Tuesday, August 4, 2009
FM assures new direct tax code, 9% growth
FM assures new direct tax code, 9% growth
The Economic Times, August 4, 2009, Page 9
Mahima Puri NEW DELHI
FINANCE minister Pranab Mukherjee on Monday assured industry leaders that the economy will return to a growth rate of over 9% in 2011-12 after expanding at 7% this fiscal, said an industrialist who attended the minister’s address to over 80 industry leaders here.
Mr Mukherjee also assured business leaders at the national council meeting of the Confederation of Indian Industry (CII) that the government will come out with a new direct tax code by August 20, said another industry representative.
Industry captains, including Godrej Industries chairman Adi Godrej, Hero Honda CEO and MD Pawan Munjal, Bajaj Auto chairman Rahul Bajaj, Religare Enterprises chairman Malvinder Singh, Eicher Group chairman S Sandilya, HSBC group general manager and country head Naina Lal Kidwai, SAIL chairman S Roongta and Nasscom president Som Mittal attended the meeting, according to the source.
“The finance ministry has prepared the direct tax code, as outlined in the Budget speech last month. It will be available for consultation in the next couple of weeks,” said an industry executive, who attended the meeting but did not wish to be identified.
The minister also reportedly told them that economic reforms, including disinvestment was on track. “While talking about PSU disinvestment, the minister said the process was very much on the cards, but added the amount that would be raised would depend upon market conditions,” said another CII national council member.
He quoted the finance minister as saying that the government’s borrowing programme will be conducted in such a way that the private sector’s requirements are met.
Mr Mukherjee also reportedly said although the Indian economy was showing signs of recovery, the global outlook still remains a concern. The Indian economy is not isolated hence a cautious approach is required. The FM also hinted that the government was taking a relook at the proposals for a bill on land acquisition, participants at the meeting said.
Cos bill tabled in LS,goes to House panel
Cos bill tabled in LS,goes to House panel
The Economic Times, August 4, 2009, Page 9
GOVT GETS IN THE ACT TO MAKE LIFE EASIER FOR COS & GIVE MORE FREEDOM TO TRUSTS
Our Bureau NEW DELHI
THE government on Monday re-introduced the new Companies Bill in the Lok Sabha, which will eventually replace a five-decadeold corporate law with one that reflects the complexities of the current economic scenario and the post-Satyam learning experiences.
The proposed new law also promises simplified regulations relating to the founding, mergers and winding-up of companies, while empowering investors to take prompt and collective action against errant moves by companies.
The Companies Bill, 2009, will now be forwarded to a parliamentary standing committee, but since the panel is burdened with no deadlines, it may take a year to get enacted, said a government official who didn’t want to be named.
The bill is similar in content to the one introduced in October 2008, which lapsed early this year with the change in government. While the Companies Bill, 2008, had promised firms greater breathing space on their operational freedom, many provisions in the bill came under intense debate after the Satyam Computer scandal and the global economic downturn highlighted a need for greater state oversight.
The provisions of Companies Bill, 2008, are broadly considered to be suitable for addressing various contemporary issues relating to corporate governance, including those recently noticed during the investigation into the affairs of erstwhile Satyam Computer Services, the government said.
The bill was introduced in the lower House by minister for corporate affairs Salman Khurshid. It proposes to make it mandatory for all companies above a particular size to reserve 33% representation in their boards to independent directors. With the Satyam scandal highlighting the need to make independent directors accountable for their work, the final form of the law is expected to have substantial changes than what is proposed in the bill.
The new legislation will try to promote shareholder democracy with protection of rights of minority shareholders, responsible self-regulation with adequate disclosure and accountability and lesser government control over internal corporate process, said statement of objects and reasons of the new Bill.
New Companies Bill tabled in Lok Sabha again
New Companies Bill tabled in Lok Sabha again
The Financial Express, August 4, 2009, Page 2
fe Bureaus, New Delhi
The government has again tabled the new Companies Bill in Parliament to replace the 53-year old Companies Act of 1956. The Bill had been introduced in the last Lok Sabha, but had lapsed with the dissolution of the House. While there have been several proposals to amend the bill since then, a ministry official said it was better to have the bill tabled in the house early, and so the amendments have been kept in abeyance. “The Bill has been re-introduced in its present form and amendments will be made after recommendations by the parliamentary standing committee,” said a ministry official.
The Bill, which is based on the concept of self regulation, recognises the chief executive officer, the chief financial officer and the company secretary as ‘key managerial personnel’ and provides for a single forum for mergers and acquisitions. It also provides for a more effective inspection and investigations of companies and penalties for offences.
