regulatory
Authority (Maha-RERA), in its first ruling, had
helped a buyer get refund of entire booking
amount of Rs26.15 lakh paid from a developer
for failing to hand over possession of the flat
within stipulated time. This case will help other
buyers seek refund from builders or developers
for failing to hand over possession of their flats

Complicated paperwork and

Aadhaar apps eco-system is
vulnerable to malware: Report
The application eco-system built around
Aadhaar is vulnerable to malware as conflicting
requirements between utility, security,
delegation and profit-making, have created the
perfect environment in the unique identification
(UID) system, says a report from Medium.com
bureaucratic impediments
affecting household savings:
Report
Indian households can benefit greatly by
re-allocating assets towards financial markets
and away from gold. However, high transaction
costs and bureaucratic impediments create
a nuisance factor for households hoping to
engage in formal financial markets, says a
report

EXCLUSIVE VIEWS On issues that matter to you

Mumbaikars should How Maharashtra Guchchi Tales

ask BMC to publish government tried to Venkatesh G
details of all civic Influence Bombay
works on its website High Court on noise
under Section 4 of pollution
RTI Act Sudhir Badami
Vinita Deshmukh

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Web Content.indd 1 08-09-2017 15:16:27

 CROSSHAIRs
Affordable Housing Plans Can Be
Derailed by the Jaypee Mess
I
n 2008, when the global financial crisis hit India,
the government granted massive concessions to the
realty sector to bail it out. Unfortunately, instead
of giving limited support and forcing them to clean up
their act, most bankers colluded with shady builders,
allowing them to expand recklessly. In most cities,
prices raced past what the market could afford and it
remains that way. Through all this, builders continued
to hold up the prices of unsold property. With banks
on the verge of going bust themselves, the music has
stopped; developers are bankrupt and saddled with
incomplete projects.
Caught in the crossfire are lakhs of home-buyers,
who invested their lifetime savings, or took huge loans
to book their dream house in such mega projects. The
government is doing its best to kick-start the market,
but it is now clear that, unless it sorts out the existing
mess, there is unlikely to be a new beginning.
Deepak Parekh, chairman of Housing Development
Finance Corporation (HDFC), and one of the
most respected names in corporate India, says, the
government’s ‘affordable housing’ plan announced in
the 2017 Union Budget has some incredible incentives
for both, real estate industry and home-buyers. Along
with the consumer protection offered by the Real Estate
Regulatory Act (RERA), it could have paved the way
for a clean-up and revival of demand. Mr Parekh says
that a decent-sized 2-bedroom apartment, which also
fits the definition of ‘affordable’ homes, would fulfil
the dreams of a growing middle-class. Unfortunately,
barring a few large and well-run corporate groups, the
industry is in an awful financial mess.
Things came to a head after the government pushed
banks and lenders to step up loan recovery efforts
through the Insolvency and Bankruptcy Code (IBC).
MONEYLIFE | 15-28
27 November
Sep 2017
2014
| 20| 14
Crosshair.indd 2
Exclusive news, the stories behind the
headlines and the truth between the
lines by Sucheta Dalal
IDBI Bank set the ball rolling when it approached
the Allahabad bench of the National Company Law
Tribunal (NCLT) to file IBC proceedings against Jaypee
Infratech for a Rs526-crore default. This subsumes
any other existing litigation against the company.
IBC proceedings against the company would have
left the home-buyers of Jaypee’s projects without any
recourse. They quickly came together to protect their
interest through litigation. The NCLT bench ordered
insolvency proceedings. The government chipped in to
help by amending the Insolvency Resolution Process for
Corporate Persons Regulations, 2016, to allow home-
buyers to file their claim as creditors.
However, treating home-buyers on par with other
creditors could also mean taking a similar haircut on
their investment. The home-buyers approached the
Supreme Court for a stay on the insolvency proceedings
ordered by the NCLT’s Allahabad bench. Although
the Court initially granted a stay and had posted the
hearing for 10th October, it has, since, agreed to hear
IDBI Bank’s plea to modify its order on 11th September.
This has put home-buyers, lenders, the realty industry
and the government on edge. IDBI Bank has pointed
out that the apex court’s stay order put the promoters
of Jaypee, who are squarely responsible for the colossal
mess, back in charge of the company. Home-buyers
are concerned that lenders would think nothing of
compromising their interest again.
An opinion piece in The Financial Express (dated
6th September) alleges that home-buyers’ move to
protect their flats could derail the insolvency process
itself. The claim that Jaypee’s home-buyers could
derail the IBC seems rather silly. This peculiar problem
pertains only to the realty industry, where dubious
developers, on the verge of bankruptcy, have also 
07-09-2017 21:15:47
  short-changed lakhs of home-buyers—many of whom to owning a home are rather different.
have paid over 90% of the cost of their home and have • Home-buyers will stop buying under-construction
not received possession of their flats. One solution projects and not only other realty projects, but the
suggested by bankers is that home-buyers, as creditors, government’s ambitious and politically important
may also “need to take big haircuts if need be.” ‘affordable homes’ plan will not take off.
Consider the enormity of what this would mean. In my view, this mess needs a political solution.
• Home-buyers put their faith in government India is notorious for having super wealthy promoters
processes and in bankers and mortgage financiers heading sick companies. A government, which has
having honestly discharged their responsibility promised to go after black money, has to find a way
of appraising the project, ensuring regulatory to deliver on this promise. The Jaypee issue, which
clearances and monitoring the use of funds. It seems involves around 30,000 persons in 27 projects is
preposterous that they should now be asked to both, complicated and political, and home-buyers are
take a haircut on par with lenders who are really mere scapegoats. Jaypee and other projects at Noida
responsible for the bad loan problem. received exceptional concessions from the Mayawati
• If IDBI Bank and other government including land
lenders agree to give up at a throwaway price. It
anywhere between 50% obviously had a quid pro quo.
to 70% of what they Over the past few years,
are owed (yes, initial the Noida Authority has been
proceedings before the working to sort out issues
NCLT indicate that the involving Jaypee as well as
haircut will be as steep as the Amrapali group which
that), a home-buyer will has 40,000 buyers and is
be told that the Rs1 crore, in a similar financial mess.
he has already paid the Amrapali investors, too, have
builder for her home is joined hands to protect their
now worth Rs30 lakh to investment. According to
Rs50 lakh. This mess needs a political reports, some investors have
• In effect, the least solution. India is notorious for paid as much as 90% or more
empowered person in the
having super wealthy promoters for their apartments while
chain will be made to pay others were due to receive
for the collusion of banks
heading sick companies. A their completed flats only by
for lending recklessly government, which has promised 2021. Since the numbers are
and failing to monitor or to go after black money, has to large and the entire industry
recovery of funds. Builders deliver on this promise will be affected by the
also sank into a deeper reputation damage, industry
mess by refusing to clear organisations are also trying
unsold inventory by cutting property prices which to work out a deal with the government for another
bankers knew and condoned but over which home- developer to step in and complete the unfinished
buyers had no control. projects. As always, they want more concessions. And
• Many are continuing to pay EMIs (equated monthly all this pertains only to Noida. There are similar issues
instalments). Defaulting on a home loan is, in fact, a with very large and high-profile developers in Mumbai
financial hara-kiri, because a default in one’s credit and Pune as well.
record makes one ineligible to get a credit card, According to one estimate, a massive Rs10 lakh
personal loans or even open trading account. crore is stuck in incomplete realty projects whose
• Lakhs of home-buyers all over the country are developers are at a financial standstill. Finding a
trapped in this absurd situation and an order on solution that neither lets off the corrupt builder-
Jaypee Infratech will affect their interests as well. banker-neta-babu nexus, nor inflicts damage on buyers
If home-buyers are hurt, there will be political is admittedly a challenge. One of the ways to do
repercussions too. Until now, political parties have this is for the government to put pressure on Jaypee
ignored concerns of the middle-class, unless there is promoters personally and real estate biggies to step in
a huge public uproar. Those who have followed our and find a solution or ban sales of under-construction
writings would know how callously governments projects. Indeed, as we go to the press, we hear that the
have ignored the plight of those who are struggling government-owned National Building Construction
to get companies to redeem corporate fixed Company will be asked to step in and complete the
deposits. But the emotions and aspirations attached Jaypee projects. 

21 | 15-28 Sep 2017 | MONEYLIFE

Crosshair.indd 3 07-09-2017 21:16:10

 DIFFERENT STROKES SUCHETA DALAL

Stop Mis-selling, Protect White

Money from Being Looted

L
ast week, I caught up with Deepak Parekh, chairman Coincidentally, Ajit Dayal, until recently the head of
of the Housing Development Finance Corporation Quantum Mutual Fund, has already lashed out at what
(HDFC), who is known for his wise counsel and he calls the decline in HDFC’s ‘ethical and transparent
for taking the lead in flagging policy issues that most standards’ in his newsletter called The Honest Truth.
industrialists are hesitant to raise. We had met Mr Parekh Mr Dayal wrote, “HDFC Mutual Fund was party to
to seek his guidance on how to push the government to the persistence (sic) survival of a scandalously profitable
frame basic guidelines for retirement homes. A study distribution mechanism for mutual funds. Commissions
conducted by Moneylife Foundation underlined this to paid to distributors were never disclosed. Worse, rewards
be an important market segment, but the government were given to distributors for selling the most products
needs to put in place a regulatory framework to protect within a timeframe. Greed was effectively encouraged. The
the rights and safety of elders. fact that this was the standard in the industry is no excuse -
Mr Parekh surprised us for the subsidiary of an HT Parekh
by going on to discuss the created firm.” He is especially
mis-selling of mutual fund riled at the directors of HDFC
(MF) schemes and insurance Bank and the HDFC Mutual
policies by banks including the Fund for their acquiescence
continued practice of offering through silence which encouraged
foreign junkets as incentives to a policy of enhancing AUM
agents and distributors. This (assets under management) at any
is an issue that Moneylife has cost. He expects the inheritors
been campaigning against for of HT Parekh’s legacy to lead
years! Mr Parekh said that he the activism to “clean up messy
had discussed his concerns with practices in the distribution
all three financial regulators— Mr Parekh surprised us by system.”
governor RBI (Reserve Bank of going on to discuss the mis- Mr Dayal, probably, has
India), chairman SEBI (Securities selling of mutual fund schemes the right to criticise because
& Exchange Board of India) and and insurance policies by Quantum Asset Management
chairman IRDAI (Insurance banks including the continued led by example and kept away
Regulatory & Development practice of offering foreign from distributors. But, like us at
Authority of India). Another Moneylife (we say no to native
junkets as incentives
surprise! advertising and advertiser-driven
He raised two key issues. ‘content’), he has had to sacrifice
First, MF industry’s practice of pampering distributors growth for ethics. Is it realistic to expect the industry to take
through foreign junkets which are passed off as education on an activist role? Shouldn’t Mr Dayal’s ire be targeted
trips. The lure of these trips to select performers decides at the government and its multiple financial regulators
which scheme is sold to the customer, rather than the whose primary duty is to protect investor interest through
suitability of products or performance of fund houses. The sensible regulation and strict supervision? Ajit Dayal takes
second issue is mis-selling of insurance products (especially credit for regulatory changes that broke the stranglehold of
the sale of insurance as single-premium policies to senior distributors on the MF industry; but Quantum’s policy of
citizens). When we pointed out that banks are the biggest doing away with distributors hasn’t met with thundering
culprits in such sales tactics, he readily agreed and said that success either.
his group (bank, mutual fund and insurance) was just as Mr Parekh’s initiative of raising the issue of mis-selling
responsible as other financial sector biggies. That is why with the regulators is important. The huge gush of money
he wanted regulators to initiate a clean-up. I am sure, into MFs has set the stage for the industry to voluntarily
many will react to Mr Parekh’s comments with scepticism. end the dubious inducements to bank employees and 

MONEYLIFE | 15-28 Sep 2017 | 22

DIFFERENT STROKES.indd 2 08-09-2017 18:54:46

 DIFFERENT STROKES SUCHETA DALAL

 distributors to sell unsuitable schemes. What we need is a internal AUM targets. What is good for the investor or
big shove in the right direction from the financial regulators suitable for her profile is, usually, not in the equation.
to end malpractices. Will they act, now that an industry If FSDC decides to follow the path taken by the UK
stalwart is asking for a clean-up? Let’s look at where we regulator, mis-selling can be stopped very quickly. In the
stand with each regulator. UK, banks, such has Lloyds, Barclays, HSBC, RBS, etc,
• RBI has been the most hypocritical, so far. In February have been forced to pay up close to £40 billion for mis-
2016, Raghuram Rajan said that he had warned banks selling insurance, writes Financial Times. They are likely
of regulatory action for ‘mis-selling’ of third-party to cough up another £500 million before August 2019,
products like insurance. RBI did nothing of that sort. says The Times UK. At the very least, a start must be made
It asked the Indian Banks Association (IBA) to come to stop the most egregious targeting of senior citizens. If
out with an appropriate industry policy regarding the insurance companies are asked to file information on all life
sale of third-party products. IBA operates like a cartel policies, other than term insurance, sold to people over 60,
and will not do anything until pushed. the government would have a quick database of potential
• Dr Rajan also came up with a cosmetic Consumer mis-selling. Cross-checking this with all complaints filed
Charter (which it now admits will never have teeth, by senior citizens, with the banking ombudsman or the
but only articulate guiding principles). Secondly, he said nodal officers of all banks, will probably identify cases of
banks would have an internal ombudsman (IO) to hear mis-selling with 90% accuracy.
consumer complaints. Details about IOs are hard to find If the regulator orders a refund of premium paid in all
on bank websites, although RBI says (in response to an these cases with interest and imposes exemplary damages
RTI application) that all banks on them, it will end the practice
have created these positions. fast enough. The clean-up needs
Their role and responsibility to start at insurance but cannot
is also not known. Thirdly, on stop there. Mis-selling by banks
the eve of his departure, Dr extends far beyond insurance (the
Rajan launched sachet.rbi.org. most egregious) and mutual funds.
in, which is a grievance filing Moneylife had seen cases where
mechanism for all financial relationship managers have opened
regulators. The website is unwanted brokerage accounts
not even updated regularly, for customers, by reusing KYC
apart from occasional, documents, because they earn an
inconsequential additions to incentive from the bank. Bank
some sections. RBI has been the most officials actively accost customers
• In 2016, RBI had also said hypocritical, so far. In and offer personal loans, by
that it wanted the Financial February 2016, Raghuram quoting absurdly low interest
Stability and Development Rajan said that he had rates through misrepresentation.
Council (FSDC) to initiate warned banks of regulatory A blogger writes about how he was
action against mis-selling by tempted by a personal loan offered
banks. But it wants other
action for ‘mis-selling’. RBI at 7.9%; but his own calculations
regulators to raise the issue. did nothing of that sort showed that the lady was quoting
This remains its position even a simple interest, while the actual
under governor Urjit Patel. The only positive action payment, at compounded interest, worked out to 14%.
on this front came in July 2017, following Moneylife There is plenty more.
Foundation’s public campaign when RBI allowed This government has promised us all kinds of
complaints against insurance mis-selling to be heard crackdowns. With less than two years to the next general
by the banking ombudsman. election, it is time it begins to protect people who believed
• In July 2016, the media reported that the insurance its promises. While an attack on black money is laudable,
regulator was actively planning to ban incentives to bank stringent action to protect hard-earned, tax-paid money is
staff—insurers would only be allowed a commission. what the middle-class will really appreciate. 
It has not happened.
• As for the MF industry, fund houses offer quarterly Sucheta Dalal is the managing editor of Moneylife. She was
incentives for select schemes and junkets for selling awarded the Padma Shri in 2006 for her outstanding contribution
specific schemes in a given timeframe that helps their to journalism. She can be reached at sucheta@moneylife.in

23 | 15-28 Sep 2017 | MONEYLIFE

DIFFERENT STROKES.indd 3 08-09-2017 18:55:08

 MUTUAL FUNDS POINTERS

Why Equity Schemes with Dividend

Option Make Little Sense
C
hoosing dividend option in a mutual fund’s equity There are a few schemes which have been excluded here
scheme for the sake of fetching regular income while that showed increase in their NAVs, but sadly these didn’t
obtaining growth in value may sound like a good pay out any dividend.
deal, and may even boost your confidence in the scheme, So, while the idea of getting dividend from a scheme
if the dividends received are better than your expectations. may be attractive, remember, it’s your own money that is
But you need to check closely what to expect. The first table being paid out. What you gain in dividends, you will lose
below lists the schemes which in capital appreciation. So, if
have offered the highest value your objective of investing in
to their subscribers in the form an equity scheme is to attain
of dividends as a percentage some regular income and, at
of the purchase price of the the same time, achieve growth
scheme’s NAV (net asset value). in the principal invested, avoid
All diversified equity schemes, the dividend option altogether
which have declared dividends and choose a growth option
between September 2016 and with a systematic withdrawal
31 August 2017, are considered plan (SWP) to get that ‘income’
for this analysis. factor.
As can be seen, high returns You can choose the
through dividends may seem frequency (weekly, monthly or
attractive, such as getting back half-yearly) and the amount of
37% of your invested money in the first year itself; but don’t income you want from your investment, say 1% of the
be surprised to see your investment value down by 30%. total present value. This way, you don’t have to wait for
Only three schemes have managed to give you ‘income + your scheme to pay out a ‘dividend’. Around 60 of the 207
positive growth’. The second table lists schemes that have open-ended equity schemes under dividend option that we
given an astounding growth in the value of investments, found hadn’t paid out any dividend in the past one year,
and simultaneously offered a decent rate of dividend. while only 10 had paid dividends every month. 

