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SEBI plans ‘safety net’ for retail investors
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Deficient monsoon to hit economic outlook: Shriram
RBI to seek details of HSBC, StanChart from UK regulator
Reliance Life Q1 net rises 140%
Changing face of life insurance
Time to shift lender for teaser rate customers
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SEBI plans ‘safety net’ for retail investors
New Delhi, August 12 Various proposals expected to be discussed and approved at the upcoming board meeting of Securities and Exchange Board of India (SEBI) on August 16 also include introduction of e-IPO, which would allow investors to bid for IPO shares electronically and without any physical paperwork. According to a senior official, the key proposals for reforms in primary market include introduction of a 'safety net' guarantee for the investors buying shares through IPOs. As per the proposed mechanism, a certain portion of the investment made by retail shareholders in the IPOs could be guaranteed for a fixed period, which could be of six months, even if the shares' value plunge below the IPO allotment price during this time. This 'safety net' mechanism is being considered only for the small retail investors, who would be compensated by the promoters and other entities selling shares through IPOs in the event of the company's shares plunging below a certain threshold limit within six months of listing or the time frame set by SEBI , sources said. As per the current regulations, the companies are allowed to provide such 'safety nets' during their IPOs, but it is not mandatory for them to make such provisions and only a few companies have provided such facility for investors in the past. SEBI is of the opinion that a mandatory 'safety net' provision would also help in fair pricing of IPOs, besides providing investors some sort of capital protection guarantee. Many companies and investment bankers have come under the criticism of over-pricing of IPOs after their shares fell below the public offer price levels in several cases. Sources said the companies could be allowed to pass on the costs of 'safety net' provision to the investment bankers, who are primarily responsible for fixing the price of shares to be sold through IPOs. At the upcoming board meet, SEBI is also likely to discuss a new definition for 'small or retail investors' as there are some ambiguity in current regulations. For IPOs, the investors putting in up to Rs 2 lakh are considered retail investors, while already listed companies distinguish small and large individual shareholders as those holding shares worth up to Rs 1 lakh and those holding shares worth more than Rs 1 lakh, respectively. For mutual funds, the regulator will consider giving the fund houses flexibility in using their expense ratio. At present, the fund houses are required to divide their expense ratio (an amount deducted from investors' funds) as per a fixed formula between the fund management fees and other expenses. There have been demands from some section of the mutual fund industry to allow levying an additional charge of 2 per cent from investors. However, the demand has faced opposition from within the industry and was being seen as return of the controversial entry-load (a charge levied on new investors), which was scrapped by SEBI in 2009. The introduction of any fresh charge could be seen as an anti-investor move and therefore SEBI is not very comfortable with any such idea, the official said, while adding that there could be certain tax incentives to attract investors to mutual funds, while measures would be discussed to help the mutual fund distributors as well. — PTI
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Anil Ambani cuts pay package to Rs 5.5 crore
New Delhi, August 12 Ambani's cumulative remuneration as Chairman of these four companies, Reliance Communications (RCOM), Reliance Power (R-Power), Reliance Infrastructure (R-Infra) and Reliance Capital (R-Cap), stood at over Rs 17 crore in 2010-11. Ambani does not take salary from any of these companies, but gets sitting fees for attending meetings of the boards and other committees. Besides, he is entitled to commission payable to directors, as per the rules of the respective companies. As per the latest annual reports of these companies, Ambani did not even take any commission from three companies, R-Power, R-Cap and RCOM, during the last fiscal. At RCOM, Ambani had waived his commission for 2009-10 and this was the third consecutive year in 2011-12, when he did not take any commission from this company. Industry experts say many top executives of Indian companies have volunteered for pay cuts, and even no salaries, in the past few years as talks of austerity measures have gained momentum amid adverse economic conditions. Among other leading industrialists, Sunil Bharti Mittal as Chairman and MD of Bharti Airtel took a 22 per cent pay cut with a total remuneration of Rs 21.3 crore in the last fiscal. — PTI
