Source Business standard
| Court says UBHL's sale of shares to Diageo is void | ||
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Bangalore,20 December The Karnataka High Courton Friday ruled as void apart of the sale of share of UnitedSpiritsLtd(USL),by UnitedBreweriesHoldingsLtd,to Diageo. On Friday,the court overturned an order, passed in March by a single-judge Bench in the company court,allowing VijayMallya'sUBHoldings to sell a significant part of its stake in USLtoDiageo.As part of the agreement betweenUBGroup andDiageo,signedi nearly November2012,UnitedBreweriesHoldings Limited(UBHL) sold6.9percentofits14.16per cent holdings(asofMay2013)in USL for₹1,460crore. Theordersaid thecompany court, which had allowed UBHL to sell itsstakein USLto Diageoin March,did not have the jurisdiction to do so while the company was still facing winding-up petitions .Unsecured creditors had filed winding-up petitions after failing to get back ₹600 crore from UBHL. It had given corporate guarantees to the creditors of Kingfisher Airlines,now grounded and unable to repay debts. Friday's ruling, which negates the sale of about 10 million shares the global spirits behemoth acquired from Mallya-led UB Holdings in July, has prompted a strong response from UB GroupandDiageo, which now holdsa26.4-per cent controlling stake in india's largest spirits company. Mallya, chairman, UB Group,said,"Wewill take all necessary steps to protect Diageo's interests,as well as ourown."The company would appeal in the Supreme Court, when it reopens inJanuary. Diageosaid:"We are also disappointed,as a bonafide purchaser for value of the USL shares, that we have been broughtintothe private dispute between KingfisherAirlines and its creditors.We are disappointed to hear that the court has overruled the previous high court order granting leave to UBHL under sections 536 and 537 of the Companies Act.We confirm that we intend to appeal the matter further." The order marked the first time an Indian court has maintained the provision of Section 536 in the CompaniesAct,1956 ,even before the admission of a winding-uppetition. TurntoPage5 >THEDEAL THAT SOURED || v 9 9 , , 2 2 0 0 1 1 2 2 --UBHLandUSL announceanagreementto sell27.4%stakeinUSLto DiageoPlcat₹1,440ashare. Diageoaimsfor53.4%in USL;tobuyremainingfrom theopenmarket || r 2 2 4 4 , , 2 2 0 0 1 1 3 3 --Company courtallowsUBHLtosellits sharesinUSL.Thepermissionwasgrantedinlieuofa depositof₹250croremade withthecourttotakecareof thewinding-uppetitions || r 1 1 0 0 --Openoffertriggeredforadditional26%as Diageoaimsfor53.4%ofUSL || r 2 2 6 6 --Open offer closes with less than 1%being tenderedin || l 4 4 --Diageo announces completionof stake purchasefromUBHL,USL with25.02%astwo banks refuse to part with 2.38% encumbered shares || v 2 2 6 6 --Diageopicksup additional1.4%at₹2,440a sharefromthemarket, takingtotalstaketo26.4% Mallya,Diageotomove SupremeCourt | ||
Infra investment gets Sebi push | ||
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Mumbai, 20 December The Securities and Exchange Board of India ( Sebi) has issued a consultation paper for a separate investment vehicle to channelise investments into infrastructure. Comments have been invited till January 20. Similar structures are in place in international markets, including Singapore, Hong Kong and America. Infrastructure investment trusts (InvITs) are being contemplated as a means of channelising savings to meet the infra sector's estimated capital requirement of ₹ 65 lakh crore over the duration of 2012- 2017, according to the paper. Sebi has proposed two possible ways of introducing such structures. One is through the mutual fund route, with the insertion of a separate chapter covering the new entities, through existing MF regulations. The fund would be set up as a trust, which would acquire shares of Special Purpose Vehicles ( SPVs) in infra projects, starting with those which have government and private partnership, and later expanded to include other projects. The sponsor for such a fund would have to be an infra developer or an SPV which has entered into an agreement for the project. The entity would be required to have a minimum stake in the infrastructure investment vehicle. The portfolio should include a mix of projects in an early stage of development and others generating cash flows, says the paper. Initially, only projects in one sector can be bundled; for example, a structure may invest in only road projects. The trusts would have to distribute at least 90 per cent of income after tax to investors. Units of the fund can also be listed, according to the paper. " While listing is not mandatory, listing of MF units will allow certain taxation benefits," it said. "Mutual fund is an established structure and including InvITs as MFs would enable easy association of investors with the vehicle," it added. Alternatively, Sebi is also contemplating aseparate framework, distinct from the MF regulations, for such investment vehicles. There would be two categories, one of which would invest in multiple infrastructure projects and the other in only one- year revenue generating ones. The first category would only be able to raise money from institutional investors, with a minimum size of ₹ 5 crore. The second category would have a minimum size of ₹ 10 lakh and could raise capital from any investor. The regulator issues consultation paper on infra investment trusts | ||
| Listing abroad sans domestic IPO set to be a reality soon | ||
