Kingfisher promoters may convert loans into equity
BS REPORTER & AGENCIES
Mumbai, 29 February
Promoters of Kingfisher Airlines might convert ~1,500 crore they lent to the airline into equity, chief executive Sanjay Aggarwal told news agency Dow Jones today.
The UB Group-run Kingfisher Airlines is seeking fresh credit support to revive the airline following three successive loss-making seasons. Lenders are yet to approve Kingfishers request for fresh funds, including working capital loans and guarantees, and have sought the promoters bring in equity to recapitalise the airline. The conversion of debt into equity will help fulfil the condition.
The airline expected the debt conversion as well as additional funding from external investors and more loans to help it raise $500-600 million (roughly ~2,500-3,000 crore) in sixeight weeks, Aggarwal said. The airline spokesperson did not respond to an SMS query sent by this paper. “We are in talks with several investors in India and overseas,” Aggarwal said. “Apart from that, our founders have 10 billion rupees (~1,000 crore) in loans with the airline and another five billion rupees (~500 crore) in optionally convertible debentures, which can be converted into equity," he said.
Last Tuesday, Kingfisher Airlines allotted equity shares against optionally convertible debentures (OCDs) to save interest costs. In a filing to the Bombay Stock Exchange, the airline said it had issued 79.8 million equity shares to LKP Securities, Redect Consultancy and Star Investments at ~25.01 apiece, in lieu of conversion of debentures. Kingfisher has debt of about ~6,000 crore, following a restructuring exercise in November 2010. As part of that, promoter loans of ~656 crore were converted into compulsorily convertible preference shares. Another ~1,137 crore worth intercorporate deposits were converted into OCDs to reduce the debt burden.
Meanwhile, civil aviation minister Ajit Singh told reporters in Bangalore today Kingfisher Airlines could not be closed just because it was making losses and banks were not helping it with funds. "You cant close down a company because they are making losses or banks are not giving them money. As long as passenger safety is not jeopardised, as long as they keep their schedule, why should we close down any industry?" Singh said.
Losses and lack of bank funds no reason to shut company, says minister
“We are in talks with several investors in India and overseas“
SANJAYAGGARWAL
CEO, Kingfisher Airlines
Madras HC orders shutdown of Subhiksha
BS REPORTER
Chennai, 29 February
The Madras High Court today ordered the winding up of Subhiksha Trading Services. The order came in response to a winding-up petition filed by Kotak Mahindra Bank, to which Subhiksha owes around ~40 crore.
The court also ordered the official liquidator to take over the assets of the 1997-founded Subhiksha and gave the retain chain three weeks time to respond. Today’s order was in response a petition filed by Kotak, which has been fighting since 2008, saying that the company has failed to repay the amounts due to the bank.
RSubramaniam, founder managing director of city-based Subhiksha, said that the company would finalise its course of action on receiving the written order. The chain ran out of cash in 2008-09 after relying on a high level of debt. Problems, though, had begun for Subhiksha in October 2008, when it had started receiving legal notices for outstanding payment. In January 2009, the retail chain was forced to shut down over 1,600 or more retail shops after it went into a cash crunch and defaulted to the tune of around ~750 crore to 13 banks.
Earlier Kotak said four more creditors, including Azim Premji led HCL, were supporting the winding-up. In 2009, Subhiksha’s subsidiary and shareholder, Cash and Carry Wholesale Traders, came out with a compromise petition to reach a settlement with the creditors and vendors. That, was dismissed by the Madras High Court in August 2009, stating that the proposal for revival cannot be termed as feasible.
Fourteen months later, on October 26, 2010, Justice V Ramasubramanian of the Madras High Court dismissed Subhiksha’s merger proposal with Cash and Carry. Then bench raised serious objections and doubts on the ~230 crore, which was claimed to be transferred between Subhiksha Services Limited and Blue Green Constructions & Investments Limited. The court, also observing inventories worth ~551 crore had vanished, dismissed the proposal, stating that it was mainly to protect Public interest, said that the revival plan submitted by Subhiksha, was based on certain presumptions including infusion of ~150 crore, as equity at par, infusion of ~100 crore, as fresh debt/debt convertible into equity, incorporating the effect of debt restructuring, utilisation of ~51 crore, of the infused cash to create the balancing investments in the fixed assets.
