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Sterlite-Morgan Bid
IFCI right in rejecting bid: Chidambaram
Calls for consolidation of banks
Bangalore, December 29
Union finance minister P Chidambaram today said the state-owned lender IFCI had taken the right decision in rejecting the lone bid by Sterlite-Morgan to buy 26 per cent equity of the company.

Union finance minister P. Chidambaram unveils a plaque as chairman, Vijaya Bank, Prakash Mallya looks on Union finance minister P. Chidambaram unveils a plaque as chairman, Vijaya Bank, Prakash Mallya looks on during the opening of the bank’s 1,000th branch and launch 
of a new scheme for youth and kids, V-GEN Uth, in Bangalore on Saturday. — PTI 

Gold touches new high
New Delhi, December 29
Gold prices today zoomed to a new peak of Rs 10,925 per ten gram driven by firming global cues as a decline in dollar boosted interest in the precious metal as an investment option.

IPOs set the Indian market sizzling in 2007
New Delhi, December 29
While the names, that came out with IPOs in 2007, have gone shorter in size, it is not the case with the size of capital raised through IPOs. Realty giant DLF came out with India’s biggest ever IPO and raised over Rs 9,000 crore (more than $2 billion), while all together the proceeds from 101 public issues during the year stood at over Rs 34,000 crore.



EARLIER STORIES

 
A man holds the new Zimbabwean dollar 750,000 note, which has been introduced due to the ongoing cash crisis in Zimbabwe
A man holds the new Zimbabwean dollar 750,000 note, which has been introduced due to the ongoing cash crisis in Zimbabwe, in Harare. Zimbabwe is suffering an economic collapse with shortages of hard currency, food and fuel. Official inflation was given in September as 8,000 per cent. The International Monetary Fund has forecast the country's inflation reaching 100,000 per cent by the end of the year. — AFP

Master Moments launched
Chandigarh, December 29
Master Moments, a premium grain-spirit-based whisky, was unveiled here yesterday. Mukesh Khetarpal, brand advisor to AB Grain Spirits Pvt Ltd, the company that created Master Moments, conducted a brand appreciation session.

Aviation Notes
Finally, AI gives cargo its due
There was a time when passengers were be all and end all for airlines. Cargo was totally neglected. This was because passengers, politician and bureaucrats, in particular, have had a hand in appointments, promotions and tansfers of officials. Cargo remained lifeless as against passengers, who could scream.

Investor Guidance
RBI permission not needed for serving foreign clients
Q: I am an advocate practicing in Delhi and have a few foreign clients (in the USA) for whom I am providing my expertise in India (legal cases and advice).


Video
ITC plans to construct three Fortune hotels.
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Sterlite-Morgan Bid
IFCI right in rejecting bid: Chidambaram
Calls for consolidation of banks
Jangveer Singh
Tribune News Service

Bangalore, December 29
Union finance minister P Chidambaram today said the state-owned lender IFCI had taken the right decision in rejecting the lone bid by Sterlite-Morgan to buy 26 per cent equity of the company.

Chidambaram, who was talking to newsmen on the sidelines of a function held to mark the opening of the 1,000th branch of Vijaya Bank here, said: “There was a single bid, a conditional bid”. He said he was sure once the re-bidding process began again, more bidders would come forward to participate in the exercise.

The IFCI had turned down a bid from a consortium of Sterlite Industries and Morgan Stanley to buy a 26 per cent stake in the company, which had led to a fall in its share prices. The sell out was effected to manage the non-performing assets of the company.

The finance minister also announced that the government would create a redemption fund from additional dividends and taxes as well as profits made on the additional capital when the Centre subscribes to the rights issue of the State Bank of India (SBI). He said this process would be done through bonds. When asked whether the government would subscribe to additional equity if other public sector banks also came up rights issues, he said: “We will do so if they also throw up additional dividends and taxes like the SBI”.

Chidambaram also called for consolidation of Indian banks to achieve faster growth rates and said though there was opposition to this move among the banking staff, it was an inevitable process. He said there was a similar opposition to computerisation in the banking staff about twenty years ago but the move had paid dividends.

He said consolidation was the name of the game the world over and Tatas had shown the way by acquiring Corus and Indian bio-technology companies were also taking over their foreign counterparts. The minister said for banks also consolidation would be the best way to grow and banking staff ,who were protesting the merger moves with the SBI, should understand that if these mergers did not happen today, external forces could impose their choices on them in the near future.

Chidambaram also called for a “flat organisation” saying there was a need to be technology driver and all barriers between officers, clerks and messengers needed to be done away with. He said the bank employees should be imparted multi-skills so that they could meet the future changes in the banking sector.

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Gold touches new high

New Delhi, December 29
Gold prices today zoomed to a new peak of Rs 10,925 per ten gram driven by firming global cues as a decline in dollar boosted interest in the precious metal as an investment option.

