Business News Today: After Nirav Modi, PNB Hit By Another Mega Scam, NRIs come under Income Tax Department's Scrutiny

PharmEasy to raise $120m in equity funding. DailyHunt in talks with Carlyle Group to raise $45m. Richard Branson's Virgin Galactic plans to go public. After Nirav Modi, PNB hit by another huge defraud scam. Deutsche Bank announces first of 18,000 job cuts. Employees around the world are now searching for new jobs; those in equity trading division hit worst. Government’s short-term fiscal fixes run the risk of doing greater damage in the long term. RBI Governor applauds government’s commitment to fiscal consolidation in Budget 2019. NRIs come under Income Tax department’s scrutiny. Central bank demand for gold is at its highest in 47 years – should we be paying attention? Some people are looking to Singapore to escape the second Bolshevik Revolution.

 

Moving on to the top Business news of the day.  

 

 FUNDING 

 

PharmEasy to raise $120m in equity funding. DailyHunt in talks with Carlyle Group to raise $45m.
 
The What: Online pharmacy platform PharmEasy is closing in on raising $100-120m in its latest equity funding round led by investors including Canadian pension fund, CDPQ and LGT, the private banking and asset management group controlled by the Liechtenstein princely family.
 
The round, if it goes through successfully, will value the five-year-old company at $500-600m, and will be one of the biggest deals in India’s online pharma space.
 
In Other News: News and content application Daily-Hunt is reportedly in advanced talks with private equity firm Carlyle Group to raise c. $45m in funding, valuing the 12-year-old company at about $650m pre-money.
 
SoftBank is also looking to potentially invest $120-150m in DailyHunt, as per sources. 

 

 COMPANIES 

 

Richard Branson's Virgin Galactic plans to go public. After Nirav Modi, PNB hit by another huge defraud scam.

Countdown To Liftoff: Virgin Galactic, Richard Branson’s s spaceflight company, is reportedly planning to go public as part of a deal with a special purpose acquisition company (SPAC).
 
The SPAC, Social Capital Hedosophia Holdings Corp, will invest about $800m for a 49% stake in the company.
 
Founded in 2004, Virgin Galactic is a subsidiary of the Virgin Group. It is developing commercial spacecraft that can be used by space tourists for suborbital spaceflights.
 
Here We Go Again: 19 Months after Nirav Modi/Mehul Choksi’s INR14,357cr scam hit headlines, Punjab National Bank is back in the news for another defraud.
 
Bhushan Power & Steel, one of PNB’s debtors, has defrauded the bank of INR3805.15cr, the bank said in a stock exchange filing on Saturday.
 
PNB said the company “misappropriated bank funds and manipulated books of accounts to raise funds from consortium lender banks”. It added that it has made provisions for INR1932.47cr to deal with this scam’s repercussions.  
 
Last year, the Nirav Modi scam hit PNB’s profits hard, but it was able to rebound and turn green in the December 2018 quarter. As of yesterday, its shares slumped 7%.

 

 DEUTSCHE BANK 

 

Deutsche Bank announces first of 18,000 job cuts. Employees around the world are now searching for new jobs; those in equity trading division hit worst.

A Terrible Day For Many: Hong Kong, Sydney, New York, London, Tokyo, Bengaluru – Deutsche Bank today announced the first of 18,000 job cuts and several employees around the world had to leave their offices with bad news and heavy hearts.

Most of those hit by the cuts belong to Deutsche Bank’s equities division, which mainly operates from London and New York.

For those who lost their jobs, the going will be tough. The market is slowing as it is and employers aren’t particularly combing through CVs to hire traders.

The Sick Man Of Frankfurt: The job cuts are a part of an ambitious – and costly – reorganisation plan of the ailing bank to become “leaner and stronger”. The bank’s investment division has been ailing for years and attempts to revamp business have failed to deliver in the past.

 

 BUDGET 

 

Government’s short-term fiscal fixes run the risk of doing greater damage in the long term. RBI Governor applauds government’s commitment to fiscal consolidation in Budget 2019. NRIs come under Income Tax department’s scrutiny. 
 
