BQuick On Jan. 31: Top 10 Stories In Under 10 Minutes  

This is a roundup of the day’s top stories in brief.

1. Economic Survey: Speeding Up Divestments The Singapore Way

The Economic Survey, released by the Chief Economic Adviser’s office a day ahead of the Union Budget, has proposed a new structure of disinvestment to maximise returns from public sector enterprises.

• The survey suggests that the government take a leaf out of Singapore’s Temasek model and transfer its holdings in central public sector enterprises to a separate corporate entity, which would be managed by an independent board.
• This entity can then continue to divest individual units at appropriate points in time.
• The aim of any privatisation or disinvestment programme should be the maximisation of the government’s equity stake value, the Economic Survey for 2019-20 said while proposing the new structure.

The survey said that CPSEs tend to perform better after privatisation.

Fifty years after bank nationalisation, government-owned banks continue to play an important role in the economy but are riddled with inefficiencies, argued the government’s Economic Survey 2020 presented a day before the budget.

• The survey stayed away from recommending privatisation or lower government shareholding in these banks and, instead, suggested the use of fintech and stock-option based incentives to improve the functioning of these lenders.
• According to the survey, over Rs 4,30,000 crore of taxpayer money is invested as government’s equity in public sector banks.

Which means every rupee invested, on an average, lost 23 paise.

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2. India’s GDP For FY19 Revised Lower

The Indian economy grew at a slower pace last year than projected earlier.

• According to the first revised estimates of national income for 2018-19, GDP growth in 2018-19 stood at 6.1 percent compared with 6.8 percent as per the provisional estimates.
• The downward revision for the previous year will mean an upward revision in growth estimates for the ongoing financial year 2019-20.
• For 2017-18, GDP growth stood 7 percent, compared to the earlier estimate of 7.2 percent.
• This is the second revised estimate for this year.

The primary and the secondary sectors were both responsible for pulling down growth.

India’s fiscal deficit widened further in December amid concerns that the country would breach its budgeted target for the third straight year.

• The gap between the government’s revenue and expenditure widened to Rs 9.31 lakh crore as of December, according to data released by the Controller General of Accounts.
• That’s 132.4 percent of the budgeted estimate of Rs 7.04 lakh crore for 2019-20.
• The deficit stood at 114.8 percent of the target in November.

Here’s how India’s fiscal math stands a day before the Union Budget.

3. Can Oil PSUs Help Bridge The Budget Gap?

With two months left in the fiscal, the government has mopped up Rs 35,000 crore— or a third of its divestment target—by selling stake in public sector companies. One source will help the Modi administration narrow the shortfall: annual dividends that state-run oil companies pay.

• Public sector enterprises have to pay a minimum annual dividend at 30 percent of the net profit or five percent of their net worth, whichever is higher, according to the Department of Investment and Public Asset Management.
• But in the last five years, all the six oil and gas PSUs have on an average paid higher.
• Three out of the six oil and gas firms may find it difficult to pay a dividend at the five-year average rate, according to BloombergQuint’s calculations based on their capital expenditure plans and earnings estimates.

Read to find out how much can oil refiners and retailers pay the government.

4. Task Force Suggests Simpler Capital Gains Tax Regime

One area that has seen a lot of tinkering in the government’s annual budget exercise is the taxation of capital gains. The changes have been mainly to capital gains tax rates applicable to different classes of assets and the holding periods that determine whether the gains would be taxable as short term or long term. This year too there is some pre-budget clamour to do away with the recently introduced long term capital gains tax.

• The Direct Tax Code Task Force, in its report, deliberated on the capital gains taxation framework in detail and has proposed a simplified regime.
• Taxsutra has spoken to those involved in the finalisation of the report and identified the key changes recommended.
• The DTC task force report recommends categorisation of assets into 3 classes.

See what are the changes suggested by the task force in this fourth part of the collaboration with Taxsuutra.

5. How Hindustan Unilever, SBI And Tech Mahindra Fared In Q3

Hindustan Unilever Ltd.’s quarterly profit met estimates as volume growth surpassed expectations amid slowing consumption in India.

• Net profit rose 11.9 percent year-on-year to Rs 1,616 crore.
• Net sales rose 2.6 percent to Rs 9,808 crore.
• Volume growth stood at 5 percent against a forecast of 3-4 percent. It remained unchanged for the third straight quarter.

The results reflect a sharp slowdown in rural and discretionary spends.

State Bank of India Ltd.’s third-quarter profit beat estimates as its asset quality improved and provisions fell.

