SUCHETA DALAL ON: TATA SUCCESSION: PUPPET IN PLACE? TATA WARS: PR, PLANTS AND PHILANTHROPY Personal Finance Magazine 25 November-8 December 2016 Rs 45 Pages 68 (SUBSCRIBER COPY NOT FOR RESALE) www.moneylife.in TA-TA GOVERNANCE? The Tata-Mistry spat has exposed how cronyism, cloak-and-dagger moves, personal ambitions, fears and pettiness drive people pretending to hold the high standards of ethics and morality. Investors should be worried Cover Page_281.indd 1 18-11-2016 18:51:02 Advertisements.indd 3 17-11-2016 21:51:28 Advertisements.indd 2 17-11-2016 21:48:42 This is the longest Cover Story we have done. 20 Different Strokes Tata Sons Head: Will A Yes-Man Be the Fate of the Group? Debashis Basu Disclaimer: Moneylife has a policy of not allowing its editorial staff to buy and sell stocks that are written about in the magazine. She also gives us an insight – Peerless Sells Its Mutual Fund Business into the dubious philanthropy and smear – ICICI Bank Home Loan Interest Rates Lowered by 15bps – Builder Arrested for Failing To Surrender Excess Land to campaigns that have been undertaken under the Government Ratan Tata’s shrewd planning. Ta-ta Governance? Sucheta’s Different Strokes explains how The Tata-Mistry spat has exposed how cronyism. All personal transactions in individual stocks are subjected to internal disclosure rules. write Sucheta Dalal & Debashis Basu the group may not be as significant a factor in the selection as the closeness to Ratan Tata. the government 14 MONEYLIFE QUIZ is left to achieve the goal of weeding out 18 counterfeit notes and black money from the economy.indd 2 18-11-2016 18:41:52 . personal ambitions. serpentine queues at banks and vote bank politics take centre stage. and continuous. – Service-Tax Introduced on Music and E-Books Sold on The Tata-Mistry spat was almost Foreign Portals overshadowed by the government’s demonetisation of high currency notes. Indian corporate sector watchers have been following the Ratan Tata and Cyrus Mistry camps engage in an increasingly bitter battle of words. is the ambiguous governance structure that the Tata group has created over the years. she raises questions about the expensive public relations and advertising budgets to maintain a spotless 12 Your Money – Palash Corporation Told To Pay Housing Society Rs3 Lakh Compensation image of Mr Tata. cloak-and- the new chairman at Tata Sons may end up dagger moves. MONEYLIFE | 25 Nov-8 Dec 2016 | 4 Content. As always. The Cover Story delves into all these issues. fears and pettiness drive being a mere puppet in the hands of Ratan people pretending to be ethical and moral. One of the major problems highlighted by Mr Mistry. Investors should be Tata and simply be a yes-man. attention. The mere volumes and numbers involved make it a gargantuan task. please do write to us with comments on the published articles and about what you would like to read. Don’t miss it. ISSUE CONTENTS 25 Nov-8 Dec 2016 What’s Left of Tata Image? F or three weeks now. While the Tata camp is pulling all strings to evict Mr Mistry from all the group companies. the shareholders of Tata companies face a long list of problems which need urgent. what remains to be Tata Wars: PR. after his ouster. In her Crosshairs section. While the raging debates. This spat also brings to the forefront the 30 Cover Story innumerable dubious transactions that had been brushed under the carpet for years. The future of worried. Plants and Philanthropy seen is how deftly the government handles its implementation and smooth transition. As good as the demonetisation looks for the economy. 800 R Balakrishnan How To Read an Annual Report for Investing Rs. You will not be able to download but there are no restrictions on the number of times you can view them.moneylife.in/icvideos/ Speaker Event Amount Prof Sanjay Bakshi Investing Traps & How To Avoid Them Rs. 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Ea Life insurance – Tata AIA Launches Three New Products ML FOUNDATION EVENTS 44 Stock Watch Fine Print KPR Mills: Strong & Steady TAX HELPLINE Growth Adani Ports and 52 Queries at Moneylife Foundation’s Tax Helpline 62 Taxmen and Special Economic Zones: Port of Demonetisation Call USEFUL APPS Kajaria Ceramics: Double 54 LookFor: Get Spotted in a BEYOND MONEY Whammy Asahi India Sea of Faces 66 Investing in Educational Opportunities for Gifted Glass: – Instant-Quantified Self: Track Your Poor Children Activity Transparently – CALM: Take a Break for a Soothing Better Experience – InShorts: All the News in Just 60 Words KEC International: Infrastructure Business Doing Better HEALTH Market Manipulation: Medicamen Biotech 56 Drug Money Market Trend: Demonetisation: Pulse Beat: Medical developments from DEPARTMENTS An Unknown.. CONTENTS FUND POINTERS TAX / FIXED INCOME LEGALLY SPEAKING 22 Choosing Better Performers 25 Bank FD Rates Down after Demonetisation 58 GST: Many States....... Unknown around the world Readers’ Response ....... indd 3 20-10-2016 21:00:44 .Advertisements. 13/1. the sales@moneylife. Tatas are wrongly placed on a very high pedestal. Bengaluru 1st Floor. 3rd Floor. by email 1 Cross.in Today.68.in Editorial Consultant Dr Nita Mukherjee nitamuk@gmail. Kalkaji. It is the same as the armaments industry Fax: 022 49205022 E-mail: mail@moneylife. HISTORY REPEATS ITSELF? Off Veer Savarkar Marg. This is a clear case of the UGLY AMERICAN. V Ganesan. But who will they sell the products the Editor! New Delhi to? It is to the people in the third world countries. 3rd Floor. to support the pharma industry. are subject to market risks.400 028 This is with regard to “Equity Funds: How Much to Expect Over Editor: Debashis Basu the Long-term?” by Debashis Basu and Mitul Patel. I believe that the markets Total no of pages . New Delhi . Mumbai . Lake Gardens. Shivaji Park. RICH GET RICHER! Circulation & Subscription Office This is with regard to “Who Wants To Defeat 315. Hind Service Industries Premises. Hind Service Industries Premises.com Editorial. st Bengaluru .400 028 pharma industry wants to make money from Tel: 022 49205000 death. read all scheme related Now. Mumbai . E-mail: diagnostic industry is blooming.000 for some more time. J-3/66. Sunil Rebello.500 to 29.indd 2 18-11-2016 17:11:36 . History repeats itself—again. These people provide the market but no have WIN a prize DDA Flats. They Moneylife is printed and published by are basically not successful businessmen! Debashis Basu on behalf of Sundararaman Gopalakrishnan. online comment RNI No: MAHENG/2006/16653 MONEYLIFE | 25 Nov-8 Dec 2016 | 8 Letters. This is an excellent article. This is because markets are trading at high value without any earnings improvement.560 021 EXCELLENT ARTICLE This is with regard to “Shareholders Pay for Kolkata Ratan Tata’s M&As and Expansions” by 395. No need to panic. Saibabanagar.700 045 Debashis Basu.in Subscription e-mail rich get richer by playing on the misery of the poor.in Sucheta Dalal Managing Editor sucheta@moneylife. the documents carefully. Dadar (W). Volume 11. Srirampuram. Advertisement. Tel: 033 2422 1173/4064 4318 It is well presented and very true. online comment Moneywise Media Pvt Ltd and published at 315. Off Veer Savarkar Marg. Shivaji Cancer?” by Prof BM Hegde. subscribe@moneylife. How true! The Park. 7th Main Road. Dadar (W). Issue 21 25 November–8 December 2016 Debashis Basu Editor & Publisher
[email protected] 019 money to buy. Kolkata . Mr Trump wants to trade only with countries which would make America great.in making money by the killings fields around the Mutual Fund investments globe. Including Covers would trade in the band of 24. Donald Trump wants USA to manufacture Write to and also export. In this world. Market fall is not related to Donald Trump’s victory or the demonetisation move. Moneylife Foundation AD.indd 1 23-09-2016 18:30:33 . Cross- multiple tasks and. Finally. when the local court of Bandra failed to allow me to What has any regulator done to undo this damage take her to the Thane Mental Hospital for certified while it was being inflicted? Zilch. online comment in Bhiwandi. They refused to support are taking the level of knowledge into another orbit. Thank you for Mahesh S Bhatt. They said that women patients bring additional sexual risk challenges. This was sent by someone are subject to market risks. got good salary increases and bonuses. naïve investors are Jaswant Aditya Singh. But banks have made hefty commissions. customers is a practice that has been rampant in Indian Amol Chavan. communication.indd 4 18-11-2016 17:14:05 . It Jaswant Aditya Singh SEBI has not been able to regulate the high and has been more than six mighty as well as the so-called small tips peddlers months and no trading YOU WIN A PERSONALISED (around 6. online comment providing such a review. It is sad to see women who give birth to us in plans). I Keep it up. long-term healing for mental illness jaunts at the expense of insurance companies. I to support later and the find that the recent articles on this subject in Moneylife Thane Mental Hospital are simply superb and a class apart from others. like expertise in not only REGULATORS CAUGHT NAPPING sports skills but also soft skills like time management. Everyday. who bought Congratulations (IFAs) of mutual funds.000 small 5-10-seater call centres based has taken place since CLOCK in Gujarat and Indore) who have managed to get then. Complaints are the data of investors opening demat accounts. They pending with SEBI present themselves as if the contact number has been but lead to no results. went to Vandrewale Foundation/rehabilitation centre Amol Chavan. Life insurance business has seen a huge volume surge in the past 15 years (post- INADEQUACY OF REHAB CENTRES privatisation) due to this and thousands of customers This is with regard to “A Foster Home for Mentally ill have lost money on ULIPs (unit-linked insurance Women”. The in Mumbai. keeping a focus on Get Caught nor Pay a Price” by Sucheta Dalal. given to them by SEBI. mirror to SEBI—of their myopic a reputed research approach to regulate only independent financial advisors company and naïve investors. It would be helpful if such topics are covered in detail. sadly. For example. This is with regard to “Wells Fargos of India neither presentations. her as there were already many patients with them. LETTERS Showing a Mirror the Best letter T his is with regard to “SEBI’s Investor Advisor to buy BSE-listed DHYANI (some Regulations: Right Step but Not small company) Mutual Fund investments Enough” by Sucheta Dalal. I left FURTHER COVERAGE NEEDED! her on streets again as the family disowned her due to This is with regard to “It Is Training Not Talent that economic reasons. the such a plight. are all trapped. getting cheated by fraudsters. And the curbs mentally ill patients by stating that this is a job for on mis-selling remain largely in letter but are not MONEYLIFE | 25 Nov-8 Dec 2016 | 10 Letters. The police failed Momentum with Fundamentals” by Debashis Basu. Jai Mauli! Creates Geniuses” by Debashis Basu. read all scheme related is a wonderful article showing a under the name of documents carefully. an SMS online comment Jaswant Aditya Singh KEEP IT UP! the state police or an This is with regard to “Picking Stocks: Marrying NGO. We do not have adequate rehabilitation relationship managers have got fat bonuses and foreign centres for slow. on how to train yourself to selling high commission products to unsuspecting be always out of comfort levels. lastly. I had an awful experience of failing to managers and honchos of insurance companies have support a 35-year old mentally challenged woman. online comment banks for a long time. it. Nor LIC (Life Insurance Corporation of India—the is it driven by passion. online comment is not likely to allow this to happen. I go tendency among Indian doctors (as a monolithic through the archives to read his articles. have never are caught napping at the wheel. that seems to work in our country while the regulators who are supposed to be drug experts. Dadar (W). Public banks for private gains. Indians give great importance with just one ED (executive director) who to unchallenged authority and are was transferred from another bank! The willing to ‘donate’ more than a appointment of a CA (chartered accountant) crore of rupees to win a backdoor with links to the ruling party on the board of entry into a medical college. Off Veer Savarkar sales@moneylife. Bank) is without a CMD (chairman and Indian society looks up to the managing director). be edited. I tried hard to explain to my friends about the inadequacy of bank fixed deposits POOR MEDICAL COLLEGE ADMISSIONS? to beat inflation. write to fax to 022-49205022. complaints about current 400 028 or call 022-49205000 or Letters to the Editor can be 49205022. LETTERS translated in spirit. The Indian Medical Council Subba Rao. Hind Service rates. which is being praised like respect. 316. There is little task-sharing (a new buzzword) between the various THINGS ARE CHANGING healthcare professionals. I don’t a public sector bank with full backing from think it makes economic sense. Caveat emptor is the only dictum hierarchy’ runs the healthcare system. On the other. pharma companies. It is more inclusive and their business. India had a very robust public health system before The malaise of bad loans is due to politicians and the revised medical curriculum incorporated public crony industrialists who have exploited public sector health into the MBBS syllabus. Unit No. Subscription Service: Industries. 316. Dadar(W). except as helpful. email us at 3rd Floor. Hind Service Industries. Marg. suggested that it had arrogance that rules India even already selected the candidate. to identify turnaround companies. For new subscription requests. People who have health is much more than the ‘social never worked as bankers want to appoint and preventive medicine’ that is taught them and tell bankers how to go about in classrooms. Mumbai 91-022-49205000. IOB (Indian Overseas multidisciplinary. 3rd Floor. Unit Advertising: For information and Moneylife Magazine. Is there such a dearth of talent at SBI (State Bank of India) that the government A SMALL REQUEST was forced to extend the term of its CMD? This is with regard to “It Is Your Money.Trust me. there is a general I never miss R Balakrishnan’s articles. please. the writer’s full name. the authors Moneylife. It is a hangover of the feudal the messiah that it is. I have not read the book. On the one hand. so I This is with regard to “Public Sector Banks: No Sign of have no idea if this possibility has been discussed. emailed to editor@moneylife. A ‘prestige-based Karthik Bharathi.in or call Off Veer Savarkar Marg. The BBB (Banking doctor with a great deal of awe and Bureau Board). online comment that things are changing. played a role in India. address us at subscribe@moneylife. online comment by R Balakrishnan. One small political community. No. a Turnaround Yet” by Sucheta Dalal. online comment HOW TO REACH US Letters: Mumbai 400 028 or faxed to 022.in in or can be posted to: The Editor. and telephone number and may or to Subscription Manager. my senior colleagues introduced me to by Debashis Basu. 'subordinates' who take orders. it will be really or share the professional space with them. 11 | 25 Nov-8 Dec 2016 | MONEYLIFE Letters. The pharmacists. not as individuals) to never allow request from me is to publish an article about the ways any meaningful role for other healthcare professionals. The Bank is today.indd 5 18-11-2016 17:15:12 . Luckily. In fact. Letters must include subscription and books. insurer voted against him last year) certainly shows Unnikrishnan Mazhuvancherry. but nobody gives a damn about This is with regard to “The Sick Healthcare System” it. Your Worry” Kunal Singh. the subscription charges lament that the doctor’s education comes from the are worth every penny. the society Corporation to submit the approached the Mumbai building completion certificate Suburban District Consumer and occupancy certificate Forum complaining of within four months and deficiency in service and all documents of title. from the and delay in providing builder. Women Mumbai-based Essel Finance’s entry borrowers will now be able to avail into mutual funds. MONEYLIFE | 25 Nov-8 Dec 2016 | 12 Your Money. Mumbai) bought flats from Palash compensation is to be paid with 9% interest per annum since 2011. medical treatment) investment manager of Peerless Mutual Fund. It amounts to Corporation (the builder) in 2007 sides.20%. four fixed. The obligation does not end by sending a draft conveyance copy. if conveyance is not in getting the conveyance. after hearing both more than six years. In 2016. the housing wrongful loss to the society. It directed Palash In 2011. ICICI Bank Under the deal.15% while other borrowers offers one liquid scheme. against property. Peerless Mutual Fund loans at 9. while PFMCL is the needs (education.. conveyance. Peerless General has launched a home loan overdraft Finance and Investment Company Ltd facility for salaried customers under will sell its entire stake in Peerless Fund which customers can avail loans from Management Company Ltd (PMFCL) and Peerless Trust Management Company Ltd Rs5 lakh up to Rs1 crore for personal (PTMCL) to Essel Finance Management. PTMCL is the trustee. for an undisclosed sum. The acquisition marks I CICI Bank’s home loan interest rates have been lowered by 15bps. The Forum. Your Money REAL ESTATE Palash Corporation Told To Pay Housing convey title and failing to execute necessary documents is a breach of Society Rs3 Lakh Compensation statutory obligation.indd 2 18-11-2016 17:18:34 .’’ society was formed with The Forum directed the 65 members. This Rs500 per day. income schemes.. that the builder has to pay the the Forum observed that increase of stamp duty from the society was partly right April 2010 on the conveyance and must be compensated for the “failed to execute conveyance deed deed” and directed the firm to pay harassment it faced due to the delay within a reasonable time. in 2009. The act of nonfeasance by avoiding to executed within four months. along with Society as compensation documents of original title. for breach of obligations within four months. The unfair trade practice by Forum was “also of the view Palash Corporation. There are no adequate reasons why they need P alash Cooperative Housing Society (Andheri. one hybrid scheme and The revised rates are applicable for three equity schemes. according to The Telegraph. which amounts to deficiency of service. will have to pay interest rate of 9. concluded that the developer unfair trade practice and resulted in and. home loans up to Rs75 lakh. The society builder to pay Rs3 lakh to should have got conveyance Palash Cooperative Housing of the property.” MUTUAL FUNDS LOANS Peerless Sells Its Mutual Fund Business ICICI Bank Home Loan Interest Rates Lowered by 15bps K olkata-based Peerless has sold its mutual fund business to the non-bank finance company Essel Finance Management. in/credithelp hel To use our credit helpline. 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For FY15-16.indd 4 18-11-2016 17:19:38 . or buying some storage on a cloud from an overseas service-provider. 10 years d. Motiramani were booked the land (2. Article 230 d. which can be downloaded by land to the government under the sections. US$ 100 billion • 5. Which Article of the Constitution of India (read along with 4. how many 6. Article 250 b. by Thane city police on or half an acre) to which will be added to the bill. The answers are in a personalised sed this very issue. read all scheme related quiz@moneylife. Domestic suppliers to surrender excess economically weaker of movies. but some cases where tax. Congrats! You win a personalised clock with an • 6. The builder was required to surrender 5% of D ownloading music or an e-book from an overseas site.a. telephone number before 14 December 2016. Tata Motors Limited d. 2 billion • 7. William Wordsworth d. beginning the complaint of a real the government for 1 December 2016.b. Article 225 In all.Quantified Self d. 15 years c. 