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Defiant promoters to face penal action: SEBI
BIZ TALK
IOC says no to govt share buyback plan
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9 firms shortlisted for CIL restructuring
RCom hikes pre-paid mobile call rates
Tax Advice
personal
finance
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Defiant promoters to face penal action: SEBI
Mumbai, May 26 As per SEBI’s minimum public shareholding norms, all private sector listed companies need to have at least 25 per cent public shareholding and promoters have been asked to lower their stake to 75 per cent or below by June 2013. For the public sector companies, the minimum public shareholding has been fixed at 10 per cent and the deadline is till August 2013. These norms were announced in 2010 to ensure that the public investors get a larger presence and help create an equity culture in the country. "The companies were given three years to comply with these norms and this time frame should have been sufficient for anyone willing to meet the guidelines," SEBI chairman UK Sinha said. "Now if we find that a company has decided consciously not to follow the guidelines, I would assume that they are doing it willingly and therefore they are willing to face the consequences," he said. Without specifying the penalties for the non-compliant companies, SEBI chief said: What these consequences would be, that would depend broadly on two parameters - the intent of the promoters and the interest of minority shareholders." "Whatever action we take, we will keep in mind that the minority shareholders don’t suffer and the intent of the companies will also be taken into account," he said. While many companies have managed to bring down their promoter holdings to comply with the norms, the market estimates suggest that close to 100 private sector listed firms are yet to meet the guidelines. Over the next few weeks, promoters of these non-compliant companies would need to sell shares worth an estimated amount of Rs 15,000 crore, collectively, to meet the norms. Asked about the penal actions SEBI would take against the companies that remain non-compliant after the deadline, Sinha said: "First, we would see whether there was an intent or not to meet the guidelines. "If we find that there was no intent at all, we would rightly assume that the company doesn’t actually want to adhere to the norms and we would take appropriate action against them as per the SEBI regulations and listing requirements." Sinha, however, added that SEBI would keep in mind the public shareholders' interest while taking action against the defiant promoters. "If a company does not meet the guidelines it is not the fault of the minority shareholders and therefore they should not suffer," he said. "Therefore, the second consideration in taking action against non-compliant companies would be that the interest of the minority shareholders are not affected," Sinha said. — PTI Shareholding norms
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Life insurance industry still evolving, says ICICI Pru
Q: The insurance premiums have not been encouraging for the industry. What are the reasons?
A: Slowdown in economic growth coupled with high inflation adversely impacted the household savings rate of the country. Within that, as per RBI data, there has been a significant slowdown in financial savings. Another contributing factor has been the uncertain global economic scenario resulting in depressed returns from equities. These and other factors prodded households to channelise their savings into other asset classes such as real estate, gold etc. There have also been significant changes in the regulatory structure in the industry. While this has resulted in a far better product and service offering for the customer, life insurance companies have had to recalibrate their business models for long-term sustainability and profitable growth. However, we are now seeing the industry turning the corner and given low penetration of life insurance products in the country, the potential going forward is significant. Q: Why is investor appetite sluggish for insurance? A: The Indian life insurance industry is in its nascent stage and still evolving. Despite this, in a short span of time the industry has reached a juncture where it competes with all other financial services products available to customers. Life insurance products are the only products which offer customers the dual benefits of ‘protection and savings’. The country’s slow economic growth, high inflation and global uncertainties have taken a toll on the household financial savings rate in the country, which has fallen to around 8% of GDP. All these factors, coupled with low-risk appetite among investors, contributed to a slow uptake of all financial services products. At ICICI Prudential Life, our mantra has been to provide products which best suit customers, convenient on-boarding process and superior customer service. This has begun yielding the desired results and for FY 2013 we registered a topline growth in excess of 15% (on a retail weighted basis) against an industry decline of approximately 2%. Q: What is the outlook for the overall industry in the year ahead? A: Much would depend on the overall economy and household savings rate. As customer preferences change over a period of time, companies need to closely monitor and adapt to these changes. Delivering a better product and service proposition has added a layer of confidence and we are witnessing customer confidence towards life insurance steadily building up. This, we believe, is likely to result in a healthy growth rate for the industry in future. Q: What are the steps taken by ICICI Prudential Life to combat the issue of mis-selling? A:
