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Current Affairs - 20 August 2016

General Affairs 

Serious steps taken against insurgency in Northeast: Rijiju

  • The Centre has taken "serious steps" against insurgency in the northeast and the situation in Assam is "better" than before, Union minister Kiren Rijiju on Friday said.
    "Militant activity is under control in Assam and now the situation in the state is better than before," the minister of state for home told reporters after inauguration the Advanced Landing Ground (ALG) in Pasighat in Arunachal Pradesh.
    Rijiju said, "I had talked with Assam Chief Minister Sarbananda Sonowal and he had asked for extra paramilitary forces for the state. It had been decided to send the forces as soon as possible, but it has got delayed due to the volatile situation in Kashmir."
    Referring to the August 5 gunning down of 14 people by NDFB (Songbijit) in Assam's Kokrajhar district -- the worst since the 2014 attack by the group when over 76 people were killed, he said operations against the outfit are still on and the army is participating in the ops under Tezpur-based 4 Corps Tezpur and Nagaland-based 3 Corps.
    The NDFB (S) attack in Kokrajhar was a "very shocking incident" after the 2014 carnage, he said, adding the Centre had recently spoken to the government of Bhutan and the Prime Minister of Myanmar about militants from here hiding in the two neighbouring countries.
    On the anti-talk ULFA (I), he said it is now desperate and is trying to show its strength but the Centre has taken a tough stance against it.

Omar Abdullah to meet Pranab Mukherjee to discuss Kashmir situation

  • After remaining closeted behind the doors and active only on the social networking sites the working President of the National Conference Omar Abdullah is ready to play active role in restoring normalcy in Kashmir valley.
    Omar has been very active on the social networking sites and feeling frustrated for a long time over poor handling of the current situation by the Mehbooba Mufti led alliance govt in the state.
    He was very vocal in his criticism and targeted the Centre for allowing the situation to go out of hands by not taking adequate measures.
    National Conference sources said that Omar is scheduled to lead a group of 20 opposition leaders from the state to meet President of India in New Delhi on Saturday where they are expected to brief him about the current situation prevailing in the Valley.
    Among others who will be part of the delegation include JKPCC president G A Mir, CPIM state secretary and MLA Kulgam M Y Tarigami, PDF chairman and MLA Khansahib Hakeem Yaseen, AIP chief and MLA Langate, Abdul Rashid, and former minister and DNP chief Ghulam Hassan Mir.
    "The appointment with the President is scheduled at 1.30 pm on Saturday in his office in New Delhi," sources said.
    Earlier, the opposition parties held a meeting here in the summer capital and passed a 4-point resolution demanding special session on the present unrest, among other things.
    The parties had also recommended political dialogue with all stakeholders and with Pakistan for resolution of the Kashmir issue. 

    Govt redesigns social media strategy to combat Kashmiri separatists' propaganda

    • Alarmed by the aggressive Facebook warfare that Kashmiri separatists mounted during the recent unrest in the valley, the Modi government has re-designed its social-media strategy.
      A photo-shopped image of Facebook CEO Mark Zuckerberg with pellet-gun injuries on his face has been widely shared on social media as part of an anti-India online campaign aimed at drawing international attention to Kashmir. Anti-India separatists also posted a number of videos portraying security forces in a bad light, especially for their use of pellet guns that fire metallic ball-bearings at violent demonstrators.
      Highly active on Twitter so far, the Modi government has now focused its attention on Facebook to counter negative propaganda on the social-networking site, official sources said. "The government has realized that common masses, especially the young people, are connected more on Facebook than Twitter," said a top-ranking official.
      As part of the new social-media plan, all ministries have, therefore, been advised to reach out to the people through Facebook, he added. The government hopes that its latest social-media strategy will help build a positive atmosphere of trust and greater engagement with common citizens.
      The external-affairs ministry has created a special Facebook page for answering public questions.
      On Friday, minister of state for information and broadcasting Rajyavardhan Rathore inaugurated a workshop for government officials on how to use Facebook more effectively for communication. "We need to open up," the minister told officials. "Typically, governments have been surrounded with iron curtains all around. But time is changing. So we also need to change our mindset," Rathore said.
      "You cannot hide information in today's world. You have to share that information. The idea is to send the right kind of content that people can engage with," he noted. Officials across ranks will be also be trained in the use of Facebook, authorities say.
      Mechanisms will be developed to enable citizens to hold live chats with ministers and senior bureaucrats on the social site, according to official sources. BJP president Amit Shah has held a series of meetings with bloggers and social-media activists over the past three months, according to insiders.
      Meantime, authorities in Jammu and Kashmir have ordered all government and semi-government employees to join their duty immediately. Most of the government staff have reported absent from work since the killing of Hizbul Mujahideen commander Burhan Wani on July 8 triggered deadly protests in the valley.

