Finance & Investing

The department of industrial policy and promotion (DIPP), the nodal agency for foreign investment policy, has written to the finance ministry giving the broad contours of the proposed foreign investment framework for LLPs. It has suggested that foreign investment be allowed in LLPs with prior approval.

"This will give foreign investors flexibility to operate in a simpler environment with minimal compliances and yet be tax efficient," said Akash Gupt, executive director of consulting firm PwC.

LLPs share many of its features with normal partnerships, but partners will have reduced personal responsibility for its business debts as the partnership itself is responsible for such liabilities.

A discussion paper is expected to be put up in public domain soon, said a government official privy to the discussions. This would be third in the series of discussion papers released by the DIPP. The earlier ones were on foreign investment in defence production and multi-brand retail.

Source: Economic Times By DEEPSHIKHA SIKARWAR Foreigners may get to set up LLPs in sectors open to FDI

The finance ministry and the central bank will work together to make regulatory changes in the law relating to security and reconstruction of financial assets, also known as SARFESI Act, to facilitate this increase in limit. "The proposal (for raising foreign equity up to 100%) is being discussed with RBI. Given that there is a rise in non-performing assets of banks, foreign investment will help resurrect some of these potentially viable distressed assets," said a finance ministry official.

ARCs typically set up a trust to raise money from qualified institutional buyers (QIB) to buy distressed assets from banks and in turn issue security receipts (SR), or certificates of share in the distressed asset.

"Raising finances is a problem since ARCs also have to maintain a capital adequacy ratio of 15%. Hence they cannot buy the assets totally on their own," the official said. The rules exempt ARCs which have a net owned fund of `100 crore from maintaining the adequacy norms.

Source: Economic Times By DHEERAJ TIWARI Govt likely to allow 100% FDI in ARCs

By pushing this distinction, retailers have asked for allowing 100% FDI in non-food retail; food retail could be opened up to FDI in a calibrated manner. Most of the organized retail chains have in place different entities for food and non-food retail in the country.

"The discussion paper is not clear on food and non-food retail and we have addressed that in our response," said Kumar Rajagopalan, chief executive officer, Retailers Association of India (RAI).

The proposal comes at a time when the debate on FDI in retail has moved from being an academic to a political discussion.

"The government now understands that organized retail can create jobs and bring investments. However, there is a big resistance on the food side," said Raghav Gupta, president of Gurgaon-based retail consultancy firm Technopak Advisors Pvt. Ltd.

Source: Live Mint By Sapna Agarwal Retailers For Non-Food, Food Retail Distinction, Asked For Allowing 100% FDI In Non-Food Retail

Instead, these PSUs would have to reach a level of 10 per cent public holding in three years for remaining listed, the Finance Ministry said here.

It may be recalled that the government had made it a must for listed companies to divest at least 25 per cent holding for the public from the promoters' stake from the prevailing norm of 10 per cent.

But within two months, the stringent condition was diluted in favour of PSUs amid fears that a host of issues, either initial or follow-on offers, could impact the disinvestment programme of the government.

"Every listed public sector company shall maintain public shareholding of at least 10 per cent...a public sector company which has public shareholding below 10 per cent on the date of the commencement of the Securities Contracts (Regulation) (SCR) Rules, 2010, shall increase its public shareholding to at least 10 per cent," the Finance Ministry said in its amendment to the norms, issued in June.

Source: The Tribune PSUs exempted from 25% public float

The recommendation is contained in a report that has suggested a more liberal framework for foreign investment in India but strict disclosure rules for investors, two persons familiar with its contents said. The report of the working group headed by UTI AMC chairman U K Sinha was submitted recently to the finance ministry.

It also wants foreign portfolio investment not to be counted for the computation of sectoral foreign investment limits, putting it at odds with the consolidated FDI policy of the government. That policy says that overseas investment of any type -- portfolio or direct -- should count in the computation of sectoral foreign investment caps.

"The whole idea is to do away with the current norms that distinguish between the same type of capital coming under different garbs. The report suggests doing away with the distinction in private equity, foreign venture capital investors," one of them said.

Source: Economic Times By Deepshikha Sikarwar Foreign Individuals May Get Direct Access To Equity Mkts

The second-largest sector for outward FDI is `financial, insurance, real estate and business services' followed by `wholesale and retail trade and restaurants and hotels'.