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Trusted to keep Your Saving Safe (Subscription Form overleaf) Magazine Subscription revised 28 April 15.indd 2 29-07-2016 16:02:58 . Introduce a friend: Fill in the details below & we will send a free copy to your friend. Avoid the traps of mis-selling which w burn a hole need financial hhelp. of Issues Cover Price 1Year Subscription 26 Issues Rs1.indd 3 25-08-2016 20:49:37 . Dadar (W). Automatic basic membership of Moneylife hits the stands Advisory Services. Hind Service Industries Premises. Shivaji Park. elp. #All disputes shall be subject to Mumbai jurisdiction only. 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Ameet Patel spoke at a the Tatas alleged that Mr Mistry was ‘drifting seminar-cum-guidance away’ from the group’s operating companies. in a seems to have had a very cosy financial nasty coup engineered by the 11 directors relationship for more than a decade.moneylife.indd 1 18-11-2016 17:29:03 . The measure may have precedence but the dimension of the effect has no precedence EXCLUSIVE VIEWS On issues that matter to you Demonetisation: Pains of Bank Employees Highlighting the suffering of bank employees post.in News & views with a big difference Was this the reason for may have stumbled upon a hot button issue with Rata Tata: the relationship Cyrus Mistry’s ouster? with C Sivasankaran. documents viewed by Moneylife show a is a big weapon in completely different picture the hands of the tax officer” organised by Moneylife Foundation in Mumbai. Mr Mistry had raised the issue of initiating However. He also How Demonetisation Has Affected spoke about the recent Rural Areas demonetisation and The Union government sent shock waves among what it means to tax not just the hoarders of unaccounted money but reporting of citizens also among its huge political constituency and the state governments. the Indian National Bank Employees’ Federation (INBEF) has requested finance minister Arun Jaitley to honour them with Demonetisation: The reset RTI use: Blame it on the ad-interim relief in their wages and affect a wage and threat of future resets common man settlement in 2017 Aniruddha M Godbole Vinita Deshmukh Demonetisation: MFIs hit by cash crunch in the near term Micro finance institutions (MFIs) are facing a severe cash crunch which is hurting their collections and disbursement. Indian Style: ML FOUNDATION What Cyrus Mistry proposed and what he got from the Tatas Beware. promoter of Ever since Cyrus Mistry was ousted Sterling Infotech. says a research note Dr B Yerram Raju debate — Rachana Arora For the latest news.demonetisation. it is too Demonetisation–Will Citizens must get involved in early to conclude that there will be high loan RBI gear up? the genetically modified crop defaults or weakening of credit culture in MFIs. session on “The AIR However. with whom Mr Tata from the chairmanship of Tata Sons. Mr Mistry is resulted in large financial benefits to Mr Sivasankaran (often tight-lipped. referred to as Siva). www. sources close to the group speculate that Mr Mistry legal action against Mr Sivasankaran Corporate Governance. twitter.com/MoneylifeIndia http://www.com/moneylife. Annual Information Report is a big weapon For two weeks. of Tata Sons (two abstained from voting). there was no explanation about in the hands of the taxman why Tata Sons’ directors ganged up to remove Cyrus P Mistry as chairman of Tata Sons. Documents reviewed by Moneylife corporate watchers are wondering what show that Mr Mistry had raised the issue could Mr Mistry have done to completely of Tata Sons’ dealings with lose the faith of the board? Tata Sons has Mr Sivasankaran. exclusives and reports on our activities TO GET THIS AND MUCH MORE INSTANTLY.in SUBSCRIBE TO OUR DAILY & WEEKLY NEWSLETTER FREE Web Content. Values. to get to the truth. provided the world a Cyrus Mistry refuses to ringside view into how step down as chairman. one learns that Rediffusion-Edelman is being paid a Ratan Tata finds no use for the much-touted whopping Rs60 crore per annum for PR support to ‘Tata culture’. quoted as saying. on par with the worst in the the 2G-telecom scandal and the machinations of the country. to retain the Tata business) because his 904-page special audit did not give Tatas the clean chit Tata Sons’ Guarantees they expected. among funding requirements of others (and still available on group companies where the net). CROSSHAIRs Exclusive news. Cyrus Mistry’s It further says that this latest riposte to Tata Sons message about guarantees is (specifically. A pink paper recently reported that Tata Sons may The Niira Radia tapes. costs could jump significantly for group companies and Even before one digests this huge PR budget. Plants and Philanthropy W hen it comes to fighting for internal control. this kind of money buy? Quite simple. the stories behind the headlines and the truth between the lines by Sucheta Dalal Tata Wars: PR.” and Reliance). I watched it closely else does one explain the shock and many allusions in the 1990s while reporting the humiliating removal to ‘damage to the Tata brand’ that greeted the crude of Russi Mody. It further quotes unnamed bankers saying. was ignobly sacked by his firm (in order carefully. How (PR) and large advertising budgets. It ensured that innuendo and falsehoods. published by Outlook and no longer guarantee loans. led by Ratan Tata. Ms Radia skilfully Unnamed executives were manipulated the media. Ties that bind: Ratan Tata inaugurates Nayati Healthcare & ‘likely to be conveyed at the page advertisement attempting Research in Mathura in February 2016. meetings) convened to oust boardroom coup to sack Mr Mistry) tells us that Ms Mistry. values and policies of Tata offs. loans and land deals Sons cannot be supported for her corporate clients with the comfort of Tata (primarily the Tata group assurance.indd 2 18-11-2016 17:30:46 . refinancing deals or Open magazines. “If Radia’s work through Vaishnavi Communications cost Tata Sons decides not to renew guarantees.” MONEYLIFE | 25 27 Nov-8 November Dec 2014 2016 || 14 18 Crosshair. over the Tata Finance episode when YM Kale. What exactly does quickly go for a toss and in come whisper campaigns. lubricated through expensive public relations group. the belated full. “Units politicians and bureaucrats that don’t adhere to the through a series of trade. were soon forgotten. Ajit Kerkar and Darbari Seth and then. a expensive PR machine is at work again in the Mistry- highly regarded senior partner at the accounting firm of Tata war and investors need to analyse news reports AF Ferguson. top executives. equity and fair-play Tata Sons as well as the Tata trusts. Nayati's chairperson EGMs’ (extraordinary general to explain the disgraceful Niira Radia (right). make their loans more costly. borrowing a cool Rs40 crore per annum. sacking of Cyrus Mistry? One must remember that this again. trading angle and sharing of price sensitive information How true is the threat about Tata Sons’ guarantees? that SEBI is reportedly investigating. Having said philanthropy has turned into a However. calling into question the whole edifice to confirm the media narrative and reinforcing public of philanthropic activity. The 14 Tata trusts. leading to a loss of revenue for India? Sons is in a position to remove The saving grace in this Mr Mistry as chairman. directors on listed group entities. Tata Motors. with the subsequent event appearing of Tata Sons. Bhaskar Bhatt. it is against a pledge of shares. We learn that the only companies where Tata Sons in the context of Nitin Nohria’s role in Mr Mistry’s has stuck its neck out by providing a direct guarantee ouster. too. SEBI must ensure that.indd 3 18-11-2016 17:31:06 .” the debt-laden Tata Steel and another two-dozen listed It was ‘the dominant theme’ at Tatas’ ‘inaugural Tata companies at competitive rates on a stand-alone reception’ in London. part of the Tata group. from the shareholder perspective. Proxy advisory firms However. The battle with Cyrus Mistry has exposed an independent director. There. because of the “threat 67% shareholding in Tata Sons. the company faces on account of loss of confidence At a time when the government has cancelled the of the promoter Tata Sons in the Chairman of Tata registrations of several NGOs. acting under orders of Chemicals. Mr Mistry is most likely to cut the losses Benefits of ‘Philanthropy’ of over 1 million-1. set a great told to look at each group well ask whether this much-touted example of good governance. sorry episode is that a few of the Sources close to Cyrus Given the aggressive muscle trustees on the Tata Trusts who Mistry say that. was “keen to advertise its Also. the trusts in the Cyrus Mistry episode. and brand management tool of this situation by telling Tata and. not to mention the insider opinion. would Indian banks really refuse to lend to commitment to corporate social responsibility. company on merit. Indian Hotels or even magic letters ‘CSR’ sprayed across all its publicity. it is worth noting that Chemicals. they agree that there is an very smart business promotion there is no scope for a repeat implicit guarantee of Tata Sons. One may well ask. The current question whether this much-touted philanthropy has structure of Tata Sons allows one individual.” He added to the drama by tendering his the Tata trusts also enjoy tax exemptions from the resignation. in the Indian context. it is Sons that trustees of its 14 unimaginable for a Tata group trusts cannot be ‘independent’ company to renege on a payment obligation. rather than a group company the role of ex-Tata executives (NA Soonawala and head and Tata nominee on the board. can do this by way of their collective to step down as chairman. 19 | 25 Nov-8 Dec 2016 | MONEYLIFE Crosshair. to be raised openly and bluntly. with the Tata Chemicals. requested Cyrus Mistry a single person. one could of group companies. he cut his business teeth in the If anything. the revelations of the past two weeks notorious opium trade with China. like TCS. TTSL. Like most other Indian merchant Messy Structure princes of his time. Ironically. but they are going of listed entities and their millions of shareholders. buccaneering capitalism with which its founder began his remarkable career. Will bankers be against such a move? points out how Tata UK. Almost in tandem. during his flexing by the Tata trusts in the are also independent directors tenure. this would have been relevant if he were government. There is a nice RK Krishna Kumar) in scrutinising the investments sequencing to this. where lenders have also pointed out that as many as 10 independent have inserted covenants in the loan agreements directors have been on boards well past the tenure allowing them to pull out the loans if it ceases to be a prescribed by governance regulations. one could well tax authorities and their own investors. “Today Tata prefers to forget the find bankable projects. Such questions would have been independent directors and dictate the fate of dozens considered sacrilegious in the past.5 million pounds a day on account A February 2015 article by Zaheer Masani (son of of Corus Steel of the UK and bring the company back the famous Swatantra Party leader Minoo Masani) in shape. now that the halo This goes against all norms of good governance and around that Tata name has been severely dented by most proxy advisory firms have been scathing in their Ratan Tata’s own actions. we hear that banks are struggling to He writes. to effectively ride roughshod over management tool. heading turned into a very smart business promotion and brand the Tata trusts. bankers were specifically Cyrus Mistry episode. Why is such a contribution from tax-exempted trust In any case. a sticky issue is Tata Steel. basis? And yet. whether the massive $50-million donation to of sorts is the controversial TTSL (Tata Teleservices Harvard Business School had a quid pro quo attached? Limited). the Tata director on Tata criticism. is a company where Tata funds.” ought to worry Tata Sons about stricter scrutiny by Given the aggressive muscle flexing by the Tata the Securities and Exchange Board of India (SEBI). Let us Limited) have all look at a few facts. being a Tata director or a trustee on its hands-off policy and foreign investors do what is best many mega charities has such a big social cache that only for their funds. The question is: What will be Ratan Tata’s The dominant view is that Cyrus Mistry was targeted ultimate legacy and in what shape will he leave India’s for trying to clean up Ratan Tata’s legacy of massive debts most famous corporate group? (steel). in Tata Sons’ nine-page Mr Mistry alleges that letter about using PR to he has been removed build his own image) by similar dubious during his three-year stratagems as were tenure. in the fifth. not even outrage caused by the brutal and. messy projects (telecom) and emotional investments As I write this column. Cyrus reputed directors of Tata Sons showed no compunction Mistry. and his family with an 18. He has not given deployed to oust him any media interviews. independent directors of four of the biggest six muscle of Tata Sons’ shareholding and cross-holdings. Cyrus Mistry leadership. However. either directly or indirectly. Tata companies (Tata That may or may not be Motors. but after a public uprising and many deaths and is now an Ratan Tata will. controls the ownership. ability not hesitated to seek the Being a Tata director or a trustee on its many and willingness to fight removal of Nusli Wadia mega charities has such a big social cache that the long war. In some cases. I suspect it is and endowments flowing from the Tata charities appear going to be a long-drawn war with many small battles to have had a powerful influence. that will happen if the government truly maintains a Remember. on the way. is probably MONEYLIFE | 25 Nov-8 Dec 2016 | 20 DIFFERENT STROKES. get his way because he alone acknowledged financial and marketing disaster). sacking of Cyrus Mistry as chairman just a couple of months. endorsed Cyrus Mistry’s First. a rare person would allow considerations such as fairness A third issue that ought to be the biggest consideration and good governance to jeopardise that position. the allegations contained Tata Global Beverages. one would say. and his biggest ally in Secondly. eventually. so we know very little That Ratan Tata has about his tenacity. Right the numbers are stacked against him because of the sheer now. but Hotels Corporation only time will tell. Tata Steel.indd 2 18-11-2016 17:32:36 . Tata a miscalculation about Chemicals and Indian Mistry’s game plan. But he has (a childhood friend only the most upright person would allow done rather well so far. DIFFERENT STROKES SUCHETA DALAL Tata Sons Head: Will A Yes-man Be the Fate of the Group? W ill Ratan Tata’s image survive the shock and about being party to a grossly unfair decision. our Cover considerations such as fairness and good consolidating the group Story shows that sensible governance to jeopardise those posts in the 1990s) for backing institutional investors Cyrus Mistry in Tata (retail investors won’t Chemicals appears to have jolted several ‘independent’ matter because they seldom make the effort to vote) need to directors of other group companies into being more aligned make a dispassionate assessment about each Tata company. from Tata Sons. The for all investors and the future of the Tata group. with Tata Sons’ thinking.4% holding. the media narrative is that (the Nano project that had to leave Singur in West Bengal Cyrus Mistry’s sacking was vicious and unfair. he has been chose to keep a studiously removed as chairman of low profile (contrary to TCS Ltd and. financial incentives of Tata Sons? The jury is still out on that. when three of the big names had been on the board for dubious. Aloo. So deep After all. to cut the group’s losses in which. We don’t know Venkat’s standing with Ratan Tata is the fact that he holds if an eventually legal battle will lead to a court-ordered the critical 1. most of the Tata buddy Sivasankaran in trustees that matter (retired the loss-making Tata Tata executives who have Teleservices (TTSL) (where There is a good chance that Mr Tata may put sinecures at the trusts the group has to pay over in place a puppet. or more. She was attack by team Cyrus.5% balancing stake in AirAsia India. it will be up to shareholders persons who may meet Mr Tata’s approval. four months. is married to Cyrus Mistry’s sister. Noel Tata. is single-handedly in Venkat. but this is a high stakes game. who know the family. Mehli Will the Rata Tata-headed selection committee pick Mistry. concerned about this and Ratan Tata’s toe his line. with Tata Sons) are already used Elite Parsi circles are already abuzz with dual control over Tata to reporting. He maintains or find an expatriate of high standing (as they have in a very low profile. run a firm called any of the names being speculated about by the media M Pallonji & Co Pvt Ltd which used to have large shipping (Indra Nooyi and N Chandrashekaran. but Ratan will only consider him as the last next steps. and his brother Pheroze Mistry. as are institutional investors. Ratan Tata is back at the steering None of these names is being discussed because they wheel of this not-so-Nano group. She can be reached at sucheta@moneylife. He is very close to Ratan Tata and group in that timeframe. doesn’t matter if it is disastrous for the group. is a frequent companion on his many travels. and set right the unsavoury have full control over dealings at AirAsia India Tata Sons. Eventually. and dredging contracts from Tata Power.indd 3 18-11-2016 17:32:49 . to Ratan Tata. in a very curious deal. among others).5%. that any professional manager will accept this otherwise Mumbai) (owned by Forbes. while change in Tata Sons’ equation with the powerful Tata trusts. without demanding thick lines to be drawn Ratan Tata lived for decades. holds 0.” Noel Tata holds a 0. Further evidence of charge of the $100-billion business empire. His appointment could also blunt the counter. What recommends them to the post is that they are orders—doesn’t matter if it is disastrous for the group. until then. to find an effective replacement for Cyrus Mistry in just Then there is Mehli Mistry (a cousin of Cyrus Mistry. Sources.Sucheta Dalal is the managing editor of Moneylife. who follows his orders— and do the job of vetting $1billion to DoCoMo). between the Tata trusts A third name doing and Tata Sons and a clear the rounds is that of R articulation of the extent Venkataramanan (Venkat). DIFFERENT STROKES SUCHETA DALAL as much. or working Sons and the powerful Tata speculation about who it may be in close coordination with trusts. with their combined Tata Motors and Tata Steel shareholding of 67%. his half-brother. In fact. of the Tata group companies to decide if any of them is There is one school of thought that Mr Tata may have a good custodian of their investment and they may vote to bring in another Tata. he may remain fully occupied in but the two families do not get along well) who could trying to oust Cyrus Mistry and Nusli Wadia from the be a dark horse. But. Simone Tata. of Mr Tata’s personal writ a former executive assistant over group decisions. who follows his Sons. Mr Tata. Ratan Tata does possible option.in 21 | 25 Nov-8 Dec 2016 | MONEYLIFE DIFFERENT STROKES. a group company) in which coveted job. There is a good chance are the best or most competent persons to head Tata that Mr Tata may put in place a puppet. Noel with their feet. investment decisions of Today. According to with Ratan Tata’s close sources.5% stake in Tata not have age on his side and nobody believes he is going Sons and his mother. unlikely to challenge Mr Tata’s authority or decisions as Elite Parsi circles are already abuzz with speculation about Cyrus Mistry did. AirAsia Investments Ltd and Tata Sons hold 49% each. Mr Mistry is Mr Tata’s confidence seems to have been sacked in Venkat that he is the precisely for pushing those managing trustee of all boundaries and attempting the powerful Tata trusts. say awarded the Padma Shri in 2006 for her outstanding contribution that “Noel is used to being bullied by Ratan and could to journalism. but is so close to Ratan Tata that it is Tata Motors) to head the group? I find it hard to believe his family which purchased the flat at Bakhtavar (Colaba. MUTUAL FUNDS POINTERS Choosing Better Performers U nlike stocks. However. Many even rely on point-to-point how a mutual fund (MF) scheme will do in the future. quartile in the period 2010-2013 moved to the 1st quartile We get a reasonable basis to narrow down the list of the in the period 2013-2016. period 2010-2013. we gave it a score of 1. Scheme Outperformance over Category Average JM Equity 0% Multi-cap Performers Taurus Bonanza 0% Scheme Outperformance over HDFC Large Cap 0% Category Average LIC MF Growth 0% Birla Sun Life India Opportunities 0% UTI Top 100 0% Birla Sun Life Advantage 0% Sundaram Select Focus 0% LIC MF Equity 0% UTI Mastershare 14% Principal Growth 0% Sundaram Growth 14% Franklin India Opportunities 0% HSBC Equity 25% Sahara Growth 0% UTI Equity 43% ICICI Prudential Top 100 43% Taurus Starshare 57% ICICI Prudential Dynamic Plan 100% SBI Magnum Equity 57% Templeton India Growth 71% Kotak 50 71% SBI Magnum Multiplier 71% Reliance Vision 86% ICICI Prudential Multicap 86% SBI Contra 100% Tata Ethical 86% Tata Large Cap 100% Tata Equity Opportunities 100% Franklin India Bluechip 100% DSP BlackRock Opportunities 100% HDFC Growth 100% Birla Sun Life Equity 100% HDFC Top 200 100% HDFC Capital Builder 100% HDFC Equity 100% Reliance Growth 100% Birla Sun Life Frontline Equity 100% Franklin India Prima Plus 100% MONEYLIFE | 25 Nov-8 Dec 2016 | 22 Fund Pointer. Now. where it is possible to take a call on 4th quartile of individual three-year periods. 