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Mumbai, 20 December Come New Year, unlisted Indian companies will get an option to pick a market of their choice to list. The finance ministry will soon make changes to the regulations governing the issue of global depository receipts (GDRs) to enable companies to list abroad without having to list domestically, two people with direct knowledge of the development said. "The committee set up to review the norms governing GDR issuances has already submitted its report. After further consultation, we plan to soon amend the ADR/ GDR scheme," said a senior finance ministry official. The expert panel, headed by former Securities and Exchange Board of India ( Sebi) whole- time member M S Sahoo, gave its recommendations to the government on November 24. The government, in September, had decided to allow foreign listing without the precondition of dual listing or having to list here. Earlier, companies had to either list first in India before they could list aboard, or had to take the tedious overseas holding company route. Though most market players had welcomed the government move, they are awaiting the final guidelines to see the structure and the level of disclosures that companies would have to make. Recommendations made by the Sahoo panel are likely to be made public soon. Companies wanting to list abroad will have to issue DRs based on Indian shares. These DRs will be the derivative of Indian shares and will have to be kept with a custodian based in India. Experts say the norms with regard to disclosure requirements will be critical. " This thing ( listing abroad) could be a doubtful starter if the companies wanting to list abroad have to meet all Sebi requirements as well," says Sandip Bhagat, partner, S& R Associates. Bhagat says the Indian disclosure requirements are different from those in the US and having to comply with both could act as a deterrent. The issue of listing abroad was also deliberated upon recently at one of the panel discussions at a summit organised by AIBI, an association of investment bankers. VS Sundaresan, chief general manager, Sebi, who was part of the panel, said certain regulatory requirements were needed to avoid regulatory arbitrage and to take care of reputational risk. " As far as the reputational risk is taken care of, we have no objection with raising capital ( abroad). If that is not addressed, the cost of raising capital will be much more for genuine issuers," he said. Rohit Chatterji, managing director, investment banking, JPMorgan India, who was part of the panel discussion, said, Companies will get to issue depository receipts; govt to notify norms soon Earlier, companies had to either list first in India before they could list aboard, or had to take the tedious overseas holding company route |
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Source Business line
Govt won't tell companies how to spend CSR funds: Pilot
OUR BUREAU
NEW DELHI, DEC 20:
The Corporate Affairs Ministry will not be the "judge or jury" on CSR spending, and companies can take a call on how they want to use the funds, said Corporate Affairs Minister Sachin Pilot.
This should come as music to India Inc, given that the new company law prescribes a regime for corporate social responsibility (CSR) spending.
But the key issue now is how will the Corporate Affairs Ministry provide this relaxation in the CSR regime as it may require changes to the law.
"I am very clear that it cannot be the Ministry or the Secretary or the State Government that can tell you where you should spend the CSR money," Pilot said at a CII-ITC sustainability awards 2013 event here. India Inc can spend the CSR money on environment, ecology or even wildlife if it so desires, he said.
CSR FRAMEWORK
The CSR provisions in the new company law are yet to come into effect. The Corporate Affairs Ministry will by this month end come up with the final rules on CSR provisions, Pilot told Business Lineon the sidelines of the event. The seven phases of draft rules on the new company law have seen tremendous response from stakeholders. The Corporate Affairs Ministry has apparently received more than 25,000 responses to the draft rules. The proposed final rules are expected to clear the air on CSR spends.
LEGAL POINT
The Corporate Affairs Ministry has several options to change the prescriptive regime of CSR spending.
With the new company law in place, some legal experts feel that Schedule VII has to be amended if company boards are to get the power to decide on the areas of CSR spending.
According to the new company law, the CSR committee of a company will have to formulate and recommend to the board a policy. This policy will have to indicate what the company proposes to do from the Schedule VII list of 10 activities, including "such other matters as may be prescribed". Indications are this phrase will be replaced with "such other activities that a company may deem fit".
EXPERT VIEW
Dolphy D'Souza, Senior Partner, S. R. Batliboi & Co, says it is possible to add to the list of CSR activities either by prescribing in the rules or by amending Schedule VII or using Section 470 of the Companies Act, 2013 to remove the difficulty. "I guess the rules will be an easy option," he told Business Line.
Lalit Kumar, Partner with law firm J. Sagar Associates, said the Centre has under Schedule VII the powers to prescribe additional matters for CSR activities other than those already listed in the Schedule. But it has no powers to delete or amend the subjects already listed unless the Centre invokes its power under Section 467 of the Companies Act, 2013. This will, however, require approval of both Houses of Parliament.
(This article was published on December 20, 2013)
Keywords: Corporate Affairs Ministry, Govt, companies, spend, CSR funds, Pilot, LEGAL POINT, CSR spending
Post big losses, Shree Ganesh wants to move CDR cell
OUR BUREAU
KOLKATA, DEC. 20:
Shree Ganesh Jewellery House (I) Ltd has approached State Bank of India (SBI) for referring its debt to the corporate debt restructuring (CDR) cell. SBI is the lead bank in a consortium of its lenders. Huge losses in import and export transitions have led the company to opt for the CDR route. SBI had a meeting with the other members of the consortium on Friday to discuss Shree Ganesh's proposal. The outcome of the meeting was not available till evening.