Their respective shares have picked up in the latest year. India's outward FDI is largely financed in the form of equity, loan and guarantee. These include sources, such as drawal of foreign exchange in India, capitalisation of exports, funds raised through external commercial borrowings, foreign currency convertible bonds and ADRs/GDRs, and also through leveraged buyouts by way of setting up of special purpose vehicles (SPVs), according to the central bank.

While India Inc has welcomed the recommendation for increasing the threshold for making open offers from 15 per cent to 25 per cent, it is worried about the proposal that will require the open offer to be made for the entire 100 per cent stake.

"That's quite harsh. One will have to mobilise a huge amount of money for an acquisition now," said Isaac George, chief financial officer, GVK Power & Infrastructure. "Mergers and acquisitions will now be restricted to those with deep pockets and those who want to acquire lock, stock and barrel," he said.

Under the existing code, which is set to change, an acquirer has to make an open offer for an additional 20 per cent stake when it crosses the 15 per cent threshold.

"The M&A activity may slow down in the short run as non-serious acquirers or those with a short-term vision may think twice before making a bid," said Siddharth Shah, principal, Nishith Desai Associates, a Mumbai-based law firm. "But it should not be a hindrance to M&As in the long run," he said.

Source: Business-standard M&As to become more expensive

Realty had a reality check when it melted furiously and was brought to realistic levels. It's now back in the limelight, with demand picking up slowly. When there is a dearth of buyers, products get the much needed innovative streak and this is what happened. Structured products in this sector have hogged the stage for some time. A quick rendezvous on how they work and whom they suit.

WHAT IS A STRUCTURED PRODUCT?
Typically, structured products are pre-packaged investment strategy across different asset classes --- equities, derivatives, debt, real estate and so on. They are best suited for high networth individuals (HNIs), wherein the minimum ticket price is significantly high. Normally, it is upwards of Rs 50 lakh.Today, financial institutions offer much lower entry options, with the intention of widening their target market.

Often, real estate investments are known to provide quick capital appreciation. However, this product adds a new perspective to this line of thought. It gives guaranteed returns in the form of interest or rental yield, with capital appreciation as a bonus or an add-on benefit.

PROCESS OF INVESTMENT
Since structured real estate invests in physical property, one may be able to avail off a home loan or a commercial loan. The regular monthly income will ease the equated monthly installment (EMI) burden significantly, compared to any other property.

Real estate products are meant for the long term and such investment opportunities are for those with an investment horizon of three years or more.

Most options allow for registration of the property. However, some may not require registration. And helps you save on the cost involved in it.

The writer is CEO, Right Horizons

Source: Business-standard Investing in realty via structured products

• REAL ESTATE FUNDS VERSUS STRUCTURED REAL ESTATE

• OPPORTUNITIES IN THIS SPACE

• FINAL TAKE

No business house without at least five years of experience in financial services will be permitted to own stake in an asset management company, said a person close to the development who did not want to be identified.

Anyone who owns over a 10% stake in the fund house would be deemed a sponsor, and will have to go through ``tough screening'' before getting an approval, the person said. Some subjective measures such as past customer service record will also be applied while giving out new licences.

"Corporates who wanted to fly below the radar with less than a 40% stake can no longer do so,'' said the official. "They would be evaluated as a sponsor if they have more than 10%, use the brand name, or have a board position."

SEBI, which has been cracking the whip on mutual funds for more than a year now, is determined to let only serious investors into the business, instead of short-term ones who lend their names in the beginning and exit later.

Source:Economic Times Non-Finance Cos' MF Foray Gets Tougher

Last week, IDFC Private Equity invested Rs 465 crore in GMR Energy, an arm of GMR Infrastructure, while Carlyle invested Rs 102 crore in Tirumala Milk Products, the second-largest private dairy in South India. More deals are in the pipeline and many like Max India, Apollo, Fortis and Godrej Consumer are in the process of raising PE money.

Of greater interest is the return of big deals. In the biggest deal this year, a group of investors that included General Atlantic, Morgan Stanley Infrastructure Partners, Norwest Ventures, Goldman Sachs Investment Management and Everstone Capital invested $425 million in Asian Genco, a Singapore-based holding firm that is setting up 4,000 Mw power-generating capacity in India.

