Moneylife 26 October 2017

SUCHETA DALAL ON: MALLYA EXTRADITION: GET ALL THE FACTS

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13 October-26 October 2017

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Ensure Your Assets Don’t Fall Under The Benami Act Will your gift to parents or siblings be considered a benami transaction? Can you invest in the name of your spouse or children? What about transfer of money by NRIs to parents/relatives? Mare sure you don't create benami assets unknowingly

STOCKS Shemaroo Entertainment

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KNR Constructions

Market Manipulation: Antarctica

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ISSUE CONTENTS

13-26 Oct 2017 Beware of the Benami Act

I

nvestment of unaccounted money into benami property is well-known. But benami no longer applies only to property. Even financial accounts can be deemed benami. In simple terms, a financial asset may be benami if the person who makes the investment does not have his/her own name on the asset, at least as a joint-holder, for varying reasons including hiding of unaccounted money, evading taxes in India or a foreign country and so on. Raj Pradhan looked at the Benami Transactions (Prohibition) Amended Act, 2016, and explains how you can avoid creating benami assets unknowingly. The Act has hefty penalties and rigorous imprisonment. The government has already cracked the whip and attached assets worth crores of rupees. There is a thin dividing line between a transaction being deemed a benami or genuine. Vijay Mallya got arrested in UK and was released on bail. Sucheta points out, in her Crosshairs column, that Indian investigation agencies will succeed in getting Mr Mallya extradited only if they present an ironclad case. Industrialists in the dock have routinely influenced investigation agencies to present weak cases. Shockingly, in Mr Mallya’s case, Indian regulators have sat on evidence shared by UK regulators a few years back. On 4th August, Securities and Exchange Board of India (SEBI) issued a circular making it mandatory for companies to report any lapse on payment of interest or principal to their lenders from 1st October onwards. Suddenly, on 29th September, SEBI suspended this move. Sucheta points out, in her Different Strokes column, that this shockingly anti-investor decision comes after a series of missteps by the present government that has put businesses and consumers alike under severe pressure. There is a disconnect between the current tepid economic growth and strong bull market. What should investors do in such a situation? Bala explains what he himself would do. A lot of investors, I think, would find that his is the right path. As always, do write in with your views including what you would like us to cover. Debashis Basu 

32 Cover Story Ensure Your Assets Don’t Fall under the Benami Act The Benami Transactions Amended Act can be a pain even for those who may not have any unaccounted wealth. Raj Pradhan describes ways in which you may inadvertently create a benami asset. How can you ensure that you do not cross the fine line which can jeopardise your asset? Will your gift to parents or siblings be considered a benami transaction?

12 Public Interest

– Regulation of Retirement Homes under Consideration – Jan-Dhan Accounts: Who Do They Serve?

16 Your Money

– NCDRC Asks Unitech To Refund Rs41 Lakh to Home-buyer – TATA AIG General Insurance Directed To Pay Car Theft Insurance Claim of Rs5.22 Lakh – DSP BlackRock Launches Equal-Weight Nifty50 Scheme – Roadside Parking in Specific Residential Areas in Delhi Will Be Paid Parking – Real Estate Developer AN Buildwell’s Director Arrested – Piramal Finance Enters into Housing Finance Segment – SBI Waives Account Closing Fees – Government Has Decided To Audit Aadhaar Enrolment Centres

17

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Disclaimer: Moneylife has a policy of not allowing its editorial staff to buy and sell stocks that are written about in the magazine. All personal transactions in individual stocks are subjected to internal disclosure rules.

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CONTENTS

20

FUND FACTS

Will Venal Indian Regulators Save Vijay Mallya from Extradition?

22 Different Strokes

Going Easy on Loan Defaulters: What Is behind the SEBI Move?

FUND POINTERS

Funds May 24 Mutual Cushion a Falling Market

& Worst Mutual 25 Best Fund Schemes

TAX HELPLINE

at Moneylife 52 Queries Foundation’s Tax Helpline PULSE BEAT

INSURANCE

30

Insurance Trends

Accident Insurance – Motor Accident Death Worth Less than Rs10 Lakh? Health Insurance – Mediclaim Renewal Notice Not Mandated Is an Issue – Heart-related Claims Data from ICICI Lombard and SBI General Fine Print

Loss 56 Weight from Black Tea?

– Get Lean, Cure Diabetes

LEGALLY SPEAKING

58 Reputation No Guarantee

xSTOCKS TAX / FIXED INCOME

26 Smart Money Investing during Economic Sluggishness

of Claiming 48 Perils Wrongful I-T Deduction

TECHNOLOGY

Protection from Data 60 IsLeaks Possible?

– G-Sec Yields Up

40 Stock Watch Shemaroo Entertainment: Is Old, Really Gold in the Digital Age?

CYBER SECURITY

of Revenge Porn in 50 Rise India PS

xUSEFUL APPS KNR Constructions: Will Growth Accelerate?

T2 App: 54 Mumbai A Must for All Air

This Obsequious 66 End Protocol Now! – Is Blue Whale for Real?

Travellers from Mumbai

– HERE WeGo: Offline Maps & GPS

Market Manipulation: Antarctica

– Android Auto: A Great eat Tool When You Are on the Road

Market Trend: Managing the Mood

– Share Your Location through WhatsApp

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DEPARTMENTS Readers’ Response ........... 8 Book Review ....................62 Money Facts ....................64

06-10-2017 17:54:40

Black Money & Tax Havens Dr Subramaniam Swamy to release the book by Prof R Vaidyanathan

Date: Friday, 27 October 2017 | Time: 6pm to 8pm Just how much black money is there in India? Estimates vary from 10% to 20% of our GDP. Conservatively, Rs15 lakh crore (10% of Rs150 lakh crore, our GDP in 2016-17). And what would be the amount of Indian money in tax havens around the world? Around Rs65 lakh crore. Truly astounding figures! Come and hear Dr Swamy and Prof Vaidyanathan, two of the distinguished authorities on analysis of black money.

Register online at moneylife.in/event/179.html Venue: BSE International Convention Hall, 1st Floor, PJ Towers, Dalal Street, Fort, Mumbai – 400001 RSVP : Shilpa at 022-49205000 or email [email protected] or Call/SMS/ WhatsApp on +91-7045156415 (Please give your name, email ID & contact number)

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Volume 12, Issue 18 13 October–26 October 2017

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Sucheta Dalal

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MIDDLE-CLASS VOTES DO NOT COUNT This is with regard to “What Is the Opposite of Achche Din? Will the BJP Course-correct?” (Moneylife, 29 September-12 October 2017) by Sucheta Dalal. Politicians can go to any extent to retain power. Everything is fair in love, war and politics. To serve the country is no longer the motive of politicians. In politics, showing big dreams to the voters is called vote-bank politics. Nothing is done for the common man, especially the middle-class. Knowing pretty well that middleclass votes do not count for winning elections, all politicians play a game against the middle-class without any fear. Mahesh Kumar, by email

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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This is with regard to the Your Money news item “Driving licence, vehicle registration to require Aadhaar” (Moneylife, 29 September-12 October 2017). There is no second opinion that the UIDAI (Unique Identification Authority of India) evades various privacy policies that all citizens are entitled to, though the Supreme Court has decided that reasonable restrictions in public interest can be allowed on privacy matters. Such reasonability is always questionable. This kind of pr proof proo ooff is vvalid a id al only for criminal activities of serious nature like murder, etc. But, in no way, can it be for the filing of income-tax returns. Some good, sane thinking must prevail with persons who are behind Aadhaar, making it almost compulsory in every step of life. The most important fact is that Aadhaar details can be hacked very easily. With changed technology, Aadhaar card will never be a fool-proof enough to prevent its misuse. 

MONEYLIFE | 13–26 Oct 2017 | 8

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LETTERS

the

Best letter

Ourselves To Blame?

T

his is with regard to “4 Schemes, Same Fund House, Same Returns!” (Moneylife, 28 September-12 October 2017). The article only reminds us of the principle of KISS: “Keep it simple, stupid.” The KISS principle states that most systems work best if they are kept simple rather than made complicated; therefore, simplicity should be a key goal in all our daily activities (living, habits, investments, etc) and all unnecessary complexity should be avoided. KISS is also an acronym for: ‘Keep it simple, silly’, ‘keep it short and simple’, ‘keep it simple and straightforward’ and ‘keep it small and simple’. We have to avoid all extra clutter (also extra noise) in our daily lives. Investments are mainly on the principle of RISK & REWARD. But if we are more greedy than fearful, we have only ourselves to blame. Sunil Rebello, online comment

 In the larger interest of the country, it is better that the

use of Aadhaar card be abandoned. M Kumar, by email

EXCESSIVE MEDIA PESSIMISM? This is with regard to the article “What Is the Opposite of Achche Din? Will the BJP Course-correct?” (Moneylife, 29 September-12 October 2017) by Sucheta Dalal. The recent bout of negativity has emerged after the announcement of the GDP growth numbers and the realisation that the next quarter’s may be even worse on account of transition to GST (Goods and Service Tax). I would focus my reply only on the GST. International experience with GST is that prices go up initially for a couple of years and come down eventually as the economy begins to adjust. Some slowdown in the economy was expected, given that GST would hit the unorganised sector adversely. This was known beforehand. Since all political parties supported GST, it can be said that we, as a nation, have taken a call to go through the pain, for the purported long-term benefits that the new tax structure offers. It was also the collective wisdom of all that an imperfect GST is better than no GST. Disgruntlement of those who were able to evade taxes earlier but are finding it difficult to do so now is expected. Economists and politicians have talked for decades about ‘widening the tax base’ but the talk went nowhere beyond taxing the middle-class and the corporate sector. One should now appreciate that prime minister Narendra Modi has taken an unpopular step in the larger national interest.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Congratulations Sunil Rebello

YOU WIN A PERSONALISED CLOCK

Of course, this is not to say that everything Sunil Rebello has been executed to perfection. The timing was, probably, driven by political expediency—the earlier the better, giving more time for things to settle down. Complaints such as software glitches could have been avoided. But these are minor issues in the larger scheme of things and will get resolved eventually. If the government was not fully prepared, it is equally true that many businesses too did not prepare adequately and kept the matter pending till the last moment. Those who prepared in time have faced no major issues. While one can say with hindsight that there was a better way to execute, I think, excessive media pessimism is unwarranted. In any case, GDP growth rate is a very short-term focused, imperfect and overrated statistic whose limitations also should be kept in mind. Chandragupta Acharya, by email

TAKEN FOR GRANTED? This is with regard to “Data Theft in Organisations and Legal Issues” (Moneylife, 15-28 September 2017) by Prashant Mali. All apps now ask for complete access to your contacts. Is this a data protection violation? We are sharing a contact without approval from the owner of contact. Data protection and privacy are big themes which are taken for granted now. Vasudevan, online comment 

MONEYLIFE | 13–26 Oct 2017 | 10

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LETTERS

 ASSIGN CLEAR RESPONSIBILITIES!

This is with regard to “Who To Blame in a Lift Accident?” (Moneylife, 4-17 August 2017) by SD Israni. How did the lift door open when the lift was not at the third floor landing? Does this reflect poor maintenance or poor installation quality? Given that most building projects come in the form of towers, can the bye-laws include clear guidelines for preventing lift mishaps and assign clear responsibilities and culpability in this regard on the managing committee of the cooperative housing society? Kumar R, online comment

ROOT OF THE PROBLEM This is with regard to “Fortnightly Market View: Creeping Frustration” (Moneylife, 15-28 September 2017). The root of the problem is the finance ministry which has turned a prosperous economy into a stagnating one with constant problems for Indian businessmen. Unless this is fixed, nothing much will happen (‘fixed’ means change of finance minister). Suketu Shah, online comment

TERRIFIC READ! This is with regard to “The Fraud at Ricoh—Exclusive: PwC Forensic Report” (Moneylife, 29 September12 October 2017) by Debashis Basu and Shashank Manilawala. Terrific read! This feels like a crash-course in auditing. Aditya G, online comment

CRYING FOUL WHEN THE TIDE TURNS? This is yet another interesting exposé by Sucheta Dalal “HFCL Scrip Drama: Raises Intriguing Questions” (Moneylife, 29 September-12 October 2017). You would be surprised to know how many corporate deals are done over messaging apps and blogs/forums which seem to be far from reality. Yet, the ever hungry for

multi-bagger ‘retail investor’ buys the stories and cries foul when the tide turns. Kunal Singh, online comment

BEST OPTION FOR A DEFENSIVE INVESTOR? This is with regard to “Picking Winning Equity Schemes” (Moneylife, 18-31 August 2017) by Debashis Basu, Pratibha Kamat and Clinton Fernandes. With all due respect, I disagree with the authors that a superior equity mutual fund scheme can be selected. As John Bogle has repeatedly said, “Always remember the relentless rules of humble arithmetic.” It’s all about the cost. In constructing the model used in the article, only the total returns of the mutual fund schemes were considered, and not the NET RETURNS, which equals total returns minus expense ratio. So, a more complete picture of the mutual funds returns should take into account the expense ratio as well. I also believe that Matthew (19:30) was right when he said: “But many who are first will be last, and many who are last will be first.” These words may equally apply to mutual fund returns. All said and done, a periodic investment in a low-cost index fund is, and always will continue to remain, the best option for a non enterprising/defensive (in Graham’s definition) investor, for creating wealth. While I do understand that a large majority of people believe that they are superior to others and, therefore, can spot an investment strategy better than others, I would like to quote Kato on the matter: “There must certainly be a vast fund of stupidity in human nature, else men would not be caught as they are, a thousand times over, by the same snare; and while they yet remember their past misfortunes, go on to court and encourage the causes to which they were owing, and which will again produce them.” Eashan, online comment

HOW TO REACH US Letters: Letters to the Editor can be emailed to editor@moneylife. in or can be posted to: The Editor, Moneylife Magazine, Unit No. 316, 3rd Floor, Hind Service Industries, Off Veer Savarkar Marg, Dadar(W),

Mumbai 400 028 or faxed to 02249205022. Letters must include the writer’s full name, address and telephone number and may be edited. Subscription Service: For new subscription requests,

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400 028 or call 022-49205000 or fax to 022-49205022. Advertising: For information and rates, email us at [email protected] or call 91-022-49205000.

11 | 13–26 Oct 2017 | MONEYLIFE

Letters.indd 5

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Public Interest been done by developed nations such as Canada, Singapore, New Zealand, Australia and others. The minister also discussed how financial products such as reverse mortgage could be encouraged among this set into retirement homes/townships of residents to give them access to which are a booming new sector cash if they begin to run out of that meets the changing savings. requirements ts of society. Mr Puri readily agreed The regulations ulations re to have his offi should include ude prescribing of cials consider how best to ensure the minimum standards tandards of en orderly development of such infrastructure, ure, service, develop townships for contracts and nd protection fo the benefit of all stakeholders and (in the form m of stak supervision,, enhance confidence in this sector. swift grievance nce Simultaneously, redress and Simul at the empowerment ent th initiative of Praveen Singh of residents)) Pr Pardeshi, in line with Par Hardeep Singh Puri, minister of state for additional chief what has ad  housing and urban

Regulation of Retirement Homes under Consideration

H

ardeep Singh Puri, minister of state for housing and urban development, has agreed to examine Moneylife Foundation’s study on retirement homes with a view to formulating appropriate regulations and guidelines to protect middle-class and affluent elders who move to such homes in the expectation of hassle-free silver years. I met Mr Puri and presented a copy of the study to him on 29th September at New Delhi and briefed him on the key findings as well as the need for formal regulations and disclosure norms to protect those who chose to move

development

Jan Dhan Accounts: Who Do They Serve?

I

f one goes by the numbers displayed on the Pradhan Mantri Jan-Dhan Yojana (PMJY) website, the financial inclusion scheme remains a huge success. At the end of September 2017, it reported 302.6 million beneficiaries with bank balance of Rs66,606 crore. These were being serviced by a vast army of 126,000 bank mitras, delivering branch-less banking. However, a closer look raises many questions about this three-year-old initiative launched with great fanfare. Of these, we know from reports that nearly 10 million accounts have no transactions. For starters, we do know that Jan-Dhan accounts were targeted to launder black money by using account-holders as money mules to deposit large chunks of tax-evaded cash. A response to a question in Parliament indicates that deposits in

Jan-Dhan accounts, which stood at Rs45,636 crore on 9 November 2016, had jumped to Rs71,036 crore on 28 December 2016. We have also seen innumerable media reports since then that the income-tax department has frozen all suspicious accounts with large deposits in these accounts. And, yet, a massive Rs4,430 crore has been withdrawn from these accounts. The steady increase in balances in these accounts (in the past) suggests that these are not normal withdrawals. Did they then escape the taxman’s eagle eye? There are issues with opening of the new Jan-Dhan accounts too. No bank is willing to open these accounts anymore, not even private banks which have been extremely eager to please the government. We already know that nationalised banks have incurred a high cost for maintaining Jan-Dhan accounts. To

a question in the Parliament, State Bank of India (SBI) had claimed that its cost for maintaining such accounts is Rs774.86 crore. However, The Times of India (TOI) has exposed another dimension to these accounts. In a report, it says that banks are taking advantage of the ‘vague wording’ of Reserve Bank of India (RBI) guidelines for basic savings bank deposit accounts, to impose restrictions on transactions or find ways to demand a minimum balance or levy charges if the four free transactions norm is exceeded. Free transactions include ATM deposits and withdrawals, online and point of sale transactions as well as standing instructions. The TOI report names top private banks for finding ways to charge Jan-Dhan customers for more than four transactions. SBI freezes the account after the monthly four-transaction limit is reached. 

