SEBI gives ultimatum to MFs to merge similar schemes

It might have happened to you when you wanted to invest in mutual funds but got all confused due to numerous schemes in the capital market offered by existing as well as ever growing mutual fund companies. In order to simplify multiple mutual fund products available in the market, SEBI has given clear message that no new schemes to be launched until fund houses merge their existing schemes with similar characteristics. The Indian mutual fund industry currently manages about 715 schemes out of which half are equity based whereas other half provide fixed income. Earlier one scheme’s merger into another was considered as sale resulting in capital gains in the hands of investors. But 2015-16 budget said, merger of schemes will no longer be considered as fresh investment, a move that had the effect of removing the tax obligation on the investor.

Comments:

The step taken by regulator has many advantages some of which are as under:

1.   Less number of schemes will enhance investor’s interest and awareness eventually encouraging higher capital investment.

2.   Tracking of return would be lot easier as comparison among different mutual funds becomes tedious task in the present scenario.

3.   Manageable portfolio of assets, i.e. MFs would be able to focus more on core assets and shredding non-core assets, hence increasing returns.

4.   Lesser promotion and advertisement costs.

         5. Lesser schemes = Increased accountability, disclosure

Sunnyvale based Bidgley raises $1.16mn, leading investor Constellation Tech Ventures

What is Bidgley?

Bidgley derived its name from the hindi meaning of the word i.e. बिजली which means electricity. It is a company founded by Mr. Abhay Gupta and Mr. Vivek Garud based in Sunnyvale, California. The company provides domestic as well as industrial level analytics of data about consumption of power by various devices. For example, if my monthly consumption in terms of units of electricity is say 500 units then the Bidgley provides solutions that can monitor the exact number of units consumed by which unit i.e. Air Conditioner used 250 units, water pump consumed 100 units, etc. Most importantly it provides the data in terms of currency i.e. units consumed multiplied rate of electricity per unit. The products and solutions offered by the company also includes monitoring solutions i.e. you will receive notifications via app installed on your smartphones if the usage has exceeded particular limit fixed by you, very similar to data pack monitoring done by our smartphones. The devices are cloud based, which means it helps you compare your usage with others who have signed off for cloud services in a particular area as it offers you Wi-Fi connectivity.

Fund raising

The company has recently raised around $1.16mn in which the lead investor is Constellation Technology Ventures which is VC arm of Exelon Corporation which itself is largest competitive U.S. power generators manufacturer.

SEBI to introduce e-IPOs

SEBI has proposed to reduce post public issue processing time and cost by introducing the concept of e-IPOs which will facilitate investors submit their Initial Public offer (IPO) application form online through the stock exchange platform without requiring to sign any document physically. Stock brokers will have to use the National Automated Clearing System (NACS) implemented by the National Payments Corporation of India (NCPI), as there will be high volume of banking transactions that too repetitive in nature.

CARO 2003 vs CARO 2015

Central government by exercising the powers conferred by sub-section 11 of section 143 of Companies Act 2013 published in the gazette, the Companies (Auditor’s Report) Order, 2015. There have been some major changes in the order and only new and relevant things are highlighted here. Highlights of a comparison between new and Companies (Auditor’s Report) Order, 2003 and Companies (Auditor’s Report) Order, 2015 are as under:
1.   CARO 2015 as CARO 2003 shall not be applicable on Insurance, Banking and companies having charitable activities. It will also not be applicable on One Person Company and Small Company, both the concepts were introduced in the Companies Act 2013.
However there have been some changes in the criteria for applicability of the order on private limited companies, i.e. the maximum amount of loans from any banking or financial institution that can remain outstanding for non-application of CARO has been increased from Rs 10 lakhs to Rs 25 lakhs.Also the words ‘public deposits’ have been removed for the CARO to be applicable on private companies. This is a logical amendment as private companies cannot raise deposits from public as per the provisions of Companies Act 1956 as well as Companies Act 2013.2.   There was requirement in erstwhile order to report whether any substantial part of fixed assets have been disposed off during the year and if it has affected the going concern assumption or not. However such requirement has been dispensed with in the new order.
3.   Auditors had to report whether companies have either granted or taken loans, secured or unsecured from companies whose names have been entered into register maintained u/s 301 of the erstwhile act. In the new order auditor has to report only on the loans granted by the company during the period under audit. Also the requirement to comment upon whether the rate of interest and other terms and conditions of loans are prejudicial to the interests of the company has been dispensed with.
4.   There was requirement to comment whether a separate register has been maintained regarding the transactions entered into with parties whose names have been entered into u/s 301 and such transactions are reasonable in regard to prevailing market prices. Such requirement has been dispensed with in the new order.

Would legislation forcing to appoint women directors on board serve the purpose?

As per the provisions of Section 149 of Companies Act 2013 and compliance with Clause 49 of listing agreement it has been mandatory to appoint at least one woman director on board latest by 31^st March 2015. There has been research by BNY Mellon, the wealth and asset management firm, that economic power and corporate governance policy of an organization are the key factors which give shape to gender diversity on the board of an organization. Research has been made after studying data collected from a sample of 1002 companies from the Forbes Global 2000 list of 2013 which included businesses from 41 countries on 6 continents. It has been found that majority of corporations believe that placing of a women director on board by way of legislation will not serve the purpose of socially as well as economically empowering women. Placing of woman directors on board by the fear of complying legislation will not even lead to compromise of board’s formation but will also create hurdles for the women who are deserving candidates for the position. Countries which have highest levels of female economic power are Australia followed by Norway and Denmark whereas United States ranks 6^th and Britain ranks 9^th.

Spectrum allocation to Telecommunication companies to hamper their growth in the near future

Aggressive bidding in the telecommunication spectrum allocation hampered Telecommunication growth. TRAI estimates that to cover the losses and liquidity crises companies may have to increase their call rates by 6 to 7 paise per minute which is in contradiction to the figure provided by government that is 1.3 paise per minute. The prices of spectrum were higher than the price recommended by TRAI by an average of 20%. The difference in the calculations are arising as government has not considered cost of capital employed by such companies.

Government created a scenario which forced the companies to bid aggressively which resulted in:

1.      Fall in the operating margins for the ensuing fiscals.

2.      Non up gradation of infrastructure resulting in poor services to consumers as a consequence of liquidity crunch.

3.      Debt portfolio of Telecom companies to increase to over Rs 350,000 crores after auction.

4.      Telecom companies to introduce differential pricing for the use of internet, thus defeating the notion of freedom of media and speech by disrupting the concept of Internet Neutrality in the country.      

MAT to be applicable on FIIs and FPIs

The Income Tax department has issued demand notices of MAT to around 100 FIIs and more than 50 FPIs. Department has been reopening cases as it believes that income has escaped the assessment in the previous years based on decision given by Authority of Advance Ruling a quasi-judicial body, in the favour of government stating that MAT shall be applicable to FIIs and FPIs. FPIs are currently paying 15% tax on capital gains for less than 12 months and no tax on long term capital gains as the same are STT paid. Investors are treating issuance of such notices as retrospective action on the part of government however the government has exempted applicability of MAT from the FY 16-17. IT department believes that FPIs are required to maintain accounts under the Act and hence liable to pay tax on book profits. Finance Minister Mr. Arun Jaitely comments on the recent development that there has been no retrospective applicability of MAT and every demand of tax is not tax terrorism and opposite of tax terrorism doesn’t mean tax haven. Finance Minister also feels that FIIs and FPIs cannot escape their moral duty to pay tax on the grounds of tax terrorism.