High Dividend, Poor Performance Modest Dividend, Good Performance

Scheme Dividend Dividend NAV Scheme Dividend Dividend NAV
Per Unit as % of Change Per Unit as % of Change
(Rs) NAV (Rs) NAV
JM Equity – Half yearly 6.10 37.43 -30.60% DSP BlackRock Natural 1.7 10.70 31.26%
Resources
Taurus Bonanza Fund 23.35 35.64 -29.35%
L&T Emerging Businesses 1.5 8.45 27.76%
Principal Emerging Blue- 16.60 32.44 -13.54%
chip IDFC Sterling Equity 1.31 7.54 24.96%
Principal Growth Fund 13.54 31.90 -12.16% L&T Midcap Fund 4 10.53 22.81%
Principal Dividend Yield 6.77 26.41 -6.48% IDFC Focused Equity 1 8.01 21.39%
Principal Large Cap 7.10 23.32 -12.02% L&T India Value 1.75 7.77 19.10%
Aditya Birla Sun Life Small 4.46 20.65 10.82% Mirae Asset Emerging 2.5 10.33 16.27%
& Midcap Blue-chip
Aditya Birla Sun Life Mid 6.71 20.51 9.17% Tata Equity P/E (Option B) 4.15 8.57 15.90%
Cap
Templeton India Growth 5 7.67 14.00%
JM Equity – Quarterly 4.40 18.84 -8.71%
Aditya Birla Sun Life Pure 3.23 11.73 13.46%
Sundaram Rural India Fund 3.50 15.89 3.28% Value

MONEYLIFE | 15-28 Sep 2017 | 24

Fund Pointer.indd 2 08-09-2017 15:14:10

 MUTUAL FUNDS FUND FACTS

Best & Worst Mutual Fund Schemes

The best# three and the worst three schemes over the past three years ranked by their
quarterly rolling returns. Premium members get access to a more refined list of top
schemes by logging in to Moneylife Advisory - advisor.moneylife.in
Equity Schemes (Quarterly Rolling Returns)
Large Cap (Category Avg: 3.94%, Sensex: 2.24%) Launch Corpus Avg. Quarterly 1-Year 3-Years** Exp
Date (Rs Crore)* Rolling Returns Ratio
L&T India Value 08-Jan-10 4903.11 6.18% 26.86% 24.70% 2.02%
Tata Equity P/E 29-Jun-04 1628.55 5.78% 24.98% 23.10% 2.31%
Aditya Birla Sun Life Pure Value 27-Mar-08 1455.82 5.33% 25.31% 21.32% 2.46%
UTI Dividend Yield 03-May-05 2752.23 3.06% 14.86% 12.25% 2.12%
ICICI Prudential Select Large Cap 28-May-09 729.91 2.95% 8.39% 11.82% 2.65%
HDFC Large Cap 18-Feb-94 1312.43 2.72% 13.68% 10.87% 2.18%
Multi-cap (Category Avg: 4.04%, BSE 200: 3.18%)
Motilal Oswal MOSt Focused Multicap 35 28-Apr-14 7880.05 7.43% 31.14% 29.72% 2.09%
Aditya Birla Sun Life Advantage 24-Feb-95 4077.08 5.58% 20.76% 22.33% 2.30%
Franklin India High Growth Companies 26-Jul-07 6922.82 5.48% 15.02% 21.91% 2.33%
LIC MF Equity 15-Apr-93 352.84 2.05% 4.62% 8.19% 2.82%
UTI Wealth Builder 17-Dec-08 934.76 2.03% 8.11% 8.13% 2.57%
Tata Regular Saving Equity 23-Jul-97 206.69 2.01% 5.20% 8.05% 1.76%
Mid-and Small-cap (Category Avg: 6.07%, Nifty Midcap 100: 8.65%)
SBI Small & Midcap 09-Sep-09 729.65 8.18% 28.10% 32.72% 2.36%
DSP BlackRock Micro Cap 14-Jun-07 5974.52 7.64% 16.29% 30.58% 2.45%
Reliance Small Cap 16-Sep-10 4261.30 7.38% 33.21% 29.51% 2.02%
IDFC Premier Equity 28-Sep-05 5966.46 4.79% 14.86% 19.15% 2.00%
Axis Midcap 18-Feb-11 1230.06 4.54% 14.29% 18.16% 2.20%
DHFL Pramerica Midcap Opportunities 02-Dec-13 147.80 3.97% 11.94% 15.90% 2.62%

Debt Schemes
Income (Category Avg: 2.37%, Crisil Composite Bond: 2.64%)
ICICI Prudential Long Term Plan 20-Jan-10 2480.01 3.03% 11.24% 12.13% 1.26%
ICICI Prudential Income 09-Jul-98 1854.56 2.81% 9.98% 11.25% 1.86%
DHFL Pramerica Dynamic Bond 12-Jan-12 179.65 2.72% 11.69% 10.87% 1.74%
L&T Triple Ace Bond 31-Mar-97 553.65 2.01% 4.64% 8.06% 1.18%
DHFL Pramerica Premier Bond 21-Jan-03 1511.69 1.96% 7.15% 7.83% 1.58%
Invesco India Bank Debt 29-Dec-12 174.53 1.74% 6.70% 6.96% 0.65%
Liquid (Category Avg: 1.90%, Crisil Liquid Index: 1.91%)
Escorts Liquid Plan 03-Oct-05 182.79 2.02% 6.97% 8.07% 0.90%
Indiabulls Liquid 25-Oct-11 6797.10 1.95% 6.92% 7.82% 0.23%
JM High Liquidity 31-Dec-97 4792.90 1.95% 6.89% 7.78% 0.27%
Reliance Liquid Fund - Cash Plan 07-Dec-01 4866.12 1.74% 5.86% 6.95% 1.06%
HDFC Cash Mgmt Fund - Call Plan 06-Feb-02 108.98 1.68% 5.99% 6.74% 0.31%
L&T Cash 27-Nov-06 468.86 1.67% 5.49% 6.66% 0.78%
# Please note the table represents a comparative performance of mutual fund schemes over a three-year period and it is not a recommendation; * Latest quarter average
assets under management; We have only considered schemes having a corpus above Rs100 crore. **Annually compounded

25 | 15-28 Sep 2017 | MONEYLIFE

Fund Facts.indd 2 08-09-2017 15:04:29

 SMART MONEY R BALAKRISHNAN
‘Professional Management’
Is Not a Panacea
A
company is an entity whose ownership is
represented by share capital. Share capital is
controlled by many, including the ‘promoters’ who
are also the founders, managers and shareholders. When
I buy even one share in a company, I become equal to the
promoter or manager. That is what we all understand, in
theory. Yet, to get some legal rights that can be enforced,
or to question the company, we should collectively own a
minimum of 10% and, if we have to block the company
from doing anything, a minimum of over 25% is needed.
First, let us get real. Irrespective of the percentage
holding, it is the
promoter who
calls the shots.
He decides on
everything,
from appointing
key executives
to auditors to
‘independent’
directors. He takes
ALL the policy
decisions and, in
some cases, they
can be so hands-
on that every small
transaction will go
through them. By
virtue of the largest
shareholding, he has “skin in the game.” But he also does
not distinguish between what is a joint stock company
(where he is accountable to other shareholders) and a
proprietary concern. He is building the company and
growing it for his children, his family. In the process, if
other shareholders get treated unfairly, it does not matter
to him.
The excesses flowing from this kind of thinking are
there for all to see. Shareholders of many well-known,
large, family-owned businesses have lost heavily over the
past two decades. Some people think that a ‘professionally-
managed’ company would be much better. From what I
have seen, in many companies, professionals are in a game
of showcasing better quarterly results so that he or she
can take performance bonuses. The board is supposed to
have ‘independent’ directors who monitor performance
MONEYLIFE | 15-28 Sep 2017 | 26
column_Balakrishnan.indd 2
and can sack the CEO (chief executive officer). We have
seen this happening in some global companies.
However, in India, if we consider a company like Larsen
& Toubro (L&T), the management is very different. The
incumbent stays on till retirement and he will choose the
successor. The board does not matter much. The CEO
builds the business and decides what businesses to diversify
into, etc. He is the king of an empire he does not own.
Capital allocation is his call. Yes, there will be some long-
range planning; but, as the mercenary hiring and firing
takes hold, long-range plans will take a backseat. We
have the example
of L&T where
there was some
strategic planning
for the long term;
but we are also
seeing the sorry
state of affairs in
Infosys, a template
of governance at
one time. Maybe
Infosys is a unique
case; but the
mercenary hiring
of the CEO and
his imprint on key
hiring, etc, is very
visible. So, as a
minority or a small shareholder, you do not have much
leeway. You cannot do much legally. A small shareholder
cannot afford even the litigation costs.
The Indian regulator has realised this and is trying
to make ‘motherhood’ changes in micro management
to favour the small or ‘retail’ shareholder. Apart from
this being questionable, it does not achieve the objective
of actually protecting or helping the small shareholder.
When the regulations were drafted, the influencers have
been a set of people who thrive on the benevolence of
the promoters and the CEOs. Obviously, laws are always
drafted in favour of those with money. And, before we
deride our nation’s regulators, let me hasten to add that
it is no better anywhere else in the world.
We still have well-managed and well-run companies.
Management competence and integrity are, in some way, 
06-09-2017 18:44:24
 SMART MONEY R BALAKRISHNAN
 closely linked. There may be marginal shades of grey; but
I find that good cash flows, high return on equity (RoE)
and consistent growth are hallmarks of good management.
Wise managements know the importance of a clean
image and the rewards that flow from it. Management
integrity fetches a premium valuation. A solid cash flow,
no repeated capital-raising (unless you are a growing bank
or a financial institution), no fear of hostile takeover, etc,
are all hallmarks of good management. I feel strongly about
some great managements issuing warrants to promoters;
but the markets are happy to ignore this trespass. Investors
seem to think, ‘let us not crib them the odd dipping into
the till’.
The recent Infosys boardroom peep show is something
peculiar: a co-promoter who refuses to fade away, a new
and ‘professional’ board whose actions are questionable
and business conditions that are challenging. What is
obvious out there is that there is a crisis of management
that is going to fester. Re-installation of any founder
would amount to a temporary fix and nothing more. The
distinction between the management structure at TCS and
Infosys is remarkable. TCS has a single dominant owner
who is removed from the management. The management
has been professional, with none of the owners getting into
executive roles. This has brought forth talent from inside
and the company is the industry leader. Infosys, on the
other hand, burst like a star on the horizon, with hands-
on promoters. Once they decided to step down, there is
a vacuum. Probably talent from inside was never allowed
to grow, with the founding partners allocating various key
roles for themselves. Instead of a long transition, it was
like an abrupt change.
In the manufacturing sector, companies have survived
bad managers. The first set of promoters has set up great
businesses and, for some time, they can suffer the burden of
What’s Your Bahana for Not Subscribing?
I am not interested in honest & insightful advice on money matters
I never have any problems with banks, credit-cards or insurance companies
I always invest on the basis of tips from friends and brokers
Finance bores me to tears
I would rather spend two year’s of knowledge on one evening of eating out
I always buy from the newsstands
column_Balakrishnan.indd 3
poor managers. Serendipity and lack of complexity work in
favour. In a service sector company, with rapidly changing
dynamics, management quality becomes extremely
important. It would have been different if the founders
of Infosys had left a 20-year vision plan for execution.
They just walked out. Infosys has been a special company
for the investors. Does this crisis mean that we chuck the
shares out of the window? Is it so bad that the business
of the company is headed to extinction?
Maybe we need to look at the financials again. It can
probably be a low-growth company for some more time
until a new fix is administered. However, the company
has a suite of businesses that gives it a solid base. Yes,
the ‘wow’ factor in Infosys may have come down, but
business capabilities have not diminished. The one issue
which, probably, we could debate is whether the company
should have gone ahead with the ‘buyback’ plan. With the
management team’s continuity in question, this decision
should have been left to the next team that will hold the
reins. The decision to adopt the buyback, just a day or
two after the controversies surfaced, raised eyebrows.
The board, being a professional one, surely, should have
deferred this call.
It is unfortunate that Infosys is caught in this imbroglio
at a time it is facing business headwinds. Its growth is not
guaranteed. It is not just a question of rising wages in India
and increasing global protectionism. It is also a fact that
business models will keep changing rapidly and, to adapt
to that, management continuity and long-range planning
seem to be critical. One thing is for sure. The premium
that we gave to the price of this stock is certainly in the
fourth quadrant now.
Disclosure: I own some shares in Infosys Ltd. 
The author can be reached at balakrishnanr@gmail.com
For subscription offers
that are a steal, look for
a form elsewhere in this
issue or our website at
www.moneylife.in
27 | 15-28 Sep 2017 | MONEYLIFE
06-09-2017 18:44:41
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MSSN GB (Insurance 1-3 ).indd 3 16-12-2016 17:29:45


