Tuesday, August 25, 2020

Will cancel spectrum allocation if telcos don't pay AGR dues: SC

Topics Adjusted gross revenue | Bharti Airtel | Vodafone Idea

According to the spectrum trading guidelines, the seller of airwaves must satisfy all pending dues before the transaction

After several rounds of hearings and a year later, the Supreme Court has reserved its judgment on the adjusted gross revenue (AGR) case. On the last day of hearing on Monday, the court observed that if telecom companies are unwilling to pay their dues, it would direct the Union government to cancel their spectrum allocation and licence.

While the court’s verdict on the tenure of paying AGR dues is expected to decide the future of Vodafone Idea, its ruling on spectrum held by telcos under insolvency will be critical for the telecom industry, analysts said.

The judgement on the aspect of additional liabilities, if any, will determine the payout for Reliance Jio and Bharti Airtel for past dues of Reliance Communications, Videocon and Aircel. Reliance Jio had spectrum sharing and trading pacts with RCom and Airtel with Videocon as well as Aircel.

The Department of Telecommunications (DoT), in its submission, said the assessment of demand for payment of dues by Airtel, on behalf of Videocon, can be done once SC finalises its view on spectrum sharing and trading.

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According to the spectrum trading guidelines, the seller of airwaves must satisfy all pending dues before the transaction. On non-payment of dues by the seller, the burden of dues is on the buyer, the court had observed.

Appearing on behalf of Bharti Airtel, senior advocate Kapil Sibal said if the liability of past dues of Videocon was to be cast on Airtel, the DoT should have clarified long back.

DoT told the court that so far no demand had been raised against Reliance Jio and Bharti Airtel for past dues of RCom and Videocon. The assessment of their liability for past dues of RCom and Videocon was under process, DoT said.

Earlier in the month, SC had sought the details of spectrum sharing pact between RComm and Reliance Jio and asked why the company using the spectrum of the bankrupt firm cannot be asked to pay the AGR dues to the government.

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The Centre had told the court there was a difference of opinion between two of its ministries--DoT and Ministry of Corporate Affairs--on the issue of sale of spectrum during the insolvency proceedings.

Earlier, the apex court had made it clear it would not hear "even for a second" the arguments on reassessment or re-calculation of the AGR related dues of telecom companies. SC in October 2019 had upheld the DoT definition of AGR and ordered telcos to pay the pending dues of Rs 1.6 trillion in licence fee and spectrum usage charges.

After the top court had rejected pleas by Vodafone Idea, Bharti Airtel and Tata Teleservices for a review of the judgment which widened the definition of AGR by including non-telecom revenues, the DoT had in March moved a petition seeking staggered payment spread over 20 years.

General August 2020

Return-hungry investors shift money from real estate, mutual funds to PMS

Akhil Chaturvedi, Associate Director and Head of Sales & Distribution, Motilal Oswal AMC, said most of the fresh funds has come as top-up money from existing investors.

Synopsis

Domestic equities have had a stupendous rally since April, luring traditional investors to stocks. BSE Sensex is up over 50 per cent from March lows. The broader market indices, too, have seen a similar run.

By Shubham Raj, ETMarkets.com

Aug 21, 2020, 10:49 AM IST

NEW DELHI: Some money managers for the rich have spotted a new trend on Dalal Street: traditional real estate and many mutual fund investors have begun shifting to portfolio management schemes (PMSes).

With real estate prices and demand falling, investors who would usually invest in properties have moved their money to equities, they claim.

Domestic equities have had a stupendous rally since April, luring traditional investors to stocks. BSE Sensex is up over 50 per cent from March lows. The broader market indices, too, have seen a similar run.

“This trend is showing in the mutual fund industry and in the PMSes as well. Among nearly 3,000 new clients, many have been first-time PMS investors. Historically, they have invested only in real estate. Now, they have turned to PMS trying to finally diversify into financial assets,” said Pramod Gubbi, a fund manager at Marcellus Investment Managers.

Gubbi said much of the migration to PMS funds has, however, been from mutual funds, some disappointed by dismal returns, and others having accumulated the Rs 50 lakh minimum corpus required to invest in a PMS.

“There is a definite trend away from traditional forms of investing, because those instruments have not delivered. We have seen a lot of first-time investors, most of whom are coming from mutual funds. I would estimate 60-70 per cent of the people are coming from there,” said Shankar Sharma, who founded and manages First Global.

Sharma said the traditional model of investing that mutual funds follow has not delivered any returns and people are tired. Thus, they are diverting to data-driven models in search of better returns, something PMSes have, he said.

Amit Jeswani of Stallion Asset concurs with Sharma’s assessment. He says PMSes today stand where mutual funds stood in 2009. “This investment tool is set to grow exponentially,” he said.

“If the first decade of this century belonged to real estate and the second to mutual funds, the next decade will be about PMSes. The total market size of the industry is Rs 1.5 lakh crore currently, which I expect to hit Rs 10 lakh crore by 2030,” Jeswani projected.

