Private SEZs told to reserve 10% space for small-scale units
The Hindu Business Line, January 19, 2010, Page 15
K.R. Srivats, New Delhi
Small-scale units may now get a better deal in allocation of space in private special economic zones .
The Centre has now said that minimum 10 per cent of the space in IT/ITES SEZ may be reserved for SSI IT/ITES units.
All other SEZs were asked to allocate 10 per cent space for SSI units.
Also, IT/ITES SEZs have been advised to set up incubators of minimum 200 seats. Currently, IT/ITES SEZs are mainly promoted by the private sector.
“The Centre's instruction covers central SEZs, IT/ITES SEZs and all other SEZs in the private sector,” Mr L.B. Singhal, Director-General, Export Promotion Council for SEZs, told Business Line.
Tuesday, January 19, 2010
Private SEZs told to reserve 10% space for small-scale units
The footfalls are back
The footfalls are back
The Financial Express, January 19, 2010, Page 10
Mona Mehta
The organised retail sector, which bounced back somewhat in the three months to September 2009, posting double-digit topline growth, should turn in an even better performance in the quarter ended December 2009. After all, economic growth was gathering momentum, there had enough liquidity in the banking system, stock markets were on a roll and companies had started hiring once again. As such, consumers had regained confidence and were willing to spend; the festive season, which set in earlier than usual last year, had seen spends go up.
Most retailers, therefore, should manage a high double-digit topline growth for the December 2009 quarter. The good news is that operating margins could improve further with companies having kept a check on costs. As a rule, retailers have been shutting down unviable stores across formats, bringing down the expenditure on rentals. Of course, they have also been adding some outlets in new locations.
Pantaloon has seen a double-digit growth in same-store-sales during the December 2009 quarter. The value segment saw a growth of 25%, 28% and 30% in October, November and December 2009, respectively. The lifestyle space didn’t do too badly, either. It grew by 6% in October 2009, 8% in November and touched double-digits in December. Kishore Biyani, CEO, Pantaloon Retail, believes there is a change in the sentiment and consumer spends are higher across categories such as apparel, fashion accessories, cosmetics and white goods. With the economy recovering, the retailer, who has around 10 million sq ft of space, should grow faster now than it did in the year up to June 2009 when revenues increased by 25.6% to Rs 6,342 crore (stand-alone).
With the value retailing growing faster and now fetching approximately 70% of revenues, gross margins could be under pressure. However, the company is making attempts to contain costs and so, operating margins could improve with better operating efficiencies and operating leverage. Given its wide range of formats and the aggression to build scale, Pantaloon is well-poised to cash in on the rising consumer spends in organised retail chains. Since October 2009, footfalls at Big Bazaar and Pantaloon have seen an estimated increase of 20-25% and a fair share of customers are buying products.
Shoppers Stop, too, is recovering from the downturn. Same store sales, which had fallen by about 7% in the June quarter, rebounded in the September quarter with a growth of 1.8% as result of which operating margins were up at close to 10%. The December quarter should be even better and the retailer will see a strong uptick in the operating margins with industry watchers forecasting a 300 basis points expansion, thanks to better operating leverage. Although the retailer hasn’t scaled up operations over the past year, it could do so now that the operating environment is more conducive. Since April 2009, Shoppers Stop has launched only two mid-sized stores, but it hopes to launch eight stores in 2010. In all, it hopes to add 4 lakh sq ft over the year, for which it plans to spend Rs 100 crore. Currently, the company has 30 large-format stores.
The Bangalore-headquartered Titan, which saw a fall in jewellery volumes of just under 10% in the September 2009 quarter, could continue to see weak volumes. The management recently noted that the festive season had seen fairly good sales, though high gold prices were a bit of a concern. It was unlikely, the management observed, that jewellery volumes would pick up significantly with gold prices at current levels. Titan’s watches business hasn’t been faring too well either, though there has been a bit of a rebound in recent months. Sales showed a marginal decline in the September 2009 quarter at Rs 295.52 crore, compared with Rs 303.45 crore posted during the corresponding period in 2008. Titan’s net profit for the first half of the year has remained virtually flat at Rs 161.09 crore, compared with the corresponding period of 2008-09. That’s not surprising since total sales were up by a mere 6.3%, at Rs 2,045 crore.
