[aaykarbhavan] Business Standard news updates 12-12-13

Sebi's new insider- trading rules to cover Parliament

BS REPORTERS Mumbai, 11 December The Securities and Exchange Board of India's (Sebi's) revised guidelines might bring public servants, such as government employees with access to price- sensitive information, under the ambit of insider- trading regulations. A report prepared by Sebi's 18- member insidertrading committee, headed by former judge N KSodhi, has recommended bringing such individuals under the regulatory net. "A new feature of the proposed regulations is that of treating public servants and persons holding statutory positions reasonably expected to have access to UPSI ( unpublished pricesensitive information) as connected persons and thereby prohibiting them from trading when in possession of UPSI," said the report. Examples of such public servants include those involved in formulating policy that could impact a company's shares. This could include the pricing policy for a natural resource or a decision on the cap on foreign investment in a specific sector. The guidelines also cover judges presiding over matters that may have an impact on a company's stock price. The report has said ' public servant' will have the same meaning as in the Prevention of Corruption Act, 1988. A member of the insider- trading committee confirmed the draft regulations would also cover members of Parliament and state Assemblies, as well as ministers. The Act defines a public servant as ' any person in the service or pay of the government or remunerated by the government by fees or commission for the performance of any public duty'. "Inclusion of public servants is an important development and in line with what is happening across the world. Public servants do have access to a lot of price- sensitive information. However, the recommendation pertains only to listed companies. The next progress should be to include other information on, maybe, taxes or the Budget. A trading plan is actually a good exemption for promoters. They will be able to execute their trades not on inside information but according to a pre- disclosed plan," said Sandeep Parekh, founder, Finsec Law Advisors. The new regulations allow insiders, especially those in constant possession of sensitive information, to trade in a company's shares only through a pre- disclosed trading schedule, to be made public at least six months before the transaction. Turn to Page 9 > NET GETS WIDER |Definition of ' insiders' expanded to include public servants |Insiders barred from passing pricesensitive information |Trading prohibited in listed securities when in possession of sensitive information |Insiders with sensitive information can trade with a pre- scheduled trading plan |Trades by promoters, employees and immediate relatives to be disclosed internally to the company |Trades of over ₹ 10 lakh within a calendar quarter to be disclosed to exchanges

 

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Sebi's new insider- trading rules to cover Parliament

The new rules also mandate those conducting due diligence of acompany to disclose such information to the public before trading in its shares. This would not apply to cases where open offers are made. "The guidelines are a step in the right direction, though more could have been done. Inclusion of public servants is an important move. Policy makers often have more price- sensitive information than company employees. There should have been more curbs on the broking and investment banking community. These entities often trade on the basis of inside information available to them," said Shriram Subramanian, founder & MD of InGovern Research Services, a corporate governance firm. "There has been a lot of discussion on promoters and employees, and less on external parties that get access to price- sensitive information. Promoters should be discouraged from trading. Trading plans will be an important deterrent in that direction." Last year, the US passed a law that explicitly disallowed insider trading by members of the Congress. The Stop Trading on Congressional Knowledge, or STOCK, Act banned Congress members from trading on inside information they were privy to because of their position. Sebi's draft regulations also require companies to keep a record of all holdings by employees, as well as third parties that may have access to inside information. The regulator has invited public comments on the report by December 31, after which it will finalise the norms.

