Interest Rate Futures contracts shall commence at 12:00 noon on August 31, 2009.
Interest Rate Futures (IRF) are Derivatives contracts which have an interest bearing security as the underlying instrument. The value of contract rises and falls inversely to changes in interest rates. For example, if Interest rate (Bond Yields) rise, prices of Govt. bonds falls. Conversely also holds true.
BENEFICIARY OF THE PRODUCT
IRF as a product will be useful for:
Ø Entities wanting to benefit from a particular view on Interest Rate.
(For E.g. If one has a view that Interest rate will rise in coming days, he can "Short" the IRF contract and Conversely also holds true.)
Ø Entities exposed to Interest Rate risk, primarily banks, insurance companies, pension funds, corporate and others.
(For e.g. If a retail investor wants to take a loan after 1 year and has a view that Interest Rate will rise from 8% to 10% in 1 year, he can "Short" the IRF contract to hedge his position)
Sunday, August 30, 2009
Sunday, August 23, 2009
India may produce 1,200 tonnes of almonds in 2009-10
Sunday August 23,2009 04:51 PM, Source: Financial Express
The production of almond- known as the king of nuts, in the country is likely to remain stagnant at 1,200 tonnes in 2009-10, while the world's output is forecast to dip by 13 per cent in the same period, a latest report said.
Almond production in India for 2009-10 is pegged at 1,200 tonnes, which is the same as last year, the US Department of Agriculture said in its trade report.
Almond cultivation in the country is restricted to selected hilly areas of Jammu and Kashmir, Himachal Pradesh and Uttar Pradesh.
The USDA data showed that India's production of almond has been stagnant at 1,200 tonnes since 2004.
The report highlighted that the world's almond output may decline by 13 per cent at 7,60,000 tonnes due to an expected smaller crop in the US, where over 80 per cent of the world's almonds are produced.
According to USDA, almond production in America is expected to fall 17 per cent to 6,12,350 tonnes in 2009-10, compared with 7,39,350 tonnes in the year-ago period.
Almond production in Europe may rise marginally to 88,950 tonnes from 79,800 tonnes in the last year. The output in Australia is expected to increase to 30,000 tonnes from 26,000 tonnes, the report said.
The production of almond- known as the king of nuts, in the country is likely to remain stagnant at 1,200 tonnes in 2009-10, while the world's output is forecast to dip by 13 per cent in the same period, a latest report said.
Almond production in India for 2009-10 is pegged at 1,200 tonnes, which is the same as last year, the US Department of Agriculture said in its trade report.
Almond cultivation in the country is restricted to selected hilly areas of Jammu and Kashmir, Himachal Pradesh and Uttar Pradesh.
The USDA data showed that India's production of almond has been stagnant at 1,200 tonnes since 2004.
The report highlighted that the world's almond output may decline by 13 per cent at 7,60,000 tonnes due to an expected smaller crop in the US, where over 80 per cent of the world's almonds are produced.
According to USDA, almond production in America is expected to fall 17 per cent to 6,12,350 tonnes in 2009-10, compared with 7,39,350 tonnes in the year-ago period.
Almond production in Europe may rise marginally to 88,950 tonnes from 79,800 tonnes in the last year. The output in Australia is expected to increase to 30,000 tonnes from 26,000 tonnes, the report said.
4G threatens to spoil Govt's 3G party
Sunday August 23, 04:51 PM , Source: Financial Express
As India dithers over a policy on 3G mobile telephony, US' Motorola wants to test the next level (4G) that could pour cold water on the Government's plan to raise Rs 35,000 crore from selling radio frequency for the existing version.
Motorola, which has tested the new next generation technology, called Long-Term Evolution (LTE), is all set to start trial services of 4G that can offer 70 MB per second (Mbps) download speeds on a mobile phone by the end of this year.
The company is likely to approach the Department of Telecom (DoT) for trial spectrum, Subhendu Mohanty, a senior executive with Networks Mobility Business, Motorola India.
This development may, however, prompt operators planning to launch 3G telephony to wait and watch, thus spoiling the Government's plan to mop up a whopping Rs 35,000 crore from auction of 3G spectrum.
Asked whether Motorola is talking to operators, Mohanty said: We would like to have trial with the players but the technology can also be tested on our own systems.
In fact, the DoT is also understood to have prepared a concept paper on the 4G and the issue may be discussed at length in the days to come. Besides Motorola, other telecom vendors are also in the process of trials, industry sources said.
As India dithers over a policy on 3G mobile telephony, US' Motorola wants to test the next level (4G) that could pour cold water on the Government's plan to raise Rs 35,000 crore from selling radio frequency for the existing version.
Motorola, which has tested the new next generation technology, called Long-Term Evolution (LTE), is all set to start trial services of 4G that can offer 70 MB per second (Mbps) download speeds on a mobile phone by the end of this year.
The company is likely to approach the Department of Telecom (DoT) for trial spectrum, Subhendu Mohanty, a senior executive with Networks Mobility Business, Motorola India.
This development may, however, prompt operators planning to launch 3G telephony to wait and watch, thus spoiling the Government's plan to mop up a whopping Rs 35,000 crore from auction of 3G spectrum.
Asked whether Motorola is talking to operators, Mohanty said: We would like to have trial with the players but the technology can also be tested on our own systems.
In fact, the DoT is also understood to have prepared a concept paper on the 4G and the issue may be discussed at length in the days to come. Besides Motorola, other telecom vendors are also in the process of trials, industry sources said.
