A group of government-appointed advisors has recommended sweeping changes to India's outdated and overburdened bankruptcy system, aiming to modernise a process that takes several years and costs investors and taxpayers billions. The changes would be the most ambitious overhaul to date of rules governing the liquidation or revival of companies in India, a country with no single bankruptcy code and where competing laws, unclear jurisdictions and inadequate resources can leave cases languishing for decades. The proposals, to be handed to the Finance Ministry as early as Monday, will impose deadlines for the first time and establish a network of insolvency professionals to lighten courts' workload and tackle delays, T.K. Viswanathan, chairman of the Bankruptcy Law Reform Committee, told Reuters. Under current rules, even deciding whether to save or liquidate an ailing company can take years, leaving it in the hands of managers who can - and do - strip assets with impunity. Under the proposed changes, a decision would have to be reached in 180 days - even 90 days for fast-track applications, Viswanathan said. "The whole essence of our exercise is that everything is done within time," he said. Foreign and domestic investors say the difficulty in exiting ventures can deter them from entering. Cases such as the protracted collapse of liquor tycoon Vijay Mallya's Kingfisher Airline empire have burnt investors. The airline was grounded in 2012 with some $1.5 billion in debt and its shares are now worthless, but creditor banks seized his former Mumbai headquarters only this year. The fate of his Goan villa is stuck in a prolonged court tussle. India ranks 130 out of 189 in the World Bank's Ease of Doing Business report, below Lesotho and Cameroon, not least because of its poor performance in resolving insolvency. The World Bank says it takes 4.3 years on average, more than twice as long as in China, with an average recovery of 25.7 cents on the dollar, one of the worst among similar size economies. 'Dead Horses'Troubled companies in India, or their creditors, largely turn to the Official Liquidator, a government-appointed officer attached to the country's high courts, who administers assets and oversees liquidation. Banks can also turn to separate Debts Recovery Tribunals (DRT), partly staffed by officials on assignment from the banks themselves and overseen by the Ministry of Finance. Both are overstretched; on visits to their offices in India's financial capital, Mumbai, computers were often off and always outnumbered by teetering pillars of files. In the cramped Mumbai office of the DRT, a tribunal considered far speedier than the courts, a Ministry of Finance letter on the notice board urged officials to move faster, as cases were "in many cases taking more than four years". Inside, officials complained they had little power to draw a line under languishing cases. "They are all dead horses," said one, gesturing to the day's case list. "They are never going to run any races, but you have to keep the dead stock." Chief among the problems is that for a single troubled company, creditors and owners can all initiate competing proceedings in different courts, tribunals and states. Current legislation - especially the Sick Industrial Companies Act of 1985 - is geared towards reviving companies, so appeals frequently follow a wind-up order, resulting in virtual paralysis. "The Official Liquidator system is a disaster. It takes a minimum of five years and can take 10 years, by which point there is virtually no value left in the asset," said Bahram Vakil, partner with law firm AZB & Partners in Mumbai and a member of the reform committee. "There is a crying need (for change). That system has completely broken down." Another committee member, M.R. Umarji, a consultant at the Indian Banks' Association and former central bank official, said staffing constraints meant it could take 15 to 20 years to wind up a company: "There are very limited numbers of persons available and there are hundreds, thousands of companies to be wound up." Proposed changes will scrap the Official Liquidator and introduce a system of registered insolvency practitioners, with a regulatory body, working under a company law tribunal. Practitioners, lawyers and drafters of the law hope it will professionalise the process, committee members said. The changes, which would probably go to parliament next year, must first overcome a mindset that is geared to avoiding, not hastening, failure. They also need to provide the means to speed it up, through initiatives to take courts online and generate a corps of insolvency practitioners. "The law can give the principles, but it requires enabling infrastructure for it to be implemented effectively," said Debanshu Mukherjee, of the Vidhi Centre for Legal Policy, a think-tank that advised the committee. "Even an efficient judge cannot work without a support system." (Reuters)
