The Tribune, Chandigarh, India

RCom gets nod to sell stake

New Delhi, June 6
Reliance Communications today decided in-principle to dilute 26 per cent equity in a strategic sale. "The board of directors of Reliance Communications (RCom) has approved in-principle the induction of strategic/private equity investors into the company for an up to 26 per cent equity stake at an appropriate premium to the prevailing market price," the company said in a statement.

The board's decision comes within two weeks of the Ambani bothers calling a truce and terminating the no-compete agreement of 2005 between the two groups.

RCom shares have risen sharply over the past few sessions on reports that RCom has started talks with some foreign telcos, including MTN of Africa and the UAE's Etisalat, for offloading part of its stake to finance future expansion plans such as the rollout of 3G mobile services.

RCom has gained over 26 per cent and the scrip rose to Rs 168.15 on June 4 from Rs 133.40 on May 21 on the BSE.

The company spokesperson declined to comment on whether the company had received any offer from foreign mobile firms.

RCom's board has also decided to examine and pursue other appropriate strategic combination and consolidation opportunities.

RCom is the second largest mobile operator after Bharti Airtel with a net profit of over Rs 8,400 crore. The company claims to have a subscriber base of 109 million.

RCom offers mobile services on both GSM as well as CDMA platform throughout the country.

Talks between RCom and MTN in 2008 had failed due to Mukesh Ambani staking claim to right of first refusal on stake in Anil Ambani group company RCom. — PTI

Rise in Ambani stocks likely

Analysts see no manipulation in the stock prices of Reliance group firms and attribute the rally to a string of positive news from the groups, mainly the scrapping of non-compete agreement between Mukesh and Anil Ambani camps.

Just a whiff of activity in their respective group firms is more than enough to lift the Ambani stocks pack in the coming days, as investors bet on India's richest siblings, who last month called a truce, they said.

ADAG's Reliance Media World even hit its upper circuit on May 31 on the BSE, on reports of that it was in talks with the US-based CBS Corporation for a possible joint venture.

Reliance Media World again hit its upper circuit limit to close at Rs 61.70 on June 4 on the BSE.

"In the short term, stock prices do reflect the sentiment apart from the fundamentals. The investors are enthused by the possibilities of new business opportunities," HDFC Securities head of private broking and wealth management Vinod Sharma said.

Media reports also stated that RIL may consider looking at entering the telecom sector, which fuelled the company's shares on the bourses.

CNI Research CMD Kishore P Ostwal said, "The shares were continuously under-performing Sensex post-Lehman. Sanity is returning now. The news flow is adding flavour which will hold traders and investors to take quick call on these stocks. Media reports are speculative. Generally investors and speculators take positions on media reports and hence stocks prices move. Investors do support the fundamentals, for speculators sentiment matters," Ostwal added. — PTI

Apollo in talks to supply tyres to VW

Cologne (Germany), June 6
Apollo Tyres is gearing up to supply tyres to Volkswagen in Europe as it looks to expand its global footprint. "Recently we have gone into VW (Volkswagen), supplying tyres for the cars they are launching in India and we are in discussion to supply tyres to them in Europe," Apollo Tyres MD Neeraj Kanwar said.

The company is also looking at leveraging from Dutch firm Vredestein, which it acquired last year for Euro 36 million, for supplying tyres to Volkswagen. Vredestein is already supplying to VW.

"Now we will talk about two brands (Vredestein and Apollo) to VW," Apollo Vredestein chief marketing officer Marc Luyten said.

The move is part of its strategy to enhance its global footprint as it eyes to achieve a turnover of $ 5 billion in the next five years.

The company said it planned to enter South Africa and Latin America through both organic and inorganic route.

"We are targeting to reach $ 5 billion-mark turnover in the next five years as we expand globally and ramp our capacities," Apollo Tyres chairman Onkar S Kanwar said.

Last week, the company launched its main brand Apollo in Europe with plans to sell 3.5 lakh tyres this year particularly in Germany, Britain, the Netherlands and Italy in the initial phase.

He said the company would be supplying tyres to the European markets from its Baroda plant. Also, some of the tyres meant for the domestic market would be produced at its Vredestein facility in the Netherlands, which was acquired last year.

Apollo is mainly into the replacement tyre segment that accounts 80 per cent of its overall business. It had started supplying tyres to the original equipment manufacturers (OEMs) five years back.