The metal set the new peak of Rs 10,925 per ten gram by adding Rs 160 in Kolkata. In Delhi, it surged by Rs 170 to reach its new high of Rs 10,780, while gaining Rs 130 to Rs 10,670 per ten gram in Chennai. In the Mumbai bullion market, gold prices rose by Rs 105 to Rs 10,715.

The earlier peak for gold was Rs 10,710 per ten gram reached in the Delhi bullion market on May 12 last year, when it touched an intra-day high of Rs 10,800.

The metal was boosted on reports of a steep rise in its prices in the overseas market yesterday, where it reached the biggest annual gain since 1979, as a decline in dollar boosted the appeal of the precious metal. This year, gold has jumped 32 per cent as a weaker US currency. — PTI

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IPOs set the Indian market sizzling in 2007

New Delhi, December 29
While the names, that came out with IPOs in 2007, have gone shorter in size, it is not the case with the size of capital raised through IPOs. Realty giant DLF came out with India’s biggest ever IPO and raised over Rs 9,000 crore (more than $2 billion), while all together the proceeds from 101 public issues during the year stood at over Rs 34,000 crore.

And the trend is set to get even stronger in the new year. There are some 170-175 public issues lined up for the new year estimated to raise about Rs 60,000 crore ($15 billion) and as the year progresses, more firms might join in the rally to raise funds from the market.

In 2007, DLF offered shares at Rs 525 each in June and when these shares were listed on the bourses on July 5, they rose to as high as Rs 714.25 within minutes. About five months later, shares are trading at Rs 950.

DLF’s return is close to 70 per cent as of now, while a number of other IPOs gave even better returns. These include PFC (120 per cent), Indian Bank (88 per cent) and HDIL (72 per cent).

In total, there have been 101 public issues so far this year, that helped raise a total of Rs 34,072.32 crore, according to data compiled by IPO tracking firm Primedatabase.

“In 2008, up to 175 companies are expected to enter the capital markets and could raise up to Rs 60,000 crore,” Primedatabase CEO Prithvi Haldea said.

Besides DLF, other major IPOs of the year include Power Grid Corp of India (Rs 2,984.45 crore), Idea Cellular (Rs 2,443.75 crore), Mundra Port & SEZ (Rs 1,771 crore) and Housing Development & Infrastructure (Rs 1,707.95 crore).

Indian bourses also played a key role on the global IPO scene, which posted record high levels in the year. Worldwide, companies raised about $255 billion through 1,739 IPOs, up from $246 billion raised in 1,729 deals in the whole of 2006, according to international consultancy firm E&Y.

Even in India, the foreign investors are estimated to have contributed about half of the total IPO proceeds, while about 35 per cent came from the retail investors.

In terms of response, Religare Enterprises, a financial services provider led by promoters of Ranbaxy Laboratories, witnessed a robust demand with its issue getting subscribed over 158.63 times. Other issues, which received strong response from investors, include -- Mundra Port, brokerage firm Edelweiss Capital, Mindtree Consulting and Power Finance Corp. — PTI

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Master Moments launched
Tribune News Service

Chandigarh, December 29
Master Moments, a premium grain-spirit-based whisky, was unveiled here yesterday. Mukesh Khetarpal, brand advisor to AB Grain Spirits Pvt Ltd, the company that created Master Moments, conducted a brand appreciation session.

“We wanted the launch to be as distinct and unique as our brand. We choose Chandigarh for the event as the city and its neighbouring towns in Punjab and Haryana have a large segment of consumers that appreciate and patronise fine flavours,” said Hardeep Singh Chadha, managing director of the company.

Master Moments plans to tap the growing whisky market in northern India. The current market size of Punjab is approximately 50 lakh cases, growing further at an encouraging pace. After Punjab and Chandigarh, the brand will be launched in Himachal Pradesh, Jammu and Kashmir and Haryana over the next few months.

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Aviation Notes
Finally, AI gives cargo its due
by K.R. Wadhwaney

There was a time when passengers were be all and end all for airlines. Cargo was totally neglected. This was because passengers, politician and bureaucrats, in particular, have had a hand in appointments, promotions and tansfers of officials. Cargo remained lifeless as against passengers, who could scream.

There was again time when industrialists, national and international, preferred to send their goods through sea, train and road. This was because transportation charges were less. It was, however, a time-consuming exercise and, thereby, money stayed locked for weeks and months.

The concept has changed. The traders have, at last, realised that time and speed are important components in business. The quick transportation of goods from one place to another yields quicker turn-over of money. As this reality has sunk into the minds of traders, they have switched from the time-consuming effort to sending goods by air. It is now a reality that cargo brings as much revenue, if not more, as passenger-upliftment.