This is a challenge being faced by the industry and companies have taken steps to address this. Our approach has been to extensively use technology and today it is all pervasive and covers every aspect of functioning of the organisation. This ensures that customers are provided a transparent process of evaluating our products. We constantly engage in skill upgrade for our distribution network enabling them to do a customer ‘need analysis’ and present relevant products which best fit the needs of customers. The right products means the customers are able to achieve their financial goals. Most notably, it allows for providing better customer service proposition and has made the on-boarding process simple and transparent. Q: What about your claim settlement ratio? A:
ICICI Prudential’s claim settlement ratio at 96.5% is the best among private life insurers. Our approach to claims settlement is to be sensitive and hand-hold the claimant/beneficiary through the claims settlement process; genuine claims are settled in the quickest possible time frame. The mantra for claims settlement is ‘First Time Right’. In order to provide convenience, we have provided wider access for claim intimation across various touch points i.e. branches, website, SMS and call centre, thus ensuring absolute convenience for the claimants during their time of distress. Several initiatives such as setting up of ‘Claims Hotline’ at all branches, ‘Claims Priority’ service desk at all branches and a ‘simplified’ claim intimation form, have helped in ensuring that the process of claim settlement gets smoothened to a great extent. Q: What are your views on FDI in insurance? A:
The industry has been keenly following this proposed reform by the government. In an industry such as life insurance which is capital-intensive, enhancing the FDI limit will bode well as it can enable higher penetration of life insurance. It would be a good measure and will positively benefit the economy as this will attract long-term capital into the country. |
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IOC says no to govt share buyback plan
New Delhi, May 26 The Department of Disinvestment (DoD) will now float a Cabinet note next month in which it will propose 10 per cent government stake sale in the oil company through the offer for sale (OFS) route, officials said. "DoD had written to IOC for a buyback. IOC replied saying it already has a huge borrowing and can’t buy back shares as it would require it to do further borrowing," a top official said. The government plans to sell 10 per cent stake or over 19.16 crore shares in the the nation's largest oil firm to rake in between Rs 6,000-7,000 crore to the exchequer. At the end of April-December 2012, IOC had a cash balance of Rs 938 crore and free reserves of over Rs 49,000 crore. However, its borrowings stood at over Rs 94,000 crore. In the full 2011-12 fiscal, IOC's cash and free reserves stood at Rs 307 crore and over 53,000 crore respectively, while its borrowings were over Rs 75,000 crore. "So far the total 10 per cent stake would be up for sale. If it has to come in tranches, for that the EGoM on disinvestment would take a final call after taking into consideration the market timing," the official added. — PTI
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9 firms shortlisted for CIL restructuring
New Delhi, May 26 The ministry had received applications from the firms like McKinsey, KPMG, Ernst & Young, Deloitte and Crisil. However, the source refused to name the firms which have been shortlisted. — PTI
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RCom hikes pre-paid mobile call rates
New Delhi, May 26 According to the company's website, it will charge base rate of 2 paise per second for mobile-to-mobile calls. The base rate, or the headline tariff, applies to customers not covered under any special scheme offered by their telecom operator. Earlier this month, the company increased mobile call rates up to 30 per cent for both GSM and CDMA pre-paid customers to improve the profits. The increase in mobile-to-mobile call rates among old players, except Aircel, has gone up by up to 100 per cent in last two years. — PTI
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Senior citizens not liable to pay advance tax
by SC Vasudeva Q. While presenting Budget for F.Y. 2012-13 on 28.2.2012, the Finance Minister had announced that senior citizens would be exempted from paying advance tax in case of income from salary and interest on bank deposit etc. But the Income Tax office does not agree to it. Kindly clarify. — MR Kashyap A. It has been specifically provided in sub-section (2) of Section 207 of the Act dealing with the liability of payment of advance tax that the liability to pay advance tax would not arise in case of an individual resident who does not have any income chargeable under the head ‘profit and gains of business or profession’ and who is of the age of 60 years or above at any time during the previous year. You can bring this sub-section to the notice of the department. Q. Earlier, interest on a Post Office savings account was fully exempt from income tax up to Rs 3,500. Now, interest on a savings account has been exempted to the extent of Rs 10,000. Kindly advise if the limit of Rs 10,000 includes Rs 3,500 or both of them are independent of each other. Also, please quote the relevant sections of the Income Tax Act. — Gurnam Singh A. Interest on a Post Office savings account is exempt to the extent of Rs 3,500 in accordance with the provisions of Section 10(15) of the Income tax Act 1961 (The Act). A new Section 80TTA has been introduced by the Finance Act 2012 whereby interest earned in a savings account maintained with a bank and Post Office would be allowed as deduction from the total income of an individual or Hindu Undivided Family from assessment year 2013-14 onwards. This deduction is independent of the exemption allowable under Section 10(15) of the Act. Q. Kindly clarify whether contributions made in a PPF account of grandchildren qualify for rebate under Section 80C. 2) As per my information, super senior citizens can now avail an exemption limit of Rs 5 lakh. Does this limit apply to gross total amount or total income i.e. excluding rebate of Rs 1 lakh under Section 80C. — Reader A. (a) Contribution of Public Provident Fund can be made by any individual on his behalf or on behalf of a minor of whom he is the guardian. Accordingly, it may not be possible for you to get the benefit for deposit made in the name of grandchildren. (b) Exemption is available to a senior citizen who has attained the age of 80 years and he is liable to pay tax only if the total income in his case exceeds Rs 5 lakh. The applicability of the above provision is with reference to the total income and not with reference to gross total income.
