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An e-weekly from the Western India Regional Council of The Institute of Company Secretaries of India

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Four-member panel to finalise rules by Sept end
rime Minister Manmohan Singh on Friday set up an experts' committee to review and rework the controversial General Anti Avoidance Rules (GAAR) tax provision. The four-member committee to be headed by Parthasarathi Shome, director and chief executive of the Indian Council for Research on International Economic Relations (ICRIER), has been asked to submit its report to the government by September 30, 2012,according to a statement released by the Prime Minister's Office (PMO).The committee will hold consultations with various stakeholders and finalise the draft GAAR guidelines. The second draft guidelines on the controversial anti-avoidance rules have to be published by August 31. The announcement of setting up the expert panel comes within two weeks of the release of draft guidelines. The guidelines were released on the direction of the prime minister, who now holds the finance portfolio. Other members of the panel are N Rangachary, former chairman of the Insurance

14 July 2012 Volume 1, Issue 8 Powered by

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From The Chairman

Dear Readers,

Reaching out for the love of knowledge

PM sets up experts panel to review, rework GAAR

P
The then finance minister Pranab Mukherjee had announced GAAR as part of the budgetary proposal in the 2012-13 union budget presented in parliament in March this year. However, following widespread protests from the business community and political parties, Mukherjee later deferred the implementation of the new tax rules by a year.The new rules will now be applicable from the beginning of the next financial year instead of April 1, 2012, as earlier proposed. "While postponing GAAR by one year to 2013 was a very welcome move, a widespread consultative process is necessary to generate a discussion on GAAR provisions so that there is an informed debate on how GAAR is going to operate," the statement released by the PMO said. The statement said the new committee would help bring transparency in the implementation of the new tax rules. The Department of Revenue will provide all necessary support to the expert committee to facilitate its work, including office assistance and assistance to facilitate consultations, the PMO said. (Source:The Times of India)

e are pleased to present another issue of Empower. By the time you receive this issue, we would have held the ICSI-WIRC's Annual Regional Conference 2012 at Indore. We have already received nearly 500 registrations. The Bombay Stock Exchange is the principal sponsor of the conference while Taxmann is the co-sponsor. We will update you about the happenings at this mela of professionals. Meanwhile, for the first time, the ICSI-WIRC had organised seminars in Jabalpur (Madhya Pradesh) and Bhilai (Chattisgarh), where there are no chapters, the response to which was phenomenal. Our heartiest complements to the Team Empower for its continuing efforts and a sincere thanks to the Free Press Journal for making this project a reality. Hope you find this issue useful. Please share your feedback at
cschairman.wirc@gmail.com

THE TERMS OF REFERENCE OF THE COMMITTEE INCLUDE: Receiving comments from stakeholders and general public on draft GAAR guidelines Vet and rework guidelines based on this feedback and publish the second draft of GAAR guidelines for comments and consultations Undertake widespread consultations on the second draft GAAR guidelines Finalise the GAAR guidelines and a roadmap for implementation and submit these to the government

Regulatory Development Authority; Ajay Shah, professor at the National Institute of Public Finance Policy (NIPFP); and Sunil Gupta,joint secretary,tax policy and legislation in the finance ministry.

Govt to push unlisted RBI to launch plastic currency on pilot basis firms to go public

Mahavir Lunawat

mid instances of counterfeiting of notes, the Reserve Bank on Monday said it was working on launching plastic currency and would soon launch a pilot project. "Counterfeiting of plastic notes is very difficult. So, we are planning to launch some plastic money on a pilot basis in four-five centres like Jaipur, Shimla, Bhubaneswar and others. We are working on it," RBI Deputy Governor H R Khan told reporters here. Under the pilot project, notes of Rs.10 denomination would be distributed through the central bank's five regional offices. The proposed shift to plastic currency notes, instead of the

usual paper notes, is primarily aimed at checking the counterfeiting, as also high cost associated with printing of paper currency, as they need early replacement due to soiling and mutilation. These notes would have an average life span of five years, compared with one year for the paper notes. Moreover, these notes are also cleaner. Besides studying the potential cost savings through plastic notes, the pilot project will also look into the environmental impact of the proposed plastic notes. Polymer notes were first introduced in Australia. (Source: Moneylife)

he government will soon come out with a roadmap to encourage unlisted companies to visit the bourses. The Ministry of Corporate Affairs is working on it along with other stakeholders. "We will soon come up with a strategy to push companies to get listed, the move will not only help firms but it also deepen the capital market," said Corporate Affairs Minister M Veerappa Moily. Amid uncertain global conditions, several companies have called off their plans to launch IPOs. The roadmap could outline a few 'incentives' for companies that go public. At present, several companies, which have the scale and turnover, are

not listed. A senior government official said that it is important to identify the reasons that have discouraged firms from listing. A government official, however, said that until market conditions improve, few companies would be willing to get listed. "But we want the roadmap to be in place so that once the market conditions improve, firms that are not listed can be encouraged to launch their IPOs," the official said. The official added that though the government cannot ask any firm to list, the endeavour would be to create appropriate conditions that would be attractive for firms to go public.
(Source:The Hindustan Times)