This is again because expenses on cargo are much less than money spent on passengers. There is no need for cabin crew, no need for food/snacks or of toilet articles and requirement of ground-staff is also little.
For at least 25 years, if not more, many foreign carriers have realised the importance of cargo movement. Many airlines have initiated independent arm of cargo. This arm off-sets losses incurred on passenger-services.

Sadly, and of course not unusual, Air India (also Indian Airlines) has stayed in deep slumber in regard to cargo. While foreign carriers have already grabbed that lucrative pie in the sky, Air India is now trying to spread its wings. It has made Nagpur a cargo hub, It should be fully operational before the end of 2009.

With cargo as a beneficial outlet, Air India has started converting some passenger aircraft into freighters. Four have already been converted to fly on international routes. Some more will be converted as new compliment of aircraft arrive in Indian skies. The domestic operations have also been strengthened since Indian has already been merged (litigation by the cabin crew, however, stays). According to officials, the turnover will reach 1,000 crore within three years.

Chairman and managing director V Thulasidas is scheduled to retire on March 31, 2008. The adverisement has been out. He is desperately trying to continue - extension or re-employment. Another key official, commercial director V.K.Verma, is scheduled to retire on December 31. Only three days remain. But he is politically very well-connected and is capable of bringing any upset.

In the meantime, on cargo movement, the CMD has gone on record as saying: “NACL (National Aviation Company Limited) is a beginner in this market. But the fact that we have a separate business unit for cargo, headed by a director, is proof of our seriousness, though infrastructure at airports needs to be upgraded...”

The question is why should Air India be beginner? What is AI doing now should have been done three decades ago when other carriers, like Lufthansa, Air France and British Airways, plunged into cargo movement. In continued trouble on delayed flights on national and international routes, AI has plunged into yet another controversy. It has signed a deal with Gati Ltd, a Secounderabad-based private freight management company, without taking its board into confidence. According to reports, there are many irregularities committed while signing the deal.AI director (cargo) Anita Ahurana has, however, gone on record as saying: “We have not only followed all procedures, but it is a good deal and it will give us good revenue”.

Why can’t AI follow rules of transparency so that it does not run into uncalled for jam or negative publicity?

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Investor Guidance
RBI permission not needed for serving foreign clients
by A.N. Shanbhag

Q : I am an advocate practicing in Delhi and have a few foreign clients (in the USA) for whom I am providing my expertise in India (legal cases and advice).

They have been paying me by wiring the money to my account with ICICI Bank from the USA.

Do I have to comply with any guidelines/ directions/ rules of the RBI or others in this regard?

To what extent is the said income taxable?

— Nirman

A: There is no need for you to obtain any RBI permission for providing such services. This amount is fully exigible to Indian income tax as professional fees earned.

Old Saral Form

Q: If any return is submitted before May 14, 2007, in old Saral Form i.e. before notification of the new return forms for AY 2007-2008, is such return valid? Are the new forms mandatory?

— Gurmel singh

A: Yes, the return is valid and hence the same must have also been accepted by the IT Department. The new forms are mandatory in nature and for the current year (FY 07-08) you will have to necessarily use the new forms.

Sale of flat

Q: I had booked a flat with a property developer for Rs 10.5 lakh in May 2004. I paid Rs 9 lakh towards the cost in installments. When the building was ready for possession in October 2007 and the builder asked for the last installment of Rs 1.5 lakh, I found a buyer (with assistance from the builder), who is willing to buy the flat. The buyer is ready to pay the last installment directly to the builder and Rs 15 lakh to me. What is my tax liability?

— Rohit

A: You have earned a right to own a flat in FY 04-05. The cost of acquisition of this right is Rs 10.5 lakh. The fact that you have not paid the entire sum is immaterial and inconsequential. If the transaction goes through before the house is ready for possession, you have earned long-term capital gains since the holding period of this right is over three years. The full value of consideration received is Rs 16.5 lakh. Here again, the fact that Rs 1.5 lakh is paid directly to the builder by the new buyer is immaterial. This is equivalent to you having received the amount directly and paid it to the builder. This is long-term capital gain since you held this right for over three years.

Had you paid the last installment to the builder and immediately after taking possession, sold the flat, you are no more selling the right to possess but the residential flat itself. The cost of acquisition remains at Rs 10.5 lakh and since you have not held this new asset for over three years, you will have earned short-term capital gains of Rs 6 lakh (=16.5-10.5). This will be charged to tax at normal rates applicable to you. Strange, how a small action can make a big difference to the tax liability.

This is illogical and inequitable. I strongly feel that the legislation should permit the assessee to take the date of the booking of the flat and not the date of its possession as its date of acquisition.

Acquisition of assets

Q: I have inherited shares from my father, who recently passed away, and I desire to sell these. Unfortunately, I can fathom the date but not the cost of acquisition.