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personal finance Be optimistic, buy on dips and focus on blue chips. But whatever is your decision, a well-planned investment strategy with proper asset allocation is important Jayant Manglik With worldwide equity markets generally buoyant and vigorous foreign institutional investors’ fund flows into India, the stage seems set for our markets to cross its all-time high levels of 6,357 on the National Stock Exchange’s 50-stock Nifty. A year ago there was much uncertainty in the western world but that seems to be a thing of the past. Of course, issues still abound but the panic in the global markets has definitely gone. And there is enough liquidity without the fear of inflation, a situation which has helped bring down the price of gold. India looks strong from an investment standpoint and last year’s record FII inflow of $23 billion seems set to be easily surpassed this year. While the FIIs investment pattern indicates that they are expecting a re-run of Nifty’s 27% jump last year, the local investors are not so enthusiastic — which can be seen from redemptions in various equity-oriented schemes of mutual funds. And while global rating agencies may not be sanguine about India despite efforts by the government on fiscal consolidation, money continues to pour into our equity markets. On the domestic front, things don’t look all that hunky-dory. The spoilsport Rupee has been continuously showing weakness against the US dollar and our GDP growth for the current financial year is likely to be in the region of 5%. While the overall Earnings per Share is going up, the local liquidity situation is still not comforting. The credit cycle has not yet turned and recent tinkering with policy rates, when Reserve Bank of India cut its key repo rate by 25 basis points in its annual monetary policy, has not helped. But our companies have a good reputation and great processes, and this combined with some quick action on the policy front by the government can definitely turn the tide. Of course, the Finance Minister can’t change the investment climate on his own. Ultimately it comes down to productivity which needs an enabling environment so that it inspires confidence in companies to step up investment. And, if we have to get enough investment to underwrite our growth plans over the next few years, equity markets will have to be strong and reflect India’s fundamentals so that funds could be raised. The recent times have been good and the equity markets seem to be consolidating for the final charge to a new high. After five successive weeks of a rising gradient, last week saw the Nifty closing down at 5,983 for a variety of reasons of which three stood out. First, the decline in global markets after Japan’s announcement had its effect on India too, just as rising global markets have a spillover effect. Secondly, the India volatility index saw a fresh breakout. Third, the deterioration of the Rupee versus the US dollar finally took its toll. But consolidation seems to be a reality and this week should see the Nifty moving in a narrow band of 250 Nifty points, mostly above Friday’s closing. Global markets also continue to be strong. On the flip side, the previous week saw four consecutive days of decline obliterating the gains that indices showed in the first fortnight of the month. Blame this on Federal Reserve Chairman Ben Bernanke’s recent indications that the US central bank could slowly cut down on its bond-buying programme in the coming months as the economic outlook improves. This, combined with the fall in Japanese Nikkei and a weak rupee has made domestic investors uneasy but FIIs continue to look at dips in the Indian equity market as an opportunity to buy in. Data from China showing that manufacturing has contracted in May has also led to hurting of sentiment in Asian markets. Also, several blue chip companies like SBI, L&T, BHEL and Tata Steel unveiled their Q4 FY13 results last week but their numbers were not in line with street expectations and added to the negative sentiment among investors. Being optimistic in such a market is frequently a good idea, so buy on dips and focus on the blue chips. But whatever your decision, a well-planned investment strategy borne out of financial planning with proper asset allocation is most important for all investors. The author is President, Religare Securities. The views expressed in this article are his own
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Rebalance asset allocation periodically
Nifty recently crossed the 6,200 mark again and experts are looking for an all-time new high in the coming months. At this juncture, many people who made good profits will be happy and who failed to participate in the rally will be looking to invest in shares or in mutual fund schemes. Before investing or staying invested, one should ask, whether this is the right time to enter or stay invested or to wait for correction or book profit. Most of the investors will be confused as what to do at this stage. The following are some assessments, which one should consider before taking a final call.
