Funding through equity route a challenge for corporates: Assocham

25 OCT, 2012, 02.43PM IST, PTI 

NEW DELHI: Corporates are finding it difficult to expand capital base and raise finances through equity route despite showing a handsome increase in the earning per share (EPS), a study by industry chamberAssocham said. 

The trends, measured by the study of about 130 companies, point out an increase of about 70 per cent earning per share (EPS) for the quarter ended September 2012 compared to the same quarter in the previous financial year. 

However, the trends do not suggest towards celebrations because these also indicate towards inability of the corporates to raise capital required for their investment by expanding the equity base. 

In the middle of sluggish stock markets and risk aversion towards equity, the corporates found it unviable to issue fresh capital through equity, it said. 

"As a result, the capital base of a large majority of the companies remained more or less stable, which in turn resulted in the higher EPS," Assocham president Rajkumar Dhoot said. 

The companies which have shown an impressive improvement as per the study, include Indo Rama Synthetics (India), Gujarat Mineral Development Corporation, Shree Cement, Somany Ceramics, Mindtree, Mahindra Holidays and Resorts and Exide India Ltd. 

However, there are some firms, including the country's largest private sector company Reliance Industries, which have shown drop in the EPS. 

The earning per share of Reliance Industries has shown a decline from Rs 17.4 in the second quarter of 2011-12 to Rs 16.60 in the comparable quarter of the current financial year. 

He said a healthy rise in the EPS should have resulted into an improved Price to Earning (PE) multiples. However, this is not seen in the market because of sluggish movement of the stock market barring the last couple of months. 

In fact, several companies, instead of increasing their capital base resorted to buy-back of the shares by utilizing their reserves to boost the bottomline for the investors.

Taxmen must probe inter-corporate gifts: Authority for Advance Ruling

29 OCT, 2012, 07.17AM IST, M PADMAKSHAN,ET BUREAU 

MUMBAI: Gifts given by one company to another need to be probed into by the tax authorities, according to the Authority for Advance Ruling, a quasi-judicial body for deciding tax disputes involving foreign companies. 

In a recent ruling in an application filed by Singapore company Orient Green Power, AAR held that a "gift" by a corporate to another corporate deserved to be inquired into by the income-tax department as the intentions of such transactions are always under a cloud. 

In this case, Orient Green Power "gifted" the shares of Indian company Bharath Wind Farm, to its subsidiaryOrient Green Power Ltd India , another Indian company. 

Since no consideration was paid in return for the "gift", the Singapore company claimed tax is not liable to be paid in India. 

The company also argued that the transfer of shares was effected before the section 56 (2) (viia) of the Income-tax Act, that stipulated such transfers are liable to be taxed, became operational. 

The income-tax department objected to this claim on the ground that the "gift" was a ploy for avoiding paying tax in India. 


The AAR observed that though the provisions of the Companies Act provide for transfer of shares, the taxpayer company did not prove that the transfer was in accordance with the provisions of the Companies Act, the AAR pointed out. AAR further observed that a gift of shares by one company to another appears to be a strange transaction. 

Therefore the tax authorities' contention that the "gift" was a ploy to avoid tax cannot be construed farfetched. 

The AAR pointed out that gifts are usually given by individuals and Hindu Undivided Family and not by companies. 

"A gift by a corporation to another corporation (through a subsidiary or an associate enterprise, which is always claimed to be independent for tax purposes) is a strange transaction," AAR observed. 

The AAR further observed that whenever such transactions involving substantial assets take place, the company concerned is liable to prove the genuineness and validity of the transaction by presenting all relevant facts. 

"To postulate that a corporation can give away its assets free to another, even orally, can only be aiding dubious attempts at avoidance of tax payable under the Act," the AAR held. 

The AAR held that the tax authorities are in a better position to investigate the genuineness and validity of the transaction and therefore declined to give an order to the taxpayer's application.

Should Subbarao ignore IMF’s advice?