The case went from one court to other, including the apex court, company court, high court. After hearing long arguments, in the past few months, the high court today passed the order to wind up the company.
Bankers forguidelines on restructured assets
BS REPORTER
Mumbai, 29 February
Indian banks have asked the Reserve Bank of India (RBI) to announce proper guidelines on the classification of restructured assets, particularly for cases in which repayments are regular, under the revised schedule.
RBI deputy governor K C Chakrabarty today met top bankers in Mumbai and discussed the rising non-performing assets (NPAs) in the system. Stress in sectors like textile, steel, mining and aviation was also discussed, bankers said.
In the meeting, lenders said if restructured assets continued to perform well, according to the restructured schedule for a certain period of time, these should be taken off the restructured book and upgraded into standard assets. This would reduce the provisioning burden on banks.
Pratip Chaudhuri, chairman, State Bank of India, said, "We said according to our definition of NPAs (non-performing assets), the restructuring definition should have atimeline. If an account adheres to the revised schedule for two years, so that there is definite proof it is performing, it should be taken out of the categorisation of the restructured account." Currently, there was no definite timeline on the upgradation of a restructured asset, he added.
"Today, there is a lot of mystery about what is restructured. Everything restructured is seen as equivalent to an NPA. Restructured means the dues are not being paid according to the schedule, not according to the revised schedule. But the ultimate recovery of the debt is not in doubt. The probation period and when it needs to exit restructuring need to be more clearly defined," he said, replying to queries after the meeting.
MNarendra, chairman, Indian Overseas Bank, said, "This was a general review. It was also aimed at finding out what the sector-wise issues are. The NPA situation is very much manageable and under control. Sectors like textile and aviation did get a special mention from the regulator." Of late, most banks have been plagued with mounting restructured assets, which has led to higher provisioning in stressed sectors. Rising interest rates and the slowdown in the economy are seen as major reasons behind this.
Sectors like aviation, textile, infrastructure, iron and steel and telecom have been the worst hit.
Loans worth ~50,250 crore were referred for corporate debt restructuring (CDR) during the April-December period of the current financial year. Currently, total outstanding loans referred for restructuring are worth ~1.43 lakh crore, according to CDR forum data. With a share of 26.8 per cent, the iron and steel sector accounts for most of these, followed by infrastructure (12 per cent) and textiles (eight per cent).
Say if assets perform well, they should be upgraded
RBI Deputy Governor K C Chakrabarty met bankers in Mumbai and discussed the rising NPAs in the system
Patent rights?
The Geneva-based World Intellectual Property Organisation (WIPO) has moved forward on the creation of asingle text for discussions in the area of genetic resources. The use of genetic resources and traditional knowledge for industrial application through patents has been an issue of debate for many years at the World Trade Organisation (WTO) and WIPO.
The new text was discussed at the 20th session of the WIPO Intergovernmental Committee on Genetic Resources, Traditional Knowledge, and Folklore (IGC) in February. The committee was set up over a decade ago to sort out the differences between countries that are rich in genetic resources and traditional knowledge and the developed world that uses these genetic resources for developing patents for industrial use.
One of the most contentious issues in creating this single legal text started with some of the developed countries seeking to change the term intellectual property rights (IPR) mentioned in the text to patents. However, countries like Bolivia that supported the use of IPR said the term needed to have boarder coverage since patents, as aterm, had a narrow focus, while IPR also included geographical indications.
The new text provides different options that can be chosen by countries for defining some important terms. For example, for defining “genetic resources” the text provides two options. The first option provided for discussions stated that “genetic resources” are genetic material of actual or potential value, while the second option defines “genetic resources” as it is understood in the CBD (convention on bio diversity) and related instruments and the International Treaty on Plant Genetic Resources for Food and Agriculture.