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The Bank of Japan held off on expanding its massive stimulus programme on Friday, preferring to preserve its dwindling policy options in the hope that the economy can overcome the drag from China's slowdown without additional monetary support. But the central bank is likely to remain under pressure to expand its already massive asset-buying programme as slumping energy costs, weak exports, and a fragile recovery in household spending keep inflation well short of its 2 percent target. Core consumer prices fell 0.1 percent in the year to September, a second monthly drop, while household spending slid even as job availability hit a two-decade high. "The effect of the yen's weakness (on import prices) is expected to taper off and consumer prices will probably weaken further from around the year-end," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance. "We forecast the BOJ will adopt more easing next January." The BOJ maintained its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($662 billion) through aggressive asset purchases. The dollar slid against the yen and the Nikkei share average lost ground after the decision, but the moves were short-lived. "This is what I would call decisive inaction on the part of the BOJ," said Stefan Worrall, cash equities manager at Credit Suisse in Tokyo. "They played this very much by the book, not leaving any room for confusion by waiting until after the market opened for its afternoon session." Markets will now focus on the BOJ's twice-yearly outlook report and Governor Haruhiko Kuroda's news conference later on Friday for clues to the timing of any future monetary easing. With the economy skirting recession, the BOJ is likely to cut its economic growth and inflation forecasts for the fiscal year that began in April. But it will only slightly alter its forecast that inflation will hit 1.9 percent next fiscal year, sources have told Reuters, allowing it to argue that Japan is on track to hit its 2 percent target. Glimmer Of HopeJapan's economy contracted in April-June and may shrink again in July-September on weak exports. Many analysts say any rebound in the current quarter will be too weak for the BOJ to achieve its 2 percent inflation target next year. Economists were split on whether the BOJ will pull the policy-easing trigger on Friday, although market bets leaned toward no action after a recent run of positive data. Some BOJ policymakers have worried that sluggish demand in emerging Asian markets could hurt both output and corporate confidence badly enough to delay planned capital investment and wage hikes. Those concerns eased somewhat after data on Thursday showed factory production rose 1.0 percent in September. BOJ officials have said economic conditions are much better now than last October, when it surprised markets by easing policy after spending took a direct hit from a sales tax hike, and companies were in no mood to raise wages. But wage growth remains subdued and households are reluctant to spend due to the rising cost of living from a weak yen, which drives up import prices. The BOJ considers "shunto" wage hike negotiations between business and labour unions, which kick off from year-end, as key to whether inflation will accelerate sustainably. "I expect the BOJ to be on hold for the rest of the year," said Koya Miyamae, senior economist at SMBC Nikko Securities. "If it was to take action this year, that would be to support wage hikes at 'shunto' and the best time to do so should have been this month." (Reuters)
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Even though the exact deal size could not be ascertained, sources close to the company said it could be over Rs 200 crore, reports Paramita Chatterjee Carlyle, one of the world’s largest private equity (PE) groups, is in advanced talks to invest in the dairy business of publicly-listed diversified group Anik Industries. The company’s dairy business operates under brand ‘Sourabh’ and includes products like spray-dried milk, ghee and whole milk. Apart from the flagship dairy business, the Indore based company is also engaged in the business of wind power, coal, agri commodities and real estate, among others. If the talks fructify, this will be one of the larger private equity deals, said a person with direct knowledge of a development. Anik has been looking to hive off the dairy business for some time now. In fact, on June 10 this year, it issued a statement to the stock exchanges saying that it needed to undertake restructuring or strategic action in respect of the dairy business. Even as the exact deal size could not be ascertained, a senior industry executive close to the company said the deal size could be at over Rs 200 crore. While an email sent to Anik Industries did not elicit any response, the Carlyle spokesperson declined to comment on the development. “Carlyle has no comment on this,” he said over an email response. Anik Industries’ scrip closed at Rs 28.40, 2.91 per cent on Thursday (Oct 29), lower than yesterday on Bombay Stock Exchange on a weak market. Overall, Sensex closed 0.75 per cent lower at 26,838.14 on Thursday. For the fiscal ended FY14, total revenues of the company stood at Rs 1,504.78 crore with net profit of Rs 11.11 crore. The dairy business has been evincing significant investor interest with demand for milk and milk products witnessing a significant rise in India over the last few years. In fact, as per data available with the National Sample Survey Office, the per capita monthly expenditure on milk and milk products increased from Rs.41.9 to Rs 115 in 2001-02 to 2011-12 in rural India. In urban India, it jumped from Rs.75.8 to Rs.184 during the same period. This is even as the overall FMCG sector has seen a decline in the number of deals this year from that of last year. “Hardcore consumer players still remain a good investment proposition,” said Raja Lahiri, partner at advisory firm Grant Thornton. “It is not easy to build a brand in India. People need funds to build them,” he added explaining that it may be the fringe players which have seen a dip in investment activity. FMCG as a category is vast with diverse sections like consumer and food and beverages featuring under it. There is still significant investor interest in dairy products, companies that make juices and food. In the dairy segment, Motilal Oswal Private Equity was recently in news for a proposed investment in Hyderabad-based dairy firm Creamline Dairy Products Ltd. The PE firm earlier invested in Parag Milk Foods.
