ESCORTS MUTUAL FUND

Can service tax be levied on MF commissions; SC admits plea

NEW DELHI: The Supreme Court has admitted a petition which has raised an important question: Is selling mutual fund products a taxable service? The apex court headed by Justice S H Kapadia admitted an appeal filed by Commissioner of Service Tax stating that sale of mutual funds (MFs) amounted to service for the purpose of levy of service tax.

Earlier, the Court had sought reply from P N Vijay Financial Services Pvt Ltd, which was selling MF products for a commission, as to why it should be allowed to claim exemption on such services.

The service tax department had challenged the Customs, Excise and Service Tax Appellate Tribunal's judgment that dismissed its appeal, holding that the consultancy firm was not liable to pay any service tax.
The government alleged that exempting commissions on sale of goods under the heading BAS was not applicable to "management consultants" dealing in sale and purchase of MFs.

It said P N Vijay Financial Services, registered under the category management consultancy service with the tax authorities, had filed an application for refund of service tax under Section 11B of the Central Excise Act 1944, as made applicable to service tax by virtue of Section 83 of the Finance Act 1994.

The firm had filed refund claim for more than Rs 6.16 lakh on the ground that it had wrongly paid service tax on the commissions earned from sale and purchase of MFs from April 2003 to March 2004 as such services were covered under BAS as per the 1994 Act, the petition added.

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Can-service-tax-be-levied-on-MF-commissions-SC-admits-plea/articleshow/5043718.cms

Equity funds valuation up by Rs 80,000 crore in 5 months

Encouraged by the V-shape recovery in the market value of equity portfolio, the mutual fund industry has started rewarding investors with dividends.
Data compiled by the Association of Mutual Funds in India (AMFI) suggest that equity funds portfolio valuation has risen by Rs 80,000 crore in the five months between March 31, 2009 and August 31, 2009, due to a 60 per cent recovery in the benchmark indices and over 100 per cent rise in mid-cap and small cap stocks.
Dividend payout data sourced from MutualFundsIndia.com shows 71 equity-related dividend paying schemes were back in the dividend paying list in the first half of the current financial year compared to only 4 in the financial year 2008-09. Overall, 96 equity schemes have paid dividend in the first half so far compared to 42 equity schemes in the first half of the financial year 2008-09.Among the equity funds that paid higher dividends are Franklin India prima fund (60 per cent), Birla Sun Life basic industries fund, Reliance RSF equity fund, SBI magnum sector umbrella fund and Taurus star share fund (50 per cent each) and Principal emerging blue-chip fund, Sahara banking & financial services fund and Birla Sun Life tax relief 96 fund (40 per cent each).
Prateek Agrawal, head of equity at Bharti AXA investment managers said “It is ideal to book profits and reward investors with dividend payments, especially during the current market condition which is good. Investors usually tend to stay invested longer in equity-oriented schemes, which have this discipline.”
 

Further, he is expecting markets to perform reasonably well in the coming days, which could give further opportunities in terms of regular profit booking and dividend distribution.
Considering favourable market conditions so far in the current fiscal, 25 fund houses have considered dividend this time compared to only 12 same period of the previous fiscal. Among this 25 fund houses, 14 fund houses skipped dividend last year between April 2008 to September 2008.
This include Baroda Pioneer, Bharti AXA, Canara Robeco, Escorts, Fortis, ING, JP Morgan, Principal, Reliance, Religare, Sahara, Tata, Sundaram BNP Paribas and Taurus mutual fund.

http://www.business-standard.com/india/news/equity-funds-valuationby-rs-80000-crore-in-5-months/370726/

RBI offers Rs600 bn at special repo

The special repo facility on a daily basis was introduced on 14 October 2008, offering Rs200 billion to meet liquidity needs of mutual funds.

Mumbai: The Reserve Bank of India will conduct a special repo auction for Rs600 billion on Monday and the reversal of the auction will be on 6 October, it said in a statement.
The special repo facility on a daily basis was introduced on 14 October 2008, offering Rs200 billion to meet liquidity needs of mutual funds.
The central bank later increased the facility to Rs600 billion to include liquidity needs of non-banking financial companies and housing finance companies.
At its policy review on 21 April, the central bank said the auction will be conducted on a weekly basis every Monday till March 2010.

http://www.livemint.com/2009/09/22110135/RBI-offers-Rs600-bn-at-special.html

INSURANCE

AEGON Religare launches Invest Maximiser Plan

HYDERABAD: AEGON Religare Life Insurance today launched its unit linked insurance plan 'AEGON Religare Invest Maximiser Plan,' which it claimed was a ULIP with the highest IRR currently available in the industry.

This plan has the lowest charges which help customer maximise their investments, AEGON Religare Chief Executive Officer, Rajiv Jamkhedkar, told media persons here.