The other area of concern for developing countries has been the need for patent seekers to state the source from where the genetic resources have been obtained and also provide details of any traditional knowledge that may be associated with these. Developed countries like the US and Japan are of the view that mandatory disclosure of such information will make the job of patent seekers very difficult. The US felt the need for carrying out studies to see the impact of such a move that did not find support from many countries like Egypt, South Africa and India. The African group was, reportedly, of the view that there are several studies that exist and they can be put together by WIPO for better understanding. India, reportedly, made a strong statement at the meeting that there are enough instances of how available genetic resources and traditional knowledge had been used freely by patent seekers without acknowledging the source of the genetic resource or the traditional knowledge attached to it.
A few countries tried to overcome this issue by stating that WIPO may put together a nonbinding document that lists out the genetic resources and traditional knowledge available in different countries. However, many others who support the need to acknowledge the presence of genetic resources in patents were of the view that non-binding documents would not serve the purpose.
The debate on the use of genetic resources and traditional knowledge has been going on for a long time since developing countries fail to make profit because of the use of genetic resources by patent seekers that are later developed into business products by industry.
The IGC, which was set up with the aim of resolving the dispute, has certainly come a long way to look at issues on both sides of the table. However, it is important for countries to ensure that the rights of the owners of genetic resources and the traditional knowledge associated with it is acknowledged and rewarded. Patents are extremely important instruments to provide a push to inventions that galvanise industry into making better products.
However, any move that takes away the original rights of the people who own the resources would be unfair. The possible exclusion of the rights of people was evident when the indigenous people who attend the meeting of the IGC staged a walkout stating that they were not being heard in these meetings.
If WIPO has to be seen as a transparent and fair organisation that balances the developmental need of members with genetic resources with the need for providing a push to inventions and innovation in industry, then it will have to find the right mix of proposals in the final document on this contentious issue.
The author is Principal Adviser with APJ-SLG Law Offices
WIPO must protect the developmental needs of countries with genetic resources as it pushes for inventions and innovation in industry
TRADE MATTERS
TS VISHWANATH
Road to IPO gets longer
SAMIE MODAK
Mumbai, 29 February
The Securities and Exchange Board of India (Sebi) is working on reducing the time gap between the close of initial public offers (IPO) and their listing, but the timeline for getting approvals for these share sales seems never-ending for some firms. At least 15 companies planning public offerings have waited for over a year to get regulatory approvals, according to processing data released by the capital market regulator on February 24.
Companies facing more than ayears delay include Shirdi Industries, Jain Infraprojects and Jawed Habib Hair and Beauty. The Sebi website lists the issue status in most of these issues as under process. In some others, it is shown as ‘clarifications sought ‘.
Shirdi Industries, which filed the IPO in April 2010, has waited for over 600 days. At present, there are more than 70 companies which have filed their draft offer documents with the market regulator.
Its not just the private companies that have been facing delays. Even government-owned Bharat Heavy Electricals Ltd (BHEL), which had filed the offer document for a follow-on public offering (FPO) in September 2011, is yet to get a go-ahead.
Uncertainty over getting a final nod has been hurting merchant bankers as issue planning becomes a challenge for them. Besides, a long delay means most of the information provided in the offer documents, including results, becomes outdated.
Once a company files draft red herring prospectus, the regulator is supposed to come up with remarks and observations within 30 days. Merchant bankers say Sebi seeks clarification or additional information just ahead of the stipulated time, which results in delays.
Merchant bankers have already met Sebi chairman U K Sinha to discuss this issue. "The chairman assured us that it will put in place a timeline, but would also ask for better disclosures from merchant bankers and companies,” said an investment banker, who claimed to have met the Sebi chairman on this issue.
In a recent seminar, Sinha had said the issuer companies should also share the blame for delays as in some cases, these companies deliberately delay sharing information sought by the regulator because market conditions are not favourable.
Sebi approvals are valid for one year. If the company fails to sell shares within this period, it has to approach the regulator again.
According to primary market observers, the average time lag between filing offer documents and receiving final approval has increased to about six months, from three months, earlier.
In the past, Sebi had taken about 400 days to give a final approval to RDB Rasayans and Rushil Decor. Maybe, the regulators apprehensions in giving these companies a go-ahead to launch public offerings were valid, as both ended among the seven companies which were recently banned by Sebi for allegedly violating IPO norms.
