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XXI 52, 20 PAGES, `12.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 79,476.19 ▲ 443.46 NIFTY: 24,141.95 ▲ 131.35 NIKKEI 225: 39,631.06 ▲ 47.98 HANG SENG: 17,718.61 ▲ 2.14 `/$: 83.45 ▼ 0.06 `/€: 89.78 ▼ 0.48 BRENT: $85.79 ▲ $0.79 GOLD: `71,511 ▼ `52 FE S P E C I A L S IndiGo may benefit from rising fares Airline to sustain fare hike below CPI via large-scale procurement benefits ■ Large broking firms, discount brokers to be impacted as they pay lower charges to MIIs due to high volumes they generate surge in derivatives trading as there will be no incremental benefit for members for generating high volumes. Futures & Options trades contribute to a significant chunk of the overall market trade. In a circularon Monday,the regulator has directed MIIs, which include exchanges, clearing corporations and depositories, to redesign the existing charge struc- ture and associated processes. This will come into effect from October 1,the circular said. Currently,most MIIs followvolume-based,slab-wise charge structure,wherein the charges are levied in lieu ofvarious services offered by MIIs and are recovered from the end clients by members. Continued on Page 7 Unacademy slashes 600 jobs ANEES HUSSAIN Bengaluru, July 1 GAURAV MUNJAL-LED EDTECH startup Unacademy has laid off around 600 employees, or 10% of itsemployeebase,initslatestround of business restructuring, sources said. Employees across technology, marketing, and sales teams have been impacted. The process to identify surplus employees began on June 15 and ended on June 30,sources told FE. An Unacademy spokesperson declinedtocommentonthematter. One employee who was let go said,“We were given an ultimatum toeitherresignorfacetermination.” In April 2022, Unacademy had laid off around 1,000 employees as part of a massive cost-cutting exercise. This was followed by another 145 LAYOFF STORY ■ Latest layoffs employees fired a month ago by group's medical entrance test prep platform PrepLadder 10% of Unacademy's employee base 1,000 employees were laid offin April 2022 in cost-cutting exercise 350 jobs slashed in March 2023, in fourth round oflayoffs 350 jobs being cut in March 2023. Thislatest roundof layoffscome a little aftera monthwhen Unacademy Group’s medical entrance test prep platform, PrepLadder, sacked around 145 employees as part of a change in sales strategy. This was the third round of layoffs at PrepLadder in the past three years. Unacademy had acquired PrepLadder in July 2020 for $50 million. On a consolidated basis, Unacademyhas managed to reduce its losses by 40% to `1,678.1 crore in FY23 from `2,847.9 crore in the preceding year. Its operating revenue rose 26% to `907 crore in FY23 from `719 crore in FY22. THE MUCH-AWAITED changes to the Special Economic Zones (SEZ)Act,meant to improve theviabilityofthetax-freeenclaves,willbe taken to the Cabinet soon, a senior official said. The draft to be considered bythe council of ministers, however, will notincludeproposalsentailinghuge revenue loss to the government, suchastreatingdomestictariffarea (DTA) sales by SEZ units akin to imports from countries with which New Delhi has free trade pacts. “Whileimportduties(applicable on DTA sales by SEZs) will stay, we have suggested that these be imposed on a‘duty-foregone basis’,” the official said. This will bring down the burden on SEZ units. On DTA sales they will just pay the tax theyhad saved on imported inputs, and not the applicable tax on the entire finished product. Import duties on inputs are lower than those on finished products. A similar dispensation is currentlyavailable in the Manufacturing and Other Operations in Customs Bonded Warehouse (MOOWR) scheme. MOOWR is run by the ministry of finance, whiletheSEZActis