MONEYLIFE | 13-26 Oct 2017 | 12

Public Interest.indd 2

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Public Interest  secretary to the chief minister (CM)

of Maharashtra, a working group is being set up to examine what needs to be done to encourage the growth of retirement homes, which cater to a growing market segment, and to put in place regulations that will protect their residents. The working group, which will include all stakeholders, is being led by Dinesh Waghmare, secretary, department of social justice & special assistance and includes BN Makhija (ex-secretary, GoI), Priya Khan (OSD, CM’s office) and representatives from ministry of urban development and department of social justice & special assistance. Moneylife Foundation is also a part of the group. Maharashtra wants to prescribe standards, ensure grievance redress, while avoiding needless

 The Bank recently agreed to allow economically weak customers as well as students and pensioners to convert their regular accounts into basic accounts with stringent restrictions, after a furore over its decision to impose huge costs for failing to meet minimum balance requirements. Charging Jan-Dhan accountholders for more than four transactions is a relatively new development. It has happened mainly due to RBI’s studious silence with regard to exploitation of bank customers and generated anger and confusion about bank charges. Interestingly, while banks insist on capping transactions on the claim of high costs, our sources tell us that banking correspondents (BCs), who earn a commission per transaction, have been encouraging needless deposits and withdrawals of the same sum of money to bump up their

red-tape and inspector raj, as also to ensure an independent rating of retirement homes to guide investors. The key findings of Moneylife Foundation’s study were as follows. Retirement homes are a new market segment with huge potential because a growing number of affluent middle-class Indians are looking to spend their retirement in a secure environment, with like-minded people of similar interests and without the burden of running a home. However, the sector needs effective regulation to ensure security and grievance redress. The need for regulation was underlined by a court case in the Tamil Nadu High Court that highlighted the travails of the senior citizens living in a retirement home in Coimbatore. The study recommends that

retirement homes must come under Central regulation, although housing is a state subject. The government must put in place regulations to ensure that every retirement home, and its management agency, is required to file details of its agreements, amenities, terms and conditions of service, licences, sanctions, and permissions; these should also be uploaded on a statutory searchable website. The promoter/developer of a retirement home must sign an agreement with the residents to ensure that services, like nutritious meals, 24x7 security, well-equipped medical centre, comprehensive insurance, record maintenance, employee screening and policy for transfer of the asset, are provided by them. — Sucheta Dalal 

commissions. This information comes from a source who has worked with the biometric identification and enrolment agencies. Despite efforts, we were unable to verify whether this is happening routinely, or even in pockets, or get information about the action taken by banks in

stipulation of a minimum threshold limit, to encourage them for business development.” More importantly, banks have been allowed to pay commissions to BCs in order sell ‘new products’ launched by them. Although BCs are not allowed to collect the commission directly from customers, the guidelines are clear that since the “delivery of services and products are at the convenience of customers, we may recover the incentives and commission from the customers such commissions/ incentives.” BCs are also paid commissions for new products launched by banks for these rural folks who are the target of financial inclusion. In an environment where educated urban consumers have been subject to the most brazen mis-selling of financial products and services, it is anybody’s guess what is being sold to this vulnerable segment. — SD 

such cases, or the turnover of BCs employed by banks. The Indian Banks Association has prescribed a minimum compensation of Rs5,000 per month, but the guidelines for engaging BCs say that BCs may be “incentivized on business volume/ transaction/milestone basis, with

MONEYLIFE | 13-26 Oct 2017 | 14

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05-10-2017 15:41:35

Your Money CONSUMER INTEREST

NCDRC Asks Unitech To Refund Rs41 Lakh to Home-buyer

A

ccording to a complaint to NCDRC (National Consumer

Disputes Redressal Commission), in 2006, DK Mathur had paid over Rs41 lakh and booked an apartment in

Unitech Horizon, a residential project in Alistonia Estate at Greater Noida (Uttar Pradesh). Mr Mathur was promised delivery of of the apartment by the end of 2008, but he failed to get it. The company said it was not in a position to hand over the property as the delay in completing the construction was beyond its control. NCDRC has asked the company to refund Rs41,15,320, to Mr Mathur

VEHICLE INSURANCE

TATA AIG General Insurance Directed To Pay Car Theft Insurance Claim of Rs5.22 Lakh

A

complaint was submitted before the Central Mumbai District Consumer Disputes Redressal Forum in 2015 by the owner of a car, M/s Banswara Syntex Limited, against TATA AIG General Insurance Co Ltd. The complaint said that, on 7 May 2012, the car was parked in the parking slot of the company’s director. The driver of the car slept in the vehicle for the night. The following morning, after the driver returned from the washroom, he found that the car was not in the parking spot. A complaint was lodged with the police and on 9 May 2012, the RTO (Road Transport Office) was informed. The insurance company was intimated and the claim submitted. However, the insurance company repudiated the claim through a letter dated 25 March 2013 on the grounds that proper care was not taken, and the vehicle was left unattended without locking it. It said that this was a breach of the policy conditions. The complainant said that the claim was repudiated on the basis of the insurance company investigator’s report. The advocate pointed out that the report said, “It was found that the location is well secured and guarded by a fleet of security persons.” The Forum ruled against the insurance company and ordered the insurance company to pay Rs5.22 lakh, along with a compensation of Rs40,000, to the owner of the Skoda car stolen from a heavily secured and guarded Mumbai building in 2012.

saying “the allottee cannot be expected to wait for possession of the apartment for an indefinite period.” It noted that the firm was not in a position to hand over the possession of the apartment. NCDRC awarded Rs10,000 as litigation cost to Mr Mathur and said that the firm had failed to hand over the possession even after eight years of promised delivery date. “The opposite party (firm) is not in a position to offer possession of the apartment. The company shall refund the amount with simple interest at 10% per annum without any further liability. In the absence of any explanation for failure to comply with the stipulation of delivery of possession, we have no hesitation in concluding that Unitech has committed deficiency in service and has indulged in unfair trade practice,” the Commission said.

MUTUAL FUNDS

DSP BlackRock Launches Equal-Weight Nifty50 Scheme

D

SP BlackRock Investment Managers Pvt Ltd, one of India’s premier asset management companies, launched its first passive fund, ‘DSP BlackRock Equal Nifty 50 Fund’. This index fund is different from other index funds as it assigns equal weight to each stock and invests equally in them. In this scheme, each company will be apportioned 2% of the portfolio, given that there are 50 companies in the Nifty 50 index. The scheme also gets rebalanced on a quarterly basis and has a built-in profit-booking mechanism, in effect buying the underperformers at ‘low’ and selling the outperformers at ‘high’. The minimum investment for this scheme is Rs1,000 and in multiples of Rs500 thereafter. There is no entry- or exit-load in the scheme.

15 | 13-26 Oct 2017 | MONEYLIFE

Your Money.indd 2

05-10-2017 17:40:24

Your Money REAL ESTATE

LOANS

Roadside Parking in Specific Residential Areas in Delhi Will Be Paid Parking

R

oadside parking in residential colonies in Delhi will be allowed in demarcated areas and a fee charged, according to new rules that are set to be notified very soon. The lieutenant governor of Delhi, Anil Baijal, reviewed the Delhi Maintenance and Management of Parking Rules, 2017, prepared by the transport department. According to the new rules, which give teeth to the draft parking policy prepared by the department, parking rates will be fixed by a ‘base parking fee committee’ headed by the transport commissioner. The rules propose that on-street parking for the first hour be priced at least twice as much as off-street parking. The parking fee will increase exponentially

every hour to discourage long duration of on-street parking and will be thrice that of off-street parking. No surface parking will ordinarily be allowed within 500 metres of a multi-level stack parking. The civic agencies will identify roads and spaces for granting permission for overnight parking of transport vehicles. The parking of commercial vehicles would be permitted only on notified roads only during night hours, on payment. In case of illegal parking on roads wider than 60 feet, the traffic police shall be the primary agency for towing away the vehicle. In case of other roads and spaces, the civic agencies shall be responsible to tow away the vehicle and impose penalties.

Real Estate Developer AN Buildwell’s Director Arrested

S

urendra Kumar Hooda, the 75-yearold promoter and director of AN Buildwell, was arrested by the economic offence wing (EoW) of Delhi Police on charges of cheating and criminal breach of trust after homebuyers who booked flats in the realtor’s Spire Woods project in Haryana filed a complaint against him. The project stalled after the developer abandoned it three years ago, and the realty firm is under liquidation. Mr Hooda was arrested on 20th September and has been hospitalised since. The Saket court rejected Mr Hooda’s bail application and sent him to judicial custody. More

than 1,700 buyers have invested in two projects of AN Buildwell—Spire Edge in Manesar, a commercial project, and Spire Woods in Sector 103, a housing project. Mired in controversy since the launch of the two projects, all directors of AN Buildwell resigned and construction work at their sites has been at a standstill for three years. The company went into liquidation in 2016. Rejecting the bail application of the realtor, the court observed that since the accused collected funds from the public in violation of the conditions of the licence granted to his company, “the court is of opinion that he is not entitled to be accorded the benefit

Piramal Finance Enters into Housing Finance Segment

P

iramal Finance announced entry into retail housing finance business through its wholly-owned subsidiary, Piramal Housing Finance. The housing finance company will offer home loans as well as loans against property and construction finance for small developers. “Given the size, scale and market relevance of the wholesale lending business, it was a natural progression to assess opportunities within the retail lending space,” Piramal Finance and Piramal Housing Finance managing director, Khushru Jijina, said. The company will initially focus on a product roll-out across all major metro cities and, thereafter, seek to establish a pan-India presence, including tier-2 and tier-3 towns and cities. BANKING

SBI Waives Account Closing Fees

S

tate Bank of India (SBI) has waived account closing charges for all savings bank customers, provided the account has been in existence for over a year. The move is the second in the round of relaxations by the Bank following protests against the penalty for not maintaining a minimum balance. Until now, the Bank was deducting Rs500 with service-tax as account closing charges on all accounts except those closed during the 14-day free-look period. The waiver will come into effect from October 2017. Customers are allowed to switch from regular savings bank accounts to a basic savings bank account (BSBA). The BSBA is similar to a regular account but it does not have a chequebook facility. A BSBA also cannot have total credits of more than Rs1 lakh or minimum balance of over Rs50,000.

MONEYLIFE | 13-26 Oct 2017 | 16

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05-10-2017 15:39:32

BANKING

Government Has Decided To Audit Aadhaar Enrolment Centres

F

acing questions over the privacy and security of the Aadhaar systems in the Supreme Court (SC), the government has decided to conduct an independent audit of all 50,000odd Aadhaar enrolment centres and inspect them. Three independent auditors will assess if enrolment centres are adhering to UIDAI’s processes and guidelines, if the hardware and software deployed at the enrolment centres are as per UIDAI’s

specifications and check whether the enrolment centre is involved in any corrupt practice and people are being

MONEYLIFE QUIZ

overcharged for Aadhaar services. Photographs of all staff at the enrolment centre and equipment will be taken and a 5-10 minute video would be shot of the ongoing enrolment and update process at the centre. The three auditors would be allotted 10,000 centres in the first year for the job. The auditors will assess if supervisors and verifiers are present at each enrolment centre to help and guide residents, if the original documents of the resident are scanned and reviewed as per UIDAI’s guidelines without retaining their hard copies, whether the behaviour with the resident is courteous and whether the centre is covered by CCTVs.

Moneylife Quiz no

269

Another quiz to tease your brain. The answers are in this very issue. The winner will be chosen by a lucky draw from correct entries and answers published in the issue dated 23 November 2017. Send in your answers to [email protected] with the Quiz no., name, address & telephone number before 1 November 2017. 1. During the global stock market crash of 2011, which of the following countries did not have a rising debt problem? a. Germany b. Spain c. Italy d. Greece

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Answer Correctly! Win a personalised sed clock with an investment nt quote!

Rajendra Kumar Phophalia

5. What is the name of the director of AN Buildwell who was arrested by the economic offences wing of the Delhi Police? a. Mohinder Singh b. Surendra Kumar Hooda c. Mohinder Hooda d. Kumarrao Mohite

2. When, in the past 10 years, were stock market highs similar those in September 2017? 6. Who is the current chairman of the Indian Railway Board? a. September 2008 b. December 2008 a. Piyush Goyal b. Suresh Prabhu c. October 2010 d. December 2011 c. Laloo Prasad Yadav d. Ashwini Lohani 3. Among equity diversified mutual fund schemes, what was the largest decline in one-year returns for 30 September 2011? a. 18% b. 25% c. 39.3% d. 40.2%

7. How much is the minimum monthly compensation recommended for banking correspondents by the Indian Banks Association? a. Rs5,000 b. Rs10,000 c. Rs15,000 d. Rs20,000

4. What was the business activity of Shemaroo Entertainment 8. When did the Benami Transactions (Prohibition) Amended in 1962? Act come into force? a. Cinema hall b. Circulating library for books a. June 1975 b. January 1988 c. Photography laboratory d. Film production c. December 2008 d. November 2016 In all, 18 readers got all the answers right last time. The winner of Quiz-267 is Rajendra Kumar Phophalia from Jodhpur. Congrats! You win a personalised clock with an investment quote!

The answers to Moneylife Quiz-267 are: • 1-a. 37% • 2-a. Capital Growth • 3-a. Dr YV Reddy • 4-b. Shadow Brokers • 5-c. 31.26% • 6-b. 60 • 7-b. 1898 • 8-d. 220 countries

17 | 13-26 Oct 2017 | MONEYLIFE

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06-10-2017 12:48:06

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CROSSHAIRs

Exclusive news, the stories behind the headlines and the truth between the lines by Sucheta Dalal

Will Venal Indian Regulators Save Vijay Mallya From Extradition?

T

he flamboyant Vijay Mallya is in the news again, after the third arrest in his lifetime and a quick bail. The only time he spent a night in custody, way back in 1985, was in connection with the acquisition of a stake in Shaw Wallace through some dubious deals overseas. That was at the height of the draconian Foreign Exchange Regulation Act (FERA), so badly misused by government ministers and bureaucrats to victimise, torture and extort from business and industry, that it had to be defanged as part of India’s economic liberalisation. That Indians are notorious for the vast wealth transferred to Swiss Banks is testimony to our extraordinary corruption levels. In 2005, Mr Mallya became the official owner of Shaw Wallace and merged it with United Spirits. Let us look at how Indian investigation agencies are likely to fare in the UK court when Vijay Mallya’s extradition trial begins next month. Their success depends on presenting an ironclad case with all the evidence they can gather. Will that happen? For many decades now, industrialists in the dock have routinely influenced investigation agencies to present weak cases that cannot back up their charges. This time around, there is enormous pressure on the government to walk the talk on recovering black money and loans from defaulting industrialists. Mr Mallya’s case covers both categories. He was re-arrested on 3rd October, after the enforcement directorate (ED) followed up the Central Bureau of Investigation’s (CBI) attempt to seek his extradition. It has filed a 5,000-page charge-sheet alleging that Mr Mallya had diverted over Rs3,000 crore lent by a consortium of 17 banks through 13 ‘multi-layered’ shell companies by creating fictitious invoices and inflated bills. These funds were allegedly transferred to several countries. Mr Mallya has called the charges wild and baseless. Meanwhile, it is important to remember that he has been formally charged only for

defaulting on a Rs900-crore loan from IDBI Bank. Since he has been declared a proclaimed offender, investigation agencies have reportedly confiscated his unpledged shares worth around Rs4,000 crore and had them transferred to the Central government. Are the latest charges enough to get an extradition? Mr Mallya is a skilled litigator and the record of Indian enforcement agencies is fairly pathetic; their charge-sheets are notorious for exaggeration and falsehoods that fall apart in court. Even today, with the country’s prestige at stake, there is no attempt to gather all possible evidence against Mr Mallya. Here is a case study on the selective approach of the Securities and Exchange Board of India (SEBI)) and its complete lack off accountability to people or Parliament. On 2 February 2017, Arvind Sawant, awant, member of Parliament (MP) from om Mumbai (south), belonging to o the Shiv Sena, wrote a letter to o the prime minister captioned Deliberate eliberate and mischievous delays elays y byy SEBI ((Mr UK Sinha)) in p probingg Vijay j y Mallya y for ‘round ound tripping’ pp g despite p specific p information/ formation/ inputs p received from om Financial Conduct Authority uthority y of the UK (emphasis his).The s).The letter exposes how two wo former SEBI chairmen have ave failed to act on explosive information formation received from the Financial nancial Conduct Authority (FCA, FCA, UK) in 2008-09. And, nd, they seemed disinclined sinclined to investigate vestigate even when hen there is nationwide ationwide outrage utrage 

MONEYLIFE | 13-26 27 November Oct 2017 2014 | 20| 14

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 over Mr Mallya’s defaults and escape to London.