INSURANCE TRENDS
New products, regulations, features and options,
interpreted from your perspective
H e a lt h I n s uranc e
Mediclaim: Do
Insurers Have
Robust Medical
Underwriting?
T he Hindu reported a case of
policyholder of the Varistha
Mediclaim policy of the National
Insurance Company who was
refused reimbursement of medical
expenses on the ground of
pre-existing diseases (PED) of
hypertension and diabetes and that
Fine Print
IRDAI Central Database of
Insurance Agents
T he Insurance Regulatory and
Development Authority of
India (IRDAI) has launched a
central database of all insurance
sales persons in India. The
database, called ‘Envoy’, is
supposed to ensure that all licensed
insurance sales persons working
for insurers and intermediaries,
including entities such as insurance
agents, broker qualified persons,
specified persons of corporate
agents, authorised verifiers of web
aggregators, point of sales persons
(POS), etc, do not work with
multiple insurers and intermediaries
MONEYLIFE | 15-28 Sep 2017 | 30
Insurance.indd 2
the cardiac problems arose from
complications of such PED. Kerala
State Consumer Disputes Redressal
Commission upheld a compensation
of Rs1.57 lakh awarded by a
district consumer forum.
The Commission pointed out
that the certificate issued by the
doctor after medical examination
of the insured had noted such PED
and also diastolic dysfunction
on echo cardiogram. In case any
extra premium was required for
coverage of the PED, the insurance
company should have demanded
and collected it.
While declaration in utmost
in the same business category. With
so many cases of fraudulent selling
by unlicensed personnel to dupe
customers with false promises,
IRDAI’s focus should be to curb
the menace of deceit instead of
trying to ensure that licensed agent
works only for one insurer or
intermediary. Instead of questioning
the insurers who underwrite such
good faith in the proposal form is
important, medical test done by the
insurance company is also a proof
of existing ailments. The insurance
company cannot pretend to be
ignorant of the medical test reports.
The customer has done the medical
tests at the location of the insurer’s
preference; hence, the insurer needs
to crosscheck the reports with the
proposal form and get it updated
from the customer, if necessary.
It will help to complete robust
underwriting. Any new revelation
in the report should be updated in
the proposal and policy document,
to clearly define the PED.
Unfortunately, there have
been cases wherein an insurance
company may keep quiet until the
claim is lodged. The policyholder
keeps paying premiums over the
years only to get claim rejection
under the garb of non-declaration
of PED. It is unfair on the part of
the insurance company to feign
ignorance about PED issues evident
from medical test reports. The
insurer should use the medical 
fraudulently sold policies, IRDAI is
interested in licensed agents do not
work with multiple insurers and
intermediaries.
No Health Fund for Senior
Citizens
A ddressing a seminar on
“Insurance the Saviour in
Healthcare, The Horizon and
Best Practices” under the aegis
of PHD Chamber of Commerce
and Industry, secretary, ministry
of health and family welfare, CK
Mishra, ruled out the possibility
of setting up of ‘Health Fund’
in the immediate future. This is
due to experience of the Centre
which reflects that the health fund
created for senior citizens has not
been appropriated as intended 
06-09-2017 19:37:22
 INSURANCE TRENDS
 tests to ascertain the PEDs and,
if necessary, collect additional
premium as underwriting loading.
Moneylife had written about
Star Health’s claim rejection case in
September 2015 Cover Story -
“6 Mediclaim Blunders
To Avoid” (http://tinyurl.
com/ybq4fjhj). The heart
ailment was revealed
during the medical
examination which was
evident from the noting
in his report. The medical
examination report
also confirms ‘TMT
STRONGLY POSITIVE
FOR INDUCIBLE
ISCHEMIA’. When the
first policy was issued,
NIL was mentioned
in PED column. This
matter was brought to the notice
of the agent. The insured was
assured by the agent that necessary
rectification will be effected and
that note has been made about the
medical condition. A claim made
in fifth year was rejected on the
 and desired in the past and,
therefore, the government is not
contemplating it any more.
Unclaimed Insurance Benefits To
Go to SCWF
J ust like unclaimed bank accounts,
there are crores of unclaimed
amounts with insurance companies.
Around Rs6,700 crore was lying
unclaimed with Indian private
and public insurance companies
at the end of 31 March 2014. The
amount, payable as death claim,
maturity claim, survival benefit,
premium due for refund, premium
deposit not adjusted against
premium and indemnity claims
that have remained unclaimed
beyond six months are defined
as unclaimed insurance amounts.
Insurance.indd 3
grounds of concealment of medical
condition and suppression of facts.
The case shows both the
apathy of the agent who fooled the
customer about PED declaration
and also the customer’s lack of
understanding. It also casts a
shadow on the insurer who did the
medical tests which had revealed
the medical condition. It is, indeed,
baffling that PED is not specified
in the policy when medical tests
clearly show it. The lesson is: You
IRDAI has asked all insurers having
unclaimed amounts of policyholders
for a period of more than 10
years as on 30 September 2017 to
transfer them to the Senior Citizens’
Welfare Fund (SCWF) on or before
1 March 2018.
Savings for Child Education Is a
Worry
A survey conducted by Birla Sun
Life Insurance Company finds
uncertainty of life a worry among
the respondents. The triggers for
worry lie in priorities: providing
for child’s education (35%), live a
long, healthy and active life (32%),
buy a dream house (22%), improve
standard of living (22%) and live
debt-free (22%). The leading causes
of uncertainties are stability of jobs
will have to help yourself and
ensure your proposal has all the
declarations and these also appear
in the policy document. If not,
make a written complaint to the
insurer or even cancel the policy
as it is worthless
without proper PED
declarations.
You need to
keep a copy of the
proposal received
by the insurer and
not just the copy
of what you had
submitted. It may
be difficult for you
to fathom; but there
are devious agents
who tear off your
PED declarations and
substitute them with
a blank PED declaration so that the
insurer will not reject the proposal.
After all, the agent gets commission
only if the insurer underwrites
the proposal. If there is a serious
ailment, the insurer is likely to
reject the proposal. 
and income as well as increase of
health-related issues and medical
costs. Moneylife’s view is that, for
children’s education, one should
avoid buying child plans from life
insurance companies. It will only
add to your worry rather than
reduce uncertainty. Don’t fall prey
to the slick advertisements pushing
for child plans from life insurers. 
31 | 15-28 Sep 2017 | MONEYLIFE
06-09-2017 19:36:40
 The Insolvency and Bankruptcy Code will work only if crooked corporate debtors,
bankers and insolvency players don’t game it. Has the rot already started, asks
Dr Rajendra Ganatra. IBC will not lead to a drastic improvement in the bad loans situation

I
ndian banks, particularly the public sector banks
(PSBs) including SBI and its associates, have
been victims of very high non-performing assets
(NPAs) and other distressed assets camouflaged
as restructured assets. The malaise has been
compounded by the extremely slow legal process for
recovery. PSBs’ gross NPAs and restructured assets
stood at dangerous 18.5% of total loan outstanding
as on 31 March 2017 (see graph on the next page).
The asset quality is deteriorating rapidly, as is evident
from worsening of asset quality indicator (AQI) of the
Reserve Bank of India (RBI), from 0.68 in March 2016
to 0.90 in March 2017. This calls for drastic measures to
avert a banking crisis. Towards this end, the seven-point
Indra-dhanush framework for revamping PSBs was
announced in 2015. However, after adoption of the
easier part, the framework has been forgotten and NPA
resolution under the Indian Bankruptcy Code, 2016
(IBC) is being treated as a panacea.
Robust Legislation
Under IBC, the process to fix financial distress has to be
mandatorily completed in a maximum of 270 days after
admission of an application by National Company Law
Tribunal (NCLT) for insolvency resolution, failing which,
the corporate debtor has to be necessarily liquidated.
The creditors can practically decide to liquidate the
company in less than two months of admission of the
insolvency application. In other words, certainty and
speed of resolution through restructuring or liquidation
is the hallmark of IBC, unlike previous credit recovery
legislations.
While the financial creditors can file for insolvency
resolution under Section 7 of the IBC, the operational
creditors and the corporate borrowers can file under
Section 9 and 10, respectively. Upon admission of the
application, the borrowing company’s board of directors
is suspended and the control passes on to the insolvency
resolution professional who must execute the mandate
in terms of IBC and under the guidance and supervision
of the committee of creditors (COC). The resolution
professional, initially, joins as interim resolution
professional (IRP) for 30 days and, thereafter, may
continue as regular resolution professional (RP) or be 

MONEYLIFE | 15-28 Sep 2017 | 32

Cover Story.indd 2 08-09-2017 19:13:48

 COVER STORY
PSBs: % Gross NPA & Restructured Loans
to Gross Advances
20% 18.5%
17.2%
16%
12.7%
12% 10.6%
8.9%
8%
4%
0%
2013 2014 2015 2016 2017
 replaced by the COC. While the COC drives the decisions
about the restructuring or liquidation, the adjudicator’s
role is limited to compliances with the provisions of IBC
and dealing with questions of law.
Hence, this legislation will not degenerate like Sick
Industrial Companies Act (SICA), The Recovery of
Debts Due to Banks and Financial Institutions Act
(RDDBFI) and The Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest
Act (SARFAESI) each of which had created endless
delays.
IBC: Restructuring / Liquidation
Under IBC, the IRP/RP in control of the company’s
operations must protect and preserve the value of
the property of the corporate debtor and manage its
operations as a going concern while he presents two
major deliverables for insolvency resolution. The first
deliverable is the information memorandum (IM) under
Section 29 of the IBC and Clause 36 of Corporate
Insolvency Resolution Process (CIRP) regulations. The
IM is expected to carry complete details of the financial
position, operations, shareholding pattern, company’s
guarantee obligations, litigations and other relevant
information.
The second deliverable is the resolution plan (RPlan),
which the RP must catalyse through transparent bids
for submission of RPlans under Section 30 of IBC by
the resolution applicants (RAs). Efficient due diligence
by RAs can be facilitated by comprehensive and credible
IM which must go beyond the mandatory requirements
in terms of IBC and CIRP, and make time and data
available to the bidding RAs for efficient due diligence.
If the RP does an efficient job, the process can lead to
rigorous bidding and acquisition of the corporate entity
by an RA, and maximised recovery for the lenders. In
Cover Story.indd 3
spite of catalysing significant interest of the RAs, if an
acceptable RPlan does not emerge, COC can liquidate the
assets, with RP acting as liquidator. Since the RP works
under COC’s supervision, the liquidation process is also
speedy. As IBC in India focuses on competitive bidding,
Section 30 auctions can also catalyse acquisitions from
operating buyers and financial investors. Since auctions
of NPAs under 15:85 structures to asset reconstruction
companies (ARCs) have tapered down, it is expected
that, for survival and growth, ARCs would be in fray
with competitive RPlans to take over the distressed
assets.
The major challenges in IBC process are: how the
IRP/RP can ensure that the operating unit continues
with normal operations, understand the business and
catalyse an optimum RPlan. Acquisition entails rigorous
due diligence and bottom-up analysis by the bidders. To
make the auctions within statutorily limited period of
180-270 days under IBC successful, the RP must display
the skill and speed comparable with that of an investment
bank. The skill requirement increases exponentially with
the size of the corporate creditor. Limitations of RP
can result in adoption of the process for its sake and
acceptance of sub-optimal RPlan. The process is likely to
see significant change, based on experience.
Banks’ Response to IBC
As the IBC process is time-bound and under
COC’s control, banks were expected to adopt IBC
enthusiastically. However, the banks’ response to IBC
has been muted.
So far, seven benches of NCLTs have
disposed of 22 applications (Section-7: 13,
Section-9: 8 and Section-10: 1) for an amount of
Rs14,423.60 crore, 97.5% of which is accounted for
by two financial institutions which were not banks.
RBI’s guidelines for 100% provisioning on IBC-driven
accounts in two years causes disincentive for banks for the
adoption of IBC for new NPAs. However, there is no such
disincentive for NPAs that are two or more years old. Yet,
banks do not seem to have adopted IBC enthusiastically
due to low liquidation values expected under the IBC
process and the resultant provisioning for the entire asset
shortfall, aside from possible accountability issues. No
wonder, an ordinance amending Banking Regulation
Act, 1949 was passed in May 2017 authorising RBI to
issue directions to banks for the speedy resolution of
distressed assets or adoption of IBC.
Simultaneously, RBI’s circular of 5 May 2017 laid
strong emphasis on banks adopting restructuring under
the existing RBI schemes within the prescribed timelines,
or face penalty. 
33 | 15-28 Sep 2017 | MONEYLIFE
08-09-2017 17:42:21
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 COVER STORY

 IBC Restructuring: A Double-edged Sword? with the resolution of 12 large accounts, with total debt
Will such moves work? Resolution of distressed account of Rs2.50 lakh crore (25% of gross NPAs), put under
entails trimming liabilities to a serviceable level so IBC. If the solitary NCLT RPlan of Synergies Dooray
that operations remain financially viable. The critical Automotive Limited approved by NCLT in August 2017
parameter which separates restructuring from liquidation is a precursor to NPA recovery levels from IBC process,
is the difference between the restructured loan amount it is worrisome for the banking sector. Let’s see the
over the estimated liquidation value of the assets, and the astounding features of Synergies RPLan.
sacrifice that the lenders are willing to make. The extent Synergies Dooray made an application to NCLT
of lenders’ acceptable sacrifice in restructuring has been Hyderabad under Section 10 of the IBC. RPlans under
left to the empowered group of banks for corporate debt Sction 30 of IBC were submitted by the three RAs The
restructuring (CDR) and corrective action plan (CAP) COC composition as formed by the RP and accepted by
structures under joint lenders forum and other structures NCLT was as follows:
introduced by RBI periodically since 2002 when CDR
was introduced. RA Paid-up Capital Remarks
But CDR/CAP have largely failed. This was due (as on date)
to the inability of promoters to meet restructuring SMB Ashes Not Available
parameters. The recent schemes, viz., strategic debt Industries
restructuring (SDR), introduced in June 2015, and Synergies Rs23.11 Cr • Group/ holding
scheme for sustainable structuring of stressed assets Castings Ltd (31/3/2016) company of
(S4A), introduced in June 2016, have also failed, since corporate debtor
the distressed companies did not have sustainable debt • Significant debt
availed from banks
of even 50% prescribed in the schemes. This establishes
Suiyas Industries Rs0.25 Cr • Too small to bid for
recoverability of less than 50% of the loan. IBC is free
P Ltd (31/3/2016) such a large borrower
from such parameters and can even provide for waiver
of past and future government dues in terms of clause
37(1)(j) of CIRP regulations. This flexibility and accent on The COC rejected the RPlans of the first two RAs
competitive RPlans has the potential to catalyse optimum and accepted that of SCL, a promoter group company.
price discovery and give to the lenders the maximum The RPlan involved payment of a small fraction of the
possible recovery, notwithstanding significant write-offs. debt outstanding.
The key, however, lies in transparent and competitive
bidding by multiple RAs. Restricted and opaque bidding Creditors Debt % Voting Share
can induce the corporate borrower’s moral hazard and in COC
result in heightened losses to the lenders. Edelweiss ARC Ltd (EARC) Rs86.92 Cr 9.84
Will the sale under IBC improve recoveries from Alchemist ARC Ltd (AARC) Rs122.06 Cr 13.83
NPA signifi cantly beyond the current 10.3% (see graph Millennium Finance Ltd (MFL) Rs673.91 Cr 76.33
below)? It is a matter of months before the figure emerges Synergies Castings Ltd (SCL) Rs89.26 Cr 0.00
Total Rs972.15 Cr 100.00

Recovery from NPAs

In effect, the RPlan delivered to secured lenders just
20% 22% 4.8% of the debt outstanding. As a precedent, this is very
18.4% damaging to banks. EARC contested the classification
16%
of MFL as a financial creditor and abstained from
12% 12.4%
voting at the COC meeting which accepted the RPlan
10.3% with 90.16% vote. EARC argued that the loans from
8% five banks bought over by SCL were assigned to MFL
through three assignment deeds. Since SCL was a related
4% party, the debt assigned by it to MFL could not be treated
as financial credit (this was not akin to assignment of
0% receivables in normal course of business). Besides, even
2012-13 2013-14 2014-15 2015-16
the assignment deeds were not executed as per the law,
since the assignee (which had a paltry paid-up capital 