He, however, said he has not spotted any cross-asset class migration, as far as PMSes are concerned. “Even though wealthy investors were not putting any more money in real estate, most of their net-worth is in that asset class,” he said.

With time, the geographic concentration of PMS investors has also been changing. Most PMS investors in India hail from top-tier cities, but second and third tier cities, too, have started making their presence felt -- a trend similar to what the equity market and the mutual fund industry had seen in recent years, Gubbi said.

However, the story of migration of funds to PMSes may not consistent with all asset managers.

Akhil Chaturvedi, Associate Director and Head of Sales & Distribution, Motilal Oswal AMC, said most of the fresh funds has come as top-up money from existing investors.

“The number of new investors has gone down. Due to lockdown, paperwork required has become cumbersome, as most PMS players are not online. So, 60-70 per cent of volumes are being supported by existing clients adding more money. The rest could be new accounts,” he said.

He said his AMC is not witnessing any money shifting out of real estate into PMS funds.

Stopped Printing Rs. 2000 notes

RBI did not print even one Rs 2,000 note in 2019-20

The number of Rs 2,000 notes peaked at 3.36 billion units (or pieces) in 2017-18. This number dropped to 3.29 billion in 2018-19. It has fallen again to 2.73 billion in 2019-20

Updated: Aug 25, 2020 16:16 IST

By Roshan Kishore and Rajeev Jayaswal, Hindustan Times New Delhi

Rs 2,000 notes were introduced after the government announced the demonetisation of old Rs 500 and Rs 1,000 notes on November 8, 2016. (Getty Images/iStockphoto)

The Reserve Bank of India’s (RBI) currency note presses did not print even one Rs 2,000 note in 2019-20. This happened because they did not receive any order to do so. The trend seems to be in keeping with a conscious decision to bring down the share of Rs 2,000 notes in total currency under circulation, which has come down from at least 50% in 2016-17 to just 22% in 2019-20.

These figures have been reported in RBI’s Annual Report for 2019-20, which was released on August 25.

RBI has also disposed a disproportionate share of Rs 2,000 notes in the soiled category. This raises questions about the government’s plan for the country’s highest denomination currency note. In January 2019, the government indicated that the printing of Rs 2,000 notes was being stopped as there was adequate supply, as reported by Economic Times in January, 2019.

“Printing of bank notes of particular denomination is decided by the government in consultation with RBI to maintain the desired denomination mix for facilitating transactional demand of public. No indent was placed with the presses for printing of Rs 2,000 denomination notes for 2019-20.However, there is no decision to discontinue the printing of Rs 2,000 bank notes,” minister of state for finance Anurag Singh Thakur told the Lok Sabha on March 16, 2020.

Rs 2,000 notes were introduced after the government announced demonetisation of old Rs 500 and Rs 1,000 notes on November 8, 2016. These two denominations accounted for 86% of the total currency in circulation when the policy was announced.

The number of Rs 2,000 notes peaked at 3.36 billion units (or pieces) in 2017-18. This number dropped to 3.29 billion in 2018-19. It has fallen again to 2.73 billion in 2019-20. The fall in number of Rs 2,000 notes in circulation is in keeping with the fall in orders for printing Rs 2,000 notes. RBI printed 3.5 billion Rs 2,000 notes in 2016-17. This came down to 151 million in 2017-18 and 47 million in 2018-19. No Rs 2,000 notes were printed in 2019-20.

RBI also seems to have disposed of a disproportionately high number of Rs 2,000 notes in 2019-20. A total of 176.8 million pieces of soiled Rs 2,000 notes were disposed of in 2019-20. Just one million Rs 2,000 notes were disposed of in 2018-19 and no Rs 2,000 notes were disposed of in 2016-17 or 2017-18. The share of disposed of Rs 2,000 notes in the total Rs 2,000 notes under circulation in 2019-20 is 6.5%. This number is just 0.6% for Rs 500 notes. Both these notes were introduced together after demonetisation.

It is Rs 500 notes which have gained at the cost of the Rs 2,000 notes. More than half of the 22 billion currency notes printed in 2019-20 were of the Rs 500 denomination. As a result of these changes in currency composition, the share of Rs 500 notes has reached an all-time high in the total currency in circulation.

A government official said on condition of anonymity that the Rs 2,000 notes were introduced in 2016 to quickly fill the gap created by demonetisation of Rs 500 and Rs 1,000 notes. It was the need of the hour.

Gradually, with increased supply of smaller notes, including new notes of Rs 100 and Rs 200, and with growing popularity of digital transactions, the urgency to issue new Rs 2,000 notes is no longer there, the official said.

“But, this does not mean that there is any move to discontinue Rs 2,000 notes,” the official added. “Increasingly, commercial banks are also using more and more smaller notes because their customers often find difficulties in getting change for Rs 2,000 notes,” the official said