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Choosing the right mid-cap mutual fund for one’s portfolio may not be as easy as placing your bet on a large-cap fund. Here are some pointers, says Sunil Dhawan When the markets are lying low and not going anywhere in a hurry, it’s largely because of the large cap stocks. The interest being shown by foreign as well as Indian institutions may be absent thus keeping markets flat. Data as per studies in the past have shown that nearly 50 percent of foreign money is in nearly 30 stocks, all in the flagship index. Markets love triggers and it is what is lacking. The wait for Bihar results could be a factor but then the corporate earnings have also remained lackluster especially in relation to sales revenue rather than profits. In these times, the focus somehow shifts to mid and small cap stocks and mid and small cap mutual funds. Typically, MF schemes that invest in shares of companies with a market capitalization of Rs 1,000 - Rs. 5,000 crore are called mid-cap funds. Small-cap funds target companies with a market cap of less than Rs.1,000 crore. Performance of such funds starts getting focus, with returns over 6 months to 3-5 years being showcased against other equity funds or the benchmark indices. When large caps don’t move, it’s the mid-cap sector that start generating interest and returns too. Nothing wrong, except as an investor, one needs to understand the role of such funds in one’s portfolio before laying hands on them. Also important is to understand how they react when markets go up and when markets fall. The risk attached to such funds may or may not suit our risk profile. Here are few things to take note of while investing in mid-cap MFs: • As per industry experts, when markets move up, it’s the large-cap sector that is first off the blocks. This could be attributed to larger liquidity in large size stocks and hence more institutional interest in them. Sound mid-size companies and the funds that have invested in them may still see positive response. • Such companies are in the growth stage and hence potential may look huge. Growth at what cost and how much of leverage need a look. Most such firms are also under researched as they fall outside the radar of big analytical firms. • Read the portfolio of few such funds carefully. Unlike the large cap funds, stocks and sectors of mid-cap funds needs a second look and careful evaluation. • See if the investment style is value driven or growth driven or a blend of both. Check exposure to top 10 or top 5 stocks. Most such mid-cap funds could be investing in large cap too. See how much is the exposure as a high exposure will defeat the purpose. The price/earnings of the top 3-5 holdings may also be looked at. These things will help you take a more informed decision and diversify your portfolio better. • Ratings can be a good starting point as they take into account risk-adjusted returns rather than absolute returns over a fixed period. The risk that a fund takes to generate returns is an important parameter. • The potential is high in them as small and mid-size companies could have the potential to maneuver faster in the increasingly changing business environment when compared to larger firms. The risk too is high as the probability for a mid-cap to convert into a large cap may not be high. • Your exposure to such funds should be limited. Not more than 20 percent into small and mid-cap funds could be ideal. The idea is to add them to portfolio to boost overall returns. • Link investments in such funds only for long term goals. As these funds are highly volatile, they need longer term to deliver. Most of such funds would generate returns over 3-5 years period.
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By Arshad Khan Yes Bank Ltd on Thursday (29 October) said net profit rose 26.5 per cent in the September quarter, thanks to higher net interest income (NII) and other income, and lower provisions for bad loans. Net profit stood at Rs 610.41 crore, compared with Rs 482.54 crore in the year-ago period. Analysts had expected net profit of Rs 596 crore on net interest income of Rs 1,099 crore for the quarter. “Yes Bank has delivered another consistent quarter of sustained financial performance reflected by healthy growth in net profit of 26.5 per cent and driven by steady increase in NII and stable asset quality,” Rana Kapoor, managing director and CEO of the bank, said in a press release. Other income, or income earned from fees, trading in foreign exchange and gain on revaluation or sale of investments, rose 22.25 per cent to Rs 618.10 crore from Rs 505.62 crore in the same period last year. However, net NPA (non-performing assets) grew 0.2 per cent to Rs 158.6 crore from 0.09 per cent in the same quarter a year ago. Asset quality of the bank still remained stable for the quarter. "The recent RBI approval for setting up AMC (Asset Management Company) operations and commencement of PD business will further deepen our value proposition for the company as well as retail customers," said Kapoor. "There has been no sale to ARC (Asset Reconstruction Company) during the previous four quarters. Also, the bank has not refinanced any loan through the 5/25 route," the bank said in a statement. Yes Bank said advances grew by 29 per cent Rs 80,015 crore and deposits increased by 24 per cent to Rs 99,344.3 crore compared to same quarter last year, adding net interest margin inched up 10 basis points to 3.3 per cent year-on-year but sequentially that remained flat. Corporate banking business accounted for 68.2 per cent of advances portfolio and the rest 31.8 per cent constituted by retail & business banking. The share price of the bank closed 1.95 per cent up at Rs 743.50. Sensex closed 0.75 per cent down at 26,838.