MONEYLIFE | 15-28 Sep 2017 | 36

Cover Story.indd 4 08-09-2017 17:38:22

 COVER STORY

RPlan for Synergies Dooray

Creditors Debt Amount as per % of Debt # Present Value as % of Debt
Outstanding RPlan Outstanding per RPlan Outstanding
EARC Rs86.92 Cr Rs4.89 Cr 5.6 Rs4.19 Cr 4.8
AARC Rs122.06 Cr Rs6.86 Cr 5.6 Rs5.89 Cr 4.8
MFL RS673.91 Cr Rs37.91 Cr 5.6 Rs32.52 Cr 4.8
SCL Rs89.26 Cr Rs3.51 Cr 3.9 Rs2.49 Cr 2.8
Total Rs972.15 Cr Rs53.19 Cr 5.5 Rs45.10 Cr 4.6
# Discount rate: 10% pa. Figures in shaded columns are calculated

 of Rs65.94 lakh as on 31 March 2016) had not paid
consideration for the assignments. NCLT rejected
EARC’s appeal on 2 August 2017. EARC has appealed.
Interestingly, the RPlan allowed netting of MFL’s unpaid
assignment value of Rs37.91 crore against interest-free
instalments for three years after a one-year moratorium.
Let’s look at what this means.
A buyer of non-performing loan expects a significant
return from such risk-proven assets and would price
them at the present value of anticipated cash flow
discounted at the required rate of return. Assuming a
modest required return of 20%pa, the present value (PV)
of the above-mentioned cash flow to MFL works out to
just Rs24.98 crore, only 66% of the assignment value of
Rs37.91 crore. In other words, MFL accepted an RPlan
with huge loss within months of executing assignment
deeds. However, this loss is notional, since the receipts by
MFL were to be fully netted with his payables in terms
of the RPlan. So, the debt assignment to MFL reflected
zero, or negative, consideration, having regard to the
transaction costs.
Following EARC’s objections, the RPlan has been
reportedly modified and requires MFL to pay the debt
assignment value first and recover later in terms of RPlan.
In such a case, based on discount rate of 20%pa, the PV
of receivables works out to around Rs29 crore reflecting
a loss of Rs8.92 crore to MFL within months of the
transaction. It is inconceivable that a finance company
will settle for such losses without a murmur sans a
sweetheart deal to compensate for such accommodation
through a carefully structured invisible deal.
IBC is of help to genuine as well as crooked corporate
debtors. Where there is a likelihood of a significant
asset shortfall, banks have no incentive to adopt IBC.
In such cases, for a promoter whose account has turned
non-performing due to factors beyond his control, IBC
provides a vehicle for speedy discharge. IBC permits
avoidance of undervalued or extortionate credit
transactions up to two years preceding the insolvency
commencement date. A crooked promoter, who has done
such transactions earlier than two years, can adopt IBC
for a speedy exit or continued control with substantial
haircut by banks.
The role of RP is, therefore, crucial for maximising
value for the banks from the distressed assets. The
Synergies matter, as and when disposed of, would 

Present Value Computations (Rs Crore)

Present Value on Repayment as per RPlan (Interest-free)
Lenders / RP 24/11/2016* 09/08/2017** 31/8/2017 31/3/2018 31/3/2019 31/3/2020 31/3/2021 31/3/2022
RP 0.49 50 - - - - -
EARC 4.14 - 1.63 1.63 1.63 - -
AARC 5.89 - 2.28 2.28 2.28 - -
MFL 24.98*** 32.52 - 12.63 12.69 12.63 - -
Deferred ST 2.49 - - - 1.17 1.17 1.17
Statutory Dues .019 - - - 0.12 0.12 0.12
Other Liabilities 0.008 - - - 0.004 0.004 0.004
* Date of assignment of loans from SCL to MFL ** Date of NCLT order *** Discounted at 20%

37 | 15-28 Sep 2017 | MONEYLIFE

Cover Story.indd 5 08-09-2017 17:38:42

 COVER STORY
Bankruptcy Resolution: Global Experience
I n the paper, titled “Cashing Out: The Rise of M&A
in Bankruptcy”, Stuart Gilson, Edith Hotchkiss, and
Matthew Osborn studied a large sample of 350 filings
for Chapter-11 bankruptcy protection in USA during
2002-2011, significant acquisitions under bankruptcy
auctions (table-1).
Table-1
Category Number %
Sold as going concern
- To financial investors (PE/ hedge 30 8.6
funds, etc.)
- To operating buyers for synergy 45 12.9
Adopted reorganisation plan 237 67.7
Liquidated and wound up 38 10.9
Total Sample 350 100.0
Overall, 52.6% of the companies sold some or
all the assets for cash, indicating significant role of
mergers & acquisitions (M&A) in Chapter-11 process.
The auctions involved multiple biddings. The secured
creditors catalysed the asset sale and use of M&A,
particularly for the going concerns in many cases.
Secured creditor recoveries often exceed 50% in USA.
 set a precedent for the transparency and quality of
transactions, and conduct of intermediaries and COC,
etc. A look at some of the advertisements inviting RPlans
shows opacity in the process to thwart competition.
This would mean banks living with the same promoters
or their proxies with maximum haircut or head-cut!
If that is the case, a robust legislation like IBC will be
undermined.
India has the dubious distinction of being the slowest
in credit recovery as is evident from World Bank study
(See graph Average Recovery Time). This has resulted
from extremely tardy process in SICA (Sick Industrial
Companies Act) /BIFR (Board for Industrial and
Financial Reconstruction) since repealed, and RDDBFI
and SARFAESI Acts. With creditor-driven IBC, India is
expected to substantially improve the recovery duration.
While this will minimise asset impairment and enhance
recovery, it cannot improve the inherent asset quality,
since low NPA recovery of PSBs is primarily due to asset
overstatement which has often come to light in the past.
It is unlikely that the Synergies recovery figure would
prove to be an outlier. My sense is that IBC will speed
MONEYLIFE | 15-28 Sep 2017 | 38
Cover Story.indd 6
Recovery from NPA
100%
80%
60%
40%
20%
0%
Japan OECD East Asia & South Asia India
Countries Pacific Region Region
Under the UK bankruptcy code, 50% of the
distressed companies were sold as going concerns
and over 40% liquidated piecemeal. The liquidation
process gets concluded in about 1½ years and delivers,
to the lenders, recovery of about 75%, with recovery
cost of about 15%, of the asset value. Overall, 75% of
the distressed assets undergo bankruptcy and the rest
are restructured, reflecting the lenders’ preference for
restructuring viable businesses. India’s situation was
among the worst.
up and may improve the recovery significantly, it will
not resolve the NPA problem which has resulted from
PSBs’ management and organizational inadequacies
Assuming an optimistic recovery of 22% (FY12-13)
from NPAs and restructured assets of Rs11.50 lakh
crore as on 31 March 2016, the government will have
to recapitalise PSBs by Rs8.97 lakh crore in short to
medium term due to growing NPAs, notwithstanding
provisionings. How will the epoch-making IBC reduce
this? To save banks from the coming crisis, it is necessary
for the government to go beyond IBC urgently, even as
it tries to plug attempts to game it. To begin with, the
government should immediately implement PJ Nayak
committee’s recommendations by professionalising
PSB top management and boards, apart from reducing
the government stake below 50%, and removing
compensation and operational constraints. Subsequently,
PSBs must be privatised. Right now, the policy-makers
and investors are complacent that the IBC will speedily
shrink the mountain of NPAs and also prevent a growth
of bad loans. This may be misplaced optimism with
dangerous consequences. 
08-09-2017 17:39:07
 UNBIASED INFORMATION:
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MSSN - Unbiased.indd 1 15-12-2016 18:10:29

 StockWatch Stocks and sectors that catch our eye

S I N T E X P L AS T IC S water transportation, sewage water ater transportation,

sewage treatment systems, etc. In n retail custom
Interest Cost moulding, Sintex manufactures
manufactu water storage solutions,
sub-ground structures, false ceilings,, d doors and cabinets
Devouring
ng Profits aimed at low-cost and mass housing solutions.
Sintex started prefabricat
prefabricated structures business

S
intex Plastics Technology
echnology (SPT) recently demerged in 2000. The prefabricated sstructures are completely
from Sintex Industries
ustries which was knocked-down kits that can be assembled at the site
into two businesses—textiles
sses—textiles by trained professionals ther
thereby minimising wastage.
and plastics. The idea a was benefits of prefabricated
The benefit
to unlock the value of the structures position Sintex as the
structure
plastics business and preferred
prefer solution in India’s
give it a clear focus and effort towards strengthening
identity. SPT has two o social infrastructure such as
subsidiaries, viz., Sintex
tex toilet blocks,
blo healthcare centres,
BAPL and Sintex Prefab fab police ch
chowkis, labour camps
Infra. The custom moulding
oulding and temporary
temp shelters, among
business is operated under others. Sintex
Sin started the monolithic
Sintex BAPL while the he prefab, construction business in 2007. It
constructi
infrastructure and monolithic
onolithic involves fafabrication and casting
construction are operated
rated of four wawalls and slabs together
under Sintex Prefab Infra. by pouring cement concrete into a
SPT has operations across
cross nine while using nominal quantity
mould, whi 
countries--16 manufacturing
acturing
locations across Europe,
ope, two in
the United States, two in i Africa
Af i and d 16 Margin Comparison
across India. Now that the dust has settled on the 25%
demerger and both the companies are listed, is Sintex
Plastics worth looking at for the long term? 20%
Sintex’s custom moulding business can be
15%
categorised under industrial and retail sector. Industrial
custom moulding has applications in automotive, 10%
aerospace, electrical, mass-transit, off-the-road vehicles
and medical imaging products. The major driver for 5%
market growth is the rise in demand for electrical,
0%
wind energy, pipe and tank applications due to increase OPM% NPM%
in the number of government projects like smart cities Sintex Plastics Supreme Industries Wim Plast
development, eco-friendly energy generation, fresh

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 Economy’s Prowess database.

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

MONEYLIFE | 15-28 Sep 2017 | 40

StockWatch.indd 2 08-09-2017 17:01:41

 STOCK WATCH

 of metallic As can be
reinforcement Company MC/Sales OPM NPM RoCE D/E Ratio P/E Ratio seen, Sintex is
bars to form Sintex Plastics 0.97 20% 7% 13.2% 1.31 13.82 doing much
a single multi- Supreme Industries 3.32 16.39% 8.5% 38% 0.18 41.77 better than its
storeyed peers at the
Wim Plast 4.65 23.67% 13.6% 31.76% 0 34.22
building. operating level
The business but, due to high
is certainly booming. Its FY16-17 revenues were debt, much of the profits are consumed by interest cost.
Rs6,029.7 crore, a 52% jump over FY15-16 revenue While its operating profit is 20% of sales, interest cost
of Rs3,958 crore. Its operating profit was Rs782.8 as a percentage of operating profit is 22% compared
crore and net profit was Rs419 crore. The return on to just 3% of Supreme Industries. This is one of the
capital employed (RoCE) was a modest 13.2% and several reasons why its price-to-earnings ratio (P/E)
return on equity (RoE) 13.5%. The operating profit is much lower than that of Supreme and Wim Plast.
margin is 20% while net profit margin is 7% which is The debt is in the form of foreign currency convertible
due to the high debt the company has on its balance bonds; hence, the risk of equity dilution also remains if
sheet. Compared to its peers, Sintex Plastics is highly bondholders exercise their right to conversion.
leveraged with debt:equity ratio of 1.3, which has led Wim Plast’s P/E is multiple of 34 because of higher
to the company not receiving higher valuation like that net profit margin and zero debt. The key factor to
of its competition such as Supreme Industries and Wim watch out for in case of Sintex is a gradual reduction
Plast. The table above gives a comparison of various in debt which will help the company receive higher
factors with competitors valuation. 

S H I VA M A U T OT E C H include: BOSCH, DENSO, Maruti Suzuki and India

Nippon etc.
Turning Around? For the past few quarters, Shivam has been doing
badly—sales growth had come down and margins

A fter two successive quarters of losses, Shivam

Autotech has made Rs2 crore profit in the June
quarter. Is it on the verge of a turnaround? Shivam is
an auto-ancillary company of the Hero group, based
in New Delhi, with manufacturing operations in
Gurugram, Manesar and Rohtak (Haryana),
Haridwar (Uttarakhand) and Bengaluru. It
is one of the largest manufacturers of
transmission gears and shafts used
by two-wheeler companies,
auto-electrical components,
steering components and
various precision engineering
components. The Bengaluru
and Rohtak plants have
been commissioned recently
with a capital expenditure of
Rs200 crore. These two plants
have been set up to manufacture
import substitute products, such as
alternators, starter motors and electric
steering components. Most of these are
meant for four-wheelers. Hero MotoCorp accounts for
nearly 78% of company’s revenue which eliminates any
volatility in revenue. Other customers of the company
contracted. However, things have looked up in the
June quarter. Year-on-year sales growth was 16.9%,
following 3.3% for December 2016 and just
1.5% for March 2017. With growth
picking up and product changes, can
we expect better margins at least
at the operational level in the
coming quarters, though
interest cost will keep the
net margins subdued until
the debt comes down. The
key to Shivam’s future is the
how quickly it starts sweating
the assets of Bengaluru and Rohtak.
Higher capacity utilisation of these
plants will mean multiple positives.
One, much higher contribution to
profits because these plants produce
higher-margin products. Two, a move to
a higher growth four-wheeler sector. Three,
opening up of the export market for these new
products. Better utilisation of these assets is critical for
Shivam’s shareholders because the company has taken
more than Rs200 crore debt to set up the new plants.
This has brought down the interest coverage ratio of 

41 | 15-28 Sep 2017 | MONEYLIFE

StockWatch.indd 3 08-09-2017 17:03:01

 STOCK WATCH
Asset Turnover Ratio
1.76
1.52
1.28
1.04
0.80
Mar-07 Mar-12 Jun-17
 the company from 2.75 (FY14-15) to 1.65 (FY15-16)
and 0.5 (FY16-17). The graphs show operating margin
and interest coverage ratio for the past six quarters.
Given the signs of improvement and operational
SOBHA
Developing Interest
R eal estate stocks have shot up over the past six
months, much to the surprise of many (including
Moneylife) who believed that, post-demonetisation,
attack on cash-based transactions and under the regime
of Goods and Services Tax
(GST), one of the biggest losers
will be the real estate sector. The
buoyancy in the real estate sector
is partly due to the ambitious
scheme, Pradhan Mantri Awas
Yojana (PMAY), under which the
government has set in motion
the goal of achieving housing for
all by 2022. Under the scheme,
a buyer with income of up to
Rs12 lakh can buy a house
of 90 square metres and avail
interest subsidy of 4%. A person
with income up to Rs18 lakh
can buy a house of 110 square
metres and avail 3% interest
subsidy. Those with income of up to Rs6 lakh can avail
an interest subsidy of 6.5% for a house of 60 square
metres.
Our discussions with Deepak Parekh, chairman
of India’s largest home loan company, Housing
MONEYLIFE | 15-28 Sep 2017 | 42
StockWatch.indd 4
Operating Profit Margin
17.50%
15.50%
13.50%
11.50%
9.50%
7.50%
5.50%
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
efficiency, FY17-18 revenues can grow in double-digits
while the company also repays debt. If the new assets
start yielding revenues, the stock may do well over the
medium term. 
Development Finance Corporation (HDFC), indicated
that real estate companies are excited about this
opportunity because it is a truly attractive scheme for
home-buyers as well as builders. If it does turn out to
be so, some of the better-run real estate companies are
likely to do well. One such company is Sobha Limited,
headquartered in Bengaluru, with a presence in 26
cities across 13 states. Since inception in 1995, it has
completed 406 projects, own
as well as contracted projects,
with a total developed area of
86.73 million square feet. It is a
rare real estate company which
has a training academy, viz.,
Sobha Academy, for training all
employees, ensuring that they are
abreast of the latest developments
in their fields of work.
Sobha has two divisions.
Its contractual segment, which
works for large companies like
Infosys, Biocon, Bayer and
Taj Hotels, provides end-to-
end solutions starting from the
conceptualisation of a project
to completion with civil, mechanical and electrical
engineering, plumbing, interiors, glazing, metal works
and landscaping. Sobha’s manufacturing vertical
provides the raw materials for construction. It has an
interiors division with one of the largest woodworking 
08-09-2017 17:03:39
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set up a non-profit trust, Moneylife Foundation, which is now the largest savers’ and investors’
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MSSN Handholding.indd 1 15-12-2016 18:07:06