Among other prominent companies, which took about six months to get their IPO documents cleared, include Future Ventures, Raheja Universal and Greatship India. While the former launched its offering, the latter two had to defer their IPO plans due to weak market conditions.
National Buildings Construction Corporation Ltd (NBCC), which filed its issue prospectus earlier this month, is also expecting an approval. The NBCC IPO, which is part of this years disinvestment programme, has already started conducting roadshows.
At least 15 companies await Sebi nod for over a year
Sebi approvals are valid for one year. If the company fails to sell shares within this period, it has to approach the regulator again.
Wednesday, February 29, 2012
Saturday, February 25, 2012
Business standard updates
Manufacturing policy runs into labourtrouble yetagain
AKSHAT KAUSHAL
New Delhi, 25 February
The ministry of labour and employment may have given a green signal to the broad contours of the National Manufacturing Policy (NMP), but the policy has yet again run into trouble. The ministry has refused to relax labour laws inside the national manufacturing zones (NMZs).
On February 16, the Department of Industrial Policy and Promotion (Dipp), the nodal agency for NMP, wrote to the labour ministry, requesting it to reconsider labour laws related to employability and retrenchment of workforce inside the NMZs.
The letter specifically sought to transfer the responsibility of the industrial establishments to insurance companies, in case of closure and layoffs.
In its reply, the labour ministry has conveyed the law cannot be changed as it could possibly jeopardise the social security of workers. “We are not in favour of such a change as it could put the fate of the labourers in doldrums,” said an official in the labour ministry on the condition of anonymity.
The official, who is directly involved with the matter, said such a change could be time consuming as it would require amendment to the Industrial Dispute Act, 1947. The reply of the Dipp is expected next week.
Labour laws relating to closure and retrenchment are governed by the Industrial Disputes Act, 1947, according to which industrial establishments are required to provide compensation and alternative employment to workers if they are laid off or the establishment shuts down.
Indian labour laws have often been criticised for being too harsh on the employer.
More recently, Prime Minister Manmohan Singh, speaking at the Indian Labour Conference, had also questioned the merit of some of these laws.
The manufacturing policy, which seeks to increase the share of the manufacturing sector in the gross domestic product from the present 15-16 per cent to 25 per cent over the next decade, was criticised by Tata Sons’ Chairman Ratan Tata yesterday. He pointed out there may be several roadblocks on the way to make that (NMP) actually implementable.
The ministry and the Dipp had for long disagreed over the agency that would enforce the labour laws in the NMZs. Earlier, the ministry maintained “under no circumstances” would it “outsource” labour inspection powers to any other agency, much to the displeasure of the Dipp.
A final agreement was reached after the ministry was allowed to handle the enforcement mechanism of labour laws. Dipp was happy after its proposal that an NMZ chief executive officer be the head of the labour machinery was cleared.
Labour ministry has refused to relax labour laws inside the national manufacturing zones
The DepartmentofIndustrial Policyand Promotion had asked the labour ministryto reconsider labour laws related to employabilityand retrenchmentofworkforce inside the NMZs
AKSHAT KAUSHAL
New Delhi, 25 February
The ministry of labour and employment may have given a green signal to the broad contours of the National Manufacturing Policy (NMP), but the policy has yet again run into trouble. The ministry has refused to relax labour laws inside the national manufacturing zones (NMZs).
On February 16, the Department of Industrial Policy and Promotion (Dipp), the nodal agency for NMP, wrote to the labour ministry, requesting it to reconsider labour laws related to employability and retrenchment of workforce inside the NMZs.
The letter specifically sought to transfer the responsibility of the industrial establishments to insurance companies, in case of closure and layoffs.
In its reply, the labour ministry has conveyed the law cannot be changed as it could possibly jeopardise the social security of workers. “We are not in favour of such a change as it could put the fate of the labourers in doldrums,” said an official in the labour ministry on the condition of anonymity.
The official, who is directly involved with the matter, said such a change could be time consuming as it would require amendment to the Industrial Dispute Act, 1947. The reply of the Dipp is expected next week.
Labour laws relating to closure and retrenchment are governed by the Industrial Disputes Act, 1947, according to which industrial establishments are required to provide compensation and alternative employment to workers if they are laid off or the establishment shuts down.