Insure them, assure them, dupe them Aviva Life Insurance Co India Pvt Ltd, has been accused of fraud.
Insure them, assure them, dupe them Aviva Life Insurance Co India Pvt Ltd, has been accused of fraud
Prominent Insurance Company Accused Of Fraud; Complaint Lodged With
IRDA-Appointed Ombudsman
Nischal Arora | TNN
Lucknow: Afraid of investing in stocks? Your investment in ‘safer’instruments too can erode and the company you hand over your life’s savings to insure your life could very well “dupe” you, as has been alleged by a city doctor.
The insurance company, Aviva Life Insurance Co India Pvt Ltd, has been accused by Dr Ram Kapoor of fraud as the company, he alleged, changed his policies, resulting in a major financial setback for him.
The manner in which it was allegedly done was even more shocking. DrKapoor, who has also lodged a complaint with the insurance regulatory and development authority (IRDA)-appointed insurance ombudsman, said he had taken two policies, numbers LLG 1241791 and LLG 1241921, with Aviva through ABN Amro Bank in June 2006. However, around 19 months later without informing beforehand or taking permission from Dr Kapoor, they issued new policies, numbers LLG 1248352 and LLG 1248353. Aviva informed Dr Kapoor vide letter dated January 15, 2008 about the change and when Dr Kapoor inquired about the reason, he was told by Aviva that the terms and conditions were same and that IRDA with a new circular had asked them to change the
policies. He was convinced.
However, he got the shock of his life when after the completion of three years he asked how much partial withdrawal could be made and he was told that the sum assured will be reduced if he did that. Since this condition was allegedly not mentioned in the original policies, Dr Kapoor protested. He was later even told that if he stopped paying the premium after three years a heavy amount would be deducted from the policies.
An angry Dr Kapoor then wrote to Aviva (letter dated July 6, 2009) but Aviva completely denied the existence of the original policies (letter dated July 13, 2009). This despite the fact that in earlier letters dated January 15,2008 they had themselves mentioned that they were issuing new policies “in lieu of” his “old” policies.
What is even bizarre is that one of the receipts he got much earlier in 2007 is against the changed policy number.
Again in letter dated August 11, 2009 Aviva said that the policies were changed on January 14, 2009. This, Aviva said, was done since after processing the “fund-switching request” sent by Dr Kapoor the old policy numbers were “not compatible with the system changes”.
However, Dr Kapoor maintains that his permission was not taken before changing the policies and moreover, Aviva allegedly changed the terms and conditions in the new policies, following which he suffered a major financial setback.
A senior official in the insurance department of ABN Amro Bank, which has a bancassurance tie-up with Aviva, said a client can make a fund-switching request four times in a year and the company cannot change his policies for that. “We have referred the case to Aviva but it seems that Aviva is not responding to the complaint properly,” the official said.
When contacted, Aviva’s spokesperson said that “only the reference numbers of the policies were changed as the systems were upgraded. No change was made to the policy itself. The changes in sum assured post the partial withdrawal on July 7, 2009 have been done in accordance with the policy terms and conditions as communicated to the customer.” Also, the spokesperson maintained that as per the reply letter to the customer (dated August 11, 2009), the change in the policy numbers was done on January 14,2009.”
The spokesperson though did not seem to have an answer to the receipt Dr Kapoor got in 2007 with the changed policy number, even before he was informed about the change, even before the company says the change was made.
Source: http://timesofindia.indiatimes.com/news/city/lucknow/Insurance-Co-accused-of-fraud/articleshow/4923720.cms
Prominent Insurance Company Accused Of Fraud; Complaint Lodged With
IRDA-Appointed Ombudsman
Nischal Arora | TNN
Lucknow: Afraid of investing in stocks? Your investment in ‘safer’instruments too can erode and the company you hand over your life’s savings to insure your life could very well “dupe” you, as has been alleged by a city doctor.
The insurance company, Aviva Life Insurance Co India Pvt Ltd, has been accused by Dr Ram Kapoor of fraud as the company, he alleged, changed his policies, resulting in a major financial setback for him.
The manner in which it was allegedly done was even more shocking. DrKapoor, who has also lodged a complaint with the insurance regulatory and development authority (IRDA)-appointed insurance ombudsman, said he had taken two policies, numbers LLG 1241791 and LLG 1241921, with Aviva through ABN Amro Bank in June 2006. However, around 19 months later without informing beforehand or taking permission from Dr Kapoor, they issued new policies, numbers LLG 1248352 and LLG 1248353. Aviva informed Dr Kapoor vide letter dated January 15, 2008 about the change and when Dr Kapoor inquired about the reason, he was told by Aviva that the terms and conditions were same and that IRDA with a new circular had asked them to change the
policies. He was convinced.
However, he got the shock of his life when after the completion of three years he asked how much partial withdrawal could be made and he was told that the sum assured will be reduced if he did that. Since this condition was allegedly not mentioned in the original policies, Dr Kapoor protested. He was later even told that if he stopped paying the premium after three years a heavy amount would be deducted from the policies.
An angry Dr Kapoor then wrote to Aviva (letter dated July 6, 2009) but Aviva completely denied the existence of the original policies (letter dated July 13, 2009). This despite the fact that in earlier letters dated January 15,2008 they had themselves mentioned that they were issuing new policies “in lieu of” his “old” policies.
What is even bizarre is that one of the receipts he got much earlier in 2007 is against the changed policy number.
