SEBI set to block P-Note route for NRIs to prevent laundering of black money

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
The regulator wants to tighten the rules amid concerns that various variants of P-Notes have been floated since the implementation of GAAR on April 1.

The regulator plans to put in place a clear bar on non-resident Indians (NRIs) and entities owned by them and resident Indians subscribing to participatory notes, a move aimed at preventing possible round-tripping or laundering of black money.

The Securities and Exchange Board of India (SEBI) is set to tweak its regulations to this effect at its upcoming board meeting on April 26 after the finance ministry recently wrote to the regulator. Such a restriction is already implied through the answer to a frequently asked question (FAQ) but the regulator feels this lacks legal sanctity.

“Most of Sebi’s FAQs themselves clearly state that they should not be regarded as interpretation of law, and that they should not be treated as a binding opinion or guidance from SEBI,” said Moin Ladha, associate partner, Khaitan & Co. “Therefore, in case of any contradictions between the regulations and FAQs, the regulations would prevail. While FAQs do indicate the position SEBI is taking, they cannot be said to override or expand the scope of the regulations.”

P-notes are a derivative instruments issued offshore to those who want to bet on the country’s stocks and bonds without registering themselves with SEBI. The regulator wants to tighten the rules amid concerns that various variants of P-notes have been floated since the implementation of General Anti Avoidance Rules (GAAR) on April 1.

Investments via P-notes had declined to a 43-month low of Rs 1.57 lakh crore in December but rebounded in January to Rs 1.75 lakh crore before dropping again to Rs 1.70 lakh crore in February. There could be a resurgence in P-note issuance as these are exempted from capital gains tax under the amended tax treaties with Singapore and Mauritius that took effect on April 1.

Legal experts said the concept of NRI itself is a grey area and defining it would be crucial for regulators. They said the prohibition should be strictly enforced to prevent round-tripping of Indian money. “The concern of round-tripping of Indian money, particularly when leading industrialists may have a foreign passport, was always a concern,” said Sandeep Parekh, founder, Finsec Law Advisors. SEBI relies on the income tax definition on what constitutes an NRI.

“The concept of who is an NRI itself is a grey zone ranging from income tax definition which is based on residency to citizenship laws which are typically drafted very broadly to include any person of Indian origin and their kith and kin who are born abroad,” Parekh said. “Defining an NRI within this spectrum would be crucial to allow legitimate money in from immigrants who have left India several generations ago and are doing exceedingly well.”

In recent discussions with a leading custodian, the latter gathered the impression that the regulator was not comfortable with NRIs as a group holding a majority interest in a Category II foreign portfolio investors (FPIs) even though regulations do not restrict this. Rules require Category II FPIs to be broad-based — the minimum number of investors should be 20 and no single investor can hold more than 49%. However, NRIs as a group cannot hold more than 49% in Category III FPIs.

Source :  http://timesofindia.indiatimes.com/business/india-business/sebi-set-to-block-p-note-route-for-nris-to-prevent-laundering-of-black-money/articleshow/58215743.cms

Public investors make big bucks on D-Street even after PE exits

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Private equity investors make big money in IPO exits. This is well known. But what is less known is that retail and other investors have also been making decent money after the exits. The largest IPO exits in the last three years made 1-14 times returns for private equity firms. But after listing, retail, HNIs and institutional investors have gained 9-156% in these firms, thanks to a strong stock market, data from Venture Intelligence show.

If the market rises further, the gains will only increase and private equity-like, super sized returns may still be possible. Investment bankers attribute this to the rising interest in equity market as well as strong fundamentals. “Stocks being valued attractively and appetite for IPOs have helped these companies,“ said Dharmesh Mehta, MD, Axis Capital. Financial stocks have obviously beaten the rest with RBL Bank surging 156% since listing in August 2016 followed by Ujjivan Financial Services with a gain of 87%.

Other gainers include Dr Lal PathLabs which has jumped 76% and Dilip Buildcon which has moved up 71%. In FY17, PE firms sold their complete stakes in 14 IPOs, as compared to 16 in FY16 and seven in FY15. According to Ajay Saraf, executive director, ICICI Securities, a PE exit augurs well for investors as the company could be expected to have better corporate governance and better fundamentals.

PE firms usually enter into sectors that have potential to do well and this gives comfort to investors while buying these stocks, said Saraf. “The PE exit trend is likely to gain further momentum going ahead,“ added Saraf.

Source:  http://economictimes.indiatimes.com/articleshow/58157676.cms

FDI in services sector up 77.6% to $7.55 billion in nine months of FY17

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
The commerce and industry ministry is considering relaxing FDI norms in certain sectors including retail to further boost inflows.

Foreign investments in the services sector increased 77.6% to $7.55 billion in the first nine months of the current fiscal, helped by government steps to improve ease of doing business.

The sector, which includes banking, insurance, research and development (R&D), outsourcing, courier and technology testing, had received foreign direct investment (FDI) worth $4.25 billion during the April-December period of last fiscal, 2015-16, according to the Department of Industrial Policy and Promotion (DIPP).