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Deficient monsoon to hit economic outlook: Shriram Ajay Shriram, vice-president, CII, and chairman and senior managing director, DCM Shriram Consolidated Limited (DSCL), represents one of the oldest and illustrious business families in India, DCM. DSCL, a spin-off from trifurcation of the erstwhile DCM Group is a Rs 5,000-crore business conglomerate with interests in agri-rural business like fertilisers, crop care, hybrid seeds and chloro-vinyl business consisting of caustic soda, chlorine, calcium carbide, power and cement. In an interview to Sanjeev Sharma, Shriram talks about the impact of weak monsoon on the agri-economy, weakening of rural demand and growth plans for his company. What is the outlook for agriculture and rural economy given the deficient monsoon? The overall impact of deficit monsoon on all kharif crops is estimated as a shortfall in total sown area by 5%. However, one needs to examine the impact crop wise. For instance, in coarse cereals and pulses, the shortfall due to deficit monsoon is likely to be steep. Reduction in sown area for coarse cereals and pulses is approximately 20% and 13%, respectively. In case of oilseeds, area sown had been normal, while area sown in rice cultivation has declined by 5%. In case of sugarcane, cotton and jute, area sown has exceeded normal estimate. Overall, the impact is likely to be severe only for farmers engaged in cultivation of coarse cereals and pulses. These farmers would need income support. However, due to deficit of rain in Punjab, Haryana, Saurashtra and Kutch, the yields of cotton and paddy are likely to be lower. Also, the farmers in Karnataka would be badly hit. We are also likely to face serious shortages of fodder in the months to come. Since more than 70 to 80 per cent of rural work force in all the states is engaged in agriculture, even this marginal shortfall can affect the sentiments of rural economy. The government is expected to take contingency measures to ward off any adverse impact of deficit monsoon through distribution of seeds, ensuring adequate power availability and increased allocations under the National Food Security Mission. The rural economy has been one of the strong engines of demand for a faltering economy. How do you see demand trends going ahead? This is a bigger concern. Given that the growth momentum in the economy is already weak, the deficit monsoon has added to the concern about the economic outlook. Lower agriculture growth would impact overall GDP. In addition, given that demand from the rural economy has been one of the key demand drivers at a time when other drivers of demand such as investment and exports have been weak, a downturn in rural incomes would be of concern for businesses. The off-take for agri-inputs viz. fertilisers, agrochemicals etc. has been adversely affected. In particular, the consumer goods sector could be impacted by the downturn in the rural economy. Given the pressure because of the monsoon and rising fiscal demands, what is the outlook for the Indian economy? With the reduction in overall sown area and poor yields caused by rain deficits, we are likely to see slower agriculture growth. Outlook for Indian economy affected by deficit in monsoon could be made up by macro policy measures such as implementation of tax reforms through fast convergence of all taxes into GST, making India an attractive destination for investment by FDI & FIIs in order to overcome adverse current account deficit and thereby strengthening the rupee. What are the growth plans for DCM Shriram Consolidated and its verticals? DCM Shriram Consolidated Ltd (DSCL) is Rs 5,000-crore integrated business group with extensive and growing presence across the agriculture and chloro-vinyl industry. The company is focused on growth through bioseed, farm solutions businesses, sugar and Fenesta windows. In bioseed & farm solutions business we do believe that in the medium term they will continue to deliver healthy growth rates given strong research programme, healthy pipeline of products and increasing geographical presence. Also, we are pursuing several initiatives to improve the performance of sugar and Fenesta businesses and expect better results from these businesses in the medium term. We expect the sugar crush capacity to increase by 20% this year. In the chloro-vinyl business the company is taking various initiatives to mitigate the impact of rising costs which have had a positive impact in the last quarter and going forward also we see a similar trend. We would definitely like to expand our businesses depending on the business environment and want to continuously upgrade capacities in our plants. We have been very tight on capex and we are focusing on what is actually required as maintenance capex for marginal de-bottlenecking. Corporate India has not been making fresh investments and many business houses are investing abroad. What are the reasons? Business sentiment has been dampened due to a variety of reasons. One is the perception that there has been a slowdown in the facilitation for large projects. Bottlenecks include land acquisition and environmental clearances. Availability of natural resources such as coal in the case of power sector has also been a limiting factor. Second is the downturn in the global economic environment and the consequent volatility in financial markets. This has made the financing environment more difficult for businesses. Thirdly, the corporate sector has suffered a decline in its profitability due to rise in the price of inputs and rise in interest rates. Higher interest rates have made many companies rethink their investment plans.
