BRANDWAGON, P9 COMPANIES, P5 INTERNATIONAL, P3 CLICKS TO CONVERSIONS THE BIG PICTURE FAR RIGHT SEEKS POWER How YouTube Premium must tailor its pitch for Indian viewers Bata puts its best foot forward for portfolio premiumisation French turn out in force for second round of parliamentary polls KOLKATA, MONDAY, JULY 8, 2024 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL 33 NO. 211, 16 PAGES, `12.00 (NORTH EAST STATES & ANDAMAN `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 FMCG FIRMS BOOST DIRECT REACH IN DISTRIBUTION PUSH FMCG COMPANIES SUCH as HUL, ITC, Parle Products, Britannia and Tata Consumer have increased their direct distribution aggressively over the last two years, as they strive to reduce dependence on wholesalers, reports Viveat Susan Pinto. ■ PAGE 4 INDIA COULD BE GLOBAL HUB FOR AI JOBS, SAYS OLA CEO OLA CEO BHAVISH Aggarwal envisions a future where India could become a global hub for AI-related employment, leveraging its vast pool of IT professionals to take on more significant roles in the global market. With AI making work “10x more productive”, he said, “we can bring 10x more jobs to India". ■ PAGE 4 OVER 7,000 FARMER COLLECTIVES GET ON BOARD ONDC WITH MORE THAN 7,000 farmers’ collectives on board the government’s ecommerce platform Open Network for Digital Commerce (ONDC), the agriculture ministry has started to train them on packaging, branding, marketing, credit linkages with banks, digital payments and compliance, reports Sandip Das. ■ PAGE 2 JAPAN'S HORIBATO SET UP SEMICON UNIT IN NAGPUR THE MAHARASHTRA GOVERNMENT is in talks with Japan's Horiba Group for a semiconductor unit, reports Geeta Nair. Deputy chief minister Devendra Fadnavis said the government has identified land in the Butibori industrial estate in Nagpur for the plant. ■ PAGE 5 FE S P E C I A L S `25,000-50,000 hike in standard deductions to make new tax regime attractive 2024-25 PRASANTA SAHU New Delhi, July 7 THE UNION BUDGET for 2024-25 may announce measures to placate the middle class and the low-income population, who have been hit by sticky food inflation and income stagnation. While policymakers are working out the incentives, official sources said these could include personal income tax reliefs, higher retention of Agniveers in the regular defence services, and more government support for urban housing to boost the labour-intensive construction sector. The government will also likely announce steps including an assured pension option as part of the increase in benefits to government staffundertheNationalPensionSystem(NPS). “Besides the poor, the Budget will likely announce measures to soothe the middle class, who are probably miffed,” an official said,asking not to be identified. The recentlyheld general elections put the BJP in a relatively uncomfortable position as it fell short of an outright majority and will needtorelyonitscoalitionpartnerstorunthe government.With Maharashtra and Haryana going to polls in October,the Budget is seen as a keyvehicle to woo the electorate. “Discussionsaregoingontomakethenew personalincometaxregimeattractivetoleave more money in the hands of people,”another officialsaid.Oneoptionistoincreasethestandard deductions further by `25,000-50,000 under the new tax regime,the official said. Underthenewincometaxregime,without the traditional deductions available in the ■ Assured pension option to government staff under National Pension System Bengaluru & Hyderabad to list of 'metropolitan cities' for House Rent Allowance claims ■ Doubling absorption of Agniveers in regular defence services with full pay, pension oldregime,a rebate is available for income up to `7 lakh and a standard deduction of `50,000 to make it attractive for individual taxpayers.If the standard deduction is raised up to `50,000,income up to `8 lakh could be exempt from paying any income tax. Thenewtaxregimeisgettingtractionwith around 60% adoption comparedtotheinitial years since its launch in 2019-20. But it still has some distance to cover. Thegovernmentisnotkeentoforcepeople to shift to the new tax regime and wants them to shift when they find it attractive. It might thus expand the number of “metropolitan cities”forthepurposeofclaiminghigherhouse rentallowance(HRA)byaddingcitieslikeBengaluruandHyderabadtothecurrentlistoffour. Continued on Page 5 Electric car volumes lose spark, plunge 14% in June THE PASSENGER ELECTRIC four-wheeler segment saw its biggest-ever monthly drop in volumes in June, with retail sales falling 14% year-on year to 6,894 units, reports Swaraj Baggonkar. The sales were weighed down by the withdrawal of subsidy by the government for the fleet segment. Market leader Tata Motors saw volumes contract 21% in June, and its share fall to 63%. ■ PAGE 4 % chg, y-o-y EV 4-wheeler domestic sales (units) Jul 7,512 120 Aug 6,727 100 Sep 6,147 73 Oct 7,245 85 Nov 7,064 77 Dec 7,220 88 Jan 8,164 137 Feb 7,231 52 Mar 9,503 8 Apr 7,415 23 May 7,638 1 Jun 6,894 14 Source: FADA INSIDE In H1, luxury car segment outpaces mass market ■ PAGE 4 Hindenburg gave Adani report to client two months in advance: Sebi PRESS TRUST OF INDIA New Delhi, July 