Because the offline world is not enough

ANUSHA SONI & SURABHI AGARWAL New Delhi, 11 December Globally, 82 per cent of small businesses are present online. Germany has the highest percentage (91), followed by the US and the UK ( 88 per cent). However, only 67 per cent of small businesses in India are present online, according to a recent survey by VeriSign Public. " With more than 25 million businesses around the globe online, those without any online presence are at a clear disadvantage," says the VeriSign report. To make amends, the Ministry of Communication and Information Technology, with the Confederation of All India Traders ( Cait), is trying to make small and medium businesses ( SMBs) move to the digital terrain, at a time when modern retail is expanding. Under this initiative, e- vyaapar. com will also be launched by the year- end. This will help SMBs to manage their inventory and accounts online and ensure tax compliance. The ministry plans to reach about 500,000 traders in one and a half years. Depending on the response, the initiative will be extended pan- India. In November 2011, Google's India office had launched a programme to bring 5,00,000 SMBs online for free. Subsequently, the company ran several initiatives for these businesses to increase web presence. The company says according to a research commissioned by it, whenever these businesses have gone digital, their revenue has increased 50 per cent and profitability has risen 49 per cent. " So, the impact is very clear, and we are trying to get as many SMBs to leverage digital in a big way as we can," says K Suryanarayana, head of SMB sales, Google India. It is expected in the long run, the initiative by the ministry and Cait will integrate about 20 million scattered small and medium traders with the country's governance structure and this will likely help the government widen the scope of its tax ambit. According to estimates, the entire project is expected to cost ₹ 25 crore, including for training and software. Through this investment, the government is expected to bring taxes of ₹ 750 crore to the exchequer. According to Cait's estimates, the annual turnover of business through small retailers and traders is about ₹ 20 lakh crore. Under the project, a singlewindow software will help local traders on many fronts. " A trader will have an identification number with which he can enter the software. Through the single window, he can manage his house tax, service tax or any other type of duties or taxes…. The software will also be enabled to manage the inventory of the trader," said Ashwini Kumar Sharma, managing director, National Institute of Electronics and Information Technology, responsible for training traders. The software, developed by Department of Electronics and Information Technology, would help traders on three counts — managing accounts and financial details, customer relationship management and tax compliance, said Praveen Khandelwal, general- secretary, Cait. The software will be developed in multiple local languages and will have a single payment gateway for greater efficiency. A course has been designed for computer awareness, too. Initially, this was to be for 80 hours, but considering the constraints of traders, it was redesigned to 10- 12 hours, said an official involved with the project. The road map The programme will be kickstarted with 250 traders in Delhi, in the last week of December. Training costs for each trader will be ₹ 2,400. For the course, a nominal enrolment fee may be charged. However, this will be reimbursed once the training is completed. " The idea is to keep the traders interested to successfully complete the training," said an official. The programme aims to cover 500,000 traders in 18 months. Under the programme, kiosks or internet- enabled computers will be installed at Jeevan Centres in Delhi. Gradually, these will be extended to other state or central government service centres across the country. It is expected Cait will carry out maintenance works for the infrastructure. The initiative may help traders save on payments to charted accountants each time they file taxes. However, the complexity of the tax process and the small scale of business may deter them from joining the initiative. "Why would a small shopkeeper, who basically deals in cash, want to pay various taxes?" argues a small retailer. And, it is expected the older generation of these traders will be averse to this. But this is the future and people will eventually have to join, says Atul Bhargava, president, New Delhi Traders Association. E- vyapar. comto help small businesses manage inventory & accounts online

 