After shutting down 140 loss-making retail stores during the June 2009 quarter, Spencer’s Retail, a division of RPG Enterprise, is expected to grow revenues by about 9% in the December 2009 quarter, according to Sanjiv Goenka, the company’s vice chairman. Goenka says same store sales have been growing at 18% in the last three months. “We have been able to reduce our operating costs to the tune of Rs 100 crore, reduce inventories, streamline our supply chain management and focus on retail innovations,” observes Goenka. Spencer’s is planning to set up about a dozen large stores by March 2011.
Oberoi Realty files IPO papers
The Hindu Business Line, January 19, 2010, Page 11
Our Bureau, Mumbai
Mumbai-based Oberoi Realty filed its draft red herring prospectus for an IPO of 39,562,000 equity shares with a face value of Rs 10 at a price band to be decided later. Sources said the company proposes to raise over Rs 1,500 crore. The issue, which will be through the 100 per cent book building process, will constitute a dilution of 12 per cent of the paid-up equity share capital.
Monday, January 18, 2010
Economists want fiscal stimulus to stay
The Hindu Business Line, January 16, 2010, Page 17
Our Bureau, New Delhi
The Government must continue with the fiscal stimulus for another year. This was suggested by top notch economists at a pre-Budget meeting with the Union Finance Minister, Mr Pranab Mukherjee, here today.
“We said that it is not yet time to withdraw stimulus,” Mr Nitin Desai, a former Chief Economic Advisor in the Finance Ministry, told reporters after the meeting. Most economists felt that time is not ripe for withdrawal of the stimulus.
“My suggestion was that stimulus should continue. It would be better to broaden the tax base rather than increase rates,” Dr M Govinda Rao, Director, NIPFP, said. He said the Centre should look at merging the Cenvat and service tax to say 9 per cent level in the upcoming Budget.
Other issues
The other issues that came up for discussion included the trade-off between growth and inflation, need to check unbridled capital flows and fiscal consolidation. On capital flows, the views were mixed, with some making a case for a tobin tax and many opposed to any form of tariffs at this juncture.
“Some felt that the US carry trade could play havoc on developing countries like India and advised caution. My view was that Indian capital account has been too open. Unbridled capital flows should be checked. But I am opposed to tobin tax. One has to take a call on capital inflows from a long-term perspective,” Dr Partha Sen from Delhi School of Economics, said.
Economists want stimulus to continue
Economists want stimulus to continue
Business Standard, January 16, 2010, Page 5
BS Reporter / New Delhi
Economists on Friday said stimulus should continue until the economy had firmly recovered. In a pre-Budget meeting with Finance Minister Pranab Mukherjee, economists said stimulus was required, but at the same time the government should not drift away from the path of fiscal consolidation.
“The general feeling of economists is that it is not the time to withdraw the stimulus,” former chief economic advisor Nitin Desai told reporters after meeting the finance minister.
Govinda Rao, director of National Institute of Public Finance and Policy and member of Prime Minister’s Economic Advisory Council, said the government may have to continue stimulus while at the same time it should control the fiscal deficit by taxing services.
Fiscal deficit is expected to widen to 6.8 per cent this financial year. The government is targeting a fiscal deficit of 5.5 per cent of GDP in 2010-11 and 4 per cent in 2011-12. FRBM Act required the government to bring down the fiscal deficit to 2.5 per cent of GDP by 2008-09.
Rao said the government would be able to bring down fiscal deficit to 5.5 per cent of GDP without any difficulty next year as arrears on account of Sixth Pay Commission report would not be there and the outgo on account of farm loan waiver would be less.
Asked whether there is a room for hike in excise duty, Rao said any change in excise duty should bring the rate on par with that of service tax. He said service tax should be brought down from 10 to 9 per cent and the excise duty be increased to 9 per cent from 8 per cent.