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RBI to seek details of HSBC, StanChart from UK regulator
London, August 12 Both the matters have come to the fore in less than a month's time, raising serious concerns over the impact on the image of Indian outsourcing industry and possible implication on India's fight against money laundering and terror funding. — PTI |
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Reliance Life Q1 net rises 140%
New Delhi, August 12 In the three-month period ended June 30, the company recorded a net profit of Rs 19 crore, as against Rs 8 crore in the year-ago quarter. Its total premium (net of reinsurance) in the last quarter was Rs 810 crore, while total funds under management stood at Rs 18,586 crore as on June 30, its parent company said, while announcing its quarterly results. Reliance Life recorded its first full-year net profit at Rs 373 crore for the fiscal ended March 31, 2012. — PTI |
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Changing face of life insurance
Privatisation of the life insurance industry has completed over 10 years now and we have already witnessed a lot of evolution. Right from zero to over Rs 17,000 crore has been contributed by private life insurance companies in the year 2011-12. The last 10 years has been the fastest growth story in the Indian insurance history. Like any evolving industry, the insurance sector has also seen a lot of rise and fall since privatisation. Moreover, we now have a 10-year history to look back at, to learn from our mistakes and take benefits from the positives.
Insurance Regulatory and Development Authority of India (IRDA), the regulatory authority responsible for growth, development and regulation of insurance industry in India post privatisation, has also been playing a very crucial role in this journey so far. By bringing in regulatory changes from time to time, it has been successful in creating conducive environment for policy holders, which has also led to the orderly growth of the industry. High growth and acceptance of unit-linked business has been witnessed in India, which has allowed a common investor not only to enjoy adequate risk cover but also benefit from the economic growth by investing in equity-related products without taking the risk of directly investing in equity. To my mind, it is one of the greatest offerings for Indian investors which help them beat inflation, while also combining investment and protection under one head. The last regulatory changes in Unit-linked Insurance Plans (ULIPs) post September 2010 have made them one of the cheapest modes of investment in equity-related products, while also offering the flexibility of choosing the level of risk cover as per the requirement of an investor. Following changes were introduced in September 2010 to make ULIP a more attractive proposition: a:
The lock-in period for ULIPs has been made 5 years instead of 3 years. b: All top-up premiums now have insurance cover c:
No partial withdrawals for ULIP pension/annuity products d: Loan up to 40% of NAV can be sanctioned e: All limited premium ULIPs, other than single-premium products, now have premium paying term of at least 5 years fULIP charge structure evened out over tenure of product. Charges on ULIPs are mandated to be evenly distributed during the lock-in period to ensure that high front-ending of expenses is eliminated. Another class of life insurance products, which was largely ignored in the last decade, is now slowly catching up with Indian investors, owing to various reasons like a) volatile equity market, b) frequently changed ULIP guidelines, and, c) Investors looking for safety of principal along with decent returns. Traditional life insurance policies have come back with a big bang after 10 years of remaining elusive. These policies offer a slew of benefits like a) Guarantee of a minimum sum on maturity, b) A higher level of risk cover built in the product, c) Participation in yearly bonuses, d) Long-term nature of the product to meet various life goals like retirement, child education, marriage, etc. However, as positives usually come along with a few constraints, traditional life insurance policies have their own limitations like a) Limited choice of asset class, b) Inflexibility of the product, as compared to ULIPs, c) Nature of the product is more debt-oriented in comparison to ULIPs, d) Not meant for investors looking for early liquidity. Thus, traditional life insurance policies are the ideal products for investors looking for safety of their hard-earned money, along with decent inflation-adjusted, tax-free returns, and an adequate risk cover on their lives and also for those who are comfortable investing regularly for long term. To take care of their liquidity needs, insurers have been smart enough to introduce products which offer regular return of money on monthly/annual basis, which are commonly known as moneyback/monthly income plans, and are quite a rage among investors these days. Simultaneously, we have also witnessed an upsurge in the pure protection category, which has gained popularity with investors, because of rising awareness levels and a lot of people also want to cover their loan liability like home loans etc. Internet revolution has also helped promoting these products in the last 3-4 years by making investors increasingly aware about their protection needs. To sum up, life insurance has gone a long way in helping investors meet their diverse life goals. The products have undergone a sea change, from ULIPs to traditional, and a mix of term insurance plans. I strongly feel that investors should have a mix of all these three and should relate their buying decisions on the basis of their needs, rather than taking ad hoc decisions on allurements like tax-saving, returns, etc on a standalone basis. The author is Principal Officer, Bajaj Capital Insurance Broking. The views expressed are his own |