Indian labour laws have often been criticised for being too harsh on the employer.
More recently, Prime Minister Manmohan Singh, speaking at the Indian Labour Conference, had also questioned the merit of some of these laws.
The manufacturing policy, which seeks to increase the share of the manufacturing sector in the gross domestic product from the present 15-16 per cent to 25 per cent over the next decade, was criticised by Tata Sons’ Chairman Ratan Tata yesterday. He pointed out there may be several roadblocks on the way to make that (NMP) actually implementable.
The ministry and the Dipp had for long disagreed over the agency that would enforce the labour laws in the NMZs. Earlier, the ministry maintained “under no circumstances” would it “outsource” labour inspection powers to any other agency, much to the displeasure of the Dipp.
A final agreement was reached after the ministry was allowed to handle the enforcement mechanism of labour laws. Dipp was happy after its proposal that an NMZ chief executive officer be the head of the labour machinery was cleared.
Labour ministry has refused to relax labour laws inside the national manufacturing zones
The DepartmentofIndustrial Policyand Promotion had asked the labour ministryto reconsider labour laws related to employabilityand retrenchmentofworkforce inside the NMZs
Friday, February 24, 2012
business standard and business line updates
No regulatory vetting of M&As involving up to 25% control
BS REPORTER
New Delhi, 24 February
Relaxing the rule on mergers and acquisitions to be vetted by it, the Competition Commission of India (CCI) has exempted acquisitions resulting in a cumulative control of up to 25 per cent of shareholding or voting rights from such scrutiny. The current practice sets the limit at 15 per cent.
Analysts say the change is in sync with market watchdog Sebi’s new takeover code, which raised the open offer trigger from 15 to 25 per cent of the shares acquired.
Besides, intra-group mergers or amalgamations involving enterprises wholly owned by group companies will escape CCI vetting.
However, companies that need to undergo CCI scrutiny will now have to spend several times more as the fee for normal M&A (merger and acquisition) scrutiny has been raised from ~50,000 to ~10 lakh and from ~10 lakh to ~40 lakh in cases where intense scrutiny is required.
In a statement today, the CCI said amendments in the regulation were made keeping in view the fees charged by other regulatory authorities in India and abroad.
A CCI official said the effect of the changes on the number of M&As under scrutiny could not be gauged immediately. He said the amendment to the Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulation, 2011 attempts to provide relief to corporate entities from making filings for combinations unlikely to raise competition concerns, reduce compliance requirements, make filings simpler and to move towards certainty in the application of the Competition Act.
The said regulation was notified in May last year.
“The merger and acquisition process is now almost eight months old and the amendment is rational and logical, in tune with the global practice,” said Dhanendra Kumar, former CCI Chairman during whose tenure the initial regulations were notified.
Since July 2011, the Competition Commission has cleared 28 merger and acquisition applications. In none of those did it find any possibility of an adverse impact on competition.
|Simpler application form for clarity and uniformity |Board-authorised company secretary permitted to sign M&A scrutiny applications along with managing director or director |Parties to provide details of value of assets and turnover, and copies of M&A agreement, board resolution, etc |A brief summary of the combination must be filed when filing notice RULE CHANGES
CBEC attaches Kingfisher’s a/c
BS REPORTER
New Delhi, 24 February
The Central Board of Excise & Customs (CBEC) today said it has again attached the bank accounts of Kingfisher Airlines after it failed to make regular payments of its arrears. The troubled airline’s discussions with the Central Board of Direct Taxes (CBDT) to de-freeze the accounts also failed.
CBEC Chairman S K Goel said Kingfisher was to pay ~1 crore everyday to clear its indirect tax dues with the department, but there were some interruptions in the last 2-3 days, following which the CBEC issued a letter to its banks instructing them to freeze Kingfisher’s accounts.
“They were paying ~1 crore per day. For past few days there has been an interruption. They have not been able to pay, so we have frozen their accounts,” Goel told reporters.
In December 2001, the service tax department had frozen the bank accounts of Kingfisher, but de-froze it later after the air carrier made partpayment of their service tax dues. Kingfisher owed ~70 crore to the service tax department, of which about ~35 crore is still due.