 

RBI governor D. Subbarao. It’s obvious RBI has plenty of reasons to be concerned about inflation, although, of course, it’s far from clear whether that concern has helped. Photo: Abhijit Bhatlekar/Mint

Mint Money :Manas Chakravarty  :Mon, Oct 29 2012. 12 31 AM IST

Should the Reserve Bank of India (RBI) cut rates on Tuesday? 

The International Monetary Fund (IMF) is clear it should do nothing of the kind. “In India, where inflation is still high, monetary policy should stay on hold until a sustained decrease in inflation materializes,” it said in its latest World Economic Outlook.

Unfortunately, wholesale-price inflation (WPI) has remained high and sticky and, in fact, moved up a bit in September, thanks to the diesel price hike. It’s higher now than it was in June. The consumer-price index fares no better—it remains higher than where it was in the first three months of 2012.

Indeed, instead of taking the usual year-on-year inflation numbers, if we take the WPI numbers from January, we find the gauge went up 6.1% between January and September, which is more than the 5.5% it rose between January and September 2011. This indicates WPI this year has been higher than the last.

But, there’s really no need to torture the data—it’s obvious RBI has plenty of reasons to be concerned about inflation, although, of course, it’s far from clear whether that concern has helped.

Consider, for instance, the so-called core WPI, which means, in the Indian context, inflation in the wholesale prices of non-food manufactured products. This core inflation, at 5.6% last month, is higher than the 5% levels it was at during March and April, although it has come down quite a lot from its peak of 8.5% or so reached last year. The only good news is that the core consumer price inflation (which excludes food and fuel) has been coming down steadily, from 10.4% in March to 8.2% in September, though it remains high.

What has changed since RBI’s mid-quarter monetary policy review on 17 September? “As inflationary tendencies have persisted, the primary focus of monetary policy remains the containment of inflation and anchoring of inflationary expectations,” the central bank had then said in its policy statement. That doesn’t sound promising for a rate cut.

What about the argument that the central bank should do its bit to help the economy revive, now that the government has tried to bring down the deficit? Well, in its last policy statement in September, the central bank said it had already reduced its policy rate in April in anticipation of action by the government to curb the deficit.

Since the last monetary policy statement, there haven’t been any further developments on the fiscal front, apart from a botched attempt to sell shares in Rashtriya Ispat Nigam Ltd. The proposed right to food legislation and the spectre of an election budget loom large on the fiscal horizon. Most of the reform measures have remained just talk.

Has growth become worse, which might force the central bank to tilt in favour of growth over inflation? Not really—the composite purchasing managers’ index (PMI), which includes manufacturing and services, rose to 55 in September from 54.3 in August due to a pick-up in services.

Has there been any change in the ability of businesses to pass on higher costs? “The pick-up in new business has allowed services sector firms to more easily pass on rising input costs,” Leif Eskesen, HSBC’s chief economist for India, said about the September services PMI.

Nomura economists Sonal Varma and Aman Mohunta have estimated a “coefficient of cost pass-through (CCPT),” an indication of how much pricing power firms have. A reading of 1 indicates complete pass-through of input costs, while a reading between 0 and 1 suggests an incomplete pass-through. They say that after rising close to 1 in mid-2011, which means manufacturers were passing on almost all their input cost increases, the CCPT fell to around 0.4 in the second quarter of 2012. Since then, however, the CCPT has risen to 0.53 in September, suggesting that manufacturers are now passing on more than 50% of their input cost increase.

This explains the stickiness of the core WPI in recent months. Another clue why companies continue to have a measure of pricing power in spite of faltering demand is available from RBI’s OBICUS or order books, inventories and capacity utilization survey. The 17th round for January-March shows capacity utilization in the fourth quarter of 2011-12 was a high 79.6%, almost the same level as in the year-ago three months, when it was 79.8%. It’s when companies are sitting on plenty of unutilized capacity that they drop prices and the survey shows that capacity utilization hasn’t changed much.

What’s on the credit side of the ledger? The rupee has appreciated a bit since early September. The spring (rabi) harvest is likely to be good and could drive down food inflation. Crude oil prices have fallen. The CRB commodity index, too, has declined in the past month. But if the Chinese economy bottoms out, how long will it be before commodity prices move up again?