If these employees were laundering funds for Indian industrialists, why has the information not been handed Mr Sawant writes that Mr Mallya diverted funds over the SIT on black money? borrowed from banks to illegal foreign bank accounts Let us look at the basis of Mr Sawant’s allegations and particularly to the London wealth management against SEBI and its then chairman UK Sinha. In desk of Union Bank of Switzerland (UBS). He says that August 2013, The Economic Times published an article SEBI has received specific inputs about this from the which said that the FCA had provided inputs to SEBI FCA in 2009 in the form of an email dump of internal on a number of promoters in the “liquor, mining, real correspondence of UBS. This included information estate, media and entertainment and infrastructure.” about Mr Mallya’s stock market transactions and a Soon after this, in October 2013, one Ramsagar Yadav list of six bank accounts of Mr Mallya in UBS. These filed an application under the Right to Information are: 364567 Highland Trading, 369939FG-Personal (RTI) Act seeking information on how corporate Account, Birchwood Hills (389458) Plc.; Suncoast houses other than the Anil Ambani group about which Valley (389459) plc; Bayside Inn (389460) plc; Venture the FCA had provided inputs and the action taken with New Holding (138154). regard to them. The letter goes on to say that Vijay Mallya made On 25 November 2013, SEBI responded saying, a profit of $5.4 million from the purchase of 633,330 “Information received from FCA is in confidence and sale of 408,333 shares on 24 May 2007. The from foreign government/regulatory agency. Further, FCA email had apparently provided the high, low the information is held by SEBI in its fiduciary and closing price of certain shares on a specific day relationship.” Dr Anil Kumar Sharma, who signed the which, on cross-checking, turned out to be those of SEBI letter, claimed that such information was exempt United Spirits, a UB group company. This information from disclosure under the RTI pertained to 2006-08 and was Act. But this response clearly received by SEBI in 2009 when indicates that SEBI had, indeed, CB Bhave was the chairman. Arvind Sawant, MP alleges received information from the One may recall that Mr Bhave that SEBI received specific FCA. When nothing further had followed up the FCA inputs happened, Indian Council of with regard to UBS and the Anil inputs about Mallya Investors filed a public interest Ambani group. The matter was from the FCA in 2009, litigation (PIL No 16 of 2014) mysteriously settled through a when CB Bhave was the in the Bombay High Court to sketchy consent order after the direct the regulator to investigate group paid up Rs50 crore and chairman, in the form of the FCA inputs on UBS. senior officials, including Anil an email dump of internal SEBI’s official response, in Ambani, were barred from the correspondence of UBS an affidavit to the court, was market for a year as part of the surprising. It flatly denied having deal. pertaining to 2006-08 received information other than We learn that while the FCA that on the Anil Ambani group provided extensive information from the FCA. It also said that newspaper articles there were details with about the Anil Ambani group, the “cannot be the basis for levelling allegations” against regard to six other industrialists, which have not SEBI. However, the PIL was withdrawn on 5 February alleges that SEBI even been investigated. Mr Sawant alle 2015 after SEBI flipped its position and submitted that misled the Bombay High Court aand the SIT (special investigation into the issue had commenced. Did it black money and investigation team) investigating b really happen? Nobody knows, since SEBI is back to asks for stringent action against tthose responsible for stonewalling queries. Who was SEBI protecting, under burying the issue. two different chairmen, and why? We have specific FCA had imposed a Remember, in August 2009, F information about internal notes of those who have £8-million penalty on UBS UB and also penalised studied the FCA information. four of its officials of whom three were SEBI is an independent regulator with enormous Indians. The ffour were: Andrew powers; can it get away by not sharing information Cumming, Jaspreet Johnson Cu received by it from international regulators under Ahuja, Sa Sachin Karpe and global treaties? What needs to be done to ensure Karan. The last three Laila Ka that SEBI joins the PM’s effort to bring back black orders were passed in 2012 money? If the government cannot ensure action and based on disclosures of investigation by its regulators, then its talk about loan an eelaborate scheme recovery and the war on black money will continue to run by the employees be mere rhetoric to fool the people.  to launder money. 21 | 13-26 Oct 2017 | MONEYLIFE

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06-10-2017 16:32:23

DIFFERENT STROKES SUCHETA DALAL

Going Easy on Loan Defaulters: What Is behind the SEBI Move?

B

Remember, while SEBI was all set to force corporates arely a month ago, Deepak Parekh, chairman of Housing Development Finance Corporation (HDFC) to disclose information about defaults, RBI has refused to was all praise for the speed with which Ajay Tyagi, name defaulters, despite a Supreme Court order. Consider chairman of the Securities and Exchange Board of India how the SEBI circular would have affected banks. Bankers (SEBI), had accepted his suggestion to get listed companies do not report defaults for at least three months and they to mandatorily report to stock exchanges every default are used to ever-greening accounts and delaying—as in payment to banks or financial institutions. Mr Parekh long as possible—the classification of loan defaults as had told us that this move would give investors timely non-performing assets (NPAs). By forcing companies to information, since there is a huge lag today before they get report payment defaults immediately, banks would no to know about financial difficulties of listed companies. longer have the power to make a variety of adjustments, On 4th August, SEBI issued a including offering fresh loans (or circular making it mandatory for other forms of finance, including companies to report any lapse on loans to group entities) to hide the payment of interest or principal to NPAs in their own books. their lenders. This was to become Public sector banks (PSBs) applicable from 1st October. The were already reeling under the reporting requirement would cover pressure of bad loans when the default in payment of interest on national democratic alliance (NDA) came to power. The loans from banks and financial institutions, interest/instalment Congress—led United Progressive obligations on debt securities Alliance (UPA) had ignored the (including commercial paper), bad loans issue and routinely external commercial borrowings over a possible panic by That SEBI was forced to defer papered (ECBs), medium term notes doling out thousands of crores an investor-friendly action to of rupees to recapitalise PSBs. (MTNs) and foreign currency allow banks and companies convertible bonds (FCCBs). SEBI NDA was expected to force to hide corporate defaults them to clean up their books said the move would fill a ‘critical gap’ in the information available and stop their corrupt lending reflects adversely on this to investors. government, which was voted practices. But prime minister Then, on Friday, 29th September, (PM) Narendra Modi began his in with such hope a press release sent after 11pm from innings by launching the Pradhan an iPhone scuttled the move with Mantri Jan-Dhan Yojana in one line: “It has been decided to defer implementation of August 2014. His stiff targets forced banks to divert SEBI circular no. CIR/CFD/CMD/93/2017 dated August 4, almost all their energy into opening these accounts. Since 2017 until further notice.” The SEBI chairman was in New many nationalised banks were also kept headless for a long Delhi for the weekend and, perhaps, the action was dictated time, there was nobody to ensure that core functions did by instructions received there. It is not clear whether the not take a hit. Barely had the pressure about Jan-Dhan objections of the Reserve Bank of India (RBI) have forced ended, when the PM announced demonetisation of Rs500 SEBI to withdraw its circular; but the market regulator’s and Rs1,000 notes on 8 November 2016, once again silence reflects a panic about the state of bank finances plunging banks and the entire country into chaos for the and the government’s struggle to deal with bad loans. The next few months. SEBI circular was aimed at protecting retail investors and Bad loans have now reached a crisis point, with stressed mutual funds (which pool retail investment) by providing assets of the entire banking industry estimated at nearly immediate information about payment difficulties of 10% of all outstanding loans. The government passed listed companies. the Insolvency and Bankruptcy Code (IBC) to help banks 

MONEYLIFE | 13-26 Oct 2017 | 22

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DIFFERENT STROKES SUCHETA DALAL

 with faster loan recovery from wilful defaulters. But, as

Goods and Services Tax (GST) with multiple tax slabs, with all grandiose schemes disconnected with ground onerous reporting requirements, frequent changes in rates reality, there were two major problems. The first case of and an online filing system that was not robust enough. successful resolution under IBC, involving Synergies Dooray While a simple GST would be beneficial in the long run, Automotive Ltd, has led to a complaint by Edelweiss especially if we are able to move towards a single rate, at Asset Reconstruction before the National Company Law the moment, GST has caused a huge disruption, especially Appellate Tribunal (NCLAT) calling it a fraud and a among exporters and traders. sham. Lenders took a 95% haircut in this case and there In this scenario, the instant reporting of defaults would are grounds to suspect that an associate company of the force banks and rating agencies to take immediate action promoter group has contrived to wangle control. such as classifying loans as a default (with commensurate The decision has had a huge hidden impact. Only in provisioning for bad loans) and downgrading of credit July this year, industrialists believed that the PM’s office rating. All this would have had a big impact on loss-making was directly monitoring the 12 cases marked for insolvency nationalised banks, which are seeking a fat government action, where the outstanding debt is over Rs5,000 crore bailout (or recapitalisation) at public expense. With the bull and 60% of it is classified as non-performing. A steel run of the Indian capital market having paused, in response industry magnate told me that bankers were asked to to bleak economic numbers, a spate of rating downgrades ensure that at least six of these companies had a change would have only precipitated a further decline in share in management. After Essar prices. A desperate government Steel’s audacious, but failed, legal appears to have pressured SEBI challenge to the recovery process, to drop the investor-friendly the Synergy Dooray case and lower move and allow the obfuscation GDP numbers, the mood has by lenders and borrowers to changed completely. Three months continue. later, the same source says that While institutional investors every defaulter company will sail with large research teams have through the National Company ways to ferret out information Law Tribunal proceedings with about corporate health, this move lenders taking a haircut and leaves retail investors at the mercy promoters retaining control either of sketchy disclosures made to directly or indirectly. Prashant stock exchanges. That SEBI After the Synergy Dooray case was forced to defer an investorRuia of Essar Steel has already and lower GDP numbers, the friendly action to allow banks gone public about his confidence mood has changed. Prashant and companies to hide corporate that the family will remain firmly Ruia of Essar Steel has in the saddle. defaults reflects adversely on this This has cast a shadow already gone public about his government which was voted in over the entire IBC process and confidence that the family will with such hope and expectation. raises concern about yet another What is worse, every problem remain firmly in the saddle mechanism to recover bad loans faced by the economy today is that may be doomed to fail. Was self-inflicted. With low oil prices the IBC legislation pushed through in a hurry without and a good monsoon after two years of drought, and taking the time to eliminate possible loopholes? There enormous goodwill and support from the public, the seems some merit to this disconcerting view, but it fits government ought to have pushed for high economic in perfectly with this government’s quick-fix approach. growth, job creation and kick-starting investment supported A bankruptcy legislation has a significant weightage in by a clean and efficient administration. Instead, with less the World Bank’s Ease of Doing Business, which is due than two years for the next general elections and negative for a revision in October. Government mandarins rushed outbursts from its own party stalwarts, the government is through the IBC legislation hoping for a 20-point jump in defensive mode and angrily attacking those who raise in India’s rank, from 130 last year. valid questions.  India’s GDP growth, which was 9.2% in the third quarter of 2016, has steadily dropped to 5.7% in the April- Sucheta Dalal is the managing editor of Moneylife. She was June quarter of 2017. While companies were struggling awarded the Padma Shri in 2006 for her outstanding contribution to cope, the government went ahead with a complicated to journalism. She can be reached at [email protected]

23 | 13-26 Oct 2017 | MONEYLIFE

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MUTUAL FUNDS POINTERS

Mutual Funds May Cushion a Falling Market

T

he current market highs are similar to those witnessed levels, given that growth has been so slow. Mutual fund investors should avoid committing any in October 2010. Here are the similarities in the markets then and now. large lump-sum investments in equity schemes at the moment and probably look at liquid funds or arbitrage schemes for the short term until the markets become Nifty50 reasonably priced. Ratios October 2010 September 2017 P/E

25.72

25.9

P/B

3.89

3.47

Dividend Yield

1.03%

0.94%

Rise in Previous 9 Months

33.7%

24%

The only difference between then and now is the extraaggressive rally of the index in the past which jumped 33% in a brief nine-month window before falling 20% in the subsequent year. The table alongside shows point-to-point one-year returns of equity diversified mutual fund (MF) schemes for the period ending 30 September 2011. The schemes declined 18% on average, with some falling as much as 39%. The global stock market crash of 2011 was mainly due to rising debt problems in Europe especially Greece, Italy and Spain. Additionally, America’s credit rating downgrade was also another reason. From a fundamental viewpoint, revenues were on uptrend and the market fall was mainly a cause of bearish market sentiment. Since there is always a ‘reason’ to trigger a fall, especially when the market is expensive, do we have any such reason at the moment that could trigger another fall like the one in 2011? Could the US-North Korea face-off be the trigger for the correction in the markets? Or the realisation, that the economy is stalled, thanks to the twin impact of demonetisation and shoddy implementation of the Goods & Services Tax. Even otherwise, the markets are definitely expensive at these

Equity Diversified Mutual Fund Schemes Scheme Name

1-Year returns %

JM Basic

-39.3

HSBC Midcap Equity

-37.2

HSBC Infrastructure Equity

-35.0

JM Multi Strategy

-31.7

Baroda Pioneer Large Cap

-29.1

Escorts Growth

-27.8

Principal Emerging Bluechip

-27.2

Escorts Leading Sectors

-26.9

DSP BlackRock India Tiger

-26.6

Taurus Discovery

-25.9

Investors who have SIPs in equity schemes will hope that the fund managers have a large amount of investments in cash and cash equivalents, to cushion any drastic fall. This wasn’t the case during the four-months prior to the 2011 crash where the amount of cash available with equity mutual funds was much lower than it is today. The increasing allocation to cash and cash equivalents signifies that managers of equity schemes are better prepared for any upcoming corrections, than in the past. Monthly inflows into equity schemes through SIPs will add further liquidity to the schemes and probably open up valuable buying opportunities if the markets fall further. 

Cash & Cash Equivalents in Equity Diversified Mutual Fund Schemes Rs Crore

2010

7,400

23,000

7,000

21,000

6,600

19,000

17,000

6,200 Jul-10

2017

Rs Crore

Aug-10

Sep-10

Oct-10

May-17

Jun-17

Jul-17

Aug-17

MONEYLIFE | 13-26 Oct 2017 | 24

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MUTUAL FUNDS FUND FACTS

Best & Worst Mutual Fund Schemes The best# three and the worst three schemes over the past three years ranked by their quarterly rolling returns. Premium members get access to a more refined list of top schemes by logging in to Moneylife Advisory - advisor.moneylife.in Equity Schemes (Quarterly Rolling Returns) Large Cap (Category Avg: 3.36%, Sensex: 1.82%)

Launch Date

L&T India Value

Corpus (Rs Crore)*

Avg. Quarterly Rolling Returns

1-Year

3-Years**

Exp Ratio

08-Jan-10

5256.30

5.15%

24.70%

20.62% 2.02%

Tata Equity P/E

29-Jun-04

1628.55

4.90%

29.55%

19.61% 2.29%

Aditya Birla Sun Life Pure Value

27-Mar-08

1617.51

4.76%

26.56%

19.06% 2.44%

ICICI Prudential Select Large Cap

28-May-09

698.51

2.47%

7.83%

9.86% 2.67%

UTI Dividend Yield

03-May-05

2720.09

2.46%

15.78%

9.84% 2.11%

HDFC Large Cap

18-Feb-94

1273.92

1.96%

13.17%

7.86% 2.20%

Multi-cap (Category Avg: 3.47%, BSE 200: 2.71%) Motilal Oswal MOSt Focused Multicap 35

28-Apr-14

8677.83

6.41%

26.33%

25.63% 2.09%

Aditya Birla Sun Life Advantage

24-Feb-95

4258.08

4.95%

20.64%

19.78% 2.30%

SBI Magnum Multi Cap

29-Sep-05

2954.72

4.72%

20.35%

18.87% 2.06%

Union Equity

10-Jun-11

199.17

1.83%

11.42%

7.30% 3.10%

UTI Wealth Builder

17-Dec-08

952.55

1.61%

8.83%

6.42% 2.57%

LIC MF Equity

15-Apr-93

338.02

1.43%

5.90%

5.71% 2.82%

Mid-and Small-cap (Category Avg: 5.16%, Nifty Midcap 100: 7.23%) SBI Small & Midcap

09-Sep-09

727.34

7.70%

36.61%

30.79% 2.37%

DSP BlackRock Micro Cap

14-Jun-07

5791.12

6.59%

17.91%

26.35% 2.41%

Mirae Asset Emerging Bluechip

09-Jul-10

4304.67

6.53%

27.05%

26.12% 2.41%

Axis Midcap

18-Feb-11

1231.42

3.54%

15.47%

14.17% 2.20%

DHFL Pramerica Midcap Opportunities

02-Dec-13

140.97

3.48%

10.91%

13.92% 2.63%

Union Small and Midcap

10-Jun-14

239.74

3.17%

15.53%

12.68% 3.08%

Debt Schemes Income (Category Avg: 2.32%, Crisil Composite Bond: 2.55%) ICICI Prudential Long Term Plan

20-Jan-10

3134.43

2.88%

9.65%

11.53% 1.26%

DHFL Pramerica Dynamic Bond

12-Jan-12

185.69

2.66%

10.35%

10.64% 1.70%

ICICI Prudential Income

09-Jul-98

2389.75

2.66%

8.38%

10.63% 1.71%

L&T Triple Ace Bond

31-Mar-97

601.89

1.96%

3.98%

7.83% 1.09%

DHFL Pramerica Premier Bond

21-Jan-03

1718.39

1.91%

6.50%

7.65% 1.55%

Invesco India Bank Debt

29-Dec-12

116.92

1.71%

6.19%

6.84% 0.65%

Liquid (Category Avg: 1.88%, Crisil Liquid Index: 1.89%) Escorts Liquid Plan

03-Oct-05

172.89

1.99%

6.91%

7.97% 0.90%

Indiabulls Liquid

25-Oct-11

6881.50

1.93%

6.87%

7.74% 0.15%

JM High Liquidity

31-Dec-97

5125.67

1.93%

6.85%

7.70% 0.50%

Quantum Liquid

10-Apr-06

121.179

1.77%

6.12%

7.07% 0.26%

Reliance Liquid Fund - Cash Plan

07-Dec-01

6142.63

1.72%

5.82%

6.87% 1.06%

L&T Cash

27-Nov-06

475.03

1.64%

5.44%

6.58% 0.78%

# Please note the table represents a comparative performance of mutual fund schemes over a three-year period and it is not a recommendation; * Latest quarter average assets under management; We have only considered schemes having a corpus above Rs100 crore. **Annually compounded

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SMART MONEY R BALAKRISHNAN

Investing during Economic Sluggishness

I

do not know if our markets will correct deep enough to catch up with earnings. Hope and money inflows seem to be the two props holding up our markets. Flows from foreign institutional investors (FIIs) used to be the sole driver of our markets. However, of late, domestic retail has made the systematic investment plans (SIPs) into a monthly inflow of Rs5,000 crore. And domestic insurance companies and other pension funds seem to be big buyers. They seem to have provided some hope to a falling market as FII flow slows down. One continuing problem is the lack of sufficiently reliable data on where the economy is going. Sometimes, it may be a question of how much. This time, I feel it is a question of direction rather than the quantum. The absence of new jobs, the panic in the software sector and the paralysis in government banks are all pointers. The economy is slowing down. There is a virtual 180 degree change in the business environment. Sales tax, excise and service tax rolled into a single goods and services tax (GST), a new law for real estate, demonetisation,

digitisation and fewer cash deals and rising compliance costs—all this is happening together. Meanwhile, there have been few structural reforms. There have been no reforms of labour laws, leading to some reluctance to invest in new capacities. Start-ups are able to create many jobs because they are more in e-commerce and alternative energy. Traditional businesses seem to have enough capacities and are reaping the profits from better capacity utilisation plus some retaliatory tariff protection measures. As global growth slips, every country is resorting to overt forms of protection by politicians who have to repay their support lobbies. An indirect form of subsidy from consumers to industries happens and the world goes on. China, the eternal mystery in world economic stage,

seems to be on its own clean-up mode. As some of its commodity supplies slow down, Indian producers rejoice without realising that profit gains are due to protection rather than increasing efficiencies. These are not permanent gains at all. The government is now pushing out infrastructure project launches in a hurry. Will it provide jobs and turn consumption demand? Demonetisation and forced digitisation have affected confidence. The costs of compliance and a less than perfect implementation infrastructure are more a bottleneck than an enabler. Yes, we are probably changing for the better; but, to use a clichéd saying: “Things will get worse before they get better.” A major bottleneck is banking, specifically public sector banks (PSBs). Lending by PSBs has effectively dried up as they face higher disclosure of non-performing assets (NPAs) and this translates into a fear of lending. Merely lowering the interest rate is not going to make a difference. For loans to be picked up, we also need a viable business. Today, the environment of rocky implementation of GST and closed door at banks do not encourage risk taking. In all this slowdown, we are very lucky that global oil prices are low. Probably, it will continue so long as the growth rates remain muted. Geopolitical tensions are also not the best of factors, to boost investment sentiments. Looking at our markets, one does not get the impression that they reflect a slowing economy. It has been held up on a lot of hope over the past three years. In the three years, we have seen cyclicals steal the show. And super profits accrued as stock multiples expanded for the below par earnings. However, what matters most is what lies ahead. First is to figure out if industrial growth will get worse. My instinct is, NO. In fact, it may pick up a bit. Infrastructure activity will boost industry. And it will be a sustained one. One thing that infrastructure companies need is money. Equity will be not easy to come by. However, debt will be available. And if projects are tied to foreign aid 