Dampen Hopes: Budget 2018-19 had projected the tax to GDP ratio to rise from 11.6% in 2017-19 to 12.1% in 2018-19 and further to 12.4% in 2019-20. However, the Budget announced on July 5th dashed all hopes. It estimated the tax to GDP ratio to be at 11.9% in 2018-19 and 11.7% in 2019-20. 
 
In this light, the Budget 2019 has sought multiple ways to plug its fiscal gap, prevent any revenue leakages and improve compliance. 
 
That’s Bizarre!: It proposed a surcharge on individual income of INR2-5cr and over INR5cr by 3% and 7% respectively, effectively meaning an increase to 42.7% from 35.8% in the tax rate on annual earnings over INR5cr.
 
Further, as per the Budget, cash-rich firms looking to buy back shares will be subject to a 20% tax that until now was applicable only to dividend distributions.
 
The government also expects to collected INR1tr in dividends from financial institutions, a staggering 43% increase from last year.
 
This overreach has clearly not reverberated well with the investors as the key market indices plunged, with the market capitalisation of all the BSE-listed companies dropping to INR147L cr on Monday vs INR154L cr at the start of Friday.
 
India’s desperate focus on short-term fiscal fixes risks doing greater damage in the long term. More on this here
 
Meanwhile…: RBI governor Shaktikanta Das praised the government’s commitment to fiscal consolidation in the Budget and applauded its achievement of bringing the fiscal deficit from 4.1% of GDP in FY15 down to 3.3% in FY20.
 
Read more on the RBI governor’s view on the Budget here.

Several NRIs are being pulled up for alleged tax evasion. Many have received notices from the Income Tax Department for reopening tax assessments of the past five to six years. 
 
A resident can attain NRI status by staying overseas for more than 182 days. The law also states that a person is a ‘resident’ if he has been in India for more than 60 days in the year in question and 365 days during the four years prior to that year. 
 
Now while an NRI is spared tax on income from outside India, a resident is required to pay tax on global earnings. 
 
Within this backdrop, many are known to divide their time in India and abroad in order to escape severe tax implications.  
 
The news comes as the Budget 2019 proposed an amendment (with retrospective effect) in the black money Act to include NRIs in the definition of ‘assessee’ – a move that would make the laws more stringent

 

 OFFBEAT 

 

Central bank demand for gold is at its highest in 47 years – should we be paying attention? Some people are looking to Singapore to escape the second Bolshevik Revolution.

Golden Opportunities?: Who buys gold? Central governments and foreign governments. And they’re buying it at their fastest pace in six years. First-quarter net gold purchases in 2019 was nearly 70% greater than in 2018.

Demand for gold by central banks itself is at its highest point since the Nixon Shock of 1971. And dumping or selling of gold is yesterday’s news.

At the same time, though, gold has been stuck in the same trading range since 2013 or so even as retail stocks have soared globally.

Why is this happening? Why are central banks hoarding gold and should investors be paying attention? Read more here.

The Rock That Became Wealthy: Five decades ago, Singapore was a dirty, impoverished piece of rock floating in the ocean. Today, it is an economic powerhouse, one of the original Tiger Economies, and one of the wealthiest places on earth.

The island-state’s transformation from economic backwater to developed country status in a single generation is a tale renowned and admired the world over.

Long Live The Revolution: For some in the world, though, Singapore’s wealth, security, low tax rates and allure serve a strange purpose. Some people, concerned over growing protectionism in the world and fearing that the resurgent left’s economics will be atavistic and mean a return to “Bolshevism”, are suggesting we take Singapore as “Plan B” and store our wealth there to escape economic Armageddon.

Apocalyptic thinking? A little too over-the-top? Well, it is ZeroHedge after all.

 

(Don't want to miss out on these End Of Day Wrap Ups?  Subscribe Now to our WhatsApp Feed and get the day's Top Business stories straight on your favourite messaging app.)