6 Jun 2016

Listed company’s documentation may get simpler

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The Securities and Exchange Board of India (Sebi) is learnt to be finalising a new mechanism to simplify the documentation process for listed companies wishing to issue new securities. Sources told FE that the concept of an ‘annual information memorandum’ will be introduced by the regulator, replacing the traditional offer document, if a company plans subsequent public issues via an offer for sale (OFS) or a follow-on public offering (FPO).

This memorandum is expected to provide exhaustive information about a company including financials, pending litigations and risk factors. Companies will have to file the document once a year. To incorporate the new mechanism, Sebi will amend Listing Obligations and Disclosure Requirement (LODR) regulations.

As per the current LODR regulations, a company needs to file an offer document whenever it comes up with a public offering. However, offer documents are not mandatory in the cases of private placement like preferential issue, qualified institutional placements (QIPs), etc. The documentation is also not mandatory in case of rights issue where the company plans to tap existing shareholders.

Offer documents are usually drafted by merchant bankers in coordination with legal advisers. Post introduction of annual information memorandum, a company will be able to cut on the fees paid to merchant bankers and lawyers for the issue.

“Currently, we have the concept of annual reports. The new mechanism is a step forward. Annual information memorandums would provide additional details like pending litigations, etc. The regulator would come up with a format for the memorandum soon. This will also help investors get all the information about a company at a single place,” said an investment banker who is part of the primary markets advisory committee (PMAC) of Sebi.

As per the current LODR regulations, a company needs to upload an annual report which should contain audited financial statements, cash flow statements,directors report and management discussion and analysis report. The top 500 listed entities in terms of market capitalisation should also disclose business responsibility report describing initiatives taken by them from an environmental, social and governance perspectives.

In October 2015, Sebi had introduced the concept of abridged prospectus that companies need to file for public offers. Under this mechanism, any company going for an IPO needs to file an abridged prospectus along with the regular draft red herring prospectus (DRHP). The abridged prospects would be a 10-page document which would provide all the key information to the investor about the company. The decision was taken in the interest of investors as the full DRHP of a company runs into 400-500 pages.

Source: http://www.financialexpress.com/article/industry/companies/listed-companys-documentation-may-get-simpler/273624/

27 May 2016

Tanzania plans to invest $1.9 billion each year in energy projects by 2025

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“Tanzania’s electricity sector faces another important challenge. As it is heavily dependent on hydropower, energy provision cannot be ascertained in times of drought,” Tanzania’s prime minister, Kassim Majaliwa, said.

Tanzania plans to invest $1.9 billion each year by 2025 in energy projects in a bid to end power shortages and boost industrial growth in East Africa’s second-biggest economy, its prime minister said.

Tanzania aims to boost power generation capacity to 10,000 megawatts from around 1,500MW at present, using natural gas and coal and reducing its dependence on hydro power sources.

“Tanzania’s electricity sector faces another important challenge. As it is heavily dependent on hydropower, energy provision cannot be ascertained in times of drought,” Tanzania’s prime minister, Kassim Majaliwa, said in a statement late on Tuesday.

“Severe and recurrent droughts in the past few years triggered a devastating power crisis as electricity generation in most of the hydropower stations have progressively been declining in recent years, occasionally resulting in long hours of power black outs.”

Majaliwa said the government wants to see more private capital investment in the energy sector.
“The projected power projects funding exceeds the existing government fiscal space,” he said. “To attract private capital, the government is improving institutional set up, legal and regulatory frameworks.”

Investors have long complained that lack of reliable power was one of the obstacles of doing business in Tanzania.

Tanzania said last week Japan’s Koyo Corporation plans to invest $1 billion in a gas-fired power plant near big offshore natural gas fields off the African country’s southern shore.
Source: http://economictimes.indiatimes.com/articleshow/52432817.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

27 May 2016

Investor sentiment improving, catalysts needed for fresh flows

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Expectations on structural reforms however remain low and “could be a positive catalyst if GST gets passed”, it said.