On the other hand, the Income Tax (I-T) department also refused to de-freeze the accounts of Kingfisher until the carrier agreed for a partial upfront payment of about 40 crore and pay the balance amount in installments over the next few months. Earlier this week, Kingfisher, promoted by liquor baron Vijay Mallya, had appealed to the department to allow it make payments over 18 months on a weekly basis.
Finance ministry officials said Kingfisher owed about ~300 crore to the I-T department since it had not deposited with the government the TDS (tax deducted at source) deducted from employees’ salary in the last two years. The amount included penalty and interest payment.
The amount of liabilities quantified on preliminary examination was ~53.82 crore for 2010-11 and ~100 crore for 2011-12. Of the total amount of ~153.82 crore, the tax department collected ~21.04 crore till December 2011. Kingfisher filed a commitment letter to pay balance ~130 crore TDS liabilities by the end of the current financial year.
Sebi may change market making rules in SME bourses
NSUNDARESHASUBRAMANIAN
MUMBAI, 24 February
Securities and Exchange Board of India (Sebi) is considering a proposal to tweak rules for market making in SME exchanges.
According to the framework, market making is compulsory for three years for companies listing on these exchanges to provide an exit to investors. But, the exchanges have put forward certain practical difficulties and requested certain changes in the rules. Though the regulator is not too keen to relax the timeline of three years, it is considering other proposals, officials in the know said.
"There is a practical possibility that the market maker ends up with the entire floating stock in the market. Also, at the other end he may exhaust the entire stock in his hand. In both situations, he may no longer be able to offer two-way quotes. So, we have asked the regulator to put a cap and floor on the floating stock that can be held by the exchange," a senior exchange official told Business Standard .Also, in situations where a venture capital investor takes a considerable stake in the Initial Public Offering (IPO), the floating stock will be reduced further, cramping the room for the market makers.
“These practical issues we have put up before Sebi,” the official said. Sebi has been very sensitive to the teething troubles of this platform, officials said. It has recently exempted the first SME IPO from the recent rule changes on market lots. The IPO of BCB Finance has opened on Thursday on the BSE SME platform.
Uttam Bagri,promoter of BCB Finance said, "The change of rule on market lots came just days before our issue was about to open. It would have made things difficult for us. But the exchange took up the matter with the regulator and they have clarified that the change would not be applicable to us."
Source Business line
I-T relief: House panel may push for higher deduction of Rs 3.20 lakh
Our Bureau
Share • print • T+
Likely to include long-term savings, children's education; corporate tax may remain unchanged
New Delhi, Feb. 24:
The Standing Committee of Parliament on Finance is likely to recommend a deduction of Rs 3.20 lakh for income-tax relief. This limit may be made available for long-term savings, investment and expenditure on life insurance, health insurance and education for children.
The committee may also recommend exemption limit for income-tax at Rs 3 lakh per annum as mentioned in the draft report, although some members are reportedly still pushing to increase it to Rs 5 lakh.
The Direct Taxes Code (DTC) Bill tabled in Parliament had proposed a limit of Rs 2 lakh from the current limit of Rs 1.80 lakh.
The committee is scheduled to finalise its views on DTC Bill by March 2, for which a meeting was held on Friday. “The members appear to be in agreement over incentivising long-term savings and social security expenditure. So, a higher limit could be a part of the final report,” a person familiar with the development said.
At present, investments up to Rs 1 lakh in specified instruments are deducted while calculating tax liability. These specified instruments include life insurance policies, public provident fund, equity-linked saving schemes of mutual funds, National Saving Certificates.. This limit also includes school fees for two children. In addition, investments up to Rs 20,000 in infrastructure bonds are also exempted from tax.
However, the majority view in the committee is that the limit on long-term savings eligible for exemption from income-tax be increased to Rs 1.50 lakh as against Rs 1 lakh proposed in the DTC.
On the other hand, limit for tax deduction by incurring expenditure on life insurance and health insurance may be hiked to Rs 1 lakh from Rs 50,000 proposed in the DTC Bill.
There also appears to be consensus to provide an additional limit of Rs 50,000 for expenditure on children's education.