 STOCK WATCH
 factories in the country, a glazing and metal works
factory and a concrete products division. In an attempt
to diversify further, it has also ventured into the retail
space with the launch of ergonomic spring mattresses
under the brand name Sobha Restoplus.
Affordable Housing
PMAY is one of the biggest drivers of its business. In
a recent media interview, vice chairman and managing
director of Sobha, JC Sharma, said that “the definition
of carpet area up to 60 square meters, to the best of
my knowledge, will ensure that all developers should
be having this kind of a product because it will bring
down their construction cost, improve their volume
and give them the income-tax benefits as well.” He
added that the company is doing two roadshows at its
two projects in Bengaluru
along with HDFC,
supported by National Revenue June 2016 Revenue June 2017
Housing Bank (NHB), for Quarter
1%
the Awas Yojana. Sobha,
in its analyst conference
call for 4QFY16-17,
said that it is aiming at 27%
1 million square feet
72%
of affordable housing
products in Bengaluru
(North) which it will try
to launch in FY17-18.
Sobha has also launched a
low-cost housing project Real Estate Contracts &
in Cochin for which it Operations Manufacturing
expects sales to pick up
soon. The margins in the
affordable housing segment are the highest for Sobha.
The other positive for companies like Sobha is that
the housing sector has been given infrastructure status
which would help companies with good governance
practices to raise funds at lower interest rates.
Another driver of the housing sector is the decision
of the labour ministry to amend the law and allow
subscribers to withdraw up to 90% of their provident
fund to buy or build homes. It also plans to allow
Employees’ Provident Fund Organisation (EPFO)
users to pay their equated monthly instalments (EMIs)
of home loans through the employee provident fund
accounts. With 400,000 subscribers and Rs9 lakh
crore plus corpus, provident fund will be a big driver
for the coming housing boom. Among the interested
will be those in the public sector and government
employees, according to Mr Sharma. He mentioned
that a notification, which has already been gazetted
MONEYLIFE | 15-28 Sep 2017 | 44
StockWatch.indd 5
on 11 March 2017, talks about the categorisation
of affordable housing and loans. Another factor that
will help better quality of builders is the Real Estate
Regulation & development Act (RERA). The Act will
make it tough for many smaller and shady players to
survive.
Strong Cash Flows
The management has mentioned that the earnings
would continue to be under stress for some time,
though FY17-18 is likely to be better. Revenue from
the real estate operations rose 21% yer-on-year (y-o-y)
to Rs506 crore in the June 2017 quarter from Rs418
crore and revenue from contracts and manufacturing
operations was up 11% y-o-y to Rs173 crore (Rs156
crore). Total revenues went up 18% y-o-y to Rs674
crore (Rs570 crore)
while net profit jumped
33% y-o-y to Rs48 crore
Quarter (Rs34 crore). The share
1%
is trading at a price-to-
earnings ratio (P/E) of
21.48.
25% In an industry
burdened with high
74%
debt, Sobha reduced its
borrowing cost during
the June 2017 quarter
by more than 50 basis
points to below 10.5%
Other Income
per annum. Its net debt
remained at around
Rs2,025 crore. The
debt:equity ratio has fallen
from 0.78 in the June 2016 quarter to 0.75 in the June
2017 quarter. Sobha has also generated positive cash
flows for the past eight quarters after meeting interest
and tax expenses. The operational cash flow jumped
30% y-o-y from Rs77 crore in the June 2016 quarter
to Rs100 crore in the June 2017 quarter.
In an another positive sign, on 23 August 2017,
ICRA revised the long-term credit rating for Sobha and
upgraded its long term credit rating for non-convertible
debentures (NCDs) and line of credit from A to A+. On
7 April 2017, its shares fell over 9% as the company’s
promoter Sobha Menon sold her 4.15% stake. The
total promoter shareholding declined from 60.24% in
the March 2017 quarter to 56.08% in the June 2017
quarter. In August 2017, it also approved a buyback of
1,458,823 equity shares for an amount not exceeding
Rs62 crore, being 1.5% of the total paid-up equity
share capital, at Rs425 per equity share. 
08-09-2017 17:04:34
 MONEYLIFE
ADVISORY
FIX YOUR FINANCES, FOREVER

Ask Vijay Kedia about Stocks

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How do you collect the data for understanding
the industry or interpreting on which stage of the
business cycle it is currently moving around? Also,
industries such as publishing and media are difficult
to interpret, how does one link the industry prospects
with revenue and growth? It would be an honour, if
you could provide answers to these questions.
Read annual reports, attend annual general
meetings, read investor presentations, brokerage
reports, listen to conference calls and watch interviews.
If you find a particular industry difficult to interpret,
then move on to another industry, as there are a lot of
opportunities available.
If a stock is not doing well, should one book loss
or hold?
Find out the reason why the stock is not doing
well. If a stock is not doing well in spite of good
performance, it should be watched closely. If the
problem is temporary, one may hold. If there is a
structural problem in the company, one may sell.
If a small-cap company has metamorphosed
into either a mid-cap or a large-cap over time,
will it be prudent as a long-term investor, to sell
during market highs and buy again during the market
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Only two people can know the lows and highs of
the market. One is god and the second is a liar.
We can see lots of news about buy this and that
stock but not much news about sell stock and
why. What should be the parameter to sell a stock?
One should exit the stock when the focus of the
management changes (unrelated diversification),
product is becoming obsolete and the valuation is too
high compared to the leader in the industry, its peers
and the sector.

Ask vijay kedia Ad.indd 2 28-07-2017 17:00:56

 STOCK WATCH

S a r da E ne r gy & M ine ral s countries, India is in a sweet spot. Steel production

reported a growth of 8.50% in FY16-17 with a
Will the Growth production of 97.40 million tonnes (MT), whereas
finished steel consumption grew by just 2.6% y-o-y
Continue? for the same period. The domestic consumption was
lower due to poor offtake from end-use segments like

S arda Energy & Minerals Limited (SEML) produces

steel (sponge iron), billets, ingots, thermo-
mechanical treatment (TMT) bars and ferro-alloys.
construction, automobiles and white goods.
Sarda’s attempt to get into mining and power had
created its own challenges which have been sorted out
In the boom years of 2004-2008, it entered into now. For the past several years, companies working in
backward integration (iron and coal mines) with the mines of Andhra Pradesh, Chhattisgarh, Madhya
power generation. In April 2017, it commissioned the Pradesh and Maharashtra have faced the brunt
24MW hydro power plant at Gullu (Chhattisgarh). of multiple attacks—from the Naxals, regulatory
SEML’s subsidiary, authorities and courts
Madhya Bharat Power which tried to clamp down
Corporation Limited, on illegal mining. In FY15-
is implementing 96MW 16, the realisations and
Rongnichu hydro margins were impacted
electric plant (HEP) near due to de-allocation of
Gangtok, that is expected coal mines with effect
to be operational in from 1 April 2015 after a
FY18-19. Riding on a Supreme Court order and
buoyant market for steel, temporary suspension of
SEML’s sales rose 34% operations in the iron-ore
y-o-y (year-on-year), from mines owing to Naxal
Rs284 crore in the June FY15-16 Segmental FY16-17 Segmental attacks. SEML’s iron-ore
2016 quarter to Rs381 Revenue Revenue mine was attacked by
crore, and operating Naxals in March 2016
1% 1%
profit jumped 42% leading to the death of an
y-o-y, from Rs51.21 employee and damage to
12%
crore in the June 2016 14% property. SEML resumed
quarter to Rs72.64 crore. operations in its iron-ore
Net profit shot up to 32% 55% mines and achieved the
30% 55%
almost Rs61 crore, up highest ever production
from an average of Rs14 of pellet, sponge iron wire
crore over the previous rod and HB wires. It has
three quarters. The June installed a new turbine
quarter net profit alone is which will effectively
more than the full year’s Steel Ferro-alloys Power Unallocated improve efficiency by
net profits of 2014-15 12%. Having gone
and 2015-16. Ferro-alloys through tough times after
and steel—billets, wire rods and hard bright (HB) wire 2008, SEML is now in a consolidation mode. SEML’s
contributed approximately 32% each in the revenue of annual sponge iron making capacity is 360,000MT
FY16-17. (metric tonnes) and crude steel making capacity is
Sarda’s rising fortunes are linked to the steel 240,000MTPA.
sector that has revived over the past 18 months, due SEML’s long-term plan involves gaining 100%
to anti-dumping duty on Chinese steel, removal of raw material self-sufficiency such as in coal, iron
differential railway freight for the transportation of ore and manganese ore (the latter for ferro-alloys).
iron ore and pellets for domestic use and exports and The company has already acquired two mines with
due to shutting down of steel capacities in China which estimated coal reserves of nearly 308MMT. The
has pushed up steel prices. Chinese steel prices are at total estimated coal reserves of SEML are 236MMT.
a three-year high. Among all major steel-producing SEML’s operational iron-ore mine is located in the 

MONEYLIFE | 15-28 Sep 2017 | 46

StockWatch.indd 6 08-09-2017 19:16:22

 STOCK WATCH

 Rajnandgaon (Chhattisgarh) with potential reserves of
20MMT and annual output of around 200,000MT.
Additionally, it has got an in-principle approval
from the government of India for five more mines,
possessing sufficient reserves to meet its requirement
for the next 25 years. It has also acquired mining rights
for manganese ore from private parties in Goa with
potential reserves of nearly 6MMT. Also, in-principle
approvals have been granted in favour of the company
for three mines in Madhya Pradesh.
Steel Outlook
The government has proposed over Rs3.96 lakh crore
investments in the infrastructure sector for the current
fiscal which will result in substantial increase in steel
consumption, going forward. The Union Cabinet
has approved the National Steel Policy, 2017, which
aspires to achieve 300MT of steel-making capacity
to meet the entire demand for high-grade automotive
steel, electrical steel and special steels from domestic
sources. It further aims to increase domestic availability
of washed coking coal and reduce imports from
about 85% to around 65% by 2030-31. The policy
is expected to result in a reduction in imports and
increased offtake of steel from domestic steel players.
With effective policy measures restricting the inflow of
steel imports in the domestic market, demand/supply
equation will determine the fortunes of steel companies.
The debt:equity ratio for the company was 0.23 in
FY15-16 and 0.16 in FY16-17. The company’s interest
coverage ratio increased from 3.08 in FY15-16 to 7.59
in FY16-17. The company’s market-capitalisation to
sales is 1.12. The operating profit margin for the June
2017 quarter was 19.05% and the operating profit was
Rs72.64 crore. The net profit for the June 2017 quarter
was Rs60.94 crore. 

P CB L

Perils of Cut & Paste

P hillips Carbon Black (PCBL), the largest manufacturing of carbon black and specialty black in India has seen
phenomenal growth in revenue, operating profit and net profit in the past few quarters. The stock price has
already surged over 190% (in absolute terms) in calendar year 2017. You wish PCBL had taken some care to
present financial information correctly. Take a look at the fixed asset schedule in its annual report for FY15-16.
Data of fixed assets of 2014-15 has simply been copied and pasted. If you check the annual report, you will be
able to clearly see that the company has not cared to change even the headings (with incorrect dates) let alone the
numbers under them. Recently, we had mentioned about a similar error at another company. 

Fixed Asset Schedule FY2014-15 Fixed Asset Schedule FY2015-16

47 | 15-28 Sep 2017 | MONEYLIFE

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 STOCK WATCH

UN UOTED
STORIES OF PRICE MANIPULATION

Blue Pearl Texspin (Rs18) Pearl also has had frequent changes
(Rs)
in directors. In 2014, four directors—
40

B lue Pearl Texspin Limited was

formerly known as E-Wha Foam
India Limited. It started off with the
setting up a unit in Goa to produce
1,500TPA (tonnes per annum) of
polyethylene foam products in
collaboration with E- Wha Foam
Korea Co (South Korea). In 2012,
it changed its name to Blue Pearl
Texspin Limited and started a textiles
business completely different from
the earlier business of manufacturing
foam and foam-based products. As
per Watchoutinvestor.com, E-Wha
Foam India ran into various issues with
the authorities. In 2005, the Bombay
Stock Exchange (BSE) charged the
company for not being traceable at
its last known address. In 2006, it did
not comply with listing agreement and
the BSE gave it a notice for delisting.
In 2007, the stock was suspended
0
30
908%
0
20
0
10
0
3 Aug-16 3 Feb-17 3 Aug-17
from trading. The suspension was later
revoked. In 2011, it did not submit
its shareholding pattern to the BSE
for the September 2011 quarter and
the corporate governance report for
the March 2012 quarter. In 2016,
it reduced its equity share capital
from Rs5.12 crore to Rs25.60 lakh
and cancelled equity share capital
amounting to Rs4.86 crore which was
utilised to write off the debit balance
in the profit and loss account. Blue
Nijal Navinchandra Shah, Narendra
C Solanki, Deepak Rane and Shankar
Pandare—resigned. The promoter
shareholding is also only 21.62%. The
company has seen no growth over
more than 14 quarters. The average
sales of the past 14 quarters were
Rs5 lakh and not exceeded Rs6 lakh in
these past 14 quarters. The sales for
the June 2017 quarter were Rs6 lakh.
In these 14 quarters, the company has
made no profit. It has made a marginal
loss in 4 out of the 14 quarters. In the
June 2017 quarter, operating profit
margin was -16.67% and the margin
for FY15-16 was -5.56%. Despite such
a dismal performance and compliance
issues, the price of the stock rose 908%
from Rs2 on 3 August 2016 to Rs20.15
on 5 September 2017. Something
is clearly fishy and the regulatory
authorities are fast asleep. 