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EM POWER
'Govt should restrict its role in banks, FIs to boards'
which is the board mechanism, but outside of board. "I don't think that it is a good example of good corporate governance. One thing for the government could be to show exemplary behaviour of eserve Bank of India Governor D corporate governance and exercise Subbarao has expressed concern their ownership rights through the over the government 'occasional- board. I think that would be good for all financial instituly exercising' its ownertions." ship rights in banks and There have been ocfinancial institutions casions when the govthrough channels outernment is believed to side of their boards, and have prevailed upon asked it to show exemthe state-owned finanplary corporate govercial institutions as ownnance. er and informally di"There are questions rected them to take about how the governcertain financial deciment will play out its sions. ownership role. This is There were reports not restricted to Nabard, RBI Governor D Subbarao that in the recent stake it is something which is being played out in a number of insti- sale of ONGC, the government had tutions, including the commercial asked state-owned LIC to pick up the banks," D Subbarao said at the 30th bulk of stake. Both the government and the Life Insurance Corporation foundation day function of Nabard. In 21 banks, including SBI, the gov- (LIC) had, however, denied the allegaernment owns majority stake.Besides, tion. LIC had pumped in over Rs.12,000 it has majority ownership in many FIs including four general insurance firms crore and purchased 95 per cent of the equity in ONGC to bail out the and one life insurer, LIC. "Occasionally," Subbarao said, "there government's disinvestment in the oil are concerns over the government ex- PSU in March. ercising its ownership rights not through the established channel, (Source: Business Standard)

May IIP at 2.4%: RBI unlikely to cut key rates in monetary policy review
ven though the Index of Industrial Production (IIP) rose at a better than expected 2.4 per cent in the month of May as against (-) 0.9 per cent in April, analysts are of the opinion that the Reserve Bank of India (RBI) is likely maintain status quo on key policy rates in its monetary policy review. Aditi Nayar, Senior Economist, ICRA feels that the overall sluggishness in the industrial sector persists in spite of the slight DK Joshi uptick in IIP growth in May 2012. "Drawing upon the guidance provided recently by the RBI, inflationary concerns are likely to dominate monetary policy in the near term. With a low probability of any meaningful easing of retail or wholesale inflation in the forthcoming data for June 2012, the RBI may maintain policy rates at current levels in the first quarter policy review." Stating that the growth figure for IIP at 2.4 per cent is still dismal and strongly reflects the weaknesses in investment cycle, Rupa Rege Nitsure, Chief Economist, Bank of Baroda, said: "Unfortunately inflation is too high to expect the RBI to reduce the policy rates. Investors are keenly awaiting investment boosting measures from the North Block," Nitsure said. Echoing similar sentiment Sanjay Mathur, Head of Research and Strategy, Royal Bank of Scotland, said that with RBI fighting inflation, key rates may be maintained at status quo. "Today's number is better than last month's but it does not signal that we are in the middle of an upturn. Unambiguously, it is a weak number for a domestic demand-driven economy like India. With the RBI looking at fighting inflation, it is likely to hold its rates steady in the July review," he said. DK Joshi, Chief Economist, CRISIL, also felt that the industrial production is not likely to have any material impact on the upcoming monetary policy as it is 'too volatile and uncertain'. (Source: The Economic Times)

Notice to Bharti-Walmart, Bharti Retail over suit on FDI violation

RBI chief asks govt to show exemplary corporate governance

merican retail giant Walmart and its Indian joint venture partner Bharti Enterprises have come under scrutiny over a public interest suit that alleged violation of multi-brand trade norms. Currently, Foreign Direct Investment (FDI) is not allowed in multi-brand retail. The Delhi High Court sought replies of the Centre, Bharti-Walmart and Bharti Retail on a plea for a probe against the firms for allegedly carrying out retail trading in the multi-brand sector in violation of India's existing FDI policy.The court issued notices on the basis of the suit filed by environmental activist Vandana Shiva.