This was the biggest PE transaction since 2008, when Providence Equity Partners invested $428 million in Aditya Birla Telecom. In its maiden investment in India in March, Quadrangle Capital Partners invested $300 million in Tower Vision India, a Gurgaon-based independent tower management firm. Shriram Capital raised $217 million from TPG Capital, while GMR Energy raised $200 million from Temasek.

Growth confidence
What's driving PE deals after a lull of two-and-half years? Bala Deshpande, senior MD for New Enterprise Associates (India), the Indian arm of a US-based venture capital fund, feels large companies raising money to invest at home is a confidence booster.

Source: Business-standard By Ranju Sarkar Large Deals Back With A Bang, India Story, Pressure To Invest Are Driving Spurt In PE Activity

• Push factors

• Earlier issues

The current uncertainty in the global economy and the subsequent volatility have seen domestic retail investors shy away from Indian equity markets. High net worth individual (HNI) traders have halved their activity in the past two months. Reason: Increased risk aversion.

According to the Bombay Stock Exchange data, average daily trading in the clients category, which represents HNIs, has come down to Rs 2,500 crore in June, down from the Rs 4,000-crore levels in the beginning of the year. In June 2009, it was above Rs 5,000 crore.

"Retail investors, especially HNIs, have been circumspect. While they are confident about the India story, they are concerned about global developments," said Ajay Bagga, head of private wealth management, Deutsche Bank.

According to Kanwar Vivek, CEO, Birla Sun Life Wealth Management, "Many retail investors have come out of the market and are sitting on the sidelines. They are waiting for the markets to touch new lows and will come in when there is a definite trend." The volatility has also scared investors and delivery-based volumes are down, he adds.

Source: Business-standard By Akash Josh HNIs Moving Out Of Equities

Cut in NFO period
The period for which an NFO is open for public subscriptions (NFO period) will stand reduced from the existing 30 days to 15 days with effect from July 1, 2010. The tax-saving ELSS category of funds have, however, been exempted from this new provision by Sebi. Investors applying to the units of the new schemes shall be allotted units/dispatched statements within five business days from the date of the closure of the issue.

New Entrants
Peerless and IDBI are the latest entrants in the mutual fund business. While Peerless has started its operations by launching ultra short-term debt and liquid funds, IDBI has launched an index fund - IDBI Nifty Index to begin with. Meanwhile, another public sector bank - Union Bank of India (UBI) has signed a joint venture agreement with Belgium-based `KBC' asset management to start mutual fund business in India.

A survey by online database on projects investment Projects Today, said investment activities are still in the recovery mode and would take some more time to gather momentum.

A total of 9,086 new projects entailing an investment of Rs 6,56,629 crore were announced in 2009-10 compared to 12,533 new projects worth Rs 8,62,634 crore in 2008-09.

This indicates a decline of 27.5 per cent in the number of start-ups and 23.9 per cent in terms of investments for ongoing projects.

However, the annual drop in project start-ups in 2009-10 was confined to the first half that recorded a steep decline in project announcements.

Source: Realty Plus New project investments drop 23% in 2009-10

Key stakeholders in the country's FDI regime have agreed on a proposal to route all investments by such companies through FIPB into sectors where caps on FDI are in place or where they are not on automatic route.

This would result in significant dilution of a series of Press Notes issued by the Ministry of Commerce and Industry last year, which redefined the country's FDI policy.

Press Notes 2 to 4 had deemed firms that had less than 50 per cent foreign ownership and where the control was in Indian hands as `Indian' companies. Such companies were permitted to make downstream investments even where there were sectoral caps on FDI, without seeking clearance from FIPB. The notes defined "control" as the power to appoint majority of the directors on the company's board.

This policy, however, came under sharp criticism from the Reserve Bank of India and some departments in the finance ministry, which said the policy could be manipulated by foreign companies to make a backdoor entry into India. They said it allowed foreign companies to make investments through their Indian units into sectors where FDI was restricted, as in multi-brand retail where FDI is banned.

Source: Business-standard By Surajeet Das Gupta New FDI norms for 'Indian' firms likely