RBI has repeatedly said high interest rates are not what’s holding back investment, that real interest rates are lower than they were before the crisis and that increasing consumption is not the solution because consumption without capacity addition will exacerbate inflationary pressures.

So, if RBI decides to cut rates on Tuesday, it’ll have to junk most of its old arguments and come up with new and interesting ones. But then, we must not underestimate its capacity for intellectual legerdemain.

:"மகாத்மா காந்திக்கு,தேசத் தந்தை என்ற பட்டம் அளிக்க, அரசியல் சட்டத்தில் இடமில்லை'

தினமலர்: அக்டோபர் 25,2012,23:35 IST


புதுடில்லி:"மகாத்மா காந்திக்கு,தேசத் தந்தை என்ற பட்டம் அளிக்க, அரசியல் சட்டத்தில் இடமில்லை' என, ஆறாம் வகுப்பு மாணவியின் விண்ணப்பத்திற்கு, மத்திய உள்துறை அமைச்சகம் விளக்கம் அளித்துள்ளது.லக்னோவை சேர்ந்த, ஆறாம் வகுப்பு மாணவி ஐஸ்வர்யா பராசர், மகாத்மா காந்தி பற்றியும், அவரை தேசத் தந்தை என, குறிப்பிடுவதற்கான காரணங்கள் குறித்தும், தகவல் அறியும் உரிமை சட்டத்தில் தகவல்களைத் திரட்ட முயற்சித்தார்.

இதில், மகாத்மா காந்திக்கு எவ்வித பட்டமும் வழங்கப்படவில்லை என்பது தெரிய வந்தது.இதையடுத்து, மாணவி ஐஸ்வர்யா, கடந்தாண்டு, ஜனாதிபதி பிரதிபா பாட்டீல், பிரதமர் மன்மோகன் சிங் ஆகியோருக்கு கடிதம் எழுதியிருந்தார். அதில், "மகாத்மா காந்தியை, தேசத் தந்தையாக அரசு அறிவிக்க வேண்டும். அதுகுறித்து, அரசு முறைப்படி அறிவிப்பு வெளியிட நடவடிக்கை எடுக்க வேண்டும்' என, குறிப்பிட்டிருந்தார்.கடிதத்திற்கு பல மாதங்கள் ஆகியும், பதில் வராததால், தன் கடிதத்திற்கு என்ன நடவடிக்கை எடுக்கப்பட்டது என்று கேட்டு மாணவி ஐஸ்வர்யா, தகவல் அறியும் உரிமை சட்டத்தின் கீழ் மீண்டும் விண்ணப்பித்து இருந்தார். இந்த விண்ணப்ப கடிதம், உள்துறை அமைச்சகத்துக்கு அனுப்பப்பட்டு, மாணவிக்கு உரிய விளக்கம் அளிக்கும்படி குறிப்பிடப்பட்டு இருந்தது.

இதையடுத்து, மாணவி ஐஸ்வர்யாவுக்கு விளக்கம் அளித்து, உள்துறை அமைச்சகம் வெளியிட்ட விளக்கத்தில் கூறியதாவது:கல்வி மற்றும் ராணுவம் தவிர, மற்றவற்றுக்கு, எந்த பட்டமும் வழங்க அனுமதில்லை என்பது அரசியல் சட்டம் பிரிவு 18(1) கீழ் குறிப்பிடப் பட்டுள்ளது. எனவே, மகாத்மா காந்திக்கு, தேசத் தந்தை என்ற பட்டம் அளிக்க, சட்டத்தில் இடமில்லை. இதனால், மாணவியின் மனு மீது எவ்வித நடவடிக்கையும் எடுக்கப்படவில்லை. இவ்வாறு உள்துறை அமைச்சகம் குறிப்பிட்டுள்ளது.

