Source Business standard
| GST Bill set to be tabled as states' key demands met | ||
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New Delhi, 15 December The Constitution amendment Bill on a national goods and services tax ( GST) is likely to be tabled in the current session of Parliament, after the Centre agreed on two main demands of the states, on petroleum products and compensation for revenue loss after the new indirect tax system is introduced. After securing Congress support for a rise in the foreign investment cap in the insurance Bill, this is another key reform Bill where the Centre has managed a broad consensus. The Bill may address the states' demand of keeping petroleum products outside GST but only for the first few years and give some kind of constitutional guarantee for compensation to states for loss of revenue due to the new indirect tax. However, the entry tax might be subsumed in GST, against the states' demand to keep it out of the new tax system. "There will be no further meeting of the Centre and states on the Constitution amendment Bill. We are likely to bring the Bill in this session," a key finance ministry source said after state finance ministers met Union finance minister Arun Jaitley and his team of officials. However, the government is not as confident of passing the Bill in the current session, according to the source. Empowered committee of state finance ministers chairman Abdul Rahim Rather said after the meeting that states wanted to keep petroleum out of GST. However, finance ministry sources said that would be done only for the first few years. "The ( GST) matter was discussed elaborately and the discussions are moving in a positive direction," said Rather, finance minister of Jammu & Kashmir. Another contentious issue was compensation to states for revenue loss due to GST. Turn to Page 16 >
Petro products may be out of GST for afew years; compensation for states will be included | ||
| Repayment rules for core, infra sectors eased by RBI | ||
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BS REPORTER Mumbai, 15 December As a step to ease the pressure on stressed assets, the Reserve Bank of India has allowed lenders to restructure existing loans above ₹ 500 crore to infrastructure and core industries' projects. Banks and financial institutions will have an option to periodically refinance such loans. Bankers said the revised norms will provide relief to completed projects which have started commercial operations in the said sectors. Many of these were finding it difficult to repay due to shortfall in cash flows and cost overruns. This leeway is expected to help ensure the long- term viability of existing projects by aligning the debt repayments with the cash flows generated during their economic life. It is a step that will reduce potential stress, said Arundhati Bhattacharya, chairman of State Bank of India. Vibha Batra, co- head of financial sector ratings at ICRA, said the new norms would " help to reduce the addition to the existing portfolio of stressed assets". According to Union finance ministry data, the stressed loan books of commercial banks were 12.57 per cent of the total of loans as of end- September. Nonperforming assets ( NPAs) had a share of 5.32 per cent and restructured assets were 7.25 per cent. While giving the flexibility, the banking regulator has attached some riders, to ensure the exercise happens within a framework of prudential norms. Only term loans where the aggregate exposure of all institutional lenders exceeds ₹ 500 crore will be eligible for such flexible structuring and refinance. Banks can fix a fresh loan repayment (amortisation) schedule for existing project loans once during their lifetime. This could be done only after the date of commencement of commercial operations, based on the reassessment of project cash flows. The exercise will not be treated as a 'restructuring', provided it is a standard loan as on the date of change of the repayment schedule. The Net Present Value of the loan should remain the same before and after the change in repayment schedule, RBI said. BK Batra, deputy managing director, IDBI Bank, said the new norms were positive in the sense that theyd help to reduce the debt servicing burden on companies. Banks will save on provisioning for restructured loans. Banks may refinance the project term loan periodically ( for example, five or seven years) after the project has commenced commercial operations. The repayments at the end of each refinancing period could be structured as a bullet repayment, with the intent specified upfront, RBI added. Refinancing can be done by existing lenders, a new set of lenders or a combination of both or by issuing corporate bonds. Such refinancing can be repeated till the end of the repayment schedule. Bank can so address existing standard restructured assets; the latters label wont change. Similarly, existing non- performing loans can be restructured under the new norms but these would continue to carry the "NPA tag", and refinancing can be done only after it becomes a standard asset, said RBI. IN BLACK & WHITE |RBI allows lenders to restructure existing loans above ₹ 500 crore to infrastructure and core industries' projects |Banks and financial institutions will have an option to periodically refinance such loans |Bankers say revised norms will provide relief to completed projects which have started commercial operations in the said sectors |Leeway expected to help ensure long- term viability of existing projects |While giving the flexibility, the banking regulator has attached some riders, to ensure the exercise happens within a framework of prudential norms | ||
| Sebi might reviewdelisting rules | ||
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Mumbai, 15 December The Securities and Exchange Board of India ( Sebi) could take are- look at the recently- introduced delisting regulations, its chief hinted on Monday. "Many have problems with one aspect of the regulation… We will see how it pans out. If required, we will have a re- look. But first see how it pans out," said U K Sinha, chairman, in his speech at the Association of Investment Bankers' summit. A clause in the new framework mandating participation from at least 25 per cent of public shareholders for the success of a delisting bid has drawn criticism from the market. Investment banking experts say this would pose a practical difficulty for promoters wanting to make an entity a private company. Last month, the market watchdog had announced new guidelines for delisting, with a shortened timeline and tweaked price discovery. The new regulation, aimed at making the process easier and quicker, will come into effect once notified by Sebi. This typically happens within two months of board approval. It had done so on November 19. According to the new norms, for a delisting bid to be deemed successful, the promoter shareholding should reach 90 per cent and at least 25 per cent of the public shareholders should tender their shares. For instance, company X, with 100 shareholders in the non- promoter category, intends to delist. Then, irrespective of the quantity of shares in the category, at least 25 per