Sales recovery 'tactical' due to pent-up demand, not sustainable: MG Motor

 

The recovery seen in auto sales in the past couple of months is not a sustainable one and there is a question mark on how the industry would fare next year as the sector is hugely linked to the economy, according to MG Motor India President and MD Rajeev Chaba.

Following the reopening of the economy after lockdown, auto sales have gradually picked up month on month since June and gained further momentum with the onset of festive season in September.

"We should not think this is a sustainable recovery. This recovery is very tactical because of pent-up demand, because of lockdown, because of some shifting from public transportation to private transportation and maybe some very few people who just want to buy cars now because they want to have some feel good factor," Chaba told PTI.

He said the market is coming back to last year's level in August and September although the April-June quarter was a wash out.

However, Chaba said, "This is all tactical but sustainable demand or the robust demand depends on the economy. Automotive industry is hugely linked with the economy of the country and vice versa. Auto industry helps the economy and the economy helps the auto industry."

Sales in September, October, November and December will be fine but still industry will be down by 23-25 per cent overall for the full year, he said adding, "From January onwards, it will depend on the robustness of the economy and the positivity of sentiments and certainty around (COVID-19) vaccines, and maybe government's stimulus further to the economy and may be to the auto industry as well."

"That's why I have my fingers crossed from January onwards," he added.

Some automakers had said that there are 'green shoots of recovery' in the industry based on the performance in September, when auto majors Maruti Suzuki, Hyundai Motor led the recovery march of passenger vehicle (PV) sales in the domestic market posting high double-digit growth.

Tata Motors, Honda Cars India, Skoda Auto India, Kia Motors India also witnessed robust increase in their September sales. While companies like Mahindra & Mahindra and Toyota Kirloskar Motor saw decline in sales, they said demand is picking up and there is a lot more confidence in the dealers.

The manufacturers are banking on festive season demand to carry forward the momentum.

Commenting on the MG Motor India's position, Chaba said since the gradual lifting of the lockdown, the company has been inching up towards normalcy.

"We are almost 80 per cent of pre-covid levels in terms of normalising the supply chain as well as demand. Luckily we still have some orders and we are able to do around 3,000 cars a month right now. In terms of demand, it is almost pre-covid level for us," he said.

He further said, "We still have around 9,000 orders for both Hector and ZS EV. So hopefully by October in terms of supply chain, it should be pretty normal, unless COVID-19 plays on its own and it deteriorates. Otherwise, we are on the path of good recovery.

CIL's coal allocation to power sector under e-auction rises 8% in Apr-Aug

 

CIL's coal allocation under special forward e-auction for the power sector registered a rise of 8.4 per cent to 7.94 million tonnes (MT) in April-August period of the ongoing fiscal.

The state-owned company had allocated 7.32 MT of dry fuel in the corresponding period of the previous fiscal year, according to the monthly summary by the coal ministry for the Cabinet.

However, in August there was no coal allocation under the scheme, Coal India Ltd (CIL) said.

In August 2019-20, 0.62 MT coal was allocated to the power sector by the company, it said.

Coal distribution through forward e-auction is aimed at providing access to coal for such consumers who wish to have an assured supply over a long period, say one year, through e-auction mode so as to plan their operation.

The purpose of the scheme is to provide equal opportunities to all intending coal consumers to purchase coal for own consumption through single window services as per requirement and at a price determined by themselves through the process of

online bidding.

Forward e-auction is aimed at facilitating all the consumers of coal across the country with wide ranging choice for booking coal online, enabling them to buy dry fuel through a simple, transparent and consumer friendly system of marketing of the fossil fuel.

CIL is one of the major suppliers of coal to the power sector. The company, which accounts for over 80 per cent of domestic coal output, is eyeing 710 MT output in 2020-21.

The PSU is eyeing one billion tonne of output by 2023-24.

The company will pump over Rs 1.22 lakh crore in projects related to coal evacuation, exploration and clean coal technologies by 2023-24, to achieve 1 billion tonne of fuel output target, Coal Minister Pralhad Joshi had said.

Govt weighs legal options after losing Vodafone tax arbitration case

 

The government is weighing its legal options after losing the high-profile international tax arbitration case against Vodafone as it looks to limit damages not just in this matter but also in case of a separate lawsuit with Cairn Energy goes against it.