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SMART MONEY R BALAKRISHNAN

 (like the good deal done for the Bullet train), we can see

the latter and take a call on the others, one by one; things easing. The government will be forced to encourage iv) Sell off mid-cap stocks that have rallied sharply in the past six months; public sector companies to lend as the slowdown hits our v) Keep a list of good shares (where 10-year average economy. RoE is more than 20% and buy them gradually as Turning to investments, the valuation matrices are the market falls; deceptive. If I take an optimistic perspective, saying that earnings will double from this level in three years, it vi) Wait for a clear sign that the economy is recovering before I get back actively in to markets; means that the markets may be valued at 10-12 times, assuming stock prices do not move from here. On the vii) I may still keep some trading going on, knowing ground, I see a lot of emphasis being given by promoters full well that there could be losses, because I am a to ‘margin’ improvements, which compulsive stock market-player. is a good thing. Return on equity But I have to set aside a certain sum (RoE) is set to rise from here. Banks for it and decide how much of loss I want to keep can only give out more loans from can I bear before I down shutters more cash handy. I for a break; here on. Private sector banks and finance companies are growing their viii) Keep some of my money in think, better buying books rapidly. Real estate, in a lot liquid mutual funds, for the time opportunities will come. being. of ways, is the lead indicator of However, if they do What I am saying may sound good times. We are yet to see this sector doing better. Unsold inventory, pessimistic to you. On the contrary. not come, I have lost abandoned projects and lower new I want to keep more cash handy. I nothing. I do not think think, better buying opportunities starts are visible. The government is that the markets will run hoping to fill this gap by speeding will come. However, if they do not up the launch of new infrastructure come, I have lost nothing. I do not away from here projects. Coming to the markets, I think that the markets will run will be wrong, whatever forecast I away from here. Yes, I know that make. Rather, I will limit myself to what I should be doing. probably the government will do its best through fiscal i) Continue my SIPs, if it is less than two years old; incentives to keep the engines firing. However, I am of ii) Probably, take most of my money off the table on the view that we need a long-term fix and not band-aid. SIPs that are more than two years old (not a dividing One final call. It is time to get rid of low-quality (low line, but older SIPs that have given more than 20% RoE, poor management) stocks and stay with high-quality growth should probably be liquidated); stocks.  iii) Take a quick review of stocks I hold. Divide them into opportunistic buys and long-term holdings. Keep The author can be reached at [email protected]

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27 | 13-26 Oct 2017 | MONEYLIFE

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06-10-2017 11:25:32

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Subscription to Moneylife magazine is included in MAS Premium Membership About MAS MAS is a SEBI-registered investment adviser and part of Moneylife, India’s most unbiased and pro-investor research and information group. We run India’s best personal finance magazine, Moneylife. We are not afraid to call a spade a spade. We are India’s only media company to have set up a non-profit trust, Moneylife Foundation, which is now the largest savers’ and investors’ association with more than 35,000 members. MAS was set up to help investors and savers make the right financial decisions and handhold them through the entire process.

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16-12-2016 17:29:45

INSURANCE TRENDS New products, regulations, features and options, interpreted from your perspective A c c i de n t I n s uranc e

Motor Accident Death Worth Less than Rs10 Lakh?

T

he Aurangabad Motor Accident Claims Tribunal (MACT) has directed a driver and the insurance company to pay compensation with interest to the widow, her daughter and parents of the deceased who lost his life when a speeding truck ran over him. The claimant had asked for compensation of

Rs20 lakh for the death of her husband. MACT awarded a joint compensation of Rs9.13 lakh in favour of the mother-daughter duo and others with 8% interest per annum from the date of petition till realisation of the cheque. Does it mean that the value of life in motor accident is worth less

than Rs10 lakh? Road accident victims may lose their lives or end up disabled. While physical abilities are irreplaceable, financial compensation can alleviate the victim's problems. Today, sky is the limit for the award that MACT can bestow. If there is proper justification, unlimited delay in claims filing is also allowed. Road accident victims, thus, have a chance of reducing the extent of their misfortune. But a number of pedestrians from the low-income group suffer in accidents. Based on their income group and age, many MACT judgements have awarded an amount much below Rs10 lakh as compensation for death. A proposal to amend the Motor Vehicles Act (MVA) aims to cap the thirdparty (TP) liability at Rs10 lakh in accident cases. At present, there is no cap for the insurer’s liability. It will be unfortunate if such a cap is legalised. It will certainly be a welcome step for general insurance companies but at the cost of fair compensation for accident victims. The proposed limit for TP liability is bad news for pedestrians. However, it can be seen as a positive too, especially if Rs10 lakh is provided as fixed compensation in all the cases. Providing a fixed benefit of Rs10 lakh will ensure that the poor are assured of this amount. Those who are well-off and/or have other insurance policies

are well protected. The quantum of claim awarded by MACT in most death cases and grievous injuries are within the Rs10 lakh proposed cap; the average payout per TP claim is less than Rs5.5 lakh.

Health Insurance

Mediclaim Renewal Notice Not Mandated Is an Issue

T

he Pune District Consumer Disputes Redressal Forum gave justice to a lapsed bank mediclaim policyholder. Bank of India did not automatically renew the mediclaim policy it had sold. Non-payment of premium led to policy lapse due to which the policyholder had to spend nearly Rs40,000 for treatment of his spouse. According to the Bank, the insurance company did not send a renewal notice and the policyholder did not give any instructions that he intended to continue the policy. But it was found that the Bank had been debiting the account of the policyholder for seven years for policy renewal. The complainant had not informed the Bank about any change in the status. It means there was gross negligence on the part of the Bank. While the decision of the consumer court helped the insured to get back the treatment cost of Rs40,000 along with 9% interest and Rs3,000 in cost, what about the policy renewal? Will the insurance company be forced to continue the policy without any break? There are several such instances of lapsed health insurance policy due to negligence of the bank or other intermediary. Insurance companies can also be blamed in 

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INSURANCE TRENDS

 many cases, as they do not always

send the renewal notice. Surprisingly, this is not even mandated by the Insurance Regulatory and Development Authority of India (IRDAI). Insurance companies can misuse this by not sending renewal notice to senior citizens or to the insured having ailments which can have claims in future. The insured will have to be proactive in renewing mediclaim policies on time without depending on the insurer to send a renewal notice. You may also have to push your intermediary (bank, agent, broker, etc) to complete the renewal process on time. It will be difficult to fight, once the policy has lapsed. Speaking at a closed-door discussion organised by Moneylife Foundation in 2012, the then IRDAI chairman, J Hari Narayan, had clarified that IRDAI does not want to mandate renewal notices. “We don’t want to mandate renewal notice as it can get gamed. If the regulator mandates it and if the insured say that they have not received it, will the cover be considered as continued? The policyholder will go to court over the dispute. There are certain things that are not mandated. The customer knows the annual cover due date and hence can do the necessary renewal.”

Fine Print How Much Commission Do Life Insurance Agents Get?

I

RDAI has found that Indian life insurers do not pay adequate commissions to their agents. According to IRDAI member (life), many agents end up getting only 10% of total

He alth Insurance

Heart-related Claims Data from ICICI Lombard and SBI General

I

CICI Lombard has extracted claims data for the past three years pertaining to heart-related diseases. The data have been collated on the basis of gender, age and demographics. The claims data show interesting trends. In males, claims pertaining to heart ailments are rising. The number of claims pertaining to parents and in-laws is also significant. Claims in the age band of 36-55 years are rising significantly. Claims in the tertiary hospitals are on the rise in the past three years. In secondary hospitals, claims were higher in 2015-16 vis-à-vis the past two years. Top-3 locations for heartrelated claims for 2017-18 are: Mumbai (24.84%), NCR (19.92%) and Chennai (7.04%). SBI General Insurance’s claims data show a 40% rise from individuals below 35 years, and a 32% increase amongst 35- to 45-year-olds in FY16-17 compared to those in FY15-16. Interestingly, according to the data, claims in the age group of 55-60 years and

premium as first-year commission instead of 35%. Is the statement made only to justify his assertion that agents do not churn policies due to unattractive incentives? Churning of life insurance policies to earn high first-year commission is common. IRDAI seems to be turning a blind eye to existing policy lapsation to mis-sell new policies with the justification of

65 years and above have declined by 13% and 25%, respectively, in FY16-17 compared to FY15-16. Various studies have shown that, while males are more prone to heart diseases, females are likely to develop heart diseases at a later age as female hormones provide protection until menopause. Increased stress, sedentary lifestyle and long working hours act as catalysts, thus increasing risk of cardio-vascular diseases.

Claims by males from SBI General went up by 12% in FY1617 compared to those in FY15-16, while claims by females witnessed a slight reduction—of 5%—during the same period. Overall, cardio-vascular diseases ranked second after those of the digestive system in terms of percentage of total amount paid for non-communicable diseases for both, FY15-16 and FY16-17. 

agents being paid mere 10% commission which is hard to believe. If IRDAI could effect a change in September 2010 in the case of front-loaded commission on unit-linked insurance policies and rule that it should be treated as being distributed over the years, why can’t it do the same for traditional products?

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Ensure Your Assets Don’t Fall Under The Benami Act The Benami Transactions Amended Act can be a pain even for those who may not have any unaccounted wealth. Raj Pradhan describes ways in which you may inadvertently create a benami asset. How can you ensure that you do not cross the fine line which can jeopardise your asset? Will your gift to parents or siblings be considered a benami transaction?

T

he Benami Transactions (Prohibition) Act, 1988, was comprehensively amended through Benami Transactions (Prohibition) Amended Act, 2016, which came into force in November 2016. Indians with benami assets will have a lot to worry about, with the amended Act having got its teeth which were lacking in the original legislation. Those having benami property to hide their unaccounted money will be in trouble as will those who happened to inadvertently create benami property, even with legitimate money. After the demonetisation drive, prime minister Narendra Modi warned of action against benami property-holders, to eradicate black money and

corruption. The Benami Act and Black Money Act are not just about property but also about all financial assets. A saver and investor should be careful about not violating these stringent legislations. The Acts also have the potential to punish genuine investors who may be ignorant of the regulatory changes. An honest taxpayer will not have anything to fear from both the Acts; but it will be worth checking if you have violated some provisions inadvertently. It is possible that you may have created an asset for a family member without your name anywhere in the asset. Questions can be raised to explain the reasoning behind it. For example, to avoid taxation in the country of residence, an NRI (non-resident Indian) may transfer money in 

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COVER STORY

 parents’/relatives’ name for investment without his/her

common practice is to put a family member’s or friend’s own name being mentioned in the account. Through name as the owner. There are cases of even putting the such action, the NRI is creating a benami asset, even asset in the name of cooks, maids, peons or drivers though the source of money is legitimate. The same can without their knowledge or by paying them peanuts to happen with a resident Indian investing in the name use their permanent account number (PAN) and other of parents or siblings without own name in the asset. details. A transaction is termed benami if an asset is held A second example: a resident Indian with a legitimate foreign account may not declare it in tax returns to avoid by one person but has been provided, or paid for, paying tax on income generated from it or to avoid any by another person. Such an asset can be movable, tax scrutiny. It may tantamount to actually converting immovable, tangible, intangible, any right or interest, legal documents, gold, financial securities and any white money into black money. One makes several decisions when opening financial other financial assets. So, benami definition is not just accounts or buying property. Will it be a single or joint for physical property, but it is also applicable for any financial asset. account and in whose name? For example, you may pay Who is paying for it? Is the for a property in name of your person putting the money sister or put your money in a going to be an account-holder bank account of your brother. or not? Are you putting your In both cases, your name is money in your family member’s not there as the owner of the name? Can you give a gift to property/financial account or a family member? Can the as a joint account-holder. It is Benami Act be applied even if a benami transaction because the gift is genuine? There is a your money is used to create thin line of difference between an asset without your name. whether or not a transaction There could be various reasons will be deemed to be a benami why you may have done such transaction. arrangement. It could be to These blurred lines mean evade taxes by utilising the that mistakes can happen Movable, immovable, tangible low tax bracket of your family unintentionally. The semantics or intangible, any right or member. Or it could be that of the definitions could interest, legal documents, gold, you have taken a loan and impact genuine asset-owners. financial securities and any want to keep your assets away Moreover, if you think you other financial assets can be a from creditors who can attach can pull a fast one and no declared a benami asset the asset, if you default on the one will notice, you will be loan repayment. caught sooner or later. For In an attempt to evade taxes existing property or financial accounts as well as the future assets you create, you need or finding ways to safeguard your asset, you are creating to be aware of the rules so that you do not violate any trouble for yourself by turning your legitimate finances provisions. Remember, you do not want your legitimate into a benami asset. Why would you take risk for your and accounted finances to be falling in the category of ‘white’ money? So, while the colour of a benami asset is benami or black money. Today, it is not just the fraudsters not always ‘black’, it can still land you in trouble. This is who have to worry; even genuine persons who need to the reason for you to know the provisions of the Benami safeguard their assets by not making any suspicious Act so that you do not make the blunder of creating a benami asset intentionally or inadvertently. move. Benami assets are liable for confiscation by the government. The guilty are punishable with rigorous What Is a Benami Property? Corruption is one of the sources of benami assets. Bribes imprisonment of not less than one year which may be are not just paid in cash, but also with gold, diamonds, extended to seven years depending on the severity of the land, house, car, stake in a company and so on. The offence. The guilty can also be charged with a fine which person taking such a bribe avoids putting such an asset may extend to 25% of the fair market value of the benami in his or her name, but will have control over it. The asset. A person could also face rigorous imprisonment 

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15-12-2016 18:35:28

COVER STORY

 for six months up to five years for knowingly giving false

information and will have to pay a fine of up to 10% of the market value of the asset. The Benami Transactions (Prohibition) Amended Act, 2016, defines a benami property/asset as: • Person holding the property or the person on whose name the property has been transferred has not paid the money or the price of the property in question is paid by someone else; • A transaction carried out under a fictitious name; • Where the person in whose name the property is registered denies any knowledge of ownership; or • Where the person paying for a transaction or propertyrelated arrangement is either not traceable or found to be fictitious.

Are You Creating a Benami Asset?

Impact of The Benami Act and Other Initiatives

A

s per media reports, the enforcement directorate, which implements the Prevention of Money Laundering Act (PMLA), has provisionally attached properties worth Rs12,000 crore in the past 15 months, believed to be the proceeds of laundered money. Government is using all available data sources—phone records, credit cards, PAN, tax returns and even social media platforms—to track down benami assets. The income-tax (I-T) department has established charges against five persons with unaccounted foreign assets of Rs5,000 crore (Rs50 billion) in the British Virgin Islands, a Caribbean tax haven. The government has unveiled a draft law which seeks to confiscate properties of fugitive economic offenders and plug loopholes to deter offenders from evading the process of Indian law by remaining outside the jurisdiction of domestic courts. It is seen as a measure to deal with cases similar to Vijay Mallya’s who escaped to the United Kingdom.

With the amended Benami Act expanding the applicability from property to all financial transactions, you need to be careful in investing your hard-earned money in the name of your spouse, child, parents, siblings and other family members. If it’s your money, the most logical thing is that you should be the single owner or a joint owner of the asset created with the money. If you are neither, determination of the actual status of the financial asset lies with the ‘competent authorities’. They will apply the property in joint name with a family member can help following considerations: • Sources of the funds used for making the payment for to avoid possible family disputes in the future. Buying property with spouse as a joint owner can help with the property are disclosed by the buyer or not. home loan tax deduction for • Intention behind buying you as well as spouse up to property in the name of the allowed limit. It can also another person, i.e., spouse, save on property registration children, parents, siblings, and stamp duty. Such property etc. cannot be treated as benami • Actual possession of the property. property and custodian of the documents of the Property/Asset in the Name of property. Spouse or Child • Disclosure of the income The Benami Transactions from the property, if any, (Prohibition)Amended while filing I-T returns. Act, 2016 states: “Benami • If gift was made by you, transaction exception will be the genuineness of the gift when the property is held by along with any supporting With the Benami Act expanding any individual in the name of documentation. the scope from property to his spouse or in the name of If the answers reflect that any child of such individual legal ways have been used to all financial transactions, you and the consideration for such reduce taxation for money from need to be careful in investing property has been provided known sources or to benefit your hard-earned money in the or paid out of the known from any specific scheme, the name of your family members sources of the individual.” asset will not be treated as So, buying a financial asset or  benami. For example, buying

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COVER STORY

 property in name of spouse or child is allowed if it is

from your known sources of income. But you will have to worry about clubbing provisions. For example, if you put your money in the name of your spouse for a bank fixed deposit (FD), then it is not a benami asset. But the interest from the investment will be clubbed with your income and taxable for you. You cannot use the low tax bracket of your spouse to lower your tax burden. The clubbing provisions prevent tax avoidance. Moneylife keeps getting asked: “How do I efficiently transfer wealth to my wife so that we can make use of her no-/ low-tax bracket?” Investing in the name of your spouse or children entails that you are actually gifting them your money and you may not remain in control of the amount you have given away. Investment in the name of your spouse and children is common but make sure you don’t fall foul of the taxman: read the dos and don’ts of such investment. Our Cover Story on investment in the name of spouse and children give details:- http://tinyurl.com/ y8nljylz

Own Property, but Don’t File Tax Returns?