The sector contributes over 60% to India’s gross domestic product (GDP) and accounts for 17% of the total foreign investment inflows.

The other sectors where inflows have recorded growth during the nine-month period of 2016-17 are telecom ($5.54 billion), trading ($2 billion), computer software and hardware ($1.81 billion) and automobile ($1.45 billion).

In step FDI growth in important sectors like services, overall foreign inflows in the country increased 22% to $35.84 billion during April-December 2016-17.

The commerce and industry ministry is also considering relaxing FDI norms in certain sectors including retail to further boost inflows. Foreign investment is considered crucial for India, which needs around $1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth.

A strong inflow of foreign investments will help improve the country’s balance of payments situation and strengthen the rupee against other global currencies, especially the US dollar.

 

Source: http://www.livemint.com/Money/G5PEusUPpmxanUhuo3O67O/FDI-in-services-sector-up-776-to-755-billion-in-nine-mon.html

FIPB clears 15 FDI proposals worth Rs12,000 crore, defers 6

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
The FIPB, headed by economic affairs secretary Shaktikanta Das, deferred 6 proposals, including that of Gland Pharma with the proposed FDI inflow of Rs8,800 crore.

Inter-ministerial body, foreign investment promotion board (FIPB) on Tuesday approved 15 investment proposals, including that of Apollo Hospitals, Hindustan Aeronautics Ltd, Dr. Reddy’s Laboratories and Vodafone, envisaging foreign investment of Rs12,200 crore. “15 out of 24 FDI proposals were approved while three were rejected,” people familiar with the matter said.

The FIPB, headed by economic affairs secretary Shaktikanta Das, deferred 6 proposals, including that of Gland Pharma with the proposed FDI inflow of Rs8,800 crore.

These proposals were deferred for further consultation and want of more information, sources added. Among the proposals approved, Twinstar Technologies will alone bring foreign capital of about Rs9,000 crore into the country.

Besides, proposal of Apollo Hospitals worth Rs750 crore and public sector Hindustan Aeronautics worth Rs170 crore for helicopter manufacturing also got green signal from the board.

The government has already announced winding up of FIPB by putting in place a new mechanism, a move which will further improve ease of doing business.

Finance minister Arun Jaitley in his Budget 2017-18 announced abolishing FIPB saying 90% of the foreign investment approvals are via automatic route and only 10% go to the board.

Currently, FIPB offers single-window clearance for applications on FDI in India that are under the approval route. The sectors under automatic route do not require any prior approval and are subject to only sectoral laws.

India allows FDI in most sectors through the automatic route, but in certain segments that are considered sensitive for the economy and security, the proposals have to be first cleared by the FIPB. With growth in FDI in important sectors like services and manufacturing, overall foreign inflows in the country rose by 30% to $21.62 billion during the first half of 2016-17. FDI in the country grew by 29% to $40 billion in 2015-16 as against $30.94 billion in the previous financial year.

Source: http://www.livemint.com/Politics/P9toBbJ2zW53TvhzKFkelO/FIPB-clears-15-FDI-proposals-worth-Rs12000-crore-defers-6.html

India to attract $15-$20 billion FII inflows in 2018: ICRA

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

India is expected to attract moderate FII inflows of $15-$20 billion in 2018, with headwinds such as the muted outlook for corporate earnings and continued compression in debt spreads relative to advanced economies, rating agency ICRA said in a report on Tuesday.

“With the muted outlook for corporate earnings and emerging sectoral concerns regarding Indian software and pharmaceuticals exports to the US, the net FII equity inflows are likely to be restricted below $5 and $10 billion respectively in FY17 (2016-17) and FY18 (2017-18), in our view,” said ICRA Senior Vice President and Group Head-Financial Sector Ratings, Karthik Srinivasan.

The agency expects aggregate FII debt outflows in FY17 of $6-$8 billion, followed by aggregate inflows of $5-$10 billion during FY18.

“Indian bond yields are unlikely to ease significantly below current levels, given the limited further monetary easing expected from the Reserve Bank of India.

“Moreover, the supply of net long term borrowings of the government is likely to increase in FY2018 from Rs 4.1 trillion in FY2017, as the central government is likely to budget a fiscal deficit range between 3 and 3.5 per cent of the GDP,” he said.

The Indian markets had witnessed record FII outflows of $11.3 billion during Q3 (third quarter) FY17 on the back of a combination of international and domestic factors, including the risk-off sentiment triggered by the outcome of the US presidential election in November 2016 and the tightening of monetary policy by the US Federal Reserve in December 2016.

Source: http://www.business-standard.com/article/news-ians/india-to-attract-15-20-billion-fii-inflows-in-2018-icra-117013101128_1.html

India ranks 130th in ease of doing business index

by | posted in: Company Incorporations, e-filing of MCA Returns, Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

India continues to rank low at 130th position in terms of ease of doing business, with the country seeing little or no improvement in dealing with construction permits, getting credit and other parameters.

