Challenges for Electric Vehicles in India, GDP Growth of India Has Been Overestimated Says Former CEA, MCA Seeks to Ban Deloitte and BSR Associates and Other Top Business News Today

Two and three-wheeler manufacturers say plans to switch to Electric Vehicles by 2025 unreal, will hit businesses. GDP growth of India has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17, says former CEA Arvind Subramanian. MCA files applications at NCLT to ban Deloitte and BSR Associates from auditing for five years. Salesforce to acquire Tableau for $15.3 bn. 

 

Moving on to the top Business news today: 

 

 MISGOVERNANCE 

IFIN management might have stonewalled its auditors by giving written assurances every time a question was raised, as per SFIO. MCA files applications at NCLT to ban Deloitte and BSR Associates from auditing for five years. 
 

Stonewalled: Following its investigations into the IL&FS Financial Services (IFIN), the Serious Fraud Investigation Office (SFIO) has revealed that the management at IFIN might have stonewalled its auditors by issuing a “management representation letter” every time a question was raised.
 

Red Flags: Such letters from the senior management attest to accuracy of the financial statement and documents submitted to auditors. It comes as no surprise then that in the past year alone, half a dozen management representation letters were given to auditors when they raised alerts on certain judgment calls by the management to facts related to loans. 
 

Zoom Out: IFIN was audited by BSR & Co, a KPMG affiliate, for a year in 2018-19, and jointly by BSR and Deloitte Haskins & Sells for 2017-18. Deloitte was the sole auditor for 2015-16 and 2016-17. 
 

Grim Future: Ministry of Corporate Affairs has filed applications at NCLT to ban Deloitte and BSR Associates from auditing for five years for alleged lapses in auditing the books of IFIN. 
 

MCA is also pushing for the appointment of a new auditor to be appointed for IFIN.

 

 EV 
 

Two and three-wheeler manufacturers say plans to switch to EVs by 2025 unreal, will hit businesses.
 
 
Complete Shift: The Centre recently mandated a 100% shift to Electric Vehicles for three-wheeler makers by 2023 and for two-wheeler makers by 2025, a move which has prompted two and three-wheeler makers to express their concerns about the enforcement of unrealistic deadlines.
 
 
Concerns: Rajiv Bajaj, Managing Director, Bajaj Auto, pointed out three main execution concerns in the plan, such as the impracticality of the scale, the ill-timing of the move, and the leaving out of cars and other vehicles which makes the initiative incomplete.
 
 
According to Venu Srinivasan, Chairman, TVS Motor Company the unrealistic deadline will not just create consumer discontent, but also risk derailing India's auto-manufacturing sector, which supports 4 million jobs.
 
 
Need of the Hour: Among those protesting this move was the Society of Indian Automobile Manufacturers (Siam) backed by Confederation of Indian Industry (CII) which said that mandating a particular technology, such as electric should not be the only way to achieve green mobility, with "openness to all technologies with clear goals" being the way forward. 
 
 
According to Siam President Rajan Wadhera, “the ambition needs to be tempered with a practical approach”
 
 
 NUMBERS 
 
 
GDP growth has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17, says former CEA Arvind Subramanian.
 
 
Overestimated: Former Chief Economic Adviser Arvind Subramanian in a report in The Indian Express has concluded that methodological changes have led to overestimating GDP growth of India by 2.5 percentage points per year between 2011-12 and 2016-17. Actual growth is around 4.5 per cent.
 
 
Zooming In: One sector where the magnitude of mis-measurement is particularly large is manufacturing. Pre-2011, manufacturing value added in national accounts tended to be tightly correlated with the manufacturing component of the index of industrial production and manufacturing exports. But, thereafter, the relationship has broken down, notes the former CEA.
 
 
More on this here
 
 
Assured and Secured: The Modi government has re-affirmed its commitment to “ensure and secure the autonomy and independence of the statistical system to produce appropriate and reliable data by adhering to internationally-agreed professional and scientific standards”.
 
 
The move comes on back of the ongoing controversy the government had found itself, regarding the computation of economic growth. 
 
 
 SLACK 
 

Slack expects revenue growth by 50% in current fiscal year.

 
50% Growth: California-based messaging company Slack Technologies said on Monday that it expected revenue to grow by as much as 50% in the current fiscal year. The company is expected to go public later on this month.
 
 
Slack said it expected FY 2020 revenue between $590m and $600m this year, with an estimated adjusted loss of 41 cents to 44 cents a share. It had revenue of $400m in fiscal 2019, which ended Jan. 31.
 
 
Only 50% Growth?: Slack also stated that for FY 2020 Q2 , which ends on July 31, it expects revenue of $139m to $141m. That would be a growth of 52% in the middle of the range, a significant slowdown from the 67% annualized growth it reported for the first quarter.
 
 
Even the growth of 49% for the full 2020 fiscal year indicates a slowdown in growth, as opposed to the 110% revenue growth in the fiscal year 2018, and 82% growth in the fiscal year 2019.
 
 
 DEALS 

 
Raytheon and United Technologies to merge, creating an aerospace and defense giant. Salesforce to acquire Tableau for $15.3 bn. Fintech companies suffer a blow from DHFL and IL&FS problems.
  
 
A Giant is Born: US defense contractor Raytheon and American aerospace giant United Technologies have announced their merger in an all-stock deal. 
  
 
The new aerospace and defense company, to be named Raytheon Technologiesis expected to have nearly $74bn in annual sales.
  
 
The merged entity would be second only to Boeing in the US with a revenue of $101bn.
  
 
Biggest Deal: Cloud-based software company Salesforce is set to acquire data visualisation company Tableau in a $15.3bn deal, marking the biggest acquisition in the company’s 20-year history. 
 
 
As part of the all-stock deal, Tableau shareholders will get 1.103 Salesforce shares, valuing the offer at $177.88 per share, representing a premium of 42% to Tableau's Friday closing price.
 
 
Cautious: The liquidity crisis at Infrastructure Leasing and Financial Services (IL&FS) along with missed repayments by Dewan Housing Finance Ltd (DHFL) to its bond holders has made risk investors wary about investing in digital lending startups.
 
 
The total quantum of equity funding in the fintech lending sector stood at nearly $394m in 2018-19, an about 5% drop from $413m in the previous year, according to business intelligence platform Tracxn. 

 
Further, the number of companies that raised funds stood at 60 against 73 in the previous year. The number of equity funding rounds dropped to 76 in 2018-19 from 91 in the year before. 

 
The funding data is till March 2019, but the last two months have been challenging due to the liquidity crisis.
 
 
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