B U S I N E S S

Vedanta merges Sterlite, Sesa Goa to create metals giant
Mumbai, February 25
Vedanta Resources will simplify its business structure by merging its Indian subsidiaries into a single unit to cut costs and improve cashflows, the company said on Saturday as it looks to streamline a structure that has hurt its market valuations.

Berkshire Hathaway identifies successor to ‘Oracle of Omaha’
Omaha, Nebraska, February 25
Berkshire Hathaway has identified its next chief executive, who will succeed Warren Buffett when the 81-year-old billionaire investor is no longer running the company, Buffett said in his annual letter to shareholders on Saturday.

The Indian rupee gained 0.7 per cent this week to close at 48.9350/9450 to the US dollar, its highest since Feb 7. — Reuters

IMF okays plan to distribute gold sale profits
Washington, D.C., February 25
The International Monetary Fund on Friday approved a plan to distribute about $1.1 billion in profits from past gold sales to IMF member countries, with the expectation they would return the money to fund an anti-poverty loan programme.

Investor Guidance
Income tax rebate on PPF investment
Q: It was reported recently that the PPF investment ceiling for income tax rebate was raised to Rs 1 lakh from Rs 70,000 earlier. Does the entire PPF investment of Rs 1 lakh qualify for the rebate under Section 80C and, if so, is the rebate applicable for the current fiscal (2011-12)?

Vedanta merges Sterlite, Sesa Goa to create metals giant

Mumbai, February 25
Vedanta Resources will simplify its business structure by merging its Indian subsidiaries into a single unit to cut costs and improve cashflows, the company said on Saturday as it looks to streamline a structure that has hurt its market valuations.

FTSE-100 miner Vedanta, which has underperformed the sector by more than 25 percent since the start of last year, has over a dozen units, none fully owned and several separately listed, producing oil to aluminium and copper to zinc.

The consolidation is expected to lead to significant synergies, including economies of scale, more efficient movement of group cash, improved allocation of capital and corporate cost savings including tax efficiencies, Vedanta said.

"The restructuring was necessary, especially after the acquisition of Cairn India, because it was a large acquisition and they needed to do things in a much more organised way in India," said Jagannadham Thunuguntla, head of research at SMC Investments and Advisors in New Delhi.

Vedanta said, as a first step, it will merge non-ferrous metals producer Sterlite Industries into sister concern and iron ore miner Sesa Goa.

The boards of the companies have approved the issue of three shares of Sesa Goa for every five shares held in Sterlite. Its unlisted unit Vedanta Aluminium, along with Madras Aluminium Co, will then be transferred to the merged company, to be named Sesa Sterlite.

Vedanta's 38.8 percent holding in oil and gas producer Cairn India, which it acquired last year, will be transferred to Sesa Sterlite, along with related debt of $5.9 billion.

Sesa Goa already holds 20 percent in Cairn India directly.

"On the face of it, the merger ratio is appearing to be slightly negative to Sesa Goa shareholders and positive to Sterlite shareholders," Thunuguntla said. "...But on a long-term basis, this will prove to be positive for the merged entity."

The group's holding in Hindustan Zinc and Bharat Aluminium Co Ltd, in which the Indian government also holds a part stake, will remain separate of the merger. — Reuters

Eyes coal assets in LatAm, India

London-listed Vedanta Resources is looking for coal assets in Latin America, chairman Anil Agarwal said Saturday. The mining group is also awaiting the coal block auctions to be offered by the government of India, he added. Vedanta earlier said it would simplify its business structure by merging its Indian subsidiaries into a single unit, Sesa Sterlite, to cut costs and improve cashflows.

COST SAVINGS?

• To issue 3 Sesa Goa shares for every 5 held in Sterlite
• Vedanta to hold 58.3% in new firm Sesa Sterlite
• Sees restructuring to cut costs by $200 million/year
• Expects consolidation to be completed in 2012

Berkshire Hathaway identifies successor to ‘Oracle of Omaha’
Warren Buffett

Omaha, Nebraska, February 25
Berkshire Hathaway has identified its next chief executive, who will succeed Warren Buffett when the 81-year-old billionaire investor is no longer running the company, Buffett said in his annual letter to shareholders on Saturday.

Succession planning has been a huge issue for shareholders for years, but despite steps to clear up who will run its investments, the company has said relatively little about who would step in for the "Oracle of Omaha" as CEO.

That changed to some degree with the letter, in which Buffett made clear there is a chosen replacement for him now but did not name the person, rather than a list from which the board could pick. — Reuters

IMF okays plan to distribute gold sale profits

Washington, D.C., February 25
The International Monetary Fund on Friday approved a plan to distribute about $1.1 billion in profits from past gold sales to IMF member countries, with the expectation they would return the money to fund an anti-poverty loan programme.

"This is an important contribution to ensure the Fund's continued support of its low-income members through adequate financing of the Poverty Reduction and Growth Trust," IMF managing director Christine Lagarde said in a statement.

Under the IMF board's decision, the $1.1 billion in gold sales profits would be distributed once member countries have provided "satisfactory assurances" that they will return at least 90 percent, or $978 million, for the currently zero-interest loan program for low-income countries.

The profits will be divided among IMF members in proportion to their financial commitment to the fund, known as their quota share. As a result, the United States, Japan, France, Germany, Britain and China will receive the largest sums.

"I urge Fund members to quickly confirm their pledges (to return the money) so that we can move forward," Lagarde said.

The IMF board approved a limited sale of the Fund's gold reserves in 2008 to diversify income soures. The sales carried out between October 2009 and December 2010 generated total revenue of about $14.8 billion, of which $10.6 billion was profit.

The Fund has already decided to place at least $6.8 billion of the profits in an endowment to diversify the IMF's income away from the money it earns on loans. It still has not decided how to distribute another $2.7 billion in profits from the gold sales. — Reuters

Investor Guidance
Income tax rebate on PPF investment
by A.N. Shanbhag

Q: It was reported recently that the PPF investment ceiling for income tax rebate was raised to Rs 1 lakh from Rs 70,000 earlier. Does the entire PPF investment of Rs 1 lakh qualify for the rebate under Section 80C and, if so, is the rebate applicable for the current fiscal (2011-12)?

— V. Ramachandran,

A: Yes, the PPF investment limit has indeed been raised to Rs 1 lakh. The entire Rs 1 lakh investment is eligible for the Sec 80C deduction with effect from FY 2011-12. Also, the interest rate for PPF has been hiked to 8.6% per annum for this fiscal. However, from now on interest on PPF will be market linked - in other words, it will change from year to year.

Q: I've taken out a home loan jointly with my father and the property is also held jointly owned. We are both paying equated monthly installments for the loan. What is the ratio in which we can claim tax rebate for the interest paid to the bank against the loan?

— Saurabh Bhardwaj

A: The ratio would be the same as the one specified in the property deed. In the absence of any specific ratio provided you may treat the property as equally owned. I assume each one of you is paying the EMIs in the same ratio.

Q: I'm told if a minor in whose name a Public Provident Fund account has been opened dies, the bank concerned will refund only Rs 1 lakh to his/her family. Is this true and does it apply to only existing accounts? I've been holding two accounts in the name of minors for the past few years.

— G. Dhalla

A: This isn't at all true. All funds in a PPF account, whether opened in the name a minor or an adult, belong to the account holder and in the event of the latter's death the funds are transferred to the nominee as specified in the account. In case of the minor's death the funds will be paid to the guardian of the minor's account.

The author may be contacted at wonderlandconsultants@yahoo.com