2nd. 3rd and 4th The results are given in the table below. We then arrived at the moved to either the 2nd. The only way to judge MF performance is to look at past A possible solution would be to judge the scheme over returns. it is difficult to figure out future performance. we gave it divided them into four quartiles. we the valuation and cash flows to set a target for cannot blindly use past performance as an indicator of expected future return. if the scheme outperformed the category that the top quartile schemes in the period 2007-2010 average. the greatest investor of all time. From January Buffett says “In the business world. the rear view mirror 2000 to end-December 2015. we had seven such periods. Many schemes from the 2nd.” Does this apply We compared the average returns of the schemes over the to MFs as well? 10-year periods with the average returns by that category. is always clearer than the windshield. There were all possible variations well-performing schemes. in the same period. we can quickly shortlist the constant outperformers and analyse them. What we concluded was a score of 0 and.or out-performed. From the table. you can see that in ranking based on performance in the 1st. 3rd and the underperformers have been constantly underperforming the category average and the outperformers have constantly outperformed the category average. 3rd or 4th quartile in the second number of times the schemes under. large-cap and multi-cap.indd 2 18-11-2016 17:34:43 . Clearly. We looked at three-year returns for various MF schemes namely. returns which are more arbitrary and dangerous. Warren a long period like 10-year rolling periods. to Large-cap Performers increase the probability of picking better-quality schemes. If the for the period September 2007 to September 2016 and scheme underperformed the category average. 66) Axis Bank 414.42) Dish TV India 51. ICICI Prudential Dynamic Plan purchased Bharti Airtel shares worth Rs133.29) Bharti Airtel 194.56) Aurobindo Pharma 247.44) Ashoka Buildcon 60.20) Bharti Airtel 203.76) Kotak Mahindra Bank 75.96) Gail (India) 304.74) Tata Motors 265.indd 2 18-11-2016 17:37:49 .49) Gail (India) 48.11 Bank of Baroda (345.67) ICICI Bank 221.05 Housing Development Finance Corporation (16. ICICI Prudential Value Discovery purchased Wipro worth Rs424.23) 23 | 25 Nov-8 Dec 2016 | MONEYLIFE Fund Facts. Mutual Funds also preferred Axis Bank and SBI.77) HDFC Mutual Fund ICICI Bank 169.84) Oil & Natural Gas Corpn 36.82) Larsen & Toubro 155.50 Sun T V Network (103.62 crore and sold Infosys shares worth Rs297.77) Cairn India 64.45 HDFC Bank (101.83) Jubilant Life Sciences 280.68) Axis Bank 384.08) Reliance Mutual Fund Mahindra & Mahindra 124.13 Indian Oil Corporation (18.74 Tata Consultancy Services (16.10 Divi’s Laboratories (119.16) ITC 69.83 Larsen & Toubro (78.58 Tata Consultancy Services (97.30) Info Edge 45.05 Maruti Suzuki India (88.51 crore and sold Bank of Baroda worth Rs277.17 Reliance Industries (262.35 crore.07 Cognizant Technology Solutions Corp (65.96 Coal India (71. HDFC Equity sold BPCL shares worth Rs125. MUTUAL FUNDS FUND FACTS Hot and Cold Stocks of Mutual Funds in October 2016 In October.93) State Bank of India 351.11 Bank of Baroda (277.66 crore. Motilal Oswal MOSt Focused Multicap 35 purchased RBL Bank shares worth Rs105.30 Crompton Greaves Consumer Electricals (50.43 Punjab National Bank (245.71) ICICI Prudential Mutual Fund Wipro 481.59 Punjab National Bank (261.63 Bharat Petroleum Corporation (251.78 Tata Motors (50.23) Infosys 153.73 Tata Consultancy Services (139.42 crore.43 Crompton Greaves Consumer Electricals (125. Top Bought Companies Top Sold Companies Company Name Value Company Name Value (Rs Crore) (Rs Crore) Wipro 453.37 Yes Bank (107.47 Reliance Industries (141.87 Divis Laboratories (106.53) Hindustan Unilever 62.31 Bharat Petroleum Corporation (233.64 crore.21 Oil & Natural Gas Corpn (17.27) Reliance Industries 140.27) Franklin Templeton Mutual Fund Tech Mahindra 101.15) ITC 205.84 TVS Motor Company (48.32 Infosys (240.04 Sun T V Network (99.81 Bajaj Finserv (101.16) NCC 109.48) Mahindra & Mahindra 53. it is sneeze by a promoter. I do not see any impairment in the earning power deepens its hold. the US cannot clamp down too do not change much. ‘ha This leaves the perverse kind of a ‘blessing in disguise’. And how will that impact question of political intolerance or vendetta. irrespective of who becomes the ruler. seeing the emergence eme of a society where However. Thus. looks to me like debating deepens and growth slows down. In this pullback. they will nowhere near New De Delhi. if cost us sometimes. oil prices politician in a position where he politic have a larger impact on our economy than anything else. become hostile in terms of regulatory enforcements. including companies that are domiciled Ambani or an Adani. as w well as the ‘note’ bank. that they thrived even when the present government was have no option but to keep trade open. markets will react to the noise and pockets a Robin Hood kind of attitude is being of opportunities will be created. irrespective of who comes to power. This leads to the White House will have to focus on bigger issues about another set of problems which the their own economy. or beneficiary. It is like a to the ‘have-nots’. why should Indian companies be hardly seen any real impact on Indian corporate earnings worried? Penalties. earnings ought to be the spurs politicians on to similar paths. talking is that the inflow of foreign investments is going to be heads and experts would be out of their jobs.com MONEYLIFE | 25 Nov-8 Dec 2016 | 24 column_Balakrishnan. more and more countries points rather than actionable points. Yes. Capital is like free-flowing water. valuations in the market are stretched. of retaliatory action thing. Thus. W these businessmen outside the US borders. either Trump or Hillary from the US. They have so much at stake in global trade to say that the present government g is close to an and investments. However. posturing does only factor that impacts stock prices. instan it is now fashionable much on others. Thus. things economies. we see subsidies At this juncture. As I see it. If I go back to history. In India. one of them wants they are caught with some wrongdoing. I am definitely companies. this is a good excuse for some pullback. and freebies as a ‘right’. Globally. etc. the more advanced nations. as the social inequality enough to figure it out. I do not think it is a political issue. What it has m meant is that. are imposed only after by the choice of American voters. healthcare and domestic issues rather politicians are forced to address— than plan vendetta on a handful of pharmaceuticals social justice justice. Whoever occupies disparities increase. Well. ho the income and wealth of Indian companies over the long term. In an So. Yes. ‘h I do not see major The author can be reached at balakrishnanr@gmail. ‘healthcare’. or embargoes. It a reason to react. And. matter of survival for the politicians. it is possible that corrections could be excessive on the it is ‘social security’ and downside also. finds its own level. Some point out to our pharmaceuticals companies as this year. elections (state elections. every price move in a commodity India’s economic outlook and politics that will decide the or any event taking place anywhere in the world becomes quantum of inflows. SMART MONEY R BALAKRISHNAN Can American Voters Impact Indian Earnings? T he noise around the stock markets is a constant. Probably. By the time you read this. every impacted. are becoming protectionist. changes in economic policies. Higher protectionism Politicians need money to fight battles. Well. One thing that all experts maintain everyone realises this. Public debate generally If we look at it logically. it is not a to change the healthcare system. Business provides means a shrinking global trade and slower growth of that.indd 2 18-11-2016 17:39:46 . but. the business models are still valid. even the US presidential election) become a big being the likely victim. I have things were in order. has to please the ‘vote’ bank Whether pharmaceuticals or IT (information technology). so many media channels. Nationalism has become a Every government runs on patronage from the industry. as capitalism Thus. Be on the look-out for opportunities. to escape their tax net. India has less to fear from justified by saying say that the ‘haves’ owe it global trade. Yes. our Indian companies’ earnings? I am not knowledgeable The bigger issue to me is that. thanks to its reluctance to open up. national elections and. For instance. if would have been elected. Thus. 05% and CASA (current and savings account) to 7%. drop in bank FD good option for a better rate is RBL a popular investment option of rates. for two-year FDs. Bank of Baroda’s three-year FD rate is 7. bank FDs remain and.25% while HDFC Bank has reduced it to 7%. by customers will lead to less cash interest rate on one-year fixed For two. A of the investor.25%.5%.94 INE941D07158 CRISIL AAA 19 December-2034 7. continue to face a decline in FD deposit cash.56 INE245A08059 CARE AA 09 September-2035 7. with government or private banks.62% 02 June-2028 7.55% 25 Apr-22 25 Apr-17 8. which is slightly lower than 6. possibly. It can lead to the 7.30% while Punjab National Bank (PNB) and SBI are offering 7. respectively.50% 05 Jan-21 05 Jan-17 7.and three-year bank in customers’ hand and improved deposits by 25 basis points (bps). there have been which offers interest rate of 8% on in the last couple of years. possibly than three years. With the will also lead to lowering of bank Cooperative banks operate locally possibility of further reduction in fixed deposit (FD) rates.28 INE038A07258 CRISIL AA+ 6.05% offered by one-year interest is taxable as per the tax slab lowering of consumption demand FD of State Bank of India (SBI).80 INE860H07623 CARE AA+ The impact of government’s move LIC Hsg Fin 8. Banks with a handful of branches for rates by the Reserve Bank of India have been sending SMSes urging local banking needs.25% while PNB’s and SBI’s FD rate for the same term is 7.000 and Rs500 on G-Sec yields will become clear in currency notes on inflation and also the coming days.77 INE115A07IO9 CRISIL AAA NSE data as of last trade date of 11 November 2016 G-Sec Maturity Yield to Tata Capital Fin Services Date Maturity 02 Aug-18 02 Aug-17 8 INE306N07II9 CRISIL AA+ 8. Even though money for the bank. T he 10-year benchmark G-Sec yield.05 Ltd 7. TAX/ FIXED INCOME Bank FD Rates Down after Demonetisation T he government’s move to with unaccounted cash. which sets the tone of the fixed-income market. They are also in future.07 Reliance Ports & Terminals 28 Oct-26 28 Oct-17 7. Bank of Baroda is offering 7. of two years to less to face declining interest income. Aditya Birla Fin 9.03 G-Sec yields on 15 November 2016 BSE data as of last trade date of 11 November 2016 25 | 25 Nov-8 Dec 2016 | MONEYLIFE Fixed Income.indd 1 18-11-2016 17:44:40 . bank FD customers will customers to visit their braches to backed by politicians. will continue societies.95% Tata Power 9. to will be difficult to do the same also offers an attractive rate of curb black money from the system. who with cooperative banks and credit year to less than two years. 8. Among government banks.000 and with back-dated FD receipts.72% on 12th November.32% 17 Nov-17 17 Nov-17 7. It Recently launched Bandhan Bank Rs500 currency notes. With falling interest rates Moreover. senior reports of sharp increase in deposits deposits of up to Rs1 crore for one citizens and others customers. has decreased Issuer Maturity Date Next Last Yield Coupon (%) ISIN Rating by 7bps in the last fortnight to end at Hindalco 9. For a depend on FD interest. ICICI Bank and Axis Bank offer 7.25% for two-year FDs. demonetise Rs1. Bank (formerly Ratnakar Bank) Indians. respectively. FDs.62% 26 Oct-17 26 Oct-17 7. The cash deposited HDFC Bank has reduced the rates.05% and 7%. It was for opening FDs longer duration. the rate is 8. G-Sec Yields Down to demonetise Rs1. Right Life Insurance Insurance is supposed to protect you. you get ethically correct advice 1. unbiased research. you will get special support during your claims. distributors. as long as you make the right declarations. Most importantly. All their income and expenses come out of your money. where do you invest and what new insurance do you buy? What are the tax implications? 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Apart from impacting alleges discrimination against the diseases due to ‘unaffordable lungs and heart. buying Sampoorna Raksha for 25 years term with death benefit of lump-sum Rs50 lakh. if the family non-participating health insurance for non-smokers and women. financial liabilities. seeks insurance cover would be available to all PLHAs. a term plan with a longer tenure and maturity age gives flexibility to the insured. this plan Fine Print Regulatory and Development Authority of India (IRDAI) seeking Will Air Pollution Raise Health Premium? Delhi HC Seeks IRDAI’s Response on HIV/AIDS Cover their reply by 17 January 2017. Hospitals inclusion of people with HIV in place by 1 April 2014. A ir pollution has been on the rise in India with high levels of smog after Diwali. A non-smoker male of age 38 interpreted from your perspective years. While there are a Launches Three 40 years. Health insurance products are companies and Insurance provided to them. The for a lump-sum of premium on maturity. pollution also people living with HIV and medical care’ and alleged that affects eyes which are sensitive and AIDS (PLHAs). and Vital product offers payout instead of monthly Care Pro which is a non-linked lower premium rates income option. even simple chemicals and pollutants in the health. will pay L i f e i n s u r anc e Sampoorna Raksha is a term a premium of Rs7. Sampoorna Raksha—a non-linked non- maturity age of 80 years. New Delhi A public interest litigation (PIL). So. It is Raksha Plus—a non-linked non. members are financially literate.450. T ata AIA Life launched three new products. The HC issued PLHAs are ‘being neglected and prone to irritation from allergies. public sector insurance accident benefit cover is not air. or have outstanding loans and Like Sampoorna Raksha. The product also Sampoorna Raksha does offer competitive participating term plan. Sampoorna offers the option premiums. but this in New Delhi have seen 30% rise in and AIDS in life and health has not happened. of increasing better to opt participating term plan with return life cover. The PIL claims respiratory and ocular complaints insurance policies. other metros too have high pollution. the Centre had said in 2013 that by 1 April 2014. popular in metros and have lower MONEYLIFE | 25 Nov-8 Dec 2016 | 28 Insurance. plan covering critical illnesses. The PIL that 100 lives are lost each day to post-Diwali. But the longer the policy term you choose. regulations. New products. The PIL contends that. the premium will also INSURANCE TRENDS increase. a notice to the ministry of discriminated against’. With Indians is a term plan with return of of lump-sum benefit or regular working for longer years and/ premiums (TROP) on maturity. for a smoker. The spouse can also five years. etc. in India. It is better Year Year Year Year Year Permanent paralysis of limbs to avoid TROP products. but it is First heart attack of specified severity 1. driver behaviour with parameters Car Premium Linked to Driver like speed.260 Cancer of specified severity for the next 10 years. 29 | 25 Nov-8 Dec 2016 | MONEYLIFE Insurance. braking. The objective arrive at better pricing of motor are high. car insurance premium is based on the make. and Pro Care Plus– benefit with income loss benefit renewal option. since most life insurance will be applicable for new policy products that offer CI cover have holders. Health regulations. Motor neurone disease with permanent best way to buy life insurance cover. like other Vital Care Pro premium for 38-year-old male Open heart replacement or repair of insurance-cum-investment products. Furthermore. especially imparting training and there was no may introduce ‘Telematics’ to in areas where pollution levels adequate office space. It is a technology can go up 10%-20% if you are and making payments to CDAs of long-distance transmission suffering from respiratory problems. The Reliance Life Penalised Rs15 Lakh Behaviour? device plugs into the car’s I RDAI has slapped a penalty of Rs15 lakh on Reliance Nippon Life Insurance for violation of C urrently. Unlike in the insurer. year of manufacture and on-board diagnostics (OBD) and can relay data on the quality of driving and usage of cars to the outsourcing norms and other location of the vehicle. A CI product can be premium guarantee of only three to considered after having adequate loss benefit. buying cover of Rs5 lakh for different policy heart valves terms buying a plain term plan. increases the costs to the insurer in of driving quality which can The increase is dependent on the violation of corporate governance help good drivers reduce their customer’s age with a possibility of guidelines.300 4. which Major organ / bone marrow transplant pays nothing on maturity.indd 3 18-11-2016 17:47:22 . 