Bournvita row invites new rules; tax notice for startups; airline traffic and more

Also in the news is Bengaluru emerging as the top city in terms of debt-raising activity by real estate companies, with a share of 31% ($3.6 billion) during 2018-22

Following the Bournvita controversy, the government has said it plans to regulate influencers so that they do not promote any product unless qualified to do so

The Federal brings you the key events that the business world is abuzz with on Wednesday (April 19).

Bournvita controversy: Centre plans to regulate influencers

The Centre has proposed norms that will make it mandatory for health and wellness influencers to disclose their qualifications for offering such advice, says a report in Business Standard.

What it implies: After a controversy broke over an influencer’s remarks on popular children’s health drink Bournvita, the government has said it plans to regulate influencers so that they do not promote any product unless qualified to do so. The controversy was regarding Bournvita’s allegedly high sugar content despite being promoted as a “health drink”. In January, the Centre released guidelines for endorsements by public figures and social media influencers. According to the guidelines, those promoting any product must inform people about any material or financial benefits they get from a brand or product for promoting them on social media. The failure to do so will attract a fine of up to Rs 50 lakh. All endorsements should use words like “advertisement”, “sponsored”, or “paid promotion”, and disclosures should be big and clear.

Also read: Bournvita says it offers ‘best of taste and health’; slams influencer’s ‘high sugar’ video

Startups get I-T notice over angel funding

Indian firms that raised capital from domestic investors at an “excessive premium” have received income tax notices, according to a report in Business Standard. The excess premium received on the transfer of shares to foreign or domestic investors by an Indian startup will be considered “income from other sources” and be subject to angel tax.

What it implies: According to the last Union Budget, startups must pay 20% of tax on any premium paid in excess of the fair market value. Hence, to avoid the tax, startups might try to readjust the rise in valuation, but funding usually happens based on higher valuation, which could put them in a spot. There is also the possibility of the angel funding drying up. According to a PwC India report, funding for India’s startup dropped 33% to $24 billion in 2022 compared to the previous year. Experts say to avoid tax, early-stage startups might start registering their parent companies in investor-friendly countries, which is called flipping.

Domestic airlines carried a record 13 million passengers in March

According to the Directorate General of Civil Aviation (DGCA), domestic airline traffic rose 21.3% to hit a record 13 million passengers (1.3 crore) during March 2023.

What it implies: Domestic airline passenger traffic has grown past pre-Covid levels, which was around 12 million. This is largely because of leisure travel, but some of the increase has also been attributed to corporate travel, as offices across the country have made it mandatory for employees to return to work. If corporate travel picks up over the next three quarters, airlines and airports will fall woefully short of capacity, which could lead to bigger issues for the industry. According to aviation consultancy firm CAPA, airlines in India are expected to place orders for around 1,500–1,700 aircraft over the next two years. Currently, airlines in India have over 700 commercial aircraft in operation and fewer than 800 aeroplanes are on order.

Also read: Bengaluru airport reports strong growth in passenger numbers in 2022-23

New York is the wealthiest city

According to a new study by investment migration firm Henley & Partners, the results of which were released on Wednesday, The Big Apple is by far the world’s wealthiest city. Last year, the global financial and cultural centre was home to 3.4 lakh high-net-worth individuals with an annual income of $1 million or more, while Tokyo, the second-wealthiest city, had 2.90 lakh millionaires. With 724 residents worth more than $100 million, New York also took first place for having the most millionaires, 95 more than the Bay Area, which comes in second place and comprises San Francisco and Silicon Valley. However, NYC fell to second place when it came to where the wealthiest of all choose to make their home, having only welcomed 58 billionaires as opposed to the Bay Area’s 63.

Research report on Indian real estate

Real estate consultancy firm, CBRE South Asia, has said Bengaluru attracted $5.2 billion of equity investments in the real estate sector during 2018-22, accounting for a 16% share. According to the report by the firm, overall investments in the realty sector between 2018 and 2022 stood at $43.3 billion on a pan-India level. Equity investments over this period stood at $31.8 billion, while debt investments were $11.5 billion.

Bengaluru also emerged as the top city in terms of debt-raising activity by real estate companies, with a share of 31% ($3.6 billion) during 2018-22. With the closure of 44 land deals and the acquisition of 700 acres, the city saw investment inflows of $1.1 billion into land/site acquisition during 2018-22. The city accounted for 10% of the capital deployed for land acquisition in 2018-22 across top metro cities. During 2018-2022, Bengaluru stood as one of three key investment gateway cities, in addition to Mumbai and Delhi-NCR, with a combined share of 63%.

Some key elements that attracted institutional investors to Bengaluru are its sound urban infrastructure, availability of a large base of the diversified talent pool, quality tenant covenants, a favourable policy ecosystem, and overall market formalisation.

Also read: Maruti, Hyundai see drop in retail sale market share last fiscal: FADA

Institutional investors leading the inflows in India: According to the report, cross-regional investors (outside the APAC region) pumped in nearly 47% of overall investments in India since 2018. Domestic investors (mainly real estate developers) have invested over $13 billion, accounting for around 42% of the total investments during this period. The remaining fraction of investment flows in India was eventually accounted for by intra-region (within APAC) movements.

More than $17 billion have been invested by institutional investors over the past five years, with North American investors continuing to make up most of these investments. On a cumulative basis, the top three investors in India have pumped in over $10 billion, accounting for a staggering 60% of the total institutional investments during this period. Regarding favoured sectoral bets, the office sector has received more than 56% of institutional inflows (about $10 billion).

Pent-up demand for office space and improved employee occupancy levels in business parks drove a solid rebound in office leasing. As a result, institutional investments in the office sector remained strong in 2022 as well. Acquisition of site/land parcels was another preferred bet, with total institutional inflows recorded at over $2.5 billion, representing a nearly 15 per cent share. Retail received over $2.0 billion in capital infusion, or more than 11% of total institutional investments, making it one of the top three preferred sectoral bets. The closure of two large deals of over $100 million made the retail sector the second most preferred sector (within core sectors) after office.

Also read: Twitter to restrict visibility of tweets that violate its policy

Book Corner: The Tatas, Freddie Mercury & Other Bawas. An intimate history of the Parsis. Coomi Kapoor. Penguin.

The Parsis are fast disappearing. There are now only around 50,000 members of the community in all of India. But since their arrival from Central Asia, somewhere between the eighth and tenth centuries, the Parsis’ contribution to their adopted home has been extraordinary. The history of India over the last century or so is filigreed with such contributions in every field, from nuclear physics to rock and roll, by names such as Dadabhai Naoroji, Dinshaw Petit, Homi Bhabha, Sam Manekshaw, Jamsetji Tata, Ardeshir Godrej, Cyrus Poonawalla, Zubin Mehta, and Farrokh Bulsara (aka Freddie Mercury).

This is a revised and updated new edition — engaging and accessible — making it the most intimate history of the Parsis by senior journalist and columnist Coomi Kapoor, herself a Parsi. The book pores through the names, stories, achievements, and continuing success of this tiny but extraordinary minority. She delves deep into the question of what it means to be Parsi in India and how the community’s contributions — from tanchoi silk to chikoos — became integral to what it meant to be Indian.

In Kapoor’s hands, the story of the Parsis becomes a rip-roaring, incident-filled adventure: from dominating the trade with China to being synonymous with Bombay, once, arguably, a city defined by its Parsis; from the business success of the Tatas, the Mistrys, the Godrejs, and the Wadias, to such current contributions as the manufacturing of COVID-19 vaccines by the Parsi-founded Serum Institute of India. (Profile Courtesy: Penguin Random House).