7 US SHORT SELLER Hindenburg Research hadsharedacopyofitsreportagainstAdani Group with New York-based hedge fund managerMarkKingdonabouttwomonths beforepublishingit,accordingto Securities and Exchange Board of India (Sebi). The short seller profited from a deal to share the spoils from the subsequent share price movement,it said.Theregulator, in its 46-page show-cause notice to Hindenburg,detailed how the short seller, Sebi has the New York hedge accused fundandabrokertied to Kotak Mahindra Hindenburg of Bank benefited from making unfair the over $150 billion profits from rout in the market “collusion” value of Adani Group’s 10 listed firms after the report was published. Sebi accused Hindenburg of making unfairprofitsfrom“collusion”touse“nonpublic”and“misleading”information and inducing panic selling in Adani stocks. Hindenburg, in its response to the notice,has described the showcause as an attempt to “silence and intimidate those who expose corruption and fraud perpetrated bythe most powerful individuals in India” and revealed that the vehicle used to bet against Adani’s flagship firm Adani Enterprises belonged to Kotak Mahindra (International), a Mauritius-based subsidiary of Kotak Mahindra Bank. Continued on Page 5 50 BSE-30 Index 40 earnings 10 9.4 (E) 20 (%) 11.2 26.8 growth 30 ex-energy 15.0 BUDGET ■ Adding INDIA INC IS expected to post good profit numbers for the April-June quarter, with sectors like automobiles,banking,metals, capital goods and pharmaceuticals doing reasonablywell during the period. Information technology (IT) players are also expected to chip in with a decent performance thanks to an improving demandenvironmentandbetterdealexecution.Tata ConsultancyServiceswill kick off the earnings season on July 11. Excluding oil marketing companies (OMCs), Kotak Institutional Equities expects the universe of companies it tracks to post a 9.3% year-on-year increase in net profits.Forthe Nifty50 set of companies, profits may stay flat y-o-y and decline 10.7% sequentially. For BSE30companies,thebrokerageexpectsprofits to go up by 8.1% y-o-y, but fall 8.4% sequentially. OMCs had seen big overrecoveries in retail sales of diesel and petrol in Q1FY24. Continuing stability in thepricesofgenericsintheUSasalsogood growth in other markets is expected to boost the earnings of pharma majors. Production volumes for two-wheelers were up 14% y-o-y in the June quarter, though passenger vehicle manufacturers reported low single-digit growth. Rev- 0 -10 -20 2020 2021 Source: Kotak Institutional Equities estimates enuesfortheautomobilespace areexpectedtogrowby10%yo-y on the back of an improvement in the average selling priceofvehiclesdrivenbyprice hikes and a richerproduct mix. Grossmargins,however,might be under some pressure due to rising prices of commodities. With the initial data from lendersindicatingthatloangrowthslowed in Q1FY25, there could be some moderation in earnings growth.As deposits were re-priced while yields remained more or less steady, net interest margins of 10-15 2022 Mar Jun ON THE TABLE GROWTH STORY 15.3 RUN-UP TO THE FE BUREAU New Delhi, July 7 Jun Sep Dec THE NSE’s DECISION to cap the issue price of SME initial public offers (IPOs) at 90% in the special pre-open sessions comes amid growing concerns about the oversubscription and listing gains in the segment, reports Vivek Kumar M. Experts say this is just one of the steps in a series of necessary reforms. ■ PAGE 6 India Inc set for a good Q1 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar NSE CRIMPS PUNTERS’ RUNWAY IN SME OFFERS Big relief likely for middle class 2023 NEWS TWEAKS ON TAX, AGNIVEER ON CARDS 2024 IN THE 2023 2024 basis points would be seen.At the same time, asset quality is likely to be stable with banks not flagging concerns about the unsecured loan portfolios. Most of the recovery from bad loans is possibly over; as such this would not be much of a kicker for state-owned banks for the quarter. FMCG companies are expected to see better or at least stable results both in terms of value and volumes. RESULTS PREVIEW Continued on Page 5 PhonePe fights for a bigger app store play Pre-installation the biggest STICKING POINTS challenge for large-scale ■ PhonePe trying to adoption of Indus Appstore JATIN GROVER New Delhi, July 7 SIX MONTHS SINCE its launch,PhonePe’s IndusAppstore — an alternative to Google Play Store — continues its fight for largescale adoption by smartphone manufacturers and consumers. The app store has recorded two million downloads since its launch, which is just 0.3% of the country’s smartphone users. According to analysts, the pace needs to quicken if it has to dent Google s near monopoly in the segment. The biggest hurdle Indus faces is convincingsmartphonemanufacturerstopreinstall it on their devices. Users have to download it from the company’s website, and also see a warning from Google’s Android that the file may be unsecured. Google Play Store comes pre-installed in all Android phones. 