| Govt set to notify 51% multi-brand retail FDI in Sept |
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New Delhi, 19 August The government has finally decided to bite the bullet on allowing 51 per cent foreign direct investment (FDI) in multibrand retail, albeit in a different format. The long-pending Cabinet decision is set to be notified by the second week of September, after the Parliament's monsoon session is over, with a clear message that the execution of the decision would lie in the court of the states. A top official told Business Standard the main opposition that came from the United Progressive Alliance (UPA)'s ally, Trinamool Congress, had been "taken care of". "The main thing now is that Prime Minister Manmohan Singh wants to roll out the decision. Suspending the move had given an extremely negative impression of India's decisionmaking powers to the world. So the decision has to be notified now, no matter what," the official, who did not want to be identified, said. The plan is to push the decision once the monsoon session of Parliament is over by September 7. "We are ready with the entire policy. It is only a matter of removing the finger from the pause button. The decision has already been approved by the Cabinet. We will now have to notify it, which will be definitely done by the second week of next month," the official said. The idea is to go ahead with the decision and let those states favouring it invite FDI in their areas, as well as respect others that are against the move. Earlier, in June, Commerce and Industry Minister Anand Sharma had written letters to key state governments, seeking their support for the move. So far Congress-ruled states such as Rajasthan, Delhi, Uttarakhand and Manipur have extended their support. Bharatiya Janata Party (BJP)-ruled state Himachal Pradesh has also given its consent, according to a senior official from the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry. Last week, during the fourth meeting of the government-industry task force, Sharma had assured the industry of a "package on FDI". Besides, multi-brand retail, the package will include some key clarifications in the FDI policy on singlebrand retailing. Earlier, the Cabinet had cleared 100 per cent FDI in single-brand retail and up to 51 per cent in multibrand retail. However, after persistent protests by Trinamool Congress and the Opposition, the government notified only one of the decisions — hiking FDI from the then cap of 51 per cent in single-brand retail. Multinational corporations such as Swedish homeware company Ikea and the Netherlands-based Zara now want certain changes in rules of that decision. The move to allow up to 51 per cent FDI in multi-brand retail will come notwithstanding recent recommendations by the Prime Minister's Economic Advisory Council to lower the cap on FDI to 49 per cent to evolve agreater consensus. The entry of large retail chains in India is expected to benefit consumers through price reductions facilitated by the reduction in intermediaries effected by retail giants such as Walmart, Tesco and Carrefour. Investments in cold-storage and warehousing will ease supply-side pressures that have driven food inflation to double digits, according to an analysis by ICRA. The notification of the multibrand retail FDI decision would be yet another move by the government to assuage the sentiments of foreign investors after it directed a review of the General Anti-Avoidance Rules and retrospective amendments to the Income-Tax Act. Notification after Parliament session; execution ball to be in states' court FIPB to reviewdirectselling policy In a rare move, the Foreign Investment Promotion Board (FIPB) has decided to discuss a stand-alone policy matter, with no company proposal or investments involved, on direct marketing and multi-level marketing in India at its next meeting on August 24. An official in the know said the initiative was linked to the government's effort to soon introduce FDI in multi-brand retail and a revised single-brand policy, NIVEDITA MOOKERJI reports from NewDelhi. 2 > |
| NEWPROFITABILITYCLAUSE |
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New Delhi, 19 August The new profitability clause for firms planning to list on the main stock exchanges will help boost the Small and Medium Enterprises (SME) platforms launched by the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The Securities and Exchange Board of India (Sebi), last week, added the minimum profitability clause for firms wanting to list on the main stock exchanges. Accordingly, only issuers with a minimum average pre-tax operating profit of ~15 crore will be allowed to make initial public offerings on the main exchanges. Investment bankers said this provision would help SME exchanges attract companies. Dara Kalyaniwala, vice-president (investment banking), Prabhudas Lilladher, said the move would push more smaller companies to seek listing on the SME exchange. Kalyaniwala cited some recent examples, where several companies barely crossed the new profitability limits. According to BS Research Bureau, at least 25 companies listed in 2011 had net profit figures less than ~15 crore. In 2012, at least three IPOs saw issuers with net profits below this number. "Only issuers with a minimum average pre-tax operating profit of ~15 crore will be able to come through this route," Sebi decided in its board meeting last week. The move will be beneficial to both companies and investors, as the SME Exchange had more safeguards in place to support the smaller IPOs. The smaller bourse keeps away very small investors, as minimum investment is pegged at ~1 lakh. Further, there are market makers and anchor investors for each scrip who ensure liquidity by giving two-way quotes. Lakshman Gugulothu, chief executive officer, BSE SME Exchange, said the move would help make a clear demarcation between the main board and the SME exchange. "There was a lot of lot of overlap because even very small companies were going to the main board and raising ~30-40 crore. This had to be minimised. The Sebi move is a market development