The Tribune, Chandigarh, India

Diageo gets nod for United Spirits open offer
Paves way for Rs 11,167 crore takeover by world’s largest liquor producer

Mumbai, February 5
Moving closer to complete its Rs 11,167 crore takeover of majority stake in United Spirits Ltd, global liquor giant Diageo Plc has got capital markets regulator Securities & Exchange Board of India’s clearance for an open offer to acquire 26% per cent stake from public shareholders of the UB group firm.

As part of the deal for purchase of 53.4 per cent stake in Vijay Mallya-led UB group's United Spirits, Diageo, the world's largest producer of spirits, has made a Rs 5,441 crore open offer for purchase of 26 per cent stake in the company from non-promoter shareholders.

The open offer, which was made about three months ago soon after the deal announcement on November 9, has been now cleared by SEBI after numerous clarifications sought by the regulator and the subsequent representations made to it in this regard.

The deal is, however, still awaiting a green signal from fair trade regulator CCI (Competition Commission of India), although the concerned parties (Diageo and UB group firms) have submitted certain clarifications sought from them.

SEBI issued its final observations on the open offer, which are necessary for the offer and the deal as a whole to go through, on January 31, 2013 and the same have been communicated to Diageo, United Spirits and the merchant banker JM Financial, a senior official said.

SEBI was earlier not comfortable with certain provisions of the proposed offer, including those related to preferential allotment of shares, as it feared that the minority shareholders might be at disadvantageous position under the existing terms of the deal. However, some changes have been made to the satisfaction of the regulator as well as the companies to clear the deal.

As part of the deal, Diageo will acquire 27.4% stake for Rs 5,725.4 crore through a combination of share purchase from existing promoters and preferential allotment of shares. In addition, it had offered to acquire an additional 26% stake for Rs 5,441.07 crore through an open offer for public shareholders. Any acquisition of 25% or more stake in a listed company triggers a mandatory open offer for purchase of additional 26% stake from the public shareholders and the same needs to be cleared by the market regulator.

The proposed open offer for an additional 26% stake in USL entails purchase of about 3.8 crore shares at a price of Rs 1,440 per share, totalling to Rs 5,441 crore, by Relay BV, a wholly-owned subsidiary of Diageo.

The open offer was earlier scheduled to start on January 7, but it was postponed in absence of necessary approvals. An acquirer can go ahead with the open offer only after SEBI issues its "observations" on the same.

United Spirits, India’s largest spirits company, is part of Vijay Mallya-led UB Group, whose aviation venture Kingfisher Airlines has been going through turbulent times for many months now and its licence is currently suspended. — PTI

Debt-wracked Kingfisher posts Rs 755 crore loss as planes sit idle
TNS & Agencies

Mumbai/Bangalore, Feb 5
Debt-ridden and with no customers, Kingfisher Airlines Ltd posted a Rs 755 crore (7.55 billion) loss in the three months to December 31 as its planes sat idle, creditors circled and regulators rebuffed the Indian airline's revival plans.

In its statement to the stock exchanges, the airline said: "During the quarter under review, Kingfisher Airlines did not have any operations. The company submitted a revival plan to the DGCA for the renewal of its scheduled operator's permit and for restart of operations," it said.

Kingfisher, which has been stripped of its flying licence, owes an estimated $2.5 billion to banks, staff, airports and oil companies, but maintained it was "a going concern" in its results statement.

The airline, once India's second-biggest, has spent the past few months negotiating with its creditors and India's aviation authorities. The country's civil aviation minister has said Kingfisher needs at least $186 million to fly again.

Kingfisher spent Rs 4.01 billion on finance costs during the quarter and Rs 82 billion on aircraft leasing charges, although none of the planes was used during the period.

Shares in Kingfisher fell 2% on Monday ahead of the results release. Its shares have fallen 56% over the past year, making it the third worst-performing global airline in terms of stock price, according to Thomson Reuters Starmine.

Kingfisher, controlled by liquor baron Vijay Mallya, has never posted a profit in its eight years of operations, and lost a combined Rs 33.1 bn in 2012.

Auditors estimate higher losses

Kingfisher's auditors, B.K. Ramadhyani & Co, said in its quarterly review report that an accounting method used by the airline to calculate costs incurred for aircraft maintenance and repairs was "not in accordance with generally accepted accounting standards prevalent in India." Had it used generally accepted accounting standards, the loss for the quarter would have been Rs 10.90 billion, the auditor said in the report that was issued by the stock exchange. — Reuters

Budget should reorient tax system, say civil society groups
Tribune News Service

New Delhi, February 5
Civil society organizations said on Tuesday the FY2014 budget should reorient tax policies like increasing direct taxes, particularly wealth and inheritance taxes, eliminating corporate exemptions and closing loopholes on tax avoidance to for inclusive development.

They said the next budget provides the government a significant opportunity to reorient tax policies towards greater revenue mobilization and pursuing a more inclusive development path, as is aimed for in the 12th Five Year Plan.

The Centre for Budget & Governance Accountability, Oxfam India and Christian Aid have asked the finance ministry to address the lack of progressivity in the country’s tax system and raise the much needed additional resources for financing education, healthcare and food security. They pointed out India currently raises only 15.5% of GDP as tax revenues, making it one of the lowest taxes of all G20 countries. By comparison, the average tax to GDP ratio in OECD countries is almost 10% percentage points higher at 24.6%.