Again in letter dated August 11, 2009 Aviva said that the policies were changed on January 14, 2009. This, Aviva said, was done since after processing the “fund-switching request” sent by Dr Kapoor the old policy numbers were “not compatible with the system changes”.
However, Dr Kapoor maintains that his permission was not taken before changing the policies and moreover, Aviva allegedly changed the terms and conditions in the new policies, following which he suffered a major financial setback.
A senior official in the insurance department of ABN Amro Bank, which has a bancassurance tie-up with Aviva, said a client can make a fund-switching request four times in a year and the company cannot change his policies for that. “We have referred the case to Aviva but it seems that Aviva is not responding to the complaint properly,” the official said.
When contacted, Aviva’s spokesperson said that “only the reference numbers of the policies were changed as the systems were upgraded. No change was made to the policy itself. The changes in sum assured post the partial withdrawal on July 7, 2009 have been done in accordance with the policy terms and conditions as communicated to the customer.” Also, the spokesperson maintained that as per the reply letter to the customer (dated August 11, 2009), the change in the policy numbers was done on January 14,2009.”
The spokesperson though did not seem to have an answer to the receipt Dr Kapoor got in 2007 with the changed policy number, even before he was informed about the change, even before the company says the change was made.
Source: http://timesofindia.indiatimes.com/news/city/lucknow/Insurance-Co-accused-of-fraud/articleshow/4923720.cms
Thursday, August 20, 2009
IRDA tweaks mortality charge norms
Friday August 21, 02:31 AM , Source: Indian Express Finance
The Insurance Regulatory and Development Authority (Irda) has withdrawn mortality charges from the overall cap on the charges levied by unit-linked insurance plans. The regulator also asked life insurers not to levy any charge on customers if they surrender their policies from the fifth year a move that will put more money in the hands of the investor.
While the move will benefit people who wish to take higher life cover in case of Ulips, it could give insurance companies the leeway to increase administration charges.
"Mortality and morbidity charges may be excluded in the calculation of the net yield," Irda said in a circular on Thursday. Mortality is the probability of death, while morbidity is the probability of disability. Mortality charge is the fee that insurance companies charge to give life cover. It increases with age.
"This allows companies to offer older customers the benefits of life insurance, without crossing the cap," Aviva India CEO and MD TR Ramachandran said.
On surrender charges Irda said, "No surrender charge can be levied by an insurer for policies surrendered from the fifth policy year and thereafter the policyholder will be entitled to receive the full fund value on such surrender." Insurance companies sometimes charge a nominal fee from customers to withdraw their unit-linked policies once the lock-in period ends. Policies withdrawn during the lock-in compulsorily attract a high surrender charge.
A Ulip has five fixed set of charges: premium allocation charge, policy administration charge, fund management charge, surrender charge, mortality charges. While companies have the freedom to decide charges like premium allocation, policy administration, fund management and surrender charge on their own; mortality charges are fixed for the industry.
To rein in high charges taken by the insurance companies, the regulator had mandated that the spread between the gross and net yield should not be more than 300 basis points or 3% for policies of 10-year tenure or less and not more than 225 basis points or 2.25% in case of policies of more than 10 years term.
When various charges levied by insurers are added on to net yield, it becomes gross yield. Irda had also said that fund management charges should not exceed 135 basis points irrespective of the tenor of the contract.
The new norms will come into effect from October 1, 2009 so that all products which are approved by the Irda on or after October 1, 2009 will be governed by the provisions of this circular. All existing products that do not meet the requirements of this circular should be withdrawn or modified by December 31, 2009.
TR Ramachandran, CEO and MD, Aviva India said the decision to exclude mortality charge from the cap is welcome move. This allows insurance companies to continue to provide adequate protection to the policyholders, which is the core objective of a life insurance policy. Moreover, it allows companies to offer older customers the benefits of life insurance, without crossing the cap.
KS Gopalkrishnan, chief financial officer and appointed actuary of AEGON Religare Life Insurance said that Irda's move is a logical move as the charges for insurance component are dependent upon various factors including age of the individual, type of insurance cover and amount of insurance cover.
"We believe this move also helps the life insurance companies in offering a need-based insurance coverage to the customers within the unit linked products. The customers thus get the best of both worlds within a unit linked product an insurance cover to meet their needs and an investment component that has competitive charging structure. The uniform sub-cap on fund management charges eases the administrative complexities,'' he said.
Kamesh Goyal, country manager, Allianz, and MD and CEO, Bajaj (BAJAJAUTO.NS : 2101.05 0 ) Allianz Life Insurance said Irda has taken a customer-friendly steps. Having one FMC limit would certainly bring more transparency in Ulip products.
The Insurance Regulatory and Development Authority (Irda) has withdrawn mortality charges from the overall cap on the charges levied by unit-linked insurance plans. The regulator also asked life insurers not to levy any charge on customers if they surrender their policies from the fifth year a move that will put more money in the hands of the investor.
While the move will benefit people who wish to take higher life cover in case of Ulips, it could give insurance companies the leeway to increase administration charges.
"Mortality and morbidity charges may be excluded in the calculation of the net yield," Irda said in a circular on Thursday. Mortality is the probability of death, while morbidity is the probability of disability. Mortality charge is the fee that insurance companies charge to give life cover. It increases with age.
"This allows companies to offer older customers the benefits of life insurance, without crossing the cap," Aviva India CEO and MD TR Ramachandran said.