T

he income-tax (I-T) department has put 14,000 properties valued over Rs1 crore each under its scrutiny as their owners have not filed I-T returns. The tightening measures will also check if the properties purchased exceed the income declared in the I-T returns; if no returns are filed, you have to specify the reasons for it. If there is concrete evidence of tax avoidance, enforcement action can be taken. With rumours of government possibly making Aadhaar authentication mandatory for real estate deals, there can be more trouble for benami property-holders. Property transaction worth more than Rs30 lakh is a trigger for the I-T department to check the source of funds of the buyer. Today, with benami property regulations revised to turn the heat on those having benami properties, property sellers, too, are under the I-T department’s lens. There are news reports of I-T department trying to find the property sellers’ source of income to buy the property they are now trying to sell. So, if you are a property seller, you may be asked to justify the source of funds used to buy the property which could have been purchased decades ago.

Buying Property/Asset for Parents? It is advisable to buy property or have financial accounts in joint names from your known sources of income. There is a thin line that separates a genuine transaction from a benami transaction. If you invest in the name of your parents without your name being mentioned in the property/asset, you are creating a benami asset. Such transactions can also put NRIs in trouble if they want to evade tax in their country of residence by name of a spouse or a minor child, there is no clubbing of income in the case of parents. transferring money to India There are instances when you for investment in the name of invest in a financial asset (bank parents. But if you are a joint FD, etc) in the name of parents account-holder of the property to get higher interest of 0.5% or fi nancial asset, it would offered. Keeping you name not be considered a benami as joint account-holder will transaction under the Act. ensure the account cannot be You may want to buy a called as benami. But is it wise retirement home for your to get 0.5% higher interest by parents. Your intention may putting your parents as first be to safeguard your parents’ account-holder? future by giving them financial There are media articles stability. You may do so by that say, “It is simpler if you making yourself as single invest in your parents’ name. owner or a joint owner to If any or both of your parents avoid violation of Benami Act. If you invest in the name of your do not have a high income, You should not buy property parents or siblings without your while you are in the highest or make investments in the name being mentioned in the 30% tax slab, you can gift name of parents (bank FDs, property/asset, you are creating them money to invest in fixed shares, mutual fund units, a benami asset deposits.” But is it a genuine bonds) without your name. gift to your parents or are you  Unlike investments made in the

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COVER STORY

 taking an FD in their name

person purchasing a joint asset with his/her brother or sister will have to prove his source of income and the remaining 50% contributed by the sibling will also have to be demonstrated under the law. But a recent income-tax appellate tribunal (ITAT) ruling gives a different opinion. ITAT recently ruled that an individual should get the full benefit of tax-exemption for property purchase made after selling own property. The right to give gift to one’s Tax-exemption will be allowed Buying Property/Investing in the parents is blurred as the Benami if he/she has purchased the Name of Siblings Act forces you to put your name property, along with stamp The Benami Transactions duty and registration charges, (Prohibition)Amended as a joint account-holder to from the sale proceeds of own Act, 2016, states, “Benami avoid being called benami asset. property. The name on the new transaction exception will be Proper documentation is a must property, if it is jointly held, when the property is held by should not result in lower tax any individual in the name of his brother or sister or lineal ascendant or descendant, exemption for the individual who paid for the property. The property may be in a joint name due to various where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint- reasons, including providing security to a family member, owners in any document, and the consideration for such and to avoid possible disputes. The I-T department property has been provided or paid out of the known wanted to restrict the tax-exemption to 50% because of sources of the individual.” So, you should not make a joint ownership. But ITAT noted that the taxpayer himself financial investment in the name of your siblings, unless has paid for the new property fully and that the brother you are joint account-holder. Lawyers suggest that a was made joint owner for the sake of convenience.  as fi rst account-holder just to get a higher interest rate? If you get back the money from your parents after the bank FD matures, is it not a sham transaction? If so, it is not a genuine gift. You are doing a transaction for tax avoidance which will be difficult to explain if there is tax scrutiny. Avoid it. You don’t want your parents to be questioned on the source of investment.

The Powerful Black Money Act

T

he Black Money (Undisclosed Foreign Income and Assets,) and Imposition of Tax Act, 2015, which came into effect from 1 July 2015, aims to curb black money, or undisclosed foreign assets and income and imposes tax and penalty on such income. For financial year 2014-15, the Central Board of Direct Taxes (CBDT) directed all resident Indians to disclose their foreign accounts in the I-T returns. The idea is to find unaccounted wealth of resident Indians stashed in a foreign country. The amount in an undeclared foreign account can be considered to be black money even if it is a legitimate account. Today, it is no longer just about taxation but also compliance. This can be a cause of worry as the Black Money Act has hefty penalties for violations. But non-resident Indians (NRIs) were not covered by the directive to disclose foreign accounts.

The Black Money Act is the Indian way of ensuring declaration of foreign accounts. It is possible that people putting money in Panama and tax havens may get away, but those genuinely paying taxes can be harassed if they do not declare their legitimate foreign account which may have been opened several years ago when they were NRIs. Similar to the Black Money Act, US is using Foreign Account Tax Compliance Act (FATCA) as a tool to find undeclared foreign accounts held by US taxpayers. FATCA is a masterstroke by the IRS (Internal Revenue Service) of the US. There are a large number of US residents and non-residents (staying in India) who have been evading taxes. FATCA forces declaration of accounts held outside US. It can also affect those who are paying taxes, but are still not in compliance for accounts declaration under FATCA.

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COVER STORY

Benami Act: Impact on Real Estate Prices

M

edia articles quote experts who say that the Benami Act may force benami property-owners to sell their properties at rock bottom prices and these distress sales may help bring down property prices. But this has not happened so far. It is possible that those with benami property transactions may have found their way out just like those with hoarded cash did not get stuck with banned notes after demonetisation. Under the amended Act, a property cannot be transferred back to the original owner. Once an asset has been marked benami, it cannot be sold further or

 Benami versus Gifting

A property/financial asset bought with a gifted amount cannot be treated as a benami property, provided the gift is irrevocable and the property/financial asset is not held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration. The gift has to be genuine to ensure that Benami Act does not get applicable. Avoid misuse of gifting to help get higher interest rate or to shirk the responsibility of paying taxes. What is important is that the gift must be genuine. It is not mandatory to document a gift. However, it is advisable to do so where transfer of substantial amounts and property is involved. The clubbing provisions are not dependent on the documentation. Gifting a financial asset to your spouse or minor child will be clubbed with your income. A gift deed allows you to transfer ownership without any exchange of money. To gift

Get reward for being benami property informer

M

edia reports suggest a government initiative that may be started soon. Government may give a reward of between Rs15 lakh to Rs1 crore to informers who provide tip-offs to investigative agencies in connection with benami properties. The tip has to be specific to qualify for the reward. The identity of the informer will be kept secret. Time will tell how the reward scheme helps to unearth benami properties.

resold to the actual owner. If a benami property is sold to a third party and the transaction concluded by way of registry of the sale, the department can attach only the proceeds from the sale but not the property. If a benami transaction is found by authorities, but it has been transferred to a third party, the officials can send notices to the current owners to get clarifications about the status of the property. The current owners will have to prove that they are not the original beneficiaries of the benami transaction or proxies.

immovable property, you have to draft the document on a stamp paper, have it attested by two witnesses and register it. To gift immovable property, registering a gift deed with the sub-registrar of assurances is mandatory as per Section 17 of the Registration Act, 1908, failing which the transfer will be invalid. Besides, such a transfer is irrevocable. Once the property is gifted, it belongs to the beneficiary and you cannot reverse the transfer or even ask for monetary compensation. However, if you want to gift movable property, like jewellery, registration is not compulsory. At the same time, a mere entry in an account book is not sufficient to establish a transfer. Apart from physically handing over the property, you need to back it with a gift deed. Once again, get a gift deed drawn and executed to complete the transfer, but the document need not be registered. Make the gift deed on the stamp paper even if registration is not required. The right to give a gift to one’s parents is blurred as the Benami Act forces you to put your name as a joint account-holder to avoid being called benami asset. Proper documentation can prove that the gift is not a sham. Taxpayers should be worried about the Benami Act as it targets not just those who indulge in corruption. A financial asset is a responsibility; if you are careless in handling finances, you may be careless in handling account ownership (single, joint) and nomination. Being careful with finances and holdings will ensure your money is safe from the government so that you and your family have uninhibited access to it. Don’t let the Benami Act raise suspicion and questions which you are unable to answer. 

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StockWatch Stocks and sectors that catch our eye

S H E MA R O O E NT E RT AINM E NT

Is Old, Really Gold in the Digital Age?

S

hemaroo Entertainment buys copyrights of media content (movies, TV programmes) and distributes them through various platforms such as TV channels, Internet video and also sells the same content on video compact discs (VCDs) & digital video discs (DVDs). Shemaroo was established in 1962 as a circulating library for books. It became a video cassette circulating library in 1979. Today, it has copyright for over 3,500 titles and continues to acquire new titles. Shemaroo has a longstanding relationships with various movie production companies such as RK films, Red Chillies Entertainment, Tips Industries, Viacom18, Nadiadwala Grandson Entertainment, etc, to source entertainment content. Shemaroo has adapted itself to changing media consumption patterns across various media platforms. These platforms can be divided into two major categories, viz., traditional media and new media. Traditional media includes (which accounts for approximately 75% of revenues) selling content to TV broadcast channels, home entertainment (VCDs & DVDs) and other niche segments such as in-flight entertainment, international film festivals, etc.

Syndicating movie rights to TV channels is one of its major revenue contributors. Thee quality of movies is very important as it aids rating channels g for TV chan (movies-only channels) and also general ner entertainment channels. With the proliferation of new TV channels, demand for content is going up and channels approach Shemaroo. Shemaroo then sells limited copyright to the channels. India is witnessing a massive shift towards digital media. Video streaming accounts for 49% of mobile data consumption in India in 2016. The move has been accelerated by Reliance Jio which is giving mobile broadband data at a very low price. Access to Internet is also faster than ever before with the advent of 4G. Increasingly there is a shift towards digital media, or new media which includes Internet services (YouTube, Hotstar, Hooq, Apple iTunes, Google Play, etc) and mobile value-added services. Hence, Shemaroo expects a rise in content acquisition budget for its customers as well as advertisement budget on digital media, especially YouTube. Since customers have moved to the segment, Shemaroo has set up various revenue models across different platforms like pay per transaction, subscription and advertisement supported (free for customers). With the large library the company has, Shemaroo can also slice and dice content and package it in a different ways, for example, small YouTube clips of different movie scenes, music videos, etc. Shemaroo  has a strong presence and relationship in digital space

Disclaimer: None of the stock information presented constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general in nature that does not take into account your individual circumstances, financial situation or needs Although information has been obtained from and is based on sources we believe to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice. Past performance is no indication of future results. Investors must do their own research before acting on them. Data Source: Centre for Monitoring Indian Economy’s Prowess database.

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MONEYLIFE | 13-26 Oct 2017 | 40

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STOCK WATCH

 where a lot of content is already deployed. It has also

entered into licensing tie-up with VuClip, a platform owned by PCCW, a content syndicator based in Hong Kong. The YouTube views of Shemaroo content grew rapidly from 50 million per month in June 2014 to over 300 million a month in June 2017. Lower-Risk Model—For Now After the release of a movie, about 80% to 90% of revenue is generated from what is known as the first cycle of a movie when it is released in theatres and then its copyrights acquired by various TV channels or other content aggregators at a very high price. At this stage, it is not very clear which movies will be successful; hence, there remains a risk. Shemaroo is not present at this stage; it acquires movie copyrights in the second cycle which generally starts after five years. By this time, it is known what has worked and what hasn’t and, therefore, it is easier for Shemaroo to select the content carefully, thus reducing the risk of not being able to monetise that content. This makes Shemaroo a preferred option for any new player in digital or traditional media which wants to source good content for its new platform. Entertainment is a hot sector; new media are mushrooming; and Shemaroo is one of the largest content syndicators. So it should be minting money, right? However, Shemaroo’s cash flows, so far, have been negative. This is so because, since 2012, it has focused on building up its content library not just monetising it. So, each year, the outflow on acquiring content has been more than inflows from new media. There is another reason for the negative cash flows: accounting treatment of rights. Rights are treated as raw material (inventories in trade parlance) and have to be written off in the year of acquisition; but it can be monetised over many years. According to the management, Shemaroo is almost near the end of the content acquisition phase. This will reduce the outflows and improve cash flows, especially since it will continue to monetise this content now. The key performance indicator to look for here is ‘sales to inventory’

Key Performance Indicator (in Rs crore) Financial Year

Gross Sales

Inventory

Sales/ Inventory Ratio

2014

264.61

200.51

1.32

2015

323.45

288.68

1.26

2016

375.05

387.64

0.96

2017

425.53

500.43

0.85

(rights acquisition) ratio. The sales/inventory ratio is constantly reducing (less sales, more acquisition); but with the acquisition phase being over, the management now intends to monetise this content; so, gradually, the ratio will start moving up. Is the Business Model Sustainable? Investors in this stock expect that revenues from the new media segment, which is witnessing a phenomenal growth, will be the engine for the future. The new media industry is growing at a rate of 30%-35%;

Revenue Break-up Rs Cr 350 300 250 200 150 100 50 0 2012

2013

2014

2015

Traditional Media

2016

2017

New Media

Shemaroo expects to grow faster or at least at the industry average. Moreover, the new media segment also has a better operating leverage; hence, operating costs do not rise much with high revenue growth; thus operating margins increase. However, Shemaroo’s investment attractiveness remains unclear due to three factors: competition, no growth of old media and extreme difficulty in getting revenues from new media commensurate with the growth. Therefore, it is not clear what kind of management plus technology and financing structure is required to make things work in the digital age. Let’s start with competition because this will make or break Shemaroo. Competition: Indeed, we are not even sure if Shemaroo understands this competitive strength of two of the world’s biggest digital media aggregators—Netflix and Amazon Prime Video—who are in India now. Shemaroo doesn’t see them as competition but allies because, to have a good Bollywood collection, they need content syndicators like Shemaroo. We don’t agree; Netflix and Amazon are not neutral platforms but content aggregators like Shemaroo and also produce original content. Secondly, Shemaroo argued, in a conference call, that Netflix and Amazon Prime are going after ‘first cycle’ Bollywood films. This has 

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 turned out to be incorrect. More than half the content

of Netflix and Amazon comprises old films. Amazon and Netflix are like Shemaroo only apparently. Their much deeper pockets, management bandwidth and, importantly, strong technological strengths make them very tough competitors. Challenges of New Media: Digital media has three critical features. One, while growth is fast, it does not bring in large revenues. This is because lots of stuff is free and cannot be monetised. People are used to free chat on WhatsApp, free Facebook, free search, free newspapers, free emails, etc; they are reluctant to pay much for other digital services. This is a huge negative for Shemaroo. Two, this means that players in the new media must somehow have access to unlimited low-cost capital to keep growing. Shemaroo does not have access to capital like Amazon and Netflix do. Three, true digitisation of businesses means that, for the first time in history, business owners can leverage customers’ explicit behaviour and latent desires to give them what they want, on a mass scale. This is achieved by capturing each customer interaction on digital platforms, allowing business owners to extract more lifetime value from its customers. This interactivity is much deeper than passively making available lots of choices, as happens in a department store. As Bernadette Jiwa, a marketing expert, puts it “We are the first business owners in history who know what our customers are thinking, feeling and doing even when they are not in our presence.” Amazon and Netflix would be focused on this knowledge. We are not sure Shemaroo will invest in this capability. It’s a different skill-set. Shemaroo will have to be as much a technology company as it is now a content-aggregating company. Stagnant Old Media: In an interview with CNBC

K N R C o n s t ruc t ions

Will Growth Accelerate?

K

NR Constructions (KNR) is an infrastructure development company with high-value projects across segments such as expressways, national highways, state highways and rural roads, flyovers, bridges and viaducts, irrigation projects, urban development, civic amenities and commercial and residential projects. It aims to add more business verticals such as elevated metro rail and railway

TV18, Hiren Gada, whole-time director & CFO, said that Shemaroo is focusing on the new media as traditional media revenues are ‘consolidating’, a polite way of saying that it is not growing. The official line is that India is a consumption-driven economy, so there will be increased spending on advertisement, over time. We disagree with this optimism. The broadcast media is struggling. Except Zee, Star, and a few regional channels, all others are losing money. And so are distributors (cable and satellite companies). A supplier to a struggling sector usually has no competitive edge. As the digital media reduce everyone’s profits and take eyeballs away from TV channels, there will further compression of margins of everyone associated with the broadcast business. Shemaroo showed a slow growth year-on-year (y-o-y) in sales and profitability in quarters ending December 2016 and March 2017, whereas the revenue growth in March 2017 was negative. This can be seen in the table below.