The Bill lays down a ceiling of Rs 50,000 on the amount of deduction available in respect of payments made for a life insurance policy, health insurance policy and education of children, all combined. In order to promote social security for senior citizens, the majority view is that an additional deduction on account of health insurance premium paid for dependent parents to the tune of Rs 20,000 may be separately allowed.
The Committee is unlikely to make any change in corporate tax. The DTC Bill proposed 30 per cent rate for corporates, without any cess and surcharges. On the other hand, the committee may suggest to the Government to review the General Anti-Avoidance Rules keeping in view the Supreme Court's judgment in the Vodafone tax matter.
Shishir.s@thehindu.co.in
(This article was published in the Business Line print edition dated February 25, 2012
BS REPORTER
New Delhi, 24 February
Relaxing the rule on mergers and acquisitions to be vetted by it, the Competition Commission of India (CCI) has exempted acquisitions resulting in a cumulative control of up to 25 per cent of shareholding or voting rights from such scrutiny. The current practice sets the limit at 15 per cent.
Analysts say the change is in sync with market watchdog Sebi’s new takeover code, which raised the open offer trigger from 15 to 25 per cent of the shares acquired.
Besides, intra-group mergers or amalgamations involving enterprises wholly owned by group companies will escape CCI vetting.
However, companies that need to undergo CCI scrutiny will now have to spend several times more as the fee for normal M&A (merger and acquisition) scrutiny has been raised from ~50,000 to ~10 lakh and from ~10 lakh to ~40 lakh in cases where intense scrutiny is required.
In a statement today, the CCI said amendments in the regulation were made keeping in view the fees charged by other regulatory authorities in India and abroad.
A CCI official said the effect of the changes on the number of M&As under scrutiny could not be gauged immediately. He said the amendment to the Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulation, 2011 attempts to provide relief to corporate entities from making filings for combinations unlikely to raise competition concerns, reduce compliance requirements, make filings simpler and to move towards certainty in the application of the Competition Act.
The said regulation was notified in May last year.
“The merger and acquisition process is now almost eight months old and the amendment is rational and logical, in tune with the global practice,” said Dhanendra Kumar, former CCI Chairman during whose tenure the initial regulations were notified.
Since July 2011, the Competition Commission has cleared 28 merger and acquisition applications. In none of those did it find any possibility of an adverse impact on competition.
|Simpler application form for clarity and uniformity |Board-authorised company secretary permitted to sign M&A scrutiny applications along with managing director or director |Parties to provide details of value of assets and turnover, and copies of M&A agreement, board resolution, etc |A brief summary of the combination must be filed when filing notice RULE CHANGES
CBEC attaches Kingfisher’s a/c
BS REPORTER
New Delhi, 24 February
The Central Board of Excise & Customs (CBEC) today said it has again attached the bank accounts of Kingfisher Airlines after it failed to make regular payments of its arrears. The troubled airline’s discussions with the Central Board of Direct Taxes (CBDT) to de-freeze the accounts also failed.
CBEC Chairman S K Goel said Kingfisher was to pay ~1 crore everyday to clear its indirect tax dues with the department, but there were some interruptions in the last 2-3 days, following which the CBEC issued a letter to its banks instructing them to freeze Kingfisher’s accounts.
“They were paying ~1 crore per day. For past few days there has been an interruption. They have not been able to pay, so we have frozen their accounts,” Goel told reporters.
In December 2001, the service tax department had frozen the bank accounts of Kingfisher, but de-froze it later after the air carrier made partpayment of their service tax dues. Kingfisher owed ~70 crore to the service tax department, of which about ~35 crore is still due.
On the other hand, the Income Tax (I-T) department also refused to de-freeze the accounts of Kingfisher until the carrier agreed for a partial upfront payment of about 40 crore and pay the balance amount in installments over the next few months. Earlier this week, Kingfisher, promoted by liquor baron Vijay Mallya, had appealed to the department to allow it make payments over 18 months on a weekly basis.
Finance ministry officials said Kingfisher owed about ~300 crore to the I-T department since it had not deposited with the government the TDS (tax deducted at source) deducted from employees’ salary in the last two years. The amount included penalty and interest payment.