Lanco gets lenders' approval for CDR KATYA B NAIDU Mumbai, 11 December Bankers of power generator Lanco Infratech on Wednesday approved a proposal to restructure a total of ₹ 7,700 crore of the company's debt. Corporate debt restructuring will allow the company a two- year interest holiday. Debt of ₹ 4,400 crore, as well as non- fund- based exposure such as bank guarantees and letters of credit worth ₹ 3,300 crore, will be restructured. The company will also get additional funds of ₹ 2,500 crore from the bankers. Of this, ₹ 1,060 crore will be non- fund based. "We will use the additional funding to pay vendors, suppliers and other service providers," said Adi Babu, chief financial officer of Lanco Infratech. The company's due payments stand at about ₹ 1,500 crore. It will spend an additional ₹ 1,000 crore on impending work. The promoters of the company, including Chairman L Madhusudan Rao, will have to put in ₹ 153 crore and the payment has to be made before the master restructuring agreement is signed; it is expected it will be signed by the end of the month. According to the agreement, the lenders will reduce interest rates 2.5 per cent for the first three- four years. This will be compensated in subsequent years, when the interest will be increased 4.5 per cent. "The moratorium will ease liquidity and will help us ease existing activity. This will help us make a comeback in the engineering, procurement and construction (EPC) business. We will go ahead with our EPC business aggressively," Babu told Business Standard. He expects business to return to normal by March. In the last 10 months, the company's EPC operations have been stalled. In addition, Lanco also saw a freeze on payments from state electricity boards, leading to a huge funding gap. The power generator is yet to receive about ₹ 2,000 crore from power distribution companies in Karnataka and Haryana. "There are two tariff orders pending with the Central Electricity Regulatory Authority and the Appellate Tribunal for Electricity. Once these orders and judgments are passed, it will take around six months for payments to be cleared. We expect the payments to come in time, not immediately," said Babu. Lanco's power generating capacity is about 4,732 Mw. The power business was affected by issues such as lack of fuel supply to its coal- and gas- based power plants. The company says a complete turnaround in the power sector will be seen only when the government provides fuel. Also, state electricity boards should increase rates; they should also be in a position to buy more power, not go for power cuts. "Once these corrective measures are taken by the government, it will help the sector see a turnaround. But for the company, we expect many issues to be resolved by March, expect for fuel for our gas- based power plants," Babu said. BREATH OF FRESH AIR |CDR will give the company a 2- year interest holiday |₹ 4,400- crore debt, ₹ 3,300- crore non- fund- based exposure to be restructured |Company will get additional funds of ₹ 2,500 crore from bankers |Lenders will reduce interest rates 2.5 per cent for the first 3- 4 years |In subsequent years, the interest rate will be increased 4.5% |Promoters to pay ₹ 153 crore before master restructuring agreement is signed "The moratorium will ease liquidity and will help us ease existing activity. This will help us make a comeback in the engineering, procurement and construction ( EPC) business. We will go ahead with our EPC business aggressively" ADI BABU CFO, Lanco Infratech Explain source of refunds, SC tells Sahara BS REPORTER New Delhi, 11 December The Supreme Court today directed Sahara India Real Estate Corp (SIRECL) and Sahara Housing Invest Corp ( SHICL) to explain the source of the money they claimed to have refunded to investors in their optionally fully convertible debentures ( OFCDs). The SC also directed the companies to file the relevant official records such as those to the ministry of corporate affairs and the income tax returns, in support of these refund claims. The judges also rapped Sahara for its series of advertisements in recent weeks against the Securities and Exchange Board of India ( Sebi). It directed the group to readvertise awithdrawal of the allegations with the same prominence, in the same media. The two companies had raised ₹ 24,029 crore by issuing OFCDs and the SC had told them to first stop the sale of these and then to remit the entire amount to the Securities and Exchange Board of India (Sebi), for returning to the depositors. They then claimed all but ₹ 2,610 crore had already been directly refunded. The duo had deposited a sum of ₹ 5,120 crore, including a "buffer", with Sebi to settle with the remaining investors. On Wednesday, the Sahara group showed evidence of 3,268 title deeds of properties in 71 locations but Sebi counsel Arvind Datar said this process assumed the refunds were already made and the group should not be made to pay twice. " If so, how did you refund? ₹ 19,000 crore is a colossal amount. Even large groups would find it difficult to mobilise. Which are the properties you sold? Where did the money come from?" he asked. He told the judges Sebi had written in May for these details but these were yet to be given by the group. The bench of K S Radhakrishnan and J S Khehar then passed an order directing the companies to file all the documents in support of the refunds as required by the Sebi letter. The order also directs Sebi to verify the title deeds and valuation reports given. Earlier CA Sundaram, representing Sahara group chief Subrata Roy, moved an application to end the court's November 21 order directing his client not to leave the country. "There is no urgent need to vary it," Radhakrishnan said. Sundaram said the 3,268 title deeds of properties in 71 locations comprised an area of 7,161 acres and were worth ₹ 20,172 crore. The bulk of the value came from three lots of land within the group's Aamby Valley luxury township project, off the Mumbai- Pune Highway. The land parcels located in Pomgaon and Kumheri villages were said to be worth ₹ 11,000 crore, according to valuation reports given by the group. The Aamby valley title deeds covered a total area of 1,747 acres. The group also gave title deeds for land in Faridabad (₹ 423 crore), Noida (₹ 370 crore), Muzzafarnagar (₹ 307 crore) and Haridwar (₹ 213 crore). The 71 locations included Ajmer, Aligarh, Kanpur, Jhansi, Kochi, Coimbatore and Tiruchi, he said. The court took severe exception