Erratic Growth Quarter

Sales Growth

Operating Profit Growth

Net Profit Growth

March-16

18.5%

34.9%

42.3%

June-16

22.5%

36.8%

39%

September-16

20.4%

41.2%

45.1%

December-16

11.6%

16.1%

14.7%

March-17

-8.6%

-16.1%

-30.3%

7.6%

2.3%

1%

June-17

We are not sure whether the slowdown was due to demonetisation; if so, there could be a pick up in the coming quarters. But we don’t see much of a long-term strength in the traditional media business. 

projects, which have a great scope in the future. KNR claims to have executed more than 6,000 lanekilometre (km) road projects across 12 states. It has four build, operate and transfer (BOT) projects of 778 lane-km in Telangana, Karnataka, Kerala and Bihar and has signed a share purchase agreement along with Patel Engineering Limited (PEL) to sell its entire equity stake in two road BOT assets—Patel KNR Infrastructure Limited and Patel KNR Heavy Infrastructure Limited—to an Essel group company. The enterprise value of both assets put together for this transaction is Rs850 crore. It has a strong engineering, procurement and construction (EPC) order-book of Rs3,338.8 crore as 

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STOCK WATCH

 on 30 June 2017 comprising Rs2,844.8 crore in roads

sector, Rs490.7 crore in irrigation and Rs3.3 crore in others. Some 37% of the order-book is for state governments and 55% for the Central government. About 6% are international orders (from Bangladesh). The management said, in a conference call, that tenders have decreased in the first quarter of FY1718 due to Goods and Service Tax and higher costs for land acquisition. KNR has bid for Rs1,400 crore in the irrigation segment and a few bids in hybrid annuity model (HAM) projects. The results for these bids are awaited. The outstanding tenders, results for which the company is awaiting, are worth Rs3,000 crore-Rs4,000 crore. KNR plans to obtain orders worth Rs2,000 crore-Rs2500 crore in FY17-18. The management said that it wishes to focus on HAM projects especially in south India since the number of bidders on HAM projects are fewer and many HAM projects (about 80) will come up for bidding in the next 4-5 months. This segment is becoming less competitive, bids are more reasonable and margins are higher. The management hopes to bag orders worth Rs2,500 crore and grow by 10% in FY18-19. One of the unique selling points of the company is early completion of its projects. KNR has a long list of clients including National Highways Authority of India (NHAI), Andhra Pradesh Road Development Corporation (APRDC), Ministry of Road Transport & Highways (MoRTH) Hyderabad Growth Corridor Limited (HGCL), Karnataka State Highway Improvement Project (KSHIP), Karnataka Road Development Corporation (KRDCL), Madhya Pradesh Road Development Corporation Limited (MPRDCL) and Bruhat Bangalore Mahanagara Palike (BBMP). The Walayar Tollway, which was completed a month before its deadline, caters to commercial traffic towards Kochi Port and Kochi International Container Transhipment Terminal. KNR has been performing well in the past quarters. The sales jumped 59% year-on-year (y-o-y), from Rs303 crore in the June 2016 quarter to Rs480 crore in the June 2017 quarter. The operating profit shot up 93% y-o-y, from Rs44 crore in the June 2016 quarter to Rs85 crore in the June 2017 quarter. Net profit

increased 124% y-o-y from Rs30 crore in the June 2016 quarter to Rs68 crore in the June 2017 quarter. Other income in the June 2017 quarter was 15% of the operating profit. This was due to an income-tax refund of Rs37 crore on which it also got Rs7 crore interest. Depreciation was up 85% y-o-y, from Rs13.17 crore in the June 2016 quarter to Rs24.38 crore in the June 2017 quarter due to revision in the estimated life of the assets for the irrigation project in Telangana. While the company performed well in the June 2017 quarter, the management expects the performance of the company to decline in the second and third quarters of FY17-18 due to the rains. At a recent analysts’ conference, it gave a revenue guidance of Rs1,700 crore for FY17-18 and Rs2,000 crore in FY18-19. Assuming a profit margin as the average of the margin of the past six quarters (10%), we arrive at a profit of Rs170 crore for FY17-18 and Rs200 crore for FY18-19. Taking the most recent available marketcapitalisation of Rs2,904 crore, the price-to-earnings ratio (P/E) of FY17-18 is 16.5 and FY18-19 is 14.5. The current P/E is 14.92.

Consolidated Profits (Rs Crore) Stand-alone

157.25

KNR Constructions

150.49

Subsidiaries

-39.67

Non-controlling interest in all subsidiaries

-16.15

Associates Joint Operations Others Consolidated

4.12 -3.13 -37.17 98.76

While the stand-alone revenue of the company was Rs1,541 crore for FY16-17 the consolidated revenue was Rs1,679 crore. The standalone net profit was Rs157.2 crore while the consolidated net profit was Rs98.76 crore. The consolidated net profit was low due to the losses of the subsidiaries and joint ventures. On a consolidated basis, there was hardly any profit growth. 

45 | 13-26 Oct 2017 | MONEYLIFE

StockWatch.indd 5

06-10-2017 16:24:39

STOCK WATCH

UN UOTED STORIES OF PRICE MANIPULATION

Antarctica (Rs1)

(Rs)

A

ntarctica Ltd claims, on its website, that it started off with providing pre-press services; diversified into printing on a jobwork basis with multicolour offset printing machines and, now, is in the packaging and printing business. The company was earlier called Antarctica Graphics Limited and, according to www.watchoutinvestor.com, it was suspended from trading by the Bombay Stock Exchange on 30 November 2007 for not complying with the listing agreement. The company now claims to be into carton box manufacturing, book printing and finishing, manufacturing labels, contract

2

1

850% 0 24 Mar-15

24 Mar-16

24 Mar-17

packaging and manufacturing tea bags. Antarctica’s packaging/printing unit is located at Falta Export Processing Zone (Free Trade Zone) about 50km from Kolkata and claims to export to Sri Lanka, the Middle East, Russia,

Kazakhstan and Nepal. The fact is that it has hardly any business. Sales for the June 2017 quarter were Rs44.78 lakh while sales for the March 2017 quarter were Rs40.96 lakh. It reported a loss of Rs17.2 lakh in the March 2017 quarter and a meagre profit of Rs4.3 lakh in the June 2017 quarter. It neither pays tax nor declares dividend. Despite such poor performance, the stock rose 850% from Re0.1 on 24 March 2015 to Re0.95 on 29 September 2017, after rising to as high as Rs1.85 in February 2016, at which point it was up by 94.75%. The promoter shareholding in the company is only 31.63%. This looks like a clear case of manipulation, but do you expect market regulators to bother? 

MARKET TREND

Managing the Mood

Athe index suffered further sell-off and fell all the

fortnight ago, the Sensex was at 31,922. Thereafter,

way to 31,081. On 6th October, it is at 31,814. There is a nagging and rising suspicion among investors that the economy is in a mess after two seriously botched up moves—demonetisation and Goods and Services Tax. Foreign institutional investors (FIIs) are continuous sellers. After having sold over Rs12,000 crore re worth of equities in August and over Rs10,000 crore in n September, they were net sellers also in the first st two trading days of October. However, domestic investors continue to pour money into mutual funds and, hence, net mutual fund purchases are more than enough to the o staunch th he net FII selling. Even in August and September, ember, compared to around Rs23,000 crore of FII selling,, buying by Indian MFs was over Rs33,000 crore. Is this a cushion for the market? But even Modi fans admit that the economic mood has turned negative. While the government is publicly brazening it out by having ministers appear on news

channels for the first time in three years to argue for the government, it seems to be paying attention to the discontent on the ground. This regime came to power by combining voters’ anger with the previous regime and catchy slogans, promising a glorious future. These easy-to-swallow bites were pushed through social media channels where they got shared These same channels are now among millions of voters. v Congress Party and Modi detractors being used by the C the gap between the promises to highlight high and performance of the government as less than two years remain for the next n elections. Perhaps the endless negative chatter on social media has neg reached the government’s ears. Amit Shah reac had to abandon his high-voltage rallies in Kerala and rush back to have a highK level leve discussion with prime minister Modi and finance minister. If the government pays attention and corrects course, the indices will be headed higher, especially since the market has now distinctly shifted into the hands of domestic investors. — Debashis Basu 

MONEYLIFE | 13-26 Oct 2017 | 46

StockWatch.indd 6

06-10-2017 17:53:05

lrc.moneylife.in

Get Free Help in 10 Areas Guidance for filing complaints with financial regulators & stock exchanges Guidance for filing consumer complaints Guidance on IT Act and issues that affect life and liberty Guidance on filing public interest litigations Guidance to whistleblowers Guidance on filing complaints & consequences in sexual harassment cases Guidance on Wills, transmission of assets, etc Guidance on filing RTI applications effectively and handling the appeals process Property, conveyance, cooperative housing society-related issues, registration, stamp duty, etc Basic legal research especially pertaining to new legislation where there are few case laws Do you have any of these legal hassles? Are you sure you have the right lawyer? Contact us at moneylife.in/lrc.html

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Credit : Tax : Legal

24-08-2017 16:44:54

TAX/ FIXED INCOME

Perils of Claiming Wrongful I-T Deduction

T

here are various Sections under which tax deduction can be claimed, to reduce your taxable income while filing income-tax (I-T) returns. For example, Sections 80C, 80D, 80G, 80GG, 80TTA and so on are some of the commonly used Sections for claiming tax deductions. At the time of filing I-T returns proofs do not need to be submitted to claim these deductions. But fraudulently claiming of deduction is tax evasion and can land you in trouble. Proofs can be verified, if there is scrutiny. There are media reports that the Hyderabad central crime station sleuths revealed in the city criminal court that at least 200 information technology (IT) employees faked disability and chronic illness of family members to fraudulently claim I-T refunds. Two I-T practitioners processed the dubious refund claims by stating that their family members suffer from chronic illness. Each one of them got a

rebate ranging from Rs50,000 to Rs1 lakh. The I-T practitioners took around 10% commission from the IT employees. The total loss to the I-T department in these cases is Rs1.36 crore. Under Section 80U, a deduction Rs75,000 is allowed for those who are suffering from 40% disability while a deduction of up

to Rs1,25,000 is allowed for those with 80% of disability. Under Section 80DD, deduction is allowed to taxpayers who have dependents with disability. For a dependent with 40% disability, a deduction of Rs75,000 is allowed for the medical

treatment (including nursing), training and rehabilitation. The limit is Rs1,25,000 for those with 80% disability. Those claiming the deduction will have to produce a medical certificate granted by prescribed medical authority, defined as a civil surgeon or chief medical officer (CMO) of a government hospital, a neurologist with an MD in neurology and, in case of children, a paediatric neurologist having an equivalent degree. However, 80DD and 80U cannot be claimed for the same disabled person. Tax benefit is also available under 80DDB for an individual for expenses incurred by him/her for the treatment of specific diseases such as neurological diseases, malignant cancers, full blown AIDS, chronic renal failure, and hematological disorders. The amount is Rs40,000 or the amount actually paid, whichever is lower. For senior citizens, the upper limit is Rs60,000 and, for very senior citizens it is Rs80,000.

G-Sec Yields Up

T

Issuer

Maturity Date

ISIN

Rating

Axis Bank 8.75%

14-Dec-21 14-Dec-17

8.75

INE238A08427

CRISIL AA (unsecured)

ICICI Bank 8.55% Perp

20-Sep-22

20-Sep-18

8.57

INE090A08TZ5

CARE AA+

Dewan Hsg Fin 9.25%

09-Sep-23

09-Sep-18

8.47

INE202B07IO3

CARE AAA

Bank of Baroda 8.65% Perp 11-Aug-22 11-Aug-17

8.88

INE028A08117

CRISIL AA+ (unsecured)

IndiaBulls Hsg Fin 9.10%

16-Aug-26 16-Aug-18

8.55

INE202B07HU2

BWR AAA

U.P Power Corp Ltd 8.48% 15-Mar-27 15-Mar-18

8.4

INE540P07178

BWR AA (structured obligation)

en-year benchmark G-Sec yield,

which sets the tone of the fixedincome market, has increased by four basis points (bps) in the last fortnight to end at 6.63% on 4th October.

Next Last Yield Coupon (%)

NSE data as of last trade date of 3 October 2017

G-Sec Maturity Date

Yield to Maturity

01 December 2044

7.31

22 June 2045

7.29

19 December 2034

7.20

G-Sec yields on 4 October 2017

BSE data as of last trade date of 3 October 2017

MONEYLIFE | 13-26 Oct 2017 | 48

Fixed Income.indd 1

06-10-2017 16:43:10

MONEYLIFE ADVISORY FIX YOUR FINANCES, FOREVER

Ask Vijay Kedia about Stocks A free resource from Moneylife Advisory, in investor interest

This is a basic resource for stock-related queries for retail investors under the initiative of ace investor Vijay Kedia. Our aim is to foster cautious and long-term investment in stocks for wealth creation. We will not offer buy/sell advice or stock recommendations and tips. Mr Kedia’s sole aim is to prevent retail investors from making careless mistakes and stay on the path of patient long-term investing in stocks. http://www.moneylife.in/askvijaykedia

Sample Questions How do you collect the data for understanding the industry or interpreting on which stage of the business cycle it is currently moving around? Also, industries such as publishing and media are difficult to interpret, how does one link the industry prospects with revenue and growth? It would be an honour, if you could provide answers to these questions. Read annual reports, attend annual general meetings, read investor presentations, brokerage reports, listen to conference calls and watch interviews. If you find a particular industry difficult to interpret, then move on to another industry, as there are a lot of opportunities available. If a stock is not doing well, should one book loss or hold? Find out the reason why the stock is not doing well. If a stock is not doing well in spite of good performance, it should be watched closely. If the

Ask vijay kedia Ad.indd 2

problem is temporary, one may hold. If there is a structural problem in the company, one may sell. If a small-cap company has metamorphosed into either a mid-cap or a large-cap over time, will it be prudent as a long-term investor, to sell during market highs and buy again during the market lows, to get better returns? Only two people can know the lows and highs of the market. One is god and the second is a liar. We can see lots of news about buy this and that stock but not much news about sell stock and why. What should be the parameter to sell a stock? One should exit the stock when the focus of the management changes (unrelated diversification), product is becoming obsolete and the valuation is too high compared to the leader in the industry, its peers and the sector.

28-07-2017 17:00:56

CYBER SECURITY PRASHANT MALI

Rise of Revenge Porn in India

A

Picture For Illustration Only

As it happens, I am handling at least two cases every bout a month ago, I received a call from Nashik—at the other end of the line was a lady who sought an month where an educated boy from a respected family appointment with me in a very subdued voice. I either posts his nude pictures or videos of his ex-girlfriend allocated a date and time and, to my surprise, found two on various websites, or pastes the girl’s face on some nude very young girls, one of them accompanied by both her body and makes it go viral to demolish her reputation and parents. Their story is tragic and has left a deep scar on make her existence hell. me, both as a lawyer and a human being. Another case that I want to narrate is that of another One of the girls had filed a complaint against her respectable family from Pune. Such is the irony of our boyfriend (she was still in a profession that, in this case, I am relationship with him) and he on the side of the boy, as a defence lawyer and bail specialist. This boy was arrested. The boyfriend owns a bungalow and has a job with was going steady with a girl who WNS, a IT company. He had shot allegedly married another man, nude pictures and videos of the girl even when she was in the thick of and posted them on as many as an affair with him. This accused, an 125 websites and forums, causing engineering graduate, in a fit of rage them to go viral. The posts had made a Facebook page of the hospital lurid descriptions about her body where the girl is working. He used it referred to her in abusive terms like to upload a series of videos of their Ran**. The story of the second girl private moments. These sexually was even worse. In this case, the boy explicit videos came to the attention was her school friend. He had lured of hospital management and they her into a sexual relationship with filed a case against unknown persons the promise of marriage. He took with the cyber-crime police. During her to his bungalow, shot explicit the investigation, the police allegedly videos of private sexual acts and traced the IP address of my client The story of the second uploaded them on a website with and he was arrested. girl was even worse. In captions that depicted the girl as a Under Section 67A of the IT this case, the boy was prostitute soliciting a client. Act, 2000, anyone who transmits her school friend. He had What is scary is that even as I sexually explicit pictures or videos write this article, the nude pictures can be punished with imprisonment lured her into a sexual and videos are available on the up to seven years and a fine that can relationship with the websites and can be accessed by go up to Rs10 lakh. It is a cognisable promise of marriage. He anyone typing her name and adding and non-bailable offence. Worse, the took her to his bungalow, postfix of ‘nude photos’ in a Google media coverage alone can destroy the shot explicit videos search. Despite a court order, the life of the accused and the victim, police are unable to remove these but affects the woman a lot more. photos and videos and the girls are Through the two cases mentioned left to fend for themselves. I have taken up this case above, which I represented from opposite ends, I want the pro-bono and opposed granting bail to the accused as readers to realise that, as a society and family, we need to intervener lawyer in all courts including the High Court. counsel the young to deal with heartbreaks. We also need The only relief is that the accused boy is still in jail as he to watch for signs of the psychologically unwell and deal with it before it goes out of hand.  is a threat to society. This an exampleof revenge porn—the publication/ sharing of explicit material portraying someone who has Advocate Prashant Mali is the President, not consented to the image or video being shared. Indian Cyber Law Consulting, author & law makes it illegal to transmit a “private sexually explicit speaker. Email: prashant.mali@ cyberlawconsulting.com photograph or film” with or without the consent of the person depicted in the content.

MONEYLIFE | 13-26 Oct 2017 | 50

Cyber Security.indd 1

05-10-2017 21:19:26

UNBIASED INFORMATION: MAS Benefit #8-10

• Moneylife Magazine • Handbook • Product Reviews

8. Moneylife Magazine:

9. Handbook:

Since March 2006, Moneylife magazine empowers individuals to invest and spend wisely by offering hard facts, insightful opinions, unbiased options and useful tips on fixed-income products, mutual funds, insurance, stocks, taxes. This bold and practical fortnightly guide is included in your MAS premium membership.

A complete online guide on every aspect of personal finance— from annuities and bank accounts to Wills and zero-coupon bonds—all in the form of common questions and answers. This handbook helps you make correct decisions about all aspects of money. Whenever you are in doubt, all you need to do is to refer to it. You will get factual and unbiased information. No need to wonder; no need to ask. Part of your MAS premium membership.

10. Unbiased Reviews:

Moneylife’s habit of calling a spade a spade comes in handy when our analysts review a financial product available in the public domain. Our reviews will leave you with no doubt about the good, the bad and the irrelevant. Part of your MAS premium membership.

About MAS

MAS is a SEBI-registered investment adviser and part of Moneylife, India’s most unbiased and pro-investor research and information group. We run India’s best personal finance magazine, Moneylife. We are not afraid to call a spade a spade. We are India’s only media company to have set up a non-profit trust, Moneylife Foundation, which is now the largest savers’ and investors’ association with more than 35,000 members. MAS was set up to help investors and savers make the right financial decisions and handhold them through the entire process.