"We are very replacement-oriented company across various zones.... Only five years ago we went into the OEMs segment in India. Today we supply to all top automotive industries and MNCs in India," Kanwar said. — PTI

FIIs shift to debt; buy bonds worth Rs 2,450 cr

Mumbai, June 6
The ongoing European crisis has shifted foreign institutional investors' (FII) interest from risky equity markets to relatively safer debt market instruments. Since last month, FIIs have invested a huge chunk of their money in the debt market by way of government and corporate bonds and debentures, while their interest in equities has largely turned negative.

FIIs were gross buyers of debt worth Rs 19,376.30 crore in May this year, while they sold debt worth Rs 16,925.80 crore, thus becoming net buyers of Rs 2,450.60 crore of debt, as per data available with market regulator Sebi.

However, during the same period, FIIs were net sellers in the equity market, selling shares worth Rs 9,436.70 crore.

"Since the last two months, the euro has been falling and investors' money is shifting to both the dollar and gold. There is a huge amount of risk aversion in the market, due to which FIIs are shifting their hard-earned money to the debt market, which is considered a safer haven than equities during volatile times," SMC Global Vice-President Rajesh Jain said.

Due to the eurozone debt crisis, investors are hedging their euros by buying precious metals and dollars.

Following the global turmoil and the increasing uncertainty in the stock markets, foreign investors are trying to seek safety and higher returns by increasing their investments in the debt market.

However, to invest in debt market instruments like government or corporate bonds, FIIs have to seek permission from Sebi, which is not the case in equities.

"There are two types of FIIs in the market - stable ones and the freaky ones. The stable ones are still buying stocks, while the freaky ones like hedge funds are creating the volatility in the market and are shifting their investments from the stock markets to the debt markets," CNI Research CMD Kishore P Otswal said.

Meanwhile, the eurozone turbulence has led foreign investors to snap their three-month long investment streak in the Indian equity market and emerge as net sellers of shares worth over Rs 9,400 crore ($ 2 billion) in May. — PTI

Mastek eyes firm abroad

Mumbai, June 6
Mastek is eyeing an acquisition in the insurance vertical in North America as well as the UK and can spend up to $ 50 million for it, a senior company official said. "Our focus is to grow in the insurance sector -- both life and general -- in these markets. We are already operating here and are talking to three-four firms for a potential buyout. The deal size can be between $ 30-50 million. This is our sweet spot," Mastek's chief financial officer Farid Kazani said here.

Mastek, which provides IT services to insurance, banking and finance firms, said it might close the deal by this year-end.

Much would, however, depend on the valuation, management and domain capabilities of the target companies, he said. The acquisition, he said, would boost the company's revenue for FY'10, ending June.

Mastek was also upbeat about government projects from the UK and expected some good deals in the next three to six months, he said.

Around 80 per cent of Mastek's business comes from government projects in the UK, which witnessed a slump following the recent political crisis in that country.

"We are quite optimistic after the change in the government in the UK. We are expecting to bag some major deals over the next three to six months," Kazani said. — PTI

DCB to cut promoter’s stake

Mumbai, June 6
Development Credit Bank (DCB) expects to reduce the stake of its promoter, Aga Khan Foundation, by around 5 per cent through a Rs 150-crore qualified institutional placement in December, a top official said.

The issue is being launched as part of the bank's efforts to bring down the promoter's holding from 23 per cent to 10 per cent, as stipulated by the Reserve Bank.

Earlier, the apex bank had put pressure on the Mumbai-based lender to reduce Aga Khan's stake and refrained from issuing any new branch licences to it over the last three years.

"The aim is to launch the Rs 150-crore issue by December. The bank's shareholders had recently approved the proposal. Post-issue, the promoter holding will be down by nearly 5 per cent to nearly 18 per cent. The issue is a part of the bank's efforts to reduce the promoter's stake in the bank in a gradual manner," DCB MD and CEO Murali Natrajan told PTI here.

After the apex bank asked the private sector lender to reduce the promoter holding, DCB had submitted a detailed road map aimed at minimising the promoter holding to 10 per cent by March, 2014.

The lender, which has been posting losses for the last several quarters, is aiming to return to the profit path by the third quarter of FY'11 and has restrategised its business model by giving more thrust to the SME and retail business, Natrajan said. — PTI

Tax Advice
Give loan to your wife on interest at market rates
by SC Vasudeva

Q. I am a senior citizen and IT assessee and file return regularly. My wife asking for a loan from me. Some friends told me to give the loan at the interest rate on a par to the banks rate of interest on saving accounts as my wife wants to do some business or deposit, term deposit in a bank. But my CA advised me to give loan on the interest at the market rate. Please clarify it as I am confused at this point. If it must be on market rate, then let me know about the market rate. How much it should be? I sold some shares in December, 2009. The shares were purchased in June, 2007, through DP. Please let me know whether this long-term gain or long-term loss should be shown in the return for F.Y. 2009-10 or not?