On surrender charges Irda said, "No surrender charge can be levied by an insurer for policies surrendered from the fifth policy year and thereafter the policyholder will be entitled to receive the full fund value on such surrender." Insurance companies sometimes charge a nominal fee from customers to withdraw their unit-linked policies once the lock-in period ends. Policies withdrawn during the lock-in compulsorily attract a high surrender charge.
A Ulip has five fixed set of charges: premium allocation charge, policy administration charge, fund management charge, surrender charge, mortality charges. While companies have the freedom to decide charges like premium allocation, policy administration, fund management and surrender charge on their own; mortality charges are fixed for the industry.
To rein in high charges taken by the insurance companies, the regulator had mandated that the spread between the gross and net yield should not be more than 300 basis points or 3% for policies of 10-year tenure or less and not more than 225 basis points or 2.25% in case of policies of more than 10 years term.
When various charges levied by insurers are added on to net yield, it becomes gross yield. Irda had also said that fund management charges should not exceed 135 basis points irrespective of the tenor of the contract.
The new norms will come into effect from October 1, 2009 so that all products which are approved by the Irda on or after October 1, 2009 will be governed by the provisions of this circular. All existing products that do not meet the requirements of this circular should be withdrawn or modified by December 31, 2009.
TR Ramachandran, CEO and MD, Aviva India said the decision to exclude mortality charge from the cap is welcome move. This allows insurance companies to continue to provide adequate protection to the policyholders, which is the core objective of a life insurance policy. Moreover, it allows companies to offer older customers the benefits of life insurance, without crossing the cap.
KS Gopalkrishnan, chief financial officer and appointed actuary of AEGON Religare Life Insurance said that Irda's move is a logical move as the charges for insurance component are dependent upon various factors including age of the individual, type of insurance cover and amount of insurance cover.
"We believe this move also helps the life insurance companies in offering a need-based insurance coverage to the customers within the unit linked products. The customers thus get the best of both worlds within a unit linked product an insurance cover to meet their needs and an investment component that has competitive charging structure. The uniform sub-cap on fund management charges eases the administrative complexities,'' he said.
Kamesh Goyal, country manager, Allianz, and MD and CEO, Bajaj (BAJAJAUTO.NS : 2101.05 0 ) Allianz Life Insurance said Irda has taken a customer-friendly steps. Having one FMC limit would certainly bring more transparency in Ulip products.
Insurance agents may've to come clean
21 Aug 2009, 0551 hrs IST, Gireesh Chandra Prasad & Anto Antony, ET Bureau
NEW DELHI: Insurance agents will soon have to disclose the commission they earn on various policies to clients before selling a product, if a high-level panel of financial regulators has its way.
The panel, set up to suggest ways to increase transparency in the way investment advisors function, hopes this will ensure brokers do not woo people away from customer-friendly products to those yielding more commission, one of its members said.
The panel, comprising officials from RBI, finance ministry as well as the regulators of insurance, provident funds and capital markets, will submit its proposals in September.
Insurers offer up to 40% of the first year's premium of a policyholder as commission to the agent, the panel member said, requesting anonymity.
Agents get their commissions mostly without the knowledge of policyholders.
According to Sashwat Sharma, director-insurance of consultancy firm KPMG, most insurers offer 20-60% of the first year's premium as commission on life endowment and unit-linked policies.
Many financial advisors are luring potential mutual fund customers into insurance policies to pocket high commissions, after the capital market regulator lifted the entry load on mutual funds, government officials said.
Recently, SEBI replaced the commission system in the mutual fund industry with a fee negotiated between the broker and the customer.
This may lead to mutual funds and the New Pension System (NPS) losing investments to insurance products in the short term as, except in metros, a lot of people depend on intermediaries for investment advice, Mr Sharma said. This will change in about 10 years, he added.
NPS, which was opened to all citizens on May 1, has fixed a commission of Rs 40 for initial costs and Rs 20 for subsequent transactions and, therefore, may be discouraged by brokers.
Brokers can be checked to an extent by making it mandatory to reveal their commission for each product to customers upfront, a finance ministry official said.
But experts feel that it may be difficult to monitor if brokers are playing by the rule, particularly in small towns. A better solution, they say, will be to remove or fix commission on insurance policies. "It is difficult to remove the commission on insurance products completely as it is provided in the insurance law itself," said the finance ministry official.
He, however, said the merits of mutual funds will attract customers. "If the equity market does well, investments will invariably come to mutual funds. If the market doesn't, then there will be less interest in mutual funds anyway. If mutual funds do well, there will be pressure on other segments of the market to reduce commission."
NEW DELHI: Insurance agents will soon have to disclose the commission they earn on various policies to clients before selling a product, if a high-level panel of financial regulators has its way.
The panel, set up to suggest ways to increase transparency in the way investment advisors function, hopes this will ensure brokers do not woo people away from customer-friendly products to those yielding more commission, one of its members said.
The panel, comprising officials from RBI, finance ministry as well as the regulators of insurance, provident funds and capital markets, will submit its proposals in September.
Insurers offer up to 40% of the first year's premium of a policyholder as commission to the agent, the panel member said, requesting anonymity.
Agents get their commissions mostly without the knowledge of policyholders.
According to Sashwat Sharma, director-insurance of consultancy firm KPMG, most insurers offer 20-60% of the first year's premium as commission on life endowment and unit-linked policies.
Many financial advisors are luring potential mutual fund customers into insurance policies to pocket high commissions, after the capital market regulator lifted the entry load on mutual funds, government officials said.
Recently, SEBI replaced the commission system in the mutual fund industry with a fee negotiated between the broker and the customer.