In the World Bank’s latest ‘Doing Business’ report, India’s place remained unchanged from last year’s original ranking of 130 among the 190 economies that were assessed on various parameters. However, the last year’s ranking has been now revised to 131 from which the country has improved its place by one spot.

The government has been making efforts to further improve the ease of doing business and aims to bring the country in the top 50.

Expressing disappointment over no change in India’s ranking in the World Bank’s index on ease of doing business, Indian government regretted that the report did not take into consideration 12 key reforms undertaken by the government.

When it comes to ‘distance to frontier’ — a measurement of the gap between an economy’s performance and the best practice score of 100 — India’s score has improved to 55.27 this year from 53.93 last year.

India is the only country for which the report has a box dedicated to its ongoing economic reforms.

The list of countries in the Doing Business 2017 is topped by New Zealand while Singapore is ranked second. It is followed by Denmark, Hong Kong, South Korea, Norway, the UK, the US, Sweden and former Yugoslav Republic of Macedonia.

Neighbouring Pakistan is ranked 144th in the list.

On the basis of reforms undertaken, the top 10 improvers are Brunei Darussalam, Kazakhstan, Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, United Arab Emirates and Bahrain.

A record 137 economies around the world have adopted key reforms that make it easier to start and operate small and medium-sized businesses, the report said.

Developing countries carried out more than 75 per cent of the 283 reforms in the past year, with Sub-Saharan Africa accounting for over one-quarter of all reforms, it added.

“What we have seen is a remarkable effort on the part of the government to implement business reforms. It looks like we are going to have to wait for another year or so. But the direction of change is fundamentally a very significant one,” Global Indicators Group Director Augusto Lopez-Claros told PTI in an interview.

The rankings are based on ten parameters — starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

India has improved its ranking with respect to various areas. In terms of getting electricity, the country’s position has jumped to 26th spot from 51st place last year.

When it comes to trading across borders, the ranking has moved up one place to 143, and in enforcing contracts the rise is of six spots to 172nd position.

However, with respect to starting a business, the ranking has slipped four places to 155th spot and in the case of dealing with construction permits by one rank to 185th.

As per the report, India’s ranking in terms of protecting minority investors dropped to 13th place from 10th position last year.

With regard to getting credit, the ranking has fallen by two places to 44.

Explaining as to why India’s reform efforts is not being reflected in the ease of doing business report, Lopez-Claros said it very often takes some time for the reforms implemented by governments about the regulatory environment to be felt on the ground by the business community.

Rita Ramalho, Manager of the Doing Business project said that there were in fact improvements this year.

“There are four areas of improvement this year in India getting electricity, trading across border, enforcing contracts and paying taxes,” Ramalho told PTI.

India’s ranking is based on the study of the system in the two cities of Mumbai and New Delhi.

“The reason why there is no real movement in the ranking is more to do with the fact that other countries are also moving. In absolute terms India, does improve significantly.

There aren’t many countries that improved more than India in terms of absolute number,” Ramalho said.

The ‘Doing Business’ project provides objective measures of business regulations for local firms in economies and selected cities at the sub-national level.

The World Bank is emphasising that countries pay attention to what it calls “distance to frontier” which is an absolute metric, Lopez-Claros said.

“There has been actually substantial increase in the last 12 months in India by couple of percentage points, which is quite large,” he noted.

Source: http://www.businesstoday.in/current/economy-politics/india-ranks-130th-in-ease-of-doing-business-index/story/238944.html

FPI inflows top Rs. 20,000 cr in Sept, at 11-month high

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

Foreign investors pumped in more than Rs. 20,000 crore into the capital market in September, making it the highest net inflow in 11 months.

This also marks the third consecutive month of positive inflows (equity and debt).

The trend is likely to continue in the coming weeks as regulator SEBI has decided to offer well-regulated foreign investors direct entry to invest in corporate bonds, say experts.

They attributed the latest flurry of capital to factors such as sound progress in roll-out of GST, better corporate earnings and the US Fed’s decision not to lift interest rates.

Sentiment turned better after the current account deficit (CAD) narrowed sharply to just $300 million, or 0.1 per cent of GDP, in the June quarter and domestic passenger vehicle sales grew for the 14th straight month in August, they added.

According to depositors’ data, net investment by FPIs stood at Rs. 10,443 crore in equities last month while the same for debt was Rs. 9,789 crore, taking the total inflow to Rs. 20,233 crore ($3 billion).

This was the highest net inflow in the capital markets since October 2015 when FPIs had infused Rs. 22,350 crore.

The latest inflow has taken the FPI investment tally in equities to Rs. 51,293 crore in 2016 while the same for the debt market stands at Rs. 2,441 crore, resulting in a net inflow of Rs. 53,734 crore.

Source: http://www.thehindubusinessline.com/economy/fpi-inflows-surpass-rs-20000-cr-in-sept-at-11month-high/article9176139.ece