3. INSURANCE TRENDS provides flexibility to customers to opt for lump-sum benefit on Vital Care Pro Premium Vital Care Pro Covers 15 CIs death along with monthly income Rs 5. Having a fixed premium mediclaim cover.610 Coma of specified severity choose to pay the premium for a 4. Insurance companies respiratory problems.060 possible only because the premium Stroke resulting in permanent has an insurance as well as 0 symptoms 10 15 20 25 30 investment component. is the maturity age is 85 years. be as long as 30 years.120 you on policy maturity. Health insurance costs of appointing CDAs is questionable insurance. This is an The revision in premium rates Alzheimer’s disease/irreversible organ degenerative brain disorders advantage. The maximum lump-sum benefit with income with joint life.240 4. But there is no lifelong benefit. One can 5. The device captures higher premium for senior citizens. The premium rates are symptoms Vital Care Pro is a critical guaranteed for the first 15 years Multiple sclerosis with persisting illness (CI) policy which offers and are subject to review thereafter symptoms protection against 15 critical based on the CI experience and Benign brain tumour illnesses. be covered in the same plan. penetration in smaller cities.290 3.550 3. Duo for the policy term of 30 years for a Vital Care Pro offers two Care–lump-sum benefit with joint CI product is certainly beneficial for options: Pro Care–lump-sum life and Duo Care Plus–lump-sum customers.180 surgery A TROP may give the satisfaction of premiums being returned to Kidney failure requiring regular dialysis 2. insurance trends show an increase that many channel development it is not based on the driver’s in the number of claims due to associates (CDAs) were not record.005 Open chest coronary artery bypass limited period of five to 10 years. the product with prior approval from the Parkinson’s disease offers premium rate guarantee for IRDAI (Insurance Regulatory and Surgery of the aorta the entire policy term which can Development Authority of India). premium. model. The regulator said US and other countries. the headquarters of the Tata group. These eminent people had got together to of Tata Sons met at the Bombay House. Hussain. personal ambitions. the past 15 years. write Sucheta Dalal & Debashis Basu O n 24th October. 2. Mr non-performance. fears and pettiness drive people pretending to be ethical and moral. Ronen Sen. Ajay Piramal. the Tata image. Amit Chandra. Nitin Nohria. Cyrus Mistry. With that one action. Khambata had flown in especially for the meeting which • No papers had been circulated about Mr Mistry’s was going to be attended by Ratan Tata personally. Investors should be worried. for non-performance. Mr Nohria and Ms a new low. cloak-and-dagger moves.30pm. the directors trip abroad. the Tata Finance. TA-TA GOVERNANCE? The Tata-Mistry spat has exposed how cronyism. already sullied by At the meeting were: Ratan N Tata. an old Tata hand. had just returned from a • No discussions had been held at the Tata Sons’ board MONEYLIFE | 25 Nov-8 Dec 2016 | 30 Cover Story. accompanied by rampant destruction Venu Srinivasan. sank to Khambata and Ishaat Hussain. sack their chairman. Farida of shareholder value in various Tata companies. Niira Radia and 2G telecom episodes in Vijay Singh. Here is why.indd 2 18-11-2016 17:50:07 . clarity on delegation stalwarts like Russi Modi (Tata ( Steel). drastic change at the top so quickly? At the heart of it is the ambiguous governance structure • Four months before he was ousted. The move advised Cyrus Mistry to chairman.4% stake. Ishaat Hussain. he famously advis was planned well in n advance. only Ratan Tata had shares K Krishna Kumar. The change also saw the definition of chairman. there are old hands like • Of the board members. cloak-and-dagger • For three of the directors. of which committee of the Tata Sons’ board had not only lauded little was known outside. various Tata trusts which control Tata Sons with a • The same committee had expressed appreciation 66% stake. which had over Rs672. According to a corporate governance framework Khambatta—abstained. “there has to be clarity on demarcation of roles. Venu moves. courage to object. M despite being just after Mr Mistry ry was appointed the an insider for nearly a decade decad (he has been on chairman. Then comes Tata Sons which has stakes in of Mr Mistry’s “multifaceted initiatives aimed at various operating companies but has plenty of outside preserving and promoting cohesive functioning of the directors. but Mr Mistry refused. His letters also raise questions on the group.8%). “Be your own man. Nohria). Ratan Tata ata got Tata the Tata Sons’ board sinsince 2006). the Shapoorji Pallonji group (SP group). reviewed by Moneylife.” To add to the confusion. the remuneration that the Tata group has created over the years. looming over all of this is Ratan Tata who pulls all the • Only two directors—Ishaat Hussain and Farida strings. directors. speed/ Almost two decades after he got rid of the Tata responsiveness of decision making. Cyrus Mistry’s performance but also recommended a There are three levels of power. Ratan Tata’s steel the various Tata companies companie is the continuing knuckles have comee out again.indd 3 18-11-2016 17:52:22 . 2012 when the selection directors two monthss prior for precisely committee picked Mr Mistry to be the Tata Sons’ this day. Finally. there are the operating companies. fears and sheer pettiness. In 2012. At the apex are substantial salary increase which he did not accept. Srinivasan and Amit Chandra (brother-in-law of Nitin Central to the issue is how the Tata group functions. ‘quorum’ of the selection committee tweaked to benefit • Ratan Tata and Nitin Nohria walked into Mr Tata trusts. corporates actually works: cronyism. COVER STORY earlier about Mr Mistry’s non-performance. that in the selection Ratan Ra Tata has left 31 | 25 Nov-8 Dec 2016 | MONEYLIFE Cover Story. ). In 2012. “We have come to tell you watchers have been following the Ratan Tata and Cyrus that we are moving a resolution to have you replaced Mistry camps engage in an increasingly bitter battle of as chairman at this meeting. of responsibilities…” p Darbari Sheth (Tata a Chemicals and Tata Tea) and Ajit Kerkar ar (Indian Hotels) in Ratan Tata: The real issue ffor shareholders of a humiliating manner. pow He also failed gave the directors to understand that nominated by he was not meant to Tata trusts tinker tin with the legacy.30pm For three weeks now. And they obliged. He had power without clear-cut accountability ac of 78- inducted the three new ‘independent’ year old Ratan Tata. greater powers however ho wobbly. to agree to such a and their conduct on all the boards of Tata companies. failed to Sons to change Article rticle read that Ratan Tata never 118 of the Articles of really wanted to give up reall Association which power. Noshir Soonawala in Tata Sons (0. Ajay Piramal.000 cores in sales and ‘independence’ of the independent directors of Tata Sons seven large operating companies. this was only their second meeting.” He was asked to ‘resign words that has exposed how the mightiest of Indian gracefully’. committee that deals with the appointment and removal • There was no item on the agenda for removing the of the chairman.” Mr Mistry. group in accordance with its distinctive values. trustees and ‘consultants’ as required. They kicked out someone whose and others who wear multiple hats and switch roles as family. Finally. Mistry’s room exactly one minute before the 2. How that raise enough doubts about the much-vaunted Tata much did they know about the operations of the culture of fair play. personal ambition. controls an 18. having Ousted chairman Cyrus Mistry has released two letters joined the board just a couple of months earlier. er. even they did not have the drawn up by Mr Mistry’s team. Indian corporate sector board meeting and said. RK Krishna Kumar. Dr M Chandy JRD Tata Trust R Venkataramanan. Dr Amrita Patel. RK Krishna Kumar The JRD and Thelma J Tata Trust R Venkataramanan. NA Soonawala. JN Tata Jointly these trusts hold 66% in Shapoorji Pallonj holds 18. VR Mehta. NA Soonawala. Dr Suma Chitnis. FN Petit RD Tata Trust R Venkataramanan. RK Krishna Kumar. RK Krishna Kumar. NM Munjee.indd 4 18-11-2016 17:53:48 . COVER STORY Sir Dorabji Tata Trust Sir Dorabji Tata Trust R Venkataramanan. SK Bharucha. Tata Education and Development SK Bharucha. Amit Chandra Tata Social Welfare Trust R Venkataramanan. Venu Srinivasan Lady Tata Memorial Trust R Venkataramanan. NA Soonawala Jamsetji Tata Trust R Venkataramanan. RK Krishna Kumar Sir Ratan Tata Trust Sir Ratan Tata Trust R Venkataramanan.73% MONEYLIFE | 25 Nov-8 Dec 2016 | 32 Cover Story. RK Krishna Kumar. KB Dadiseth. Amit Chandra Trust R Venkataramanan. NA Soonawala. RK Krishna Kumar. Amit Chandra. FK Kavarana. KB Dadiseth. Amit Chandra. SN Batliwala. JN Mistry Navajbai Ratan Tata Trust R Venkataramanan. SN Batliwala. Prof SM Chitre Tata Education Trust R Venkataramanan. Dr Armaity Desai.40% Tata Sons Tata companies hold 8. NA Soonawala.87% Others hold 6. JN Tata. Sarvajanik Seva Trust NM Munjee R Venkataramanan. JN Mistry Bai Hirabai JN Tata Navsari Charitable Institution NA Soonawala. JN Tata. Dr PB Desai. RK Krishna Kumar JN Tata Endowment Trust R Venkataramanan. once left information everyday about what has appeared in the a board meeting in progress. Clearly. Cyrus Mistry. keeping the board waiting media about him. in the media about him and lobbyists in Delhi who used He would like to tell Mr Mistry to draw massive fees from the that he has no locus standi in operating companies. he made this proximity to power. But Ratan Tata is the a 18. He gets detailed Sons’ directors. the independence of independent His main strength is his public Now. He was sending a Tata charitable trusts which hold 66% of the group’s signal. “He is paranoid about 1. “He is paranoid about it. Ratan Tata.500 people on the ground.98% 28. Nitin Nohria and Vijay Singh. Farida Khambata Nitin Nohria. “I had to the group. whom the Tata satraps He appoints other trustees who hardly have any say. The latter employs perception of fairness and values. But he did not do it for a year.01% 31. Tata Sons Ltd. stepped down from the Tata Sons’ board. “He but Mr Mistry narrates some shocking incidents of has crafted his reputation so phenomenally well. chairman of the trusts and so he controls the group. says an insider.” confided Mr Mistry to someone very clear earlier. has turned into a Mr Tata claims never to have meddled in Tata Sons wily player. Amit Chandra. Actually. He has alleged that Tata an insider. Then there are lawyers and take him out of all equations. Mr for lobbying. The group used to spend Rs40 crore for almost an hour.26% 26. Vijay Singh. had ignored during JRD Tata’s time. N Chandrasekharan. Over the years. Cyrus’s father. it spends Rs60 crore on directors even though the persona. Ralf Speth.indd 5 18-11-2016 17:54:03 . the Mr Tata’s strategy. Ishaat Hussain Ratan Tata. on the Tata Trustees: Mr Tata controls the group through 14 board. to obtain instructions from Ratan a year on Niira Radia’s firm Vaishnavi Communications Tata on a decision. is to it. Ajay Piramal. He was a ease out several hangers-on who are prone to flaunt their director at Ratan Tata’s pleasure. His main strength is his public persona.independent Directors Ronen Sen.75% 73. “He has crafted his Arun Nanda of Rediffusion and Tatas have built a great public reputation so phenomenally well.” Edelman PR. When Pallonji Mistry. He gets detailed information bulk of who are deployed for the make life difficult for Mr Mistry everyday about what has appeared Tatas.5% stake but zero rights.” says remote controlling by Mr Tata. close to him. Ratan Tata promised to induct Cyrus or his brother. He wanted to tell the Mistrys that they may have holding company. Shapoor. says a person close to Mr Mistry. now.63% 29.05% 36. burnishing the Tata Tata does not seem to believe in image and fixing things in Delhi. 33 | 25 Nov-8 Dec 2016 | MONEYLIFE Cover Story. COVER STORY Tata Sons Non-executive Independent Directors Executive Director Non . Venu Srinivasan MAJOR TATA COMPANIES Tata Global Tata Steel TCS Tata Motors Indian Hotels Tata Power Teleservices 22.17% him. Fix Your Finances.indd 2 29-07-2016 16:12:48 . MONEYLIFE ADVISORY FIX YOUR FINANCES.in MAS is a SEBI-registered investment adviser and part of Moneylife. India’s most unbiased and pro-investor research and information group. FOREVER Finally.moneylife. Subscription to Moneylife magazine is included in MAS Premium Membership MSSN GB Ad_invest. No Conflict of Interest savers. Forever Actionable advice on investment that works. Plus continuous one-on-one online support No Bias. NCDs? • Which Long term Debt Funds? • Which Short term Debt Funds? • Which Liquid Funds? Investools with equity funds & stocks • Monthly Investing • Investment Restructuring • Lump-sum Investing • Investing for Specific Goals Stocks • Long-term Stock picks • SIP Tool for Stocks MSSN GB Ad_invest.7 Equity Fund Choices • Which Large-cap Funds? • Which Mid-cap Funds? • Which ELSS? • ELSS SIP Tool Fixed Income Choices • Which Bonds. MAS Benefit #4 .indd 3 29-07-2016 16:14:07 . VR Mehta. in fact. The 2025 Vision plan formulated Mr Mistry is downright ugly? by Mr Mistry. He claimed that. The SP group has been He seemed clueless about the fact that the pie has to get just as concerned about dividends. Siva was among them. In September 2016. Mr Mistry was trying to recover Siva’s share of owes to the group but is unwilling to repay. of Japan. it is considered dividend. Tata Sons has deposited the full amount interests. made a huge investment leak the board’s decision on to Siva in TTSL in 2009.74 million shares he sold. preference to declaring dividends to the holding company. Tata way of his opinions. a alleging oppression and subsidiary of Tata Steel. including Siva. by Tata Sons Ltd. Of this. The facts are a little different. under Mr Mistry’s watch. Tata—a friendship that could compromise Tata group’s Meanwhile. or a return of 594%. which meant an instant benefit of Rs468 crore. However. the claim amount to protect the interests of the Tata Here is what happened. Siva had got a preferential group. dividend has actually gone of the Sir Dorabji Tata Trust was chosen to speak for the up compared to what it was under Ratan Tata’s regime. Mr Mehta’s understanding is that if there is a choice Dividends to the trusts from Tata Sons had gone down between strengthening the operating companies by and it affected the philanthropic activities of the trusts conserving cash or declaring dividends. the years. How many of them have the courage that the SP group earned was just about Rs60 crore— to tell Mr Tata that the way the group is dealing with there was no increase. Siva did within days. All this was Siva know of what transpired spired at based on the closeness that Siva and Ratan Tata seem to the Tata Sons’ board meeting of have shared. Mr Mistry briefed the board allotment of shares of Tata Teleservices Ltd (TTSL) that Siva was not responding onding to the Tata Sons’ demand through Sterling Infotech Ltd (now known as Siva that he pay up and the board agreed Industries & Holdings Ltd) at a favourable price in 2005 to take legal action. The dividend a great distinction. This gave Siva a hefty profit close relationship between tween of Rs209 crore. The bigger issue is that many trustees may not Today. huge sums involved. there is a view that Mr Mistry touched a raw nerve by seeking legal action This put-option became active in April 2014. it was Sivaiva who not have the money to pay. COVER STORY Siva. Under the agreement. under certain conditions. against Chennai-based businessman C Sivasankaran Siva was to bear the burden of DoCoMo’s claim in (Siva) who has struck a close friendship with Ratan proportion to the 20. longer period. with the Mr Mistry was pushing to recover Rs694 crore that Siva court. all those who had sold shares to DoCoMo got claims from Tatas in proportion to the shares sold. 15 September 2016? Did d someone NTT DoCoMo. the he option clause wherein DoCoMo had the option to sell its sudden backtracking ng TTSL shares back to the Tatas. Mr Mehta did not let these facts come in the Tata group was dependent on only two companies. had a discussion on dividend policy. If the MONEYLIFE | 25 Nov-8 Dec 2016 | 36 Cover Story. He easily got a loan from sent a legal notice to Tata Standard Chartered Bank against a virtual guarantee Sons. TTSL and DoCoMo. 6% came from existing and allow him to strikee before the shareholders. more so for an even bigger for each person’s share of it to increase. one should give which was unacceptable. “Mr Tata only sneered at him. the However. Kalimati Investments. as per the When the Tata-Mistry spat started. “Being on a Tata trust can change a person. Further.” says someone close to the group. However. the deal with DoCoMo had a put. TSL. he sold 40% of Tata Sons’ board could act? The his shares to DoCoMo. Consultancy Services(TCS) and Jaguar Land Rover(JLR). Documents reviewed by Moneylife show that on behalf of all the parties. in less than three Ratan Tata and Siva. Siva! Possible Reasons behind Ratan Tata’s Vicious Action A s speculation about the reason for Cyrus Mistry’s ignominious ouster increases. Did crore to Siva as an inter-corporate loan.indd 6 18-11-2016 17:54:35 . to increase gradually to 15% and then plateau. the dividend paid by Tata Sons is only 10%. a trustee plan. trustees. of Tata Sons’ board in n Many are indebted to Mr Tata for making them trustees. I have seen it Pallonji Mistry used to raise the issue of increasing myself. was made to advance Rs132 mismanagement of TTSL. When Ratan Tata was the chairman. under Mr Mistry. Also. It was understand the deep trouble the Tata businesses are in.oCoMo. Deloitte Mr Nohria is the dean of Harvard Business School (HBS). it appears that R Khambata). six years ago. of course. Ajay Piramal along with Amit Chandra. Tata Companies: The least discussed. He has often asked is probably the AirAsia scam. was acting against the interest of the group. Mr Mistry had ordered an audit into the go down that road. group is dependent on just two companies. it was a small operating companies throws their future into jeopardy. Vijay Singh. and. have joined the board. is a director in with Ratan Tata. supported Ratan Tata’s decision to oust Venkatraman. as Tata Trusts’ representatives. Until recently. flagged off by Ernst & Young (EY). Immediately after Cyrus management by TTSL and its listed subsidiary Tata Mistry was sacked. at a huge valuation. the has a 1. shouldn’t Tata Motors. Also. Can you imagine what would Rs22 crore payment to unknown parties that was be the perception about the Tatas. It was supposed to be All the Tata Sons’ directors’. and Teleservices Maharashtra Ltd. Coincidentally. his former Cyrus Mistry. is literally a bogus company. It included Ratan Tata loyalists like the Harvard that generate the surplus that is distributed as dividend Business School dean Nitin Nohria and old Tata hand to Tata Sons which allows the Tata trusts to spend on do- and finance man Ishaat Hussain. Removing him from the boards of undergone many changes. the board was expanded to bring This constant conflict in goals poses a major challenge to in industrialists Venu Srinivasan (TVS group) and the growth of the group. seem curiously connected. They want to see steps being taken to turn around the many Tata Sons: Next in the hierarchy comes Tata Sons.indd 7 18-11-2016 18:03:50 . despite The Deloitte report came out in October 2016.5% stake. Also. Link Media received from an international donor. Ralf Speth. of TCS Ltd. board of five persons. In August. if you add up earnings of all trusts. close to things that may land on the doorstep of Mr Mistry had to tell him “even if there were. to explain their action. maybe. Till today. But publishing a full-page advertisement in the newspapers the Tatas have chosen to take no action. “although he lacks understanding of Indian companies The second reason for Mr Mistry being targeted and the Tata ethos. is on the board of AirAsia and also with Mr Mistry on various Tata boards. if we do that. Tata Global Beverages 37 | 25 Nov-8 Dec 2016 | MONEYLIFE Cover Story. or needed to be ploughed back into business expansion. Tata Motors. COVER STORY initiating legal proceedings against Siva. are the Tata operating companies like Tata Consultancy Services. they defence secretary. the board has was working towards. Tata Steel and so on. Then there were former gooding. a confidante of Ratan Tata. All of them also appear to have supported executive assistant and now a trustee on every single Ratan Tata’s decision to sack Nusli Wadia for siding of the Tata Trusts. Tata Chemicals. apart from Ratan Tata and Cyrus From the view of the Tata trusts.” says an insider. The lack of independent voice in Tata Sons’ board should be a major red flag for investors. of Mr Mistry’s ouster. Sources close to whether India has any Chapter 11 provision (of the US) Mr Mistry suspect that. Nitin Nohria plays a key role as Mr Tata’s confidante a Siva group company in 2004. Mr Mistry what would be the impact on our borrowing cost?” appointed Deloitte as the forensic auditor. Finally. businesses that are wobbling. managing Mr Mistry is the chairman of group companies director of Bain Capital in India and brother-in-law like Tata Steel. and Ronen Sen. Deepak Parekh who supported Rs600 crore between early 2003 and mid-2008 Mr Mistry in IHCL. with very different objectives from those of the Tata and left his debt-laden legacy for his successor to handle? trusts. the Tata group N Chandrashekharan. Keki Dadiseth. who sided with Mr Mistry Siva has a deep and longstanding relationship as a director of Indian Hotels (IHCL). the largest donation it has ever called Link Media which got Rs12 crore. has forked out Rs330 crore to purchase Dishnet DSL. Venkat earns a whopping salary of Tatas have not produced any evidence that Mr Mistry over Rs3. This was what Mr Mistry Since Mr Mistry’s appointment in 2012. we cannot Mr Tata. and Nitin Nohria are directors towards services relating to procurement and vendor in Piramal Realty. They want dividends and price appreciation. he was getting too under which Tata Teleservices can file for bankruptcy. it is these companies Mistry.5 crore. barring one (Farida a ground-handling agent. Even if they had cash to declare dividend. the Tata group pledged a One of the payments was connected to a company $50-million gift to HBS. heading JLR. and the timing of Nitin Nohria. Interestingly. established bogus payments (for work not done). the man who ran the Institutional investors have invested in these companies business empire for 16 years between 1996 and 2012. Siva may have been paid nearly Piramal Enterprises. the blame be laid on Ratan Tata. as representatives of the Tata trusts. former had to see whether cash could be distributed as dividend Indian envoy to US. Sychophantic letter to Mr Karunanidhi. 