cent of them should participate in a delisting bid for it to be successful. "The 25 per cent rule will ensure wider participation. But Sebi should look at the value, instead. In most other regulations such as the takeover code, it is the quantity of shareholding that is given importance," said Tejesh Chitlangi, partner, IC Legal. There has been a representation to Sebi, highlighting low public shareholder participation in reverse book building (RBB) offers— a price discovery mechanism used for delistings. Experts say the percentage of shareholders tendering shares in an RBB is typically in single digits and this is making the market nervous. Lack of a provision on shareholder participation was a loophole that companies were seen to be exploiting, the Sebi chairman explained. " If you look at what has happened in the past. we feel justified in what we are doing. There have been instances when delisting has been successful with only two shareholders participating," said Sinha. Sebi wants delisting companies to reach out to shareholders to ensure an offer is successful. Convertible bonds Sinha also said Sebi was looking at removing the disparity between foreign currency convertible bonds ( FCCBs) and convertible bonds issued in local currency. FCCBs have a maturity period of up to five years. Similar instruments when issued in the domestic market have a maturity period of only 18 months. Sinha said a clause in the Companies Act needed to be amended to realign the norms and the regulator had started a discussion in this regard. IPOs On concern that Initial Public Offerings ( IPO) were getting delayed due to regulatory approvals, the Sebi chief said theyd sped up the clearing process and the number of filings hadnt improved. "We have set tight timelines (for clearing IPOs). The number of filings hasn't improved. We hope it does as the investment climate improves. If our requirements are met, we will be clearing documents as fast as possible," said Sinha. Chief U K Sinha says there is market opposition to requirement on 25% investor participation NEW NORMS OLD NORMS Threshold limit Promoter holding must cross 90% Promoter holding must cross 90% or must acquire at least 50% of public shareholding, whichever is higher Investor participation 25% of total public shareholders No such requirement Offer price The price atwhich the shareholding The highest price atwhich determination of the promoter, after including the maximum numberof shareholders through RBB shareholding of the public shareholders place their bids in RBB who have tendered their shares, reaches the threshold limit of 90% Timeline 76 days 137 days Delisting directly Allowed Notallowed pursuant to open offer DELISTING FRAMEWORK "Many have problems with one aspect of the regulation… We will see how it pans out. If |
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Source Business Line
Task force to submit suggestions in 45 days NEW DELHI, DECEMBER 15: The Government will revisit the food safety Act to make it more stringent to check growing instances of adulteration and contamination. "Two days ago, we set up a task force, which will submit its suggestions in 45 days, which will be then be put up in public domain for inviting comments. Imported food items will also be covered by this," Health Minister JP Nadda informed the Lok Sabha on Monday. Replying to a calling by PV Midhun Reddy of YSR Cong and Satyapal Singh of BJP, Nadda admitted that food adulteration and contamination were one reason for the rising burden of non-communicable diseases across the country. "It is also proposed to revisit the punishment stipulated for milk adulteration and make it more stringent," Nadda said, adding that the Government would focus creating infrastructure and manpower to face the challenge, such as setting up testing labs under public-private partnership. Nadda further added that 13,571 out of 72,200 food samples analysed in 2013-14 were adulterated, resulting in launch of 10,325 civil and criminal cases. He also informed the House that the Food Safety and Standards Authority of India was at present engaged in an exercise for harmonisation of the maximum residue limit of pesticides in food commodities. Earlier, Reddy said the threat from adulteration and contamination of water, milk, oil, etc, was "greater than the threat from terrorism", as it would take more lives in the long run. Terming the unregulated use of pesticides and antibiotics as "slow poison" and the use of hormone injections on cows to increase milk yield, as a more "serious crime than cow slaughter", Reddy particularly urged the Government to ensure "Shudh Bharat" (Pure India)" along with the initiative, "Swachch Bharat." (This article was published on December 15, 2014
Promoter becoming a public shareholder: SEBI spells out reclassification norms OUR BUREAU Open offer among three conditions proposed by market regulator MUMBAI, DECEMBER 15: The Securities and Exchange Board of India, which has spelt out the conditions under which promoters of companies may be reclassified as public shareholders, has provided five situations which may result in a request for reclassification. Acquisition by another The first is that of promoters who seek reclassification after the company has been acquired by another entity. The promoters request the company to terminate the shareholders agreement and want to classify themselves as public shareholders post termination of shareholding agreement. Then, informing the developments to stock exchanges, besides giving up their special rights and privileges by an amendment to the Articles of Association of the company after obtaining shareholders' consent through postal ballot. Post daughter marriage The second arises when a company seeks reclassification of the status of the promoter's daughter post her marriage with a family member of a business competitor. Entry of strategic investor Entry of a strategic investor who picks up 50 per cent in the company and the promoter who earlier held 70 per cent stake in the company is now reduced to 25 per cent and the promoter still continues to be the chairman according to agreement. This gives rise to a situation for seeking reclassification, as the control of the company has changed hands. Family separation agreement Two family members who have jointly promoted several companies enter into a family separation agreement due to a dispute which is registered. According to the agreement, the first will transfer majority of its holding in some of the companies to the second and the second will transfer majority of its holding in the remaining companies to the first entity. In such a case, both would desire to be reclassified as public shareholders in those companies where they do not hold a majority stake. Pruning stake, rights Finally, the Infosys example — company is run initially by family members. However, they want to exit from the day-to-day operations of the company and would hold a minor stake in the company handing over the management of the company to professionals while giving up their special rights in the company. (This article was published on December 15, 2014)
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