Current facts of market Let me first clarify that neither I am trying to time the market, nor I am predicting market movements to go up or down. I am just trying to highlight the basic principles of financial planning, i.e. ART A – Asset allocation R – Risk appetite T – Time horizon Asset allocation plays a major role in deciding your returns over a period of time. Your portfolio returns depend more on asset allocation than fund performance. Asset allocation means balancing between risk and reward by investing in different kind of asset class such as equity, debt and liquid instruments. In simple words, it means don’t put your all apples in one basket. Invest according to your risk appetite, time horizon and defined future goals, but never forget your asset allocation on any given point of time. Different asset class has different levels of risk and returns. You must always invest according to time horizon available for the investment. Longer the time duration available, higher should be the equity exposure and if the time horizon is very short then your portfolio should be debt-oriented. Asset allocation once decided should be followed seriously and accordingly should be rebalanced periodically. Rebalancing is the process of restoring your portfolio back to its original asset allocation. Rebalancing generally should be done every year or when you get some good profits from one asset class like today. You should also rebalance it two years prior to reaching your goals and shift a major part to debt portfolio. Gold investment should not be more than 10 to 15% of your total portfolio. It is also advisable to take the professional advice which can help you a lot. Let us take an example Sachin, 30, has decided to invest as per his asset allocation, in the ratio, 70% in equity and 30% in debt. He invested Rs 10 lakh last year on June 1, 2012. Accordingly, he has invested Rs 7 lakh in equity and Rs 3 lakh in debt. After one year, his value in equity has gone up to Rs 9.10 lakh (30% growth) and Rs 3.24 lakh in debt (10% growth). His total investment has risen to Rs 12.34 lakh, giving him an overall return of 23.4% on his total portfolio. Now, his investment is 74% in equity and 26% in debt. This clearly shows that he has more exposure to equity as compared to his asset allocation and need to book profit in equity and allocate the profit to debt. He has to book profit in equity and has to withdraw an amount of Rs 46,000 and allocate to debt fund. This will again bring him to his original asset allocation as per his goal and time horizon decided by him. You should also keep in mind that after every five years, you have to change your asset allocation and have to decrease equity exposure and increase debt allocation. In Sachin’s case, when he turns 35, his asset allocation will be 65% in equity and 35% in debt. This rebalancing of portfolio will always keep Sachin in a win-win situation. Market movements will not affect him much, whether market goes up or down as he is rebalancing his portfolio regularly as per asset allocation. Before taking any investment decision, you must do some homework and check ART first. If you are confused and unable to take any decision, just follow the basics. Asset allocation and rebalancing your portfolio regularly is a key to success and financial freedom. The author is Head, Financial Planning,
Apna Paisa. The views expressed in this article are his own |
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Q: The insurance premiums have not been encouraging for the industry. What are the reasons?
With worldwide equity markets generally buoyant and vigorous foreign institutional investors’ fund flows into India, the stage seems set for our markets to cross its all-time high levels of 6,357 on the National Stock Exchange’s 50-stock Nifty. A year ago there was much uncertainty in the western world but that seems to be a thing of the past. Of course, issues still abound but the panic in the global markets has definitely gone. And there is enough liquidity without the fear of inflation, a situation which has helped bring down the price of gold.