2010: Voltas: Land held on lease by Voltas was sold to Dr Shanmuganathan. Indeed. then telecom minister. MONEYLIFE | 25 Nov-8 Dec 2016 | 38 Cover Story. 1999: Tata Tetley: Grossly overpaid acquisition that took years to digest. 2007: Corus. Mounting losses 2007: Loan of Rs1700 crore by Tata Realty to Unitech. Tata Sons exited the company at a loss of Rs1. 2003-2008: Various hotel acquisitions that inflicted huge losses and had to be written off. acquisitions and people.indd 8 18-11-2016 17:56:31 . facilitated by Niira Radia. because of the close relation between Ratan Tata and the promoter of Piaggio Aero. COVER STORY Teflon-Coated The Tatas under Ratan Tata have a long history of getting carried away with new projects. a grossly overpaid acquisition. Mr Tata is accusing Mr Mistry of non-performance when he is infact cleaning up Tata’s mess. 2008: Tata Sons bought one-third stake in Piaggio Aero. a professional of highest integrity. for roughly one- eighth of its estimated value. 2004: Backdoor entry into telecom.000 crore and will have to be shut down. 2001: A 500-crore Tata Finance scam authored by Mr Tata’s blue-eyed boy Dilip Pendse. The agent to negotiate this deal used to be employed by a firm owned by Rajathi Ammal (Karunanidhi’s wife). a manager would have had to pay a price for any one of these. a Malaysian. an Italian aircraft company. 2014: Side-agreement with DoCoMo which has landed Tata Teleservices in a $1. But nothing ever seems to touch the Tata’s Teflon- coated image. forced by his own partners to resign in the most shameful manner. lavishing praise on A Raja. Pre-1991: Mess at Nelco. for 2G licences. 2002: AF Ferguson being forced to withdraw its report on Tata Finance because it implicated many Tata stalwarts.16-bn soup 2016: AirAsia: A forensic investigation revealed fraudulent transactions of Rs22 crore involving non-existent entities in India and Singapore by the AirAsia and Tata alliance. 2008: Ambitious Nano project that has lost more than Rs1. YM Kale.150 crore. 2003: Dishnet DSL: Grossly overpaid acquisition from friend Sivasankaran that turned worthless in a year. 2011: 2G Scam. The money was allegedly used by Unitech to pay. which survived mainly on orders secured from Tata group companies. In any other organisation. And he is being supported by some of the biggest names of the Indian corporate sector. Mr Mistry always believed removed from everywhere? That task is onerous. using the media effectively international investors with the intention to buy out Mr and starting whisper campaigns. a Tata Sons’ director on the board 3.” says an insider. Let’s not keep flipping and with the right governance. the Tatas would want to keep their Cyrus Mistry. As the Tata-Mistry spat gets uglier. on a new corporate governance framework. He 1. “We still can’t believe that for strategic issues. He continues to be the too much of power in the hands of one person. Tata companies share information of shock. whose board is yet to meet. consultants and lobbyists. COVER STORY and IHCL.” with Ishaat Hussain. TCS has replaced Mr Mistry Tata Sons impotent. They are making the board of out of every Tata company. fortified with there is scope for price-sensitive information passing on hangers-on. “I don’t want the group to be controlled meetings. the IHCL directors have shown Sons and Tata trusts. are often consulted. “We were taking Sons for over 80 years and Cyrus time explaining legal opinions officially. 39 | 25 Nov-8 Dec 2016 | MONEYLIFE Cover Story. he has an insignificant 0. He attempted to have it discussed in and has ulterior motives. Who will do the enormous 2. There is a chairman of Tata Motors. Tata Beverages has passed a resolution removing regulator’s insider trading and corporate governance him as chairman which. “because that would concentrate solidarity with Mr Mistry. I A New Governance Structure am not asking as a trustee. Information moves through various layers in the Independent directors of these companies are in a state group rather freely. would show that Mr Mistry was have been shareholders in Tata the group may have a tough pushing for this. But. the board did confided. Mr Tata would want the Mistry reputation intact. especially since Mr Tata structure with the lines of power has now invited ace dealmakers to and accountability clearly drawn. the group would have a tough time explaining. This is logical. Of course. Tata trustees board “let’s decide once and for the right hands and be provided and consultants even before all. Mr Soonawala and Ishaat Hussain Ratan Tata is doing this. Mr Mistry had started working by the Tata-Mistry spat. Investors have to stay Mistry’s stake. stake in Tata Sons. Of these. The the board of the operating flopping. them. There are people in Bombay House family to disappear. is illegal. Mr Mistry is group? According to sources. especially since Mr Mistry feels humiliated and wants his while Ratan Tata is acting like the typical lala in deciding reputation restored. Take a that a single person should not be the chairman of Tata look at the part two of our Cover Story. especially since the same person could head the Tata There is no clearly laid down policy and system today. trusts and Tata Sons. Mr Mistry’s If SEBI investigates whether There were elaborate discussions fi ght is not to get back at the helm with various stakeholders and a there is scope for price- of the Tata group. not find time for it. Tata trustees and consultants even before not worked well so far.indd 9 18-11-2016 17:59:20 . The third is the issue of compliance with the market of TCS. to people close to him. A fact that is often forgotten is that. says a source. What ought to be the governance structure for the clean-up that almost all companies need if. continue? It has to Tata Sons.” Mr Mistry is said to have the board meetings thrice but. One of the two said at a meeting: “I am asking for these details in my individual capacity. this poor governance structure may who should be on the boards. Indeed. A governance structure that protects the group’s wanted to create a fair and transparent governance interests. Darius Mistry is keen that the leadership Khambatta (legal counsel) was of the group should not pass into supposed to attend one of these wrong hands. although Ratan Tata would like him to be thrown have to be independent. Mr Mistry charges. the Tata Sons board. There are three issues thrown up Realising all this. Tata Power is the only major Tata company with their boards and upwards to Tata Sons directors. it could be a disaster.5% of the family of As against this. Nitin Nohria and Amit Chandra have met the ethics and fair play card. He His objective now is to ensure sensitive information passing has been telling the Tata Sons’ that the companies should stay in on to Tata Sons. curiously. Tata Chemicals and Tata veto power of 30% with the Tata trusts. Ajay who are masters at scripting the narrative by playing Piramal.” If SEBI investigates whether Can this clumsy three-tier structure. plan was prepared in 2015. Trust nominees Steel. There are records to show. focused on a simple fact. compared to 18. norms. According to our information.8% come to the attention of investors and regulators.” says a member of by a coterie that has had nothing to do with the group Mr Mistry’s team.” Minutes of the meeting Shapoorji Pallonji Mistry family companies has approved them. especially since the group has no the board of the operating companies has approved clear-cut succession plan. Limited. Then there are the egoistic substantial su portion of product new forays that are bleeding. Corus. but he paid a various Tata group companies? After all. Mr Mistry had done a dispassionate onate after exploring various options.000 British employees (TTSL). 2009 till date.000 crore net worth of the But Mr Tata has never displayed what is called a buyer’s group. which is more than the Rs174. in a Over the next four years after its acquisition.indd 10 18-11-2016 18:07:49 . He was busy and travelling during this group companies are facing and what shareholders can period. lett expansion that have turned into o a Mr Mistry has hinted at potential major drag. development de costs creating a and need to be addressed.000 crore. Does this centralised power structure give a clue to Tata Steel: A Pension Fund with a Steel Plant the shareholders about the decision-making they can Problems: Anglo-Dutch steel giant.000 crore. From and launched a systematic clean. was one expect. Ratan Tata failed to rev revive Corus and Mr Mistry. starting with Indeed. Mr the cost of acquisition. which have a slim hope of ever ver making money. ignoring the fact of Tata companies face a long list of problems that that this commodity business is at a cyclical peak. Between 2011 and 2015. when 12 out of 13 employees do not contribute to it. over-valued ov since inception. rose from Rs132. and approve the statement. letter to the Tata Sons board. the overseas seas of about Rs28. Meanwhile. o decided to exit the analysis of these hobbled businesses nesses business with minimum damage. a pension fund. like the Nano project deal-making machismo saddled the company with huge and the telecom businesses. As the asset is invested in AirAsia and Singapore re Airlines (Vistara). The Mistry’s moves amounted to o letter let also alleges aggressive undoing his strategy. debt not only for the assets purchased but also for the capital employed in IHCL (Indian Hotels Corporation pension fund liability which is running at £15 billion. with a steel business (Mundra) and Tata Teleservices (Maharashtra) Ltd because it pays the pension of 130. There and snatched the company at a 30% higher price than are also the highly capital-intensive domestic businesses what was being offered by the Brazilian rival. were the outcome of impairment losses in excess of im Ratan Tata’s ambitious strategy gy Rs60. Why was this unacceptablee to provided for impairment losses pro Mr Tata? Both. shareholders horrendously expensive price for it. about how Mr Tata got carried by the bidding process leaving the group with a large debt overhang.000 crore to Rs196. nor has he businesses could potentially result in a write-down over been questioned about it. “A realistic assessment of the fair value of these remorse about this scandalous acquisition. can decide on the and Cyrus Mistry drags on. the very close to Ratan Tata. Tata Steel (Europe). the company has up. however accounting ac by capitalising a flawed. This kind that are haemorrhaging money. time of about Rs118.000 crore—higher than Rs between 1999 and 2010. He found time only two weeks later to review expect from each of them. Why did the Tatas take 15 days to come back is now the subject of a lawsuit and is unlikely to die with a rejoinder? Because of a surprising weakness in down soon because it seems to be connected with people India’s largest business group: only Ratan Tata.000 crore.” wrote Mr Mistry. Tata Motors. If this spat between Ratan Tata ‘interim’ chairman of Tata Sons. it is a fitting case study for management students the expensive foreign acquisitions that have gone sour. too. lean. need urgent and continuous attention. Tata Power wags called Corus. COVER STORY Tata Shareholders: Tough Time Ahead T he day after getting fired as a Tata Sons’ chairman. what can Tata shareholders public position of the group. Tatas as have future fu liability. In his acquisitions and large-scale domesticstic letter to the Tata Sons board. as Mr Tata seeks to remove Mr Mistry from of Ratan Tata’s prized acquisitions. This episode trouble. economic benefits fromfro the asset do not match the MONEYLIFE | 25 Nov-8 Dec 2016 | 40 Cover Story. according a person close expect? We have summarised below what various Tata to the situation. a recent forensic investigation in AirAsia Cyrus Mistry hit back with a five-page reply that revealed fraudulent transactions of Rs22 crore involving exposed how parts of the group were in deep non-existent parties in India and Singapore. in addition to to Mr Mistry say that Tata Motors is under-reporting funding the development of the Hexa and Nexon SUVs expenses.indd 11 18-11-2016 18:08:12 . This creates a piquant situation because Ratan Tata has reportedly assured British unions that he will not sell Corus. The Tata Motors team was banking on Ratan Tata who loves the adulation he gets as one of the a good reception for Hexa. He concluded that the steel business enjoyed products. less money the company will have for its expansions. They also say that Nano was intended to be a car below Rs1 India Hotels: Checking Out lakh. both. regular introduction of new consumer. In October. What Happens Now: Tata Motors has strong leaders for including the Kalinganagar plant. Sources close Nano and focus on a two-seater sports car. Europe’s second-biggest gap. improving player in steel today—it is the biggest producer as well as customer experience. he is more likely to take a practical decision to pare assets and cut the debt. after which steelmaker. Combining forces director after a longish would have enabled Tata.000. if the company turns independent. implementation of the Kalinganagar (Odisha) steel plant Possible Solutions: To make a turnaround. the management agreed to commercial vehicles company. whose digital promotions have apparently keen to hang on to it but does he have much commercial shown a lot of public interest. back. Remember. and third-ranked Thyssenkrupp. COVER STORY value carried on its books.000 crore. The September 2016 quarter results the group.5 key factor million pounds a day on account of Corus. development expenses. He pursued a merger closer collaboration between the Indian passenger car of Tata Steel’s European steel unit with Thyssenkrupp division and JLR. peaking at Rs1. Tata Steel reaffirmed that talks are appointment of Guenter Butschek as CEO and managing progressing with Thyssenkrupp. He had played a hands-on role until the AG. that was losing money. now that he is back in the saddle. This is not in the offing over acquisition of Jaguar Landrover (JLR). Tata Motors was a have been poor. was to rebuild What Happens Now: It is a very emotional decision to employee confidence after get rid of the English white elephant for the Anglophile the Nano fiasco. In August. He also toured China to understand the had apparently outlined four areas for immediate dynamics of the steel business because China is the main attention—cost.000 cars from an installed capacity of 100. The Nano plan makes it to the ground by a rash of investments across the world 3. the domestic operation (Guenter Butschek) and for JLR (Ralf Speth). Ratan Tata’s has consistently lost money. together a joint working team with JLR to allow the the more uncertain will be Tata Steel’s future and the Indian operations to benefit from the British experience. Many excesses of the boom a new platform. quality and productivity. which has saved the next year or so. It has followed an aggressive accounting and the Kite 5 sedan. improving supplier performance and period are still to be wrung out. Mr Mistry of Tata Steel. but the costs were always above this. at fancy prices. ran IHCL and almost ran Profi ts are nowhere visible. Before this acquisition. which had diversified slow down investment in the development of a new into passenger cars. A It is here that lenders have inserted covenants in the loan agreements allowing them to pull the loans if Tata Steel ceases to be a part of the Tata group. Indian shareholders are paying for a loss of 1 million-1. creating a future liability. or Cyrus Mistry remains the chairman. Mr Bickson earned a compensation 41 | 25 Nov-8 Dec 2016 | MONEYLIFE Cover Story. He also a super-cycle in 2003-2008 and the current downturn is suggested refreshing the design of vehicles. However. to better had stepped use the facilities and cut costs. Raymond Bickson. None of this solves Tata Motors’ policy to capitalise a substantial portion of the product current problems. it needs to have a far better Tata Motors: Small Card. an SUV to be launched in largest employers in UK. favourite. Mr Mistry wanted to shut it down but Mr Tata’s Mr Mistry’s Solutions: Mr Mistry has speeded up the emotional attachment has held back this crucial decision. Media reports say that he is January 2017. and sprucing up the brand image. Big Problems product portfolio for its domestic business (commercial Problems: One successful move of Ratan Tata was the vehicles and passenger cars). This product Problem: Between 2003 and 2014. bringing in not just a normal correction. Mr Mistry has also put choice? The more he delays the decision to get rid of it. On the other hand. DoCoMo has approached the Delhi of permanent residents who simply cannot be shifted. developing a Sivasankaran. This has now become a legal tangle. who was the group Mistry. Mr Tata’s team clearly did profitability is declining and investments are slowing. If Tata Sons does initiatives being taken up. IHCL the award but the Reserve Bank of India is refusing to let veterans say that the group had reviewed Pierre in the Tatas remit the money because the buyback agreement past but dropped it. (to make it viable) impossible. would cost that he was on course to charting a turnaround at anywhere between $4 billion-$5 billion. TTSL’s future seems bleak. the stock price will languish. which were the outcome of a close friend of euphoric acquisitions during the boom years. but nothing worked out. The wanted to exit recent quarter’s results show that the debt is reducing and the telecom the operating profitability is improving. this. Pierre in New York is another worry. IHCL had housed the Searock property broader Taj label. What Happens Now: If Mr Mistry is removed from alleges Mr Mistry. after discovering that it has a set