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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

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B U S I N E S S

Board insulates Reliance Ind
Mukesh, promoters plan Rs 17,000 cr infusion to pre-empt hostile bids
Mumbai, February 24
Mukesh Ambani and other promoters of Reliance Industries Ltd will invest nearly Rs 17,000 crore in the country’s largest private firm to raise their stake to 54.53 per cent, a move that will insulate it from any hostile takeover bid.

Nissan presses pedal for India
Tokyo/Mumbai, February 24
Nissan Motor Co. will set up a car factory in India with Renault SA and Mahindra & Mahindra in 2009, sources close to the matter said, giving the Japanese automaker its first manufacturing foothold in the booming Indian market.





EARLIER STORIES

 
Rare currency dealer Kaizad poses with a Rs 10 note from Kashmir dated 1876 at the Coin Fair in Ahmedabad
Rare currency dealer Kaizad poses with a Rs 10 note from Kashmir dated 1876 at the Coin Fair in Ahmedabad. The rare note from Kashmir is priced at Rs 2 lakh. The two-day fair attracted some 40 dealers from across India. — AFP

Arcelor-Mittal to explore Senegal mines
London, February 24
Luxembourg-based Arcelor Mittal, world’s largest steel company, today announced it has signed various agreements with Senegal government to develop iron ore mines in that country.

DRL eyes Merck’s arm
London, February 24
Dr Reddy’s Laboratories, one of India’s leading drugs firm, is planning to bid for the generic arm of Merck, the German pharmaceuticals giant. “We will take a look at it and then decide,” Dr Reddy’s CEO G.V. Prasad said.

BSNL new norm worries SMEs
New Delhi, February 24
Small and medium players in telecom industry and services, operating in backward areas, are likely to suffer as BSNL has changed the procedure of procurement.

Children walk down the ramp with leather goods at a fashion show in Kolkata on Friday night
Children walk down the ramp with leather goods at a fashion show in Kolkata on Friday night. The show was organised by the India Leather Product Association. — PTI

Aviation Notes
Hyderabad airport scores over Delhi
The Indira Gandhi International Airport (IGIA) had two inaugurations. The first was on May 2, 1986. It was done in a hurry as the then Civil Aviation Minister Jagdish Tytler had his own games to play. the second, official and wholly, was done on November 19, 1986, the day of Indira Gandhi’s birthday.

Investor Guidance
No dollars for Indian mutual funds
Q : I am located in the US and am on a student visa. I am Indian. Was wondering what would be the process and procedure for investing in MF’s in India now that I reside abroad. What is the paperwork required. Also, what are the tax implications? Will I pay tax in India as well as in US? Also what is the tax rate levied. How is it different for an NRI to invest?

 

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Board insulates Reliance Ind
Mukesh, promoters plan Rs 17,000 cr infusion to pre-empt hostile bids
Tribune News Service & PTI

Mumbai, February 24
Mukesh Ambani and other promoters of Reliance Industries Ltd will invest nearly Rs 17,000 crore in the country’s largest private firm to raise their stake to 54.53 per cent, a move that will insulate it from any hostile takeover bid.

The RIL Board, which met here today, decided to issue 12 crore preferential warrants convertible into equal number of equity shares to the promoters who will increase their shareholding from 50.62 per cent to 54.53 per cent.

At yesterday’s closing stock price of Rs 1,412.8, 12 crore warrants of Rs 10 each translate into an equity infusion of Rs 16,953.6 crore in the company.

The move, which puts Mukesh Ambani firmly in the saddle, is possibly the single largest equity infusion by promoters in an Indian company.

An RIL press note issued after the Board meeting, however, did not say at what price the warrants would be issued.

The 12 crore preferential issue will increase the paid-up capital of the company to Rs 1,513 crore from Rs 1,393 crore.

An amount equivalent to 10 per cent of the price will be paid on allotment of warrants and the remaining 90 per cent at the time of subscription of equity shares within a period of 18 months, the release said.

“The board’s approval to enhance the equity capital of the company by preferential issue of warrants to promoters demonstrates our commitment to value creation at Reliance,” RIL chairman Mukesh Ambani was quoted as saying.

