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Reliance begins pumping crude in KG basin
US Cong examines $700-b bailout plan
No raise in 5Mhz spectrum limit: DoT
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Rel Capital likely to set up housing finance Co
India’s billion-dollar club shrinks to half in value
Market Update
Tax Advice
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Reliance begins pumping crude in KG basin
Mumbai, September 21 Reliance Industries chairman Mukesh Ambani said his company would be producing 5.5 lakh barrels of oil equivalent per day in the next six quarters, accounting for nearly 45 per cent of India’s oil and gas production. Ambani made this announcement at a specially convened Editors’ conference in Mumbai today. According to Ambani, RIL will begin to produce 20,000 barrels of oil from Diwali and increase the output to 5.5 lakh barrels per day over the next six quarters. However, the production of gas from the KG fields, which was postponed to November this year, would be further postponed to the January-March quarter next year, Ambani said. “As many as 5,50,000 barrels per day of hydrocarbons can feed cooking gas to 100-120 million households,” he stated. Outlining the ambitious oil and gas production programme, Ambani said his company would account for 40-45 per cent of gas and oil produced in India in 6-8 quarters (by up to two years). Oil output from the KG basin will bring down India’s import bill by Rs 1,000 billion per year, he said. With this milestone, Ambani stated that RIL would become the largest deepwater developer in the world. “The Krishna-Godavari basin is India’s Gulf of Mexico,” Ambani said of the gas-find here. P.M.S Prasad, president, RIL, said the company would spend close to $10 billion to produce oil and gas from this field. “The gas will be used for power and fertiliser projects. It will also be supplied to homes across the country,” added Prasad. Gas from the KG fields would be priced at $4.2 per mmBtu or about $26 a barrel oil equivalent as per the norms specified by the government. RIL has 90 per cent stake in the Block KG-DWN-98/3 or D6. It pumped first oil from the block on September 19 and would go rapidly in the coming weeks. Ambani said it was not only KGD6 where huge reserves of gas have been found but also in Mahanadi and Cauvery basins. RIL has made discoveries in four major basins in India and achieved an exploration success of 63 per cent, which is higher than global averages. At present, both RIL and his brother Anil Ambani’s Reliance Natural Resources Ltd have been locked in litigation over the use of gas from the KG fields. RNRL has obtained a stay from the courts over the sale of gas from the block to third parties. Ambani added that RIL would simultaneously look at renewable and alternate energy resources. The company is also looking at entering the exploration and production of uranium, he said. According to Ambani, the RIL group’s retail business has been progressing satisfactorily. Between six and eight lakh farmers have benefited so far.
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US Cong examines $700-b bailout plan
Washington, September 21 Democratic lawmakers, who control both houses of the Congress, said yesterday they hoped to approve the bailout quickly but wanted changes such as more oversight, limits on executive pay at participating firms, and assistance for homeowners. US treasury secretary Henry Paulson would have extraordinary powers over the massive warchest and his decisions would not be reviewed by any court, according to the draft legislation. The government could acquire up to $700 billion in home and commercial mortgages and related assets from US-headquartered banks and other institutions over the next two years. Precisely how the purchases would be executed was unclear. To allow for the bailout, the US government’s debt limit would rise to $11.315 trillion from $10.615 trillion. The bailout plan follows a wrenching week that transformed Wall Street with Lehman Brothers’ failure, the agreed sale of Merrill Lynch and a government takeover of ailing insurer AIG. The debt plan was hatched amid grave concerns that other major banks could collapse and that credit markets were close to freezing, threatening the functioning of the US economy. Showing more deals may still be in the works, Morgan Stanley’s board was scheduled to meet yesterday to consider a possible takeover by Wachovia Bank or selling a bigger stake to China Investment Corp, according to sources familiar with the situation. — Reuters |
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No raise in 5Mhz spectrum limit: DoT
New Delhi, September 21 A senior DoT official said though globally operators were given more spectrum for 3G, 5Mhz was enough in India as the usage here was different with subscribers, at least initially, preferring the standard 3G services like high speed Internet and music download besides voice. The issue has been raised by the foreign players who are yet to come to India. Indian prospective 3G players, however do not see this as a problem. — PTI |
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Rel Capital likely to set up housing finance Co
