To de-stress banks, Modi govt plans ‘significant’ stressed assets fund

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Given the need for large chunks of equity capital to infuse new life into banks’ stressed assets, the government plans a new fund of “significant size” with this mandate, minister of state for finance Jayant Sinha said on Tuesday. A variety of other funds including the proposed National Infrastructure Investment Fund (NIIF) could help bolster the planned stressed assets fund, he added.

“We need an efficient resolution (of the issue of rising stressed assets) and recovery process for our banks,” Sinha said on the sidelines of a conference organised by rating agency Crisil on the deepening of corporate bond markets. He said a committee might be set up to take a look at what kind of haircuts would need to be taken by banks and what their sustainable levels of debt could be. While these could be commercial decisions taken by banks, the government would ensure the process is carried out with integrity, he emphasised.

Many state-owned lenders are facing a tough situation, having reported large losses owing to assets turning sour. Gross non-performing assets in the banking system at the end of March are estimated at Rs 5.7 lakh crore while the provisions set aside by banks in FY16 was Rs 1.43 lakh crore. Total losses of PSBs in FY16 was Rs 17,022 crore.

“We expect a variety of funds — distressed debt funds, special situations fund and NIIF — to participate in the equity investments in these stressed assets,” the minister said. The NIIF, intended to give a leg-up to the country’s efforts to find the elusive equity capital for its huge plans for infrastructure creation, is being set up with an initial corpus of Rs 40,000 crore, half of that from the government, which will remain a minority partner.

The NIIF, which will have several sector-specific sub-funds, is expected to catalyse financing of infrastructure projects by leveraging the corpus multiple times. Many global sovereign wealth funds including the Abu Dhabi Investment Authority, Singapore’s Temasek and Russian Direct Investment Fund have evinced interest in investing in the NIIF. The search for the CEO of the fund has reached the final stage, the minister indicated.

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Sinha said: “There are also many other players who are looking to invest in the stressed assets of Indian banks. So we expect that there will be a vibrant market to be able to take these assets that are in need of equity capital right now.” On Tuesday, finance minister Arun Jaitley, on a visit to Japan, pitched for investments in the NIIF to Japanese investors.

While Sinha has indicated the NIIF’s participation in the proposed stressed assets fund, the former’s stated objective has been to maximise economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects. It could also consider other nationally important projects if commercially viable.

 

Source: http://www.financialexpress.com/article/industry/banking-finance/bank-npas-centre-turns-to-stressed-assets-fund-to-cap-crisis/270598/

Japanese investors keen on India’s infra growth story: Arun Jaitley

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TOKYO: Japanese conglomerate SoftBank and a number of investors here have shown keen interest in investing in India’s “infrastructure growth story”, Finance Minister Arun Jaitley said today as he kicked off his 6-day visit to Japan aimed at attracting investments from Asia’s second biggest economy.

After a meeting with Jaitley, SoftBank Group CEO Masayoshi Son said he is also interested in Internet companies as well as solar energy sector, where he has already announced $20 billion investment through a joint venture.

“There are people who want to participate in infrastructure growth story. For example, at the SoftBank meeting we just had, they are looking at one of the biggest investments in solar power already,” Jaitley said after meeting Son.

“There are people who want to participate in infrastructure growth story. For example, at the SoftBank meeting we just had, they are looking at one of the biggest investments in solar power already,” Jaitley said after meeting Son.

In June last year, SoftBank announced that the group was forming a joint venture with Bharti Enterprises and Taiwan’s Foxconn Technology Group to invest about $20 billion in renewable energy in India. The JV would aim to generate 20 gigawatts of electricity.

“They have made considerable headway and have identified location. It will probably be one of the largest investment in those areas,” Jaitley said.

The Japanese telecom and Internet giant has made a string of tech investments in India, amounting to $2 billion in the past two year. SoftBank is looking at accelerating the pace of investments in the future.

“India has a great future… We are interested in investing for Internet companies, also for solar energy. We would make a strong commitment,” Son said.

He had previously said that India’s market is poised for massive growth, making it an important destination for investors.

SoftBank’s investments in the past two years include $627 million in online-retailing marketplace Snapdeal and leading a $210 million funding round in taxi-hailing app Ola Cabs.