This may lead to mutual funds and the New Pension System (NPS) losing investments to insurance products in the short term as, except in metros, a lot of people depend on intermediaries for investment advice, Mr Sharma said. This will change in about 10 years, he added.
NPS, which was opened to all citizens on May 1, has fixed a commission of Rs 40 for initial costs and Rs 20 for subsequent transactions and, therefore, may be discouraged by brokers.
Brokers can be checked to an extent by making it mandatory to reveal their commission for each product to customers upfront, a finance ministry official said.
But experts feel that it may be difficult to monitor if brokers are playing by the rule, particularly in small towns. A better solution, they say, will be to remove or fix commission on insurance policies. "It is difficult to remove the commission on insurance products completely as it is provided in the insurance law itself," said the finance ministry official.
He, however, said the merits of mutual funds will attract customers. "If the equity market does well, investments will invariably come to mutual funds. If the market doesn't, then there will be less interest in mutual funds anyway. If mutual funds do well, there will be pressure on other segments of the market to reduce commission."
Check out stocks that yielded 400% return
20 Aug 2009, 1351 hrs IST
The bull phase, which set in the markets early this year, has propelled stock prices of some companies such as Kwality Dairy, Visagar Polytex, Geekay Finance, Well Pack Papers, Bhagyashree Leasing and Falcon Tyres by over 400% in just one year.
Some other counters such as CNI Research, Filatex Fashions, Kiri Dyes, SI Group, Fem Care Pharma , VST Tillers, Shree Cement , Mphasis, Hawkins Cookers and Avery India have made investors richer by 125-250 % in the same time, CMIE data shows.
Compare this to sensex stocks like Tata Steel (gained 24%), RIL (-12 %), HDFC (3%), Infosys (16%), Bhel (37%) and ICICI Bank (9%). Among sensex stocks, only Maruti Suzuki finds place in the basket of stocks that have at least doubled in the last one year. Sensex has gained 3% during this period with many heavyweights managing to grow value by 15-20 %.
Check out stocks that yielded 400% return in just one year.....
Kwality Dairy / Visagar Polytex Ltd / Well Pack Papers Ltd / Geekay Finance / Bhagyashree Leasing and Finance Ltd / Falcon Tyres Ltd
The bull phase, which set in the markets early this year, has propelled stock prices of some companies such as Kwality Dairy, Visagar Polytex, Geekay Finance, Well Pack Papers, Bhagyashree Leasing and Falcon Tyres by over 400% in just one year.
Some other counters such as CNI Research, Filatex Fashions, Kiri Dyes, SI Group, Fem Care Pharma , VST Tillers, Shree Cement , Mphasis, Hawkins Cookers and Avery India have made investors richer by 125-250 % in the same time, CMIE data shows.
Compare this to sensex stocks like Tata Steel (gained 24%), RIL (-12 %), HDFC (3%), Infosys (16%), Bhel (37%) and ICICI Bank (9%). Among sensex stocks, only Maruti Suzuki finds place in the basket of stocks that have at least doubled in the last one year. Sensex has gained 3% during this period with many heavyweights managing to grow value by 15-20 %.
Check out stocks that yielded 400% return in just one year.....
Kwality Dairy / Visagar Polytex Ltd / Well Pack Papers Ltd / Geekay Finance / Bhagyashree Leasing and Finance Ltd / Falcon Tyres Ltd
Glenmark takes 17% knock, biggest in 2 months
20 Aug 2009, 0312 hrs IST,(An Extract from E.T)
Glenmark, one of the top 10 pharma companies in India by market capitalisation, witnessed a sharp fall of 17% in its intra-day stock price on the back of disappointing IIb clinical trial results for its drug Oglemilast.
This is the largest fall in the company’s stock price in the last two months. At the end of trading on Wednesday, the stock was down 15% even as the Sensex shed 225 points (1.5%).
Glenmark licensed the US rights for Oglemilast to Forest Laboratories in 2004 with the former receiving an initial milestone payment of $35 million out of a total deal size of $190 million. Oglemilast is an orally administered inhibitor drug, touted to be an important and novel therapeutic target for asthma and chronic obstructive pulmonary disease (COPD), also known as smoker’s cough.
The results of the phase IIb study, which were expected in the second quarter of this fiscal, revealed that Oglemilast did not show a statistically meaningful increase from baseline compared to the placebo (dummy drug). The tests, undertaken to evaluate the efficacy and safety of the drug, were conducted on 428 patients suffering from moderate to very severe COPD.
“We are disappointed that Oglemilast has not been successful in this study,” said Howard Solomon, chairman and CEO of Forest Laboratories. “Oglemilast is still being studied for the treatment of asthma, with results expected during the first calendar quarter of 2010. With Glenmark, we are considering what further action would be useful or appropriate”, Mr Solomon said in the joint press statement released by the two companies.
The failure met by Oglemilast is yet another setback to Glenmark, which has been the most successful Indian company in monetising its innovative R&D and having received milestone payments of $115 million to date. In October last year, Eli Lilly suspended the clinical development of Glenmark’s experimental drug to treat osteoarthritis pain.
“The focus for Glenmark will be to continuously discover best-in-class or first-in-class molecules, take them to clinical trials and then look at outlicensing these molecules. We presently have at least three more outlicensing candidates, GRC 10693, GBR 500 and GRC 15300”, said Glenn Saldanha, MD & CEO of Glenmark in an email statement to ET.