The ministry of corporate affairs plans to make amendments, including defining the accountability of independent directors, as part of the bill. To strengthen corporate governance in firms, it has stipulated that independent directors should account for at least one-third of the board. For listed companies the clause 49 provision of the Listing Agreement of Sebi, which mandates having at least 50% of the board populated by independent directors, will prevail. In a recent statement, Salman Khurshid, minister of corporate affairs said, “The new Companies Bill will be more objective; it will give a balanced approach to both the role of independent directors and their accountability. The attempt (therefore) is to make it more unambiguous and explicit.”
Further, the government also seeks to make stringent norms for auditors and corporate governance in the bill. The bill also provides for formation of a one person company, while empowering the government to provide a simpler compliance regime for small companies.
The Companies Bill is the largest ever rewrite of the 53-year-old Companies Act. The proposed Bill will have 480 sections compared to over 600 sections in the Companies Act, 1956, in addition to providing for greater shareholder democracy and less government intervention. “The new legislation will try to promote shareholders democracy with protection of rights of minority shareholders, self-regulation with adequate disclosure and accountability and lesser government control over internal corporate processes,” said another official connected with the process.
Companies Bill, 2009 introduced in LS
Companies Bill, 2009 introduced in LS
The Hindu Business Line, August 4, 2009, Page 15
Our Bureau, New Delhi
The Corporate Affairs Minister, Mr Salman Khurshid, on Monday introduced in the Lok Sabha a new Bill that seeks to replace the existing Companies Act of 1956.
The new Bill has been introduced in view of an earlier version (the Companies Bill 2008, tabled on October 23) lapsing after the dissolution of the 14th Lok Sabha with the announcement of elections.
Some of the special features of the Companies Bill, 2009 include prohibition of insider trading by company directors or key managerial personnel and declaring it as an offence with criminal liability; mandatory consolidation of financial statements of subsidiaries with holding companies and recognition of cross-border mergers, besides having a single forum for approval of mergers and acquisitions.
Framework for fair valuations
The Bill also provides that the minimum number of independent directors to be appointed in listed companies should be one-third of the total number of directors. For other companies, the number of independent directors may be prescribed through rules.
Also, companies will not be allowed to raise deposits from the public except on the basis of permission available to them through other special Acts.
The Companies Bill 2009 also provides a framework for enabling fair valuations in companies for various purposes. Appointment of valuers is proposed to be made by an audit committee or in its absence by the board of directors.
Moreover, shareholders’ associations or group of shareholders are to be enabled to take legal action in case of any fraudulent action on the part of a company and to take part in investor protection activities and “class action suits”. Company matters such as mergers and amalgamations, reduction of capital, insolvency including rehabilitation, liquidations and winding up are proposed to be dealt with by the National Company Law Tribunal.
Integrity of audit
The new Bill also provides that claim of an investor over a dividend or a benefit from a security not claimed for more than a period of seven years will not be extinguished. The Investor Education and Protection Fund (IEPF) is to be administered by a statutory authority.
Later, speaking to reporters, Mr Khurshid said that the Government has in the Bill factored in the lessons from the Satyam scandal. He also highlighted that the Bill will go to the Standing Committee which will also look into the proposed provisions.
Asked about auditors, the Minister said that although the Institute of Chartered Accountants of India (ICAI) was yet to submit its report (in the wake of the Satyam scandal), the Government has come up with certain provisions to ensure that the audit community maintains the integrity and independence of the audit process.
Auto, metals, realty team up to take Sensex near 16k
Auto, metals, realty team up to take Sensex near 16k
The Economic Times, August 4, 2009, Page 11
A better-than-expected Q1 show coupled with improved sentiment in the global market helped the BSE benchmark add to its weekend tally by 254 points. Is the Street ready for another rally?
Agencies, MUMBAI
THE Bombay Stock Exchange benchmark Sensex rose to touch its highest level in more than a year on Monday. The 30-share index gained 253.92 points, or 1.6%, to end the day at 15,924.23.
The rally got support from investors’ taking long positions across the board following positive opening of the European markets and gains in auto, realty and metals spaces.
Maruti Suzuki and Mahindra & Mahindra paced gains after saying they sold more vehicles last month. Maruti Suzuki climbed 3.98% to 1469.55 while Mahindra & Mahindra gained 6.88% to close at 915.75.
Among the metal stocks, Sterlite Industries gained to a seven-week high after a measure of six metals traded in London jumped 1.7% on July 31. Tata Steel advanced 4.9% to 485.2, while Hindalco, the biggest aluminum producer in the country, jumped 8% to 108.3.