      It's official. Modi to be Incredible India's brand ambassador

      • Its official. Prime Minister Narendra Modi will be the face of Incredible India campaign of the Union Culture and Tourism Ministry.
        After much deliberations, a decision has been taken in this regard. Concepts for ad films have also been directed to be submitted in a week's time. Modi will be talking about the significance of different places in those films.
        Union Culture and Tourism Minister Mahesh Sharma had earlier hinted that Modi is the "best face" of the campaign but no formal decision was taken back then.
        Bollywood actor Aamir Khan was the last brand ambassador for this campaign. However, he was not approached agains for renewal of his contract in the wake of his "leaving India" controversial remark. This ended the contract.
        Since then, the names of the suitable candidate for the campaign was being speculated. Bollywood superstar Amitabh Bachchan's name was also being discussed. There were demands to appoint someone apart from Bollywood as the brand ambassador.
        However, the finally, the name of Modi has been sealed. The Prime Minister has been touring the world and making efforts to have India's voice heard on international forums and also on one-on-one basis with different countries.
        Modi has also been trying to isolate Pakistan by creating a rapport not only with the US, which funds the neighbouring country's defence requirements but also several Islamic countries.

      Coal scam: CBI frames charges against HC Gupta

      • After breaking down at the CBI special court and seeking cancellation of his bail, legal troubles for former coal secretary HC Gupta are not over yet. A CBI special court in Delhi framed fresh charges against Gupta and five others in another coal scam case.
        The case pertains to alleged irregularities in allocation of Moira and Madhujore-North and South-coal blocks in West Bengal to VMPL in September 2012.
        Besides HC Gupta court also framed charges against a private firm Vikash Metals and Power Ltd, former joint secretary in Ministry of Coal K S Kropha, the then Director of Coal Ministry, K C Samria, Managing Director of Vikas Metals , Vikash Patni and its authorised Signatory Anand Mallick.
        Charges have been framed under sections 120-B (criminal conspiracy), 409 which pertains to criminal breach of trust by public servants, 420 (cheating) and under sections 13(1)(c) and 13(1)(d) (criminal misconduct by public servants) under the Prevention of Corruption Act.
        All these accused pleaded not guilty to the charges framed against them and claimed trial after which the court fixed 9 September to commence the trial.
        In September 2012, the CBI had registered an FIR in the case and later filed a closure report.  Later in 2014 the CBI special court  rejected the closure report in the case & asked to further investigate the matter. 

      Business Affairs 

      French firms to pump euro 8 billion into India

      • Bullish on India's growth, major French companies will invest about euro 8 billion in the country in next few years.
        "Leading French companies will invest some 8 billion euros in Indian market over the few years," French Ambassador to India Alexandre Ziegler said on the sidelines of a CII event in Kolkata on Friday.
        French majors had already invested euro 20 billion in the country accounting for the third largest FDI inflow from the European country.
        In his presentation, the ambassador emphasised that France did not look at India as just a market but as a partner and so it participates strongly in 'Make in India' along with innovation.
        "There are 25 research and development centers by French companies in India," Ziegler said.
        West Bengal has, however, failed to attract French investment in a big way so far and accounts for just four per cent of total French FDI in India, he said and hoped that more companies from his country will find interest in the state.
        Many French companies are likely to participate in the Biswa Bangla summit early next year, he informed.
        Ziegler said though the discussion was fruitful no policy-related matters were discussed.
        Replying to a question on safety, Ziegler said security matter is a global concern but France has taken all measures to protect its people.
        Ziegler, who is here on his 3-day visit till August 20 also met state Finance Minister Amit Mitra.