"The AEGON Religare Invest Maximiser Plan is aimed at providing the customer with the highest value and is a reiteration of our core strategy of being customer-centric both in terms of products as well as service and overall experience," Jamkhedkar said.

The AEGON Religare Invest Maximiser Plan offers the lowest premium allocation charge in the industry. The charges are at five per cent for the first year and two per cent from second to fourth year and no charges from fifth year of the policy, he said.

The company also offers guaranteed special units to the policy holders starting from the end of the 10th policy year, and every third year thereafter, he said adding that the life cover is up to five times the annualised premium.

The minimum entry age is 90 days and maximum 50 years, with a minimum annualised premium of Rs 12,000.

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/AEGON-Religare-launches-Invest-Maximiser-Plan/articleshow/5042600.cms

Irda asks insurers to disclose premium-awaited policies

The Insurance Regulatory and Development Authority (Irda) has asked all life insurers to disclose the information on premium awaited-policies, in order to measure the persistency rate, or the renewal rate of policies.
“Every insurer has their formula to calculate persistency. This will lead to a standard formula as companies will use it to evaluate the lapse rate. The end purpose of the regulator is to increase disclosures,” said Bharti AXA Life Insurance chief financial officer V Srinivasan.
The regulator has asked insurance companies to provide data of premiums awaited in the individual business of non-single premium for both number of policies on which premium is awaited and the premium amount on these policies.
It has asked insurers to separately submit data on the individual policies sold under rural and social sector obligations.
The regulator has asked insurers to furnish the details of polices awaited for 2008-09 separately for linked and non-linked policies with break-up of the annual premium by September 30, 2009, while the insurers can submit data of the first quarter of the current by the middle of the month following the subsequent quarter.

http://www.business-standard.com/india/news/irda-asks-insurers-to-disclose-premium-awaited-policies/370980/

Insurers cut rates as film makers rush for cover

As producers rush to insure their films from delays in launch due to unforeseen circumstances such as a strike or a natural calamity, insurers are offering covers at lower rates.
The premium for film insurance has fallen from 0.8 per cent of the sum assured to 0.4 per cent in the last two months.
United India Insurance has been into the film insurance business for long. Of late, the other three public sector players, Oriental India, National India and New India Assurance, have jumped into the fray to have a share of this business. A few large private sector insurers such as Bajaj Allianz are also present in this segment.
“After the two-month-long strike by multiplexes and delay in releases due to swine flu, the awareness about covering losses has gone up. With more players coming into the market, the rates have fallen. We are moving away from most of the recent movies as the rates are unviable,” said a senior executive at United India Insurance.
Movies such as Life Partner and Kaminey, which had a delayed launch as multiplexes and theatres closed due to the swine flu scare, didn't incur losses as they were insured. Though the insurer is yet to estimate the loss, the film makers will not suffer much, say industry sources.
While the policy covering production is the most popular, the cover against loss of profit in distribution is increasingly becoming popular.
The distribution loss for What’s your Rasheee?, which is releasing on October 2, has been insured by Oriental Insurance for Rs 20 crore.
The source added that there was a huge demand for annual cover by big production houses such as UTV, Sony and Yash Raj. This would insure any number of films made in a particular year.
The production policy insures lead actors, crew and film sets, while a distribution insurance covers losses suffered by the producer when the release of the film is stalled due to any reason.
The third most popular is the errors-and-omission insurance. Under this policy, legal matters are taken care of and the insurance company pays the court fee of the producer.

http://www.business-standard.com/india/news/insurers-cut-rates-as-film-makers-rush-for-cover/370832/

BANK

RBI governor meets bankers, discusses industry issues

Mumbai: Amid inflation turning positive after over three months and slackening credit growth, RBI Governor D Subbarao met bankers here and discussed various industry issues.
The Governor asked for feedback from bankers on various aspects such as loan growth in different segments, Allahabad Bank Chairman and Managing Director K R Kamath, who attended
the meeting, told reporters.
"This (meeting) was basically to get a feedback from the bankers on industry matters," Kamath said.
After remaining in negative zone for 13 weeks, wholesale prices inflation rose to 0.12 per cent for the week ended September 5, fuelled by rising food prices, making it difficult for RBI to chose between promoting industry growth or stemming surging prices.
Inflation based on retail prices of items consumed by agriculture and rural labourers released today also showed that it is more or less remained constant at elevated levels of over 12 per cent in August.
The RBI governor had earlier made it clear that he would continue with soft interest rates policy unless sure of sustained economic recovery.
Other bankers who attended the meeting were SBI Chairman, O P Bhatt, ICICI Bank Managing Director and CEO Chanda Kochhar and Bank of India CMD Alok Misra.
RBI is scheduled to come out with its quarterly review of credit policy on October 27.

http://www.financialexpress.com/news/rbi-governor-meets-bankers-discusses-industry-issues/518793/