violates Indian laws. like the Ambanis. This was the worst business Mr Mistry had inherited Mr Mistry’s Solution: Sources close to Mr Mistry say from Rata Tata. That is probably why bidders for a possible sale. the Tatas had assured DoCoMo that they would buy back their shares at a predetermined price. under the Mr Tata. He also wanted to initiate legal to recover dues from cutting food & beverage expenses. The strategy of business because of its utterly bleak divesting loss-making overseas ventures and better cost prospects. Introduction of new customer loyalty programmes. most likely. COVER STORY of over Rs10 crore a year even as the company was brands may be axed and all its hotels branded under the incurring losses. Besides.17 billion making a much needed renovation of the entire property in good faith. Tata Teleservices’ revenue is stagnating. involve postponing tough decisions. Mr Mistry brought in Rakesh Sarna. president Americas for Hyatt Hotels Corporation. like the Taj Boston and its C Sivasankaran. DoCoMo has tried to enforce liabilities. High Court where the Tatas have deposited $1. TTSL is also the IHCL. with an international arbitration decision going against the Tatas.indd 12 18-11-2016 18:08:45 . Mr Mistry’s In 2014. at Bandra (Mumbai) in an off-balance sheet structure. IHCL had to write-down nearly its entire the group has net worth over three years which impaired its ability to several messy pay dividends. This artificially reduced its actual IHCL. This will. or a fire sale. holdings in Orient Hotels. are the key anyone to turn around this company. Mr Mistry’s restructuring included selling dealings with off several foreign properties. A shutdown. centralised system for resource allocation and enabling What Happens Now: Increasing competition. Tata-Bickson regime. It is haemorrhaging heavily. In the process of unravelling some of the bad company where investments. not bother to take a close look. and the direct room booking through hotel websites. as Solution: Mr the managing director and CEO. over the years.000 crore from Tata leadership and unanimously expressed full confidence in Sons for investment but there has been no decision on him. the independent directors of IHCL endorsed Mr Mistry’s TTSL board then requested Rs10. initially. MONEYLIFE | 25 Nov-8 Dec 2016 | 42 Cover Story. will make it tough for on commissions paid to third-party agents. Mr Tata would most likely fire Mr Sarna almost immediately and hire someone who would change the course of this group in accordance with his wishes. There have been conversations with potential control is beginning to pay off. If so. Vivanta and Gateway budget not put in fresh money. However. Tata Teleservices: Out of Range Problems: The telecom business was supposed to be a sunrise sector in mid-2000 and Tatas entered it through the backdoor. to save messy investments of the past. poor management quality and the 2G licensing scandal ensured that the business never reached a critical mass. However. in the first quarter of 2017. is a doughty fighter and corporate Mr Mistry’s Solutions: The company is seeking to grow watchers believe that Mr Tata has needlessly started its renewable portfolio in India and in select international another dangerous battle. respectively and that the board. The management is studying the design crore. In any case. including hydropower. COVER STORY Tata Power: Blackouts facilities. We have already reached out acquiring some of the country’s numerous underutilised to Debasis Ray. as a shareholder. this substantially depresses the return on or to distribute directly to end-users. has sent shock waves through the of the state of affairs of the company and disclosed all group and its directors. The message is. What Happens Now: All these ambitious expansions need a strong and stable management. a close friend statements published presented a “true and fair view and ally in the past. In fact. the notice revolves around the Tata Power-Welspun deal under from Tata Sons to remove Mr Wadia as an independent which Tata Power acquired Welspun’s renewable energy director. growing the company than involving themselves in and its project pipeline. experience and commitment to get out of the mess the companies find themselves in. Of that. as with most utilities. published in the newspapers.500 rather than coal. — Research inputs by Namrata Patel Ltd (TPREL) the portfolio of Tata Power has grown ------------------------------------------------------------------------ to about 2. is understood to have provided credible proof Chemicals and Tata Global Beverages .indd 13 18-11-2016 18:09:48 .400MW (megawatts). 43 | 25 Nov-8 Dec 2016 | MONEYLIFE Cover Story. and involved in the process from the beginning. Domestic acquisitions are a part of Tata Problems: Sources close to the Mistry camp allege that Power’s plan to nearly double its global power capacity Tata Power bid aggressively for a project in Mundra. like Bhaskar Bhat and Harish Bhat have done at Tata however. Nusli Wadia. In companies where independent directors have stood firm and supported Cyrus Mistry. along with Mr Tata. The Tata group has charged Mr Mistry with interested party. 30%-40% will come based on low-priced Indonesian coal. has clean energy.” The 9-page Tata letter. with a view to transporting compressed natural capital employed (40% of the overall company’s capital gas from the Middle East to India for power generation employed).000 crore of of ships. stranded plants. based on his plans and performance. Tata group’s spokesperson. instead of investing in expensive new for inputs. Mr Mistry would have steered the company to slightly higher returns. Tata Power plans to expand its capacity by been the basis for the Tata version. They the Tata group. changed. making it the largest End Note: We have been told by one of the Tata Sons’ directors renewable energy company in India. That he has already set in motion allegations by saying that its annual reports and financial the process of removing Nusli Wadia. In any case.000MW by 2025. As regulations from unconventional sources.” The action is a signal to Tata employee added that members of the Tata Sons’ board first heard of directors to display their loyalty in no uncertain terms— the acquisition through reports in the media. accuses him of “conducting himself as an assets. to 20. It would require deft handling. It also expects capital for Tata Power and carries the risk of considerable to complete the first phase of a $420-million 180MW hydropower joint venture in Georgia. the losses in 2013-14 amounted to Rs1. shareholders are unlikely to make money from this stock over the long term. The solar project at “none of the directors is commenting on any issue relating to the Anantapuram (Andhra Pradesh) will also add 100MW of matter. This is a highly capital-intensive business with low returns. Tata Power responded to Mr Mistry’s directors one by one. had been apprised will impact the decisions of independent directors as well. Mr Mistry. Given that Mundra constitutes Rs18. you would rather have your board concentrate on With the acquisition of Welspun Renewable Energy. Tata Power Renewable Energy ugly spats. markets through organic and inorganic opportunities. that Mr Tata is material facts as required under applicable laws. Then there is the overpowering presence of Rata Tata who may not want his ‘legacy’ undone. as and when required. Ratan Tata seems hell bent on removing the future impairment. in a manner designed to cause harm to keeping them in the dark by about the acquisition.” intolerant of independence and anyone who is not 100% One of the major contentions in the current spat with him is conniving with Mr Mistry. of Rs120 crore. with a capital Limited. and net profit growth was 56%. Those who have subscribed to the stockletters should only follow the stocks recommended there.400 Mills has also managed to reduce its debt:equity ratio to 0. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice.indd 2 18-11-2016 18:12:06 . KPR Mills has 600 reported strong results for the September 2016 quarter. Another capital expenditure. knitted grey & dyed fabric garments per year. All of these manufacturing facilities and readymade garments.15 crore for FY15-16. to Rs81. 1.000MT capacity and garment manufacturing capacities in India and manufacturing facility with a capacity of 95 million produces yarn. KPR are based in Bijapur Sugar Mills and Jahnvi (Karnataka).000MT. mainly of readymade garments. financial situation or needs Although information has been obtained from and is based on sources we believe to be reliable. Nov-15 May-16 Nov-16 Sales went up by 24%. is Performance Gets Rewarded planned to increase the fabric processing capacity from 25MT to 50MT per day for FY16-17. 1. 5000 tonnes day (TCD).19 Disclaimer: None of the stock information presented constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general in nature that does not take into account your individual circumstances. Jahnvi Motors Private capacity to 95 million garments per year. It also has Motors Private Limited. is a retailer of Audi cars and has an outlet in expenditure of Rs150 crore and will go on stream soon. Data Source: Centre for Monitoring Indian Economy’s Prowess database.200 KPR has had large cash flows for two years but the expansion spree that the company has undertaken. KPR Mills has a yarn division with production Strong & Steady Growth capacity of 90. we do not guarantee its accuracy and the information may be incomplete or condensed. windmills with energy Quantum Knits production capacity of manufactures readymade 61. MONEYLIFE | 25 Nov-8 Dec 2016 | 44 StockWatch.92MW which supplies garments mainly for around 60% of power exports.59 crore). a fabric processing K PR Mills has vertically integrated division with 9.39 crore (Rs609. to Rs755. 800 Some 36% of the total sales are achieved through exports. a fabric division with production capacity of 27. Past performance is no indication of future results. taking the total of energy. KPR Sugar has requirements of the textiles a capacity for crushing unit. This will be Adjusted closing Price in Rs funded from internal accruals and bank finance. The garmenting This subsidiary also has capacity is undergoing a production facility of another expansion by 36 Co-gen. Investors must do their own research before acting on them. It also has three active are based in Tamil Nadu. producing 30MW million.000MT. Quantum and Co-gen plant Knits Private Limited.12 in FY14-15. only the sugar manufacturing subsidiaries. The third subsidiary.98 for FY15-16 from 1. KPR 1.000 has again affected the free cash flows which stood at negative Rs2. StockWatch Stocks and sectors that catch our eye K P R Mi l l s Coimbatore. 96% of the total capital. it is time for the company A dani Ports and Special Economic Zone (Adani) to reap the benefits. The market-cap to sales ratio stood 120 at 1.274 on -40 27 September 2016.62% and net profit growth of 62.183.26% to Rs1. the quarter was up by Its flagship port. The stock rose from its 52-week low of Rs620 on 0 17 February 2016 to its 52-week high of Rs1. STOCK WATCH crore (Rs52. Adani’s Gulf of Kutch. revenues were up 18%. over the same ports and terminals at period last year. and special economic and net profit shot up zones (SEZ). The nine locations across operating profit for the Indian coastline.350 150 -4. is the RoCE (return on largest commercial capital employed) port in the country.95 on 11-12 12-13 13-14 14-15 15-16 11 November 2016 and may be worth looking at. logistics (Rs1842. 23%.095. For the quarter ended September is an integration of three verticals. It has achieved an average sales Investments Are Paying Off growth of 19. namely. to Rs2. The stock is trading at a price- Free Cash Flows 160 to-earnings ratio (P/E) of 16. A da ni P o r t s and S p e c ial E c onom ic Z ones Adani has 19 subsidiaries.450 Free Cash Flows -2. Mundra Port in the Last year.49 and market-cap to operating profit ratio stood 80 at 8.93 and has cash earnings per share of 96.11. It was trading at Rs1.400 210 -3.indd 3 18-11-2016 18:12:34 .89 a pan-India presence crore (Rs651.08% for the past five years.300 Nov-15 May-16 Nov-16 11-12 12-13 13-14 14-15 15-16 45 | 25 Nov-8 Dec 2016 | MONEYLIFE StockWatch.129.18 crore).05 crore ports.07. Rs Cr 240 The RoCE (return on capital employed) for FY15-16 stood at 14% and RoNW (return on net 200 worth) stood at 19%. two joint ventures and one associate company. After Port of Call having made capital investments for several years in creating modern facilities. 2016.30 crore). was 14% and RoNW Strong Results Continuous Investments Adjusted closing Price in Rs Rs Cr 330 450 -500 270 -1. 40 The promoters hold 74.32 and owns and operates crore). for the long run. four step-down subsidiaries. It has 68. indd 4 18-11-2016 18:17:37 . for the September builders.95%. Even the cash economy is not fully barely rising by 3. K a j a r i a C e ram ic s Slower Growth & Demonetisation Impact Double Whammy Adjusted closing Price in Rs 740 T iles market leader.83%. STOCK WATCH (return on net worth) was 22%. Kajaria Ceramics to its 52-week high of Rs740 from its 52-week low of earns 70% of its revenues from retail sales. By 11th November. have to buy tiles quarter.665 The debt:equity ratio stands at 1. Kajaria’s main market segment. crore while it needed to make investment of Rs4. funded by borrowings. This plunge was because of investors’ disruption.6MMT (million metric tonnes).578 operating profit to market-capitalisation ratio of 12.000TEU (twenty-foot equivalent 52-week high of Rs317 on 25 October 2016. the stock was down The next quarter will be bad because of the current to around Rs500.49% over the 545 480 415 Nov-15 May-16 Nov-16 to demonetisation. The real worry for Kajaria is that even normal Then the government announced the demonetisation growth had come down to a crawl. One of the largest sources of black money transactions is real estate. For the year ended at sales to market-capitalisation ratio of 7.14% and domestic (AICTPL) in Mundra.5) by cheque or cards. since the requires massive capital investments which have to be business has little competition. Kajaria’s revenues were Rs630. Users will have to buy tiles and Kajaria’s past five years.09% 610 and average net profit growth of 31. has captured over 10% of the market share and has 675 achieved an average sales growth of 21.38%.59 for FY14-15.447 crore. The cost to the customer could increase because of Rs63.96 on 12 February 2016 to its of handling 18. and net profits notes.000 currency notes on the evening of quarter growth in sales and profit was in single digits. This leaves no free cash flow for the shareholders. while operating profits were eliminated. The government has already issued Rs2. 8th November. The real picture will emerge in the March assumption that Kajaria’s revenues will go down due 2017 quarter. the rest Rs423. But. For instance. work is under way The promoters hold 58. the stock had already gone down to under on the purchase by cheque or other methods. lot lower than 1. On 19 October 2016. the stock rose products are preferred. The stock unit) container vessels. Our sense is that the effect of demonetisation would be temporary.08 crore) rose only 7.62) up just 6. MONEYLIFE | 25 Nov-8 Dec 2016 | 46 StockWatch.45. The September of Rs500 and Rs1. not a crore and had to borrow an additional Rs2.72(Rs118. on expectations of 30% comes from government orders and from major continued great performance.09 (Rs609. it is a good stock to track.05 on 18 November 2015. The problem with the business is that it still Nevertheless. Besides.95 and March 2016. with a cumulative capacity of was trading at 276. ultimately.62 crore (Rs59. The stock price rose from its completed next year when the Terminal will be capable 52-week low of Rs165. Kajaria Ceramics.68%.94% while foreign to expand the Adani International Container Terminal institutional investors hold 17.000 Rs126.53 for FY15-16.50 on 11 November 2016. of the GST (goods & services tax) that will be levied As a result. Retail buyers will. Rs600. Construction is due to be institutions hold 14. The stock is trading 6. cash from operations was Rs2. 02.indd 5 18-11-2016 18:18:45 . STOCK WATCH A s a h i I ndia Gl as s Expansions Paying Off Transparently Better Rs Cr 110 A sahi India Glass Limited (Asahi) has reported a 10% rise in revenues for the September 2016 60 Free Cash Flows quarter. It sells four kinds of glasses: automotive glass. Asahi has been able to reduce the net debt by Rs100 crore bringing down the debt:equity ratio to 3.31% of the total shares as 200 of September 2016 and the public holds 45. What is the reason for this dramatically For FY15-16. In FY15-16. and made net profit of Rs42. sluggish demand market-cap to sales ratio is 2.90 on 160 11 November 2016. consumer glass and solar glass. in FY15-16. Asahi’s RoCE (return on capital improved performance in the September quarter? employed) was 17% and RoNW (return on net worth) The company derives more than 70% of its was 25%. doubling the capacity of glass encapsulation and enhancing in FY14-15. from 120 10 manufacturing units and three warehouses-cum-sub- Nov-15 May-16 Nov-16 assembly units. The operating profit was up 26%.95 crore production of door glass by 20%.14 crore (Rs93. Asahi commands 76.72 from 5. to Rs615.52 crore).02 and market-cap to operating profit ratio is 11. The revenue from the automobile sector. the stock is expensive. Asahi had made net losses for three continuous years. The share price rose from its 52-week low of Rs135 on 22 180 March 2016 to its 52-week high of Rs210 on 8 November 2016. The stock was trading at 191.7 million windscreens per annum. Also. 47 | 25 Nov-8 Dec 2016 | MONEYLIFE StockWatch. This reduction in financing costs.35 crore (Rs20. followed by net profit of Rs86.02 crore -90 11-12 12-13 13-14 14-15 15-16 for automobiles has been the major reason for its net losses. it commissioned new capacities for laminated glass of 0. benefit of lower oil prices and demand growth had helped Asahi return to the growth path. architectural glass.814 crore). to Rs33. the rising prices of oil in FY13-14 put a lot of pressure on operating margins of the glass manufacturer.82. Asahi is a joint venture between Asahi Glass Co 140 Ltd (AGC) of Japan and Maruti Suzuki India Limited (MSIL). Asahi announced Growth in Place an interim dividend of 60% on 25 October 2016 after Adjusted closing Price in Rs nine years. However.8 crore).57% share of the Indian passenger-car glass market. In the past year. These losses were exacerbated because of high-cost debt raised to fund expansion. and a huge 63% rise in net profit.59%. The share is trading at a price-to-earnings (P/E) ratio of 44.97 crore (Rs561.04 for FY14-15. The promoters hold 54. from FY11-12 -40 to FY13-14. 10 to Rs118. 