MARKET TREND

Temporary Blip? Now, we have both macro data and

micro data (earnings of listed companies)

Tlater, it was about 100 points higher. Meanwhile, the

wo weeks ago, the Sensex was at 31,596. A fortnight
major data-point of last fortnight was the announcement
that India’s GDP (gross domestic product) grew by just
5.7% in the June quarter, its slowest
west pace since the
January-March quarter 2014. A Reuters’ poll had
forecast a growth of 6.6%. In the e January-
March period, it was 6.1%. Remember,
ember,
GDP growth is being measured by
a new formula for the past two
years. The growth, by the
old formula, would be about
3.5%. It is the industry sector which
hich dragged
draggge
ged
d and Services Tax. The next two quarters
the Q1FY17-18 GDP growth to itss lowest level in 13
quarters. Already, IIP (index of industrial
ndustrial production) was
down to 1.7% in May and, actually, lly, contracted by 0.1% in
June, the first time in four years that it has contracted.
turning very tepid. However, the market
only dipped a little as a result of this poor
macro news. From a peak of 32,686 on
2nd August, the Sensex is down to around 31,700, about
1,000 points, or just about 3%, so far. It appears that
dire macro data and poor corporate data are of little
importance
imp to investors who seem to be
convinced that these are temporary
blips. This is partly true. In the June
quarter, the economy was coming out
q
of the
t impact of demonetisation and
then had to handle the issue of Good
will show whether the bulls are right to
assume that earnings growth is just round
assu
the
th and will justify the strong run-up over
he corner an
the past three years. — Debashis Basu 

MONEYLIFE | 15-28 Sep 2017 | 50

StockWatch.indd 8 08-09-2017 17:05:22

 TAX/ FIXED INCOME

Black Money Act and Declaration of

Foreign Accounts

T
he Black Money (Undisclosed refused to spell out whether the provide details of their overseas
Foreign Income and Assets) need for inclusion of NRI foreign bank accounts when they file
Act aims to curb black accounts in income-tax return (ITR) tax returns; only those who seek
money, or unreported assets, and was inserted into the forms for refunds need to do so. However, the
imposes tax and penalty on such FY16-17 ITR filing inadvertently NRIs who are claiming refund and
income. For FY14-15, the central or intentionally. It led to NRIs do not have bank accounts in India
board of direct taxes may, at their option,
(CBDT) has directed furnish the details
all resident Indians to of one foreign bank
disclose their foreign account in the return
accounts in their of income for issuance
returns. The idea is to of refund. NRIs need
find unaccounted wealth not give account
of resident Indians details if they are not
stashed in a foreign seeking refund. It will
country. Amounts be interesting to see if
in an undeclared anything new comes
foreign account can be up next year to bring
considered to be black NRIs under the ambit of
money, even if it is a disclosing their accounts
legitimate account. Today, it is no and foreigners, who file tax abroad. With strict steps taken
longer just about taxation but also returns in India, to interpret it in by the government to curb black
compliance. This can be a cause different ways. There were also money and unearthing undisclosed
of worry as the Black Money Act several representations as the new foreign accounts of resident Indians,
has hefty penalties for violations. requirement lacked any statutory you can never know if NRIs are
But non-resident Indians (NRIs) provision. Finally, days before the also put through similar checks. It
were not covered by the directive to filing deadline of 31 July 2017, appears that this government is keen
disclose foreign accounts. chairman of CBDT clarified that to pull out black money from every
The government, initially, it is not mandatory for NRIs to place possible.

G-Sec Yields Down

Issuer Maturity Next Last Yield ISIN Rating

T he 10-year benchmark G-Sec Date Coupon (%)

yield, which sets the tone of the Axis Bank 8.75% perpetual 28 Jun-22 28 Jun-18 8.63 INE238A08443 CRISIL AA+
(unsecured)
fixed-income market, has decreased
by three basis points (bps) in the last CARE AAA
Indiabulls Hsg Fin 8.90% 26 Sep-21 26 Sep-17 8.02 INE148I07GF5
(unsecured)
fortnight to end at 6.48% on
Reliance Jio Info 9.25% 16 Jun-24 16 Jun-18 7.62 INE110L08037 CRISIL AAA
6th September. (unsecured)
NSE data as of last trade date of 5 September 2017
G-Sec Maturity Yield to
Date Maturity HDFC Ltd 1.50% & 11.73% 16 Sep-20 16 Sep-17 7.96 INE001A07QR7 CRISIL AAA
01 December 2044 7.21 Shriram Transport Fin 27 Mar-20 27 Mar-18 7.60 INE721A07LX9 CARE AA+
Comp 8.10%
19 December 2034 7.07
CRISIL AAA
02 June 2028 7.01 HDFC Bank Ltd 7.95% 21 Sep-26 21 Sep-17 7.46 INE040A08369
(unsecured)
G-Sec yields on 6 September 2017
BSE data as of last trade date of 5 September 2017

51 | 15-28 Sep 2017 | MONEYLIFE

Fixed Income.indd 1 08-09-2017 11:08:16

 CYBER SECURITY PRASHANT MALI
Data Theft in Organisations and Legal Issues
D
ata theft is defined in Section 43 (b) of the
Information Technology Act, 2000 (IT Act) as
follows: “If any person without permission of the
owner or any other person who is in charge of a computer,
computer system of computer network, downloads, copies
or extracts any data, computer database or information
from such computer, computer system or computer
network. It is the term used when any information in the
form of data is illegally copied or taken from a business
or other individual without his knowledge or consent.”
In the era of information technology (IT), data is an
important raw material for all businesses, including brick
and mortar companies, business process outsourcing units,
banking, media and IT companies. Data has become
an important tool as well as a weapon for corporates
to capture larger market share. Given its importance,
data security has become a big
concern for all businesses. Data
theft and piracy are huge threats
that are forcing companies to
spend millions of rupees on
data analytics. In many cases,
the bottom-line of a business
depends on the security of its
data. A recent episode of the
popular television series, Game
of Thrones, had kindled a huge
discussion on data theft. Let
us look at some of the issues involved in data security
Mobility-related Issue: The problem with data theft is that
it has no international borders. For example, a computer
system may be accessed in the US, its data manipulated
in China and the consequences of that action felt in India.
The fact that cyber criminals can operate across different
sovereignties, jurisdictions, laws and rules is an issue
in itself. Collection of evidence, in such circumstances,
is complex. It requires investigations to be conducted
in three different countries which may not even be on
talking terms with one another; poor technical know-how
of our cops only adds to the woes. Lack of coordination
between various investigating agencies and navigating
the extradition process of various countries is another
headache. The absence of specific laws to deal with the
crime of data theft is, however, the biggest problem; it
allows a culprit to get away by picking and choosing from
various legal loopholes, even after being caught.
Our Data Protection Laws: Data theft has emerged as
one of the major cyber crimes worldwide. India does not
have specific laws to deal only with data protection, but
MONEYLIFE | 15-28 Sep 2017 | 52
Cyber Security.indd 1
we have the IT Act. Here are a few Sections of this Act
that are significant.
Section 43 (b) of the IT Act provides protection
against unauthorised downloading, copying, extracting
information, data or a database, by imposing heavy civil
compensation which could run into crores of rupees. Section
43 (c) provides for compensation in case of unauthorised
introduction of computer viruses or other contaminants.
Clause (i) provides compensation for destroying, deleting
or altering any information residing on a computer or
diminishing its value.
Data is an intangible asset whose value could run
into millions of dollars, but Section 43 does not quantify
the compensation to be paid. Hence, a complainant is
dependent on the mercy of our courts and the intelligence
of his lawyer.
Section 66 of the Act protects
against data theft, while Section
72A deals with the punishment
for disclosure of information
in breach of a lawful contract.
Both these Sections provide
for a penalty that includes
imprisonment of up to three years
or fine of up to Rs5 lakh or both.
In a recent judgement, Canara
Bank Vs CS Shyam & Another,
the Supreme Court (SC) held that
service details of an employee also amount to ‘personal
information’ and cannot be furnished even under the Right
to Information Act. Similarly, in another case, it was held
that an employer couldn’t use, or ask for, bank statements
of an ex-employee. These two cases are an indicator of
the rights of individuals, even before the recent SC upheld
right to privacy as a fundamental right.
So, the next time you plan to copy or download data
from the computers or network of your friends, clients,
teachers or employers, please remember that your actions
can put you behind bars for up to three years. And you
could lose even more, if a compensation claim suit is also
filed in a civil court. Corporates, as victims of data theft,
have the option of filing both, a civil and criminal case,
simultaneously with injunction remedies. 
Advocate Prashant Mali is the President,
Cyber Law Consulting, author &
speaker. Email: prashant.mali@
cyberlawconsulting.com
08-09-2017 19:27:16
Advertisements.indd 5 08-09-2017 19:15:46
 BLOCKCHAIN DEBANJAN CHATTERJEE
Improving Financial Safety with Blockchain
I
n October 2013, the FBI (Federal Bureau of Investigation)
bust the first modern market, SilkRoute. The website
had sold stolen credit cards, weapons, drugs and
other illegal products. In May 2017, the hacker group
‘Shadow Brokers’ unleashed the WannaCry ransomware,
infecting computers across 150 countries. In July 2017,
the online black-market, AlphaBay, was shut down by law
enforcement. What was common to the three crime rings?
Usage of Bitcoin as the mode of transaction. Consequently,
Bitcoins have entered popular consciousness as a facilitator
of criminal activities.
Bitcoin is a crypto-/digital currency that is built on
blockchain technology. Blockchain is a public ledger that
tracks and conducts all transactions in a decentralised
fashion. The Center for a New American Security (CNAS)
stated, in a May2017 report, that terror groups are not
yet using digital
currencies in large
scale, because
traditional means
of transferring
value such as
cash, pre-paid
cards and hawala
are continuing to
serve the funding
needs satisfactorily.
Similarly, recent
findings of the
British think
tank, RUSI (Royal
United Services
Institute), do not
show a strong
link of crypto-currency with organised terrorism. People
familiar with the evolution of financial crime landscape
are sure to view this as an anomaly because, typically,
criminals are among the first ones to adapt and leverage
new technology. To illustrate, as the Internet grew in
visibility, the menace of cybercrime multiplied manifold.
Blockchain is, often, referred to as ‘the greatest invention
since Internet’. Hence, now might be good time to examine
the repercussions blockchain technology can have on
financial crime risk.
The unique feature of crypto-currency that attracts
criminals is the ease of transferring value across entities/
international borders without being regulated by banks.
This is a stark change from fiat money, which has to
pass through bank-enabled channels (such as SWIFT),
MONEYLIFE | 15-28 Sep 2017 | 54
blockchain.indd 2
and, hence, is susceptible to detection. So there may be
clandestine exchanges helping crooks transact in such
currency.
In India, there is uncertainty about the legality of
crypto-currency. The Reserve Bank of India (RBI) has
set up a committee to examine it. Consequently, current
investments carry the risk of being declared illegal. Also,
there is always the additional risk of getting hacked.
Riding on the wave of interest in such currencies,
there has been an uptick in phishing attacks, deceiving
people into sharing confidential information. Also, Ponzi
schemes have mushroomed, luring hapless investors with
the promise of phenomenal returns. As the debate on
the criminal implications of crypto-currency rages on, a
consensus seems to be emerging on the potential of the
underlying blockchain technology to deter and detect crime.
Most crypto-
currencies offer
pseudo (and
not complete)
anonymity. On
the one hand, it
might be difficult
to map individuals
to their blockchain
wallets. But, on the
other hand, since
each transaction
is broadcast on
the blockchain,
the entire deposit/
withdrawal activity
of each and every
blockchain wallet
is public information. Consequently, for a prospective
money-launderer, the entire process will be publicly
transmitted and recorded for posterity in a form that is
immune to forgery. Intuitively, this can act as a deterrent to
using Bitcoins for criminal purposes, provided blockchains
are continuously scanned by crime fighting entities.
Currently, there are security firms that leverage attributes
such as transaction patterns, IP addresses and information
from Internet service-providers to help authorities manage
financial crime risk on the blockchain. But, on the other
hand, criminals can avail services of a ‘crypto-currency
tumbler’, to confuse the trail back to the funds’ original
source. Some websites, like ShapeShift.io, help users convert
one digital currency into another, thereby potentially aiding
currency layering. But the crucial point is, all of the above 
08-09-2017 11:42:02
 BLOCKCHAIN DEBANJAN CHATTERJEE

 automatically gets recorded on the blockchain; hence, it towards a new type of application called ‘smart contract’.
is quite easy for a forensic agency to get accurate data. These are user-defined programs which contain rules that
However, it must be mentioned that there are specific govern transactions. To illustrate, in blockchain networks
crypto-currencies (notably, Zcash and Monero) which offer such as Ethereum, credit card issuers, acquirers and
a greater level of anonymity than Bitcoin. Interestingly, in merchants can all come together and place in production
May 2017, the shadow brokers switched to Zcash as the a multitude of predictive analytics algorithms that would
preferred means of payment, for their monthly supply of approve a transaction in real-time only if certain risk-
hacking resources. control parameters are satisfied.
A point worth noting is that blockchain transactions Similarly, to curb risk of money laundering, there is a
are irreversible. In traditional banking, potential for regulatory bodies to be
merchants can be charged back party to every transaction. Banks could
if banks detect fraud charges. If a There is a lack of still perform know your customer
criminal uses a fraud credit card to sharing of intelligence (KYC) checks while onboarding
buy digital currency on any exchange, customers. But when transactions are
the owner of the exchange has to bear across banks, due to generated, the regulator and the bank
the loss since the bank would reverse fear of confidential can jointly analyse them from multiple
the payment made to the merchant data leakage. Private, perspectives and decide whether or not
(exchange), but the merchant cannot to raise a red flag.
initiate a reversal of the blockchain distributed ledgers can Crypto-currencies have emerged
transaction. Moving on, let us focus on help in this regard as facilitators in some pockets of the
the potential of blockchain technology criminal world. However, key features
to systematically curb financial crime of the blockchain, such as transparency
risk. and trust protocols, can go a long way in deterring and
Currently, most financial organisations individually detecting financial crime. Some believe that the current
employ data science to detect fraud charges. However, encryption techniques driving blockchain technologies
there is a lack of sharing of intelligence across banks, due would become obsolete in a world with affordable
to fear of confidential data leakage. Private, distributed quantum computing. In such a future, criminals might
ledgers can help in this regard. Consortiums with in-built try to create counterfeit blocks. That is a whole new
transparency controls, where access levels of participating story arc—one that moves to the next level of the cat-
banks are coded (and monitored), along with foolproof and-mouse game perennially played between criminals
audit trail of how the data is being used, can help bridge and custodians. 
the trust gap. Fraud detection models of the future, built
on such humungous data, would naturally be more adept
in recognising crime patterns. In February 2017, State Debanjan Chatterjee is an alumni of the Delhi School
Bank of India announced Bankchain, an initiative to share of Economics and has been part of fraud analytics team
information between banks on blockchain. of a multinational bank for the past decade.
The second generation of blockchains has moved

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blockchain.indd 3 08-09-2017 10:55:58


