Mumbai, February 24
US banking giant Citigroup sold its nearly 10-per cent stake in India's biggest mortgage lender for $1.9 billion on Friday, ending a seven-year alliance and raising much-needed capital.

Citigroup, the third-largest US lender by assets, said the sale of 145.3 million shares in Housing Development Finance Corp (HDFC) — the whole of its 9.85% stake — was "part of Citi's ongoing capital planning efforts." Total proceeds from the sale to mainly foreign institutional investors were expected to be $1.9 billion, resulting in an after-tax gain of $722 million.

"We’re pleased with the results of our investment in HDFC," said Pramit Jhaveri, Citi India's chief executive, in a statement.

The sale came as Citigroup faces a potential multi-billion-dollar writedown of its minority stake in Morgan Stanley Smith Barney brokerage.

"It's obvious Citi needed money and HDFC is an attractive asset they had," said Santosh Singh, a financial services analyst at Espirito Santo Securities.

Citi may also have sold its stake to raise funds to help it conform to strict new global capital adequacy rules that will require lenders to keep higher reserves to absorb financial shocks, analysts said.

Other global banks such as HSBC and Goldman Sachs have been selling Asian assets not regarded as "core investments" ahead of the new global Basel III capital adequacy rules that come into effect next year.

"Foreign banks are freeing up their overseas investments" to improve their capital base, said Jigar Shah, head of research, Kim Eng Securities.

HDFC's stock plunged over 6% to a day's low of Rs 665.30 to bring shares broadly in line with the price at which Citi sold its stake. The shares later retraced to close down 3.45% at Rs 676.20.

Analysts called the fall a "kneejerk" reaction that did not reflect HDFC's fundamental value. HDFC, one of India's best-known blue-chip stocks, pioneered housing finance in India in the 1970s and has witnessed rapid growth. The sale coincided with a sharp rally by India's stock market which several foreign investors have seized on as a chance to sell their stakes in Indian financial institutions and realize profits.

Earlier this month, Carlyle Group LP sold 1.3% of its stake in HDFC for about $270 million. Also this month, a unit of Singapore state investment company Temasek Holdings sold nearly 40 per cent of its holding in India's ICICI Bank for $300 million.

But Ravi Trivedy, a partner at KPMG India, said foreign investors remained "deeply committed" to India's financial services sector even with a lack of expected reforms by PM Manmohan Singh's Congress-led government. — AFP

New Delhi, February 24
A group of ministers on Friday approved a new investment policy for the urea sector, to make the nation self-sufficient in the key soil nutrient. The government in 2008 had announced a “new investment policy”' to boost urea production, but the scheme failed to attract fresh investments.

With demand-supply gap of urea widening, the government in 2010 decided to frame a new policy. Last year, a Committee of Secretaries (CoS), headed by Planning Commission Member Soumitra Choudhary, was set up for this purpose.

According to sources, the GoM, headed by Finance Minister Pranab Mukherjee, approved the policy as per the CoS recommendations. In the draft policy, the CoS has suggested incentives for setting up of greenfield (new plants) and brownfield (expansion of existing plants) facilities.

At present, the country faces a shortfall of 7 million tonne, which is met through imports. Domestic urea production is estimated at 22 mt, while the consumption is pegged at 29 mt. — PTI

New Delhi, February 24
Faced with the European Union's decision to impose a carbon tax on all flights operating on its skies, India and 22 other countries, including Russia, China and the United States, have decided to retaliate with a series of measures which would impose heavy costs on European airlines and plane manufacturers.

A joint declaration to this effect was unanimously adopted at a meeting of these countries in Moscow earlier this week, which asked the EU and its member states that they "must cease application of Directive 2008/101/EC to airlines/ aircraft operators registered in third states".

Through the directive, the EU has included all flights operating on its skies in the Emission Trading System (EU-ETS) for payment of the carbon tax for carbon dioxide emission. The directive has been effective from January this year.

Indian carriers that fly to Europe — Air India, Jet Airways and Kingfisher — may end up having to pay millions of dollars annually on this count as it requires them to pay 15% of the cost of compensating for the carbon dioxide emitted during landings or take-offs from Europe.

Among the measures decided upon by the 23 nations are "imposition of additional levies/charges on EU carriers/ aircraft operators as a form of countermeasure", reviewing bilateral air services agreements, including “open skies” with individual EU member states and suspension of "current and future discussions or negotiations to enhance operating rights for EU airlines and aircraft operators".

India had taken the lead in hosting a conference of several countries here last September in which a declaration was unanimously adopted to oppose the EU move.

This was followed by the Moscow meeting on February 21-22 where the joint declaration was adopted which starts by saying that the "inclusion of international civil aviation in the EU -ETS leads to serious market distortions and unfair competition".

In the joint declaration, the 23 nations decided to file an application under the Chicago Convention for resolution of the dispute in accordance with the rules of the United Nations body, the International Civil Aviation Organization (ICAO).

They also decided to use existing or new state legislation, regulations or other legal mechanism to prohibit their own airlines and aircraft operators from participating in the EU-ETS.

They also decided to mandate EU carriers to submit flight details and other data relating to carbon emission with the aim of taxing them.