Glenmark, one of the top 10 pharma companies in India by market capitalisation, witnessed a sharp fall of 17% in its intra-day stock price on the back of disappointing IIb clinical trial results for its drug Oglemilast.
This is the largest fall in the company’s stock price in the last two months. At the end of trading on Wednesday, the stock was down 15% even as the Sensex shed 225 points (1.5%).
Glenmark licensed the US rights for Oglemilast to Forest Laboratories in 2004 with the former receiving an initial milestone payment of $35 million out of a total deal size of $190 million. Oglemilast is an orally administered inhibitor drug, touted to be an important and novel therapeutic target for asthma and chronic obstructive pulmonary disease (COPD), also known as smoker’s cough.
The results of the phase IIb study, which were expected in the second quarter of this fiscal, revealed that Oglemilast did not show a statistically meaningful increase from baseline compared to the placebo (dummy drug). The tests, undertaken to evaluate the efficacy and safety of the drug, were conducted on 428 patients suffering from moderate to very severe COPD.
“We are disappointed that Oglemilast has not been successful in this study,” said Howard Solomon, chairman and CEO of Forest Laboratories. “Oglemilast is still being studied for the treatment of asthma, with results expected during the first calendar quarter of 2010. With Glenmark, we are considering what further action would be useful or appropriate”, Mr Solomon said in the joint press statement released by the two companies.
The failure met by Oglemilast is yet another setback to Glenmark, which has been the most successful Indian company in monetising its innovative R&D and having received milestone payments of $115 million to date. In October last year, Eli Lilly suspended the clinical development of Glenmark’s experimental drug to treat osteoarthritis pain.
“The focus for Glenmark will be to continuously discover best-in-class or first-in-class molecules, take them to clinical trials and then look at outlicensing these molecules. We presently have at least three more outlicensing candidates, GRC 10693, GBR 500 and GRC 15300”, said Glenn Saldanha, MD & CEO of Glenmark in an email statement to ET.
LIC buys shares of Rel Comm worth Rs 1,274 cr
20 Aug 2009, 1920 hrs IST, PTI
MUMBAI: Life Insurance Corporation of India has hiked its stake in Anil Ambani Group company Reliance Communications to 7.02 per cent after buying fresh shares worth Rs 1,274.4 crore through an open market transaction.
LIC has purchased 4.16 crore shares representing 2.01 per cent stake in private telecom services provider Reliance Communications worth Rs 1,274.4 crore, Reliance Communications said in a disclosure to the Bombay Stock Exchange.
Prior to the purchase, LIC held 5 per cent stake in the company, while now it holds 7.02 per cent stake or 14.50 crore shares of Reliance Communications.
Shares of Reliance Communications today settled at Rs 245.25 on the BSE, up 2.08 per cent from the previous close.
MUMBAI: Life Insurance Corporation of India has hiked its stake in Anil Ambani Group company Reliance Communications to 7.02 per cent after buying fresh shares worth Rs 1,274.4 crore through an open market transaction.
LIC has purchased 4.16 crore shares representing 2.01 per cent stake in private telecom services provider Reliance Communications worth Rs 1,274.4 crore, Reliance Communications said in a disclosure to the Bombay Stock Exchange.
Prior to the purchase, LIC held 5 per cent stake in the company, while now it holds 7.02 per cent stake or 14.50 crore shares of Reliance Communications.
Shares of Reliance Communications today settled at Rs 245.25 on the BSE, up 2.08 per cent from the previous close.
Inflation rate inches up
The rate of inflation inched up marginally to minus 1.53 per cent for the week ended August 8 from (-)1.74 per cent in the previous week following continued uptrend in food prices in the wake of an erratic and deficient monsoon in large parts of the country.
Even as the wholesale price index-based inflation continued to remain in the negative territory during the week as compared to 12.82 per cent in the like week a year-ago on account of the high base effect, the uptrend in price movement is in keeping with the Reserve Bank’s expectations.
It may be recalled that earlier this week, RBI Deputy Governor K. C. Chakrabarty had noted that the deficient monsoon was likely to spur inflationary pressures with food prices rising in the coming months on account of reduced kharif sowing. In any case, cereals such as rice and pulses are set to turn dearer as the government on Thursday announced hikes in the minimum support prices (MSP) for paddy by Rs. 100 a quintal and pulses by up to Rs. 240 a quintal, mainly to help farmers and induce higher kharif procure- ment.
On the liquidity front, with the spectre of drought likely to worsen the situation by way of further impacting food prices, the apex bank is expected to keep its key policy rates unchanged for some more time so as to contain the WPI inflation at the tolerable level of about 5-5.5 per cent by the end of this fiscal.
On a year-on-year basis, however, the rise in food prices has been much steeper, with vegetables turning more expensive by nearly 40 per cent, cereals by 11.6 per cent, pulses by 17.6 per cent and condiments and spices by 4.7 per cent.
Even as the wholesale price index-based inflation continued to remain in the negative territory during the week as compared to 12.82 per cent in the like week a year-ago on account of the high base effect, the uptrend in price movement is in keeping with the Reserve Bank’s expectations.
It may be recalled that earlier this week, RBI Deputy Governor K. C. Chakrabarty had noted that the deficient monsoon was likely to spur inflationary pressures with food prices rising in the coming months on account of reduced kharif sowing. In any case, cereals such as rice and pulses are set to turn dearer as the government on Thursday announced hikes in the minimum support prices (MSP) for paddy by Rs. 100 a quintal and pulses by up to Rs. 240 a quintal, mainly to help farmers and induce higher kharif procure- ment.