It paid $200 million for a 35 per cent stake in InMobi, an Indian mobile-advertising network, starting in 2011.

SoftBank also has a JV with Bharti Group, Bharti SoftBank, the investments of which include the mobile application Hike Messenger. Its other investments include real-estate website Housing.com, hotel-booking app Oyo Rooms and Grofers.

Son had previously predicted that India’s e-commerce industry would become a $500 billion business in the next 10 years.

SoftBank, which owns one of Japan’s biggest mobile carriers and a controlling stake in US-based Sprint Corp, has been moving quickly to expand its Internet and media holdings.

As the largest shareholder in Alibaba Group Holding Ltd, the Chinese e-commerce company, SoftBank has ample resources to deploy for acquisitions.

Source: http://economictimes.indiatimes.com/articleshow/52491788.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Filing tax returns on time has benefits

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With the income tax department allowing ample time for filing returns, many taxpayers take it easy.

For the income earned in the past financial year (FY16), a taxpayer can file returns up to March 2018. However, sticking to the first deadline of July 31 has its benefits.

Say, you make a mistake while filing returns – it can be a wrong computation or incorrect bank account details.

If you file returns on time, the income tax (I-T) department will allow you to revise it as many times as you wish until the end of the assessment year.

In case of belated filing, the taxpayer loses this advantage.

“Not being able to revise returns can lead to problems. For example, in case of wrong computation, the department can send a notice. Incorrect bank account details can delay refunds,” says Vikram Ramchand, founder, Makemyreturns.com.

Missing the first deadline also means that the taxpayer cannot carry forward certain losses.

The Income Tax Act allows individuals to carry forward losses under the ‘capital gains’ head and also business losses for professionals and businesspersons.

These can be adjusted against the future gains for up to eight years.

Due to the correction in stock market in the last financial year, many investors would have suffered a loss in their equity trade.

Filing returns on time can help them utilise these losses in the coming years.

“The only loss that’s allowed to be carry forward for latecomers is the loss from house property,” says Ramchand.

This is the deduction that a person gets on the interest portion of a home loan under Section 24.

Though the deduction can be claimed in the subsequent year, the total limit for deduction will remain Rs 2 lakh for first-time home buyers. In case of a house property that’s not self-occupied, the entire interest can be claimed as deduction.

For those filing belated returns, they will also need to shell out a penalty.

There will be a one per cent penalty every month under Section 234A on the liability if the return is not filed on time, according to Kuldip Kumar, partner and leader (personal tax) at PwC India.

Professionals and businesspersons will also need to pay one per cent penal interest per month under Section 234B, if 90 per cent of the tax is not paid by March 31.

If you don’t file returns at all, there are provisions in the I-T Act that say if the tax due is more than Rs 3,000, the taxpayer can be prosecuted and jailed.

Ramchand says that in his experience, he has also seen that those who file returns on time get faster refunds and their filing is processed quickly, too.

Last year, many taxpayers who filed before the deadline got refunds within a fortnight, according to Ramchand.

However, in case of belated filing, the processing and returns are both delayed – it can easily take six to eight months.

Also, those filing belated returns usually see that their refund amount is adjusted against some pending tax demand of the past, according to tax experts.

Although this is not a rule, tax experts say such cases of adjustments are higher for those filing belated returns.

PwC’s Kumar points out that in the recent Union Budget, the period of filing returns has been reduced from two years to one year.

Taxpayers will need to file returns before the end of the relevant assessment year.

This will apply from the next assessment year.

Therefore, it’s beneficial, one should start filing returns on time to avoid hassles later.

Read Source: Rediff.com

MUDRA disburses Rs. 1.43 lakh cr to small, micro entrepreneurs

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The entrepreneurship streak appears to be stronger in the small retail business space, going by the pattern of loans disbursed by the Micro Units Development and Refinance (MUDRA) Bank.

Small retailers, shopkeepers and those running micro units have utilised almost half of the loans disbursed under the MUDRA scheme launched by the Centre in April 2015.

As of May 20, the total loan disbursement was about Rs. 1.43 lakh crore and new entrepreneurs accounted for much of it.

