[aaykarbhavan] Business standard and Business line news updates 27-11-2013

Govt zeroes in on six firms for divestment



Govt zeroes in on six firms for divestment

VRISHTI BENIWAL & INDIVJAL DHASMANA

New Delhi, 26 November

The finance ministry, having lined up half a dozen companies to sell
the government's stake in, is also planning to tweak the disinvestment
strategy by reviving Specified Undertaking of Unit Trust of India (
Suuti) and launching publicsector exchange- traded funds ( ETFs).

Ministry officials agree the Budget target of raising ₹ 40,000 crore
through disinvestment this year may be difficult to meet but say the
proceeds may be around ₹ 24,000 crore, if some big- ticket issues,
such as those of Indian Oil Corporation (IOC) and Coal India Ltd (
CIL), hit the market. The government, which raised ₹ 23,920 crore in
2012- 13, has also set a target of ₹ 14,000 crore through sale of its
stake in some private companies.

Among the companies likely to be disinvested in this year, the first
could be Power Grid Corporation of India Ltd ( PGCIL) or IOC — in
December. The public issue for Engineers India Ltd ( EIL) is scheduled
for January, while that for Hindustan Aeronautics Ltd is likely to
come after that.

"All options — ETFs, offer for sale ( OFS), follow- on public issue
(FPO) — are available... but we won't go for distress sale. The basket
of funds has to be decided in the case of ETFs," a finance ministry
official said, adding talks were on to revive the defunct Suuti.

Suuti, through which the government holds stakes in ITC, L& T and Axis
Bank, was dismantled after aCabinet decision in March 2013. It was
decided ₹ 40,000- crore assets would be transferred to an asset
management company ( AMC), which would leverage the assets to raise
resources for the government.

Now, the government wants to revive Suuti so that it can sell stakes
in these private companies because aCabinet clearance is required each
time shares held by the proposed AMC are to be sold.

Though foreign institutional investors ( FIIs) had earlier this month
raised some tough questions at road shows conducted in the US, UK,
Hong Kong and Singapore for sale of IOC stake, the government expects
to raise over ₹ 4,000 crore through sale of equity in the firm.

Foreign investors had expressed their concern over volatility in the
foreign- exchange market, subsidies and the fiscal deficit.

Turn to Page 9 >

ECONOMY 4 >

>IOC divestment likely by December 10

TROUBLE? DIVESTMENT IN TRYING TIMES Key disinvestment issues in 2012- 13

Realisation in ₹ crore

*Without including the ₹ 18,000 crore targeted to be raised from
equity stake held by Suuti in non- govt firms ** Till September of the
current financial year Source: Finance Ministry, Controller General of
Accounts

Strategy being reworked to launch ETFs, revive Suuti; proceeds may be ₹ 24k cr

**

________________________________

Click here to read more...Turn to Page 9 >



Click: Article continued from…Govt zeroes in on six

________________________________

Govt zeroes in on six firms for divestment


>FROM PAGE 1

The government had assured them oil marketing companies would not have
to take a hit on their books — because of their ₹ 1,45,000crore
estimated underrecoveries this year — as either fuel prices would be
increased or the finance ministry would part- bear the loss incurred
on selling fuel below market price.

"We told them petrol had been deregulated and diesel prices were also
going up by 50 paise amonth. With the resolution of the Iran issue
oil, prices would stablise," the official added.

The investors, however, asked whether the reforms would continue even
if a new government was formed after the 2014 general elections. For
IOC divestment, the road shows abroad were attended by the world's
largest fund management companies, including Singapore's GIC; those in
the domestic market are to be conducted soon.

The timing of disinvestment in Coal India, which is likely to fetch ₹
10,000 crore, has not yet been decided. But an auction route is
likely.

The government had conducted road shows for CIL stake sale in the US
and Singapore earlier; it was likely to do so again in other markets,
the official said.

The finance ministry is expecting a good response to its public
issues, given the recent stability in the currency and equity markets,
as well as a greater comfort on the current account deficit front. " A
lot would depend on timing and valuation of the issues," the official
added.

This year, the government has raised about ₹ 1,400 crore, but that has
been due to the norm that mandates dilution of 10 per cent stake in
public- sector undertakings.

The timing of disinvestment in Coal India, which is likely to fetch ₹
10,000 crore, has not yet been decided. But an auction route is likely



Sahara to give new title deeds for ₹ 20,000- cr assets


PRESS TRUST OF INDIA

New Delhi, 26 November

Fighting a long- running battle with the Securities and Exchange Board
of India (Sebi), the Sahara group on Tuesday said it would submit new
title deeds for properties worth ₹ 20,000 crore to the market
regulator, which had termed assets offered earlier as overvalued.

The new proposal follows after the Supreme Court last week restrained
the group from selling any properties and restrained chief Subrata Roy
and three other top executives from leaving the country without the
court's permission. The court will hear the matter next on December
11.