The board also approved a proposal to set up a new petrochemicals unit worth $3 billion. According to a statement by the company, RIL's new unit would have an annual capacity of 2 million tonnes and would be complete by 2010-11.

The unit will produce ethylene, propylene and other special derivative products, it said.

The company also confirmed its plans to raise up to $2 billion from overseas markets to fund a capital spending plan for its oil and gas business.

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Nissan presses pedal for India

Tokyo/Mumbai, February 24
Nissan Motor Co. will set up a car factory in India with Renault SA and Mahindra & Mahindra in 2009, sources close to the matter said, giving the Japanese automaker its first manufacturing foothold in the booming Indian market.

Nissan, Japan’s third-biggest automaker, had been studying the possibility of joining an existing local partnership between France’s Renault and India’s Mahindra since November and had set a March 9 deadline for a decision.

The three automakers will jointly own the factory in the southern city of Chennai, with initial annual output capacity of 4 lakh units in 2009, one of the sources said. Mahindra, India’s biggest utility vehicle and tractor maker, will own half of the venture, and Nissan and Renault will each hold 25 per cent. The factory is likely to build derivatives of Renault’s no-frills Logan car. A decision on other products, including those under the Nissan badge, will be made later, the sources said.

The three companies and Tamil Nadu will make an announcement on the project on Monday. Officials at Nissan and Mahindra declined to comment, while Renault could not immediately be reached.

Nissan is a latecomer to India, where passenger car sales are projected to double to 2 million units by 2010. The Tokyo-based automaker sells only the imported X-Trail sport utility vehicle in Asia’s fourth-biggest economy, with sales totaling just 190 units last year.

“It’s a definite boost for Nissan, which has been quite behind,” said Viraaj Teckchandani, an analyst at ASK-RJ Securities.

“It’s also positive for Mahindra, which could have access to a wider distribution network overseas for their Scorpio (sport utility) through Renault and Nissan.”

The new project in Chennai is likely to include a large sourcing operation for the Renault-Nissan alliance, the sources said. Chennai, a port city that is also home to car factories belonging to Hyundai Motor Co., Ford Motor Co. and BMW AG, has a widely established vendor base.

Carlos Ghosn, chief executive of both Nissan and Renault, has repeatedly expressed interest in India not just as a manufacturing site for vehicles, but for procuring cheap auto components for use globally by the Franco-Japanese alliance.

Renault owns 44 per cent of Nissan, which in turn holds 15 per cent of the French carmaker. — Reuters

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Arcelor-Mittal to explore Senegal mines

London, February 24
Luxembourg-based Arcelor Mittal, world’s largest steel company, today announced it has signed various agreements with Senegal government to develop iron ore mines in that country.

The project is expected to entail an investment of $2.2 billion. The total estimated reserves are about 750 million tonnes, located in four locations in the Faleme region and comprise haematite and magnetite deposits.

Lakshmi Mittal, President and CEO of Arcelor Mittal said in a statement: “We are delighted at having signed the binding agreements with Senegal in Dakar yesterday and are now looking forward to moving forward with this important project. Once completed, the Faleme project will prove to be an important source of iron ore supplies for our European plants.” — PTI

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DRL eyes Merck’s arm

London, February 24
Dr Reddy’s Laboratories, one of India’s leading drugs firm, is planning to bid for the generic arm of Merck, the German pharmaceuticals giant. “We will take a look at it and then decide,” Dr Reddy’s CEO G.V. Prasad said.

Prasad said any bid from Dr Reddy’s would be as part of a consortium, most likely backed by private equity.

“We don’t have the size to do it on our own,” Prasad, who was on a visit to London, told The Times.

Hyderabad-based Dr Reddy’s, one of India’s largest manufacturers of generic medicines already owns a small European generics business.

“We see the potential to grow that quite significantly,” Prasad said.

Germany’s Merck said in January it was considering sale of its generic drugs business to help pay for its seven billion pounds acquisition in September of Serono, the Swiss biotechnology group. — PTI

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BSNL new norm worries SMEs
Tribune News Service

New Delhi, February 24
Small and medium players in telecom industry and services, operating in backward areas, are likely to suffer as BSNL has changed the procedure of procurement.