2 million downloads since Indus Appstore's launch — just 0.3% of smartphone users in country ■ Google Play Store comes pre-installed on all Android phones convince phonemakers to pre-install Indus Appstore on their devices ■ Demand from end-users, privacy and security key concerns for phonemakers Most smartphone manufacturers are evaluating PhonePe’s proposal to preinstall Indus Appstore, executives at smartphone companies said. Continued on Page 3 New UK govt to demand Tata Steel save jobs in Wales India, UK officials to meet for FTA talks this month THE UK GOVERNMENT will demand that jobs are saved atTata Steel’s plant in Port Talbot,Wales, in exchange for state support for the industry, new business secretaryJonathanReynoldssaidonSunday, reports Bloomberg. Reynolds said both he and Prime MinisterKeirStarmer have already spoken to Tata Steel over its plantoshutitsblastfurnaces,amovethat could hit some 2,800 jobs. ■ Page 4 WITHBUSINESSOFgovernmentformation over in India and the UK, officials frombothsideswillgettogetherlaterthis monthitselftocarryforwardthenegotiationprocessontheproposedFreeTrade Agreement between the countries, reports Mukesh Jagota. Currently, the 14th round of talks is on. “The two sides are in touch and will meet this month,”a senior official said. ■ Page 2 HABIT FORMATION COULD TAKE 5-7 YEARS, SAY ANALYSTS ■ EXPLAINER, P6 Why old tax regime still has many takers The old regime offers deductions and exemptions which many still find useful ■ PERSONAL FINANCE, P7 Low volatility funds offer stable returns These have lower expense ratios compared to actively managed funds ■ eFE, P10 ‘AI and data analytics have become strategic imperatives for businesses’ Interview with Shukri Dabaghi, SVP - EMEA Emerging Markets & Asia Pacific, SAS Q-comm may take longer to deliver success in Bharat S SHANTHI Bengaluru, July 7 AFTERTASTING SUCCESSinurban centres, quick commerce startups are nowlooking atTier2 and 3 markets as the next growth frontier. Replicating their Tier-1 success in smaller towns and cities, however, could take as long as five to seven years.And while the opportunity is huge, it will come with region-specific challenges,sayanalysts. “While convenience as a value proposition should hold in Tier 2 and 3 cities aswell,lowerAOV(average order value) and concentration of demand due to lower population density and a slow change in consumer behaviour, could adversely impact unit economics,” Pankaj Makkar,managingdirector,Bertelsmann India Investments,told FE. Thee-commercemarketshareof these geographies has been steadily increasing.However,despiteoverall adoption, the biggest challenge for q-commerce players will be achieving‘habit formation’,say analysts. In urban India,quick commerce players like Blinkit, Zepto, Swiggy Instamart and BB Now (BigBasket) could change the ‘planned buying’ or ‘kirana store shopping’ habits of consumers to a large extent in no time. However, other geographies may take time, which is likely to cause lower city-level growth and a longer time to profitability. Analystsestimateitwilltakefive to seven years for habit formation and to achieve urban-like success in Tier 2 and 3 cities. “This timeline considersthetimeneededforinfrastructure development, consumer education, and the gradual shift in shoppinghabits,”ShashankRandev, founder and partner,100X.VC,said. According to Goldman Sachs, India’saddressablequickcommerce RETAIL LANDSCAPE ■ Up to 5 profitable players can be accommodated in the market by FY30, says Goldman Sachs $150 billion value of India’s addressable q-commerce market in top 50 as of 2023 1.7% of retail sales from overall new commerce, expected to rise to $40 bn by 2030 from $2 bn in 2022, says Deloitte 30 cities serviced by quick commerce players, with plans to expand to 40-50 cities market in the top 50 cities stands at $150billionasof2023andthemarketcanaccommodateuptofiveprofitableplayersbyFY30.India’soverall newcommerce segment,which also includes D2C, social commerce and livecommerce, accountsfor1.7%of all retail sales and is expected to rise to $40 billion by 2030, from $2 billionin2022,saysDeloitte’sreporton the future of retail. The massive opportunity has naturally led to increased competition in the segment.Forinstance,e- commerce giant Flipkart will enter thesegmentwith‘FlipkartMinutes’ this month.Reliance Retail has also been planning a q-commerce foray. Ola has re-entered the grocery deliveryspaceviaONDC,whileUber hasreportedlyrampedupitshyper- local delivery services. Praveen Govindu, partner, Deloitte (India), consulting believes the best approach leading players should now take is to look at scaling and strengthening their existing markets, and deepen penetration. “Theycan look at a phased rollout in Tier2,3 markets,take learnings and keepscalingwithathree-tofive-year horizonforanall-Indiaplay,”hesaid. Zomato, too, recently emphasised that Blinkit will continue to focus on the top eight cities,including Delhi-NCR, Mumbai and Bengaluru,to expand its dark store network and penetrate deeperinto the urbanmarkets.Ofthe75newstores the firm added in FY25 Q4, 80% were in these eight cities. Govindu also thinks unit economics and cost to serve will ultimately determine penetration into Tier 2- 3 markets. Continued on Page 3 Kolkata