Besides India, Russia, China and the United States, the meet was also attended by representatives of Armenia, Argentina, Republic of Belarus, Brazil, Cameroon, Chile, Cuba, Guatemala, Japan, Republic of Korea, Mexico, Nigeria, Paraguay, Saudi Arabia, the Seychelles, Singapore, South Africa, Thailand and Uganda.

The European Union authorities have been maintaining that they would stand firm on the EU-ETS legislation and called upon its opponents to come up with an alternative system that would help curb greenhouse gas emissions by the airlines. — PTI

New Delhi, February 24
Ahead of the FY 2013 budget, a key Parliamentary panel scrutinizing the Direct Taxes Code (DTC) is likely to recommend raising of income tax exemption limit to Rs 3 lakh and tax breaks on investments to Rs 2.5 lakh.

"There is a consensus among the members that annual tax exemption limit be raised to Rs 3 lakh," sources said after the meeting of the parliamentary standing committee on finance chaired by senior BJP leader Yashwant Sinha.

Raising the tax exemption limit from Rs 1.8 lakh currently, they said, was necessary to provide relief to the people braving the impact of high inflation.

Members also felt that the total tax saving deduction limit, which include investment in provident fund, life insurance, children education and infrastructure bonds, should be raised to Rs 2.5 lakh from Rs 1.2 lakh, sources said.

At present, investments up to Rs 1 lakh in specified instruments are deducted while calculating the tax liability. In addition, investments up to Rs 20,000 in infrastructure bonds are also exempted from tax.

The standing committee on finance has decided to finalize its report on DTC by March 2, enabling Parliament to consider the ambitious reforms in direct tax regime in the budget session beginning March 12.

"The committee will present its report to Parliament in the third week of March", sources said.

The DTC Bill proposes the tax exemption limit of Rs 2 lakh and also provides for revising the tax slabs for all the three categories.

Currently, income of Rs 1.80-5 lakh attracts 10 per cent tax, Rs 5-8 lakh 20 per cent and above Rs 8 lakh, 30 per cent. The DTC, which will replace the Income Tax Act, 1961, was referred to the committee for scrutiny in August 2010.

On Thursday Congress party leaders in their wish-list asked Finance Minister Pranab Mukherjee to present a "please all" budget and raise income tax slabs. — PTI

Los Angeles/Hong Kong, Feb 24
A Chinese firm trying to stop Apple Inc from using the iPad name in China has launched an attack on the consumer electronics giant's home turf, filing a lawsuit in California that accuses it of employing deception when it bought the trademark.

A unit of Proview International Holdings Ltd, a major computer monitor maker that fell on hard times during the global financial crisis, is already suing Apple in multiple Chinese jurisdictions and requesting that sales of iPads be suspended across the country.

Last week, Proview Electronics Co Ltd and Proview Technology Co filed a lawsuit in Santa Clara County that brings their legal dispute to Silicon Valley.

Some legal experts said there could be different outcomes from the U.S. and Chinese cases, but a spreading of the lawsuit and delay in coming to settlement terms could hurt Apple more.

"In relation to the U.S., Apple is going to somewhat have a homeground advantage," said Elliot Papageorgiou, a Shanghai-based partner and executive at law firm Rouse Legal (China).

At stake for Apple is its sales and shipments in China, where its CEO Tim Cook said it was merely scratching the surface. Debt-laden Proview International, meanwhile, needs to come up with a viable rescue plan before mid-2012 or else it faces delisting from the Hong Kong stock exchange.

"Given the current timeline, Apple would have the greater impetus to come to settlement simply because the ability to disrupt shipments is more immediate than the pressure faced by Proview and its potential delisting," said Papageorgiou.

Proview accuses Apple of creating a special purpose entity — IP Application Development Ltd, or IPAD — to buy the iPad name from it, concealing Apple's role in the matter. In its filing, Proview alleged lawyers for IPAD repeatedly said it would not be competing with the Chinese firm.

Apple on Friday reiterated its statement saying it had bought Proview's worldwide rights to the iPad trademark in 10 different countries several years ago. — Reuters

New Delhi, February 24
Research In Motion (RIM), makers of BlackBerry smartphones, on Friday launched a new operating system (OS) for its PlayBook tablets with additional functionalities, including the ability to run Android-based applications.

The BlackBerry PlayBook OS 2.0 will add advanced messaging features, increased social integration and better browser, among other things, Research In Motion (RIM) Manager, Carrier Product (India), Ranjan Moses told reporters here.

The new OS also supports Android applications like Pool Break Pro. This will enable developers create applications for Android and make the same applications available to PlayBook users as well.

The new OS is available as a free update for existing users and the new devices will have the new OS in-built. BlackBerry Playbook is available at an offer price of Rs 19,990 for the 64 GB model. Last December the Canadian giant had slashed the price of its PlayBook by more than half to Rs 13,490 for the 16 GB version to cash in on the festive season and burgeoning demand for tablet PCs in India.

RIM, which is known for its BlackBerry series of phones, had introduced PlayBook in June in the Indian market.

According to analysts, sales in the tablet PC segment in India are expected to touch one million units over the next 12 months. With 3G (high-speed internet services) being rolled out aggressively, the opportunity has only expanded, they said.

Since the launch of Apple's iPad in the country, the tablet market has been witnessing huge competition, with more and more new contenders launching their devices. — PTI