• Net profit rose 41.2 percent year-on-year to Rs 5,583.36 crore.
• Net interest income rose 22.4 percent to Rs 27,778.79 crore
• Provisions for bad loans fell 45 percent but slippages nearly doubled.

Here’s what was behind the spike in slippages for the largest bank in India.

Tech Mahindra Ltd.’s third-quarter profit beat estimates on higher deal wins.

• Profit rose 2 percent sequentially to Rs 1,146 crore.
• Dollar revenue rose 7.3 percent to $1,353 million.
• Operating profit rose 8.4 percent to Rs 1,179 crore.

The Mumbai-based software services firm won deals worth $1.23 billion in the quarter.

6. Sensex, Nifty Fall Ahead Of Budget

Indian indices extended fall for the seventh consecutive trading session ahead of the Union Budget, which will be presented tomorrow by Finance Minister Nirmala Sitharaman.

• The S&P BSE Sensex fell 0.47 percent to close at 40,723.49.
• The NSE Nifty 50 fell 0.61 percent to end at 11,962.10, the lowest since Dec. 11, 2019.
• The broader markets represented by the NSE Nifty 500 Index fell 0.58 percent.
• Six out of 11 sectoral gauges compiled by NSE ended lower.

Follow the day’s trading action here.

7. Indiabulls Divests Property Unit To Embassy, Blackstone

Indiabulls Housing Finance Ltd. exited the real estate business nearly three months after the central bank rejected the non-bank lender’s merger with Lakshmi Vilas Bank Ltd.

• Indiabulls Real Estate Ltd. agreed to merge with itself certain ongoing, completed and planned residential and commercial projects of Blackstone-backed Embassy Group in a share-swap deal, according to an exchange filing.
• The combined entity will become the development arm of the Embassy Office Parks REIT Ltd. Indiabulls Real Estate will issue shares to the Embassy Group investors.
• The swap ratio is yet to be fixed.

The proposed merger is also expected to bring capital for the property business.

8. Wipro CEO Quits While IBM Gets A New One

Wipro Ltd. Chief Executive Officer Abidali Z Neemuchwala is leaving after a turbulent four years during which growth stalled and the Indian IT services giant fell farther behind rivals Infosys and TCS.

• Neemuchwala will remain at his post until a new CEO is appointed, the company said in a statement. His departure means an even more active role -- at least temporarily -- for Rishad Premji, Wipro’s hands-on, customer-facing executive chairman and son of outsourcing industry pioneer Azim Premji.
• It’s the culmination of growing dissatisfaction with Wipro’s inability to close the gap with Infosys and TCS, according to people familiar with the matter, who asked not to be named discussing a sensitive matter.

Like the rest of India’s IT industry, Wipro has struggled to adapt to a slowdown in growth in recent years.

International Business Machines Corp. named Arvind Krishna as chief executive officer, replacing longtime CEO Virginia Rometty.

• Krishna, 57, is currently the head of IBM’s cloud and cognitive software unit and was a principal architect of the company’s purchase of Red Hat, which was completed last year.
• Rometty, 62, will continue as executive chairman and serve through the end of the year, when she will retire after almost 40 years with the company, IBM said in a statement Thursday.

Krishna is well respected for having championed a deal with Red Hat.

9. No Auto Sales Revival In January

Weak consumer demand and the shift to the stricter Bharat Stage-VI emission standards hurt retail auto sales in January, according to a BloombergQuint survey of eight large dealerships.

• After a festive-season spike in October and November, retail sales had moderated in December.
• Attractive promotional offers in the previous month were rolled back in January as inventory fell.
• Automakers and industry experts had warned about a potential disruption as India moved to stricter emission norms from April.

Dealers are pinning hopes on the Feb. 1 budget.

10. Arvind Kejriwal’s Shift From Insurgent To Incumbent

It’s the Aam Aadmi Party’s turn to face the dynamic that BJP’s grappled with for the last few years – of defending a state it swept in a landslide, writes Amitabh Tiwari.

• AAP’s 2015 win was so large that even with a 15 percent negative swing, it would win a healthy majority.
• But this is also a different AAP from 2015: with no Prashant Bhushan, Yogendra Yadav, Kumar Vishwas, and Kapil Mishra. All power rests in Kejriwal and Sisodia’s hands
• To keep his narrative focused on local issues, Kejriwal has risked earning the ire of minorities by not openly supporting anti-CAA protests.

So what does an AAP ‘running on the report card’ campaign look like? Read here.