Investor sentiment towards the Indian economy is improving but markets are now looking at the passage of key reform bills like the Goods and Services Tax ( GST ) to act as “new catalysts”, says a Citigroup report.

Expectations on structural reforms however remain low and “could be a positive catalyst if GST gets passed”, it said.

According to the global financial services major, both equity and fixed income (FI) investors are portraying a constructive outlook for India, but are waiting for the next ‘catalyst’ for fresh inflows.

“Positioning on India still remains heavy and relative valuations do not appear to be cheap. This is possibly leading to a lack of substantial fresh inflows as the markets await new catalysts,” Citigroup said in a research note.

The BJP-led NDA government assumed office on May 26, 2014 with a thumping majority in Lok Sabha , but some key bills, including the one on GST, have been stuck in Rajya Sabha due to opposition from some other parties, mainly Congress.

As per the report, foreign equity as well as fixed income investors believe that the Indian economy is relatively attractive than other emerging market economies as it provides better macro stability. Some investors were also enthusiastic about the prospects of a cyclical recovery.

Though investors are on a cautious mode but with better monsoon forecasts, rural consumption is likely to revive. Moreover, urban consumption is expected to get a boost post the 7th Pay Commission implementation.

Source: http://economictimes.indiatimes.com/articleshow/52398282.cms

27 May 2016

ClearTax raises $2 million from FF Angel and Sequoia Capital

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Financial technology startup Defmacro Software , which owns and operates online tax returns filing platform ClearTax , has raised $2 million (Rs 13.3 crore) from FF Angel , the angel investing arm of Peter Thiel-led Founders Fund , and Sequoia Capital .

The five year-old company will use the proceeds from the round to launch a slew of consumer-focused tax-saving products, including mutual funds and other equity-linked saving schemes. It will also be adding to its leadership team, said Archit Gupta , chief executive of ClearTax.

“We have taken the long route, and now we are extremely excited to have some of the biggest thought leaders and investors on board as our partners,” Gupta said. “We are an instrument-agnostic platform that will allow consumers to choose their rate of return and select what to have in their tax savings basket.”

The transaction, which closed last week, marks FF Angel’s first investment in India, and comes a month after Bengaluru-based ClearTax secured $1.3 million in a seed funding round from a group of Silicon Valley investors including PayPal cofounder Max Levchin and Scott Banister, an early investor in Facebook and Uber.

26 May 2016

Make in India: India woos Chinese investors, promises conducive environment

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“We will facilitate your efforts to make your investments in India profitable. We must take advantage of the opportunities that abound in the growth of both our economies,” said President Pranab Mukherjee.

India today promised a conducive environment for Chinese investors and urged them to participate in ‘Make in India’ and other flagship programmes of the government to boost bilateral trade.

“We will facilitate your efforts to make your investments in India profitable. We must take advantage of the opportunities that abound in the growth of both our economies,” said President Pranab Mukherjee addressing a meeting of the India-China Business Forum here on the second day of his four-day visit to China.

The forum, attended by industrialists and businessmen of both sides, was told by the President that India would like to see greater market for Indian products in China in a bid to balance bilateral trade which is now in China’s favour.

This, he said, would particularly be needed in sectors where the two countries have natural complementarities as in drugs and pharmaceuticals and IT and IT-related services and agro products.

“It is a matter of satisfaction that there is emerging focus on two-way investment flows,” he said.

The President noted that the bilateral trade between India and China has grown steadily since the turn of this century from USD 2.91 billion in 2000 to USD 71 billion last year.

Guangdon province boasts of a USD one trillion economy with high manufacturing and other industries along with being a powerful export house of China. It has sister province relationship with Gujarat and Maharashtra.

A pilot smart city cooperation project has been announced between Shenzhen and the Gujarat last year.

Referring to the links of 2nd century before the Christian era between Guangdong and Kanchipuram through a direct sea route, Mukherjee said this is an exciting time for India and China to reinforce the old linkages and join hands for new.

Noting that India has recorded a growth rate of 7.6 per cent each year for over a decade now, he said India believes that it cannot grow in isolation.