These companies have been receiving tax incentives for operating in backward areas and as BSNL has amended the procurement procedure to avail benefits of Cenvat Credit, they would now be deprived of the benefit of zero excise duty while submitting their tender offers.

The Telecom Industry and Services Association (TISA) in a statement said it has received information from its members that BSNL is in the process of amending procurement procedure to avail benefits of Cenvat Credit Rules.

Under the new procedure, the evaluation and comparison of responsive bids shall be done on the basis of net cash cost to BSNL, thus excluding Cenvat-able duties and taxes, which means the large number of industrial units is backward areas, will be deprived of the benefit of zero excise duty while submitting their tender offers.

This will result in financial loss to many companies, which have established industrial units in backward areas in Uttarakhand and Himachal Pradesh.

To some extent, the incentives were also offsetting high cost of operation in such backward areas, and deprived of same, they can never be competitive.

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Aviation Notes
Hyderabad airport scores over Delhi
by K.R. Wadhwaney

The Indira Gandhi International Airport (IGIA) had two inaugurations. The first was on May 2, 1986. It was done in a hurry as the then Civil Aviation Minister Jagdish Tytler had his own games to play. the second, official and wholly, was done on November 19, 1986, the day of Indira Gandhi’s birthday.

By the time international terminal was commissioned, it had already become obsolete because work had progressed at a snail’s pace. The VVIP, VIP and other enclosures were more of MF Hussain’s painting advertisement than modern terminal for the convenience of passengers and frequent flyers and other users.

Several renowned analysts and international aviation personalities lodged vehement protests but the government ignored them. Worldwide, international airports are considered more human jungles than global villages. Worldwide again, international airports are considered worse than zoos because unlike zoos which are occupied by trained and disciplined animals, Indian airports, including IGIA and Mumbai’s Sahara, are controlled by inefficient authorities.

At IGIA’s two inauguration ceremonies, it was time and again emphasised that another bigger capsule of world class standard would be completed before the year 2000 was out. The work too commenced in 1996 as land, expertise and other wherewithal were readily available. But procrastination and political uncertainty delayed the start of the construction work on module two until February 18, 2007. During these 16 years, buildings including RAW’s air force guest house, have come up. Crores of rupees were spent in constructing these buildings. Now most of them will have to be dismantled as they stand in the path of capsule two. What a collosal waste of tax payer’s hard money!

A new 4430-metre long runway capable of handling the A-380 super jumbo jets will also be ready. This is a good development and three runways should be able to reduce congestion but the scenario in December-January will always be murky because the authorities are indecisive in handling the fog related delays.

There are many ultra-modern features immersed in this module but many feel that this capsule will also be obsolete by the time it is put to use in 2010 during Commonwealth Games and after as Delhi International Airport Limited, has not been getting proper cooperation from K. Ramalingam’s Airports Authority of India. He became AAI’s Chairman on March 11, 2004 and his tenure will end in 2009. He Specialises in planning and operation areas but his style of functioning is far far consistent.

Delhi is country’s capital and its flying importance is much more than that of Hyderabad. Both those who have had an opportunity to study plans and designs feel that Hyderabad airport is more international in outlook than Delhi.

The GMR Group chief G.M. Rao hummed an optimistic viewpoint. He said: “Don’t worry, be happy. Every Indian will be proud of the new airport which will be pride and joy of all. He said: “We have taken care of every detail, no matter how small”. According to him, the new module will be comparable with any airport in the world. “Even detractors will be happy”, he announced.

Time will tell how far his words come true.

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Investor Guidance
No dollars for Indian mutual funds
by A.N. Shanbhag

Q : I am located in the US and am on a student visa. I am Indian. Was wondering what would be the process and procedure for investing in MF’s in India now that I reside abroad. What is the paperwork required. Also, what are the tax implications? Will I pay tax in India as well as in US? Also what is the tax rate levied. How is it different for an NRI to invest?

