Midnight News Update – Jan 19th 2017
Arun Jaitley has admitted that the government will be looking to sell 25% stake in the five state owned general insurance companies. The move is likely to unlock a huge amount of value for the government ahead of the end of this financial year. It is not yet clear whether the sale will be purely by offer for sale (OFS) or will be combined with a fresh issue too. This will be a big positive for Indian business houses with a general insurance subsidiary as it will give a credible benchmark for valuing the hidden value of these companies. This may also pave the way for the eventual listing of the LIC, which is expected by many to be the most valuable company in India once it is listed.
Speaking before the Parliamentary Panel, Dr. Urjit Patel confirmed that the discussions for demonetization drive had begun as early as January 2016. One of the key interrogators was Dr. Manmohan Singh who had termed the demonetization drive as a monumental failure. The RBI did not have the final data on the final amount of money that was reissued and the amount that was actually demonetized as the reconciliation is yet to be done. Dr. Patel is also likely to appear before the Public Accounts Committee (PAC) on January 20th.
In a setback to the Mistry camp, the National Company Law Tribunal (NCLT) dismissed the contempt petition against Tata Sons. The contempt petition was filed by Mistry against Tata Sons objecting to his ouster from the Tata Sons chairmanship on October 24th 2016. Mistry becomes a critical voice in Tata Sons because the group holds over 18.4% in Tata Sons and that gives them a power voice. Mistry had sought the intervention of the NCLT as there had been a breakdown of governance in Tata Sons.
GST is expected to hike the power tariffs of wind and solar power plants by 50 paisa per unit. As a result, the industry is seeking deemed exporter status for these renewable power companies to cushion the impact of GST. Currently, there is no central excise on equipment used for solar and renewable energy. However, even assuming that the GST places these products in the lowest bracket, they may be liable for 5% excise.
Warburg Pincus, through its affiliates, has acquired a 14% stake in PVR Cinemas for a consideration of Rs.820 crore. Multiples, the PE firm promoted by Renuka Ramnath, is the other major shareholder in PVR. The Bijli group, who are the promoters of PVR group, continue to be the largest shareholders. PVR has been a phenomenal media story in India and has given phenomenal returns over the past few years.
The AMFI, which represents the interests of the mutual fund industry in India, has given its budget wish list to the finance minister. Firstly, the AMFI has demanded extension of the current equity linked benefits under Section 80C to debt schemes too. Currently equity linked savings schemes with a 3 year lock in are eligible for tax rebate under Section 80C. The AMFI has also proposed a MF Long Term Retirement plan on the lines of the 401K in the US, where investors can use the equity route to create wealth for their post retirement years. AMFI has also called for the reintroduction of Section 54EC wherein the exemptions were available for capital gains reinvestments. Lastly, the AMFI has also asked for Fund of Funds (FOF) to be treated as equity for tax purposes.
The ecommerce industry in India continues to bleed for the full year 2016. Flipkart topped the list with an annual loss of Rs.5223 crore followed by Amazon India with an annual loss of Rs.3571 crore. Snapdeal followed close behind with net loss of Rs.2960 crore. Most of these ecommerce companies have been splurging heavily on advertising and marketing as well as offering unsustainable discounts. With capital drying up, companies are likely to find it increasingly difficult to sustain their operations. Most ecommerce companies have taken an additional hit as the cash-on-delivery (COD) business has also gone for a toss in the light of the demonetization drive.