“In an increasingly interconnected world, India would like to benefit from technology advances and best practices of different countries.

“The comprehensive reforms introduced in key areas of our economy have enhanced the ease of doing business in India. Our foreign investment regime has been liberalised through simplified procedures. And removal of restrictions on foreign investments,” he said.

The President said these reforms have renewed the interest of global investors in India. In 2014, there was a 32 per cent growth in investments and in 2015, India emerged as one of the biggest global investment destinations, he said.

Mukherjee said India would like more of China’s overseas direct investment which has now crossed USD 100 billion mark.

He said the Indian government was setting up industrial corridors, national investment and manufacturing zones and dedicated freight corridors to stimulate investment in this sector.

Its ‘100 Smart Cities” initiative will transform India into a digitally empowered society and knowledge economy, he said.

“India welcomes your participation in these programmes. Chinese companies with inherent strengths in infrastructure and manufacturing can look towards India as an important destination in their ‘Going Global’ strategy.

“On their part, Indian companies can partner with Chinese enterprises in the new domain of ‘Internet of Things’ which underlines the ‘Made in China 2025’ strategy,” he said.

The President said he was happy to note that a good start has been made by Chinese businesses who are investing in infrastructure projects and industrial parks in India.

Bilateral cooperation in India’s railway sector is also progressing well, he said.

A good number of premier Indian IT firms and other manufacturers are present in China, he said and noted that Indian entrepreneurs were also considering the prospects of jointly exploring opportunities in third countries.
Summing up, the President said India believed there was great potential for economic and commercial cooperation among the two countries, which faced similar opportunities on coming together.

“To realise the full potential of our economic partnership, it is important to bridge the information gap between our business communities.

“We are committed to providing a conducive environment for more investments from China. We stand ready to facilitate many more collaborations between the industry and businesses of our two countries across different sectors. India invites investors from China to be partners in India’s growth story,” he said.

Source:
http://economictimes.indiatimes.com/articleshow/52428771.cms

15 May 2016

India, Mauritius to amend tax treaty

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies, India & International - Corporate updates | 0

India will levy capital gains tax on investments routed through Mauritius from April 1 next year, bringing down the curtains on a contentious three decade-old rule that allowed companies to bring in billions of dollars by paying negligible taxes.

The taxes on capital gains will apply to investments made from April 1, 2017 and will be imposed at 50% or half of the domestic rate until March 31, 2019, and at the full rate thereafter.

How do people use tax havens to avoid paying taxes?

Through “round tripping” or “treaty shopping”.

How does round tripping work?

Round tripping refers to routing of investments by a resident of one country through another country back to his own country.

You get money out of India and transmit it to a tax haven with whom India has a bilateral tax avoidance treaty such as the double-taxation avoidance agreement (DTAA). In the tax haven, this money is treated as capital of a registered corporate entity. You now invest this money back in an Indian company as foreign direct investment (FDI) by buying stakes or invest it in Indian equity markets.

How does this help in avoiding taxes?

The entire purpose of this exercise is to window-dress as foreign capital your original money that you had taken out from India.

In the entire process, you end up paying zero or negligible taxes. In India, you can claim tax exemption citing the DTAA arguing that you have paid taxes in the source country. In the source country, taxes are negligible since it is a tax haven.

What is DTAA?

These are bilateral treaties signed between governments to prevent companies from being taxed twice over.

So, what was the problem with Mauritius?

Mauritius, and other tax havens, has almost negligible taxes. This was encouraging companies to route their investments in India through “shell” companies (those that exist only on paper) in Mauritius and avoid paying taxes.

How big was the problem?

At $94 billion, Mauritius has been the largest FDI source for India, accounting for 34% of total FDI in India between 2000 and 2015.

What are the changes that will plug this gap?

The changed DTAA will make it mandatory to pay capital gains tax on sale of shares in India by companies registered in Mauritius

When will the new rules kick-in?

Share sales in Indian companies by Mauritius-registered firms will be taxed at half of the applicable rate between April 1, 2017 and March 31, 2019.