4% Throwing light on the first half performance and outlook.731 3.compared with Rs3. The company has reduced its debt Infrastructure 85 55 54. continues to diversify its customer base to include state Last year. to Rs2. Transmission Business Verticals Q2 FY16-17 Q2 FY15-16 Growth & distribution business. Consolidated earnings before interest. MONEYLIFE | 25 Nov-8 Dec 2016 | 48 StockWatch. which contributed 84% to (Rs crore) (Rs crore) (y-o-y) revenue. driven by strong operational 130 performance. it turned around and posted a positive profit before tax. This year. particularly servicing the railways. The company’s transmission & distribution business has secured orders of Rs859 crore in India.indd 6 18-11-2016 18:19:05 . they have been able to complete partnership projects.Water 19 21 -9.SAE 261 201 29. STOCK WATCH K E C I n t e r n at ional Can It Now Surprise? Infrastructure Business Adjusted closing Price in Rs 170 Doing Better 150 K EC International’s profit grew 130% y-o-y.121 crore y-o-y. in the infrastructure business. tax and depreciation (EBITDA) grew by 22% y-o-y. The cable business of the company has bagged an order of Rs105 crore. to Rs3. The company given. railways and cable Nov-15 May-16 Nov-16 businesses. chief Solar 26 0. in the September .957 crore at the end of . One. The company’s railway business has secured an overhead electrification order of Rs120 crore in the north-western region in India. and construction solutions for solar able to achieve the 10% growth guidance that we have power projects with single-axis tracker. in the September quarter.5 — financial officer. and margin expanded by 140 basis Growth in Pockets points.1% quarter . He added: “With the kind of orders we have got of Rs108 crore for providing turnkey engineering. Africa and the Americas.Railways 66 34 94.5% March 2016.790 crore. Cables 228 283 -19.066 2.640 crore. to 9%. KEC has secured new orders of Rs686 crore in 90 transmission & distribution. on slow growth in transmission 110 & distribution segment and lower cable business. but cables business declined 19% in the .4% infrastructure segment showed a whopping 55% Distribution growth. and Transmission & 1. The margins are improving because of two factors. grew by 3% y-o-y. in the first six months. Secondly.5% by Rs317 crore.7% four projects in Saudi Arabia. we are expecting that we will be procurement. where working capital was released. the SAE Towers business has shown impressive performance.9% September quarter. to Rs185 crore. going forward. though revenue during the September 2016 quarter increased only 3%. to Rs65 crore. Also. Rajeev Aggarwal. the company completed seven projects ahead electricity boards and developers of public-private of schedule.121 2. the solar business has received orders prices.790 1.” KEC is focusing on faster execution of projects. to Rs1. said that revenue growth in first half Inter SBU (8) (3) — of the financial year was muted due to low commodity Total Net Sales 2. 89. at Rs9 lakh. Then. 40. Unknown are products of chores: columnists have to comment and broking houses have to Tchange. In the past FY15-16. political expediency cy comes in the way. (Rs) M edicamen Biotech is a pharmaceuticals company and has been in this line of business 345 The total borrowings stood at Rs19. they are contradictory and. It is an difficult to admit it. respectively. We don’t even get the repeated re ad nauseam for the correct data to arrive at a sense of past pas few months: the market was what is happening—unlike corporatee expensive. If it is negative. It claims to 260 expansion and for research and have two formulations plants at development. easy to forget data and get euphoric.45 crore for FY15-16. Nations are not run in the most to focus foc on earnings trough. Total borrowings despite no growth in sales and profits? three years. it negligible. we.69% FY11-12 were Rs100.28 crore for September 2015.indd 7 18-11-2016 18:19:21 . unknown. Meanwhile.8% of its revenue through exports. crisis of 2008 or tech boom of the pastast 20 years) or the best answer to a m monumental change is ‘I don’t at the national level (liberalisation off 1991). preferring to believe that the current When a major economic change is positive. too much pessimism. 90 from Rs6.93 crore. The company has shown no growth in sales promoters held 45. bu but. respectively. STOCK WATCH UN UOTED STORIES OF PRICE MANIPULATION Medicamen Biotech (Rs244) FY11-12 from Rs9. were sceptical. Rs44 lakh and (P/E) ratio stands at a ridiculous reported net losses of Rs83 lakh and Rs48 lakh. and we had stocks. Why is the stock price rising.51% of the total 5 or profits. the Rs249. it is easy to slip into an essentially cash economy. FY14-15 and 101. the net profits have been by Medicamen rose to Rs13. Wait and watch. as human beings. expe Most experts then preferred performance. You re-do the be followed follo by earnings growth—which expected earnings. nobody really knows the impact excitement in the air—even among sensible people— of taking 86% of currency notes out of circulation from which can mislead. It could be at the global level (financial here are times when we are confronted with a major come out with interpretations. the (Uttarakhand). There is a lot of What now? Remember. Total sales for Jan-14 May-15 Nov-16 shares as of September 2016—1. For FY11-12 and FY12-13. The company earns stock jumped an enormous 3619%. Rs4. know’. however.69 crore in Will the regulator find out? MARKET TREND Demonetisation: An mind as I kept reading different reports and opinions on demonetisation which Unknown. Nations are One thing we were more far more complex entities than certain about.95 on 16 November 2016.53 crore and lower than the promoter holding as of have declined to Rs67. no significant Bhiwadi (Rajasthan) and Haridwar 175 3619% outcome can be seen. Medicamen says that debt has been taken for capacity since December 1993. superficial. for FY13-14. Sometimes. We either buy the stock or wait for a lower valuation. often. arguing efficient manner.81 crore in FY10-11. The price-to-earnings FY15-16. you would make high valuation go away magically. These are thoughts that came to — Debashis Basu 49 | 25 Nov-8 Dec 2016 | MONEYLIFE StockWatch. unknown. 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MONEYLIFE ADVISORY FIX YOUR FINANCES, FOREVER www.savers.moneylife.in MSSN - Unbiased.indd 1 29-07-2016 16:09:26 HEALTH BM HEGDE Drug Money In my previous piece, I have described how the cancer industry works. It is not for nothing that thinkers like Nobel Laureate Linus Pauling and many others have called T his world is a wonder. In the quantum worldview, cancer research, and even cancer charity, a fraud! The next the world runs on energy—both occult and overt. biggest medical money-spinners are the recent addition of But the world remains an enigma and what we see so many hi-tech vaccines. There seems to be a vaccine for here is not the reality. What we see is Adi Shankara’s maya every illness now. Thanks to the manufacturing techniques which Nobel Laureate Hans Peter Durr calls Wirklichkiet, and the additives and preservatives, many vaccines are a drama, in German. capable of creating new diseases like autism. A recent BBC In reality, what runs the world is money, muscle and documentary shows the dangers of doctors prescribing brain power. Of the three, the first, money power, is the most too many medicines and doing so many unnecessary tests dominant. Up until money came into this world, humankind that they are damaging human health, to a great extent. was altruistic (homo-altruisticus); ever since money came Medicalising death is another big money spinner. The here, altruism went out through the window and greed last 10 days of the dying contribute to 90% of the corporate took charge and humankind hospital profits in the ICCU became man’s greatest enemy (intensive cardiac care units). (homo-economicus). William One must read Atul Gawande’s Wordsworth put it so beautifully wonderful book Being Mortal, in his poem, The World is too to gauge the level to which much with us, thus: “…little do corporate medicine has sunk, we see in nature that is ours… to make money using death as we have sold our soul to the a tool. When Breath Becomes devil.” Air is another poignant book by The Innu community study a young brilliant neurosurgeon in the Innu land, off the coast at Stanford who suffered at the of Saskatchewan in Canada, hands of cancer specialists! showed how the Innus, who Way back in 1823, James were ignorant of the ways Wakeley, a young physician of this world until Canadian member of the House of economic system invaded them Commons, investigated to in 1732, led an egalitarian find that the London doctors, society without any illness or of those days, were a bunch unhappiness. With money, came of “corrupt, incompetent, disease and misery. nepotistic fools” who were like an abscess on the patient’s The most powerful money clout in the world is that body. Being a passionate doctor, he started the prestigious of the drugs and device lobby which is worth trillions medical science journal and named it The Lancet denoting of dollars and is thrice as powerful as the oil lobby. The that this lancet should teach London doctors some science November US presidential election was controlled by the and help drain the pus from the abscess that they had drug lobby. The documentary film SICKO, by Michel become. Recently, the present editor of that journal, Moore, shows how every single US congressman and Richard Horton, appointed a medical historian to find senator is under the thumb of the prescription drug barons. out its impact on the medical profession after nearly 185 They, and their indirect bosses, who pose to the world as years. The report’s essence was that “doctors have now philanthropists, are, in fact, real cut-throat businessmen transformed themselves into a huge corporate monstrosity who live on human misery called illnesses. If that is so in eating into mankind’s health all over the globe!” God save the most enlightened country like the USA, one can only mankind from these greedy monsters. imagine the state of affairs in other countries! Let us throw some light on how this powerful lobby tries to medicalise the whole of mankind, to keep its coffers Professor Dr BM Hegde, a Padma filled. I call that the sickness industry, the most lucrative Bhushan awardee in 2010, is an MD, one at that. They have even devised a new sub-set called PhD, FRCP (London, Edinburgh, Glasgow & Dublin), FACC and FAMS. screening industry which tries to make every human being He can be reached at
[email protected] a patient when he/she comes for a check-up. MONEYLIFE | 25 Nov-8 Dec 2016 | 56 BM Hegde.indd 2 18-11-2016 18:30:30 He of the 1960s was the cause of a a big gap wasn’t expecting to find that sexual wave of suicides and divorce in the after the activity was so similar to music USA of the 1990s onwards. notes that a longish gap after the last meal the majority of research relating of the day and the following day’s to the orgasm has focused on its breakfast.” feels Adam. Rock day’s and dance. that time-restricted feeding did help authenticity. I emotional connection. not just in the nature is an African word that signifies last of the experiences. evolutionarily. as long as I give in Evanston ( IL. do intermittent fasting Turns out this idea is supported by daily! Fasting is good modern understandings of science. I think. Now. evolutionary functions. 57 | 25 Nov-8 Dec 2016 | MONEYLIFE BM Hegde. which should be the our ancient if intense enough and if it lasts bedrock of a happy marriage. one of the experiences can be like trance possible hypotheses is that you states is. USA). ranks that. as most of us the American Mind. Modernity is not in that context. Although I do not know how “The idea that sexual this works. He rhythmic sexual stimulation is refers in that book to his research fasting comparable to the way it responds which showed that rock music by giving to rhythmic music and dance. of the Weinberg College of Arts and Sciences at Northwestern University up even if I overeat. MEDICAL DEVELOPMENTS FROM AROUND THE WORLD I had a bitter experience once in Delhi. it’s actually an altered state of lower consciousness. for the first and calling it the best. this could change the way fasting. written than In addition. that makes research. The chair of time. HEALTH BM HEGDE SKIPPING DINNER ROCK MUSIC AND IS HEALTHY. I had mentioned reduce body weight and make the getting information from the West Allan Bloom’s book Closing of animal healthier. “he enjoys rock music and thus it will reduce weight in the obese cannot be bad!” A good example of without any reduction in total SEXUAL ORGASM AND ITS a really closed mind! calorie intake! SCIENCE I followed this principle of the Jains some years ago and have found that my weight does not go A dam Safron. PhD. ancient. a process called “neural good sense with the new findings of check their entrainment-sexual trance. but periodic In theory. and habits but long enough—can boost neural might even have led to suicide in we need to oscillations at correlating later life! In retrospect. to frequencies. human studies performed in India are but RNIs (resident the meeting was Dr Karan Singh carefully did show that eating the non-Indians)! Modernity in every who got up to condemn me in no last meal very early (in the study. Sex is a been studied for its source of pleasurable sensations and health benefits. which had people view their sexuality. rhythm-keeping both being one and the same. This book is a classic. He We ability may serve as a test of fitness gives graphic details of how that can learn for potential mates. but beyond feel. the rhythm of meal. for health. in some ways.indd 3 18-11-2016 18:31:36 . his research found by a professor of social philosophy daily that the way the brain reacts to at the University of Chicago. but also in that sexual intercourse. culture should come from its uncertain terms as he said that they finished the last meal at 2pm) antiquity. destroyed the emotional bondage a lot from Rhythmic sexual stimulation— in marriage. I was to talk on the present state Animal studies did show of education in India and.” the science of sexual orgasm. HELPS HUMAN HEALTH REDUCE WEIGHT J ains in India do not eat after sundown. SD Israni is a corporate lawyer & Fellow of ICSI. The other major benefit products like food grains.com MONEYLIFE | 25 Nov-8 Dec 2016 | 58 Legally Speaking. as. indirect taxation is that taxes are levied at various stages The president of India gave his assent to the right from the stage of procurement of raw materials. rates vary across states. step towards implementation of the new tax regime which it has entailed amendment to the Constitution of India. 2014. 2011. India proposed GST will be value added tax and it will be levied has its own peculiar problems to be addressed by taking across goods & services by the Centre as also the states. When this sees the light of day. Consumers should note that the Though. the Bill. LEGALLY SPEAKING SD ISRANI GST: Many States. eventually. precious national time is lost in logistics. passed by the Rajya Sabha. VAT (value added tax) and several other local taxes. Government’s efforts are on to minimise the adverse impact of the new taxes. with some deft manoeuvring by the Central government adding to the cost. will roll out with effect from 1 April 2017. it will be perhaps be the biggest tax reform the country To deal with this. However. Article 246. excise duty. but it lapsed with the dissolution of GST? There is a possibility that certain products will become cheaper. Email: sdisrani@gmail. One Market? T he Constitution of India. for businessmen. This was achieved within 23 days. the Schedule VII. ideally. All products as However. This has been a major other laws which parliament or the state legislature enact. read along with of the 15th Lok Sabha. and 28% plus cess Interestingly. Central sales in the Lok Sabha. Beginning with 0% for essential base and increase tax compliance. it has not been smooth sailing for GST. the new Bill finally saw and service-tax are imposed by the Central government. while others may become costlier in the near term. tax. benefit the consumers at large.indd 2 18-11-2016 18:33:29 . Thereafter. was introduced in Parliament consumer is: How will he/she benefit from the imposition to enable the levy of GST. it is 4%. in the long run. 2016. it is expected that the entire economy will benefit from the new tax regime and. had to be ratified by from making the taxation process complex and cumbersome at least 50% of states. various other products and services. being in the To add to the complexity. tax gets levied on the price which includes GST being 1 April 2017. the states into confidence. to Constitutional Amendment Bill on 8 September 2016 intermediate stage. became GST Constitutional Amendment The second stage comes when the goods are on the way Act. which. to manufacturing of finished goods. So. the light of the day after being passed by both the houses of while each state has its own set of taxes including sales Parliament on 8 August 2016. The problem with the existing system of and effective liaison with other parties. thereafter. including certain amendments tax. be seen from the fact that it started with the Constitution The million-rupee question posed by an ordinary (115th Amendment) Bill. now five different slabs of It is expected that such a move will help broaden the tax tax have been announced. taxes paid earlier. there should be one or two rates. to be a reality with the proposed target of implementing at every stage. The impact of all GST law. as can well as services will be impacted by the new tax regime. unlike most of the for luxury goods and ‘sin’ goods. provides for the division of powers Constitution (122nd Amendment) Bill. enacting the GST law is. now come into effect. goods & services tax (GST) law has has seen since Independence. was introduced between the Centre and the states. Apart nature of a Constitutional amendment. What seemed highly improbable is now slated these taxes has a cascading effect on the final price. thereby paving the way for the enactment of to the market to reach the consumer. 12% and 18% for is the expected reduction in economic distortions. in December 2014. MODVAT (modified value added tax) After due legislative process. Moneylife. FOREVER www. relatives. corporate bonds. (But you are only a sales target for them) Option4: Research insurance. India’s most unbiased and pro-investor research and information group. MONEYLIFE ADVISORY FIX YOUR FINANCES. MAS was set up to help investors and savers make the right financial decisions and handhold them through the entire process. so. markets. We are India’s only media company to have set up a non-profit trust.000 members.savers. We are not afraid to call a spade a spade. HANDHOLDING: MAS Benefit #11 • One-on-on e-Help • Portfolio X-Ray We are not agents. neighbours. financial theories… Become a financial expert yourself.000 actively traded stocks… How is an average saver supposed to choose? You have 5 options Option1: Do nothing. Ask any confidential question about investments. wealth managers.moneylife. bank FDs. over 3. mutual funds. office accountant. no-conflict platform. derived wisdom from social media or the press/TV. Moneylife Foundation. (Is this practical?) Option 5: Choose Moneylife Advisory A no-bias. hundreds of insurance products. distributors. stocks. (But do they know more than you? And how do you know that?) Option3: Rely on ‘relationship’ managers. Option2: Rely on friends. which is now the largest savers’ and investors’ association with more than 35. insurance agents. We run India’s best personal finance magazine. brokers or lead generators. Subscription to Moneylife magazine is included in MAS Premium Membership About MAS MAS is a SEBI-registered investment adviser and part of Moneylife.in MSSN Handholding. you get ethically correct advice There are thousands of mutual fund schemes. distributors. insurance and taxes and you get the right answer.indd 1 29-07-2016 16:08:23 . corporate FDs. enforced? Please refer to a statute called The Advocates between the legally correct and the morally justified. The lawyer countered that failed to turn up and we got the this was a different matter. Knowledge of the law will suffice. When the haemel-imbibing practices. we put our would you favour. or represented. Yet. had resisted the move. be tougher than he. we had their part? made a point. duck’s back. attorney. fees astronomical. advising him at every instance. Not on brought to Mumbai. relations. more importantly. to avoid outright The law is more strict for judges. As a judge he cannot take up that person’s Ten years ago. We had few cards to play. may seek justification. he may have litigated. If one finds any sort of stationed far away. It is free and on the net. such applications of the law. YOU BE THE JUDGE BAPOO MALCOLM Ethics in the Legal Profession A nasty joke. like the judge not being to a trio following one natural to your advocate’s liking. The accused were octogenarians. Wrong move. Is it true? Are lawyers a law unto themselves? little bending here. will applaud. We ‘tareek-pe-tareek’ treatment submitted that the parties were and a lot of flak from our the same and so was the cause. founded collision with the bench. If a We now entered the fray. becomes blurred. Avoid ill- departure. One can almost hear sighs of with well-heeled clients. maybe 99 stakes are high. proposed advocate picked on just one point. us or the foot down. would not get his fees and. He case. freshly minted. only to be judge is assigned a matter. Was it correct on Though the matter was resolved peacefully. especially when it No lawyer can argue with incessant prompting. a person. Ethically. full gallop. The opposition’s other lawyer? junior lawyer was warned to The lawyer put forward produce the counsel ‘within one two more appeals. he has the confronted by a fearsome defence jurisdiction and. We try and bring you an advocate. Act. but in new is the difference between a lawyer and a leech?’ matters involving the same litigants. A lawyer. wanting rather similar. a curvature there. represented our client previously. he must exercise it. forcing the other side to settle. on the net. Our man had wanted them ‘bonding’. Whom and adjournments. having represented a person. now recused. Point Bapoo Malcolm is a practising lawyer in taken. but our matter did not end there. Whatever a client says to his advocate is privileged. You be the judge. A happiness. rightly so. As confrontation. he may ask for another bench. if not acrimony. we Said it had something to do with Draculan personally believe that it must be avoided. In our matter. crucial. This applies not only as a client in a crime matter. asked the question: ‘What appointed after being on the other side. cannot then plead for the opponent. elasticity becomes the key. We came to our knowledge that the new. Please email your comments to mail@moneylife. The dividing line. but extends to family impatient type. and the future rosy out of 100.indd 2 18-11-2016 18:34:59 . The question that usually arises when lawyers are MONEYLIFE | 25 Nov-8 Dec 2016 | 60 You Be the Judge. to professional practice. not Is there is no code of conduct? And. if so. we had a lawyer matters. And let us know. all excuses. He ‘recuses’ himself. the accused We protested at his presence in this appointed a new counsel. two. 1961. That is the law. One. after all these years. You be the judge. one question remains unanswered. of the short-fuse. reduced some shaky advice. After three months You be the judge. as we will see Mumbai. can it be explanations. It cannot be used to the detriment of his client. even friendships.in later. We continued to resist. Scare tactics were but water on a advocate. The foursome. Two out of three. his replacement would With the counsel came the first. We are not there The opposing lawyer had to compare ‘janma-patrikas’. and won the day. He did. had previously played a counsellor’s role. that he hour’. horse-mounted client. There was nothing there. 316. Dadar (W). The ring was a The authors have excellent credentials for attempting reserved area. your date of birth and expiry of the credit card should be mentioned. which takes the subject head-on which is its Harshad was just an onlooker. It was a desperate sperate move. He cajoled the doorman and stepped in to watch how the Written in a racy style. 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Maneck N Goiporia’s house. ” he said to a packed audience. depositing the money into the bank or exchanging it for new notes. What to do with these notes? There are two aspects involved. 1988.” 6 of the Registration Act. weeding out black • The COLLECTOR referred to in clause (g) of Section 3 of the Right money. “To keep a watch on high-value transactions undertaken WhatsApp or email messages. He was speaking at a seminar-cum-guidance session on “The AIR is a big weapon in the hands of the tax officer” organised by Moneylife Foundation in Mumbai and supported by Capital First. the various tax Rehabilitation and Resettlement Act. believe in. information only from official sources. but. “Most households in the country would have a few high denomination notes which are now no longer legal tender. While explaining • The registering authority empowered to register MOTOR the seriousness of VEHICLES under Chapter IV of the Motor Vehicles Act. he gave to Fair Compensation and Transparency in Land Acquisition. hasty decisions based on some posts on social media. ML FOUNDATION EVENTS MONEYLIFE FOUNDATION SEMINAR ON ANNUAL INFORMATION REPORT Taxmen and Demonetisation M essages spread over social media or He also explained the system used by income-tax (I-T) WhatsApp may be entertaining or department to collect information on all types of financial informative sometimes.indd 2 18-11-2016 18:36:47 . Please consult an honest tax consultant or chartered accountant Who Has To File an FTRA? and take his guidance • The REGISTRAR or SUB-REGISTRAR appointed under Section about these things. 1956. namely. and the income-tax implications. “do not rush or take buying property. when it comes to tax matters. says Ameet Patel. tax slabs. transactions. MONEYLIFE | 25 Nov-8 Dec 2016 | 62 Event. 1908. investments or “However. and disseminate. the government in • The POST MASTER GENERAL as referred to in clause (j) of Section 2 of the Indian Post Office Act. 2013.” Mr Patel cautioned. 1898. a practising chartered accountant (CA) for the past three decades. implications for • The recognised STOCK EXCHANGE referred to in clause (f ) of individuals in various Section 2 of the Securities Contracts (Regulation) Act. including bank deposits. • Buy-back of shares from any person (other than the • Payments in cash aggregating Rs10 lakh or more for shares bought in the open market) for an amount or purchase of pre-paid instruments issued by RBI. officers was highlighted and he emphasised the need to Touching upon the importance to know about the be alert with disclosures by assesees. He emphasised the need department and on whom scrutiny has been initiated. orders or banker's cheque of Rs10 lakh or more. post-offices. a debit or credit card or through issue of travellers • Payments made by any person of an amount cheque or draft or any other instrument of an amount aggregating 1) Rs1 lakh or more in cash. schemes of a mutual fund (other than the amount • Cash deposits aggregating Rs10 lakh or more in a received on account of transfer from one scheme to financial year. Central Information Branch (CIB). based on details provided can be given online.” Mr Patel said. the ITO has two tools with which he can confront question is supremely important a taxpayer with massive dose of information from the AIR or FTRA and CIB. • Receipt from any person for sale of foreign currency • One or more time deposits (other than a time deposit including any credit of such currency to foreign made through renewal of another time deposit) of a exchange card or expense in such currency through person aggregating Rs10 lakh or more. type and of statement of financial transaction or reportable account quantum of transaction and the source of income and (FTRA) which was previously called ‘Annual Information misreporting or non-reporting of any could spell trouble Report (AIR)’. • Cash deposits or cash withdrawals (including through • Receipt from any person of an amount aggregating bearer’s cheque) aggregating Rs50 lakh or more. He further added that by the taxpayer. and 2) Rs10 aggregating Rs10 lakh or more. must file an FTRA. in one or more accounts (other than a another scheme of that mutual fund). where the for which various entities. etc its dissemination to assessing officers (AOs) and other • IS IT REALLY CURRENT YEAR’S INCOME? This users in I-T department. value aggregating Rs10 lakh or more.indd 3 18-11-2016 18:37:19 .” Mr Patel said. as the chances of scrutiny. companies and examples of assesees who have got notices from the IT mutual funds. Rs10 lakh or more for acquiring bonds or debentures • Receipt of cash payment exceeding Rs2 lakh for sale. for an assessee. “So. authority referred to in Section 50C of the Act at Rs30 • Receipt from any person of an amount aggregating lakh or more. like banks. in or Rs10 lakh or more for acquiring units of one or more from one or more current account of a person. ML FOUNDATION EVENTS What Is Reported to the Tax debenture issued by that company). He gave banking finance companies (NBFCs). seasonal sales information from internal as well as external sources and pattern. TCS returns (for scrap sales). He touched upon the entities that are required to file Mr Patel then went on to explain how the AIR and CIB an FTRA. • Receipt from any person of an amount aggregating Dept Rs10 lakh or more for acquiring shares (including share • Payment in cash for purchase of bank drafts or pay application money) issued by the company. by issued by the company or institution (other than the any person. He cited the nature and value of transactions would impact assesees in two different scenarios. the income-tax law has framed the concept the ITO has information about the filer’s name. current account and time deposit) of a person. against bills raised • Purchase or sale by any person of immovable property in respect of one or more credit cards issued to that for Rs30 lakh or more or valued by the stamp valuation person. lakh or more by any other mode. of goods or services of any nature (other amount received on account of renewal of the bond or than those specified). he explained how Matching of Cash Deposited CIB aids the widening of tax base through identification • With current year’s books / income of stop filers and non-filers and the deepening of tax base by providing information for proper selection of cases • With earlier years’ income for scrutiny assessments through collection. The intelligence and efficiency of the by third parties can get a person into trouble. 63 | 25 Nov-8 Dec 2016 | MONEYLIFE Event. return is filed and where the return is not filed. non. collation of • With other factors (debtors’ aging. He for individuals to disclose income and details to his/her also explained how responses to notices by the department CA. 85 19% Godfrey Phillips India 1.068 8.905 17.69 -4% Nifty 8. crore).30 -37% Bovespa 61.75 19% S&P 500 2. sellers of stocks during the fortnight (Rs8.825 FII Net Investments (Rs Crore) 110 -2.980 0% Eskay K'N'It (India) 0.125 3.60 597. ML Large-cap Index.085 2.55 173.51 -9% ML Small-cap Index 116.05 113. They sold shares worth Rs48.18 crore.38 12% Taiwan Weighted 9.51 -6% 7 Nov-16 16 Nov-16 ML Mega-cap Index 119.115 Index 04 Nov 16 Nov +/- 500 Sensex 27.281 -2% MONEYLIFE | 25 Nov-8 Dec 2016 | 64 * 20 O 16 ** 1 N 16 Money Fact. May 2016=100 -220 130 -755 -1.75 8.391.900 Bank of Baroda 142.111.62 crore). respectively.60 9.34 0.65 108.10 47.274.295 5% Dynemic Products 91. ML Mega.693 6.31 crore.290 120 -1.95 -32% Nikkei. 7% and 9%.indd 2 18-11-2016 18:39:03 .00 110.298.30 23.10 14% Signet Industries 37. 5%.57 -7% ML Mid-cap Index 125.046 5.95 108. 4% and 3%.360 7 Nov-16 16 Nov-16 100 Indians: Domestic institutional investors were net buyers of stocks (Rs5. Garware-Wall Ropes 525.48 105.40 22% 15.205 3% FTSE 6.133.643 22.234.915 Berger Paints India 259.78 -9% GLOBAL MARKET TRENDS 17.70 16.15 26.221.962 -1% Ansal Housing & Construction 25.07 -10% Nikkei Mega-cap Gainers/Losers 04 Nov 16 Nov Change 16.982 1. MONEY FACTS STOCKS INDIAN MARKET TRENDS FUND FLOWS The Sensex and the Nifty fell 4% each during the fortnight Foreigners: Foreign institutional investors were net ended 16 November 2016.55 -39% Shanghai Composite 3.759 -1% (All Prices in Rs) Hang Seng 22.345 May-16 Aug-16 Nov-16 ML Large-cap ML Small-cap Nifty ML Micro-cap 1. They bought shares worth Rs26.177 4% Prakash Constrowell 15.750 1% Micro-cap Gainers/Losers 04 Nov 16 Nov Change Korean Composite 1.433.885 ML Micro-cap Index 114. S&P 500 and Mid-cap Gainers/Losers 04 Nov 16 Nov Change Shanghai Composite advanced 6%.80 -36% Index 04 Nov 16 Nov +/- Nikkei 16.78 cap Index and ML Mid-cap Index declined 6%.730 ML Mid-cap ML Mega-cap Sensex DII Net Investments (Rs Crore) 1.75 198.13 103.303.60 -4% -115 ML Large-cap Index 115.598 60. NASDAQ Composite.65 -24% Large-cap Gainers/Losers 04 Nov 16 Nov Change 14.00 951. 315 Share Prices Index.862 6% Small-cap Gainers/Losers 04 Nov 16 Nov Change NASDAQ Composite 5. respectively.930 May-16 Aug-16 Nov-16 Corporation Bank 40. 90 2. for 09 Nov-16 Vama Industries GK Properties Pvt Nitin Siddamsetty 0. in September 2016. companies dipped 1% each.60 -22% 4.65 751.95 14.15 589. 23% and 22%. in September.47 moved up to 3. Ansal Housing 25. MONEY FACTS STOCKS What’s H T Shares of public sector banks were in demand during the fortnight.64% Companies 04 Nov 16 Nov +/.78% compared to 16 Nov-16 Mitsu Chem Plast Aryaman Broking Jhaveri Trading and Investment Pvt 0.70 16.10 17% companies declined 14%. inflation 07 Nov-16 Aarey Drugs Pharma Nomura Singapore Antara India Evergreen Fund 0.54% in October. Punjab National Bank rose 13%. too. In October 08 Nov-16 Apoorva Leasing Fin Times Capital Services Pvt Sri Endrash Investment & Finance 1.40 58.30 -37% Anant Raj 50.45% since last year.20 14% ML Sectoral Trends Banks 2% Real Estate -17% Bank of India 106.40 36.79% in October.20% Real estate companies were punished. 65 | 25 Nov-8 Dec 2016 | MONEYLIFE Money Fact.85 -22% 90 3.00% Arihant Foundations 61.35 13% 100 Odds -1% Paints -13% PNB 131.80 14% Telecom Services -1% Cement -14% St Bk of Travancore 520. in October 2016. to 4.85 19% respectively. Bank of Baroda.05 243.65 148.78%.80 13% May-16 Aug-16 Nov-16 All Prices in Rs URBAN INFLATION What’s N T Combined inflation for urban and rural areas declined. Shares of telecom services companies and energy Companies 04 Nov 16 Nov +/.55 95.55 173.20 14% Oil & Gas 0% Garments -14% 110 St Bank of Mysore 519.00 47.25 13% Energy -1% Building Material -14% St Bk of Bikaner 663.50% Lancor Holdings 30. ended flat.05 55.70 108.05 -23% 5. inflation for clothing fell marginally to 3. Prices of 08 Nov-16 Mindtree Rekha Nemish Shah Amrit Petroleums Pvt 155. In urban areas. Ansal Buildwell and DLF declined 37%. in urban areas declined to 3. Indian Bank and State Bank of India advanced ML SECTORAL TRENDS Shares of banks rose 2%.50% Peninsula Land 18. Food inflation in ML Real Estate Index urban areas declined significantly.10 -21% Apr-16 Aug-16 Nov-16 Oct-15 Apr-16 Oct-16 All Prices in Rs to 2. 19%. Stocks of cement Indian Bank 207.19 2016.75 18. Inflation for housing fell 10 Nov-16 Suyog Telematics LTS Investment Fund Ivory Consultants Pvt 2.15 17% 120 State Bank of India 242. Inflation 27%.85 marginally to 5. from 3.10 589. Ansal Housing & Construction.47 miscellaneous items.70% in September 2016.indd 3 18-11-2016 18:39:21 . respectively.85 277.75 -22% 4. while shares of oil & gas companies 22%. Vijaya Bank 41.80 -22% 100 Kolte Patil Dev 122. from 4.40 22% companies declined 17% and 13%. 24%.45 121.39% Anant Raj.50% HDIL 73.29 3.17% in October. prices of vegetables declined by Date Company Buyer Seller Rs Cr 6.86 ago. 130 Corporation Bank 40.75 -24% 5. compared to a year 07 Nov-16 Lloyds Metals and Energy Lloyds Metals and Minerals Uttam Exports Pvt 6.20 -24% Annual Change 110 Ansal Buildwell 71.05 48. 17% and 14%.45 23. from 3. BL Kashyap & Sons. Stocks of real estate companies and paints ML Bank Index Bank of Baroda 142.19% BULK DEALS in September.49 fuel & power increased by 0. respectively.10 47.85 -27% 120 Significant Decline BL Kashyap & Sons 24.15%. Corporation Bank.00% DLF 139. vibrant CEO of a multinational conglomerate. IITs and another 800 Dakshana Foundation to NITs. The Foundation now electricity or hospital within a radius of 15km. all costs is where Dakshana Foundation comes in. colonel Sharma runs Dakshana like a opportunities for exceptionally gifted children from young.dakshana. with Warren Buffett. “A total 1. while they DAKSHANA FOUNDATION a ship that is sailing smoothly towards are studying for their class 11th and Kadus.044 Dakshana-sponsored anywhere beyond Delhi and underprivileged scholars. Dakshana has been offering one-year pursue a professional course in engineering or medicine. brings with him the vast experience of managing a large The inspiration for setting up Dakshana. Dakshana signed a memorandum of Dakshana’s team comprises mainly its alumni who understanding with the ministry of human resources and have been beneficiaries and have graduated as engineers development to prepare deserving. cost of books children from economically backward families. From a village with no beneficiaries.5344 Email spai@dakshana. Mathematics at Patna (Bihar). headquartered at Kadus A year earlier. Kumar Sharma. from a tiny village near Kargil in by Dakshana. colonel Ram poverty through education. to prepare for the are able to achieve this. and Abhayanand. Taluka Khed. but have decided to come back and serve Dakshana as students from the 595+ Jawahar Navodaya Vidyalayas Fellows. are borne Noor and Sadika.indd 1 18-11-2016 18:40:35 . founded by Anand Kumar. Pune. Mr Pabrai Village. Heading the team is commander Arun Mishra across India for the IIT entrance exams. when he chief operating officer of won a bid to have lunch Dakshana Foundation. Maharashtra are exempt under Section 80-G of the Education course. scholarships to help underprivileged students from state after passing the entrance examination. The entire had set up Dakshana with operation is headed by an the objective of alleviating army veteran. Harina Kapoor. Yet. During the year.2685. was the Ramanujan School of by the scholars at all Dakshana Centres of Excellence. success. 52. He impoverished rural backgrounds in India.org MONEYLIFE | 25 Nov-8 Dec 2016 | 66 Beyond_money. Telephone +91. how many government schools. to help gifted incurred for coaching. and cost of application forms. for Mr Pabrai operation with ease and success.” says Sharmila Pai. the two has 400 Dakshana scholars undergoing training which is girls were given a one-year scholarship to study at Pune fully funded by Dakshana at six locations across India. Fondly known as ‘Dadaji’ and his wife. investor and hedge IIT-JEE over the past eight fund manager.20. In 2006. They are Dakshana’s track-record of results has been the first from their village to be sent for further studies excellent.3485 Income-tax Act.2685.20. who has Dakshana’s mission is to fought the three wars for focus on investing in the delivery of world-class education India. colonel Sharma is a philanthropist in the true sense as 33. one rupee a year. but disadvantaged. and prepare for their medical entrance exams. boarding and lodging. All donations to Dakshana 12th of the Central Board of Secondary Pune. Patna’s he works full-time for Dakshana for a remuneration of deputy director-general of police and a lover of physics. (chief administrative officer) with 20 Dakshana does this by offering a two. even if their child is gifted? This JEE or medical entrance exams. an aggregate was established by Mohnish acceptance rate of 51% at Pabrai. At 76 years.” says Sharmila Pai.org Web www. will be the first to attend have been accepted by medical college next year.100 of 2. “The programme is absolutely free for Jammu & Kashmir. That Dakshana is money went to charity. years’ experience in the Indian Navy. BEYOND MONEY Investing in Educational Opportunities for Gifted Poor Children I t is the dream of all parents that their child should Since 2015. who made years. Fax +91. news in 2007. year scholarship to selected students He runs the Dakshana administration as after they complete class 10. after class 12. are examples. for each student. a local mathematician. indd 4 18-11-2016 18:47:06 .Advertisements. Postal Registration No: MCW/184/2015-2017. Date of Posting Alternate Tuesday & Wednesday. MAHENG/2006/16653.indd 1 17-11-2016 21:48:15 . MUMBAI 400001. POSTED AT PATRIKA CHANNEL SORTING OFFICE.REGISTERED WITH THE RNI UNDER NO. Advertisements. Date of Publishing 18 November 2016.