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Paramita Chatterjee A sector that used to be on top of the list for private equity (PE) firms now features a tad lower when it comes to investor interest. The consumer story in the domestic market has not spruced up the fast-moving consumer goods (FMCG) sector as a top investment sector, if we go by pure investment data availablefor this year. Consider this: In the last 10 months of the current calendar year, only three FMCG companies have received funding from risk capital investors such as PE and venture capital (VC) firms, as per Venture Intelligence. In terms of value, PE and VC firms have invested as much as $50 million in the January-October period this year. This is significantly lower than 2014, which witnessed 6 deals worth $66 million. The drop in investment interest in the so called traditional FMCG sector comes at a time when risk capital investors are increasingly shifting their focus on new age sectors such as mobile and internet that are riding the domestic consumption wave. However, industry analysts say this is just a temporary blip as the Indian consumer story is secular and spells a long-term growth trend. “Hardcore consumer players still remain a good investment proposition,” said Raja Lahiri, partner at advisory firm Grant Thornton. “It is not easy to build a brand in India. People need funds to build them,” he added explaining that it may be the fringe players which have seen a dip in investment activity. FMCG as a category is vast with diverse sections like consumer and food and beverages featuring under it. There is still significant investor interest in dairy products, companies that make juices and food. The latest deal in the FMCG space was clinched by Premji Invest, the private equity fund promoted by Wipro's billionaire Chairman, Azim Premji, which has invested in Mumbai-based Hygienic Research Institute, hair colour makers of Vasmol and Streax products. This was announced earlier this week. Earlier this year, PE firm Everstone Capital acquired Modern Bakery, the bakery business of FMCG giant Hindustan Unilever for an undisclosed amount. Both the transactions have seen investments above $30 million. The other two deals that have been sealed earlier this year have been of a small ticket size.
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Export-Import Bank of India (Exim Bank) has extended a Line of Credit (LOC) of $87 million to the Government of the Republic of Zimbabwe, for renovation/up-gradation of Bulawayo Thermal Power Plant.The LOC Agreement to this effect was signed in New Delhi on Tuesday (October 27) by H.E. Mr. Patrick Anthony Chinamasa [M.P.], Minister of Finance and Economic Development, on behalf of the Government of Republic of Zimbabwe and Yaduvendra Mathur, IAS, Chairman & Managing Director, on behalf of Export-Import Bank of India.With the signing of the of the agreement for $87 million, Exim Bank, till date, has extended two LOCs to the Republic of Zimbabwe, at the behest of India, taking the total value of LOCs to $115.60 million. The first LOC of $28.60 million was extended in June 2013 for up-gradation of Deka Pumping Station and River Water Intake System in Zimbabwe.Exim Bank has now in place 201 Lines of Credit, covering 63 countries in Africa, Asia, Latin America, Oceania and the CIS, with credit commitments of over $12.28 billion, available for financing exports from India. Under the LOCs, Exim Bank will reimburse 100% of contract value to the Indian exporters, upfront upon the shipment of equipment and goods/ provision of services. Exim Bank's LOCs afford a risk-free, non-recourse export financing option to Indian exporters. Besides promoting India's exports, Exim Bank's LOCs enable demonstration of Indian expertise and project execution capabilities in emerging markets.(BW Online Bureau)
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New initiative by the income tax department makes life easier for taxpayers who are served notice after scrutiny of their income tax return, writes Sunil Dhawan Getting a notice from the income tax department has a direct effect on one’s heartbeat. One should, however, not panic and address the issues raised by the department especially when one is not on the wrong side of taxes. Scrutiny of income tax return may occur primarily because of understating of income or computing of excessive expenses thus leading to under-payment of tax. There may be an instance when you haven’t disclosed a certain income. For a salaried employee, where the taxes are deducted by the employer as TDS and has no other income under other heads, the probability of such notice is minimal. The scrutiny is assessment of the income tax return and its giving an opportunity to taxpayer to explain to the officer the income, expenses, losses, deduction availed are factually correct with the aim of ascertaining any under-reporting of taxes. Under section 143(3) of the Income Tax Act, the returns filed earlier may also be reopened. There is a provision to reopen a case within a period of six years from the end of the relevant assessment year. Online scrutiny: On receiving the notice, one has to physically reach the assessment office of income tax department and explain to the officer the reason for mismatch. There is good news on this front. An “e-Sahyog” pilot project has been launched by the income tax department which aims at reducing the need for the taxpayer to physically appear before tax authorities. The objective of “e-Sahyog” is to provide an online mechanism to resolve mismatches in Income-tax returns of those assesses whose returns have been selected for scrutiny, without visiting the Income Tax Office. Here are the steps for the notice to be addresses online by the tax payer.• If there is a mismatch, the tax payer gets intimated by SMS and e-mail.• The taxpayers will simply need to visit the e-filing portal and log in with their user-ID and password to view mismatch related information• The response can be submitted online. • The responses submitted online by the taxpayers will be processed • If the response and other information are found satisfactory as per automated closure rules, the issue will be treated as closed. Proper disclosures, filing of returns on time, filing the form correctly are some of the things one can do to avoid such notices. Small taxpayers stand to benefit by this move.
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