Partha Sen of the Delhi University’s School of Economics said the stimulus measures should not be withdrawn hastily as India was still not out of the woods.
The government gave 6 per cent reduction in excise duty and 2 per cent cut in service tax to help the industry deal with the slowdown. The measures have helped the economy grow by 7.9 per cent in July-September quarter this financial year.
Industry chambers have already urged the government not to withdraw the stimulus for next six months.
Stimulus helped industry add capacity worth $30bn
Stimulus helped industry add capacity worth $30bn
Times of India, January 17, 2010, Page 21
TIMES NEWS NETWORK
New Delhi: The fiscal stimulus seems to have worked wonders for the industry which has added an additional capacity worth $30 billion in 2008-09 by importing capital goods taking advantage of the zero per cent import duty.
A Federation of Indian Chamber of Commerce and Industry (FICCI) survey reveals that capital goods imports increased five times to $30 billion in 2008-09 as compared to $6.5 billion in 2003-04; provoking, in fact, complaints from the domestic manufacturers against cheaper imports putting them at a disadvantage of at least 10%-20 %.
Their loss has meant gain for China which overtook Germany as the largest exporter of capital goods. Till 2006-07, Germany had the largest share in Indias total imports of capital goods. It was disloged by China in 2008-09 which accounted for 23% of the imports. Germanys share fell to 16%.
The worst affected domestic industries include manufacturers of construction equipment, machine tools, turbines and transformers. Taking up cudgels for them, the industry body FICCI wants the government to reverse the fiscal stimuli by proposing preference policy, correction in inverted duty structure and capital goods parks.
These imports are now hurting the domestic industry and have captured a significant market share in the country, the study notes. The construction equipment imports account for 112% of domestic production; imports of transformers are 50% of domestic output while that of turbines constitute 70%. Imports of generators and machine tools are 330% of domestic production.
The study says zero duty imports have resulted in various projects in power, oil and gas, fertilizer, mining on their increased dependence on imports while restraining the growth of domestic industry.
Arguing in favour of a more level-playing field for the domestic industry, the report says the cost disadvantage of domestic industry visa-vis foreign suppliers comes in the range of 11% to 22%.
While the imported capital goods face no custom duty, CVD (countervailing duty), SAD (special additional duty) or any other local tax for supply to mega power plants and other projects, the domestic industry has to bear all of them, added with higher cost of financing and infrastructure deficiencies which makes them uncompetitive, the study noted.
Commercial realty back in business in Mumbai
Commercial realty back in business in Mumbai
The Hindu Business Line, January 17, 2010, Page 13
Developers are going the extra mile to showcase their projects.
S. Shanker
Commercial real estate may not have got over the slowdown blues, but it has not stopped developers from showcasing innovative designs to draw their clientele.
Kanakia Spaces, which has just about completed its 1.2 million sq.ft project costing Rs 380 crore in Andheri, Mumbai, claims to have the largest single floor plate of 1.60 lakh sq.ft (0.7 km long; and more than 3.5 acres) in the country.
The eight-floor complex shaped like a boomerang on about 10 acres also boasts of a 3,500 sq.ft vertical garden at its 40 ft tall entrance lobby. A 1,000 sq.m pond is being created close to the gate to match the lush walled green inside.
Of a total plot area of 32,481 sq.m, the garden area (outside) is 4,693 sq.m along with a paved spread of 6,620 sq.m. The building expanse covers 5,231 sq.m. Two floors of basement parking are for 1,200 cars.
“We are planning to get golf-carts to ferry people inside the campus, said Mr Vishal Doshi, AGM, Marketing and Business Development. Kanakia has sold close to 40 per cent of office space at around Rs 10,000 a sq.ft. The company also offers space on lease at Rs 100 a sq.ft.
