[aaykarbhavan] source Business standard

Kindly  go  through  the  updates  from  business standard, 

 The  important  update  is  that   Companies Act 2013  bars schemes with over 12.5 per cent of annual returns, considering them as public deposits. The Act also restricts jewellers from raising funds through various deposit schemes over 25 per cent of their net worth. Therefore, jewellers offering more than 12.5 per cent returns will have to withdraw the scheme and redeem the fund thus collected.

 

Fair value norms for share transactions by foreign investors eased

Mumbai, 15 July To provide more flexibility on foreign direct investment ( FDI), the Reserve Bank of India ( RBI) has allowed nonresidents to issue and transfer shares of unlisted companies on determination of a fair value, in accordance with internationally accepted pricing methods. The fair value needs to be certified by a chartered accountant or a merchant banker registered with the Securities and Exchange Board of India ( Sebi). However, the pricing of the share shall not be less than the fair value for issue and transfer, said RBI. Earlier, the methodology for share valuation was laid down and had to be done by a Sebi- registered merchant banker or a chartered accountant on the discounted free cash flow method. On issue of shares to non- residents, the price for transfer had to be in line with the pricing guidelines laid down by RBI from time to time, where the issue of shares was by preferential allotment. This provision has been removed. For issue of shares of listed companies, the price shall be worked out in accordance with Sebi guidelines. When shares are transferred, the price shall not be less than the one at which apreferential allotment can be made under Sebi guidelines, said RBI. It also said when a transfer of shares is made by non- residents to residents, the price shall not be more than the minimum at which the transfer can be made from a resident to a non- resident. "The attempt is to attract foreign flows. The flows will also help the rupee. Maybe the government wants these foreign institutional investors to broadbase their investments in even mid- cap stocks and not only large- caps. It will also help to boost foreign exchange reserves of the central bank," said a currency dealer with astate- run bank. RBI DECISIONS |RBI allowes non- residents the issue and transfer shares of unlisted companies on determination of a fair value |The pricing of the share shall not be less than the fair value for issue and transfer |For issue of shares of listed companies, the price shall be worked out in accordance with Sebi guidelines |When shares are transferred, the price shall not be less than the one at which a preferential allotment can be made under Sebi guidelines

Jewellers face ₹ 20,000- cr redemption from gold deposit schemes

DILIP KUMAR JHA Mumbai, 15 July The jewellery sector, which is reeling under lower sales in the ongoing lean season, faces redemptions to the tune of ₹ 20,000 crore as a result of closure of gold deposit schemes. The new Companies Act bars schemes with over 12.5 per cent of annual returns, considering them as public deposits. The Act also restricts jewellers from raising funds through various deposit schemes over 25 per cent of their net worth. Therefore, jewellers offering more than 12.5 per cent returns will have to withdraw the scheme and redeem the fund thus collected. According to estimates by Ficci, the total deposits under various schemes by jewellers across the country come to about ₹ 20,000 crore. Jewellers were using the money collected through gold deposit schemes was utilised as working capital. Tanishq, the industry leader which has already discontinued its schemes, faces an outgo of ₹ 1,000 crore as it has asked depositors to collect money or purchase jewellery equivalent to their deposits within two months. Depositors of Tanishq's gold accumulation scheme can avail some returns, should they opt to buy jewellery against their investment. However, if they take back cash, they will get only funds equivalent to the amount deposited. "According to an estimate, about ₹ 20,000 crore is deposited annually under various gold accumulation schemes. Since, the new Companies Act bars companies to offer more than 12.5 per cent annual returns, there will be a redemption pressure on companies," said Mehul Choksi, chairman and managing director of Gitanjali Gems and chairman of FICCI's gems and jewellery committee. Pune- based P N Gadgil offered returns of 19 per cent for three- year term, while Mumbaibased Tribhovandas Bhimji Zaveri with 10- month scheme offered 12 per cent annual returns. "The basic objective of such schemes was to ensure future sales. Enrolling customers for a certain period with luring offers, jewellers were in fact making long- term customer base. So, more than fund- raising, jewellers used to develop a long- term bond with customers, who preferred to buy jewellery for all occasions," said R K Sharma, chief operating officer, PC Jeweller. Actor Shilpa Shetty- promoted Satyug Gold has also come out with a gold- accumulation plan, which, according to Satyug's CEO Raj Kundra, is different from the schemes of other jewellers. "We buy gold equivalent to the amount deposited by customers on a real- time basis. Our back- end partner is Karvy; Brinks Arya is our delivery partner; and, IDBI is our trustee. We provide customers just a platform to buy gold with a minimum amount if anything untoward happens to the company tomorrow. Customers are safe as we do not keep funds with us. We buy gold and deposit in customers' account on the day of deposit," said Kundra. According to Haresh Soni, chairman of All India Gems & Jewellery Trade Federation, there will be a short- term redemption pressure on the company with the possibility of longterm liquidity crisis. On redemption, however, jewellery sales will improve for a short- term followed by a lull period. Huge capital outflow might increase jewellery sales in the short term but cause a liquidity crisis in the long run The new Companies Act bars schemes with over 12.5 per cent of annual returns, considering them as public deposits. The Act also restricts jewellers from raising funds through various deposit schemes over 25 per cent of their net worth