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Time to shift lender for teaser rate customers
A lot of people who took teaser rate home loans in 2009-2010 or in early 2011 have finished the period of fixed interest rates and are now paying floating rate of interest. The typical floating rate interest that they are paying is around 11.5-11.75 per cent whereas new home loan consumers are able to get the rate in the range of 10.25-10.75 per cent. Clearly whatever their savings may have been in the teaser period, today they are paying 1-1.25 per cent higher than what they would have paid if they were on floating rate today. Of course they have an option to shift the loan from their existing lender to another lender at the lower rate of 10.25 per cent-10.75 per cent. The lower end of the rate band is offered by SBI for loans up to Rs 30 lakh and some foreign banks for large-value cases. They will not have to pay any pre-payment charge to their existing lender if their teaser rate loan has already converted into a floating rate loan. National Housing Bank (NHB) has clarified this aspect through a circular to all housing finance companies such as Housing Development Finance Corporation Ltd (HDFC), LIC Housing Finance and others. If their teaser rate loan is from a bank such as State Bank of India (SBI), ICICI, Axis, IDBI, Citibank, Standard Chartered, HSBC and others then the Reserve Bank of India (RBI) (which regulates all banks) has also clarified that there will be no pre-payment charges if the teaser rate loan is shifted to another lender after it turns into a floating rate loan. Before you shift from your existing teaser rate lender, check with him if he is willing to shift you to a floating interest of 10.50 per cent at the maximum. It is better to pay him a small fee (normally around 0.56 per cent of the outstanding loan amount) as a one-time fee and shift to this lower floating interest rate loan of 10.50 per cent per annum instead of going through the entire process of shifting your loan from one lender to another. But if the shifting fee is higher than 0.56 per cent or the rate being offered by your existing lender is higher than 10.50 per cent, you should shift your loan to another lender. If you have a loan in excess of Rs 50 lakh coupled with a good credit record, you should be able to get an interest rate of 10.25 per cent per annum from several foreign banks. Whichever course of action you follow, make sure you shift to a floating rate loan and at a cost not greater than 10.50 per cent and preferably more like 10.25 per cent. The author is CEO, Apnapaisa.com. The views expressed are his own
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Tax Advice
Q. Please suggest some solutions for my queries. My particulars are as under:
I am a 72-year-old university pensioner. My sources of income are as under: (i) Pension Rs 3 lakh + (ii) Interest on bank fixed deposits (FDs). (iii) Interest on 5 years Senior Citizen Scheme of Post Office My queries are:- a) If income tax is deducted at source in respect of 2(i) and 2(ii) above, can I fill up Form 15H and submit it to the post office and make deposits in 5 years SCS in a bank/PO under Section 80C to the extent income is received from the post office, limited to Rs 1 lakh in a year, to neutralise the income tax payable. Am I required to to file I-T return in case when no more tax is payable? b) Shall it be obligatory to submit I-T return if I do not submit Form 15H anywhere and allow income tax to be deducted at source in full and make no deposits under Section 80C. — TR Sharma A. Your queries are replied hereunder:- a) You can file Form 15H for non-deduction of tax on pension and bank interest provided your total income after claiming a deduction under Section 80C of the Income Tax Act 1961 (The Act) is Rs 2,50,000 or below the said amount. b) You can claim the benefit under Section 80C of the Act by depositing an amount not exceeding Rs 1 lakh in any of the schemes prescribed under the said section. c) You will be required to file the income tax return in case your income is below the maximum amount on which the tax is not payable, provided you have claimed a deduction under Section 80C of the Act and the total income is reduced to an amount below the taxable limit on account of such claim. Q. I am working in Power Com (PSEB). My salary details for the year 2011-12 AY 2012-13 is as under: Basic pay + GP = 2,53,320 ADA = 1,32,751 Allowance = 1,74,085 Arrears = 95,461 Electricity concession for 1,500 units @ Rs 4.90 = 7,350 (perquisite value) Savings GPF = 79,482.00 Tuition fee (one daughter) = 50,000 Infra bonds = 20,000 Interest paid on education loan = 4,269 I have been provided a rent-free accommodation by the department. What will be perquisite value for this? Please calculate my tax liability for AY 2012-13. My department has deducted TDS of Rs 49,550. Can I revise the previous years return as the arrear pertains to previous years? Please advise. — Harpinder Singh Peori A. (a) The perquisite value of a rent-free accommodation should be taken as 10% of your salary and allowance in view of the fact that