US bank failures reach 94 in 2009: FDIC

Washington: Two more US banks have closed down -- including the sixth largest bank bankruptcy this year -- to bring the total number of bank failures this year to 94, according to the government banking insurer. The Indiana-based Irwin Union Bank was shuttered with a total of USD 2.7 billion in assets and total deposits of some USD 2.1 billion, the Federal Deposit Insurance Corporation (FDIC) said in a statement yesterday.
In the same group, the Kentucky-based Irwin Union Bank failed with assets of USD 493 million and total deposits of some USD 441 million.
The institutions were banking subsidiaries of the Columbus, Indiana-based Irwin Financial Corporation.
With 27 branch locations between them, the two banks are set to reopen under regular business hours today as branches of First Financial Bank, with deposits continuing to be insured by the FDIC.
After suffering no bank failures at all in 2005 and 2006, the US banking system saw three banks going under in 2007, followed by 25 in 2008.
With the bankruptcies yesterday, the institutions brought the number of bank failures this year to 94 -- highlighting the extreme stress that the global financial crisis has placed on US banking institutions.
The FDIC said it estimated the transactions would cost the government's Deposit Insurance Fund USD 850 million.

http://www.financialexpress.com/news/us-bank-failures-reach-94-in-2009-fdic/519129/

Govt VCs look abroad for funds

Absence of adequate long-term pool of capital in India triggers trend.
Funds promoted by government-owned financial institutions, pioneers of the venture capital business in the country, are trying to claw their way back and are in the process of raising a total of Rs 3,000 crore.
At least two of them, UTI Ventures and Sidbi Venture Capital, are tapping overseas markets to raise around Rs 1,000 crore each, while IFCI Ventures, which is raising over Rs 900 crore for three funds, plans to tap foreign investors for its next fund.
“For the three funds that we are raising, we are not averse to tapping overseas investors. But we are not pursuing them actively either,” said IFCI Venture Capital Fund Managing Director BN Nayak.
The interest in overseas funding is a result of the absence of a sufficient long-term pool of capital. While Life Insurance Corporation of India (LIC) is one of the biggest domestic investors, banks that invest in private equity and venture capital funds often face constraints. Bank investments in private equity and venture funds carry a risk weight of 150 per cent. Besides, they do not have long-term funds and allocate only a small percentage to alternative assets. Also, PE investments are mark-to-market.
“If you are able to raise funds from overseas, your credibility in the market increases. Investors should be able to hold on to the investment for seven-nine years. Investors in India do not have long-term funds,” said a partner with a state-owned PE fund.
So, Sidbi Ventures, which had till now depended on local investors, wanted to tap overseas markets, said the firm’s President, Vipul Mankad.
Investors in Sidbi VC’s first fund were the ministry of communication and information Technology, IDBI and Sidbi. Eight large public sector banks invested in its second fund.
Since the start of operations in 2000, the firm has raised has raised two funds — the National Venture Fund for IT and Software with a corpus of Rs 100 crore and the SME growth fund, which has a corpus of Rs 500 crore (in 2004). The first fund has invested in 31 companies while the SME growth fund has invested in 22 companies.
Similarly, UTI Ventures managed to raise its first fund from Indian institutional investors, while almost 50 per cent of its second fund was raised from the domestic market. The firm is now looking to raise around Rs 1,000 crore overseas.
While the two are in the process of fund-raising, IFCI Venture Capital Funds has set up three funds – India Auto Components Manufacturing Private Equity Domestic (IACMPED), India Enterprise Development Fund and Green India Venture Fund. It has already committed around Rs 267 crore from IACMPED, which has invested in Jagdish Khattar-promoted Carnation Auto. In addition, the three funds have committed investments in Satyam Cineplex, Luminous Auto, battery-driven rickshaw maker Innovative Modular Machines and Regent Energy, which is setting up a hydro power project.
“Four-five deals are under process. The idea is to try for at least 20 per cent returns through investment in 15-16 companies from each fund. We are looking at a ticket size of Rs 15-30 crore,” said Nayak.
While IFCI and LIC have already committed over Rs 100 crore, the firm is also accessing individuals willing to put in over Rs 5 lakh.

http://www.business-standard.com/india/news/govt-vcs-look-abroad-for-funds/370936/

SEBI

Takeover norms revised ; ADRs/GDRs at par with domestic shares

MUMBAI: Market regulator SEBI today revised the takeover norms by bringing ADRs/GDRs with voting rights on par with the domestic shares, which makes an open offer mandatory if 15 per cent stake is bought in a company through these securities.

The revised norms may have major ramification on the fate of proposed Bharti-MTN deal as both the parties hammering out the contentious issues including the open offer.