New Delhi, September 21 The company has already filed an application with National Housing Bank and is also seeking a no-objection certificate from other regulators like the Reserve Bank and Insurance Regulatory and Development Authority, he said. Reliance Capital is already into the mortgage business through its consumer finance arm. In order to make the mortgage business more focused and to achieve certain objectives, the company has decided to spin its venture as a Housing Finance Company. The company is also considering foraying into investment banking business as soon as market conditions improve. — PTI |
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PepsiCo to invest $500 m in India
Gurgaon, September 21 She said the investment would be made spread over increasing manufacturing capacity, market infrastructure, environment sustainability initiatives, research and development, new product development and agriculture. She added that as the company was open to acquiring local brands or companies. Asked if the company had earmarked any budget for acquisitions in India, she quipped: “We have billions of dollars to target companies in India.” PepsiCo, which has so far invested over $1 billion in India, will be giving capacity enhancement a priority. PepsiCo India CEO (beverages) Sanjeev Chadha said the company would be expanding its existing capacities. — PTI |
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India’s billion-dollar club shrinks to half in value
New Delhi, September 21 There were as many as 226 companies with a market valuation of at least a billion dollar as on January 10 - the day when the stock market benchmark Sensex scaled its life-time peak before falling prey to a bear-run continuing for over eight months now. However, the size of this elite club has shrinked to just 139 companies now and its cumulative market value currently stands at about $796 billion (Rs 36,62,000 crore), against close to $1,600 billion (Rs 1,60,000 crore) on January 10. This diminution is primarily caused by a sharp plunge in the stock market that has lost nearly one-third of its value during this period. A steep fall of over 17 per cent in rupee value versus US dollar has also contributed considerably in the shrinking size of this elite league. Those having moved out of this club include Anil Ambani group’s Adlabs Films, Tata group’s Tata Tea, Naresh Goyal-led Jet Airways, biotechnology major Biocon, IFCI, Max India, HCL Infosystems, Patni Computer, Jain Irrigation, Bajaj Hindustan, Gujarat NRE Coke, Praj Industries, Madras Cement and India Cement. Besides a number of real estate firms such as Ansal Housing, Omaxe, Sobha Developers and Peninsula Land and banks such as J&K Bank, State Bank of Mysore, Yes Bank, Syndicate Bank, UCO Bank, Central Bank and Allahabad Bank have also moved out of this league. While top companies of the club have managed to hold onto their billion-dollar status, they have also seen a sharp erosion in their valuations. Mukesh Ambani-led Reliance Industries has lost close to Rs 1,50,000 crore, while state-run ONGC has also seen a depletion in their wealth close to Rs 50,000 crore. Besides, realty giant DLF has lost more than Rs 1,00,000 crore and companies like Reliance Communications, Bharti Airtel, ICICI Bank, MMTC, NMDC, SBI and L&T have also registered huge losses. — PTI |
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Market Update
The domestic bourses recovered from a nine-week low as markets rallied on Friday after regulators in the UK and US halted short-selling in financial stocks on Thursday.
A deep financial crisis engulfed the global markets earlier in the week when the US investment banking giant Lehman Brothers filed for bankruptcy, Merrill Lynch was bought over by Bank of America in a distress sale and the world’s largest insurer AIG had to seek the US government help to thwart an imminent collapse. The BSE (Bombay Stock Exchange) Sensex gained 0.3 per cent for the week to close at 14,042. Nifty gained 0.4 per cent to close at 4,245. Markets had fresh lease of life after the US Treasury Secretary Henry Paulson proposed to congressional lawmakers a proposal that would create an entity to deal with the billions of dollars of bad debt still choking the financial system. Going forward, markets may open strong on Monday on the back of stellar gains in the overseas markets, but investors will be keenly watching the news emanating from the U.S. financial sector. The market sentiment remains fragile on sustained selling by foreign institutional investors. Any further bad news from the U.S. will impact domestic bourses. The markets will also keep a close watch on the developments on the Indo-U.S. nuclear deal, as per news emanating from the U.S. Congress aims to vote on the deal before it adjourns in a week’s time, ahead of the November presidential elections. Union Bank of India (UBI)