        A little-known Chinese pharma company buys an equally less known Indian firm for an astronomical valuation, and causes a stir in the industry. Why exactly did the deal happen?

        • The jury is still out on whether Shanghai Fosun Pharmaceutical Group's recent decision to shell out $1.26 billion for a controlling stake in Hyderabad-based Gland Pharma was too aggressive. Some say the bid for a contract manufacturing firm valued at $1.35 bllion, besides having a US presence with Rs 300 crore net profit and over Rs 1,000 crore in sales, was a strategic acquisition that demanded Fosun to pay a premium. Others, including Indian pharma majors who lost out to the Chinese group's bid, however, are of the view that despite Gland's track record and positioning, the deal should have been in the range of $800 million to $1 billion.
          The fact that the $8-billion Fosun Group was keen on the US market makes the deal special, given that 62 per cent of Gland Pharma's revenues of $169 million in 2015 came from the US, compared to 16 per cent from India and the rest from other geographies. Besides, Gland expects more business from the US as its prototype for Enoxaparin - a leading anticoagulant that commands a $1.4-billion market shared by half a dozen pharma players - is waiting US regulatory nod.
          What's more, Gland's enterprise value (equity plus debt, minus the cash) was pegged at $1.35 billion based on the company's earnings before interest, taxes, depreciation and amortisation (EBITDA) for 2015/16, only a shade below the current valuation of $1.46 billion, which is based on the deal. And, to further drive home the point, a section of industry experts feels that the $1.05 billion, or $96.87 per equity, Fosun is expected to pay upfront is also in line with the price-to-earnings (PE) ratio of 35-40 that leading Indian pharma companies are trading at on the bourses. Gland is privately held and is not a listed company.
          The remaining amount will be paid over a period of two years as a contingent consideration if the US launch of the Enoxaparin prototype goes through - if the US Food and Drug Administration (FDA) approval is obtained before 31 December 2016, Fosun will pay $50 million; between January 2017 and 31 December 2018, the upper limit will be $25 million, and if the launch is after 31 December 2018, the Chinese firm will not pay any contingent consideration.
          Once the deal is completed, the Chinese group will hold 86.08 per cent equity interest in Gland Pharma - a direct acquisition of 79.99 per cent equity interest and 6.08 per cent through the subscription of convertible preference shares issued by Gland. The deal also allows purchase of the 10 per cent equity retained by the promoter shareholder at a later date. "The founder shareholders shall have the right to exercise a put option within one year from the expiration of the period of one year after the share purchase agreement (SPA) closing date to require the buyer to further acquire the remaining shares of Gland held by the founder shareholders for a consideration up to $180 million," says the deal agreement. However, for now, Ravi Penmetsa, the current Vice-Chairman and Managing Director, will be appointed as the CEO for a three-year period. Penmetsa, however, refused to comment on the development.
          What's in a Deal
          It is hard not to compare the Fosun-Gland agreement with other mega deals in the Indian pharma space - the 2008 takeover of Ranbaxy by Daiichi Sankyo, and Ajay Piramal selling his formulations business to Abbott in 2010. At the same time, there is a huge difference. Piramal and Ranbaxy were bought for their domestic branded formulations businesses. Gland Pharma, on the other hand, is a contract manufacturer of injectables, which are mostly exported to regulated markets.
          Analysts say the valuations of the Gland deal cannot be compared with the Piramal-Abbott and Ranbaxy-Daiichi transactions because it is more of a manufacturing capacity acquisition or an asset purchase. Yet, the numbers make for an interesting case. Piramal's formulations business was acquired by Abbott for nine times its sales, while Ranbaxy was acquired at five times its sales. Gland, going by the March 2015 sales figures of Rs 1,000 crore, roughly translate into eight times sales - something that the Indian pharma companies, including Dr Reddy's, Torrent and Baxter, were not willing to pay.
          Analysts feel the move by Fosun was triggered by the fact that most Chinese companies, like some of their Indian counterparts, are facing the US FDA heat. Between 2010 and 2015, the number of inspections in China rose from 48 to 132. In comparison, India saw an increase from 72 to 203. But in India, there are many good facilities without FDA issues. Gland Pharma was one such company.