At present, an open offer is triggered by holding of ADRs/GDRs (American and Global Depositary Receipts) only if they are converted into domestic shares with voting rights. The purchase of 15 per cent domestic shares also makes it mandatory for the buyer to make an open public offer to buy an additional 20 per cent equity in the company.

Following the revision of regulations, buying 15 per cent ADRs/GDRs would also trigger an open offer, provided these securities have voting rights attached with them, SEBI Chairman C B Bhave told reporters after the board meeting.

For ADRs/GDRs without voting rights, an open offer would be triggered only after their conversion into domestic equity shares with voting rights, he added.

The revision is in tune with the market developments, Bahve said, adding that the amendment will be applicable from the day it takes place it would not be effective retrospectively.

The amendment will bring ADR/GDR holders with voting rights at par with the shareholders, he said.

A takeover regulation panel has been appointed for an overall review of the regulation, Bhave said.

"You know the ADR/GDR exemption was given at a time when the voting rights of ADR/GDR holders never used to be with the individual holders," he said.

"But we find that, of late, people are looking at this structures whereby voting rights remain with the ADR/GDR holders. In other words, depositories would vote at the instructions of ADR or GDR holders," he added.

Takeover norms would now cover IDRs and GDRs with voting rights. IDRs can also have anchor investors, Bhave said.
The SEBI Board has also decided to extend the concept of 'anchor investors' to issue of Indian Depository Receipts (IDRs) on similar terms as applicable to public issues made by domestic companies.

The board said that at least 30 per cent of the issue size of the IDRs will need to be reserved for allocation to retail individual investors, who may otherwise be crowded out.

http://economictimes.indiatimes.com/articleshow/5043667.cms

SEBI reserves 30% IDRs for retail investors

Our Bureau
Mumbai, Sept. 22
Any issue of Indian Depository Receipts (IDRs) which would allow a foreign company to list its equity shares on the Indian stock exchanges, would have at least 30 per cent of issue size reserved for retail investors, SEBI decided at its board meeting here on Tuesday.
Still at concept stage
IDRs which are still at a concept stage, would also have anchor investors on similar terms as applicable to public issues by domestic companies, the SEBI Chairman, Mr C.B. Bhave, said at a media briefing after the board meeting.
anchor investor
The ‘anchor investor’ for domestic public issues is a recent concept where, prior to the opening of a public issue, qualified institutional buyers(QIB) can pick up a maximum of 30 per cent from the 60 per cent of the net issue reserved for QIBs. There is a 30-day lock-in period mandated for anchor investors.
accounting standards
In another major decision, the SEBI Board decided that it would bring out applicable accounting standards to be followed by a listed company undergoing corporate restructuring by way of merger, demerger or amalgamation.
Such listed companies will have to submit an auditor’s certificate to the stock exchanges to the effect that the accounting treatment followed in respect of financials contained in the corporate restructuring scheme, is as prescribed by SEBI.
The Board will prescribe ‘applicable accounting standards’ through an amendment to the listing agreements, a news release from SEBI said.
Unlisted companies
The same accounting norms would also have to be followed by unlisted companies who are looking to list.
“An unlisted company undergoing similar corporate restructuring and proposing to make an IPO shall make disclosures in the DRHP in terms of Accounting Standard 14. This will be mandated through the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009,” SEBI said.
In an amendment to the SEBI Takeover Regulations, the Board has extended disclosure requirements on two per cent acquisition or divestment by those who hold shares or voting rights of between 15 and 75 per cent in a company. Earlier the range was 15-55 per cent.
http://www.thehindubusinessline.com/2009/09/23/stories/2009092352001500.htm

Sebi has no application for dual listing

Amid reports that South Africa is insisting on dual listing structure for the proposed Bharti- MTN deal, market regulator Securities and Exchange Board of India (Sebi) today said it has not received any application for dual listing.
When asked on dual listing for Bharti-MTN deal, Sebi Chairman Bhave said it was "too premature" to comment on the issue of dual listings.
Dual listing is seen as a key issue that is holding up finalisation of talks between Bharti Airtel South African telcom MTN.
MTN is seeking clarity on what rights MTN and its shareholders are likely to get for holding 36 per cent economic interest in Bharti Airtel.
Under the announced scheme of arrangement, Bharti Airtel is to acquire 49 per cent economic interest in MTN. In return, MTN will acquire 25 per cent economic interest in Bharti Airtel for $2.9 billion and MTN shareholders will acquire another 11 per cent.
Meanwhile, Sebi today revised the takeover norms by bringing ADRs/GDRs with voting rights on par with the domestic shares, which makes an open offer mandatory if 15 per cent stake is bought in a company through these securities.
The revised norms may have major ramification on the fate of proposed Bharti-MTN deal as both the parties hammering out the contentious issues including the open offer.
http://www.business-standard.com/india/news/sebi-has-no-application-for-dual-listing/74096/on