The Sensex climbed 8.1% last month as the first-quarter results of 23 of the 30 companies on the index beat analysts’ estimates.
“The good earnings by Sensex companies have added to the confidence of investors,” said Deven Choksey, CEO of KR Choksey Shares & Securities. “The markets will see an upside going forward.”
The Nifty added 1.6% to 4,711.4, crossing the 4,700 level for the first time since June 3, 2008. The BSE 200 Index increased 1.7% to 1,941.93.
An “increase in rural demand” as a result of “government spending” is helping drive demand in some sectors such as auto manufacturing, said Navneet Munot, chief investment officer at SBI Funds Management, who oversees the equivalent of $7.3 billion in assets.
Among the other gainers, Hindustan Zinc, India’s largest producer of the metal, rose 6.8% to 738.4. The company raised prices of zinc and lead after the metals jumped on the London Metal Exchange.
Interest rates may climb up after Dec
Interest rates may climb up after Dec
The Hindu Business Line, August 4, 2009, Page 6
Vidya Bala
M.V.S. Santosh Kumar
Interest rates may head up after December on the back of higher credit offtake, the Government's borrowing programme, infrastructure spending, and the consequent private participation, according to Mr Y. M. Deosthalee, Chief Financial Officer of Larsen & Toubro.
Inflationary pressure, as a result of inflow of funds from overseas debt and equity investors, may also fuel an interest rate rise .
"If inflows continue, there will be a pressure on the RBI to buy dollars. If that happens, they would have to release rupees, leading to inflationary pressure, resulting in interest rate increase. All indicators are towards an increase in interest rates," he said in an exclusive interview with Business Line.
It may be noted that the RBI recently raised its Wholesale Price Index (WPI) forecast for end-March 2010 to five per cent from four per cent earlier, stating that global commodity prices have rebounded faster than the global economy.
NCD ISSUE
The expectation of rising rates could be one reason why L&T Finance, a whollyowned subsidiary of L&T, has lined up a Rs 500-crore (with an option to retain another Rs 500 crore of over-subscription) non-convertible debenture (NCD) issue later this month.
The interest rate of the NCDs, which are to be listed on the NSE, would be disclosed a few days before the issue.
According to Mr Deosthalee, also the Chairman of L&T Finance, the company is tapping the NCD route to diversify its funding sources from wholesale debt market to retail market as well. The issue would also provide the company with funds for a longer tenor of 5-10 years. NBFCs are mostly dependent on wholesale market - mutual funds and banks for their funding; these carry tenor of 3-5 years.
Wholesale debt market
Mr Deosthalee said stated that the wholesale debt market in India the country lacks depth, as a mature debt market should have debt with different maturity profiles.
"The market currently lacks sufficient debt (issuances) with long tenor. This can be overcome if there are pension and retirement benefit-related reforms, as these are long term liabilities with an objective of long term asset creation" he said.
Infrastructure projects such as power fit into this slot, as there are currently very few lenders given the long-term nature of the projects. Such long term issuances, according to Mr Deosthalee need more participants (investors) willing to accept all kinds of debt (government and corporate) with different maturity profiles.
The other important pre-requisite for a good debt market is the removal of aberrations arising from partly-administered interest rates.
"The interest rates given by the Government on post-office deposits or the public provident fund are administered and compel banks to keep interest rates high. These aberrations need to go to have a smooth yield curve that is market determined," Mr Deosthalee said.
Realtors see rise in commercial inquiries
Realtors see rise in commercial inquiries
Business Standard, August 4, 2009, Page 4
Neeraj Thakur & Raghavendra Kamath / New Delhi/ Mumbai
In the past two months, property developers have reported an increased number of inquiries for their properties, indicating the economy is on its way up, clearly visible in companies’ recent quarterly results.
This upturn comes soon after an earlier stalling of demand. In February, DLF, the country’s largest property developer, said it had stalled construction on 16 million sq ft (MSF) of commercial space (retail and office) due to lack of demand.
So, too, with other developers like Unitech, Parsvnath and Raheja, who either stalled or slowed the construction of their commercial properties due to a demand-supply mismatch.
That is changing. “We will restart the construction on our stalled commercial projects, as the inquiry from companies has increased. By the time these inquires turn into actual transactions, we want to be ready with our projects”, said Rajiv Singh, vice-chairman, DLF Ltd, after the company’s Q1 results.
Due to a supply-demand mismatch, rentals came down by 30-35 per cent in the past one year in most micro markets and developers were forced to delay their projects. However, many companies now feel rentals have touched bottom and want to expand.