MUDRA offers three categories of loans, Shishu (covering loans up to  Rs. 50,000), Kishor (loans above  Rs. 50,000 and up to Rs. 5 lakh) and Tarun (above  Rs. 5 lakh and up to  Rs. 10 lakh).

The objective of the scheme is to encourage new small businesses and ensure that at least 60 per cent of the credit flows to Shishu category units and the balance to the Kishor and Tarun categories. This has been realised as loans sanctioned/disbursed under the first category have so far have been higher than those under the other two categories.

According to a senior official at the State Bank of India, the demand for loans has been more from those taking up , among others, transport and community/personal service businesses.

In terms of States’ performance, Karnataka topped last year with Rs. 16,469 crore disbursements, followed by Tamil Nadu ( Rs. 15,496 crore) and Maharashtra ( Rs. 13,372 crore).

In disbursals, State Bank of India and its associate banks accounted for the biggest share of Rs. 16,999 crore. The disbursals by the 39 NBFC-Microfinance Institutions were also significant at Rs. 44,026 crore.

MUDRA loans are cheaper than those offered by other agencies, such as banks and MFIs. The cost of MUDRA funds, on an average, is 150-200 basis points lower than the benchmark repo rate.

Source: http://www.thehindubusinessline.com/todays-paper/tp-money-banking/mudra-disburses-rs-143-lakh-cr-to-small-micro-entrepreneurs/article8651795.ece

Now, listed companies’ management to explain audit qualifications : SEBI

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Markets regulator Sebi today asked listed companies to disseminate cumulative impact of audit qualifications in a separate format along with the annual audited financial results to the stock exchanges.

Besides, the management of a company would be required to explain its view about audit qualifications.

The new framework would ensure that the impact of audit qualifications are clearly communicated by the companies concerned to their investors in a timely manner apart from streamlining the whole process.

Sebi decided to have the new system on audit qualifications after extensive discussions with its advisory committees, Institute of Chartered Accountants of India (ICAI), stock exchanges and industry bodies.

Now, listed entities will be required to disclose the cumulative impact of all audit qualifications on relevant financial items in a separate form called ‘Statement on Impact of Audit Qualifications’ instead of the present form.

Such disclosures will have to be made in a tabular form, along with annual audited financial results filed in compliance with the listing regulations.

The new mechanism will be applicable for all the annual audited standalone/consolidated financial results, submitted by the listed entities for the period ended March 31, 2016 and thereafter.

The listed entity will have to furnish a declaration in case there are no audit qualifications.

In case of audit reports with modified opinion, a statement showing impact of audit qualifications will be filed with the stock exchanges in a format specified by the regulator, Sebi said in a circular today.

Issuing a format for ‘Statement on Impact of Audit Qualifications’ for the financial year, Sebi said that companies will have to disclose net profit, networth, turnover, total expenditure, earning per share, total assets and liabilities.

Besides, the firms will have to make submission about details, types, frequency of audit qualification. The management will have the right to give its views on the audit qualification.

Also, the management of the listed entity will have explain its views on the audit qualifications.

“Where the impact of the audit qualification is not quantified by the auditor, the management shall make an estimate. In case the management is unable to make an estimate, it shall provide reasons for the same. In both the scenarios, the auditor shall review and give the comments,” Sebi noted.

Source: http://www.business-standard.com/article/pti-stories/now-listed-cos-management-to-explain-audit-qualifications-116052700918_1.html

Intangible MNC assets may be taxed in case of a global merger and acquisition

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A recent clarification by the government has created a stir among some multinationals which are concerned that their Indian entities might be taxed even in case of a global merger and acquisition with another global company.

More so, the worry is in case of multinationals that hold intangible assets in India, either through research and development centres, or are engaged in businesses where it is tough to value assets.

This is mainly because tax component, if at all, would be decided on valuation of the Indian entity, and whether valuation (Indian entity) accounts for more than half the holding entity outside India. This comes in the wake of the Central Board of Direct Taxes (CBDT) announcing rules for determining fair market value in case of indirect transfer of shares of an Indian entity. Rules specify a method for determination of “fair market value” of foreign target company shares and Indian company shares. In case of an indirect transfer of shares or transaction, if the value of Indian assets is more than 50% of the foreign target company, this could lead to taxation in India.