measure which will be positive for both the main exchange and the SME platform." This will induce investor appetite in the main exchange also, as only companies with considerable size and profit track record will be present there, say experts. Companies with paid-up capital of up to ~25 crore can be listed on the SME Exchange. Considering companies list at a premium, they could look at a market capitalisation of around ~250 crore. Usually companies look to divest up to 40 per cent of the equity. Thus, issuers looking to raise up to ~100 crore could come to the SME platform, say experts. Gugulothu said the SME Exchange was picking up well and such moves would help add to the momentum. "Every week, we are seeing one or two companies coming for listing and few others filing prospectuses. In the next two months we will have 1015 companies listed on the platform," he added. Main exchange Name Net profit (latest) Issue size MT Educare 8.25 99.00 VKS Projects 3.16 55.00 Olympic Cards 2.19 25.00 BSE SME Monarch Health -0.44 12.00 BCB Finance 0.23 8.85 Max Alert Systems 1.73 8.00 Sangam Advisors 0.22 5.07 Jupiter Info 0.02 4.08 Figures in ~ crore Source: BS Research Bureau SMALLIS BEAUTIFUL Recentlistings |
| LEGAL DIGEST |
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>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> HCs notto hearwrits by consumers The Supreme Court has issued a "direction of caution" to the high courts that they should not accept writ petitions against orders of the National Consumer Commission. According to the Consumer Protection Act, appeals against the order of the commission lie to the Supreme Court only. But in this case, Cicily Kallarackal vs Vehicle Factory, the Kerala High Court admitted awrit petition challenging the order of the commission and passed certain orders. The Supreme Court asserted that the Act did not prescribe this procedure. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> NewIndia to pay compensation The Supreme Court has asked New India Assurance Company to pay ~19.75 lakh to a person who had suffered amputation and other serious disabilities in a road accident. The motor accident compensation tribunal had awarded only ~4 lakh in the case, N Suresh vs Yusuf Shariff. The Karnataka high court raised the amount marginally to ~7.26 lakh. On further appeal, the Supreme Court re-calculated the compensation due in such serious cases causing permanent disabilities and hiked the amount, to be paid by the insurance company. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Notify acquisition publicly: SC If the government does not issue a public notification regarding acquisition of land, the acquisition will be invalid and illegal. Notification in the official gazette is not enough. On this reasoning, the Supreme Court has quashed a land acquisition by the Maharashtra government as it did not issue public notification to that effect. The Land Acquisition Act makes it mandatory to announce the acquisition in the official gazette as well as publicly. In this case, the government's defence was that it had published the notification in the gazette but did not issue public notification. The claimant to the land challenged the acquisition as the procedure was not followed. However, the Bombay High Court dismissed the petition. Therefore, the claimant moved the Supreme Court. Allowing the appeal in the case, Kulsum Nadiadwala vs State of Maharashtra, the court emphasised that when a procedure is prescribed in the law, it should be strictly followed. Both requirements under Section 4 should be mandatorily followed. This is so even if the land owners have been served with individual notices or are aware of the acquisition from other sources. Merely because the land owners had failed to file objections within the prescribed 15 days after the gazette notification, the acquisition would not be valid. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Delay fatal to preventive detention Inordinate delay in executing a preventive detention order will make it illegal, the Supreme Court asserted in the case, Saeed Malik vs State of Maharashtra. In this case, the Directorate of Revenue Intelligence launched investigation into fraudulent exports made from Nhava Sheva port under the drawback scheme of the Customs Act by fictitious firms. One of the alleged racketeers was arrested and later released on bail. While he was on bail, a detention order was issued against him. But it was executed only after some 15 months. He moved the Bombay High Court challenging the detention. The high court dismissed the petition, leading to the appeal. The Supreme Court pointed out the rights a detenu under Article 22 of the Constitution. The detenu's representation must be considered with urgency. In this case it was not done. The authorities could not give any satisfactory explanation for the undue delay and other violations of procedure. Therefore, setting aside the high court order, it quashed the detention order. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> OILchallenge to award dismissed The Delhi High Court last week dismissed with costs the petition of Oil India Ltd (OIL) challenging the majority award by a threemember arbitration tribunal in the dispute with Essar Oil Ltd. The dispute arose out of a 1995 contract entered into between the parties for drilling of offshore wells on turnkey basis offshore Saurashtra coast, Gujarat and offshore North East Coast, Orissa for the purpose of exploration of oil and/or gas. OIL alleged delays on the part of Essar and the latter made counter charges. After a year, OIL terminated the contract alleging that Essar was "incompetent and incapable of performing its obligations under the contract." This led to arbitration by former Chief Justice of India, Justice R S Pathak, and two retired Delhi High Court judges, which went against OIL. The Delhi High Court stated that the majority award was well-reasoned and did not require interference by it. MJ ANTONY THINKSTOCK |
Company Secretary, Chennai
email csarengarajan@gmail.com
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