Parsvnath Developers is developing nearly two MSF of retail space and says it is bullish. “We are focusing on timely completion of our projects, as the demand will certainly increase in the coming months”, said Pradeep Jain, chairman.
According to a report by CB Richard Ellis, office leasing volume increased by approximately 3-4 per cent in the National Capital Region (NCR) during the first quarter of FY10. Increasing levels of corporate confidence should help maintain the momentum. The NCR saw some big-ticket transactions in the April to June period.
Many companies, including those in the auto, telecom, information technology and banking sectors, posted good results in the first quarter of FY10. These companies had put their expansion plans on hold for the past year. With their balance sheets coming into shape, they are likely to go for expansion once again in the next six to 12 months. Raheja Developers was going slow on three MSF of commercial projects due to lack of demand. “We will pace up our construction and would start delivering projects in the next 6-12 months,” said Naveen Raheja, CMD.
Royal Palms Estates slashes prices by 40% in Mumbai
Royal Palms Estates slashes prices by 40% in Mumbai
Business Standard, August 4, 2009, Page 4
Rajesh S Kurup / Mumbai
Housing in the city has become a bit more affordable, with Royal Palms Estates slashing prices of prime properties in the western suburbs by up to 40 per cent.
This follows a similar move by other realtors, including Housing Development & Infrastructure, Puravankara Projects, Omaxe, Tata Housing Development and even the state government, all of whom have either reduced prices or forayed into affordable housing, following a slump in demand.
According to an analyst, this would have an impact on overall property prices in the city, with other real estate companies expected to follow suit. The monsoon being a dull season, builders come up with such offers till September.
Royal Palms Estates has begun offering ready to possess apartments at Goregaon, a north-western suburb, for Rs 3,999 a sq ft (PSF). This is lower by around 40 per cent compared with the prevailing property rates of around Rs 5,500-5,700 PSF.
When spoken to, Royal Palms Estates’ joint managing director Dilawar Nensey confirmed the development. “There is still a price resistance in the market, and traditionally the monsoon is a slack period for property sales. A number of bargain hunters surface during this season and take quick decisions if they find a property worth acquiring, either for personal use or for investing,” Nensey said.
More important, Royal Palms Estates needs to generate funds for future plans and is doing so by disposing of existing properties. It’s better to sell at discounted prices, rather than holding on to it, he added.
Royal Palms is setting up two Special Economic Zones (SEZ) at Goregaon – one for information technology and another for gems and jewellery – and needs funds for these projects.
DE Shaw to retain $100-m investment in DLF Assets
DE Shaw to retain $100-m investment in DLF Assets
The Financial Express, August 4, 2009, Page 2
fe Bureaus, New Delhi
Private equity fund D E Shaw is only partially exiting the KP Singh promoted company DLF Assets Ltd (DAL). It will retain around $100 million of the $400 million it had invested in DAL two years ago.
Rajiv Singh, vice-chairman, DLF, told an analyst conference recently that the company would shortly convey the outcome of the ongoing talks between the promoters of DLF and DE Shaw, which was showing an interest in maintaining its stake in DAL.
While D E Shaw refused to comment on its exit from DAL, DLF said these are large and complicated transactions which take a lot of time and the details will not be known until the deal is done.
It is believed that DE Shaw’s partial exit will be based on fair market value, however it is yet to receive Reserve Bank of India (RBI) approval for the exit.
In May this year, the promoters had sold 9.9% of their stake in DLF to raise Rs 3,800 crore, of which Rs 2,200-2,400 crore was to be used to buy out DE Shaw’s investment.
DAL had promised D E Shaw a fixed put option price. The details of the contract between D E Shaw and DAL is however not known. Standard Chartered Bank is believed to be the authorised banker for the DAL-DE Shaw deal and it is working on Foreign Exchange Management Act (FEMA) compliance issues.
In 2007, DE Shaw had invested $400 million in DAL and it also holds compulsory convertible preference shares (CCPS) of DAL with a fixed put option price. The RBI had said that CCPS with fixed put option price was not FEMA compliant.
DLF Ltd’s receivables from DAL now stand at Rs 2,600 crore, compared with Rs 4,906 crore as on March 31, 2009. The company received Rs 2,500 crore from DAL in the first quarter of FY10, exceeding the target of Rs 2,000 crore. DLF expects another Rs 500 crore from DAL during the fiscal. DLF is focusing on de-leveraging and the company’s net debt stands at Rs 11,686 crore, compared with an opening net debt of Rs 13,958 crore at Q1FY10.
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