English bs 23 01 2018

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TUESDAY, 23 JANUARY 2018 20 pages in 1 section

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www.business-standard.com

MUMBAI (CITY) ~6.00

VOLUME XXII NUMBER 116

THE MARKETS ON MONDAY

CCh hg # g#

Sensex 35,798.0 Nifty 10,966.2 Nifty futures* 10,992.5 Dollar ~63.9 Euro ~78.3 Brent crude ($/bbl) 68.6## Gold (10 gm)### ~30,040.0

*(Jan.) Premium on Nifty Spot; **Previous close; # Over previous close; ## At 9 pm IST; ### Market rate exclusive of VAT; Source: IBJA

286.4 71.5 26.3 ~63.9** ~78.3** 68.7** ~15.0

WORLD P6

SANOFI AGREES TO BUY US FIRM FOR $11.6 BN

Consumer Sentiments Index

(Base: September - December 2015 = 100)

NEW OPPORTUNITIES

ASHLEY COUTINHO

Mumbai, 22 January

(%)

Forensic departments of large audit firms and independent investigation agencies have been inundated with requests for forensic work following the push to clean up the bad debt mess under the Insolvency and Bankruptcy Code (IBC). According to some estimates, the forensic business linked to the IBC has more than doubled in the past few months, and experts believe it will only increase. The work primarily includes doing background checks on promoters, asset searches, verification of creditors, and forensic monitoring of cash flows. For big accounting firms, this is the icing on the cake as they are already working on bankruptcy cases as insolvency professionals. Checks on promoters Background checks on promoters have surged after the recent amendment to the Insolvency and

Source: BSE-CMIE

PAYROLLS DATABASE AHOY!

10 >

INDIA TO GROW FASTER THAN CHINA IN 2018: IMF Indiaisprojectedtogrowat7.4percentin 2018asagainstChina’s6.8percent,the InternationalMonetaryFund(IMF)saidon Monday,makingitthefastest-growing country.InitslatestWorldEconomicOutlook update,theIMFhasprojecteda7.8percent growthrateforIndiain2019. 4>

THE SMART INVESTOR P12

Nifty nears 11k after heavyweights rally

Stocksendedatrecordhighsforthefourth sessionwiththebenchmarkNiftynearing the11,000-markamidhugeinflowsfrom overseasinvestorsandsharpgainsinindex heavyweightssuchasRIL,TCS,andONGC. TheBSESensexsurged286.43points,or 0.81percent,tocloseat35,798.01.

THE SMART INVESTOR P13

Axis Bank breaks the jinx, net up 25 per cent

Afteraprolongedperiodofnegativestock reactiontoitsquarterlyresults,AxisBank brokethejinxwithitsQ3performance.The stockwasamongthetopgainerson Monday,rising3.5percent.Netprofitrose 25percentyear-on-yearto~7.26billion.

Stocks rise as US Senate votes to end shutdown

StocksandTreasuriesgained,whilethedollar erasedlosses,aftertheUSSenateapproveda Billtofundthegovernment.Allmajorequity gaugesroseafterlawmakersvotedtoenda partialgovernmentshutdown. 6>

> RESULTS

RECKONER

Quarter ended Dec 31, 2017; Common sample of 145 companies (results available of 150) SALES Dec 31, ‘16 Dec 31, ‘17 NET PROFIT Dec 31, ‘16 Dec 31, ‘17

9.4% 12.9%

3,129 billion

7.1% 23%

477 billion

2,772 billion

388 billion

Companies which have reported zero sales are excluded Data compiled by BS Research Bureau; Source: Capitaline

| Audit firms, investigation agencies inundated with forensic work related to IBC | Business linked to IBC has more than doubled in the past few months | Double bonanza for big accounting firms as they also work as insolvency professionals ILLUSTRATION: AJAY MOHANTY

Bankruptcy Code (IBC). This stems from concerns that promoters or their allies might try to buy back the companies at a discounted value through proxy investors. This is especially true when the bidders are overseas entities or come from a seemingly unrelated industry.

Cryptocurrency exchanges face the red flag In some cases, RoC is seeking an undertaking

SOMESH JHA & DILASHA SETH New Delhi, 22 January

T

he banking system is not the only one keeping a safe distance from the existing cryptocurrency business players. Opening virtual currency exchanges has become equally tough, especially when words like bit, crypto, coin, virtual are part of a company name. The Registrar of Companies (RoC), under the Ministry of Corporate Affairs, has stopped registering cryptocurrency exchanges under the Companies Act, 2013. In some cases, the RoC is asking for an undertaking from software development- or information technology-related companies that it will not deal with cryptocurrencies such as bitcoins, it is learnt. “I tried to register my company in December, but the RoC didn’t accept my request. The company’s name had the term ‘bitcoin’ and the RoC said it wouldn’t support it,’’ an executive THE OTHER with an upcoming crypto- SIDE OFTHE currency exchange said. COIN-II Cryptocurrency exchanges are a platform for buying and selling virtual currencies. Around ~100 billion worth of transaction is taking place on average per month on these exchanges in the country, industry estimates suggest. A co-founder of a new exchange platform on the outskirts of Delhi narrated how he struggled with the registration process. Name proposals such as Cryptocoin, Bitmoney and Bankyourcoin were rejected by the RoC. “The registration was finally approved after we applied as a software company without any of the controversial words,” he said, requesting Turn to Page 16 > anonymity.