Under CDR, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates.
Export credit
Export Credit Guarantee Corp of India Ltd, which provides export credit insurance facilities to exporters and banks, has a substantial exposure linked to certain overseas transactions of Shree Ganesh, according to sources.
As on March 31, 2013, the company's long-term borrowings were at Rs 100.4 crore and short-term debt at Rs 496.84 crore. The interest coverage ratio in 2012-13 was 2.26.
Shree Ganesh reported a net loss of Rs 1,047.74 crore in the July-September quarter this fiscal against a profit of Rs 82.57 crore in the corresponding quarter last fiscal.
The company incurred a loss of Rs 396.2 crore in certain trade transactions.
The company also disclosed that it cancelled a bullion purchase contract in October with Shree Ganesh Jewellery House FZE, a wholly-owned subsidiary in the United Arab Emirates.
"As such, the subsidiary had suffered a loss of around Rs 1,137 crore, of which Rs 61.75 crore is to be provided in standalone books as a diminution in value of investment, and Rs 623.72 crore has been provided against bad debt, since the subsidiary is also one of the debtors of the company," Shree Ganesh stated.
According to the management, nearly 81 per cent of the company's revenue was derived from exports in 2012-13 and 98 per cent of its raw materials were imported, creating a hedge. Since exports exceeded imports, a weakening rupee tended to benefit the company's margins. Early last month, rating agency CARE had suspended the ratings assigned to bank facilities and instruments of the company.
Dubai subsidiary
During the second quarter of FY12, the company had entered into a gold purchase agreement through its Dubai subsidiary Shree Ganesh FZE, a Shree Ganesh spokesperson told Business Line. . However, "ambiguity" in regulatory policies led the company to unwind the contract, which led to a loss during the current year, the spokesperson said. "To fund the loss resulting from gold purchase contract, Shree Ganesh requested debtors for goods on credit. SGJ offered to sell the products through a mix of cash payment and credit terms for a longer period," the company added.
The Shree Ganesh stock on Friday closed up 4.95 per cent on the BSE at Rs 24.4 on expectation of a better direction of the company's finances.
jayanta.mallick@thehindu.co.in
PSU exchange-traded fund to be launched by February
SHISHIR SINHA
NEW DELHI, DEC. 20:
A Central Public Sector Enterprises (CPSE) Exchange-Traded Fund is likely to hit the market in February.
According to Finance Ministry officials, the Department of Disinvestment has identified 11 listed public sector enterprises, including blue chips, such as Coal India, ONGC, Indian Oil, Power Grid, Rural Electrification Corporation and Power Finance Corporation. These firms have been selected on the basis of their five-year dividend record. Now, an Empowered Group of Ministers will finalise the composition of the proposed fund. It will also take a call on the timing, the official added. Goldman Sachs will manage the ETF.
Rs 14,000-cr target
This fund aims to help the Government to mop up more funds through its disinvestment target. The target for 2013-14 is Rs 14,000 crore, but the Government has so far managed to garner only around Rs 3,000 crore. With uncertainty over two big-ticket disinvestment proposals — Coal India and Indian Oil — the Government hopes to bet big on the CPSE ETF. However, it has not fixed any target to be mopped up through the ETF.
The Cabinet Committee on Economic Affairs has already approved setting up a fund. The Ministerial panel will also decide on the discount to be provided. An ETF is like an equity mutual fund scheme that consists of shares of many companies. It tracks an index and is traded on a stock exchange. Its constituent stocks are listed and actively traded.
One unit is enough
Since this fund has shares from various sectors providing for diversification, an investor can buy just one unit of such an ETF and get the benefits of trading in the constituent stocks. This fund will also help investors reduce their investment risk.
The usual mode of taking a partial disinvestment offering of a CPSE to the market includes initial or further public offering, offer-for-sale through stock exchange and institutional placement.
The proposed CPSE-ETF will serve as an additional mechanism for the Government to monetise its shareholding in those CPSEs. The fund will include a small percentage of shares, say, 2-3 per cent, in the proposed instrument.
It will have stocks from various sectors, except banks.
The fund will also help minimise market disruptions seen in public offerings of listed CPSEs. Officials feel this will be beneficial for the Government from a pricing perspective, as part of the discounts can be back-ended. It will also help fulfil domestic investors' appetite for an equity ETF product as such investors are vastly underserved vis-a-vis foreign investors.
ETFs were introduced in India in 2001 with the launch of Nifty BeES. At present, there are 33 ETFs with assets under management close to Rs 11,500 crore, held by 6.2 lakh investors.
Gold ETFs dominate the ETF market in the country.
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