On the liquidity front, with the spectre of drought likely to worsen the situation by way of further impacting food prices, the apex bank is expected to keep its key policy rates unchanged for some more time so as to contain the WPI inflation at the tolerable level of about 5-5.5 per cent by the end of this fiscal.
On a year-on-year basis, however, the rise in food prices has been much steeper, with vegetables turning more expensive by nearly 40 per cent, cereals by 11.6 per cent, pulses by 17.6 per cent and condiments and spices by 4.7 per cent.
Wednesday, August 19, 2009
Bayer suffers defeat over patent dispute in India
Wednesday August 19,2009, 11:50 PM
FRANKFURT (Reuters) - German drugmaker Bayer has suffered defeat in an Indian court in a crucial legal dispute over approval of a copycat version of its cancer drug Nexavar.
Bayer had taken India's Cipla to court after the generics supplier had applied to sell a cheaper, generic version of Nexavar, scientifically known as sorafenib, in India even though the drug's patent is protected through 2020 in India.
The Delhi High Court dismissed Bayer's case.
"We are disappointed about the ruling and are now examining our legal options," said a spokesman for Bayer on Wednesday.
The ruling establishes a precedent in the subcontinent for how intellectual property rights will be weighed against making potentially life-saving drugs available more cheaply.
Bayer has described Nexavar, currently cleared for fighting tumours of the kidney and the liver, as one of its most promising drugs, foreseeing up to 2 billion euros ($2.82 billion) in annual sales.
That figure is only matched by projections for its blood thinner Xarelto.
FRANKFURT (Reuters) - German drugmaker Bayer has suffered defeat in an Indian court in a crucial legal dispute over approval of a copycat version of its cancer drug Nexavar.
Bayer had taken India's Cipla to court after the generics supplier had applied to sell a cheaper, generic version of Nexavar, scientifically known as sorafenib, in India even though the drug's patent is protected through 2020 in India.
The Delhi High Court dismissed Bayer's case.
"We are disappointed about the ruling and are now examining our legal options," said a spokesman for Bayer on Wednesday.
The ruling establishes a precedent in the subcontinent for how intellectual property rights will be weighed against making potentially life-saving drugs available more cheaply.
Bayer has described Nexavar, currently cleared for fighting tumours of the kidney and the liver, as one of its most promising drugs, foreseeing up to 2 billion euros ($2.82 billion) in annual sales.
That figure is only matched by projections for its blood thinner Xarelto.
Indian textile and apparel industry set to grow
Wednesday August 19, 08:50 PM
Ludhiana, Aug.19 (ANI): With a strong domestic demand and the stimulus provided by the government, Indian textile and apparel industry is confident that it would grow.
With the Central Government recently offering aid under the Technology Upgradation Fund Scheme, the Indian textile and apparel industry is confident that it will be able to handle market competition and grow, especially in the export sector.
The Indian textile companies are now aggressively upgrading their technology to compete in the global market.
India is the second largest textile economy in the world after China. But the slowdown being witnessed in the U.S. and Europe has also caused an impact on its growth.
In the last eight months, India's five-billion dollar strong textile export sector has witnessed a sharp fall of 33 per cent.
Exporters have been asking for a billion dollar aid for market development and other tax benefits to target newer markets since the U.S. and the European Union countries, which constituted over 60 per cent of the exports, are saturated.
Recently, the government came to their rescue and decided to give 510 million dollars as financial help to domestic textile firms to upgrade their manufacturing units. The aid under the Textile Technology Upgradation Fund Scheme is seen as a stimulus to the sector.
"3,140 crore was allotted to the MoT which was never done earlier. And this was allotted to promote the Textile Upgradation Fund Scheme, which is the most popular scheme in independent India, which has really brought in lot of investment to the tune of 166,000 crores in the textile industry," said Dayanidhi Maran, Union Minister for Textiles recently.
This is for the first time such a large sum of money has been released at one-go under the scheme. The fund has been transferred electronically through more than 121 financial nstitutions and banks to the accounts of 12,514 beneficiaries.
The government has already disbursed 1.64 billion dollars under the scheme launched in April 1999.
"If we can increase its capacity as well as quality, definitely the foreign buyers will prefer India instead of China. That means scope for investment in textile industry is still there. So, I would not say that in the spinning only, spinning is already in a sufficient capacity in India, but the value added products in garments and accessories. So there is a big scope of further expansion," said Ajit Lakra, Managing Director, Superfine Knitters Ltd., Ludhiana.
Attracting investment would be government's thrust area to push industry growth rate to 8-10 per cent from the current level of six percent.
To achieve this target the textile ministry plans to attract investments worth over 31 billion dollars over the next five years.
Also, the Indian exporters are looking at newer markets like Latin America, Japan, New Zealand and South Africa. And small-scale apparel and accessories manufacturers and exporters are optimistic about weathering the crisis.
"In the so-called recession period we are doing better than the past years, because we are dealing in fashion accessories. So our items start with 50 cents, 1-2 dollars. So in this recessionary period a woman when she has to change her attire, she would start to change her look with a cheaper item.
She could just change her earrings, she could just change her bangles and she could change her scarf rather than going for a new dress or a new hand bang or new shoes. So, that's why our sales have increased in these periods," said K.S.Kohli, proprietor of Kohli Associates Pvt.Ltd.
Textile sector in India accounts for around 8 per cent of GDP, contributes 14 per cent of the value addition in the manufacturing sector and more than 30 per cent of the export earnings of the country.
