New Delhi, September 17
The Cabinet's decision to allow foreign carriers to take up to 49% stake in Indian carriers appears to be unfolding contrary situations day by day. It seems that unlike some earlier predictions, Vijay Malaya-promoted Kingfisher Airlines may not after all be such a big beneficiary of this latest tweak in the aviation policy. SpiceJet, backed by media baron Kalanithi Maran, could be a beneficiary as "given its 18% share of the domestic market and unimpaired balance sheet," says an aviation report by Kotak Institutional Equities.

The change in policy is unlikely to solve problems of debt-laden Indian carriers and banks because more reforms are needed to rationalise taxes on ATF to make the sector operationally viable. But given the current situation, SpiceJet, or Wadia Group-promoted GoAir from the unlisted space, could be the biggest beneficiary of the new development, says the report.

Kotak says SpiceJet could provide an attractive entry point for a foreign airline given its over 18% share of the domestic market and relatively unimpaired balance sheet. After a spell of five consecutive quarterly losses, the carrier posted a net profit Rs 56.15 crore in the first quarter due to significant growth in operational and financial parameters.

Incidentally, the Chennai-based airline had reported a net loss of Rs 71.96 crore in the same period of the previous fiscal. Also, according to the financial institutions, the gross debt of the SpiceJet for FY2012 was Rs 10 billion. Its working capital debt (representative of cash losses) was only Rs 4 billion and the rest of the debt was on account of aircraft acquisitions.

Naresh Goyal, a promoter of second largest Indian carrier Jet Airways (a complex network of companies and financial arrangements) -and Rahul Bhatia's InterGlobe Enterprises-owner of IndiGo which already have the US-based Caelum Investments as its 48% shareholders have never been keen on allowing foreign airlines to invest in Indian carriers.

Now according to Kotak: “Jet Airways will not gain as it is already in violation of the FDI norms as the promoter (with 80% stake) is classified as an overseas corporate body. Kingfisher because of large liabilities and IndiGo with 48% foreign ownership as per media articles will not gain anything from it.”

While earlier also the FDI limit was 49%, but investments by foreign carriers were not allowed.

Experts believe unless economic reforms-particularly to rationalise taxes on ATF which makes it 40% higher versus international prices on an average for Indian carriers-the new policy may turn to be a futile exercise. State sales tax on ATF (25% on an average) is the largest component. So either states should be convinced to reduce taxes or ATF moved to 'declared goods' category so as to attract uniform 4% sales tax across the country.

More than opening up the sector for foreign airlines, Kotak seems more enthused by return of pricing discipline in the sector. "With domestic jet fuel prices at an all-time high and declining passenger numbers, there are no immediate benefits. Nevertheless, pricing discipline means that profits can scale up quickly in the event of correction in oil prices or in case Rupee appreciates," it says. 

New Delhi, September 17
Investment bank Morgan Stanley on Monday set a new target of 23,069 points by the end of December 2013 for the 30-share index BSE Sensex. The new target implies an index trading at 14.9 times estimated 2014 earnings.

The target surpasses an all time high of 21,206.77 points hit by Sensex on January 10, 2008. "Conditions for a new bull market are getting slowly satisfied. The yield curve has stopped flattening, liquidity is improving, valuations appear supportive and profit margin expansion is a growing possibility in the coming months," the investment bank said in a note.

The bank expects a domestic earnings growth of 10 per cent in fiscal 2013 and of 19 per cent in fiscal 2014. Morgan Stanley has said that cyclicals are "ultra cheap," and prefers "quality" cyclicals over defensives.

As a result, the investment bank is "underweight" on consumer staples in its model portfolio, while raising energy and materials to "overweight" and taking industrials to "neutral." Morgan Stanley has also cut technology exposure in its portfolio by 100 bps.

Deutsche Bank and Citigroup also raised their targets for Sensex after the government announced reforms last week, including opening up the country's multi-brand retail sector to foreign direct investment. Deutsche Bank raised its December 2012 target for the BSE index to 20,000. Citigroup raised its BSE target to 19,900 for June 2013 from its previous target of 18,400 for December. — Reuters

Mumbai, September 17
The overall advance tax realisation from the top 100 companies in the financial capital during the second quarter logged in a healthy 10% rise.

This was driven by handsome payout by top corporates like SBI, LIC and HDFC Bank, which helped negate a 15% drop by the largest corporate RIL.

The overall growth in the top 100 corporate tax payers from the metrapolis, which contributes to over 30% of income collection annually, comes even as there has been gloomy news on the economic front.

On a half-yearly basis, there has been an 11% jump among the top 100 list, a senior income tax department official said here today.

Advance tax is a staggered way of paying income taxes through the year to avoid piling up of tax liability for the year-end. It is generally taken as a barometer of corporate earnings for the period.

The country's largest lender State Bank's advance tax payment was up 10.30% to Rs 1,820 crore from Rs 1,650 crore it had paid a year ago, the official said, adding its competitors ICICI Bank (Rs 815 crore against Rs 650 crore) and Bank of Baroda (Rs 620 crore against Rs 600 crore) also did well during the reporting period.

