NAYANIMA BASU
New Delhi, 5 August
India might see a flurry of single
"We have sorted out all issues by taking policy measures. We have allowed their own outlet and franchising," Amitabh Kant, secretary, Department of Industrial Policy
&Promotion ( DIPP) told Business
Standard. Several investment proposals by Tommy Hilfiger, H& M, Swarovski, Skechers, Nike and Adidas were stuck in the pipeline as they wanted to run company- owned direct retail outlets as well as franchise outlets. Some of them like Tommy Hilfiger wanted to have a wholesale presence as well. In an important clarification, the government tweaked the foreign direct investment ( FDI) policy on single- brand retail last month stating that non- resident entity/ entities will now be allowed to undertake single- brand retail trading business through " one or more wholly owned subsidiaries or joint ventures ( JVs)." According to an official, proceeds from franchise business will come into the current account, while those through the FDI route will be accounted in the capital account.
Presently, 100 per cent FDI is allowed in single- brand retail trading, out of which proposals beyond 49 per cent require prior approval from the government.
So far only one proposal by Swedish furniture maker IKEA has come on the table. Others have largely shied away from making any big- ticket investment announcements here, owing to the stiff ridersinthepolicy. Themostimportant being that of 30 per cent sourcing norms. According to the policy, proposals involving FDI beyond 51 per cent, sourcing of 30 per cent of the value of goods purchased, need to be from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors.
"The government has to come out with a single policy on retail. The issue of sourcing remains unanswered. There should be no linkage between sourcing and retail," said Arvind Singhal, chairman, Technopak — a retail advisory firm.
|Several single- brand retailers might soon get government approval to operate in multiple formats |Government has now allowed single- brand retailers to operate their own outlets, franchise stores and wholesale |Large number of investment proposals by marquee international brands were held up due to lack of clarity in policy |Government believes since franchise money comes into the current account and FDI proceeds in capital account, there is no violation of rules |Single- brand retailers have also been demanding government relax mandatory 30 per cent sourcing norms
TALKING SHOP
| Only 26% companies has full- time chief compliance officers, says survey |
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New Delhi, 5 August Not even one- third of Indian companies have a full- time chief compliance officer ( CCO), show a survey by Deloitte. While 58 per cent of the surveyed companies at the global level has a full- time officer, in India, only 26 per cent have one. About, 62 per cent of the Indian companies have a designated CCO, but a majority of them have an additional responsibility, according to the Compliance Trends Survey Report. The survey added top compliance officers generally have the right reporting structure in their company to maintain their independence. For India, 48 per cent of CCOs report to the CEO, whereas 22 per cent report to the board. Globally, only 36 per cent of CCOs report to CEOs, while 21 per cent go to the board. Globally, 364 companies were considered for this survey, out of which 37 were from India. The survey says 17 per cent Indian respondents held the title of CCO, chief ethics officer, or chief ethics and compliance officer; six per cent held some other C- level title ( chief risk officer, chief audit executive); 20 per cent held a variety of titles at the vice- president level. The rest of the Indian respondents held a range of other titles - director of business conduct, director of anticorruption audit, deputy compliance officer, business unit compliance officer, etc. Of the 37 respondents, the single largest industry group represented was consumer & industrial products at 19 per cent. Next were technology, media and telecommunications and financial services industry at 14 and 11 per cent, respectively. The survey report said the sudden increase in the regulatory enforcement in India has catapulted compliance risk on top of the board, management and audit committee agenda. Additionally, it observed that the regulatory regime in India continues to be complex requiring regular interactions with multiple regulators. "With the increased transparency in terms of board level compliance reporting, there is still a long way to go to integrate compliance as a strategic partner in business," the report said. According to the survey, 78 per cent Indian organisations perform an enterprise- wide compliance risk assessment with 43 per cent of them doing it on an annual basis. Additionally, only 14 per cent Indian organisations outsource or cosource their employee and ethics hotline as compared to 39 per cent global organisations. As many as 24 per cent organisations do not outsource any of their compliance activities. Approximately 92 per cent of the Indian respondents mentioned ' code of conduct' as the topmost area of responsibility of the compliance function. Globally, the compliance training was considered as the top responsibility. |
| Shareholder reclassification put on hold |
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Mumbai, 5 August About two dozen companies, including Mindtree, Indiabulls Real Estate, Infosys and Sun Pharmaceutical Industries, might have to put on hold their promoter reclassification plans till regulations are issued in this regard. Some which have gone ahead with categorising some promoter entities as ordinary shareholders, might have to again reclassify these as promoters. This follows the National Stock Exchange ( NSE) writing to the companies to change nothing on promoter reclassification till regulations are issued by the Securities and Exchange Board of India (Sebi). "We have sent such letters to individual companies when they sought permission from the exchange for reclassification. All this was sent before the guidelines were announced," said V R Narasimhan, chief regulatory officer, NSE, in a reply to a query from Business Standard. NSE declined to comment on individual cases. The Sebi board in June had approved norms for reclassification of promoters, where a promoter entity willing to forgo control and special privileges was allowed to be termed an ordinary shareholder. These regulations, however, are yet to be notified by Sebi. In the proposed regulations, Sebi would allow the reclassification after signing of a separation agreement and promoter holding falling below five per cent. The regulator will also allow reclassification on a case- to- case basis if it feels the move is appropriate. Any entity later termed public would not be allowed to hold key management positions in the listed company or its associate and cannot exercise control over the affairs of the company. A company would need to disclose the details and reason for reclassification to stock exchanges. The co- founders of information technology major Infosys, N R Narayana Murthy and S Gopalakrishnan, had last year made a request for this declassification. The company said last October it would evaluate the legal implications. Presently, they are classified as promoters. Another listed company in the oil sector applied in February 2015 to declassify its promoters. Companies in the engineering and real estate sectors sought de- classification of promoters in January. Two sets of promoters were formally changed from joint to sole control in June last year. In another company, informal guidance for declassification of relatives as a promoter group was rejected by Sebi. Some companies have reclassified despite the regulations being yet to be notified. The issue had come up during the process of compliance with the 25 per cent minimum public shareholding norm. At the time, Sebi had frowned upon moves by some companies to reclassify some promoters as public shareholders, ahead of the deadline for meeting this norm. Gillette India, Gokaldas Exports and Balmer Lawrie were companies at odds with Sebi on this issue. In June 2013, the Securities Appellate Tribunal ( SAT), while hearing Gillette's appeal, directed Sebi to look into instances where companies had removed certain entities from the promoter group to the public category. "The regulator should not contemplate action but a solution," Jog Singh, presiding officer of SAT, had said. NSE tells firms not to proceed with reclassifying promoters as ordinary shareholders till Sebi notifies approved guidelines [1]NSE asks companies to wait for Sebi notification on promoter reclassification [1]Move likely to impact at least 14 companies [1]These companies will have to maintain status quo or might have to once again classify some entities as promoters [1]Sebi board in June had cleared framework for promoter reclassification [1]Sebi has allowed reclassification as ordinary shareholders provided promoters give up control or special rights if any ON THE BACK BURNER COMPANIES TO BE IMPACTED BY THE MOVE
Info Edge ( India) Asian Hotels ( North) Limited KDJ Holidayscapes & Resorts Ltd Pennar Industries Limited Indiabulls Real Estate Infosys Limited Mind Tree OnMobile Accel Frontline Sun Pharma Hindustan Oil Exploration Company Gillette Zuari Agro Chemicals & Zuari Global ING Vysya Bank |
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Practising Company Secretary
Chennai
Mobile 93810 11200
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