Last month, an international arbitration court ruled that the Indian government seeking Rs 22,100 crore in taxes from telecom giant Vodafone using retrospective legislation was in "breach of the guarantee of fair and equitable treatment" guaranteed under the bilateral investment protection pact between India and the Netherlands.

Finance Ministry sources said the government will decide on challenging the award before a court in Singapore - which was the seat of the arbitration, after taking legal opinion.

While the cost implication in the case is limited to having to pay Rs 85 crore to Vodafone in legal cost, what is weighing on the government mind is a separate arbitration involving UK's Cairn Energy plc.

If a separate arbitration panel were to hold a demand for Rs 10,247 crore in taxes using the same retrospective legislation as illegal, the government will have to pay Cairn as much as USD 1.5 billion (Rs 11,000 crore).

This is the amount equivalent to the value of shares of Cairn that the government had sold to recover a part of the tax demand. It also includes the dividends and tax refund seized.

Sources said Vodafone International Holding (a Netherland company) had in February 2007 bought 100 per cent shares of Cayman Island-based company CGP Investments for USD 11.1 billion to indirectly get 67 per cent control of Hutchison Essar Ltd - an Indian company.

The Tax Department felt the deal was designed to avoid capital gain tax in India and so imposed a tax demand, which was rejected by the Supreme Court in 2012.

To stop abuse and plug theloophole of such indirect transfer of Indian assets, the government in 2012 amended the law to make such transfers taxable in India, they said adding Vodafone was slapped with a fresh demand which the firm contested through international arbitration.

The tax demand on Cairn Energy, they said, is different as it pertains to alleged capital gains the firm made on transfer of Indian assets to a new company and listing it on bourses.

Dheeraj Nair, Partner, J Sagar Associates, said the government "should challenge the (Vodafone) award since this award will have persuasive value in other treaty arbitrations which concern the retrospective tax measures".

"Any party dissatisfied with the award has a right to challenge it, therefore such challenge is justified," he said.

Sonam Chandwani, Managing Partner at KS Legal & Associates, however, said "as the Permanent Court of Arbitration situated in The Hague had passed the award in favour of Vodafone, there lies no further authority for putting up appeal".

"The government can only go back to the Permanent Court of Arbitration on some technical point, but that will not serve any purpose," she said.

Since the Indian Arbitration Act obliges the government to implement a foreign tribunal award, Vodafone can ask for the same in case the award was challenged in Indian courts, she said.

"However, in the present scenario, since all the property, both tangible and non-tangible of Vodafone, lies outside India it will be difficult for the government to procure the same," she said.

She said in the case of Cairn Energy, India in order to procure the retrospective taxes has already expropriated all their investment.

"In circumstances such as when the Permanent Court of Arbitration gives a decree in favour of Cairn, the government of India still has the option to procure the desired retrospective taxes via grounds such that taxation is not covered under any bilateral investment protection treaty and as such cannot be arbitrated. It is challenging the jurisdiction of such panels to adjudicate on a tax matter," she said.

Nair said the government certainly has the option not to appeal in Vodafone but do so in the case of Cairn as each case is independent and brought under a different treaty, which gives different protections.

Cairn's claim is under the India-UK treaty whereas Vodafone's claim was under the India-Netherlands treaty.

While Nair said there would not be any additional negative impact on investor sentiment as they recognise that challenge proceedings are part of the norm, Chandwani said appealing against an international arbitration award will disincentivise the investors.

"Any investor will start contemplating on investing in such countries as any dispute arises the government of such countries might not comply with the international order, putting the investors to losses. It creates hindrance in the ease of doing business in such countries and thus discourage them to make any investments to indulge in any form of funding," she said.

Investment fund TPG to invest Rs 1,837 crore in Reliance Retail Ventures

 Reliance Industries Limited and Reliance Retail Ventures Limited (RRVL) announced on Saturday that global investment firm TPG will invest Rs 1,837.5 crore into RRVL, a subsidiary of Reliance Industries.

This investment values Reliance Retail at a pre-money equity value of Rs 4.285 trillion. TPG's investment will translate into a 0.41 per cent equity stake in RRVL on a fully diluted basis. This marks the second investment by TPG in a subsidiary of Reliance Industries, following a Rs 4,546 crore investment in Jio Platforms announced earlier this year.

This is the second investment announced in half an hour by Reliance Retail Ventures around midnight, the earlier one being by GIC of Singapore. Mukesh Ambani, Chairman and Managing Director of Reliance Industries, said: "I am pleased to welcome TPG as valued investors in Reliance Retail Ventures mission of growing and transforming the Indian Retail ecosystem for the benefit of all Indians. TPG has a proven track record of being a valuable partner to global technology businesses and industry leaders and we look forward to their guidance and support in our journey."