The amount of liabilities quantified on preliminary examination was ~53.82 crore for 2010-11 and ~100 crore for 2011-12. Of the total amount of ~153.82 crore, the tax department collected ~21.04 crore till December 2011. Kingfisher filed a commitment letter to pay balance ~130 crore TDS liabilities by the end of the current financial year.
Sebi may change market making rules in SME bourses
NSUNDARESHASUBRAMANIAN
MUMBAI, 24 February
Securities and Exchange Board of India (Sebi) is considering a proposal to tweak rules for market making in SME exchanges.
According to the framework, market making is compulsory for three years for companies listing on these exchanges to provide an exit to investors. But, the exchanges have put forward certain practical difficulties and requested certain changes in the rules. Though the regulator is not too keen to relax the timeline of three years, it is considering other proposals, officials in the know said.
"There is a practical possibility that the market maker ends up with the entire floating stock in the market. Also, at the other end he may exhaust the entire stock in his hand. In both situations, he may no longer be able to offer two-way quotes. So, we have asked the regulator to put a cap and floor on the floating stock that can be held by the exchange," a senior exchange official told Business Standard .Also, in situations where a venture capital investor takes a considerable stake in the Initial Public Offering (IPO), the floating stock will be reduced further, cramping the room for the market makers.
“These practical issues we have put up before Sebi,” the official said. Sebi has been very sensitive to the teething troubles of this platform, officials said. It has recently exempted the first SME IPO from the recent rule changes on market lots. The IPO of BCB Finance has opened on Thursday on the BSE SME platform.
Uttam Bagri,promoter of BCB Finance said, "The change of rule on market lots came just days before our issue was about to open. It would have made things difficult for us. But the exchange took up the matter with the regulator and they have clarified that the change would not be applicable to us."
Source Business line
I-T relief: House panel may push for higher deduction of Rs 3.20 lakh
Our Bureau
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Likely to include long-term savings, children's education; corporate tax may remain unchanged
New Delhi, Feb. 24:
The Standing Committee of Parliament on Finance is likely to recommend a deduction of Rs 3.20 lakh for income-tax relief. This limit may be made available for long-term savings, investment and expenditure on life insurance, health insurance and education for children.
The committee may also recommend exemption limit for income-tax at Rs 3 lakh per annum as mentioned in the draft report, although some members are reportedly still pushing to increase it to Rs 5 lakh.
The Direct Taxes Code (DTC) Bill tabled in Parliament had proposed a limit of Rs 2 lakh from the current limit of Rs 1.80 lakh.
The committee is scheduled to finalise its views on DTC Bill by March 2, for which a meeting was held on Friday. “The members appear to be in agreement over incentivising long-term savings and social security expenditure. So, a higher limit could be a part of the final report,” a person familiar with the development said.
At present, investments up to Rs 1 lakh in specified instruments are deducted while calculating tax liability. These specified instruments include life insurance policies, public provident fund, equity-linked saving schemes of mutual funds, National Saving Certificates.. This limit also includes school fees for two children. In addition, investments up to Rs 20,000 in infrastructure bonds are also exempted from tax.
However, the majority view in the committee is that the limit on long-term savings eligible for exemption from income-tax be increased to Rs 1.50 lakh as against Rs 1 lakh proposed in the DTC.
On the other hand, limit for tax deduction by incurring expenditure on life insurance and health insurance may be hiked to Rs 1 lakh from Rs 50,000 proposed in the DTC Bill.
There also appears to be consensus to provide an additional limit of Rs 50,000 for expenditure on children's education.
The Bill lays down a ceiling of Rs 50,000 on the amount of deduction available in respect of payments made for a life insurance policy, health insurance policy and education of children, all combined. In order to promote social security for senior citizens, the majority view is that an additional deduction on account of health insurance premium paid for dependent parents to the tune of Rs 20,000 may be separately allowed.
The Committee is unlikely to make any change in corporate tax. The DTC Bill proposed 30 per cent rate for corporates, without any cess and surcharges. On the other hand, the committee may suggest to the Government to review the General Anti-Avoidance Rules keeping in view the Supreme Court's judgment in the Vodafone tax matter.
Shishir.s@thehindu.co.in
(This article was published in the Business Line print edition dated February 25, 2012
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