Investors, who wish to make banking a part of their portfolio, may take exposure in UBI with a medium-term perspective. The reason for bullishness on UBI are the improving asset quality of the bank, 100 per cent roll out of CBS in all its branches, improving efficiency ratios and is under-valued compared to its peers. The bank’s asset quality has improved significantly over the past few years reflecting the bank’s focus on qualitative growth. The gross non-performing assets (NPAs) in percentage terms declined to 2.2 per cent as compared to 2.9 per cent in the last financial year. This is despite the worsening monetary conditions in the economy. With a view to maintaining its asset quality, the bank has kept a close watch on its unsecured loan portfolio. This reduces the risk of higher delinquencies during the rising interest rate scenario. Most of the banks have witnessed a significant increase in their unsecured portfolio on the back of robust retail consumption demand seen in the recent past. UBI leads its peers in terms of technology implementation. It has successfully rolled out CBS in all its branches. Now, the bank’s 100 per cent business is covered under CBS. This augurs well for the bank, as it opens new avenues for fee income by offering various technology-based products and services to its clients. UBI’s constant endeavour to increase the profitability by improving the efficiency is evident from the fact that the average business per employee improved to Rs 6.2 crore per employee in last year as compared with Rs 5.1 crore in previous year. During the period 2003-08, the average business per employee increased at a compounded annual rate growth of 20 per cent, while the number of employees during the period has remained almost constant. The bank trades at a price to book of 1.35 times on the last financial year’s book value that does not capture the true value of the stock. Investors with a medium-term view may buy this stock for steady returns. |
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Tax Advice
Q I am getting a better opening in a multi national company as I have a much better future in the new organisation on account of the job specifications. My appointment letter requires me to give a notice of three months for leaving job. My new employer has agreed to compensate me with the notice pay as I have been asked to join without waiting for the notice period. Is the amount paid in lieu of the notice pay taxable?
— Nitesh Khushwahw, Gurgoan A According to Section 17 of the Act, the term ‘salary’ apart from wages etc. includes profit in lieu of or in addition to any salary or wages. Profit in lieu of salary has been defined by Section 17(3) of the Act and includes any amount due or received, whether in lump sum or otherwise, by an assessee from any person before his joining any employment with that person or after cessations of the employment with that person. In view of the above, the amount received by you from your new employer in lieu of the notice pay would be treated as profit in lieu of salary and taxable as part of the salary received/receivable by you. Capital gains tax
Q I have been advised by my chartered accountant that to save capital gains tax I can buy capital gains tax saving bonds to the extent of Rs.50 lakh in a financial year and, therefore, he has advised that I can split the buying of such bonds within two financial years. The period of six months in my case does cover the two financial years. Is there any instruction from tax department in this regard? — Pranjal Sharma, Sangrur A There is no instruction from the tax department regarding such interpretation. Further there is no ruling of any court on this issue. However, a simple reading of the section gives this impression as the limit provided in Section 54EC of the Act is Rs.50 lakhs per financial year. Your chartered accountant has correctly advised you that bonds can be bought in two financial years. I may add that allowability of exemption on the basis of this interpretation is yet to be tested before the Income-tax Appellate Tribunal or any court of law. Settlement of claim
Q Please clarify whether the amount received from the bank towards settlement of claim (maturity value of the FD plus interest) against FDRs in single name of the deceased without any nomination or renewal, can be credited to the capital account, by the legal heir, as capital receipt from the deceased father. — Manmohan Lal Gupta A The amount received by the legal heir from the bank towards the maturity amount of the fixed deposit (excluding interest) placed with a banker is a capital receipt. The interest on such fixed deposit up to the date of death is taxable in the hands of the deceased and, thereafter, in the hands of the legal heir. The original amount of deposit is not taxable under the provisions of the Income-tax Act, 1961, (the Act). The legal heir can credit the amount so received to his capital account. Tax liability
Q I am an employee looking after the account department of a share broker. Apart from the salary income, I keep on trading in futures and options on the basis of leads available to me by listening to the gossip of various share brokers. I am able to make approximately Rs.50,000 per annum. This is a part time business. My employer is aware of it and has not raised any objections in this respect. My salary is about Rs.2,40,000 and I have paid life insurance premium of Rs.30,000/-. Would you please let me know my tax liability as also the relevant return form which would be applicable in my case? — K. I. Singh, Amritsar A On the basis of the facts given in the query, the total income in your case would work out at Rs.2,90,000 before allowing relief of Section 80C of the Act. The net taxable income (after allowing relief under Section 80C of the Act) would work out at Rs.2,60,000 on which a tax on Rs.11,000 and education cess of Rs.330/- would be payable for assessment year 2009-10. The applicable form in your case would be ITR-4. |
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