So if an US-headquartered company invests in India through a Mauritius company and at any point in time there’s a change in ownership, the tax could be applied. The tax would be triggered in India if the ownership of the Mauritius company is changed, and if more than 50% of the total assets of this company (Mauritius company) are in India.

“If a multinational has a presence in India through an intermediate holding vehicle in a third country, and if there is an M&A deal at the intermediate holding entity level, the Indian entity can attract taxation in India,” said Amit Singhania, Partner at Shardul Amarchand Mangaldas.

“While the 50% rule applies, valuing the Indian assets, particularly the right of management or control in an unlisted Indian company would be challenging,”  Singhania said.

Many multinationals are now rushing to their Indian tax consultants to find out which transactions could attract tax here. “Many multinationals that have a presence in India through Mauritius could face some tax in India even if there is an offshore M&A deal, especially where the seller is based in a country whose treaty does not exempt capital gains tax in India,” said Rajesh H Gandhi, partner, tax, Deloitte Haskins and Sells.

“However, more importantly, it could be challenging to identify and value some of the assets and determine the place where they are situated. This would be more relevant for assets like human resources, contractual rights and intangibles such as mobile applications, results of R&D or patents developed in India but registered elsewhere,” said Gandhi.

Industry trackers say that in case of an M&A at an international level, the shares of holding companies are transferred or merged, which is where the problem lies. Many experts also point out that information and documentation required to ascertain the valuation of Indian as well as an intermediary is not just complicated but tough to come by in many cases.

“If so, income tax would assume the Indian entity’s valuation is more than 50% of the holding entity,” said a consultant currently advising such a client. Experts point out that patents held by the Indian company, and some other assets too have to be valued. Not only valuing these intangible assets could have different views, in some cases, these patents or other intangible assets are developed in India but sit on the balance sheet of other group companies outside India.

Source: http://economictimes.indiatimes.com/articleshow/52474147.cms

Amazon sets the pace for e-commerce in India

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Seattle-based e-commerce giant Amazon should be happy that even before it turns three in India on June 5, the company has emerged a leader in this market. Before rivals can protest, we are not talking numbers yet. The American player has won the first round simply because it has successfully pushed competition to change the narrative and metrics of the online play.

Earlier this week, the almost nine-year-old poster boy of Indian ecommerce, Flipkart, announced in three separate interviews that customer satisfaction would be its mantra from now on. GMV or gross merchandise value of goods sold on the platform, till now the benchmark for success, will be kept aside, said Binny Bansal, who became CEO of Flipkart in January. Not too long ago, Snapdeal CEO Kunal Bahl had the same to say about shedding the GMV goalpost.

In the process, both Flipkart and Snapdeal have endorsed what the American e-commerce major has always maintained and indirectly acknowledged Amazon’s heavyweight presence in this market.

Here’s how the customer has always been the central point for Amazon. When asked about the next round of investment coming into India and whether the figure would be higher than the $2 billion announced in 2014, the company’s India head, Amit Agarwal, had said in December 2015: “All I can say is that we will not be held back for investments…. We don’t manage to a number but to the customer’s expectation.” Also, GMV was never a benchmark that this company referred to, unlike its rivals.

The focus on customer flows from the top. In September 2014, Amazon founder Jeff Bezos had told this newspaper, ”I stay heads down, focused. I encourage these guys (the India team) to not pay attention to a bunch of noise, and rather stay focused on the customer experience, figure out how to get products to customers faster with more reliability, earn trust with customers. The rest will take care of itself.”

In fact, the Bansals of Flipkart have known the napkin sketch of flywheel (with customer at the centre) drawn by Bezos some 17 years ago only too well: the two IITians had worked at Amazon in the US before starting their own venture in 2007.

As for numbers, estimates show that Amazon’s growth in India was 250 per cent in 2015 compared to the previous year. This year, the growth has been around 150 per cent. The number of active sellers on the platform is pegged at 85,000 and industry reports have shown that its website is top of the list in e-commerce. The company does not offer separate customer data for different geographies, but it has a total global user base of 300 million plus.