The second largest private sector lender HDFC Bank, which is the most valued bank by market capitalisation, showed an impressive 37.5% rise in payout, with the amount going up to Rs 1,100 crore from Rs 800 crore. For life insurance giant LIC, it jumped to Rs 1,300 crore from Rs 1,160 crore, the official said.

However, in the case of Mukesh Ambani-led Reliance Industries, which is the country's largest company by market value, September quarter tax outgo declined 15% to Rs 1,530 crore from Rs 1,800 crore in the year-ago period, the official said.

Cement companies, which have otherwise been affected due to sluggish growth on the infrastructure sector, also showed a jump in tax outgoes. While Ultratech posted a 100% rise in advance tax payout to Rs 200 crore, Ambuja Cement's Rs 160 crore was an over 68 % increase as compared to the same period of last year, the official said.

It may be noted that the construction sector continued to grow in the second quarter due to the delayed monsoons, which helped the cement sector.

The Tata Group company TCS, which is the country's largest software exporter, witnessed a 35% increase at Rs 812 crore, while Tata Power's payout rose a tad to Rs 75 crore against Rs 70 crore, and Tata Chemicals paid Rs 60 crore this quarter against Rs 53 crore a year ago. Among other conglomerates, the tax outgo of diversified Aditya Birla Nuvo declined to Rs 30 crore from Rs 32 crore last year, the official said.— PTI

New York, September 17
Demand for Apple Inc's new smartphone, the iPhone 5, has exceeded initial supply, making it the fastest-selling iPhone ever and pushing the delivery date for some pre-orders to next month.

Apple said on Monday that pre-orders for the new mobile device surpassed 2 million in the first 24 hours. A majority of pre-ordered phones will be delivered as planned by September 21, but many will not be delivered until October, it said.

Pre-orders "have shattered the previous record held by iPhone 4S, and the customer response to iPhone 5 has been phenomenal," said Philip Schiller, Apple's senior vice president of worldwide marketing.

It is not unusual for Apple products to sell out the first day. Orders for the previous iPhone, the 4S, the last product the company introduced before the death of co-founder Steve Jobs, surpassed 1 million in the first 24 hours, beating Apple's previous one-day record of 600,000 sales for the iPhone 4.

Apple's US store, at www.apple.com, on Monday morning showed pre-orders for the iPhone 5 would take two to three weeks to ship. AT&T, the No. 2 US mobile service provider, said it set a sales record with the iPhone 5 over the weekend, making it the fastest-selling iPhone the company has ever offered.

AT&T did not disclose how many iPhones it sold but said the iPhone 5 was still available for pre-order and would go on sale September 21 at AT&T retail stores. The phone's other carriers, Verizon Communications Inc and Sprint Nextel Corp, also showed similar delays in shipping the phone. Topeka Capital Markets analyst Brian White said demand was well above expectations.

"Given the much stronger-than-expected iPhone 5 pre-order sales, we expect a meaningful jump in the three-day sales results for the iPhone 5 compared to the over 4 million iPhone 4S weekend sales last year," he said. Although more consumers were opting for the pre-order method, White still expects long lines Friday when the phone goes on sale in stores.

Apple began taking orders for the iPhone 5 at midnight Pacific time September 14. Shipping dates for the slimmer, faster smartphone slipped by a week within an hour of the start of pre-orders.

Apple previously said it would start shipping the iPhone 5 by Sepember 21 in the USand most of the major markets of Europe such as France, Germany and the UK. It goes on sale September 28 in 22 other countries. — AFP

Mumbai, September 17
India's reforms announced last week at first glance appear credit positive. But there is still considerable execution risk given the Congress-led coalition's divisions and recent track record of policy reversals, says Fitch Ratings. Broader concerns regarding the weak and inconsistent regulatory framework remain.

These concerns will remain material for economic performance ahead of elections in 2014, weighing on the sovereign credit profile. Fitch assigned Negative Outlooks to India's 'BBB-' ratings in June 2012. We await evidence of implementation of the measures on the ground and will also look to see how the economy reacts.

The government has increased the amount of foreign-direct investment permitted in a range of industries and, most importantly, has resolved its long-running dispute regarding multi-brand retail foreign-direct investment (FDI). This demonstrates some commitment to growth-enhancing reforms despite recent political deadlock.

The compromise on retail FDI is to hand over approvals to individual states. These can now grant approval to multi-brand FDI of up to 51% in cities with a population over 1m as long as at least half of the foreign investment goes toward back-end infrastructure, such as manufacturing, design and distribution. Large states including Delhi, Maharashtra and Andhra Pradesh have already said they will approve such investments.

New rules also allow for an increase in foreign ownership in the power sector. Fixing the poor financial condition of utilities so that they can upgrade infrastructure and improve operating performance is important in addressing a capacity constraint on the Indian economy's growth potential.

The government has also altered fuel subsidies so that there is less of a difference between the price of diesel and petrol and the subsidy is more accurately directed at the poor. If implemented fully, these measures should help contain the fiscal cost of fuel subsidies this fiscal year, although India's budget remains exposed to commodity prices more broadly through food and fuel subsidy programmes. Fitch projects the government deficit at 5.7% in the year to March 2013, missing the budget target of 5.1%.