Queries
At Moneylife Foundation’s
Ask tax-related questions at moneylife.in/taxhelp. It’s free
Tax on Compensation
Money
I have been awarded compensation
from the Motor Accident Claims
Tribunal (MACT) for an accident
case. I want to know whether the
compensation, which includes the
actual compensation as well as the
interest, is taxable.
Ameet Patel’s Reply:
The compensation can be
considered as a capital receipt.
Capital receipts are generally not
taxable, unless there is a specific
provision to tax such a receipt.
You can, therefore,
claim that the
compensation is
not taxable. If it is
not taxable, then
the question of any
TDS (tax deduction at source) on it
by the insurance company will not
arise. As regards interest, one will
need to read the Tribunal’s order in
detail to decide. My personal view
is that the interest would also be a
capital receipt. However, this stand
may not necessarily be accepted by
the income-tax department. The
insurance company may deduct
tax under Section 194A because
that Section deals with interest
payments. If they do deduct tax,
then it will be a Herculean task for
you to convince the income-tax
officer that it is not taxable in your
hands.
MONEYLIFE | 15-28 Sep 2017 | 56
Tax Queries.indd 2
Tax Helpline
Wrong Challan
I calculated the bank interest
for the FY13-14 and paid self
assessment tax of Rs6,000 online
but I made a mistake in selecting the
challan type. When CPC processed
my return, they raised a demand of
Rs6,000.
I realised my mistake and
replied to them with the copy of
online challan but they are not
convinced. The assessing officer
also closed my complaint saying
the he cannot rectify it. What is my
recourse?
Ameet Patel’s Reply:
Since you are willing to pay the tax,
you do not need to file any revised
return. Simply pay the outstanding
demand and select “Tax on
Regular Assessment” while paying
the tax. Once you pay the tax,
automatically, the demand will get
knocked out in the system after the
bank uploads the information.
You can then check your online
e-filing account after about two-
three weeks. The demand should get
deleted from it by then.
Taxability of Notice Period
Pay
M y previous employer deducted
two months salary as I had to
switch jobs before serving my notice
period. However, in Form 16, they
have indicated the deducted amount
Supported By
and it shows up as salary given. I
believe, from recent news reports,
that the income-tax department
allows for this amount to deducted
from salary income for filing
returns. Is this true?
Subodh V Shah’s Reply:
The income-tax appellate tribunal at
Ahmedabad, in the case of Nandino
Rebello, has recently
held that notice
pay deducted by
the employer is not
liable to tax. Only
the actual salary
paid is taxable. Placing reliance
on this judgement, we may say
that only actual salary received is
taxable.
The actual salary received after
deduction of notice pay may be
reflected in your income-tax return
(ITR) amendment.
Sale of 10-year Old Shares
I am a senior citizen, have a
permanent account number (PAN)
and have been paying income-tax
for many years. I wish to sell
shares that I have held for over 10
years. Will long-term capital gain
be applicable to me? Can you
guide me to a web-link explaining
this?
Ameya Kunte’s Reply:
Gain from sale of shares after 10
years would be
regarded as long-
term capital gain.
If these shares are
of a listed company
and are now sold
through the stock exchange, the
entire long-term capital gains would
be fully exempt from tax.
On a separate note, you can
refer to the tax calculators available
on income-tax department’s website:
http://tinyurl.com/ycpskmd7 
08-09-2017 17:55:40
 Supported By

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Tax Helpline.indd 2 24-02-2017 16:12:20

 USEFUL APPS YAZDI TANTRA
Findo: Your Smart Search
Assistant
W ww.Findo.com is your smart search assistant—across
email, files and personal cloud. Our data storage has
now permeated across multiple media. And, very often,
we know the name of the file, but do not remember where
we had stored it–on GMail,
Dropbox, Evernote or Google
Drive. Sometimes, we may not
even remember the name of the
file, just a vague description.
Findo runs through all your
storage and locates the desired
files in a jiffy. You can search
everywhere from one place—save time and frustrating
moments when your boss is in urgent need of that contract
or presentation. When you can’t remember the name of
the person or file, Findo uses artificial intelligence (AI) to
build a knowledge graph of your contacts, places, events,
files, invoices, etc, and understands what you are looking
for. The more you use it, the more accurate it gets! And
the entire operation is quick and secure. Now search
intelligently across your storage locations—head to http://
www.Findo.com now!
Photoscan by Google: Revive
Old Memories & Store Them
A ll of us have a large bunch of old photos either in old
photo albums or just bound together lying somewhere
in our cupboards or attics, unseen, untouched for years.
We have tried digitising them so that they are available on
the cloud, but the results have been atrocious! Photoscan
by Google solves this problem. Just scan the photos using
this app and you get excellent,
scanned photos, worth preserving
online. You will get glare-free scans
with an easy, step-by-step capture
flow with automatic cropping and
perspective correction. Once they
are scanned, you can automatically
back up your scans with the free
Google Photos app to keep them
safe, searchable and organised. Now, bring your scans
back to life with movies, filters and advanced editing
controls. And share them with anyone, just by sending
a link. Revive old memories and store them in eternally
perfect condition—download Photoscan now! Android:
https://goo.gl/U9QoqT iOS: https://goo.gl/gcRd9g
MONEYLIFE | 15-28 Sep 2017 | 58
Tantra - column.indd 1
Google Maps: Comprehensive
Accurate Maps in 222 nations
I have tried many apps for maps but I always come back
to Google Maps—very accurate and providing a host
of features rarely matched by the other apps.
Apart from turn by turn
navigation, now Google Maps
also takes voice commands—once
in the driving mode, you can ask
questions like: ‘What’s my next
turn?’ ‘What’s my ETA?’ ‘How’s
the traffic ahead?’ etc. You have the
option to explore alternative routes,
avoid tolls and highways and also set your favourite routes.
And, in case you are visiting your favourite restaurant,
you can even browse the menu and place orders before
you reach there! Google Maps boasts comprehensive,
accurate maps in 220 countries, over 15,000 cities and
detailed business information on over 100 million places.
No wonder. I keep coming back to Google Maps! Android:
https://goo.gl/SKUZQB iOS: https://goo.gl/ZfXmJp
YouTubeKids: Let Your Kids
Discover and Explore
T hese days, all our kids need and want a Smartphone.
And, with the type of videos available online, it could
get dangerous. Kids.youtube.com helps them to dive into
a new world of discovery, learning and fun. YouTubeKids
gives your family an easy way of
watching favourite shows/movies,
discovering science or exploring
anything that catches one’s
imagination. It is free, simple to use
and very, very safe! YouTubeKids is
made for curious minds and is safe
for the entire family. They have even given a link to parental
guidance on how to use YouTube Kids effectively for the
entire family. Happy Viewing!! https://kids.youtube.com/ 
Yazdi Tantra is a chartered accountant
by training, computer consultant by
profession, entrepreneur-developer by
hobby and trainer in his leisure time.
He is currently the vice-chairman of
Zoroastrian Co-operative Bank Ltd
and has been running a medium-sized computer
company ON-LYNE for the past 24 years.
08-09-2017 10:59:18
 HIGH FAT DIET
COULD BE A GOOD
IDEA!
MEDICAL DEVELOPMENTS FROM
T here is never an end
to arguments over
the relative importance
of the three macro-nutrients our
body needs, namely, carbohydrates,
proteins and fat. Some experts have
argued that we need to be on a low- disease and total mortality. During
fat diet; others argue that we need
to be low in carbohydrates. Within
this discussion, the relationship
between macro-nutrients and
cardio-vascular disease and
mortality is most controversial. To
add more fuel to the controversy, a
recent study titled “The Prospective
Urban Rural Epidemiology” (PURE)
came up with some results that
overturn conventional ideas about
AROUND THE WORLD
association between consumption
of carbohydrates, total fat and each cancer. All medical practitioners
type of fat with cardio-vascular
the follow-up, the researchers
documented 5,796 deaths and
4,784 major cardio-vascular disease
events. Here are the stunning
results:
• Higher carbohydrate intake was
associated with an increased
risk of total mortality but not
with the risk of cardio-vascular
disease or cardio-vascular disease energy, should be revised
mortality.
in light of these findings.”
What are these guidelines?
Eat less fat. A
sub-branch of this
approach also says
eat less animal protein
because it is associated with
and cardiologists repeat this like a
mantra to their patients but a large
observational research like PURE,
obviously, tells us something else:
fat is not so bad; high carbs are bad.
In the light of the findings of PURE,
many scientists have been asking
whether standard dietary guidelines,
that limit the total fat intake to less
than 30% of energy and saturated
fat intake to less than 10% of
SUGARCANE FOR SOUND
SLEEP

I n today’s stressful world, sleep

fat. The results were uploaded on
the website of The Lancet on
29 August 2017.
PURE is a large, epidemiological
cohort study of individuals aged
35-70 years (enrolled between
1 January 2003 and 31 March
2013), in 18 countries, with a
median follow-up of 7·4 years.
For this study, dietary intake of
135,335 individuals was recorded
using validated food frequency
questionnaires. Participants were
categorised into quintiles of nutrient
intake (carbohydrates, fat and
proteins) based on percentage of
energy provided by the nutrients.
The researchers assessed the
• Intake of total fat and each type
of fat was associated with lower
risk of total mortality.
• Higher saturated fat intake was
associated with lower risk of
stroke.
• Total fat and saturated and
unsaturated fats were not
significantly associated with
risk of myocardial infarction or
cardio-vascular disease mortality.
Put it simply, high carbohydrate
intake was associated with higher
risk of total mortality, whereas total
fat and individual types of fat were
related to lower total mortality. The
researchers note “global dietary
guidelines should be reconsidered
deprivation is common. Lack of
sleep causes many problems such
as fatigue, higher blood pressure,
cardio-vascular diseases, diabetes,
weight gain and so on. Sleep
deprivation leads to stress; and
stress itself leads to loss of sleep.
The healthcare industry’s response
to this has been to come up with
sleeping pills that have severe side-
effects. A research group led by
Mahesh K Kaushik and Yoshihiro
Urade of the International Institute
for Integrative Sleep Medicine (WPI-
IIIS), University of Tsukuba, found
that a compound called octacosanol
reduces stress and restores stress-
affected sleep back to normal.
Octacosanol is abundantly present
in various everyday foods, such as
sugarcane (thin whitish layer on
surface), rice bran, wheat germ oil,
bee wax, etc. The crude extract is
policosanol, where octacosanol is
the major constituent. Policosanol
and octacosanol have already been
used in humans for various other
medical conditions. 

59 | 15-28 Sep 2017 | MONEYLIFE

Health.indd 3 08-09-2017 17:43:53

 LEGALLY SPEAKING SD ISRANI
Postal and Courier Services Offer
Poor Redress for Service Deficiency
T
he past 25 years have witnessed dramatic changes in
India’s postal scenario. Although the private sector
has to operate in a restricted environment dictated
by the government, it has made huge inroads into the
postal department’s domain. Consumers now have many
options and are no longer dependent on ‘snail mail’ of the
postal service. India Post responded to the challenge and
revenue loss that it suffered by introducing ‘speed post’
services which soon became very popular.
Millions use speed post service in the expectation
that their letters/packages will be delivered quickly.
Unfortunately, this does not always happen. Since volumes
are high, invariably, there are glitches,
leading to delays, damage or even
loss of letters/packages. What is the
liability of postal authorities for such
delays? This is a question that arose in
a complaint filed by Bhanwarlal Gora
of Jaipur before the district forum
against the manager, speed post and
the postal department of Jaipur.
Mr Gora sent an application for
appointment to the post of a gram
sewak / ex-officio secretary, by speed post addressed
to the chief executive officer, Pali, on 03.04.2008. The
letter should have been delivered in two days; but it was
delivered only on 07.04.2008. The last date for submission
of the application was 05.04.2008; hence, Mr Gora’s
application was not considered. His complaint before the
district forum claimed this as a ‘deficiency in service’ and
sought compensation. India Post responded with a written
statement denying any liability to pay compensation.
The district forum, on consideration of the pleadings
and evidence, ruled in favour of Mr Gora and asked India
Post to pay him Rs50,000 as compensation for mental
tension, harassment and economic loss. It also awarded
Rs10,000 for costs. The total amount was payable within
a month or 12% interest was payable thereafter. India Post
appealed before the state commission which dismissed
it. The postal department then approached the National
Consumer Disputes Redressal Commission (NCDRC)
challenging the orders passed by the lower authorities.
India Post’s counsel argued that Section 6 of the Indian
Post Office Act, 1898, as also the circular issued in 1999
by the general manager (business development) addressed
to all chief post master general which, inter-alia, provides
that, “in the event of delay of delivery of domestic speed
MONEYLIFE | 15-28 Sep 2017 | 60
Legally Speaking.indd 2
post articles beyond the prescribed delivery norms as part
of the money back guarantee, the speed post charges paid
by the customer would be refunded.”
NCDRC was informed that, in accordance with this
circular, Rs22 was offered and paid to the complainant.
A few other cases were also cited, to make the same
point. NCDRC noted that Section 6 of the Indian Post
Office Act provided immunity to the government, i.e.,
postal department, from any liability by reason of loss,
mis-delivery, delay or damage to any postal article in the
course of transmission, except in cases where a liability
is undertaken by Central government in express terms.
NCDRC also referred to the relevant
rules, circulars and clarifications and
concluded that the consumer was only
entitled to a refund of costs.
Accordingly, on 28 August 2017,
NCDRC set aside the orders of the
state and district forums and ruled
in favour of India Post with the
observation that speed post charges
must be refunded to the complainant
if they had not been paid as yet.
Following this order, we need to be aware of the risk
of delay. This is with regard to India Post; but private
couriers are no better when it comes to restricting their
liability for deficiency in service. Here is what I found on
reading the fine print regarding liability printed by Vichare,
a local courier in Mumbai. It has limited its liability to
Rs50 only. However, if you are willing to pay 3% extra at
the time of couriering an article, the liability increases to
Rs50,000. Vichare will independently decide the value of
the package; moreover, if it is insured, the consumer must
make a claim with the insurance company and Vichare
will only provide a certificate of damage/loss; it has no
further obligation.
In other words, the next time you want to courier or
post something important, please remember that we, as
consumers, have very little recourse if the article is delivered
late, lost or damaged. 
SD Israni is a corporate lawyer & Fellow
of ICSI. Email: sdisrani@gmail.com
06-09-2017 18:21:33
Pathbreakers.indd 2 06-09-2017 16:24:34
 BOOKS

Advice & Dissent: My Life In Public Service and understand the very subtle hints or what Dr Reddy
has left unsaid. In the effort to achieve that ‘balance’, the

Selective Memories book seems to have lost out on the sharp wit and humour
that Dr Reddy was known for.
The memoir of every IAS officer, with a career worth

I
t is raining books by bankers and former governors of writing about, has large tracts on their early days as
the Reserve Bank of India (RBI). Quick on the heels of collectors when they were testing their newly acquired
Duvvuri Subbarao’s book (Who Moved My Interest powers. Dr Reddy is no exception. But the account of his
Rate. Leading the Reserve Bank through Five Turbulent childhood and family end up as a distraction from the
Years), we have Yaga Venugopal Reddy’s Advice & Dissent: latter half of the book which is more of economic history
My Life In Public Service. Even before we digest this, starting with the crucial years from 1989 to 1993, when
the high-profile Dr Raghuram Rajan’s book (I Do What India was on the verge of a default and the liberalisation
I Do), was released on 5th September. It promises to stir process that it triggered.
up a debate, going by its provocative James Bondish title To many of my vintage, Dr Reddy’s account of how
derived from his much-quoted answer to a media query: the 1990-91 balance of payments crisis unfolded and the
“My name is Raghuram Rajan and I do what I do.” options discussed, make for interesting reading. That
The three governors some policy-makers were in favour of defaulting on their
headed RBI in succession obligations is generally known. But Dr Reddy chillingly
and their books are bound writes that his opinion was sought on temporarily freezing
to evoke comparisons. Dr NRI (non-resident Indian) deposits! Given the devastating
Reddy is globally renowned impact it would have had in terms of loss of confidence
and feted for withstanding of the Indian diaspora, he correctly advised that this
political pressure and should neither be contemplated, nor even mentioned in
protecting India from the background papers. At a time when nationalised banks are
global economic crisis. Dr in a crisis and we have a government that did not hesitate
Subbarao was left with the to eliminate 85% of currency, one can only pray such
tough tasking of dealing thoughts for domestic maladies are never contemplated!
with the aftermath of the Dr Reddy tells us about the desperate attempts to raise
crisis as inflation went foreign exchange, including thoughts such as by selling
out of control and the Indian embassy in Tokyo and the eventual decision to
charismatic Dr Raghuram revalue gold reserves and to raise $200 million by leasing
Rajan, who succeeded him, RBI gold to the State Bank of India (SBI). Much of this is
ADVICE & DISSENT: MY enjoyed a star status and unknown to the general public, although the shipping of
LIFE IN PUBLIC SERVICE brought new glamour to 47 tonnes of gold to Bank of England to raise 405 million
YV REDDY the staid image of the Mint dollars was widely reported. The story of how India’s
Harper Business Street regulator. balance of payments crisis, coming from an insider like
Pages 480; Rs799 Both, Dr Subbarao Dr Reddy, would have made riveting reading. But there is
and Dr Reddy, had five- very little. For instance, you have a line, which says, “In
year terms compared to Raghuram Rajan’s three years. my view if there is one person who showed extraordinary
Dr Subbarao’s book is clearly focused on his five leadership in managing the balance of payments crisis, it
years at RBI; but Dr Reddy’s book, with a far broader was (S) Venkitaraman as Governor, RBI.” Disappointingly,
autobiographical sweep, is rather disappointing in its no other details.
very selective memories. If you are expecting to hear There are some perplexing omissions as well. Dr Reddy
some trenchant advice for the government or even the was the joint secretary capital markets when the Harshad
incumbent at RBI, or juicy details of his dissent with then Mehta scam of 1992 happened. This monumental event
finance minister, or anybody else, you would be sorely does not find even a passing mention, although this event
disappointed. In Dr Reddy’s book, RBI comes across as a alone paved the way for Securities & Exchange Board of
perfect institution with brilliant colleagues who did not miss India (SEBI) Act, which led to the transformation and
a trick. We know that is untrue. He is less effusive about modernisation of India’s capital market. All we have is one
his time at the finance ministry. But, again, only an inside shady comment alluding to an ego tussle over seniority
circle of those who understand the power play which goes between GV Ramakrishna (the uncompromising SEBI
on in North Block, can probably read between the lines chairman who led the capital market transformation and 

