QBiz: Rajan’s Warning to Startups, Govt Cuts EPF Rates to 8.7% 

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Is the startup boom in India here to stay? (Photo: iStockphoto)

1. Rajan Warns Against Deep Discount Model in Startups But Pitches for Easier Norms

With concerns being raised about cash-burn in the burgeoning e-commerce sector, RBI governor Raghuram Rajan has made it clear that getting revenues through deep discounting is not a viable business model for startups.

“If the only reason you are getting revenues, not profit, is because you are selling based on 50 percent discount, it can’t be viable in the long run,” he was quoted saying by the Financial Express.

He was quick to acknowledge that many businesses are in different stages of their life-cycle with some trying to establish the viability.

“All these businesses are trying to establish viability, some are still being financed in a big way,” he said, adding that it is natural for some of them not to work which will lead to shutting down the business.

The RBI governor also pitched for “bare minimum regulation” to encourage startups. He urged officials to sensitise themselves to the issues that small businessmen have to face in completing day-to-day tasks.

“A lot of officials, including myself, learn the difficulties of working in India as an aam aadmi only once we leave office and once we lose the assistant to the assistant to the assistant to the assistant,” he said.

2. India Proposes BRICS Portal to Address Trade Issues: ET

The next time any of the BRICS countries tweaks its import or export licences imposes an anti-dumping duty or changes the criteria for product registration, the other members of the grouping of emerging economies are likely to learn about the development instantly.

According to Economic Times, this could be possible if a proposal floated by India to create a database of various barriers to trade other than those related to tariffs among Brazil, Russia, India, China and South Africa gets accepted.

India, under its presidency of BRICS, wants to strengthen trade across the five-nation grouping, besides globalising its ease of doing business drive as part of which it is planning a dedicated portal to address trade-related issues among the partners through a single window.

3. UltraTech Cement Profit Rises 10 Percent to Rs 723 Crore: Livemint

UltraTech Cement, India’s largest cement maker, has announced that its net profit for the quarter ended 31 March rose 10 percent due to a better operational performance.

According to Livemint, the company reported a consolidated net profit of Rs 723 crore against Rs 657 crore in the same period a year ago. Net sales rose 5 percent to Rs 6,850 crore from Rs 6,517 crore.

The company had been expected to post a net profit of Rs 686.2 crore on net sales of Rs 6,933.1 crore, according to Bloomberg analyst estimates stated in the report.

Total expenses for the January-March 2016 period were higher by 6 percent, year-on-year (y-o-y), at Rs 5,857.01 crore.

4. Asset Sales Seen as a Band-Aid for Bleeding Banks: Livemint

Indian lenders, who are pushing indebted firms to sell assets as they try and reduce the stress on their balance sheets, may only see temporary relief unless borrowers are persuaded to restructure their businesses to make them more sustainable, reports Livemint.

Proceeds from sale of assets are enough to only cover interest payments for a few quarters, after which the borrowers may struggle again, bankers said.

“The sale of some assets and transfer of ownership of some parts of land will only cover the interest payment for a year or so. This would mean that in about a year, companies and banks may face similar issues to what they are facing now,” a senior banker said.

5. NSE to Challenge SEBI Panel’s Findings, Says Did Not Flout Rules: Livemint

The Securities and Exchange Board of India (SEBI) has sought an explanation from National Stock Exchange of India (NSE) on a report by a SEBI-constituted expert panel which had recommended action against the bourse for violating norms of fair access, according to two people quoted in a Livemint report.

The SEBI technical advisory committee (TAC) in March had submitted its findings to SEBI that some traders on the exchange had unfair access to market data and trading systems.

6. Govt Cuts EPF Interest Rates to 8.7 Percent for 2015-16: BS

The Finance Minister has overruled a decision of the Employees’ Provident Fund Organisation and cut the interest rate to 8.7 percent for the financial year 2015-16, reports Business Standard.

The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) had approved an 8.8 percent interest rate. For financial years 2013-14 and 2014-15, the interest rate was 8.75 percent.

However, Union Labour Minister Bandaru Dattatreya, in a written reply to the Lok Sabha on Monday said, 

The CBT, at its meeting held in February, had proposed an interim rate of interest at 8.8 percent to be credited to the accounts of Employees’ Provident Fund subscribers for 2015-16. The ministry of finance has, however, ratified an interest rate of 8.7 percent

7. Infosys, Wipro May Pay Large Sums for Mega Deals: ET

In what maybe a sign of the escalating war for large deals, India’s top outsourcing firms like Infosys and Wipro are increasingly more open to making large upfront payments while bidding for large deals that offer assured revenues, reports the Economic Times.

This comes at a time when India’s $160-billion IT industry faces its slowest revenue growth in nearly a decade.

As per the people quoted in the report, Indian outsourcing firms have traditionally stayed away from large deals (over $500 million) which include the takeover of customer assets including data centres or delivery centers.

But it seems top honchos at the aforementioned IT majors have indicated that Wipro would not hesitate to go after large deals using upfront payments if the opportunity is large enough.

8. International Hotel Chains Looking to Scale up Properties in India

International hotel chains Marriott, Starwood , Carlson Rezidor and InterContinental Hotel Group are looking to scale up the number of properties in India by 2020, reports the Economic Times. They are moving faster than their local rivals, widening their presence to strengthen their negotiating position with online travel agencies and take on new-age disruptors such as Airbnb.

US operator Marriott, which has 32 hotels in the country, has over 35 units in the pipeline across its seven brands. Carlson Rezidor runs 76 hotels and has a target of 170 operational and under-development properties in India by 2020. British hospitality chain InterContinental Hotel Group wants to triple its business over the next 3-5 years in India, its third-biggest growth market.

9. Buybacks Draw Firms as Taxes Squeeze Dividends: BS

In order to reward shareholders, especially promoters, companies are opting for share buybacks over dividend payouts, according to a Business Standard report. This is because buybacks attract zero tax whereas dividends are taxable and now attract additional levy.

Bharti Airtel and Bharti Infratel on Saturday said their boards would decide whether to go for dividends or buyback — or both.

Technology firm Wipro has announced a Rs 2,500-crore buyback (to start in May) and a final dividend of Rs 1 per share as against Rs 7 per share for the previous financial year (2015-16).

Wipro joined nearly half a dozen listed companies, including pharma firm Dr Reddy’s Laboratories, that have announced buybacks since the start of the new financial year (2016-17) on 1 April.

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