—Dhan Paul Lakhanpal

A. Your CA has correctly advised you that interest on the market rate should be payable by your wife in respect of a loan received from you by her. The market rate should be ascertained with reference to the rate of interest charged by the banks on loans granted to any commercial undertaking. It is presumed that the Securities Transaction Tax has been paid in respect of the shares sold through LSE Securities. In such a case, the profit arising on the sale of shares will not be taxable. The loss incurred on the sale of such shares will not be allowable. It will be advisable to disclose the profit/loss arising on sale of shares in the tax return.

Advance tax

Q. I am senior citizen pensioner. Under self-assessment tax, I want to deposit Rs 4,365 for the FY 2009-10 after expiry date i.e. March 31, 2010. Kindly intimate if any penalty is to be paid extra. If yes kindly intimate percentage per month.

— Jagjit Singh Sohi

A. An assessee is required to pay advance tax in a financial year in case the amount of advance tax computed in the manner laid down in the section 209 of the Act exceeds Rs 10,000 for a particular financial year. The amount of tax payable by you being much lower than Rs.10,000, you will not be liable to pay interest or penalty for the payment of the amount of Rs 4,365 on self-assessment basis.

Tax liability

Q. I am a bank employee. I would like to know the actual income tax to be paid by me for the year 2009-10. My details of income are as under: Gross salary - 4,75,613; Donation 50 pc (80G) -25,000; Investment -1,00,000; Total paid tax-27,420.

— S.R. Paysa

A. On the basis of the figures given in the query, your total taxable income will work out at Rs 3,63,113. This is on the presumption that the donations made by you are covered for the purposes of deduction under section 80G of the Income-tax Act 1961 (the Act), that Rs 25,000 is the permissible deduction under the section and that the investments made by you are also those which are specified under section 80C of the Act. The tax payable on the total income works out at Rs 27,420, including education cess of 3pc. You have already paid tax to the extent of Rs 27,420. There will thus be no further liability of tax in respect of the total taxable income as worked out above. The computations as above are also based on the presumption that you are not a senior citizen.

Return information

Q. I am a senior citizen aged 85. In addition to my pension, I earn interest on fixed deposits etc. in various banks and post office. The interest has to be included in the tax return for the fiscal year. The banks and post offices do not supply the requisite information readily and a number of visits have to be paid. This is a tiresome job for an aged person. My queries are: Is it necessary to supply information about interest exactly from April 1 to March 31 of the years? Cannot I supply the information only on maturity of the deposit, showing the total amount of interest in the last year?

In case of certain deposits such as KVP of post offices, information about interest is available for specific periods e.g. 2 ½ years or for subsequent half years, can any use be made of this information?

Is it necessary to get a certificate from each bank or post office about the interest received/accrued for enclosing with the Income-tax return? Cannot one calculate the interest oneself?

— Bishan Chand

A. It is possible for an assessee to declare interest earned in the year in which the fixed deposits mature. However, the credit for the deduction of tax at source may be a difficult proposition in such a case. This is because the banks are required to deduct tax at source on accrual basis. The tax deduction certificate will also be issued on accrual basis. It will, therefore, be advisable to include the interest earned from April to March on accrual basis in the total income.

The interest accrued on Kisan Vikas Patras can be computed with reference to a table which has been notified by the government. It will be advisable to include interest earned on Kisan Vikas Patras on the basis of such table.

A certificate from the bank or the post office indicating the interest earned from April to March should always be obtained so as to include the correct amount of interest with the total income. Interest is computed by the bank on the basis of guidelines issued by the Reserve Bank of India and therefore it may be difficult for you to compute the interest yourself. This position will also apply to interest earned on post office savings bank account.

TCS liability

Q. I made a scrap dated on May 1, 2010, but the person has not a PAN. Now in this case the TCS liability is raise or not if yes then what rate on TCS deducted.

— Mahesh

A. The provisions with regard to the tax deduction at source which have been amended so as to provide that in case the Permanent Account Number has not been furnished by the deductee, the tax will be deducted @ 20 per cent. These provisions are not applicable to cases relating to collection of tax at source. The collection of tax at source in case of scrap sale continues to be at 1 pc of the sale value.