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BS REPORTER
New Delhi, 16 July The Cabinet on Thursday allowed composite foreign investment caps, merging those on foreign direct investment and portfolio investment. The move will benefit companies in single brand retail, credit information business and commodity and power exchanges; it isn't applicable to banks and defence companies. Bankers, however, claimed they would benefit from the move, leading to confusion on the matter. Besides, a clause in the proposal, mooted by the Department of Industrial Policy and Promotion (DIPP) — portfolio investment up to an aggregate of 49 per cent be allowed without being subject to government approval and sectoral norms — has resulted in various interpretations, with some experts saying foreign portfolio investment (FPI) of up to 49 per cent could be allowed in the print media. Foreign investment of up to 100 per cent through the automatic route is already allowed in a vast majority of sectors. Briefing reporters after a Cabinet meeting on Thursday, Finance Minister Arun Jaitley said, " From now, all FIIs ( foreign institutional investors), NRIs ( non- resident Indians) and other foreign investments will be clubbed… It will be constituted as a composite cap." However, a board resolution would still be needed from the company concerned to increase FPI beyond 24 per cent, but that level could now be increased to the sectoral caps. "Currently, companies require board resolution to increase FII limits beyond 24 per cent. It seems a resolution will still be required to increase it beyond 24 per cent. But now, it could be increased till the sectoral limit, against a separate FPI limit, as is the case in some sectors now," said Punit Shah of Dhruva Advisors LLP. Earlier in the day, the Cabinet announcement had evoked positive response from lenders, with YES Bank saying it had already secured board approval for increasing the FPI limit up to 74 per cent, as well as an enabling nod from shareholders for this. Rana Kapoor, managing director and chief executive, YES Bank, said, "Currently, our FII holding is below 49 per cent. Therefore, from YES Bank's capital- raising perspective, we now have headroom to substantially increase the FII holding, given intensive FII interest in YES Bank in the past." Turn to Page 5 > speculation of higher cap for print media Scope of more FPI FDI Total investment Air transport services ( 49%) Jet Airways 5.51 24.00 29.51 19.49 SpiceJet 2.67 0.00 2.67 46.33 Telecom services ( 100%) Bharti Airtel 23.11 21.66 44.77 55.23 Idea Cellular 51.07 0.00 51.07 48.93 Media ( 26%) DB Corp 18.51 0.00 18.51 7.49 HT Media 14.24 0.01 14.25 11.75 Multi- brand retail ( 51%) Future Retail 17.33 0.00 17.33 33.67 Trent 20.11 0.00 20.11 30.89 Commodity exchanges ( 49%) MCX 16.63 0.00 16.63 32.37 Construction development: Townships, housing, built- up infrastructure ( 100%) DLF 20.75 0.00 20.75 79.25 Oberoi Realty 17.01 0.00 17.01 82.99 DESTINATION INDIA ILLUSTRATION: AJAY MOHANTY NRI promoters are not included in foreign promoters; Figures in brackets show sectoral cap Compiled by BS Research Bureau Source: Capitaline/ DIPP RELATED REPORTS ON P4 | Nod to .. | |
Banking stocks rose following the Cabinet announcement: Axis Bank was up 4.14 per cent on the BSE, followed by Kotak Mahindra Bank ( 4.03 per cent), YES Bank ( 3.11 per cent), HDFC Bank ( 1.54 per cent), State Bank of India ( 1.29 per cent) and ICICI Bank ( 0.83 per cent).