(Source: Business Standard)

FinMin quashes Vodafone plea, to reply after PMO's nod

ismissing Vodafone's contention in the Rs.20,000 crore tax case, the Finance Ministry has prepared a reply to the company's rejoinder which would be sent after approval of the Prime Minister. "We did not agree with Vodafone. The Inter- Ministerial Group (IMG) on Vodafone has prepared reply of Vodafone's rejoinder. The reply will be sent to the Prime Minister's Office first. After approval of the PMO,it will be sent to Vodafone," a senior official said after the meeting of IMG. The government had earlier formed the IMG to look into the arbitration notice send by the telecom major under the India-Netherlands bilateral investment protection agreement (BIPA). The government has already replied to the initial notice arguing that tax matters are not covered under the BIPA. Following which the British telecom major sent the rejoinder seeking an assurance that the retrospective tax amendments would not apply to acquisition of Hutchinson's stake in Hutch-Essar in 2007. The notice to the rejoinder,which has been prepared by the IMG, will have to be approved by Prime Minister Manmohan Singh, who had taken over the finance portfolio following the exit of Pranab Mukherjee. (Source: FPJ)

Sebi mulls new self-regulatory body for stock exchanges

apital market regulator Sebi plans to set up an independent SRO (self-regulatory organisation) for stock exchanges, but wants day-today trading regulations and surveillance actions to remain with the bourses themselves. Under the existing regulatory framework in India, the stock exchanges act as the front-line regulators for the market and Sebi is the ultimate oversight and regulatory authority. After putting in some efforts to effect a major overhaul last month in the way stock exchanges are run and owned,Sebi is now looking at ways to minimise any possible conflict of interest in the regulatory and business interests of bourses. As per new rules, exchanges can also get listed, although not on their own platform.Sources said Sebi feels that an independent SRO could be set up to take over member regulation functions

of stock exchanges in the long run, but trading regulations and surveillance actions should remain with bourses. However, a dual-reporting structure could be introduced for the regulatory department of stock exchanges for now to tackle any conflict of interest. The head of regulatory department would report to the MD or CEO of the bourse as well as to an independent committee of the exchange's board. The Sebi board has already approved a proposal for providing the seed fund for setting up the SRO, whenever deemed appropriate. In listing of companies, Sebi would continue to prescribe minimum standards, but exchanges can put in place additional measures.The heads of listing department would also have a similar dual reporting. (Source: The Hindustan Times)

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T services provider Mahindra Satyam is in discussions to acquire an aerospace engineering firm in Europe. The acquisition is part of a larger plan by the company to improve its offerings in engineering services, and in the healthcare and financial services verticals. Mahindra Satyam is likely to finalise the transaction in a couple of months, said two senior company officials, without providing more details. Currently, around 4,500 employees provide engineering services, of whom 1,000 specialise in aerospace engineering. Mahindra Satyam CEO CP Gurnani responded to an ET query about the potential acquisition,saying it was "todeveloped expertise in tally speculative." this area. Software in"We are in the market dustry grouping Nassfor acquisitions, but we com estimates the anhave nothing on the nual business potential plate right now," he said. from engineering servAn aerospace acquisiices at $4 billion. tion will also help Mahin"We (Mahindra dra & Mahindra to Satyam) intend to comstrengthen its foothold in plete two acquisitions aeronautics. The engiby the end of the year. neering services division We would also be lookof IT companies help aircraft manufacturers de- Mahindra Satyam CEO ing at BPO businesses," said a company official. sign aircraft using emCP GURNANI He said leaders from bedded software systems that ensure a high degree of ac- various business units have been curacy. Mahindra Satyam and compa- asked to submit proposals so mannies such as Infotech Enterprises and agement can evaluate them. Mahindra Satyam could spend close Tata Consultancy have in particular

WIRC

Satyam in talks to buy European engg firm I

to Rs.800 crore on these two acquisitions, he added. The company had a cash balance of a little over Rs.3,000 crore as on March 31, 2012. "Airbus and Boeing are coming out with new aircraft-the A 320 Neo and 737Max.There are also manufacturers such as Pratt and Whitney that are launching new models every year. These programmes run for years and there is opportunity waiting to be tapped even in high-precision designing and numerical control tools for component manufacturers," said K Ashok Kumar, an independent consultant and former chief technology officer at Infotech Enterprises. (Source:The Times of India)