          High Margin Business
          Global generic injectables market is estimated at $17-billion. And given the fact that the largest players, Israel-based Teva Pharmaceutical and US-based Hospira, are facing issues with the FDA, there is an acute shortage of injectables in the US market. Getting a slice of this would not only mean immediate pricing power, but also a bigger market share. Also, estimates show that if EBITDA margins were 20-25 per cent for generics tablets and capsules, for injectables it is 50-60 per cent EBIDTA in the US market.
          Fosun's Forte
          The Fosun Group, which has a business strategy of "organic growth with external expansion and integrated business operation", sees itself as "dedicated to becoming a first class enterprise in major global healthcare markets". Nevertheless, analysts still see its inability in terms of building such capacities in China. Perhaps the need to gain momentum and expand their operations in the US drove the company to seal the deal with Gland Pharma. The Group, set up in 1994, is a behemoth of sorts - a leading healthcare group in China primarily engaged in pharmaceutical manufacturing, research and development, healthcare services, production and sale of medical diagnosis kits and medical devices, and pharmaceutical distribution and retail. The company's other arm involved in the deal is Fosun International, whose businesses include integrated finance (wealth) and industrial operations. The integrated finance (wealth) business includes four major segments: insurance, investment, wealth management and Internet finance, while the industrial operations division includes health, happiness, steel, property development, and sales and resources.
          Gland Slam
          Gland Pharma was incorporated in 1978, but took off in 1996 following an investment of Rs 1.5 crore by private equity investor Ventureast. The company had just touched sales of Rs 2.5 crore when Sarath Naru, the Managing Partner of Ventureast, was impressed by the approach of its founders. "One, Gland's manufacturing capability in small volume parenterals (primary packaging material for biotech drugs or liquid medicine) was impressive. Two, the founders were extremely hung up on quality and execution. It was the first company to get an SPV facility approved by the US FDA in India," says Naru, adding: "The other thing that convinced us was the involvement of Vetter, a German SPVmanufacturer, which came in as a strategic investor and provided technology and training."
          But, in 2003/04, Ventureast exited Gland Pharma. "We got a good exit - a high single-digit multiple. We exited because we play a portfolio game and we cannot stay all the way till double-digit multiple in every case," he adds. Gland was later funded by two other PE investors.
          Test Case
          The Fosun-Gland deal, coming close on the Indian government's decision to allow foreign direct investments of up to 74 per cent in pharmaceutical manufacturing, has enthused a section of industry insiders, while others still remain sceptics. Some pharma industry veterans feel it may not be easy to get investment easily. "This will be a test case for the government of India in special verticals, such as injectables and vaccines, and much would depend on who within the Indian government today would do the advocacy for a Chinese company in the current political atmosphere," said an expert on condition of anonymity.
          For the moment, however, there is a long list of positives from the deal, including the mouth-watering valuation of an Indian drug manufacturing firm. There's also a lesson from Gland's success - the will to excel and planned execution can take Indian companies to new heights. Says an analyst: "Gland is the first injectable drug manufacturer that has been approved by the FDA and has obtained GMP certification for markets around the world. Gland's main business model is joint development of products and introduction of licences to provide all global major pharmaceutical companies with the manufacturing services in relation to injectable generic drugs. As one of the few companies that engage in the manufacture of injectable drugs, Gland takes a leading position among the comparable companies in the Indian market." That is some food for thought for other Indian manufacturers.
          For the moment, however, the tax department may be watching - for if all goes well with deal, there may be a good sum - around Rs 800 crore, or thereabouts - in tax collections, too. Now it is up to the regulators to clear the deal - the Competi-tion Commission of India (CCI) and Foreign Investment Promotion Board (FIPB). 