If the capital gains tax in India is 10% currently, Mauritius-registered companies will be taxed at 5% during the first two years beginning April 2017. Full capital gains tax will apply from April 1, 2019.

What about previous investments?

The new rules will not apply only to investments made before April 1, 2017, meaning share sale of investments made before this date will be exempt from capital gains tax.

Which companies will benefit from the reduced tax rates during the first two years?

The benefit of 50% reduction in tax rate during the transition period from April 1, 2017 to March 31, 2019 shall be subject to a limitation of benefit (LOB) Article.

A Mauritius-registered company (including a shell or conduit company) will not be entitled to lower tax rate, if it doesn’t spend at least Rs 27 lakh in Mauritius in the previous 12 months. This is called ‘purpose and bonafide business test’.

How will impact investors?

Many foreign investors will have to redraw their strategies. The incentive to route investments through Mauritius will cease to exist once the new rule kicks-in. This could raise their tax outgo.

What about markets?

It could hurt short-term foreign investor inflows into India, particularly from companies whose investment strategies are guided by minimising taxes. This could pull down markets initially.

Are these rules related to the general anti-avoidance rules (GAAR)?

GAAR are aimed at curbing tax avoidance and aim to give tax authorities the right to scrutinise transactions that they feel have been done to avoid taxes.

Under GAAR corporations may be forced to restructure salaries of employees if taxmen conclude that these were structured only to avoid taxes. Similarly, if a foreign investment transaction from Mauritius has taken place with an intent to exploit DTAA, it will come under GAAR.

Implementation of GAAR will take place from April, 2017.

Source: http://www.hindustantimes.com/business/india-mauritius-tax-treaty-all-you-need-to-know/story-QSOlvKyt6rrN7E00S7wp9K.html

15 May 2016

Projects worth Rs. 80,000 cr coming Tamil Nadu’s way

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Tamil Nadu State’s ports will also benefit hugely fromRs. 4-lakh-cr Sagarmala programme: Gadkari

“We need cooperation from State governments for infrastructure development. In Tamil Nadu, unfortunately, we had to terminate two projects,” said Nitin Gadkari, Road Transport, Shipping & Highways Minister. “We never mix politics with development and development with politics,” claimed Gadkari, speaking at ‘Breakfast with BusinessLine ’, an interactive session with senior executives from the corporate sector. But in Tamil Nadu, he said, his Ministry had to give up on the Maduravoyal-Chennai Port elevated road project as there was no progress. Gadkari said he had “written many letters to the State government” to no avail.

Another road project, by L&T, also had to be shelved, said Gadkari, who is touring the State to campaign for the BJP in the Assembly elections, which will be held on May 16.

“We need an atmosphere in the country for development of infrastructure. Our government and my ministry look for ways to help develop infrastructure in different States with different political parties but sometimes we are helpless,” he shrugged.

“I am not speaking politically, but I am talking of practical issues such as forest and environment clearances,” claimed Gadkari.

There is strong political will at the Centre and speedy decision making. Positive cooperation from stake holders will help achieve goals, he said.

Sagarmala programme

Tamil Nadu will be a huge beneficiary under Sagarmala, a Rs. 4-lakh-crore flagship programme of the Centre envisaging port-led development. Conceived as a 10-year project, he hopes to complete it in five years.

Gadkari listed out projects totalling more than Rs. 80,000 crore relating to port and industrial investments in Tamil Nadu. Under Sagarmala, the State will get an LNG terminal at Ennore at a cost of about Rs. 3,000 crore; at Tuticorin Port, a North Cargo Berth, a foodgrain berth, an additional container berth and a coal jetty are planned.

Also in the pipeline is the development of ports at Sirkali and Colachel. Work on all of these will start within two years, he said.

Huge investments are also planned in developing inland waterways using the major rivers in the State, including the Tamiraparani, Manimuttar, Cauvery, Palar, Vaigai and the Bhavani. These present a huge opportunity for private sector investments, he said.

 

Source: http://www.thehindubusinessline.com/todays-paper/projects-worth-rs-80000-cr-coming-tns-way/article8597545.ece