administeredby the ministry of commerce and industry. Apart from tax issues, the amendments will seek to address the operational hurdles being faced bySEZs. “Currently,forsomething as routine as getting jobwork done from a unit in DTA, the SEZs require permissions.Similarly if IT firms have to get a job done from outside they face numerous compliance issues,”the official said. Continued on Page 7 « 32,585 40,022 23 Toyota Kirloskar 18,237 25,752 Kia India 19,391 21,300 JSW MG 5,125 Motor 4,644 41 10 « 9 Source: Companies Suzuki’s inventoryat 37-38 days or around 160,000 is on the higher side,he added. Continued on Page 7 GST collections rise 8% in June PRIYANSH VERMA New Delhi, July 1 GROSS GOODS AND services tax (GST) collections came in at `1.74 trillion in June (May transactions), up 8% on year,said official sources. This was against `1.73 trillion collected in the previous month. The year-on-year growth rate in Junewas the slowest in around three years.InMay,itwas10%,theslowest in 34 months. The drop could be attributed to slowereconomic activity during the election period,and a plateauing of collections after a robust trend foralong period. In June, the government settled `39,586 crore to the central GST fromintegratedGSTcollections,and `33,548 crore to the state GST. Pratik Jain, partner, PwC India, said:“Whilethegrowthincollection in June seems to be on a lower side compared to the previous month, overall GST collections have shown an encouraging trend over the last few months.” AccordingtoSaurabhAgarwal,tax partner, EY, timely audits, scrutiny measures,andeffectiveenforcement bytheCentralBoardofIndirectTaxes andCustoms(CBIC)havecontributed to the impressive collections,which crossed 1.5 trillion for the fourthstraight month.“This robust performance reflects a buoyant economy, withbusinessesdemonstratingcommendable self-compliance,” he said. However, some experts say, the sub-10% growth in June could be TAX MOP-UP Gross GST collections (in ` trillion) 2023 1.74 MUKESH JAGOTA New Delhi, July 1 M&M 8 Jun exchanges, clearing corporations and depositories SEZs: Norms on domestic sales to ease, Cabinet nod likely soon 47,235 43,524 Tata Motors 1.73 to be designed for equal levy irrespective of the volume generated surge in derivatives trading with no incremental benefit for members for generating high volumes ■ MIIs include Continued on Page 7 50,001 50,103 Hyundai Motor May TO ENSURE A level-playing field for big and smaller players in the broking industry, the Securities and Exchange Board of India (Sebi) has said charges levied by market infrastructure institutions (MIIs) on members should be uniform and equal irrespective of the volume generated. Themovewilllikelyimpactlarge brokingfirmsanddiscountbrokers, whoeffectivelyenduppayinglower charges to MIIs due to the high volumes they generate, the CEO of a broking house said. It is also aimed at curbing the ■ New structure ■ Move to also curb pandemic period. Thegrowthintheprivatesector’s declaration of investment intent contractedforfourquartersinarow to `35,600 crore and that of the governmentcontractedforsixquarters in a row to `24,700 crore in the quarter ended June this year. 1,33,027 1,37,160 2.1 VIVEK KUMAR M Mumbai, July 1 PARITY PLAY 66.7 1.78 reported the lowest level of project announcements, both private and government,sinceSeptember2009. The private sector’s share in new projects plunged to just 66.7% in June quarter, down from 85.4% in March quarter and 90.9% in the previous three-month period.This is likelyto be one of the lowest level over many years, excluding the Jun % chg 3 Apr Mar Jun 2024 Mar Dec Feb Move will hit big broking houses, discount brokers 2024 INSIDE Manufacturing PMI rises in June PAGE 2 UPI transactions up 49% in June PAGE 6 attributed to low recoveries by the CBIC, as most cases pertaining to FY18-20 have been settled.