Picking and choosing
Comparisons with Flipkart and Snapdeal are tough. But in a cat and mouse chase, both Amazon and Flipkart or their investors have been dishing out data from time to time, citing analytics firms. In December, two sets of data came out. One was from Bezos in an email to customers. “Just two and a half years from our launch, Amazon.in has become the most visited e-commerce site in India,” Bezos wrote. He cited data analytics firm ComScore to say Amazon was leading with more than 30 million monthly unique visitors as of October 2015. Flipkart was at 27 million while Snapdeal was at 20 million. These numbers reflected unique visitors to e-commerce sites through desktop or laptop, rather than through mobile apps.

In the same month, Naspers, a South African Internet company, said Flipkart, along with Myntra, had over 50 million monthly active users on its smartphone app, three times larger than those on Snapdeal and Amazon during the September 2015 quarter. Naspers owns 17.4 per cent in Flipkart.

If number of visitors is what Amazon and Flipkart cite to claim leadership position, Snapdeal is peddling transaction numbers for the top slot. Snapdeal co-founder and COO Rohit Bansal said in February that the company has 1 million transacting users on the platform (Snapdeal, Freecharge and Shopo combined), and the number is higher than Amazon and Flipkart put together. Snapdeal aims to grow the transacting user number to 20 million by 2020.

There have been shipment comparisons too. Based on interaction with an unnamed logistic firm, a recent media report said that Amazon was the only e-commerce firm to have grown in shipment share from a year ago. While Amazon’s shipment share is said to have grown to 21-24 per cent from 19 per cent earlier, Flipkart’s share dropped from 43 per cent to 37 per cent and Snapdeal’s from 19 per cent to 14-15 per cent. These numbers could not be verified independently.

Number of sellers is another way of comparing the strength of a player. Against Amazon’s active 85,000, Flipkart has more than 100,000 and Snapdeal around 250,000.

The measure of success
Of late, companies have even started measuring the average delivery time as a benchmark in e-commerce. A recent study by PwC put Snapdeal ahead of Amazon and Flipkart in that measure.

Till recently, when the industry referred to GMV as the only solid currency, Flipkart was an undisputed leader at around $10 billion of total sales, followed by Snapdeal at $4 billion and Amazon at $2 billion as of 2015 estimates. One of the analysts that this newspaper spoke to projected the 2017 GMV at $12 billion for Flipkart, $9 billion for Snapdeal and $6.3 billion for Amazon. But according to him, the math could change as it was possible for Amazon to cross Snapdeal’s GMV while moving closer to Flipkart, depending on how the three played out the GMV-versus-profitability game.

A report published by Bank of America-Merrill Lynch in May 2015 placed Flipkart on top with 43 per cent market share, followed by Snapdeal at 30 per cent and Amazon at 18 per cent.

One year later, things have moved on. As reported by this paper, in the next 12 to 18 months, Amazon has the potential to be at the top of the pack, executives at three prominent international analyst firms say. If Flipkart and Snapdeal focus more on getting profits, shifting their attention from GMV, Amazon could race ahead faster, they said.

Stumbling blocks
But there are challenges on the way. The riders that came with the recent guidelines allowing 100 per cent FDI in online marketplace companies are among the hurdles. While liberalising e-commerce, the Department of Industrial Policy & Promotion has introduced conditions to ensure that platform owners do not turn sellers. Thus, sales cannot exceed 25 per cent for any vendor, marketplace players or their group companies cannot sell, guarantee and warranty must be the sole responsibilities of the sellers, and platform owners cannot influence pricing of products so that there’s a level playing field.

In fact, Amazon highlighted the regulatory risks in its India business, citing the latest e-commerce guidelines, in its filings to the US Securities & Exchange Commission.

Apart from the risk of sellers not being able to offer products at low prices on Amazon, as it may be interpreted as ”influencing pricing”, its worry is also Cloudtail, the most prominent vendor on the platform. Cloudtail, a joint venture of Amazon with Catamaran Ventures, promoted by Infosys founder NR Narayana Murthy, must reduce its sale to adhere with the latest Indian policy.

Even so, analysts believe that Amazon stands a better chance than the rest to be a long-term leader in e-commerce in India, primarily because of its war-chest. Amazon is a $100-billion conglomerate and it does have an open cheque book for India.

Source: http://www.business-standard.com/article/companies/amazon-sets-the-pace-for-e-commerce-in-india-116052601474_1.html