[aaykarbhavan] Business standard news updates 18-9-2013

Sebi puts riders on Holcim deal

NSUNDARESHA SUBRAMANIAN & SAMIE MODAK New Delhi/ Mumbai, 17 September The Securities and Exchange Board of India ( Sebi) has thrown a spanner in the works of Swiss cement major Holcim, which is planning a complex restructuring process. Sources said the regulator had directed exchanges to ask listed Holcim- entities Gujarat Ambuja and ACC to effect a few changes to the resolutions they were putting before shareholders. While the company had framed a two- tiered process in which there would be two different resolutions, Sebi wants a single resolution, putting the entire transaction to vote at a go. A source said Sebi had given its observations to the National Stock Exchange and BSE, as their no- objection certificates were required for any structuring process to go through. Earlier, companies had to secure just ahigh court approval and a no- objection certificate from exchanges. However, in February this year, Sebi issued a circular directing all listed companies to seek its approval for any merger, demerger and amalgamation. The move was aimed at protecting minority interests, as several companies were found putting public shareholders in disadvantageous situations through complex restructuring processes. The ACC- Ambuja deal was the first major one to seek the market regulator's approval. Sebi's move was a shot in the arm for small investors and their chances of stalling the deal, perceived as antiminority, said people aware of the directive. The transaction was to be executed through a merger of Holcim India Private Ltd (HIPL) with Ambuja. Currently, HIPL owns 9.76 per cent stake in Ambuja and 50.01 per cent in ACC. As part of a two- tiered process, Ambuja would first acquire 24 per cent in HIPL for Rs 3,500 crore in cash, and this would be followed by a stock merger between HIPL and Ambuja. As part of the merger, Holcim would receive 584 million new equity shares of Ambuja, which would help the Swiss company raise its stake in Ambuja to 61 per cent. Upon the merger, HIPL's 9.76 per cent holding in Ambuja would be cancelled. According to the shareswap agreement, vetted independently by fairness committees and accounting firms, for every 74 shares in HIPL, Holcim would get 10 Ambuja shares. Wants a single resolution to be put before shareholders for two- leg deal According to sources, Sebi has directed the exchanges to ask the listed Holcim- entities to make changes to resolutions they are putting before shareholders for vote

 

Panel slams selection process of regulators   SURAJEET DASGUPTA &INDIVJAL DHASMANA New Delhi, 17 September A committee headed by former Securities and Exchange Board of India ( Sebi) Chairman M Damodaran has lashed out at the orientation of debates to the backgrounds and personalities of regulators. It also slammed the practice of conducting interview- based selections of regulators by a panel. In a report on regulatory reforms for businesses, the committee said, "Unfortunately, much of the debate and discussion on regulatory organisations tends to focus on the backgrounds and personalities of the head of the regulatory organisation." Such sterile debates didn't help in understanding the organisation's regulatory philosophy, which significantly influenced the content and scope of regulations, it said. The Damodaran committee was constituted by the Ministry of Corporate Affairs after a World Bank report ranked India 132nd on the ease of doing business, well below most countries in the South Asian Association for Regional Cooperation and other countries in the BRICS (Brazil, Russia, India, China and South Africa) bloc. An analyst said of late, there was much hype over the appointment of Raghuram Rajan as Reserve Bank of India governor, with some observations focusing merely on his looks. The euphoria in the markets had resulted from the announcement of various measures by the new governor, as well as the perception that the differences between the central bank and the finance ministry over monetary stance would now end. The committee recommended atransparent mechanism to appoint a watchdog. "The appointment of persons to head regulatory organisations should be attempted in a far more transparent manner," it said. It recommended a system in which the head of a regulatory organisation and his board- level colleagues appeared before an appropriate parliamentary committee once every six months to report on various developments and discuss the broad plan of action for the next six months. From time to time, the government adopts different mechanisms for various watchdogs. For instance, Rajan's name was forwarded by Finance Minister P Chidambaram to Prime Minister Manmohan Singh, who gave his approval to the appointment, those in the know said. However, after Damodaran's exit from Sebi in 2008, an interview was conducted and C B Bhave was selected chairman. BUSINESS SENSE What the Damodaran panel recommended |Transparent mechanism to appoint a watchdog |Regulators to be made independent of government departments for financial support |Regulators to undertake self- evaluation once in three years and put report in public domain |Draft regulations to go through a two- stage consultation process: by going back to stakeholder with revised draft MDAMODARAN Former Sebi chairman EASE OF DOING BUSINESS Ranking among 185 nations Countries 2011 2012 South Africa 41 39 China 91 91 Russia 118 112 Brazil 128 130 India 132 132 Source: World Bank Group DAMODARAN COMMITTEE Stresses on functional autonomy of regulators   Sebi doesn'twant FMC under its purview RAJESH BHAYANI Mumbai, 17 September With the Forward Markets Commission ( FMC) being moved to the finance ministry, sources say the commodity market regulator would remain a separate division; it wouldn't be merged with the Securities and Exchange Board of India ( Sebi), as was widely believed. "Sebi has conveyed to the finance ministry it doesn't want FMC to come under its purview," said the source, adding the regulator had wrote to its parent ministry that without amending the Sebi Act, commodity derivatives couldn't be regulated by Sebi. Parliamentary approval is needed to amend the Act. The Sebi Act deals with securities and the definition of securities, according to the Securities Contracts Act, doesn't include commodities. Therefore, Sebi isn't able to allow exchange- traded funds ( ETFs) in commodities other than gold. For gold ETFs, too, a special arrangement was made. For FMC, irrespective of whether it is merged with Sebi or remains a division under the finance ministry, it would have to be strengthened further. Bringing FMC under Sebi would create several regulatory discrepancies--the capital and commodities markets function differently. For equities, a price rise is good for all, but for commodities, consumers and producers have divergent interests. Also, in case of agriculture commodities, the prices determine inflation and cropping patterns. Earlier, FMC was a division under the department of consumer affairs. To make FMC a powerful statutory regulator, the Forward Contract Regulation Act would have to be amended. A Bill for the amendment is pending with Parliament. Observers see possibilities of the convergence of policies governing stock exchanges and commodity exchanges. In what could be a beginning, on Monday, FMC announced the restructuring of a risk management group headed by J R Verma, who had headed many such panels, including those on equity derivatives. The group would also have a Sebi representative and a BSE official. Recently, FMC had questioned whether shareholders should be allowed to trade on the same exchange in which they held equities? It had sought the views of commodity exchanges. If implemented, this could be the first big move towards the convergence of the policies of capital and commodity market regulators. For commodity exchanges excluding MCX, it could lead to huge volumes. For FMC, the change in the parent ministry wouldnt help the spot commodity exchange segment, as this space remains unregulated. There is aneed for a regulator for spot exchanges. OPINION 11 > >EDIT: Fixing commodity trading POLES APART |The definition of securities, according to the Securities Contracts Act, doesn't include commodities |Bringing FMC under Sebi would create regulatory discrepancies — the capital and commodities markets function differently |For equities, a price rise is good for all, but for commodities, consumers and producers have divergent interests |To make FMC a powerful statutory regulator, the Forward Contracts Regulation Act would have to be amended

 

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CS A Rengarajan

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