However, later in the day, the DIPP and finance ministry officials clarified the composite caps wouldn't be applicable to the defence and banking sectors --- the FPI cap would remain at 24 per cent in defence and 49 per cent in private sector banks. Currently, foreign investment of up to 49 per cent is allowed in defence and 74 per cent in private banks. Subject to certain conditions, foreign investment may exceed 49 per cent in defence, with the approval of the Cabinet Committee on Security. Besides FDI and FPI, investment by NRIs, foreign venture capital investors, limited liability partnerships and those in the form of depository receipts would qualify as foreign investment. In sectors with composite caps, the existing condition of seeking the FIPB's approval would hold. For instance, in single- brand retail, foreign investment beyond 49 per cent will still require an FIPB approval. That might increase greater scrutiny of FPI money in some cases, a DIPP official said. Punit Shah said there would be greater scrutiny of FPI inflows beyond the automatic route in sectors with both automatic and approval routes. Thursday's Cabinet decision, it would appear, will make it difficult for the Securities and Exchange Board of India to monitor FPI investments. However, Shah said it would be possible to monitor FPI investments, as these would continue to be separate from foreign direct investment, though the limits would be merged. The Cabinet decision will allow FPI investment up to an aggregate of 49 per cent without the government's approval or compliance with sectoral conditions if such investments do not result in transfer of ownership or control of Indian entities from resident Indians to non- resident ones. This, too, is a grey area. " FDI of up to 26 per cent is permitted in the print media, with government approval. After the change, portfolio investment of up to 49 per cent is permitted without government approval, if there is no change in control with a resident Indian citizen," said Mehul Modi, senior director, Deloitte in India. He added there was need for more clarity in this regard. Currently, up to 26 per cent FDI is allowed in print media engaged in news and current affairs and in Indian editions of foreign magazines dealing with news and current affairs, with government approval. | CSR is not about charity Tata Steel is investing deep into the lives and livelihoods of communities in quite a few villages
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Coffee- table books are increasingly being elevated to the status typically bestowed upon objets d'art and other collectibles. So when another one lands on your table with breathtakingly beautiful pictures of an India you may have never seen, the first reaction could be cynicism usually associated with expensive corporate public relations exercises. But it
would be a mistake, as On The Road to Initiatives Of Change, presented by Tata Steel and authored by Deepa Adhikari, is an extraordinary tale of a unique corporate engagement with the lives of communities. The steel giant has been supporting youth leadership training in some of India's remotest areas under a programme that was earlier grandiosely titled ' Moral Rearmament'. Thankfully, it is now known as just ' Initiatives Of Change' ( IofC) and has reached out to over 3,500 youth in the last four years. The collection of transformation tales of rural youth, who brought in change in the hinterlands of Jharkhand and Odisha, tells you why corporate social responsibility ( CSR) should be looked at as a business process, and not charity. So what Tata Steel Rural Development Society ( TSRDS) does is to encourage and enable people to take ownership of a project and replicate it for the good of the next community. The examples are right there — all 35 of them, each of whom has proved to be an agent of change for the community they belong to. Take the case of Sashmita Mohanto at Ransol village in Odisha's Jajpur district. This middle aged wife of a primary schoolteacher stepped out of her home only after she started finding it difficult to run the household on a single income. Mohanto came to know that TSRDS funds women's self- help groups. Village women, who want to start a business, come together to form these. Each month, they contribute a certain amount of money to a common fund, which is then deposited in the local bank. Once the fund is large enough, they approach the TSRDS, or a bank or another funding body, with a business plan. If the plan is approved, they get money to start the business. So Mohanto created a self- help group but her native intelligence made her realise that if the business has to survive, it needs to scale up. Since the village already had five women's self- help groups of 10 members each — all interested in the poultry business — Mohanto brought all of them under one umbrella organisation and then approached TSRDS to avail of a poultry scheme in which the initial infrastructure, raw materials and operational costs were being offered for free. TSRDS also organised an intensive poultry training programme to all 50 members. Mohanto found a ready market in the village anganwadi and the primary school and today, every member of the self- help group has a poultry coop with 20 chickens. Mohanto has now set her sights higher and would like to form a cooperative to scale up further, not just in poultry but in other cash- rich produce like mushrooms. The high- school pass woman, who has economically empowered 50 women in her village with a soft nudge from TSRDS, is on her way to becoming an entrepreneur. Or, take Naresh Chandra Pradhan, a farmer who was funded by TSRDS for training in the Orissa University of Agriculture and Technology and Central Rice Research Institute, Cuttack. Pradhan has planted, for the first time, the hybrid G9 variety of banana, which lasts longer in the farm- to- fork cycle and yields fruit for three years. There's more. Vishnu Kumar Chauhan, who earlier did nothing else but drink cheap liquor, performs awareness plays on alcoholism all over the country after TSRDC trained him in acting. What makes the stories look real is that Adhikari doesn't seek to project that it's roses all the way. Listen to Ravindra Kumar, a young TSRDS executive, who speaks to the author at Joda in Odisha's Kendujhar district where IofC runs a programme. "If we are lucky, about five to 10 of these 30 girls, will find livelihood as community teachers and health workers. The rest will get lost in the quagmire of poverty and social rejection. There are so many of them," says Kumar. The biggest contribution of On The Road… is that it compels you to think beyond lip- service CSR, that is building ad hoc infrastructure and providing mobile ambulances and nothing more. What most corporates forget is that CSR is all about investing deep into lives and livelihoods and empowering and enabling backward communities. SHYAMAL MAJUMDAR | |
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