While disagreeing with Sebi's view that the properties offered earlier
as security for ₹ 20,000 crore were overvalued, the group said in a
public notice in newspapers on Tuesday it would " submit title deeds
relating to other properties of Sahara aggregating ₹ 20,000 crore,
instead of debating any further on the issue raised." The group said
it " has been making sincere efforts over the last few months to
comply with the order of Supreme Court pertaining to the ongoing
litigation with the Sebi" and assured its depositors, customers and
business associates that it will successfully " overcome these
challenges".

The the Supreme Court has asked the group to hand over title deeds of
unencumbered properties worth ₹ 20,000 crore to Sebi, which was last
year tasked with the job of refunding over ₹ 24,000 crore to investors
from whom two Sahara firms had raised money through issue of certain
debentures.

The group has submitted ₹ 5,120 crore so far to Sebi, while earlier it
had claimed to have refunded more than ₹ 20,000 crore directly to the
concerned investors.

Sebi had informed the apex court on November 20 the group had
overvalued the worth of two properties offered as security earlier
this month and accused the group of not handing over all original
title deeds for assets worth ₹ 20,000 crore.

In its last hearing on November 21, the apex court said its last
month's direction for submission of properties worth ₹ 20,000 crore "
has not been complied with in its letter and spirit".

Sahara had submitted documents for two plots of land — a 106- acre
land in Versova, a western suburb of Mumbai, which it estimated at ₹
19,000 crore, and a 200acre land in Vasai, which it estimated to be
worth about ₹ 1,000 crore.

The case related to Sahara Housing Investment and Sahara India Real
Estate raising more than ₹ 24,000 from an estimated three crore
investors through issuance of certain bonds between 2008- 2009.

Sebi, however, charged them of having raised these funds through
various illegalities and restrained them in November 2010 from
mobilising further funds. Subsequently, Sebi ordered refund of money
through an order passed in June 2011. The matter later reached the
Supreme Court, which passed an order on August 31, 2012 asking Sahara
firms to deposit the money with Sebi for refund of investors' money.

The Supreme Court will hear the matter next on December 11

'India's corporate tax rates among highest'


PRESS TRUST OF INDIA

New Delhi, 26 November

Tax rates for companies in India are among the highest in the world
and the number of payments is also more than the global average,
putting the country at a low 158th rank on the Paying Taxes 2014 list.

However, the time taken for tax payments is relatively less in India,
which is rated ahead of China and Japan where it takes 318 hours and
330 hours, respectively, to comply with tax regulations, according to
a World Bank and PwC report.

According to the report, the total tax rate in India can be as high as
62.8 per cent, there are as many as 33 payments under the head of
profit, labour and other taxes, and the time taken to comply with
taxation requirements could be as much as 243 hours.

On a global average, a company takes 268 hours to pay taxes, makes
26.7 payments and has a total tax rate of 43.1 per cent. India was
placed 158th position in the overall ranking of paying taxes, above
Brazil ( 159th) and below the Russian Federation (56th) and China,
which was ranked 120th. The United Arab Emirates was in first place,
followed by Qatar and Saudi Arabia in second and third positions in
the overall ranking.

The report noted that in South Asia, India is the only economy ( of
eight) with a complete online system for filing and paying taxes.

In the Asia Pacific region, in the past year, the Maldives and Sri
Lanka have introduced online platforms for filing and paying labour
contributions, easing the administrative burden of complying with
labour regulations, the report noted.

Over the past nine years, China registered the largest drop in the
number of tax heads, with a fall of 28 payments, followed by India and
Malaysia, which each reduced payments by 22.

The most common reason for the reduction in the number of payments is
the introduction and improvement of electronic filing systems along
with their adoption by taxpayers, the report said.

1UAE 2Qatar 3Saudi Arabia 56 Russia 120 China 158 India 159 Brazil POOR SHOW

Rankings based on tax rates for firms and number of tax payments in 2014

Source: Paying Taxes 2014

Sebi agrees to ease delisting rules
Sets up internal panel to iron out issues companies face with
delisting regulations


SAMIE MODAK

Mumbai, 26 November

Almost a year back, when Arvind Jolly decided to take his company
Jolly Board private, its stock price was quoted around ₹ 300 apiece.
After discussions with investment bankers, it was concluded that
India's leading fibre- board maker might have to shell out a maximum
of ₹ 600 per share to public shareholders, who owned 10 per cent in
the company, to ensure that the delisting bid was successful. After
protracted negotiations, Jolly Board ended up paying ₹ 1,000 a share
to public shareholders under the reverse book building ( RBB) process
used for delisting.

Mumbai- based Jolly Board is not the only company which, in recent
times, has been forced to pay through the nose to go private. In the
past, several companies, intending to delist from bourses, have either
had to give in to the exorbitant demands of shareholders or shelve
their plans to go private, leading to protests by industry bodies and
corporations.

After years of lobbying to relax the delisting norms, the Securities
and Exchange Board of India ( Sebi) has finally given in to the
demand. The market regulator has set up an internal panel to iron out
issues faced by companies with the delisting process. The committee
has started work.