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MSSN - Unbiased.indd 1

15-12-2016 18:10:29

Supported By

Queries At Moneylife Foundation’s

Tax Helpline

income will be taxable as capital gains. It seems that we are talking of stage 2 of the taxation. The shares were allotted 10 years ago; hence, the shares will be treated as longterm capital asset and the resulting gain will be taxed as long-term capital gain (LTCG).

Ask tax-related questions at moneylife.in/taxhelp. It’s free

Tax Liability of an NRI

Rebate on Home Purchase

M

I

have bought a property worth Rs25 lakh. The loan was sanctioned in 2013. But the builder handed over possession of the flat in 2016. The house registration was done in July 2016. It is my first property. To claim tax rebate of Rs50,000 under Section 80EE, the loan should be taken in FY16-17. Is there any way I can claim the rebate under Section 80EE? Ameya Kunte’s Reply: Section 80EE provides for additional deduction for home loan interest to the first-time home-buyers. One of the key conditions for claiming the deduction u/s 80EE, as amended by the Budget 2006 (i.e., Finance Act, 2016) is that the loan must be sanctioned during FY16-17. Since your home loan was sanctioned in 2013, you would not be eligible for the additional deduction for home loan interest under Section 80EE as applicable for FY16-17. Section 80EE was originally introduced in the 2013 Budget (i.e., Finance Act, 2013). The original Section provided for additional deduction up to Rs1 lakh for home loan availed in FY13-14. Applying the old Section to your facts, in my view, you were eligible for the additional interest deduction in

FY13-14 or FY14-15 (in specified situations). However, the time limits for revising FY13-14 and FY14-15 returns have expired. Unfortunately, you will not be eligible to the deduction under Section 80EE. You would, however, be entitled to the regular deduction under Section 24 for the home-loan interest on the self-occupied house up to Rs2 lakh for FY16-17.

Tax on ESOPs

A

bout 10 years ago, as an employee, I was allotted employees’ share options (ESOPs) in an unlisted public limited company in India. The company in which I hold ESOPs is acquired by a European company. If I receive a consideration against my ESOPs, how should I calculate the amount of income-tax that I need to pay? Subodh V Shah’s Reply: ESOPs are taxed in two stages: 1. At the time of exercise of the option. The taxable amount will be the difference between the fair market value (FMV) and the exercise price and will be taxed under the head ‘Income from Salaries’. 2. At the time of sale of the shares. Consideration received less cost of acquisition (being FMV considered for taxation of perquisites). This

y cousin has acquired British citizenship. He has properties in India. Does he have to pay tax on those properties now that he is a British citizen? He has a PAN (permanent account number) but does not have, and is not eligible for an Aadhaar, linking of which has been made mandatory recently. Ameet Patel’s Reply: Any income that arises/accrues in India or is received in India is taxable in India for all. For non-residents (whether citizen or otherwise), the same rule applies. If someone has more than one residential property (and if none of them is rented out), any one property will be considered as self-occupied (and, therefore, having NIL income). The other property(ies) will be considered to be ‘deemed to be let out’ and the owner will need to compute the deemed income for such houses and include that income in his/her computation. After that, if the total income exceeds the threshold limit for that year, tax will have to be paid and return of income will also have to be filed. If any property is actually rented out, obviously, the rental income has to be included in the computation. Aadhaar is not mandatory for non-residents. Therefore, for your British cousin, there is no requirement of linking PAN and Aadhaar. 

MONEYLIFE | 13-26 Oct 2017 | 52

Tax Queries.indd 2

03-10-2017 20:24:42

Supported By

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Every new query posted will be sent to our panel of tax experts When we get the opinion/advice from our expert, we will post the reply You can access similar issues faced by other taxpayers

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24-02-2017 16:12:20

USEFUL APPS YAZDI TANTRA

Mumbai T2 App: A Must for All Air Travellers from Mumbai

want on the underground, bus, bike, train, tram or ferry. Android: https://goo.gl/6OPWSD iOS: https://goo.gl/TupiFv

T

he Mumbai T2 app is a great app for Air Travellers— to and from Mumbai. The app works not only for Terminal 2, but is also great for domestic flights! The app offers you flight information, such as international and domestic flight status, and flight schedule for arrivals and departures. It also gives information on the various airport facilities, such as the check-in counters, gates, customs, baggage wrapping points, washrooms and dd drinking k water, restaurants and shops. What’s more, you can also discover all these through the augmented reality experience it offers. Augmented reality is a revolutionary technology that allows you to ‘see’ the options using your camera. A must-try! Besides, if you save your flight on the go, it gives you the gate No., any changes to them, and also when it’s time to reach your gate. Find the availability of an airport taxi and even a restaurant within CSIA (Chatrapati Shivaji International Airport) Terminal 2 to catch up on a cup of coffee. You can even keep our SOS number handy for any emergencies. A must for all air-travellers to and from Mumbai! Android: https://goo.gl/WibB9p iOS: https://goo.gl/saekdW

Android Auto: A Great Tool When You Are On the Road

HERE WeGo: Offline Maps & GPS

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ERE WeGo is a free app that makes city (in any city) navigation effortless. With detailed routes, turn-byturn guidance and information about every way of getting around, it’s the only app you need, to get through the city. It tells you everything about your route before you leave. Turn-byturn guidance keeps you stress-free behind the wheel. The maps can be used offline, saving you data charges. You can download the maps before you leave, so that you can keep using the maps even when there is no signal. Offline maps are available for most cities across the world. HERE WeGo has public transit information for 1,300 cities including New York City (NYC Subway, NYC Bus), San Francisco (BART), Chicago (CTA), Boston (MBTA), London (TfL), Berlin (BVG), Munich, Paris, Barcelona, Madrid, Rome, Milan, Vancouver, Toronto, Sydney, Melbourne and many more. Go where and when you

W

hen we enter our car with our phone, we want everything to turn hands-free. Android Auto does just that. You can connect your phone to a compatible car display, or put your phone in a dock and use Android Auto directly from your phone screen. It works with any car which has compatible Bluetooth connection and on Android versions 5 and above. Navigate with Google maps, listen to playlists or podcasts from your favourite apps, send messages via voice, and more. Once connected to your car Bluetooth, you are truly hands-free. With a simplified interface, large buttons and powerful voice commands, Android Auto is a must when you are on the road. Be safe, be careful and be hands-free! Android: https://goo.gl/BS2ONa

Share Your Location through WhatsApp ften, we need to send our current location to our friends/relatives. Doing so from other apps is not so convenient. WhatsApp allows us to send our current location directly to the receiver in three loc easy steps. 1. Select the person or group to whom you wish to send your current location. 2. Select attachment (the paper-clip shaped icon) on the top rright of your screen 3. From the list of options t shown, select location and send— that’s it. Your location will be immediately visible to the receiver(s) on their phones on Google maps. This simple trick will save you lots of time and help you communicate your location speedily and efficiently!  Yazdi Tantra is a chartered accountant by training, computer consultant by profession, entrepreneur-developer by hobby and trainer in his leisure time. He is currently the vice-chairman of Zoroastrian Co-operative Bank Ltd and has been running a medium-sized computer company ON-LYNE for the past 24 years.

MONEYLIFE | 13-26 Oct 2017 | 54

Tantra - column.indd 1

03-10-2017 18:12:20

HANDHOLDING: MAS Benefit #11

• One-on-on e-Help • Portfolio X-Ray

We are not agents, distributors, brokers or lead generators; so, you get ethically correct advice

There are thousands of mutual fund schemes, hundreds of insurance products, bank FDs, corporate FDs, corporate bonds, over 3,000 actively traded stocks… How is an average saver supposed to choose? You have 5 options

Option1: Do nothing. Option2: Rely on friends, relatives, neighbours, office accountant, derived wisdom from social media or the press/TV. (But do they know more than you? And how do you know that?) Option3: Rely on ‘relationship’ managers, insurance agents, distributors, wealth managers. (But you are only a sales target for them) Option4: Research insurance, mutual funds, markets, stocks, financial theories… Become a financial expert yourself. (Is this practical?) Option 5: Choose Moneylife Advisory A no-bias, no-conflict platform. Ask any confidential question about investments, insurance and taxes and you get the right answer.

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15-12-2016 18:07:06

WEIGHT LOSS FROM BLACK TEA?

that type-2 diabetes can be controlled if patients lose 12kg-15kg or so. Typeould it be that black MEDICAL DEVELOPMENTS FROM 2 diabetes is considered tea may promote AROUND THE WORLD incurable; but evidence is weight loss by changing growing that it is curable bacteria in the gut? When measured after four weeks, if certain steps are taken, according In a study of mice, scientists at to a study headed by Professor University of California Los Angeles the weight of mice that were given green or black tea extracts was Mike Lean of Glasgow University’s (UCLA) have found that black tea Human Nutrition Section. Prof alters energy metabolism in the liver down to the same levels as those that were given the low-fat diet. Lean points out that, currently, 488 by changing gut metabolites. The “The results suggest that both study, published in the European green and black teas are prebiotics, Journal of Nutrition, found that substances that induce the growth both, black and green tea, changed of good micro-organisms that the ratio of intestinal bacteria contribute to a person’s wellin animals. Apparently, this led being,” said Susanne Henning, to a fall in the ratio of bacteria the study’s lead author and an associated with obesity and, at the adjunct professor at the UCLA same time, bacteria associated with Center for Human Nutrition. “Our lean body new findings suggest that black mass tea, through a specific mechanism drugs are licensed worldwide to through the gut microbiome, may treat type-2 diabetes by lowering also contribute to good health and blood glucose levels. “They are weight loss in humans.” not treating the disease process,” Dr Zhaoping Li, director of the he said. He was quoted as saying UCLA Center for Human Nutrition, that “Not only is type-2 diabetes chief of the UCLA Division of preventable by not getting fat, but Clinical Nutrition and the study’s as long as you get in early after the senior author, was quoted as saying disease is established—in the first five years or so—you have a better increased. that the findings suggest that the health benefits of both, green tea than even chance of becoming In the study, four groups of mice and black tea, go beyond their non-diabetic.” This information is were given four different sets of antioxidant benefits, and that both hardly known, because “it is rarely diets. One was given low-fat, highteas have a strong impact on the gut recorded officially.” Type-2 diabetes sugar and the other high-fat, highmicrobiome. now affects 5%-10% of the UK sugar. A third set of mice got the population and about 10% of total same as the first with added extract National Health Service expenditure of green tea. And a fourth set of GET LEAN, CURE DIABETES in that country goes into treating mice got the same diet as the second report published by the British the condition.  with added extract of black tea. Medical Journal (BMJ) says

C

A

Eating a health food? But what about financial health?

The best wealth food. Once every fortnight

For subscription offers that are a steal, look for a form elsewhere in this issue or our website at www.moneylife.in

MONEYLIFE | 13-26 Oct 2017 | 56

Health.indd 3

06-10-2017 16:45:19

TION MONEYLIFE FOUNDA

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make our voices heard

Since February 2010, Moneylife Foundation, the Voice of Savers has enrolled 67,200+ members, conducted 345+ workshops, handled scores of grievances & made four representations to policymakers. We need to do much more As the Voice of Savers, Moneylife Foundation is proud to have been one of the fastest growing NGOs, reaching out to savers across India (Gurgaon, Kolkata, Bengaluru, Chennai, Nashik, Pune, Hyderabad and Goa), covering a wide variety of subjects. On advocacy, we continued to pursue the government for appropriate legislation to prevent people from being looted by thousands of money-chain schemes. We took up the issue of harassment of senior citizens because of problems with TDS. In August 2011, Moneylife Foundation was accepted as an affiliate member of OECD’s International Network on Financial Education (INFE).

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Donate Ad.indd 1

26-07-2017 11:06:40

LEGALLY SPEAKING SD ISRANI

Reputation No Guarantee

A

s consumers, we have always been made to believe that well-known brands are generally reliable, that dealing with reputed companies ensures proper performance of the product and, in case of any problem, the company will come to the rescue of customers. How often have we heard that it is safer to use good products from established companies and, to an extent, this is right. In other words, a consumer feels assured while dealing with a familiar name that has been around for a long time; the name becomes a guarantee of service. Unfortunately, it can happen that not every reputed company cares for an individual consumer and this could be true of some of the biggest names in the market. Ask Dwarikanath Baranwal of Varanasi (UP). He did not expect that purchase of an ordinary pressure cooker will generate so much pressure for himself even though he was dealing with a wellknown reputed company.

Around 2012-13, Mr Baranwal purchased a pressure cooker worth Rs980 of the well-known brand ‘Hawkins’. The cooker turned out to be defective d f and d so he h approached hd Hawkins for replacement. As the company was not responsive, Mr Baranwal approached the district consumer forum. The forum directed Hawkins to pay Rs980, besides a compensation of Rs3,000. Mr Baranwal was also awarded litigation cost of Rs2,000. He was relieved that his stand had been vindicated as his claim was upheld by the district forum. However, his happiness was shortlived as he soon realised that Hawkins was in no mood to redress his grievance. Instead of complying with the order passed by the district forum, Hawkins chose to file an appeal against the order. Much to cheer of Mr Baranwal, the state commission concurred with the finding of the district forum and dismissed the appeal of Hawkins. Hawkins should have gracefully accepted the fact that two statutory bodies had upheld the contention of the complainant in a matter involving a paltry amount. Instead, it opted to file an appeal; but the when it did file the appeal, it was beyond the time limit. Hawkins had to satisfy the National Consumer Disputes Redressal

Commission (NCDRC) about the reasons for the delay in filing the petition and seek condonation for the delay in filing. The counsel for Hawkins contended that the 47 days delay in filing of the petition was unintentional. In fact, the company claimed that “the delay took place because of bureaucratic procedure involving taking of legal opinion and getting permission from the headquarters of petitioner-company to file the revision petition.” By taking such a stand, Hawkins had shown itself in poor light. NCDRC made references to several cases, including some well-known judgements of the Supreme Court on the subject of condonation. After considering the detailed arguments placed before it, NCDRC said that Hawkins “appears to be taking advantage of its financial clout in trying to defeat the benefit of concurrent finding of the fora below. Therefore, we do not find any reason to condone the delay. Application is accordingly dismissed. As a consequence, the revision petition is also dismissed as barred by limitation. Hawkins kept on (Hawkins Cookers losing in different Ltd vs Dwarikanath consumer courts but Baranwal, judgement was pronounced on continued to fight, 22 September 2017). trying to deny a few It is noteworthy thousand rupees of that NCDRC has specifically claim to its customer remarked that the company seemed to be taking advantage of its financial clout and thwarting the efforts of the complainant to get justice. This is also evident from the fact that the company would have spent a large sum on fighting before various authorities while refusing to pay the meagre a amount of Rs5,980/- to its customer. Therefore, every consumer should always be alert and not get carried away by big and well-known names; the true character of a company is known by the treatment it gives to its customers who approach it with a complaint. 

SD Israni is a corporate lawyer & Fellow of ICSI. Email: [email protected]

MONEYLIFE | 13-26 Oct 2017 | 58

Legally Speaking.indd 2

06-10-2017 11:27:17

Pathbreakers.indd 2

06-09-2017 16:24:34

TECHNOLOGY

Is Protection from Data Leaks Possible? No government can be trusted to put data security ahead of its surveillance needs. The best you can do is minimise data leakage from your side, advises Yogesh Sapkale

I

n September 2017, Equifax, the credit bureau, reported a serious data breach that affected 143 million US customers or about 44% of the country’s population. This breach into one of the most sophisticated data centres gave hackers easy access to every piece of information of customers, like full name, social security number, date of birth, addresses, and driving licence number. Hackers can use this information to impersonate and dupe the person, while putting entire blame on the very person whose ID they have used. This is the stark reality of the digital age where more than 99% people blindly believe that all their online data is safe and secure. In the Indian context, the same blind faith can be seen in the statements of Union ministers about data storage of Aadhaar or the unique ID (!) number. Those who understand technology do not believe such statements or trust the government to put security ahead of its ever-growing need for surveillance. Especially, when the same set of politicians who opposed Aadhaar before coming to power are zealously enforcing the UID number for everything. Coming back to data breaches and data leakages, your data is protected as long as it is in your possession. When the data is not in your possession, all you can do is to just pray! This is because, for all those who have access to your data, you are just a product which needs to be sold in the market. In such a situation, you are not important and your consent, willingness or even your right to privacy does not matter. You may have heard someone saying ‘data is the new oil’. Yes, that is true. Your personal information is very valuable and that is why you are lured and even threatened (by government!) to part with your private information and data. All this collected data is then analysed and sold as classified information to buyers at a premium. As per reports, there could be over 3,000 data-

brokers across the world, who are collecting, storing, analysing and then selling your personal information for a hefty fee. Citizens believe that government regulation and legislation can protect them. But there is not much hope on this front and you will have to make sure you do not share your personal data with anyone, including the government. Share data only on a ‘need to know’ basis. If the government ‘agency’ threatens you into sharing your permanent account number (PAN), share only that number and not any other information. The same applies to other private parties. Even when you install an app on your mobile device, make sure you read all the information about the app. It is important to know what information the app can access from your device. Also, if possible (it can be done through a privacy guard available on some operating systems), make sure that the app is given bare minimum access for working. For example, an app for ‘torch’ does not need access to your contacts or gallery. So disable this access. If the app does not work without gaining such access, simply uninstall it from your mobile. You do not require a snooping app on your mobile device in any case. Remember, you or any organisation or institution, cannot protect your data forever from breaches. However, what you can do is to minimise leakage of data from your side. Start with social media. Remove all the information that is not required for you to use the social media account. For example, remove your mobile number or other contact details from Facebook. You can still access it through your email ID. If possible, create a separate email ID for your social media presence or for everything that does not affect you financially. Be safe until the next data breach happens and pray it does not affect you! 

MONEYLIFE | 13-26 Oct 2017 | 60

Technology.indd 1

05-10-2017 15:42:42

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The skyscraper that houses BSE hadn’t yet come up. There used to be a trading ring, where brokers and jobbers struck deals, located in the adjacent three-storied structure. The ring was a reserved area, open only to jobbers and brokers. Harshad was just an onlooker. But he had a burning desire to get in and do deals. He cajoled the doorman and stepped in to watch how the world of the stocks spun on its invisible axis. That afternoon a new chapter began in the life of Harshad Mehta. A totally unfamiliar world that would be his kingdom ten years later...