 

Composite foreign investment cap proposed for most sectors SURAJEET DAS GUPTA & INDIVJAL DHASMANA New Delhi, 15 July The department of industrial policy and promotion (DIPP) has prepared adraft Cabinet note proposing the limits for foreign direct and portfolio investment be merged into composite caps. The note has proposed a combined cap in most sectors where foreign direct investment (FDI) is allowed or where foreign institutional investors (FII) have a separate limit. Various government departments have been asked to comment on the note by July 23. Composite caps have been suggested for sectors like agriculture, tea plantations, petroleum and natural gas, manufacturing, airports, real estate, telecommunications, mining, non- banking financial companies and pharmaceuticals. In some sectors where only FDI and FII investments are allowed now, the department has proposed investments by non- resident Indians and foreign venture capital firms as well. These include 100 per cent foreign investment in asset reconstruction companies, 74 per cent in private banking, 20 per cent in public- sector banks and 49 per cent in power exchanges. Also included are investments by foreign venture capital firms in insurance and the print media's news & current affairs segment, which were off- limits for them so far. "Overall, I think there is some clarity. The proposals are categorical that composite caps will be allowed in most sectors, giving clarity to foreign investors," said Dev Raj Singh, executive director, tax & regulatory services, EY. The department said the proposal would provide Indian companies a wider choice of investors. It rejected the contention that portfolio investments were neither lasting nor intended to control a company. It argued there were cases of companies being controlled by portfolio investors, and hence the need for composite caps. For instance, the department said, broadcasting carriage services had a sectoral FDI cap of 74 per cent, of which 49 per cent could come through the automatic route. A company, the department pointed out, could simultaneously have 51 per cent FII holding through a special resolution of its general body followed by a board resolution. The note suggested a composite cap of 51 per cent in multibrand retail, instead of just FDI. The Narendra Modi government is opposed to foreign investment in this sector, though it has not clarified whether the policy decision of the United Progressive Alliance government will be reversed. The same cap is proposed for single- brand retail, cash- and- carry wholesale trading and business- to- business ecommerce activities. FIIs will not be permitted in the defence sector and FDI will be restricted to 26 per cent, the note says. Finance Minister Arun Jaitley had announced in last week's Budget the composite cap for foreign investment in defence was being raised to 49 per cent. " This is an anomaly," Singh pointed out. The proposals have some exceptions. Currently, power exchanges, infra firms in the securities market, credit information companies and commodity exchanges have sublimits within an overall cap. Commodity exchanges have a 23 per cent FII limit and a 26 per cent FDI limit. These separate limits will be retained, given the sensitive nature of the financial sector, the department has proposed. Besides, if FII investment rises beyond 24 per cent in existing drug companies, it will be subject to government approval, as well as certain riders. Clearance will also be needed for Indian companies established with foreign investment and not owned or controlled by a resident entity. For the purpose of control, all forms of foreign investment will be taken into account. Government approval will not be required if the foreign investment permitted is 100 per cent through the automatic route. FII inflows into India so far this year have stood at $ 23 billion. The country has also received $ 24.29 billion worth of FDI over the same period. DIPP proposes composite foreign investment cap for a vast range of sectors The composite cap will include FDI, portfolio investments, investments by NRIs and foreign venture capital investors |Differential treatment: Commodity exchanges, power exchanges, infrastructure company in the securities market and credit information companies will have separate FII and FDI caps |Approval needed: The govt's clearance will be required in case an Indian firm is being established with ownership and control vested in foreign entities |Cap for drug firms: If foreign portfolio investment rises beyond 24% in existing pharma companies, the investment will be subject to government approval and some other riders DEFINING INVESTMENT

 

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A.Rengarajan

Company  Secretary

Chennai

93810  11200

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Posted by: CS A Rengarajan <csarengarajan@gmail.com>

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