Oxfam India CEO Nisha Agrawal, comparing India’s tax regime with that in other G20 countries, said: “Not just the developed countries, even other developing countries like Brazil, China, South Africa, Argentina and Turkey have a higher tax-GDP ratio than India. Furthermore, other countries rely more on direct taxation, which raises greater revenues from those who can afford to pay more, and therefore have a more progressive structure of taxation than India. It’s imperative that India’s tax revenue mobilization is stepped up and we rely more on direct taxes instead of indirect taxes, which are regressive because they affect the rich and poor alike.”

John Suresh Kumar of Christian Aid emphasized the need to review and rationalize the gamut of exemptions in the government’s tax system, which were estimated to be worth 6% of GDP in 2011-12.

Subrat Das, director of the Centre for Budget & Governance Accountability, highlighted the loopholes in international taxation noting India’s commitment at G20 to tackle tax evasion and illicit financial flows and noting that wooing investors should not be at the cost of this commitment.

Meanwhile, Finance Minister P Chidambaram has asked the officers of customs and central excise to make every effort to achieve the budgetary target for the collection of indirect taxes for fiscal 2012-13. He also called on the departmental officers to take advantage of technological advances towards ensuring a nonintrusive tax administration and promoting a nonadversarial tax environment.

“There is of course apprehension that you may fall short of budget target. But, nevertheless, in the remaining seven weeks or so you must make efforts to achieve the budgeted target,” Chidambaram said while addressing officials of the Central Board of Excise & Customs.

Bharti Airtel to buy Alcatel-Lucent stake in India JV

New Delhi, February 5
Telecom major Bharti Airtel said Tuesday it is buying the entire shareholding in the joint venture with Alcatel Lucent, as part of a new business model to manage fixed line and broadband networks. Bharti will acquire the entire equity stake in Alcatel Lucent Managed Network Service India.

In a statement, Bharti said it was introducing a new business model for managing fixed line and DSL broadband networks, on the lines of Indus Towers.

Bharti Airtel subsidiary Bharti Infratel holds 42% stake in Indus Towers, with the remaining stakes in the company with Vodafone (42%) and Idea (16%).

"The operations of the entity will be strengthened by the transition of proven tools, processes and all manpower and skilled resources from the existing joint venture," the statement said. The entity would operate independent of Bharti.

Going forward, the entity would invite other operators to join in with equity participation and bring the management of their broadband and fixed line networks under its fold. Shishir Kumar, currently the Bharti's CEO (Upper North) has been appointed as the CEO of the entity.

Financial details were not disclosed.

"... With this innovative model, we are breaking new ground in an industry which is on the cusp of a massive data growth," Bharti Airtel CEO (India & South Asia) Sanjay Kapoor said. This new model, along with the recently launched Network Experience Centre, would provide greater control for Bharti Airtel over the delivery of a world-class data experience to customers, he added.

On the latest development, Alcatel-Lucent India president & MD Munish Seth said the joint venture was a catalyst in transforming Bharti's Telemedia business at an accelerated pace. "The formation of this new model is a step in that direction and will leverage the core competencies that Alcatel Lucent Managed Network Service India has built over time," he said. — Reuters

NTPC stake sale on Feb 7, may net Rs 12k crore

New Delhi, February 5
The government will offload 9.5% stake in power major NTPC on Thursday, which may fetch the exchequer around Rs 12,000 crore.

"The EGoM has approved 9.5% stake sale in NTPC. The stake sale will be made on February 7," disinvestment secretary Ravi Mathur told reporters here Tuesday. The Empowered Group of Ministers on disinvestment is chaired by Finance Minister P. Chidambaram.

When asked how much would be raised through the sale, Mathur said: "It would be as planned — around Rs 12,000 crore". He added the floor price, or the minimum offer price, would be notified to the bourses on Wednesday.

The government expects to sell shares in four other state companies before March-end, Mathur said.

The government plans to sell over 78.32 crore shares or 9.5% stake in NTPC through offer for sale (OFS). It currently holds 84.5% stake in NTPC.

Shares of NTPC closed at Rs 155.60, up 0.16% on the BSE. At the current market price, the stake sale could fetch over Rs 12,100 crore to the exchequer.

The government had last month appointed merchant bankers including Citigroup, SBI Capital Markets and Morgan Stanley for managing the NTPC stake sale.The department has recently completed 10% stake sale of the Oil India through the auction route raising over Rs 3,141 crore for the government. The government has raised over Rs 10,000 crore though PSU stake sale so far this fiscal.

Besides OIL, the government has raised Rs 6,000 crore from stake sale in NMDC, Rs 800 crore from Hindustan Copper and Rs 125 crore from NBCC.

Share sales in state companies has been a key element of the government's plan to bring down its fiscal deficit to 5.3% of GDP by March-end to avoid a credit downgrade from global ratings agencies. — PTI, Reuters

Hero MotoCorp workers plan hunger strike for higher wages
Tribune News Service

Gurgaon, February 5
While the Hero MotoCorp management is pegging its hopes on the ongoing negotiations with the union to resolve labour trouble, the workers have threatened to go on an indefinite hunger strike to get their demands fulfilled.

Claiming that the management is in no mood to adhere to their “justified” demand of a wage hike, the labour union has decided to take “more concrete” steps to sort things out. The workers are asking for an increment between Rs 15,000 and Rs 18,000 (over a three-year period) as compared to Rs 6,500 given to workers at the Dharuhera plant in 2011.

“All these talks are just a tactic of the management to buy time as, despite negotiations in the presence of the state labour authorities, they have so far shown no inclination to agree to the wage hike demanded by us. What they are offering is meager taking into account the workload and existing cost of living. We didn’t want any trouble and have tried to work things out ever since August last year, but now its time we harden our attitude and fight for our rights . We are planning to go on a hunger strike in the plant premises to wake them up,” said a union member.