Infosys below par despite weak `

nfosys yanked lower what was already a tepid forecast for the year and performed below expectations in the first quarter that ended in June, sending its stock into another resultsday nosedive. The increasingly grim predictions from India's second-largest software exporter suggest that its long-term strategy of pursuing high-quality growth is not quite in sync with the demands of the current market environment. The Bangalore-based company was below par on almost all fronts despite a falling rupee: pricing declined by more than 3 per cent; margins fell despite the company freezing employee pay; it added one less client than in the last quarter; the bread-and-butter financial services business was wobbly and Europe a washout. While analysts have been demanding that the company put its cash pile of about $4 billion to better use, Infosys continued to hold steady to what many view is a risk-averse attitude. De-

No wage hike for now, says Shibulal

n another indication of the slowdown worries plaguing Infosys, the company's CEO SD Shibulal on Thursday said that there would be no wage hike for now. "We will revisit the decision to give wage hikes if any in October," he said. Infosys, which employs nearly 1.5 lakh, announced a wage freeze last quarter and said it would review the decision depending on performance. But with below par results despite a falling rupee, it is unlikely that the freeze will be lifted any time soon.

spite chatter about acquisitions or a share buyback, it gave no indication of anything imminent. "Infosys is battling on two fronts" the market and internal changes. They are still dealing with the second part, which has reflected in the results," said Sudin Apte of Offshore Insights. Infosys said revenue for 2012-13 would grow by around 5 per cent,compared to its guidance of 8 to 10 per cent three months ago. Breaking from practice it did not provide a quarterly forecast citing the volatile external environment. Chief executive S D Shibulal and the rest of the top management have maintained that Infosys' strategy is tailored towards long-term growth that emphasises high-end work. The company has consistently maintained that there can be no trade-off between growth and margins but after more than a year of underperformance it appears to be falling between two stools. (Source: The Economic Times) erating margins of 27.5 per cent were a big positive for the company even after it gave an average wage hike of eight per cent in India and witnessed a pricing decline of one per cent. S D ShibulalInfosys, on the other hand, reduced its FY13 guidance and said it would have a growth rate of five per cent from the earlier 8 to 10 per cent. "We are seeing sporadic pricing renegotiation and some demands for discounts.We lost $13 million because of the currency and took a one-time write-off of accrued revenue on a large transformational programme," said S D Shibulal, CEO and MD, Infosys. The company saw volume growth of 2.7 per cent. (Source: Business Standard)

Eight Indian cos in Fortune 500 list, IOC, RIL lead pack
ight Indian firms have made the cut in the list of world's 500 largest companies compiled by Fortune magazine, with Indian Oil and Reliance Industries finding a place in the top 100. Out of the eight, five are state- run entities.With annual revenue of USD 86,016 million, Indian Oil has cornered the 83rd spot up from 98th place last year. Mukesh Ambani-led Reliance Industries is the first Indian private firm to make it into the top 100 list. With annual revenue of USD 76,119 million, RIL has improved its ranking to 99 from previous year's 134. Besides IOC and RIL,the other Indian companies in the list are steel- maker Tata Steel, Tata Motors, oil entities Bharat Petroleum, Hindustan Petroleum,ONGC and State Bank of India.The list also features Citigroup,ArcelorMittal, led by people with Indian roots. Fortune's global list of world's 500 largest companies for 2012, compiled on the basis of latest annual revenue figures, is topped by Royal Dutch Shell ending retail major WalMart Stores' two-year winning streak. The energy giant had annual revenues of USD 484,489 million. At the second place is energy firm Exxon Mobil, followed by Wal- Mart Stores, energy company BP, and oil producer and refiner Sinopec Group. Bharat Petroleum featured at 225th place,followed by Hindustan Petroleum (267), SBI (285),Tata Motors (314), ONGC (357) and Tata Steel (401). (Source: FPJ)

TCS balm after Infy pain

he first-quarter results of Indian IT services bellwethers - TCS and Infosys - clearly indicate the gap between the two companies is widening. While Tata Consultancy Services (TCS) has grown its business at a steady clip in a difficult environment, by reporting growth across sectors and geographies, the Bangalore-based Infosys is seen to be struggling due to client-specific issues resulting in ramp-downs and disappointing numbers. While Infosys reduced its guidance, the TCS management said it would be able to beat Nasscom's industry growth target of 11-14 per cent for the year provided

cross-currency fluctuations were not too volatile. The results clearly showed TCS was taking over from Infosys as the industry bellwether, said Partha Iyengar, vice-president and country manager-research, Gartner India. N Chandrasekaran, MD and CEO,TCS, said, "This was a spectacular quarter for us. As of now, there is no cause of concern." This confidence is showing in the numbers,too.TCS reported a strong volume growth of 5.3 per cent for the first quarter ended June 30.Revenue was up 37.7 per cent year-on-year at Rs 14,869 crore and 12.1 per cent sequentially.Op-