OPINION

EDIT: THE THREAT OF CRYPTOS

P11

WHAT ARE THESE EXCHANGES? These are online platforms where one can exchange a cryptocurrency for another currency, including fiat currency such as rupee or dollar. After creating an account, a unique digital wallet is given to investors to store cryptocurrency. In India, major exchanges are Coinsecure, Zebpay, Unocoin, Koinex, Coindelta, BuyUcoin, and Bitxoxo

REGULATORY SUGGESTIONS BY INDUSTRY | Allow a self-regulatory authority on the lines of Payment Council of India | Fix minimum capital requirement for setting up exchanges | Provide insurance cover for exchanges | Approve tiered KYC approach, to be tightened with increase in trade volume | Mandate all exchanges to have anti-money laundering software for rupee transactions | Allow companies to file suspicious transaction records with Financial Intelligence Unit

Mumbai-Delhi air route is world’s third busiest now SURAJEET DAS GUPTA

New Delhi, 22 January

BUSIEST ROUTES IN 2017 Route Jeju-Seoul Gimpo Melbourne-Sydney Mumbai-Delhi Fukuoka-Tokyo Haneda Rio de Janeiro-Sao Paulo Congonhas Sapporo-Tokyo Haneda Los Angeles-San Francisco

Source: Oag.com

No. of flights 64,991 54,519 47,462 42,835 39,325 38,389 34,897

FLIPKART’S JABONG EYES LOYALISTS VIA VIP SLOTS

Forensic audit biz soars as firms head for bankruptcy

THE BSE-CMIE TRACKER

Unemployment rate

COMPANIES P2

It is the third-busiest air route in the world, with as many as 47,500 departures and landings last year. Yetdespitereachingthis position,theMumbai-Delhi routecouldfaceserious challengesinsustainingor improvingitthisyear.The reason?Hardlyanyadditional capacityisnowavailableat Mumbaiairporttodeploymore flightsonthisroute. Butwiththedemand growingby10-12percent annually,andwithno possibilityofaddingmore flights,flyerswillsoonfacea hikeinairfaresthisyear. AccordingtoOAG,anair travelintelligencefirmbasedin

theUK,theMumbai-Delhiair routewasthethird-busiestin theworldlastyear,withan averageof130flightsbetween thetwocitieseveryday.In2016, Indiawasnumbersixinthe peckingorderofthebusiest routes,andthiscalculationwas basedonthecapacitydeployed ontherouteoneway.In2017 onlytheJeju-SeoulGimpo route(withover64,991flights) andMelbourne-Sydney(54,519 departuresandarrivals)were busierthanMumbai-Delhi. Airlinessaytheroutemakes upabout10percentoftheir capacityandrevenues,making itbyfarthebiggestmarket. Turn to Page 16 >

BACKPAGE

DOMESTIC AIR TRAFFIC CROSSED 100 MN IN 2017

P20

| Connected parties’ definition under the amended IBC put onus on IRPs, committee of creditors (CoC) to do due diligence | Assets are often held through proxy owners and cannot be linked back to promoters | Preferential and undervalued transactions under scanner

“We are being asked to do checks on the background and linkages of bidders in the majority of cases,” said Reshmi Khurana, managing director and head of South Asia, Kroll. “A thorough assessment of the background of bidders, their intent, source of funds, and past track record has become

critical for the banks while selecting the buyer.” The connected parties’ definition under the amended IBC is quite exhaustive, and the onus is now on insolvency professionals and the committee of creditors to abide by the requirements and carry out the necessary diligence, experts say. “Several Indian companies work through a maze of subsidiaries and associate companies that have complex cross-holding structures and multiple directorships. Also, several companies often do not disclose who the related parties are, even in annual reports. This makes it difficult to ascertain who the related parties are,” said Vikram Babbar, partner, fraud investigation & dispute services, EY India. According to experts, there have been instances in the past when background checks have helped identify siphoning off large funds through dummy or shell companies and the infusion of promoters’ equity by round-tripping of borrowers’ or bankers’ funds. Turn to Page 16 >

AN INDIAN PM IN DAVOS AFTER 20 YEARS Officials greet Prime Minister Narendra Modi on his arrival at the Zurich International Airport to participate in the World Economic Forum (WEF) in Davos on Monday. Modi will be meeting Swiss President Alain Berset in Davos and will later host a dinner for global CEOs. He will deliver the opening plenary address at the five-day WEF Summit on Tuesday. He is also scheduled to have a bilateral meeting with Swedish Prime Minister Stefan Lofven. The theme for this year’s summit is ‘Creating a shared future in a fractured world’. PHOTO: PTI

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