– Sushil

A : The process remains the same. Indian MFs do not accept dollar currency. You will have to open an NRE or NRO account in any bank in India and invest in the MF using the funds credited in that bank. As far as the tax implications are concerned : Equity-based MF schemes are governed differently from the debt-based schemes. In both the cases, dividend is tax-free in the hands of the investor. However, there is a dividend distribution tax @14.025% payable by the MF directly to the exchequer in the case of debt-based whereas the equity-based are exempt from this tax.

Equity-based schemes are also exempt from long-term capital gains tax. The short-term capital gains are taxed @10.2% only.

In the case of debt-based schemes, short-term gains are treated as normal income of the assessee and taxed at the rates applicable to the assessee. The long-term gains will attract tax @10.2% without indexation or @20.4% with indexation, whichever is more beneficial to the assessee.

In the case of ELSS, there is an additional benefit of deduction u/s 80C. About tax incidence in the US, you will have to check with a local tax consultant there.

Farm income

Q: I am aware that an individual has to file his income tax return if his gross income exceeds Rs 1 lakh per annum irrespective of his tax liability. However, my query is, is it required to file the return in the following hypothetical cases if a person has:

1. Only agricultural income exceeding Rs 1 lakh per annum.

2. Agricultural income (less than Rs 1 lakh/annum) plus income from other sources like interest on savings etc (less than Rs 1 lakh/annum), total exceeding Rs 1 lakh /annum.

– Rangrajan

A : 1. If a person has agricultural income only, he need not file the tax returns, irrespective of the size of his income.

2. If the total of normal and the agricultural income exceeds Rs. 1 lakh, the returns are required to be filed.

ETF and Index Fund

Q : I would like to start a SIP into Exchange Traded Fund (ETF). Can you advise how I can do the same, or will you suggest me to go into an index fund.

– Agnihotri

A : An ETF is much cheaper and more efficient than an index fund. Index funds suffer more expenses than an ETF on account of transaction and fund administration costs. To that extent, ETFs are cheaper. However, SIPs in the traditional sense are not possible in an ETF. However, you can constitute your own SIP by buying units of a fixed amount monthly on the exchange. The effect will be the same, only auto debit or post dated cheques will not be involved.

STCL setoff

Q : Kindly let me know the rules on short-term capital loss (STCL) & long-term capital loss (LTCL).

Can STCL be offset against STCG in the same year?

– Sumit

A : You must setoff STCL against short-term capital gain (STCG ) both earned during the same year and have only net STCG or STCL.

Short-term gains

Q : If I have only income from short term gains (By buying and selling stock shares within one year) to the tune of Rs 2 lakh, how much income tax do I have to pay? I have no other income. Do the exemption limit for individuals of 1 lakh and an additional 1 lakh u/s 80C applicable for income from STCG also?

– Andhare

A : The tax on short-term gains is @10.2 per cent. We presume you are a Resident. In that case the benefit of the tax threshold of Rs 1 lakh is available. The benefit of Sec. 80C is available on your other income but not on the capital gains.

Year for indexation

Q : My father died in 1993 and three sisters became legal heirs to the ancestral house.

This being joint family property, my uncle continued to live there and we also used it to keep our things and lived in it for short periods.

After uncle passed away in 2000, the cousins are now selling the property. Which year should we take for indexation, 1993 when we became owners or 1981. We have used the house for a period longer than long term capital gains after the death of father. Can you give us case examples for this?

– Pradnya

A : The cost of acquisition in this case would be the cost that your father paid to acquire the property. If the property was acquired before 1.4.81, then fair market value as on 1.4.81 would be considered as cost of the property. However, indexation would be applicable from the time you came to own the property i.e. from 1993 onwards.

NRE account

Q : I opted NRE account of private well known bank, as faster in response and transact on line facility. But is it safe to park money in private banks. Do we get money back in any worst case like Western union? Or you suggest additional NRE account in nationalised bank as it is secure. I don’t know whether it is a valid question itself.

– Kedar Thakur

A : It is a valid question the answer to which depends upon your choice of private or nationalised banks. There are some nationalised banks that are very healthy and there are some private banks that could be healthier. At any rate, a maximum of Rs. 1,00,000 is the only insurance you have against your deposits with any private or nationalised bank.

The authors may be contacted at wonderlandconsultants@yahoo.com

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