Recent measures have mainly focused on economic growth and haven't added clarity to the government's plans regarding its own balance sheet and fiscal consolidation. Some plans, such as asset sales, appear insufficient to reach the government's target. The government approved the sale of around 10% of four companies to raise Rs 150bn ($2.8bn). This will leave the government the clear majority owner of all these companies and only raises half of the budgeted target for the next fiscal year of Rs 300bn. Fitch believes prospects for meaningful action on fiscal consolidation before the general election in 2014 are limited. — Reuters

New Delhi, September 17
Allowing 51 per cent FDI in multi-brand retail can attract investments of up to 3 billion dollar in India in the next two years, according to consultants.

Stating that the government's decision to go ahead with FDI in multi-brand retail sends positive signal to foreign retailers waiting to enter India, consultancy firms Tecnova, KPMG and Ernst & Young are unanimous that the latest policy reforms will stimulate the sector's growth.

"In the next maximum of two years, foreign investments of around $ 2-3 billion in the multi-brand segment can be expected after the decision," Tecnova India president Ajay Muttreja told PTI.

Tecnova specialises in cross-border market entry strategy and had helped the likes of global luxury house LVMH set up shop in India. "These investments will come from mid and large sized companies, not only in the West but even from companies in the far East," he added.

KPMG India Partner (transaction services) Mohit Bahl said even the single brand segment will benefit from the latest government move. "In single brand retail, opportunities will be immediate and we may see some investments in the next 12 months," Bahl said, adding in the multi-brand retail, the benefits will be far reaching and of longer period.

Muttreja of Tecnova said in the single brand retail the investments may not be as big as those in the multi-brand since many companies are already present in India. Ernst & Young Tax Partner Gaurav Karnik said relaxation in FDI norms is a good thing for the country.

"Because of investments coming in and development of infrastructure, there will be more employment. Supply chain system will also improve and it will help farmers," he added. — PTI

New Delhi, September 17
Trouble seems to be brewing again in Air India, this time with pilots of erstwhile Indian Airlines unionised under the Indian Commercial Pilots Association (ICPA) issuing a legal notice to the airline CMD Rohit Nandan to protest against recent changes in their flight duty hours through a new flight duty time limitations (FDTLs).

The legal notice argues that the flight duty time limitations of ICPA pilots are fixed under a bilateral agreement between the union and the management and that "all these settlements are within the knowledge of the company and the government (DGCA), and therefore, no unilateral alteration is permissible"

Civil Aviation Minister Ajit Singh earlier this month had asked Air India to implement FDTL of 125 hours per month for pilots (as mandated by sector regulator DGCA), instead of 90 hours a month as per their union agreement, to increase flying-time and in turn utilisation of fleet and manpower. A recent study by the ministry had found that Air India pilots were flying just 6.5 hours a day against the laid down norm of nine hours.

A letter notifying that the flights were being operated by ICPA members "under

protest and without prejudice to their rights" has also been sent to GM operations (In-charge Airbus Fleet), according to the ICPA.

Observing that pilots were not aware of the norms and regulations of the new scheme, the statement said "in these circumstances, the ICPA states that any inadvertent violation on the part of our pilots of the applicable norms and regulations is entirely at the risk and expense of the management."

Ministry sources said that there was no question of rolling back the new rules and that the legal notice would be responded to in the same way-legally.

Meanwhile, ICPA pilots maintained that they were in no mood to strike work and disrupt operations like their Air India counterparts from the IPG had when they went on a strike demanding exclusive rights to flying Dreamliners. ICPA pilots said that all they wanted were amicable bilateral consultation on the matter.

On the other hand, Civil Aviation Minister Ajit Singh has ordered immediate suspension and initiation of major penalty proceedings against six senior officers of the Airports Authority of India (AAI).

A CBI inquiry has found these officers involved in committing irregularities and favouring Bhadra International India Ltd, in award of contracts for ground handling services Chennai and Kolkata airports.

New Delhi, September 17
Indian software services provider Tech Mahindra on Monday said that it has acquired 51% stake on a fully diluted basis in Comviva Technologies for Rs 260 crore.

Comviva Technologies is a Bharti Group company providing mobile value-added services (VAS). The deal will be subject to regulatory approvals. The new brand identity will be Mahindra Comviva.

As part of the arrangement, Tech Mahindra will make an upfront payment of Rs 125 crore towards the stake acquired and the balance amount of Rs 135 crore will be paid out over a period of five years based, on Comviva achieving mutually agreed performance targets. The current promoters will continue to hold a 20% stake on a fully diluted basis in Comviva, post the deal closure.

"In addition to the market leading capabilities, this will also add to our relationship with large operator groups across the world," Vineet Nayyar, executive vice chairman, Tech Mahindra, said

Comviva chairman Rakesh Bharti Mittal, said, “We believe that Tech Mahindra, with its deep domain expertise in IT and telecom technologies, is an ideal partner to guide the future growth story of Comviva.