MONEYLIFE | 15-28 Sep 2017 | 62

Book Review.indd 2 08-09-2017 10:56:49

 BOOKS

 was Dr Reddy’s senior from there is nothing there, except

the Andhra Pradesh cadre of to tell us that Dr Reddy
the IAS) and RBI governor received a threat of sorts
S Venkitaraman. Similarly, from Subrata Roy (or rather,
the Ketan Parekh scam is a letter denying any threat
dismissed with a superficial to the then governor), even
account of the disastrous though the Supreme Court
failure of Global Trust Bank of India defanged the once-
(GTB), headquartered in powerful Saharashri and put
Andhra Pradesh without any him behind bars in 2014.
mention of how shockingly Yes, Dr Reddy deserves
the Bank was colluding with all the accolades for
Ketan Parekh’s corporate safeguarding India from the
cronies to divert funds. On Sahara: At one stage, I global financial crisis; but
RBI’s failure to detect the
misuse of overseas corporate
received a hand-delivered letter, this book would have been
so much more valuable had
bodies (OCBs) to invest in purported to be from the chief it dispassionately dissected
the capital market was a big of the company, saying they some of RBI’s big failures
blot. Some of these were set in financial supervision
up with only $10 capital. But had heard that I believed my life or had given us an inside
Dr Reddy’s memoirs do not was under threat from them. I account of how North Block
even allude to any failure really works, instead of the
of supervision; he merely
was assured that there was no subtle hints about things
discusses what he did to shut basis for such fears. I handed left unsaid. The discussion
them down. the letter over to my deputy on interest policies and the
Similarly, the book deep thought behind each
touches upon the dubious governor and told him to keep speech by an RBI governor
decision to grant a sovereign it, and forget about it or deputy governor or
guarantee to Enron public statements, would be
Corporation’s Dabhol power essential reading for all those
project which set back the power sector in India by a who are interested monetary economics and public policy.
decade. This happened while Dr Reddy was at the North Especially since Dr Reddy livens up the narrative with
Block. All we get is a couple of paragraphs on how he had interesting anecdotes and events that happened during and
opposed the sovereign guarantee, to put it on record that around the decisions. These chapters are the best part of
he had no role in that scandalous clearance. One would Dr Reddy’s memoirs. One cannot help wondering
also have liked to hear more on the Sahara group, which how much better it would have been had he been less
was asked to refund deposits of over Rs75,000 crore circumspect about key economic and financial milestones
raised under a residuary non-banking finance company. in India’s history and a little more dispassionate and open
This was subsequent to a detailed RBI inspection. But no, about his colleagues and bosses at RBI. — Sucheta Dalal 

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63 | 15-28 Sep 2017 | MONEYLIFE

Book Review.indd 3 08-09-2017 10:57:09

 MONEY FACTS STOCKS

INDIAN MARKET TRENDS FUND FLOWS

The Sensex ended flat and the Nifty inched up 1% during Foreigners: Foreign institutional investors were
the fortnight ended 6th September. ML Large-cap Index and net sellers of equities (Rs4,958.16 crore). They sold
ML Mega-cap Index rose 3% each, while ML Mid-cap Index shares worth Rs38,779.90 crore. 
and ML Small-cap Index advanced 4% each. 
100

Share Prices Index, March 2017=100 -220

120
-540

-860

110
-1,180 FII Net Investments
(Rs Crore)
-1,500
28 Aug-17 6 Sep-17
100
Indians: Domestic institutional investors were net
buyers of equities (Rs3,876.63 crore). They bought
shares worth Rs21,883.27 crore. 
90 1,400
Mar-17 Jun-17 Sep-17
DII Net Investments
1,100
ML Large-cap ML Small-cap Nifty ML Micro-cap (Rs Crore)
ML Mid-cap ML Mega-cap Sensex
800

500
Index 24 Aug 6 Sep +/-
ML Micro-cap Index 98.07 103.79 6% 200
ML Mid-cap Index 114.17 118.81 4%
-100
ML Small-cap Index 106.08 110.31 4% 28 Aug-17 6 Sep-17
ML Large-cap Index 112.65 116.12 3%
ML Mega-cap Index 114.95 118.00 3% GLOBAL MARKET TRENDS
Nifty 9,857.05 9,916.20 1% 2,500

Sensex 31,596.06 31,661.97 0% Kospi

Mega-cap Gainers/Losers 24 Aug 6 Sep Change 2,300

Central Bank of India 73.55 98.80 34%

2,100
Idea Cellular 90.05 81.80 -9%

Large-cap Gainers/Losers 24 Aug 6 Sep Change

1,900
Bombay Dyeing & Mfg 85.05 146.40 72% Mar-17 Jun-17 Sep-17

Kwality 147.50 123.10 -17% Hang Seng and Nikkei ended flat, while the FTSE fell
Mid-cap Gainers/Losers 24 Aug 6 Sep Change
1%. Bovespa and Shanghai Composite advanced 3%
each. NASDAQ Composite rose 2%. 
Nitco 68.00 102.90 51%
Index 24 Aug 6 Sep + / (-)
Religare Enterprises 57.95 40.45 -30%
Bovespa 71,133 73,412 3%
Small-cap Gainers/Losers 24 Aug 6 Sep Change
Shanghai Composite 3,272 3,385 3%
New Delhi Television 38.65 62.40 61% NASDAQ Composite 6,271 6,393 2%

Shilpi Cable Technologies 27.20 22.60 -17% S&P 500 2,439 2,466 1%
Taiwan Weighted 10,489 10,548 1%
Micro-cap Gainers/Losers 24 Aug 6 Sep Change
Hang Seng 27,519 27,614 0%
Indo Thai Securities 33.00 59.70 81% Nikkei 19,354 19,358 0%
Servalakshmi Paper 1.92 1.31 -32% FTSE 7,407 7,354 -1%

(All Prices in Rs) Korean Composite 2,376 2,320 -2%

MONEYLIFE | 15-28 Sep 2017 | 64

Money Fact.indd 2 08-09-2017 19:17:19

 MONEY FACTS STOCKS

What’s H T ML SECTORAL TRENDS


Textiles companies were in demand during the fortnight. Bombay Dyeing &
Mfg, Mandhana Industries, CIL Nova Petrochemicals, Ester Industries and
Shares of textiles companies and
printing & publishing companies
advanced 9% each, while shares of
Himatsingka Seide soared 72%, 45%, 25%, 24% and 21%, respectively. 
steel products companies rose 8%.
Companies 24 Aug 6 Sep +/-
Stocks of telecom service companies
declined 6%; stocks of oil & gas
ML Textile Index Bombay Dyeing & Mfg 85.05 146.40 72% services companies and software &
110 Mandhana Industries 5.90 8.57 45% IT services companies fell 1% each. 
CIL Nova Petro 27.70 34.75 25%
ML Sectoral Trends
JBF Industries 153.15 190.85 25%
105 Trading 14% Telecom Services -6%
Ester Industries 31.65 39.40 24%
Odds 12% Oil & Gas Services -1%
Himatsingka Seide 311.05 376.80 21%
Textiles 9% Software & IT Serv -1%
100 Eastern Silk Inds 5.13 6.19 21%
Printing & Publishing 9% Pharma 0%
Winsome Yarns 2.10 2.50 19%
Steel Products 8% Diversified 0%
Soma Textiles & Inds 10.93 13.00 19%
95
Mar-17 Jun-17 Sep-17 Raymond 733.75 857.40 17%

All Prices in Rs
URBAN INFLATION


What’s N T Urban inflation rose to 2.17%

in July 2017 from 1.41% in June
2017. Combined urban and rural
Telecom service companies were a mixed bag. Idea Cellular, Bharti Airtel, inflation was at 2.36% in July
Bharti Infratel and Reliance Communications declined 9%, 7%, 3% and 2017, increasing from 1.54% in
2%, respectively.  June 2017. Inflation for clothes
and footwear items in urban
Companies 24 Aug 6 Sep +/- areas was 2.76% in July 2017
ML Telecom Service Index compared to 2.84% in June 2017.
Idea Cellular 90.05 81.80 -9%
120
Inflation for household goods
Bharti Airtel 432.95 402.95 -7%
Crawling Up?
Bharti Infratel 383.90 371.45 -3%
110 5.50%
Reliance Comm 22.90 22.55 -2%

4.45%
MTNL 19.55 20.00 2%
100

Tata Comm 642.10 659.35 3% 3.40%

Tata Teleservices 6.75 7.02 4% 90 2.35%

Mar-17 Jun-17 Sep-17
All Prices in Rs
1.30%
Jul-16 Jan-17 Jul-17
BULK DEALS
Date Company Buyer Seller Rs Cr and services in urban areas was
29 Aug-17 RBL Bank Cartica Capital Cartica Capital 2 Limited - FDI 413.25
marginally higher at 3.00% in July
2017 compared with 2.92% in
28 Aug-17 Dion Global Solutions Ralph James Horne Cresta Fund 2.75 June 2017. Inflation for housing
04 Sep-17 Aryaman Capital Markets Holly Enterprises Pvt India Finsec 0.40 in urban areas increased to 4.98%
in July 2017 from 4.70% in June
06 Sep-17 Vaksons Automobiles Yogeshkumar B Shah Overskud Multi Asset 0.38
2017. In urban areas, inflation
06 Sep-17 Relicab Cable Aryaman Broking Pratik Paresh Shah HUF 0.28 for personal-care and effects was
lower, at 2.00% in July 2017,
31 Aug-17 OP Chains AG Shares And Sec Hem Sec 0.19
decreasing from 3.11% in June
05 Sep-17 Sam Industries Ishita Gaurav Mohatta Cerebral Securities Pvt 0.13 2017. 

65 | 15-28 Sep 2017 | MONEYLIFE

Money Fact.indd 3 08-09-2017 19:17:39

 PS
Loose Ends at Infosys
N ow that R Seshasayee and the
two foreign directors on the
Infosys board have hit back at NR
formal letter, blaming NRN for Vishal
Sikka’s exit). It is fairly certain that the
two foreign directors, Jeffery Lehman
Narayana Murthy (NRN), we have a and John Etchemendy, were inducted
few new questions. Mr Seshasayee to the board with Mr Murthy’s consent.
has called NRN vindictive, slanderous What is forgotten by most is that
and, effectively, a liar. NRN has not Infosys has made many mistakes with
responded. What does it say about the its board. These controversial directors
much-admired NRN’s judgement about were persuaded to make a quiet exit. I
people? Remember, both, Vishal Sikka remember, the dean of a global business
and Mr Seshasayee, were hand-picked school telling me that decisions
by him as was RavRavi in Infosys were influenced by the
Venkatesan, who
w expression on NRN’s face. If he appeared
was inducted to be positive, the independent directors
as the vice- would vociferously support the decision,
chairman or do the opposite. Incidentally, many
problems
after problem corporate watchers have noticed that
with the board
boar two former independent directors,
began (but Mr with a long stint on the board during
Venkatesan seems
see Mr Murthy’s active leadership, had
to have gone
go been the strongest voices asking him
along to back-off and leave Mr Sikka alone.
with the
t Neither of them raised the issue of hefty
board’s
boar compensation and huge exit packages
which were so contrary to the Infosys
culture. On the other hand, hundreds of
former employees came out to back the
chairman. Does this mean that Infosys
employees imbibed the organisation’s
culture far better than its board?
Media reports now tell us that a
corporate governance committee,
headed by Uday Kotak, will recommend
rules on what information the
company’s management and board of
directors can share with founders and
what they cannot. This probably covers
situations like Rupa Kudva (former
chief of CRISIL) allegedly asking NRN
to sign a non-disclosure agreement to
get access to an Infosys investigation
into severance pay and other issues. It
would make more sense if the Kotak
committee asks such reports to be made
public. It is good that NRN is happy with
the return of Nandan Nilekani as vice-
chairman; but it will be a travesty if the
‘full investigation’ report is buried just
because one of the founders is back at
the helm. In fact, NRN’s own credibility
lies in ensuring this, especially in the
face of Mr Seshasayee’s allegations.

Tax Reminder or Threat? Drop CSR Hypocrisy

A lthough the government talks of
treating honest taxpayers with
respect, the income-tax (I-T) department,
obviously, thinks differently. The easiest
way for the I-T department
to meet the steep tax
collection target set
by the finance
ministry is to hustle
and frighten existing
taxpayers to cough up
more. Many companies
have just got letters from
the department reminding them
to pay advance tax by 15th September.
But, instead of sending out a friendly
reminder, the letter threatens them with
penal interest as per Section 234C of the
Income-tax Act for failure to pay advance
tax. Did the I-T department have reason
to suspect that companies are likely to
dodge tax payment? No; in fact, it chose
the highest tax-paying companies in
Mumbai for their pay-up threat!
An angry businessman tells us, “I
find it insulting. Nobody needs
to remind us to comply; else
we wouldn’t be in the top
taxpayers’ list.” Also, he
says, the government is
unconcerned that its own
economic decisions have
adversely impacted his business;
so he will earn less and pay less tax than
last year. “No wonder, nobody feels like
paying tax in India. The more you pay, the
more you are harassed,” he ends. Is the
government listening?
W hile on Infosys and good
governance, how about the
company ending the tradition of having
the CEO’s wife head Infosys Foundation?
Vishal Sikka’s wife headed Infosys
Foundation implementing the company’s
corporate social responsibility (CSR)
initiatives and resigned soon after he did.
How does this practice go with a public
limited company? Since Infosys was
the benchmark for good governance,
this dubious practice has been quickly
adopted by many listed companies and
wives/daughters of many promoters/
founders now control 2% of the profits
earmarked as CSR spend and have
lavish offices and expenses to do so.
It’s time to scrap the hypocrisy of
mandatory CSR.

MONEYLIFE | 15-28 Sep 2017 | 66

PS.indd 1 08-09-2017 10:57:59

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