— Rakesh

A: Many of you would not know the cost of acquisition of the assets when the documents are lost or destroyed through natural calamities like flood or fire, or sheer negligence There are no guidelines in the act indicating how to handle such situations. This deficiency requires correction. Until the authorities provide any solution, you have to fend for yourself.

This is what you can do:

If the assets were acquired prior to April 1, 1981, you have the option to substitute the fair market value as on that date in place of their cost. In case of equities, prices prevalent on April 1, 1981, of A-group shares at major bourses are available in all ready reckoners. If a scrip was purchased later or happens to be in B1 or B2 category, you can request the stock exchange to give you a certificate indicating the quote of the date and if you do not know the date, ask for the lowest price during the year of purchase. All exchanges provide such information at a fee, albeit a little stiff one.

Possession of house

Q: I have sold a house and invested long-term gains in another larger house of which I took possession within two years for saving tax on the capital gains. Unfortunately, the registration of the property took a little more time and now my ITO is denying the benefit of Section 54 because the registration was not carried out within the stipulated time. I am being denied the exemption due to circumstances beyond my control.

— Anwar

A: CIT v Dr. L. N. Nagda 211ITR804 Bombay (1991) is a landmark decision in this respect. It deals with a case where the ITO had declined to grant exemption under Section 54 on the grounds that the registered deed for the new house purchased was not executed within one year (raised to two years by FA86) of sale of the old house. The court observed, “taking into consideration the letter as well as the spirit of Section 54 and the word ‘towards’ used before the word ‘purchase’ in Section 54, it is clear that the said word is not used in the sense of legal transfer and, therefore, the holding of a legal title within a period of one year is not a condition precedent for attracting Section 54.”

Gifting shares to wife

Q: If I get X share through IPO and I transferred the same to my wife’s account off the market and sell from her account to gain profit (short-term capital gain), does this transaction attract any tax liability on me since I am already a tax payer and want to avoid more tax through this transaction. Is this right strategy?

— Vaman

A: It is obvious that you are gifting the shares to your wife and, therefore, the STCG she earns will be clubbed and taxed in your hands.

The authors may be contacted at wonderlandconsultants@yahoo.com 

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BRIEFLY

Indiabulls tie-up
Mumbai, December 29
Indiabulls Financial Services has tied up with Sogecap - insurance arm of French financial major Societe Generale (SocGen). “We have entered a joint venture with Sogecap in which we have the majority 74 per cent stake. The JV will have an initial capital of Rs 300 crore,” IBFSL’s director Gagan Banga said. — PTI

NACIL approval
Mumbai, December 29
National Aviation Company of India (NACIL) has said it will borrow $469.415 million to buy Boeing aircraft for flag carrier Air India. The decision was taken by NACIL’s board today, the company said. Air India would add B777-200LR, two 777-300 ERs and two spare engines. These aircraft would be added in 2008. — PTI

IOL Broadband
Mumbai, December 29
IOL Broadband Ltd today said it has given permission to raise Rs 115.2 crore through preferential issue of 20 lakh warrants, carrying an entitlement to apply for equivalent number of equity shares at a price of Rs 576 each. The shareholders took a decision to this effect at its annual general meeting, the company said. — PTI

Ultrapure
New Delhi, December 29
Home appliances maker Ultrapure Technology and Appliances India (UTAIL) today said it has tied up with construction company Shipra Group for supplying modular kitchens. The company, which launched its modular kitchens in the market after setting up of a Rs 70-million factory in Himachal Pradesh, has received the Rs 4 crore order from Shipra, a company statement said. — PTI

DPL unit
Kolkata, December 29
The Durgapur Projects Ltd today commissioned its seventh unit of 300 MW capacity. A company release said DPL successfully generated 102 MW from the coal-fired unit today. The optimum capacity would be reached gradually. Synchronisation was made successfully on November 24. - PTI

Hindustan Copper
Mumbai, December 29
Hindustan Copper has said it will allot 15.7 crore equity shares worth Rs 78.5 crore to the government on preferential basis against conversion of a loan and plan equity support. The shareholders at the annual general meeting have approved the allotment to be made against conversion of government loan. — PTI

Mascon Global
Mumbai, December 29
Mascon Global has said it will raise $50 million through issue of international securities. The company informed the BSE that the board of directors has approved the issuance of foreign currency convertibility bonds (FCCBs) worth $1 lakh each aggregating $50 million. — PTI

LIOC pact
Colombo, December 29
Sri Lankan arm of the Indian Oil Corp (LIOC) has entered into an agreement with the financial services group the Lanka ORIX Leasing Co (LOLC) under which the latter will open service centres at LIOC’s filling stations. Commencing operations under a recently-signed agreement with LIOC, it opened its first service centre at the Lanka IOC filling station in Morawaka in South-central Sri Lanka yesterday. — PTI

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