 

ALSO READ: Singapore's GIC to invest Rs 5,512.5 crore in Reliance Retail Ventures

Jim Coulter, Co-CEO, TPG, said: "Regulatory changes, consumer demographics and technological disruption are creating seismic shifts across the entire retail value chain in India. In the midst of this transformation, Reliance Industries has utilized technology and scale to position Reliance Retail as an incredibly strong, well-organized, and innovative leader. We are excited to join with them as they seek to create a more inclusive retail industry that allows Kiranas and Indian consumers to benefit from the connectivity, efficiency, and accessibility of the Reliance Retail omnichannel platform."

Isha Ambani, Director of Reliance Retail, said: "We are delighted to welcome TPG to the Reliance Retail family in our journey of revolutionizing the Indian Retail landscape and improving the economic prospects of millions of merchants and enhancing consumer experience. TPG's rich experience will be invaluable to the Reliance Retail mission."

Puneet Bhatia, Co-Managing Partner and Country Head, India of TPG Capital Asia, said: "There is a significant opportunity to transform the Indian retail ecosystem for the better. Through their New Commerce initiative, Reliance Retail continues to lead the industry by creating a retail platform that meets the demands of a new generation of Indian consumers. We are excited to work with Reliance Industries as they reimagine the retail experience across the value chain."

TPG is making the investment from its TPG Capital Asia fund. The transaction is subject to regulatory and other customary approvals.

GIC, TPG to invest about $1 billion in retail arm, says Reliance Industries

 Indian oil-to-telecoms conglomerate Reliance Industries Ltd said on Saturday Singapore sovereign wealth fund GIC and global private equity firm TPG Capital invested a combined Rs 7,350 crore (about $1 billion) in its retail unit.

Reliance, controlled by Asia's richest man Mukesh Ambani, has secured more than $2 billion in investments from global investors, including KKR & Co, Abu Dhabi state fund Mubadala and Silver Lake Partners, in Reliance Retail Ventures Ltd over the past few months.

GIC will invest Rs 5,512 crore for a 1.22% stake, while TPG Capital Management will invest Rs 1,838 crore to own a 0.41% equity stake in the retail arm, the company said.

The investments in Reliance Retail values the company at a pre-money equity value of Rs 4.285 trillion ($58.47 billion), Reliance said.

This is TPG Capital's second investment in Reliance. In June, the firm invested $598 million in Reliance's digital unit Jio Platforms.

Mumbai-headquartered Reliance has approached investors in Jio Platforms about buying stakes in its retail arm, Reuters had reported in September.

Reliance, already India's biggest retailer with roughly 12,000 stores, forged a $3.38 billion deal in August to acquire rival Future Group's retail business.

The conglomerate is also expanding its so-called new commerce venture, which ties neighborhood stores to Reliance for online deliveries of groceries, apparel and electronics in a space currently dominated by Walmart Inc's Flipkart and Amazon.com Inc's Indian arm.

Flipkart to host six-day 'Big Billion Days' festive sale from October 16

 E-commerce firm Flipkart on Saturday revealed the timeline of its flagship sale event of the year, 'The Big Billion Days' (BBD), which will commence from October 16. The six-day event aims to tap the country’s festive season, as millions of consumers, sellers, artisans, and brands are expected to come online to buy and sell products.

The BBD this year will bring offers each hour from lakhs of sellers and thousands of brands across categories. Further, Flipkart Plus customers will be able to have an ‘early access’ on October 15.

“This festive event continues to focus on Flipkart’s commitment to providing value for consumers, opportunities for growth for MSMEs (medium and small enterprises) and sellers, and employment generation through e-commerce,” said Kalyan Krishnamurthy, CEO, Flipkart Group. “Through strong partnerships with brands and sellers, we have tapped into the power of interconnected businesses and technology to bring consumers a wide range of products at great prices at their doorsteps this festive season.”

Walmart-owned Flipkart has enabled new and convenient payment offerings on its platform, to pave the way for an inclusive and consumer-centric shopping experience. Flipkart consumers shopping during BBD will be able to avail a 10 per cent instant discount through their SBI debit and credit cards. No-cost EMIs will be made available to consumers through offers from Bajaj Finserv EMI cards and other leading bank credit and debit cards. Flipkart has also partnered with digital payments firm Paytm to offer assured cashback to consumers paying through Paytm Wallet and Paytm UPI. Debit-card EMIs on select cards (with no minimum balance) and Flipkart Pay Later continue to bring credit access to consumers.