population of Bathinda was less than 25,00,000 as per 2001 Census. Accordingly, the same would work out to be Rs 56,016 after taking into account the salary, ADA and other allowances. (b) You can revise your return for the assessment year 2011-12 before March 2013 and include the amount of arrears of income in the return for the year ended 31st March 2011. You can also seek relief under Section 89 of the Income Tax Act, 1961 (The Act) in case the arrears are included in any of the years i.e. year ended 31st March, 2011 and/or year ended March 31, 2012. On the basis of figures given by you, your tax liability for the year 2012-13 works out at Rs 52,471 after including the arrears of salary received by you without, however, claiming any relief under Section 89 of the Act. As against this, you have already paid Rs 49,550 by way TDS. The balance amount payable is Rs 2,921. Q. This year e-filing has been made mandatory for individuals having income above Rs 10 lakh, but since June 2011, I am trying to log in with my PAN number. It showed PAN already registered, whereas I never registered it, all my mails to info@incometaxindia.gov.in have failed to solve the issue. It appears somebody has hacked my PAN number. Now, what should I do? I have not filed my return due to this issue. Where can I lodge a complaint that return is not being filed because online account has been hacked? — Anshu Narula A. You should contact the helpline of the Income Tax Department and seek their assistance to solve your problem. |
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Aviation Notes
“Building the future of Indian aviation”. This was the theme of International Air Transport Association (IATA) Director-General Tony Tyler’s speech at an interactive session organised by Confederation of Indian Industry (CII) here recently. The talk was highly analytical, informative and educative, as all areas concerning civil aviation were adequately highlighted.
Being passionate about aviation, Tyler touched upon passenger traffic, cargo movement, fare instability, airport infrastructure, taxes and levy charges and involvement of public-private partnership (PPP) consortiums. His thrust was that India is a fertile market and much more can be achieved with more systematic and regulated functioning. He showed urgency for greater participation of stakeholders and establishment of level-playing policies for brighter future than what has been achieved so far. He also emphasised on the safety of 3 billion people, who fly globally annually. A study of Indian civil aviation reveals that flying is no longer ‘joy’; it is a cattle journey as airlines, in an effort to make money, not only seek payment for every need, like allotment of ‘preferred seat’, but they treat ‘passengers like live cargo - handle with care’. This abnormal situation has arisen because Indian regulatory authority like Directorate-General of Civil Aviation (DGCA) has become a mere ‘paper tiger’. While IATA is not what it used to be between the 1960s till 2000. During this period, airlines, travel agents and other agencies concerned craved for an IATA- recognition. When an IATA inspector made a quiet entry into the Capital, there was panic and tension in the aviation sector, particularly among airlines and travel agencies. Now, no one cares for the IATA, which, according to airline bosses, is more a ‘social outfit’ than a regulatory authority. The study shows that flying on long international sectors is as rough and tough as flying on Indian domestic routes. The IATA charges hefty affiliation fee from units. Let the IATA chief spell out what ‘team effort’ does IATA make to reduce the global downturn and what is IATA’s contribution in rendering stability to the Indian civil aviation? If only IATA continues to be as strong and dispassionate as it was between 1960 and 2000, the Indian civil aviation scenario would not have been plagued by multiple diseases. |
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Ajay Shriram, vice-president, CII, and chairman and senior managing director, DCM Shriram Consolidated Limited
(DSCL), represents one of the oldest and illustrious business families in India,
DCM. DSCL, a spin-off from trifurcation of the erstwhile DCM Group is a Rs 5,000-crore business conglomerate with interests in
agri-rural business like fertilisers, crop care, hybrid seeds and chloro-vinyl business consisting of caustic soda, chlorine, calcium carbide, power and cement. In an interview to Sanjeev Sharma, Shriram talks about the impact of weak monsoon on the
agri-economy, weakening of rural demand and growth plans for his company.
Privatisation of the life insurance industry has completed over 10 years now and we have already witnessed a lot of evolution. Right from zero to over Rs 17,000 crore has been contributed by private life insurance companies in the year 2011-12. The last 10 years has been the fastest growth story in the Indian insurance history. Like any evolving industry, the insurance sector has also seen a lot of rise and fall since
privatisation. Moreover, we now have a 10-year history to look back at, to learn from our mistakes and take benefits from the positives.
A lot of people who took teaser rate home loans in 2009-2010 or in early 2011 have finished the period of fixed interest rates and are now paying floating rate of interest. The typical floating rate interest that they are paying is around 11.5-11.75 per cent whereas new home loan consumers are able to get the rate in the range of 10.25-10.75 per cent.