VERTICAL GARDEN
The vertical garden looks ‘pinned up' displaying 12,320 exotic plants with a drip irrigation system to water the plants twice a week. The commercial space comes with a bundle of add-ons such as a 616 sq.m club house, gymnasium and cafeteria, exclusively for the inmates.
DEMAND UP
“It is after a long gap that we see demand picking up in office spaces in various locations, thanks to the rapid infrastructure development happening in Mumbai, such as the Bandra-Worli sealink. We are experiencing good demand for small business spaces from the banking, financial services and insurance companies as well as shipping and logistic units, said Mr Mayur Shah, Managing Director, Marathon Group.
With the economy looking up and encouraging financial performance across sectors in the third quarter, the demand for office space is expected to increase in a big way. Upcoming development such as the Metro and Mono rail is expected to further boost commercial spaces demand.
Among various locations, Lower Parel is fast emerging as a hot destination for commercial spaces. BFSI companies are looking for great ambience, hospitality, facility of best restaurants, safety and security measures and unique designs, while buying spaces in Lower Parel, he felt.
Mr Abhishek Kiran Gupta, Head-Research, Jones Lang LaSalle Meghraj, said Mumbai saw the completion of about nine million sq.ft every year in 2008 and 2009, whereas the average annual absorption was six million sq.ft for the two years.
The overall vacancy level across Mumbai is about 14 per cent. Prices, both in the city and micro-markets, had corrected 35-50 per cent in 2008-09.
To keep real estate costs down tenants had moved from the central business district (CBD) to secondary business districts (SBDs) such as Andheri and suburbs such as Malad, Powai, Thane and Navi Mumbai.
Standard Chartered, UBS, Ernst & Young and JP Morgan are among those who chose to shift from Nariman Point (CBD), he said.
Financial centre
A Religare report said BKC had gradually transformed itself from a secondary district to the city's second business district (after Nariman Point) and is set to become India's international financial centre.
BKC's G block, housing leading banks and financial institutions, had secured the Maharashtra Government's nod to increase its floor space index (FSI) from two to four.
However, development in the block was likely to be spaced out due to the high realty prices stemming from the strong, continued demand and improving connectivity to the centrally located business hub.
Malaysia as a second home, anyone?
Malaysia as a second home, anyone?
The Hindu Business Line, January 17, 2010, Page 13
The number of foreign buyers has quadrupled since 2004.
Malaysia is a “hidden real estate paradise” with affordable commercial space and choice of a home-away-from-home, says Mr Kumar Tharmalingam, Member, Board of Governors, Malaysia Property Incorporated.
Mr Tharmalingam is in India promoting Malaysia as an option for those looking at investing in real estate overseas. Whether it is a company expanding its operations or someone on the lookout for quality living space Malaysia can cater to their needs, he says.
Selling in India
Malaysia has so far promoted real estate investments opportunities in markets in South East Asia, Australia, the UK and the Middle East and is now promoting itself in India. Increasingly Indian companies are looking at Malaysia — costs are growing for them in Singapore and other South East Asian countries — for its lower land cost, he says.
MPI, a Malaysian Government initiative, is organising a property expo in Chennai from January 22 to 24 featuring ‘the best of Malaysian Real Estate' which coincides with the CII's partnership summit 2010.
Real estate business contributes to about a third of Malaysia's GDP. In 2008 it accounted for about RM 1 billion in revenue, about 10 per cent more than it contributed in the previous year. Persons of Indian origin contribute a significant portion , says Mr Tharmalingam whose family migrated from India to Malaysia four generations back. Indians are also among the leading property investors in Malaysia after Singapore, the UK and Korea.
Malaysian real estate has weathered the downturn of 2008 better than most other countries in the South East and market sentiments have been on the upswing from the end of 2009. This year “a flurry of launches” is anticipated for both commercial and residential space in major cities such as KL, Penang, Johor and Kota Kinabalu which is a reflection of the market demand. Depending on the location, properties in Kuala Lumpur, Penang and Johor could range from $150,000 to $300,000.