“From FY21 onwards,the GST compliance process was streamlined.Hence,it’s likely that due to low recoveries,the 12% growth beingwitnessed in the past several months will ease,” said AnkurGupta,practice leader– indirect tax at SWIndia. FY24 SAW 13 FIRMS SHOWING POSITIVE TRENDS More startups on profit track as investors tighten the screw S SHANTHI Bengaluru, July 1 Why banks are not hopping onto BBPS STARTUPS SEEM TO be showing results on the profitability front in the last twoyears,withventure capitalists and private equity firms tightening their purse strings and stressing on profit first rather than just growth. In FY24, three unicorns turned profitable: Travel tech startup Oyo, Honasa Consumer’s Mamaearth, and food tech major Zomato. Also turning profitable were Lendingkart and Mensa Brands’ MyFitness (the latter was Ebitda profitable). In comparison, only two unicorns—ChargebeeandRivigo— had turned profitable in FY22, and onlyonestartup,Digit Insurance,in ■ EXPLAINER, P9 Jun Sep 2023 Levy uniform charges: Sebi to market infra institutions ■ INVESTOR, P9 Joining BBPS entails an additional investment for banks without a significant value addition Mar Mar 85.4 1.74 1.68 GLOBAL INVESTOR KKR on Monday said it is acquiring a controlling stake in Baby Memorial Hospital, a multi specialty hospital chain in Kerala, reports Raghavendra Kamath. According to sources, KKR has bought a 70% stake in the chain for `2,500 crore. ■ PAGE 4 general feebleness of the investment cycle, given the contraction phase for private-sector project announcements since the second quarter of last fiscal. In the just-concluded quarter, the growth in private and government investment announcements declined 94% and 84%, respectively. In value terms, the quarter 106 28.3 41.1 40.9 24.5 94.4 Jun ‘24 Jun ‘23 (units) Maruti Suzuki Jan KKR PICKS UP 70% STAKE IN KERALA HOSPITAL CHAIN Mar Jun 2024 MAHINDRA & MAHINDRA (M&M) and Toyota outpaced the rest of the auto pack in June, posting doubledigitgrowthinJunewhiletheirrivals sawvolumesriseinlowsingle-digits. The passenger vehicle (PV) industry recorded wholesale volumes (company dispatches to dealers) of 340,784 units, as per estimates provided by Maruti Suzuki. This was a growth of just under 4% year-on-year. Without M&M and Toyota, the industryvolumes are down 1%. “The increase (in volumes in June) is coming from the launch of newmodels from the competition,” Partho Banerjee, head of sales and marketing,Maruti Suzuki said. Searing temperatures across the north of the country were blamed for the lacklustre performance, making automotive companies keep their showrooms open well past their usual closing time. “Because of high temperatures buyers are not visiting the showrooms. So, to promote sales we extended theworking hours forthe dealers besides doing events in the evening,” Banerjee said. Maruti DOMESTIC AUTO SALES 1.68 1.65 MORGAN STANLEY BELIEVES Reliance Industries can add up to $100 billion to its market capitalisation in its fourth monetisation cycle with the help of new stream of cash flows and valuation multiples catching up. ■ PAGE 6 Jun Sep Dec 2023 Dec 90.9 0.4 SWARAJ BAGGONKAR Mumbai, July 1 Dec RELIANCE CAN ADD $100 BN TO M-CAP: MORGAN STANLEY 0.2 29.9 14.8 49.9 70.4 18.8 84.1 Mar 3 Sep 74.6 « A SPECIAL COURT in Mumbai has issued a non-bailable warrant against fugitive Vijay Mallya in a `180-crore loan default case linked to Indian Overseas Bank. The warrant was issued on June 29 by special CBI court judge SP Naik Nimbalkar and a detailed order was made available on Monday. 