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launched first. The bourse, according to a few other market sources, could also step up its marketing efforts by selling memberships to the 1,000 unique members of commex MCX. MCX-SX has around 750 members, including a large number of new members who joined in the past few months. Sources said that apart from around 1,200 members on NSE and BSE, its common members on other exchanges, MCX also has around 1,000 unique members who hail from the hinterland. The equity exchange may tap these members, many of whom are among the 'new generation rural rich.' The promoters of the exchange, Financial Technologies (FT) and MCX, will halve their equity stake from 10 per cent within the next eighteen months to comply with Sebi's new norms on ownership of the exchange. Shah said that the new norms will be met within the prescribed time. (Source: The Economic Times)

MCX SX to launch currency options TURF WAR: Lawyers bar

CX Stock Exchange (MCX-SX) will launch trading in stocks and interest rate derivatives within the next few months. The exchange which currently runs currency futures trading platform will also offer the facility for currency options trading, said MCX-SX chairman Jignesh Shah. On Tuesday, MCX-SX received the capital market regulator, Sebi's approval to operate as a full-fledged stock bourse,hours before a court-imposed deadline came to an end. In currency futures it competes with NSE,the market leader in cash and derivatives segment of equity. "The date of the launch will be fixed at our next board meeting, which will be held this month, but we will first start off by offering options in currencies very shortly....it could be within the next few days," said Shah. He indicated that as a new entrant, MCX-SX would consider incentives for members to trade. "The launch of new assets will take place in the next few months," he added.

consultants

Jignesh Shah (L), Vice Chairman, and Joseph Massey, MD & CEO, MCX-SX in Mumbai during a press conference While MCX-SX officials were tightlipped about the timeline, market sources said the promoters could launch new assets in October, around Dussehra, one of the most auspicious days in the Hindu calendar. However, MCX-SX officials declined to comment on the exchange's specific strategy or the segments that would be

India 3rd on foreign investors' list: UN

ajor global companies consider India their third-most favoured destination after China and the United States, a UN report said on Thursday, and investment inflows could increase by more than 20 per cent both this year and next. Foreign direct investment (FDI) flows into India increased by 30 per cent to nearly $32 billion in 2011, though held back by slow pace of reforms, it still remains a long way down the league table of FDI recipients.China drew $124 billion last year, while Brazil attracted

nearly $67 billion and Russia $53 billion. "The FDI inflows into India can go up by 20 to 25 per cent this year and by about 20 per cent next year, if the present trend continues," said Nagesh Kumar, Chief Economist, United Nations Economic and Social Commission for Asia and the Pacific, while releasing the UNCTAD's World Investment Report 2012.Some 179 global companies-from the manufacturing, services and primary sectors- were surveyed between February and May, on their favoured investment destinations for 2012 to 2014.

Kumar said FDI growth seems to be keeping its momentum in 2012, referring to furniture maker IKEA and Coca Cola's recent announcements to pump nearly $5 billion combined into India over the long term.Though India's economic growth slowed to 5.3 per cent in the March quarter, its slowest in nine years, its trends still compared favourably, Kumar said. "Compared to many other places,India is doing better in terms of growth," he said. (Source: NDTV Profit)

he major auditing firms operating in India including the big four - Ernst and Young, KPMG, PricewaterhouseCoopers and Deloitte - could find themselves losing a major revenue pie. The Society of Indian Law Firms (SILF) on Saturday decided to ask all management and accounting firms to stop providing legal advice to their clients, after a recent Supreme Court order that observed that the expression "to practise the profession of law" under the Advocates Act, 1961 covers both litigation as well as nonlitigation matters, and must be handled only by advocates. This could translate into the auditing firms losing a substantial amount of revenues and clients. According to SILF, the foreign law firms have for long been offering advice on non-litigation matters to their clients.In Saturday's meeting,the society also decided to take up the issue with the Institute of Chartered Accountants of India and the Ministry of Corporate Affairs. "We would first take up the issue with the ICAI and the ministry of corporate affairs. In case the accounting firms including the foreign ones continue to provide legal advice to their clients,the government too must intervene," Lalit Bhasin, president, SILF and managing partner,Bhasin & Co said."But if it does not solve the problem,we are ready to take up the issue in court." The big four of auditing have been offering all consulting services under one roof. A senior official at a foreign audit firm, who did not wish to be identified, said the matter needed to be looked into.

(Source: The Hindustan Times)

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