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Scam Ad.indd 1

21-10-2016 18:07:06

BOOKS

THE FIX

Libor: The Big Fat Lie

W

estern financial markets are often characterised by a colossal failure of supervision, every few years. Whether it is the Savings & Loans scam in the 1980s, the insider trading scandal of the late-1980s, the accounting scandal post dot-com bust in early-2000 or the bursting of the housing bubble in the mid-2000, companies, traders and bankers have repeatedly gamed the system and made millions. The supervisory failure is so routine and regular that it does not shock people anymore. But fixing the London Interbank Offered Rate? Even for the world-weary, it was a shock. It all started on 16 April 2008 when The Wall Street Journal printed a story on its front page with the headline “Bankers Cast Doubt on Key Rate Amid Crisis”. Written by Carrick Mollenkamp from Fleet Street, London, it began: “One of the most important barometers of the world’s financial health could be sending false signals. In a development that has implications for borrowers everywhere, from Russian oil producers to homeowners in Detroit THE FIX to, bankers and traders are LIAM VAUGHAN, expressing concerns that the GAVIN FINCH London Interbank Offered Wiley Rate, known as Libor, is Pages216; Rs1,772 becoming unreliable.” That was a serious understatement. Libor was actually being rigged with impunity. Libor is a benchmark of interest rates that the world’s leading banks charge each other for short-term loans. It was supposed to be ‘the world’s most important number’, to which more than $300 trillion of mortgages, loans and derivatives were pegged. And, yet, a close network of traders and brokers was manipulating this number on which a substantial part of the Western economy depended, before getting caught in 2012. Liam Vaughan and Gavin Finch’s The Fix tells us the story of this monumental scandal. The most obvious question is: How was Libor getting manipulated? The starting point was the primitive way Libor was calculated. The rate was an average of different

banks’ estimates of how much they thought they would have to pay for funding. As the authors write, the “big flaw in Libor was that it relied on banks to tell the truth but encouraged them to lie. When the 150 variants of the benchmark were released each day, the banks’ individual submissions were also published, giving the

From the first weeks of his probation in the summer of 2006 until he walked out the door in September 2009, Hayes and his colleagues had made more than 2,000 documented requests on at least 570 days. The trader had sought to manipulate Libor about three-quarters of the times he was in the office and made almost no attempt to hide it world a snapshot of their relative creditworthiness.” Those making their firm’s Libor submissions “were prevented from deviating too far from the truth because their fellow market participants knew what rates they were really being charged.” The central character in all this was Tim Hayes. Sometime in 2006, Hayes, a trader with UBS Securities based in Tokyo had figured out how to rig Libor. When he was a junior trader in London, Hayes “had got to know several of the 16 individuals responsible for making their bank’s daily submission for the Japanese yen.” He realised that these guys relied on inter-dealer brokers, the middlemen involved in all trades, on what rate to submit each day. “In the opaque, over-the-counter derivatives market, where there is no centralised exchange, brokers are at the epicentre of information flow. That puts them in a powerful position. Only they can get a picture of what all the banks are doing. While brokers had no official role in setting Libor, the rate-setters at the banks relied on them for information on where cash was trading.” Hayes cultivated them, bribed them to submit rates 

MONEYLIFE | 13-26 Oct 2017 | 62

Book Review.indd 2

06-10-2017 14:48:12

BOOKS

 according to his

“It is the rate at which banks do not lend to each other... it is not a rate at which anyone is actually borrowing.” Mervyn King, Governor of the Bank of England, in late-2008 on Libor

market positions, which came especially handy for him in the crisis of 2008, when, incredibly, instead of the rate shooting up (due to the liquidity crisis), Libor indicated that it would fall. This helped Hayes survive the 2008 crisis as he offloaded his positions based on rigged rates. In 2009, Hayes left UBS and joined Citibank, lured away for a $3 million

bonus by Chris Cecere. Among those who read the WSJ article on Libor was Vince McGonagle, working at the enforcement division of the Commodity Futures Trading Commission (CFTC) in Washington for 11 years. He asked his staff to put together a dossier and decided to launch an investigation. Earlier, in March, economists at the Bank for International Settlements, a group created by central banks around the world, had published a paper that identified unusual patterns in Libor during the crisis. However, the study concluded that these were “not caused by shortcomings in the design of the fixing mechanism.” Sometime in the afternoon of 8 December 2009, Cecere felt that the six-month yen Libor was too high. When he checked the submissions from the previous day, he was surprised to see that Citigroup had put in one of the highest figures. “Cecere contacted the head of the risk treasury team in Tokyo, Stantley Tan, and asked him to find out who the yen-setter was and request that he lower his input by several basis points. It turned out the risk treasury desk in Canary Wharf was responsible for the bank’s Libor submissions,” write the authors. Tan spoke to the London office to consider moving the quotes lower. However, the risk management group in London didn’t budge. Cecere asked Tan to ask London again and was rebuffed by Andrew Thursfield, Citigroup’s risk head. Hayes tried to work his contacts in London but failed. Not only would Thursfield not oblige but, in March 2009, he gave a presentation via video link to investigators on the rate-setting process. Hayes tried to push harder and got reported by Citibank officials in London. After this, the scandal unravelled quickly, as CFTC closed its net and even the brokers stopped cooperating with Hayes.

Finally, Deutsche Bank, UBS, Barclays and other banks paid up a fine of a few billion dollars and just one person went to jail: Tom Hayes, arrested in 2012 and convicted in 2015 for 14 years, which was reduced to 11. This is a compelling story of the Libor scandal told through Hayes, the obsessive high-risk trader, later diagnosed with Asperger’s disease, who bent the rules, bullied the brokers and bribed them to fix Libor to his advantage. The authors narrate the crime and one punishment in a factual manner, without getting into value judgement on whether others in the game deserved to be convicted as well. Separately, it transpired that even foreign exchange rates were manipulated, between December 2007 and January 2013, in which traders in UBS, Bank of America, Citigroup, JP Morgan, Barclays and the Royal Bank of Scotland were involved. Later, six banks were fined $5.6 billion over this separate scam. The book reads like a novel where characters, events and locations come alive with vivid descriptions. It opens with a secret meeting in a bar with a source, who identifies Hayes as the villain of Libor manipulation setting the tone of for a gripping thriller. But the real villains of the saga are British Bankers’ Association (BBA), Financial Services Authority (FSA), UK, and Bank of England (BoE). BBA continued to The Libor scandal “dwarfs claim, long time by orders of magnitude after the WSJ article, any financial scam in the that the Libor was history of markets,” — reliable even in times Andrew Lo, professor of of financial crisis. finance, MIT In October 2008, the International Monetary Fund found that “although the integrity of the U.S. dollar Libor-fixing process has been questioned by some market participants and the financial press, it appears that U.S. dollar Libor remains an accurate measure of a typical creditworthy bank's marginal cost of unsecured U.S. dollar term funding.” The minutes of the Bank of England show that deputy governor Paul Tucker was aware as early as in November 2007 of concerns that the Libor was being manipulated. In early 2008, the then New York Fed President Tim Geithner wrote to BoE chief Mervyn King to ‘fix’ Libor. But BoE didn’t act on it. FSA couldn’t care less about Libor. This is a short, fascinating book and a must-read. — Debashis Basu 

63 | 13-26 Oct 2017 | MONEYLIFE

Book Review.indd 3

06-10-2017 14:48:47

MONEY FACTS STOCKS

INDIAN MARKET TRENDS

FUND FLOWS

The Sensex dipped 1% and the Nifty ended flat during the fortnight ended 4 October 2017. ML Large-cap Index, ML Mega-cap Index and ML Small-cap Index ended flat, while ML Mid-cap Index rose 1%. ML Micro-cap Index fell 3%. 

Foreigners: Foreign institutional investors were net sellers of equities (Rs12,221.76 crore). They sold shares worth Rs48,475.40 crore. 

Share Prices Index, April 2017=100

0 -1,075

120

-2,150

FII Net Investments (Rs Crore)

-3,225

110

-4,300 100

-5,375 4 Oct-17

25 Sep-17

Indians: Domestic institutional investors were net buyers of equities (Rs13,803.89 crore). They bought shares worth Rs34,266.39 crore. 

90

80 Apr-17

Jul-17 ML Large-cap ML Mid-cap

ML Small-cap ML Mega-cap

Oct-17

DII Net Investments (Rs Crore)

4,160

ML Micro-cap

Nifty Sensex

5,200

3,120

22 Sep

04 Oct

+/-

2,080

ML Mid-cap Index

107.65

108.43

1%

1,040

ML Large-cap Index

106.50

106.53

0%

ML Mega-cap Index

110.66

110.61

0%

ML Small-cap Index

102.70

102.36

0%

9,964.40

9,914.90

0%

31,922.44

31,671.71

-1%

7,600

94.09

91.31

-3%

7,480 7,360

Index

Nifty Sensex ML Micro-cap Index

0

GLOBAL MARKET TRENDS FTSE

Mega-cap Gainers/Losers

22 Sep

04 Oct

Change

Avanti Feeds

1999.75

2402.3

20%

661.55

573.9

-13%

22 Sep

04 Oct

Change

Graphite India

352.85

449.7

27%

Kwality

113.55

97.65

-14%

22 Sep

04 Oct

Change

403.75

603.8

50%

Index

157.6

138.75

-12%

FTSE

Reliance Capital Large-cap Gainers/Losers

Mid-cap Gainers/Losers Ador Welding Tourism Finance Corpn. of India Small-cap Gainers/Losers Orient Press Gammon India Micro-cap Gainers/Losers Raj Rayon Inds

22 Sep

04 Oct

Change

96.15

135.9

41%

8.23

5.97

22 Sep

04 Oct

0.22

0.3

7,240 7,120 7,000 Apr-17

(All Prices in Rs)

16.44

11.5

Jul-17

Oct-17

The FTSE, Hang Seng, NASDAQ Composite and Nikkei rose 2% each, while Taiwan Weighted and Shanghai Composite ended flat. 

Hang Seng

22 Sep

04 Oct

+ / (-)

7,311

7,468

2%

27,881

28,379

2%

6,427

6,535

2%

Nikkei

20,296

20,627

2%

-27%

Bovespa

75,390

76,591

2%

Change

S&P 500

2,502

2,538

1%

Korean Composite

2,389

2,394#

0%

10,450

10,469*

0%

3,353

3,349#

0%

36%

NASDAQ Composite

Taiwan Weighted Bharati Defence & Infrastructure

4 Oct-17

25 Sep-17

-30%

Shanghai Composite *3 Oct 2017, #29 Sep 2017

MONEYLIFE | 13-26 Oct 2017 | 64

Money Fact.indd 2

06-10-2017 15:13:11

MONEY FACTS STOCKS



What’s H

T

ML SECTORAL TRENDS

Oil and gas companies were a mixed bag during the fortnight. GAIL (India) Ltd, Hindustan Oil Exploration Company, Oil India and Oil & Natural Gas Corporation advanced 9%, 8%, 7% and 5%, respectively.  Companies

ML Oil & Gas Index

22 Sep

04 Oct

+/-

398.55

436.35

9%

85.55

92.30

8%

Oil India

328.85

351.30

7%

ONGC

164.45

172.10

5%

Indraprastha Gas

1,436.95

1,451.10

1%

Selan Exploration

186.80

179.55

-4%

GAIL (India)

110 Hindustan Oil

100

90

80

Tide Water Oil Co

Apr-17

Jul-17

6,587.5

6,311.30

-4%

Oct-17

Shares of oil & gas companies and petrochemicals companies advanced 6% each, while shares of non-ferrous metals companies and hotel companies advanced 5% each. Stocks of education companies, paints companies and sugar companies fell 3% each. Stocks of engineering, procurement, construction and infrastructure companies also fell 3%.  ML Sectoral Trends Oil & Gas

6% Trading

-5%

Petrochemicals

6% Education

-3%

Non-ferrous Metals

5% Paints

-3%

Hotels

5% Con_EPC_Infra

-3%

Industrial Intermediates

3% Sugar

-3%

What’s



All Prices in Rs

RURAL INFLATION

N T

Engineering, procurement, construction and infrastructure companies were punished. Gammon India, Pratibha Industries, Unity Infraprojects and C&C Constructions declined 27%, 16%, 10% and 9%, respectively.  Companies

22 Sep

04 Oct

+/-

Gammon India

8.23

5.97

-27%

ML Con_EPC_Infra Index

Pratibha Industries

9.15

7.73

-16%

110

Unity Infraprojects

5.70

5.15

-10%

C&C Constructions

47.55

43.25

-9%

Prakash Constrowell

4.63

4.23

-9%

Ion Exchange (India)

525.00

479.95

-9%

Tantia Constructions

16.50

15.25

-8%

JMC Projects (India)

417.35

385.80

-8%

Hindustan Const Co

35.00

32.50

-7%

6.33

5.96

-6%

GTL Infrastructure

Combined inflation for urban and rural areas in August 2017 rose to 3.36% from 2.36% in July 2017. Inflation in rural areas rose to 3.30% in August 2017 from 2.41% in July 2017. Food & beverages inflation rose to 1.88% in August 2017 from 0.65% in July 2017 in rural areas. Milk & milk products inflation decreased

Inching Up?

105

6.00%

100 4.50%

95

3.00%

Apr-17

Jul-17

Oct-17

All Prices in Rs

1.50%

BULK DEALS Date

Company

Aug-16 Buyer

Seller

29 Sep-17 GOCL Corporation

Hinduja Power

Dilipkumar Vishindas Lakhi

26 Sep-17 Monnet Ispat Energy

Sri Silverdale Opportunities

APMS Investment Fund

4.03

04 Oct-17

The Arj Investment

Villa Trading Company Pvt

3.90

27 Sep-17 LKP Finance

India Max Investment Fund

Prime India Investment Fund

1.25

25 Sep-17 Aditya Vision

NNM Securities Pvt

JS Enclaves Pvt

0.39

04 Oct-17

Kedia Prabha B

Garnet International

0.24

Vijay Lakhotia

0.17

Saurashtra Cement

Pankaj Polymers

27 Sep-17 Tirupati Industries (India) Rahul Lakhotia

Rs Cr 23.29

Feb-17

Aug-17

to 3.03% in August 2017 from 3.34% in July 2017. Inflation for clothing increased marginally to 5.44% in August 2017 from 5.17% in July 2017. For fruits, inflation increased sharply to 5.35% in August 2017 from 3.83% in July 2017. For sugar & confectionery, it decreased to 7.76% in August 2017 from 8.79% in July 2017. 

65 | 13-26 Oct 2017 | MONEYLIFE

Money Fact.indd 3

06-10-2017 15:13:26

PS End This Obsequious Protocol Now!

A

few years ago, the head of a leading public sector bank startled us with this admission: ‘We may not have a good salary and perks but the one thing you have in plenty in a public sector undertaking (PSU) is staff—there are always dozens of people around you.’ One of the things these hangers-on do is to suck up to the bosses. It is a standard protocol for a group of seniors niors to drop all work and land up at airports orts to receive and send-off their bosses.. This obsequiousness is unavoidable for those who want promotions; heads of State-owned institutions, who have e gone up the ladder doing exactly this, his, are unwilling to put an end to this colossal wastage of valuable time. And so it was that a bunch of top railway officials landed up at the e Mumbai airport to receive Ashwini Lohani, chairman of the Railway Board, after 23 people had been

Is Blue Whale for Real?

T

he Blue Whale online game, driving youngsters to suicide, has been widely discussed by the media in the past few months. The government has also directed major social media giants to disable any links providing access to the suicidal trap game. The deadly game reportedly assigns nearly 50 tasks to those who play it, which include physically harming themselves (providing evidence of it) before moving on to the next level. The final task involves suicide. Advocate Mahendra Limaye, who has been crusading relentlessly against cyber-fraud and lack of cyber-literacy, has an interesting

staff to give him an entire list of officers who had received him and promised action against them. Mr Lohani told the media that he had ‘finished the protocol culture at Air India’ and will ensure that it is ended in the railways too. Mr Lohani needs a big g ovation for this move. Even if he achieves n nothing else at the railways, ending this dubious protocol alone with mean saving savin thousands of man-hours of sen senior management time which should shou have been employed in ensuring that tha critical safety-related work is done. We now need to urge the prime minister ministe to this culture take note of this and end thi across PSUs as well as a the mindless protocol protoco attached parliamentary to 20-odd parlia committees that are waited upon by senior of management o Ashwini Lohani, PSUs. 

crushed to death at Elphinstone Road Station in Mumbai because of their criminal negligence in providing basic infrastructure. Fortunately, this story has a positive twist. Mr Lohani had made it clear that he should not be received at the airport. p Clearly, the ‘senior official and heads of departments’, who turned up, believed it was a display of fake modesty. But Mr Lohani blasted the officials for their red-tape and ‘babu culture’, reports media. He asked his

chairman, Railway Board

question. He asks why the media has failed to provide a fact-based follow-up of the cases of Blue Whale-driven suicides reported by them. Advocate Limaye is, probably, the first to question why the entire digital footprint of this game has even been reported by the police and

suspects that the hue and cry about the game itself may be false or exaggerated. He further says, “The game is not

available on any website nor are its links available on any popular social media sites like Facebook, WhatsApp or Twitter. Nor do any search engines like Google and Yahoo have any traces of links leading to Blue Whale game.” Even the Russian social networking site VK, which was blamed for facilitating access to the Blue Whale game, does not have any notable presence in India, he says. In fact, he wonders if the game even exists, since it has never been reported to the cyber-crime helpline that he runs. Is this another big hoax that has been played on the media? What does it say about those reporting this Blue Whale game? Will anyone provide evidence to contradict advocate Limaye’s charge? 

MONEYLIFE | 13-26 Oct 2017 | 66

PS.indd 1

05-10-2017 15:36:09

Advertisements.indd 2

02-10-2017 12:44:46

REGISTERED WITH THE RNI UNDER NO. MAHENG/2006/16653. Postal Registration No: MCW/184/2015-2017. POSTED AT PATRIKA CHANNEL SORTING OFFICE, MUMBAI 400001. Date of Publishing 6 October 2017. Date of Posting Alternate Tuesday & Wednesday.

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