0.5 5 Jun 80.8 « NON-BAILABLE WARRANT ISSUED AGAINST MALLYA 0.9 10.5 « THE INDIA METEOROLOGICAL Department (IMD) on Monday announced that most parts of the country ar expected to get 'above normal' rainfall during July, considered the crucial month for the Southwest monsoon season, reports Sandip Das. ■ PAGE 2 THE VALUE OF new investment projects announced fell a sharp 92%onyearto`59,900croreinthe June quarter,extending a declining trendofthepreviousthreequarters. The lowest value since September2009,whenthe Centre forMonitoring of Indian Economy (CMIE) started collecting data on capex plans of the government and the private sector,is partlyowing to the deferment of decisions amid the election period. But experts say this shows the 1.5 6 1.8 Mar 86.4 % chg, y-o-y « IMD FORECASTS 'ABOVE NORMAL' MONSOON IN JULY SAIKAT NEOGI & PRIYANSH VERMA New Delhi, July 1 2.2 Share of private sector in new projects (in %) « THE INITIAL RESPONSE of foreign investors to the inclusion of Indian bonds in the JPMorgan Chase emerging markets bond index seems to be tepid, reports Sachin Kumar. While around $1 billion investment was expected on Day 1, around $400 million have been invested in the two days since inclusion. ■ PAGE 6 TRACKING THE CAPEX CYCLE Sharp drop in pvt sector’s share; polls New projects announced Private (` trillion) Govt (` trillion) % chg, y-o-y seen as a big factor 14 M&M & Toyota buck subdued June sales trend Nov JPM INCLUSION: FII INFLOWS TOUCH $400 MN IN 2 DAYS New projects take a knock 2023 NEWS ANNOUNCEMENTS DOWN 92% IN JUNE QUARTER 2024 IN THE TURNING POINT First profitable quarter in FY24 First full profitable fiscal in FY24 ■ Delhivery:Q3 ■ Oyo ■ Myntra:Q3andQ4 ■ Awfis:Q4 ■ Mamaearth’s parent Honasa ■ SUGARCosmetics:Q4 ■ Zomato ■ MobiKwik:H1FY24 ■ Lendingkart ■ PBFintech:Q3 ■ Mensa Brands’ MyFitness (Ebitda profitable) Note: FY24 results of many startups are yet to be posted Source: Reports, MCA FY23,according to Tracxn data. Besides, eight other startups have reported profits in either the third orfourth quarter of FY24,and one in Q1FY25. Five of these nine— ■ Only 2 unicorns ■ In FY23, only had turned one startup had profitable in FY22 turned profitable Delhivery, Myntra, MobiKwik, Meesho,and Urban Company— are unicorns. While Delhivery and PB Fintech turned profitable in Q3, MyntrapostedprofitsinQ3andQ4. ■ Meesho:Q2 ■ Practo:Q4(Ebitdaprofitable) ■ UrbanCompany:Q1FY25 Awfis and Sugar Cosmetics were profitable in Q4, MobiKwik in the first half of the year, Meesho in Q2, and Practo in Q4 (Ebitda level). Urban Company has posted profits in Q1 of the current fiscal. Going ahead, according to Prasenjit Chakravarti, partner, Khaitan & Co, 20-30% of leading domestic startups are likely to turn profitable by FY25/26.“The recent profitability trend among Indian startups, particularly in Q3 and Q4 of FY24, is indeed a promising development. This also serves as a harbinger,indicating thatthe trend will likely continue for many other startups,”Chakravarti told FE. For Anurag Ramdasan, partner, VC firm 3one4 Capital,the ballpark figure of companies turning profitable is even higher. He expects more than 40% of growth-stage companies to achieve their profitabilitymilestones in the next twothreeyears.“However,it is unrealis- tic to set such expectations for early-stagecompanies,where product market fit and growth remain the primaryindicators ofvalue creation,”said Ramdasan. Today, there is an evident shift from a “growth at all costs” approach to operational efficiency inthe financialsof startups,according to analysts. “In every boardroom conversation,achievingprofitabilityisaclear leverforstartups.Tocomeintopublic markets, a lot of investors will value profit,” Karan Taurani, senior vice president and research analyst, Elara Capital told FE. Some startups like MyGate have been chasing zero cash burn. Continued on Page 7 HYDERABAD