Flipkart said it would offer deals across categories such as mobile, TVs and appliances, fashion, beauty and food. The other categories include toys, baby care, home and kitchen, furniture and grocery. Flipkart’s Private Brands are being offered by the lakhs of sellers and Flipkart Samarth artisans, weavers, handicraft makers, and other under-served communities,

Flipkart has also forged new strategic partnerships with top brands across each category to bring a wide assortment of products and deals to ensure that consumers from metros to tier-IV cities look forward to BBD. Moreover, this festive season consumers will also experience 2GUD through its social commerce platform. They would be able to witness an uninterrupted video shopping experience with their favourite influencers showcasing the best offers on the latest fashion trends, gadgets and beauty.

Flipkart is also working with celebrities including Amitabh Bachchan, Virat Kohli, Alia Bhatt, Ranbir Kapoor, Sudeep Kiccha, and Mahesh Babu, who will be seen in creative avatars as they engage with the BBD event.

Paytm, other startups vow to fight 'big daddy' Google's clout: sources

 Dozens of India's technology startups, chafing at Google's local dominance of key apps, are banding together to consider ways to challenge the US tech giant, including by lodging complaints with the government and courts, executives told Reuters.

Although Google, owned by Alphabet Inc, has worked closely with India's booming startup sector and is ramping up its investments, it has recently angered many tech companies with what they say are unfair practices.

Setting the stage for a potential showdown, entrepreneurs held two video conferences this week to strategise, three executives told Reuters.

"It's definitely going to be a bitter fight," said Dinesh Agarwal, CEO of e-commerce firm IndiaMART. "Google will lose this battle. It's just a matter of time."

He said executives have discussed forming a new startup association aimed chiefly at lodging protests with the Indian government and courts against the Silicon Valley company.

Nearly 99% of the smartphones of India's half a billion users run on Google's Android mobile operating system. Some Indian startups say that allows Google to exert excessive control over the types of apps and other services they can offer, an allegation the company denies.

The uproar began last month when Google removed popular payments app Paytm from its Play Store, citing policy violations. This led to a sharp rebuke from the Indian firm's founder, Vijay Shekhar Sharma, whose app returned to the Google platform a few hours later, after Paytm made certain changes.

In a video call on Tuesday, Sharma called Google the "big daddy" that controls the "oxygen supply of (app) distribution" on Android phones, according to an attendee. He urged the roughly 50 executives on the call to join hands to "stop this tsunami."

"If we together don't do anything, then history will not be kind to us. We have to control our digital destiny," Sharma said.

One idea raised was to launch a local rival to Google's app store, but Sharma said this would not be immediately effective given Google's dominance, one source said.

Sharma and Paytm, which is backed by Japan's SoftBank Group Corp, did not respond to requests for comment.

Google declined to comment. It has previously said its policies aim to protect Android users and that it applies and enforces them consistently on developers.

Straining Ties

This week the US company angered some Indian startups by deciding to enforce a 30% commission it charges on payments made within apps on the Android store.

Two dozen executives were on a call on Friday where many slammed that decision. They discussed filing antitrust complaints and approaching Google's India head for discussions, said two sources with direct knowledge of the call.

Participants included sports technology firm Dream Sports, backed by US hedge fund Tiger Global, social media company ShareChat and digital payments firm PhonePe, the sources said. None of those companies responded to requests for comment.

Google defends the policy, saying 97% of apps worldwide comply with it.

Google already faces an antitrust case related to its payments app in India and a competition investigation into claims it abused Android's dominant position. The company says it complies with all laws.

These spats strain Google's strong ties to Indian startups. It has invested in some and helped hundreds with product development. In July, its Indian-born CEO Sundar Pichai committed $10 billion in new investments over five to seven years.

The conflict "is counterproductive to what Google has been doing - it's an odd place for them to be," said a senior tech executive familiar with Google's thinking. "It's a reputation issue. It's in the interest of Google to resolve this issue."

Google looms over every aspect of the industry.

Paytm on Saturday told several startup founders, in a communication seen by Reuters, that it was collating input on challenges to Google Play Store and its policies to submit to the authorities.

To craft their attack, they are using a shared Google document.

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