          Sensex ends 46 points lower but above 28,000 level, Nifty ends at 8,666; SBI top gainer

          • The S&P BSE Sensex on Friday settled the day 46 points lower, while the broader Nifty50 ended above its key 8,650 mark.
            The headline indices fell as broader sentiment was hurt after hawkish comments from some US Federal Reserve officials.
            The 30-share index ended the day at 28,077, down 46.44 points, while broad-based 50-share index quoted 8,666, down 6.35 points at close.
            New York Fed President William Dudley and San Francisco Fed President John Williams reiterated the case for raising interest rates in the coming months after US labour data.
            Domestic markets were flat to slightly lower for the week as the recent momentum has slowed due to a lack of meaningful drivers despite good buying by foreign investors.
            "Though we are getting good inflows, a lot of people domestically are waiting for a correction. Profit-taking is also happening at all levels," said Neeraj Dewan, director at Quantum Securities.
            The Nifty Bank index touched a 17-month high, with State Bank of India being the top percentage gainer. The scrip settled the day 4 per cent higher.
            But Power Grid Corp of India fell as much as 1.35 per cent after rising 2.2 per cent this week on the back of good earnings and positive management commentary.
            A lowdown on markets today
            11:55 am
            Sensex at 28,135, up 11.91 points
            Nifty at 8,681, up 7.90 points
            09:22 am
            Sensex at 28,132, up 8.60 points

          Bangladesh turns to Black Sea region for wheat as India supply fades

          • Grain millers in Bangladesh are boosting their wheat purchases from Russia and Ukraine as cargoes from key exporter India fade due to a supply squeeze in that country.
            Bangladesh has booked about 800,000 tonne of wheat from the Black Sea region for shipment between mid-July and October, up from around 550,000-600,000 tonne in the same period last year, two trade sources said.
            Strong demand from South Asia's top wheat importer and other key buyers could help buoy benchmark futures, which have been recovering from a 10-year low of $3.99-1/4 a bushel hit earlier this month due to pressure from plentiful global production.
            "India is out of the market, Bangladesh buyers are taking larger volumes of feed wheat as well as milling grade wheat from Russia and Ukraine," said one Singapore-based trader.
            "It is all about prices, most Bangladeshi millers take the cheapest origin."
            Buyers paid $155-$168 a tonne, free on board, for Black Sea feed wheat with about 10.5-percent protein content, the sources said. They declined to be identified as they were not authorised to speak with media.
            For milling wheat with 11.5- to 12.5-per cent protein, importers have paid $165-$180 a tonne FOB, they said.
            India has been exporting wheat to Bangladesh for the last few years, but its recent crops have been hit by a severe drought linked to the El Nino weather pattern and by unseasonable rains.

            Russia and Ukraine, two of the Black Sea region's leading wheat producers, have seen bin-busting grain production.
            Ukraine's 2016 grain harvest is likely to be around 3 million tonnes bigger than the year before at around 63 million tonnes, agriculture ministry official Leonid Sukhomlin said earlier this week.
            And Russia is facing a lack of grain storage as it remains on track to produce the largest cereal crop in post-Soviet history, said the head of Russia's Grain Union.
            But analysts warned against relying too heavily on shipments from the Black Sea.
            "Worldwide, many countries are depending on Russia to supply much of their wheat and that is risky," said one agricultural commodities analyst. "There could be delays."
            Much of the Middle East and North Africa has heavily booked wheat shipments from the Black Sea region, taking advantage of lower prices.
            Traders said there is already a delay of 10-12 days for ships waiting to load wheat at Russian ports.
            Bangladesh has also booked about 200,000 tonnes of higher quality Canadian milling wheat, the sources said.

            PV Sindhu fan? Strike gold with these jewellery stocks

            • While shuttler PV Sindhu gives her 'heart out' to win gold medal at Rio Olympic Games, you should also strike gold, but of a different kind.
              With festive season round the corner along with a sharp surge in gold prices, it is time to add jewellery stocks in your portfolio.   
              Brokerage ICICI Securities has come out with a report stating the ongoing albeit silent structural change in favour of organised jewellers remains one of the best themes to bet on for long-term investors.
              Apart from macro benefits such as rollouts of the 7th Pay Commission and normal monsoon, the brokerage believes jewellery companies will also benefit from 1) 50 per cent year-on-year (YoY) higher number of wedding days between October 2016 and Jun 2017, 2) stimulus to revenues and margins due to higher gold prices, and 3) favourable base.
              The brokerage also said Street is overly concerned about the near-term impact of regulatory changes. On the contrary, these changes are acting as a stimulus for growth of the organised jewellery sector befitting Titan company (Titan) and PC Jeweller (PCJ), it said.
              The jewellery sector reported strong revenue growth in the June quarter in spite of many challenges such as closure of stores for nearly 10 days in Apr 2016 due to jewelers strike, and impact of mandatory PAN card for jewellery purchases above Rs 2 lakh. However, over 10 per cent surge in gold prices (highest in the past 14 quarters) and healthy consumer offtake helped the companies to report strong revenue growth.
              While other consumer companies are jittery ahead of the rollout of Goods and Services Tax (GST), it is not a major concern for jewellery companies.
              "Though there will be overhang on the jewellery sector due to uncertainty about the expected GST rate, we believe the overall tax incidence may not increase ahead," said the brokerage.