Did you know | There is a new NPS option for companies

Deepti Bhaskaran  :mint Money : Thu, Oct 25 2012. 07 44 PM IST


The new scheme will be available from next month

There is a new scheme called the corporate central government scheme under the National Pension System (NPS). This scheme is meant for companies who want to invest, for their employees, through pension fund managers in pension funds tailored for government employees. The new scheme will be available from next month.

How companies invest in NPS

Presently, companies can invest in NPS either by choosing the private sector NPS or the government NPS. Both these schemes have the same architecture and design but differ in investments and pension fund managers. Private NPS currently has six fund managers and three funds called asset class E that invests in equity, asset class C that invests mainly in corporate bonds, and asset class G that invests in government bonds. As per the investment norm, an investor can’t put more than 50% of the money in equities.

But in case of the government NPS, which is handled by three fund managers and the corpus is divided among them, the equity investment is restricted to 15%. Do note that while investment in equity in case of private NPS is only through index funds, government scheme can invest in equity directly or through mutual funds.

The new option

But now, the Pension Fund Regulatory and Development Authority has allowed the private NPS fund managers to increase fund management charge (FMC) up to 0.25%.

In order to allow government pension funds to charge the same FMC to companies, the regulator has proposed a new scheme called corporate central government scheme. The investing company will have to choose the fund manager and the corpus will no longer get divided among the three fund managers namely LIC Pension Fund Ltd, SBI Pension Funds Ltd and UTI Retirement Solutions Ltd.

Tax benefit

Around 10% of your basic salary plus dearness allowance, that is contributed to NPS, is eligible for a tax deduction under section 80CCD of up to Rs.1 lakh. However, if your employer also chooses to contribute to your account then contribution equal to 10% of your basic salary plus dearness allowance is deductible in your hands under section 80CCE.

ஆயுத பூஜை நல்வாழ்த்துகள்

ஆயுத பூஜை நல்வாழ்த்துகள்!

Gopalkrishna, Gandhi in race for RBI Dy Governor Feb 2013

Two senior most executive directors of RBI - 

G.Gopalakrishna and R Gandhi, are in the race for the 

post of deputy governor that will fall vacant after the present incumbent Anand Sinha retires in February; 2013. Although RBI has recommended further extension of Sinha, the government is unlikely to accept this.

Saikat Das
moneycontrol.com

Two senior most executive directors of the Reserve Bank of India- G Gopalakrishna and R Gandhi-are in the race for the post of deputy governor that will fall vacant after the Anand Sinha retires in February; 2013. Although the central bank has recommended an extension for Sinha , the government is unlikely to accept this, sources said.

"Those two executive directors are the potential candidates for the post of deputy governor. Extension for Sinha remains a remote possibility as he will turn 62 next February. The government will have to set a new precedent if it extends his tenure beyond the age. It is unlikely," a senior RBI official told moneycontrol.com on condition of anonymity.

A deputy governor, as per norms, can be appointed till the age of 62 or for a period of five years, whichever is earlier.  G. Gopalakrishna will be retiring in March, 2016 while R Gandhi will hang his boots most probably in November, the same year. Both of them qualify the set rules to assume the post of a deputy governor.

Currently, Gopalakrishna is looking after four departments including department of banking supervision, financial stability unit, department of communication (DoC) and secretary's department. Gandhi's portfolio includes departments like internal debt management (IDM), human resource management, external investments and operations as well as central security cell.

Recently, Dr K C Chakraborty got an extension of two years as deputy governor till his age of 62. Chakraborty was appointed as deputy governor in June 2009 and his term ends on June 2014.

Earlier, Shyamala Gopinath, a former deputy governor who retired on June 20, 2011 had obtained an extension at the Mint Road office in Mumbai. She was appointed as deputy governor on September 20, 2004. Besides, governors and deputy governors, the retirement age in RBI is at 60.

Anand Sinha who was appointed in 2011, has been dealing with the critical issue of new banking license. He is supervising it under the department of banking operations and development (DBOD). As a part of reform measures, the government is reportedly working closely with RBI to introduce new banking license. RBI has already brought out draft guidelines for the same.