to newspaper advertisements issued by Sahara after the November SC hearing, calling Sebi a " sarkari goonda" and alleging a witch hunt. Radhakrishnan said, "We are taking this very, very seriously. Don't take us for a ride. You are already on contempt; why are you precipitating the issue?" Khehar added Sebi was only implementing the court order and " What you are telling them, you are indirectly telling us." And so, he said, an apology had to be published by the group with the same prominence and in all papers in which the original advertisement against Sebi was published by Sahara. Datar informed the court the regulator has sent a legal notice to Sahara for their disparaging remarks. The court refused to entertain arequest from SIRECL counsel S Ganesh to reverse a Sebi move to freeze bank accounts of group companies. "On December 4, they have written to banks to freeze all our accounts. We are running businesses. It is difficult." However, Khehar said Sahara's lawyers were to blame. "All they had to do was comply with our order. But you advised them wrongly," he said. Apex court slams group for issuing ads against Sebi, denies relief to Sahara chief even after filing of 3,000- odd title deeds |The Supreme Court on Wednesday directed Sahara India Real Estate Corp and Sahara Housing Invest Corp to explain the source of money they claimed to have refunded to investors in the optionally fully convertible debentures |The court also directed the firms to file the relevant official records such as filings with the ministry of corporate affairs and income tax returns in support of these refunds |Slams Sahara for issuing advertisements. It has directed Sahara to issue an apology in similar prominence and in all the papers the advertisement was issued |Sebi has issued a legal notice against Sahara separately for the sarkari goonda remark against it. It has also written to banks to freeze Sahara accounts |No relief for Subrata Roy, despite submitting title deeds including three Aamby valley properties worth ₹ 11,000 crore |Sebi to check veracity of deeds, claims |Next hearing in January NO END TO SAHARA'S TROUBLES Sahara chief Subrata Roy   RBI to introduce steps to bolster bond market: Rajan BS REPORTER New Delhi, 11 December Reserve Bank of India ( RBI) Governor Raghuram Rajan on Wednesday cautioned that tapering of the US' bond- buying programme by the Federal Reserve might have unexpected results, but added India was prepared for it. He said the central bank would bring measures to augment liquidity in the debt market in coming weeks. "We are much better prepared to deal with any possible tapering, partly because we built some reserves... Current account deficit ( CAD) numbers are far better, far healthier than in May. But we would not say we are complacent, as there could be unexpected effects of tapering," Rajan told reporters on the sidelines of Delhi Economics Conclave, organised by the finance ministry. The markets come under heavy pressure whenever there are talks of a tapering. In this context, the Federal Open Market Committee meeting on December 17- 18 is going to be keenly watched. RBI has raised $ 34 billion in the September- November period through concessional swap windows it offered to banks for foreign currency non- resident funds and overseas borrowing. Finance Minister P Chidambaram had recently said the mobilisation had far exceeded the government's expectations. In his address at the conclave, the Governor said RBI would roll out measures to improve liquidity and depth of the government securities ( Gsec) market in coming weeks. He added the central bank would also strengthen the corporate bond market and improve liquidity in the derivatives market. Amid economic uncertainty looming, with the Congress' defeat in four of the five Assembly elections, Rajan said astable central government after next year's Lok Sabha elections could not be taken for granted and stressed the reform process should not be stalled. "It implies all parties have to work together to ensure the government emerging after the general elections has the time to come to terms with the challenges in managing the Indian economy. Otherwise, markets and rating agencies may not be willing to cut the new government much slack. Any slowdown in putting large, stalled projects back on track before elections or any additional fiscal slippage will only amplify the large challenges the government will have to face," he said. Rajan added, under these circumstances, it would help if Parliament passed key Bills and if current authorities took action to improve growth and fiscal health, including raising diesel prices to the market level and eliminating other poorly targeted subsidies. Rajan said the rupee had stabilised after falling to its alltime low of 68.80 a dollar at the end of August, and CAD was set to be contained at a level below three per cent of gross domestic product ( GDP) this year. CAD, which had touched a high of 4.8 per cent in 2012- 013 and risen further to 4.9 per cent in the April- June quarter of this year, came down to 1.2 per cent of GDP in the JulySeptember period, mainly as efforts to curb gold imports yielded results. However, to questions on gold import curbs leading to smuggling, the RBI governor said a compression was necessary in the short term but not desirable in the medium term. He also said economic growth had started picking up and the rate of GDP growth was likely to be around five per cent this year. Ahead of RBI's review of its monetary policy on December 18, Rajan said he would focus on controlling inflation and rolling back the measures that had been taken to check the rupee's volatility and improving liquidity. "It ( inflation) is proving very costly to our economy in terms of savings and investments. We need to bring inflation down. No single data or point or number will determine our next move, but our effort, firmly, is to control inflation," he added. Concerned over rising bad loans, the governor said RBI could consider making future borrowings more expensive for wilful defaulters. The central bank will next week bring adiscussion paper on distressed borrowers and rising non- performing assets. RBI Governor Raghuram Rajan addresses the inaugural session of the Delhi Economics Conclave 2013 in New Delhi on Wednesday. PHOTO: PTI Cautions about ' unexpected results' that the tapering of US quantitative easing may have

 

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