              Currently, jewellery attracts 10 per cent customs duty, 1 per cent excise duty and nearly 1 per cent VAT. "Even if there is any marginal increase in tax incidence, the shift from unorganised sector to organised sector will be faster post rollout of GST," the brokerage added.
              Stocks to watch
              1. Titan Company: With healthy earnings growth momentum helped by rising gold prices and improvement in consumer sentiment post normal monsoon, the brokerage reiterated its 'buy' rating on the stock with a target price of Rs 488, an upside of 18 per cent against Thursday's closing.  
              2. PC Jeweller: The regulatory changes may impact the business in short term, but ICICI Securities is extremely positive about long-term growth of PCJ. It reiterated 'buy'  rating on the stock with a target price of Rs 576, an upside of 25.47 per cent against Thursday's closing.

            General Awareness

            Carbon Clean 200 List – 7 Indian Companies among the 200 companies throughout the World

              • A special institution named Corporate Knights created the Carbon Clean 200 (Clean200TM) – a list of the 200 largest companies worldwide ranked by their total clean energy revenues as an invitation to a larger discussion of how we can invest in a clean energy future.
                The Carbon Clean 200 :-
                More than 70 of the companies included in the list receive a majority of their revenue from clean energy, the rankings show, with most of the 200 from China (66 entries) and the US (40), although there is also strong representation from Japan (20), Germany (8), India (7) and Canada (5).
                • The biggest 200 public companies ranked by green energy revenues, was first published on August 15, 2016 by Corporate Knights and As You Sow.
                • The Clean 200 are listed by their estimated green revenues in USD. The dataset is developed by multiplying a company’s most recent year-end revenues by its BNEF New Energy Exposure Rating mid-point.
                • The Clean 200 uses negative screens. It excludes all oil and gas companies and utilities that generate less than 50% of their power from green sources, as well as the top 100 coal companies measured by reserves, top 100 weapons producers, as well as laggards on tropical deforestation 14 , and child or forced labor and companies who engage in negative climate lobbying.
                • The list was compiled by As You Sow, a nonprofit organization that promotes environmental and social corporate responsibility, and Corporate Knights, a company that produces corporate rankings, research reports and financial product ratings based on corporate sustainability.
                The list is topped by Japan’s Toyota Motor followed by Germany’s Siemens AG. The top 20 list as follows
                1TOYOTA MOTOR
                2SIEMENS AG-REG
                3JOHNSON CONTROLS
                4SCHNEIDER ELECTR
                5PANASONIC CORP
                6 EMERSON ELEC CO
                7 VESTAS WIND SYST
                8PHILIPS LIGHTING
                9ABB LTD-REG
                10KONINKLIJKE PHIL
                11DONG ENERGY A/S
                13XINJIANG GOLD
                14EATON CORP PLC
                15SHARP CORP
                16BOMBARDIER INC
                17TESLA MOTORS
                19FIRST SOLAR INC
                20HELLA KGAA HUECK
                Indian companies among Carbon Clean 200 List:-
                • Among Indian companies are Suzlon Energy at 68 rank for its wind farms,
                • Bharat Heavy Electricals Ltd at 106 for its wind electric generators and solar cells,
                • Tata Chemicals at 114 for chemicals for biodiesel, solar energy, and fuel cells.
                • Thermax Ltd is at 139
                • Exide Indus at 153 for electric storage batteries.
                • IDFC Ltd at 155 for its green infrastructure financing
                • Havells India at 166 for energy meters.

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