Govt policy
Foreign investments in Malaysian real estate are driven by the Government policy. Foreigners can own freehold property in Malaysia unlike elsewhere in the South East; and property values are among the lowest in the region with capital appreciation at 5-6 per cent, a reason why the downturn in 2008 was not a major shock to investors in Malaysian real-estate. Malaysia-My-Second-Home encourages overseas pensioners and expatriates who have worked in Malaysia to buy property. They can stretch there pension funds more in Malaysia, he says.
Most important, the Torrens land law system is transparent and title disputes are avoided. “If your name is on the title you are the owner,” says Mr Tharmalingam. The number of transactions by foreign buyers has increased four-fold to more than 5,000 in 2008 from 1,275 in 2004. . These do not include those of foreign companies that set up shop in Malaysia. Typically, companies first lease property and after consolidation begin to own property.
Over 120,000 residential units are built every year in Malaysia and 90 per cent of them are sold leaving a small surplus. Home loan rates are around 7 per cent with a buyers' margin around 15 per cent. Commercial property supply matches demand with 1.8-2 million sq.ft built every year, he said.
OUR CHENNAI BUREAU
Finmin may not tinker with corp tax rate
Finmin may not tinker with corp tax rate
The Economic Times, January 18, 2010, Page 9
Deepshikha Sikarwar, ET Bureau
NEW DELHI: The finance ministry is likely to keep the corporate tax rate unchanged at 30%, as it faces stiff resistance from companies to the draft direct tax code's proposal to cut the rate to 25% and remove all exemptions.
"Corporates are resisting the phasing out of exemptions even with a lower tax rate," said a senior government official.
The industry prefers the current system where the effective corporate tax rate is only about 20% due to various exemptions, he said requesting anonymity.
The Central Board of Direct Taxes, the key government body that formulates and administers tax policy, is not willing to cut rates, as any reduction in statutory rate will further reduce the effective rate and dent the government's revenues.
The government is already struggling with a 16-year high fiscal deficit, equivalent to 6.8% of the gross domestic product for the 2009-10 fiscal year.
The finance ministry is also likely to retain the tax exemption given to retirement savings at the time of withdrawal in the draft direct taxes legislation.
The tax code has also suggested and exempt-exempt-tax (EET) taxation regime for existing schemes such as provident fund. Under an EET arrangement, investments in savings schemes and the returns earned on them are exempt from tax, but the entire corpus is subject to tax at the time of withdrawal. The proposal has received flak from financial experts.
The government seems to be in favour of continuing the existing regime that is a mix of EEE (exempt-exempt-exempt ), EET and ETE (exempt-tax- exempt).
The draft direct taxes code, unveiled in August 2009, seeks to replace the decades old Income Tax Act, 1961. The code is proposed to come into effect from April 1, next year.
These changes along with a proposal to levy a minimum alternate tax (MAT) on gross assets figured in the discussions at a meeting between Prime Minister Manmohan Singh and finance minister Pranab Mukherjee, said the official quoted earlier.
The review exercise is now aimed at bringing a new law that will further the objective of reform , yet be acceptable to 'aam aadmi'. The official said the key policymakers are keen to continue with the proposed MAT on gross assets. But the definition of gross assets could be changed to give some relief to asset heavy infrastructure companies.
The draft code has proposed a levy of 2.0% MAT on the value of gross assets of all non-banking companies and 0.25% on banking companies.
The value of gross assets is the aggregate value of fixed assets of a company, capital works in progress and the book value of other assets, after taking out the accumulated depreciation on fixed assets and the debit balance of the profit and loss account, if included in the book value.
The finance ministry is looking to keep capital works in progress out of this definition to give relief to infrastructure companies.
"The industry's reservations on asset-based MAT is on the very principle of it and hence does not get adequately addressed by exempting elements like work-in-progress . While the infrastructure sector, with its long gestation periods, will get relief for the initial period, what constitutes work-in-progress will become a bone of contention with the revenue authorities. I still believe that the MAT provisions existing in the current Act should be continued with minor tweaks, if necessary" said Amitabh Singh, partner, Ernst &Young.
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