According to people with direct knowledge of the development, the
regulator is planning to examine the entire delisting framework,
including the quantum of shares required to be purchased, the price
discovery and realignment of rules with clauses in the new Companies
Act. Companies find it difficult to delist as traders or operators
take positions on the stock soon after a delisting announcement,
artificially pushing up prices and dictating terms for delisting, say
promoters and bankers.

"The challenge with delisting is that agroup of shareholders gets
together can decide the price. Also, the quantum required to be
purchased is a problem. As shares tendered in delisting attract
capital gains tax, it deters many shareholders from participating,"
says Jolly, managing director, Jolly Board, which delisted recently.

Sebi need not dilute the delisting requirements as it doesnt want to
be seen as a facilitator for companies to exit but should try to
strike a balance between the expectations of shareholders and the
exiting company, say law firms. " There needs to be an equilibrium
with the seller on one side and the acquirer on the other. If a few
shareholders get together before the bidding, they can dictate the
price. If the exit price is too high and the delisting doesnt go
through, it deprives genuine shareholders of an opportunity to exit,"
says Sudhir Bassi, executive director at leading law firm Khaitan &
Co.

Besides structural issues with delisting, there are certain lacunae in
the delisting regulations, which Sebi could try and iron out, say some
lawyers. "Under the new Companies Act, 2013, it is provided that when
a listed company is merged with an unlisted company, the unlisted
company can remain unlisted. Therefore, this clarity should also be
provided in the delisting guidelines," says Lalit Kumar, partner,
JSagar Associates. Experts say Sebi should also address certain
concerns surrounding possible clashes between delisting regulations
with other regulations such as those on buybacks or the takeover code.

OUTBOUND Some companies that have delisted since 2012

Company Date of delisting

UTV Software March 16,2012 Nirma Limited March 28, 2012 Alfa Laval (
India) April 19, 2012 Patni Computer Systems May 28, 2012 Chemplast
Sanmar June 25, 2012 Chettinad Cement July 8, 2013 Mangalam Ventures
August 20, 2013 Jolly Board September 11, 2013

Source: BSE

|It is a price discovery mechanism used during voluntary delisting of
shares |Under this, shareholders can bid at various prices above or
equal to the floor price |Bids are accepted and matched by the
exchange till the time the offer is open |The price at which most bids
are received becomes discovered price from public at the discovered
price |Either 50% of public shareholding or 90% promoter holding (
whichever is higher) has to be achieved to ensure delisting is
successful





Source Business line



New tax regime soon for foreign portfolio investors

SHISHIR SINHA

SHARE · COMMENT · PRINT · T+





NEW DELHI, NOV. 26:

To boost dollar inflows, the Finance Ministry plans to address the
complicated taxation issues for Foreign Portfolio Investors (FPI)
without waiting for the next Budget.

FPIs are a new category of investors created by merging existing
Foreign Institutional Investors (FIIs), sub-accounts and qualified
foreign investors (QFIs).

Indications are that FPIs will get the tax benefits available to FIIs.
"The new taxation regime for FPIs will be prescribed through a
notification shortly," a senior Finance Ministry official told
Business Line, adding that this neither requires any amendment to the
Income Tax law or any change to the Rules. This means that foreign
investors will not have to wait till the next full-fledged Budget and
the Finance Bill for the new regime to kick in.

In fact, Finance Minister P. Chidambaram has called for a meeting of
the Economic Affairs Secretary, the Revenue Secretary and officials
from the Tax Department to discuss the issue. The meeting will take
place in a couple of days and, based on the discussion, a notification
will be issued after being vetted by the Law Ministry.

NOTIFICATION SOON

The notification will prescribe the mechanism for tax compliance
besides rates and other matters.

The key issue is who will ensure compliance. Currently, for the FIIs,
it is the Custodian who normally takes responsibility for FII clients.
However, this is not so easy with Qualified Foreign Investors.

"Considering the size of individual QFI accounts, Qualified Depository
Participants do not find it viable to provide tax compliance services.
This creates problems," the official added.

On October 5, the Securities and Exchange Board of India announced a
new category of foreign investors as FPI. The decision was taken on
the basis of recommendations by the K. M. Chandrasekhar Committee,
which suggested that the Government could consider bringing more
clarity and certainty while prescribing tax provisions for FPIs.

TAX TREATMENT

In an interview to Business Line in October, SEBI Chairman U. K. Sinha
had said, "We have recommended to the Government that the same (what
is available for FII) tax treatment and procedures should be available
for FPI category. My impression is that it is going to happen soon.
Once that happens, the foreign portfolio investment part will become
very smooth and we can expect foreign portfolio investment to be
high."

Commenting on the latest move, Vasudha Sundararaman, MD and CEO, SBISG
Global Securities Services, said that it is important to communicate
to foreign investors willing to come via the proposed FPI route that
"the same taxation will be applicable to them as that of
FII/Sub-Accounts. The sooner we communicate this to them, the better
our chances to bring them on board."

shishir.s@thehindu.co.in

(This article was published on November 26, 2013)

Keywords: tax issues for Foreign Portfolio Investors, FPI, SEBI
Chairman U. K. Sinha, RBI, Finance Ministry, tax treatment for FPIs

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