It is the single largest employer with an estimated workforce of 35 million.
Shrinking global demand has resulted in job losses in the sector, but the government has promised to create 10 million jobs over the next five years.
The government has also announced the constitution of a 41-member working group to form a national fibre policy, aimed at making India self-sufficient in fibre consumption and export equirements. By Karan Kapoor(ANI)
Ludhiana, Aug.19 (ANI): With a strong domestic demand and the stimulus provided by the government, Indian textile and apparel industry is confident that it would grow.
With the Central Government recently offering aid under the Technology Upgradation Fund Scheme, the Indian textile and apparel industry is confident that it will be able to handle market competition and grow, especially in the export sector.
The Indian textile companies are now aggressively upgrading their technology to compete in the global market.
India is the second largest textile economy in the world after China. But the slowdown being witnessed in the U.S. and Europe has also caused an impact on its growth.
In the last eight months, India's five-billion dollar strong textile export sector has witnessed a sharp fall of 33 per cent.
Exporters have been asking for a billion dollar aid for market development and other tax benefits to target newer markets since the U.S. and the European Union countries, which constituted over 60 per cent of the exports, are saturated.
Recently, the government came to their rescue and decided to give 510 million dollars as financial help to domestic textile firms to upgrade their manufacturing units. The aid under the Textile Technology Upgradation Fund Scheme is seen as a stimulus to the sector.
"3,140 crore was allotted to the MoT which was never done earlier. And this was allotted to promote the Textile Upgradation Fund Scheme, which is the most popular scheme in independent India, which has really brought in lot of investment to the tune of 166,000 crores in the textile industry," said Dayanidhi Maran, Union Minister for Textiles recently.
This is for the first time such a large sum of money has been released at one-go under the scheme. The fund has been transferred electronically through more than 121 financial nstitutions and banks to the accounts of 12,514 beneficiaries.
The government has already disbursed 1.64 billion dollars under the scheme launched in April 1999.
"If we can increase its capacity as well as quality, definitely the foreign buyers will prefer India instead of China. That means scope for investment in textile industry is still there. So, I would not say that in the spinning only, spinning is already in a sufficient capacity in India, but the value added products in garments and accessories. So there is a big scope of further expansion," said Ajit Lakra, Managing Director, Superfine Knitters Ltd., Ludhiana.
Attracting investment would be government's thrust area to push industry growth rate to 8-10 per cent from the current level of six percent.
To achieve this target the textile ministry plans to attract investments worth over 31 billion dollars over the next five years.
Also, the Indian exporters are looking at newer markets like Latin America, Japan, New Zealand and South Africa. And small-scale apparel and accessories manufacturers and exporters are optimistic about weathering the crisis.
"In the so-called recession period we are doing better than the past years, because we are dealing in fashion accessories. So our items start with 50 cents, 1-2 dollars. So in this recessionary period a woman when she has to change her attire, she would start to change her look with a cheaper item.
She could just change her earrings, she could just change her bangles and she could change her scarf rather than going for a new dress or a new hand bang or new shoes. So, that's why our sales have increased in these periods," said K.S.Kohli, proprietor of Kohli Associates Pvt.Ltd.
Textile sector in India accounts for around 8 per cent of GDP, contributes 14 per cent of the value addition in the manufacturing sector and more than 30 per cent of the export earnings of the country.
It is the single largest employer with an estimated workforce of 35 million.
Shrinking global demand has resulted in job losses in the sector, but the government has promised to create 10 million jobs over the next five years.
The government has also announced the constitution of a 41-member working group to form a national fibre policy, aimed at making India self-sufficient in fibre consumption and export equirements. By Karan Kapoor(ANI)
Saturday, August 15, 2009
It's official: India is in a drought
It's official: India is in a drought
After days of dilly-dallying, the government seems to have finally bitten the bullet. It has now confirmed that India has been indeed drought affected, with the country's northwestern region, known as the bread basket being the worst hit. As per a leading daily that has quoted the Indian Meteorological Department, 31 of the 36 weather divisions have got deficient or scanty rain with the shortfall increasing to 29% from last week's 25%.
To make matters worse, there are indications that monsoons may even withdraw earlier in mid-September instead of early October, thus affecting the Rabi crop as well. Needless to say, a significant damage has already been done to the Kharif crop.
As far as the damage of poor rainfall on the economy is concerned, these seem to be early days yet to make any meaningful estimates. Fortunately, things don't seem as bad as they were during the drought of 2002. For one, we are having a large buffer stock of wheat and rice that may help in curbing runaway prices and secondly, with the government running many pro-poor schemes like the NREGS (National Rural Employment Guarantee Scheme), damage to an average farmer's income could also be minimised. Even some well known economists are not willing to downgrade India's growth just yet. Having said that, the CMIE has reduced its forecast for India's GDP growth from 6.6% to 5.8% for the current year. We second that view and believe that the drought that India is facing will certainly have a negative bearing on economic growth this year.
After days of dilly-dallying, the government seems to have finally bitten the bullet. It has now confirmed that India has been indeed drought affected, with the country's northwestern region, known as the bread basket being the worst hit. As per a leading daily that has quoted the Indian Meteorological Department, 31 of the 36 weather divisions have got deficient or scanty rain with the shortfall increasing to 29% from last week's 25%.
To make matters worse, there are indications that monsoons may even withdraw earlier in mid-September instead of early October, thus affecting the Rabi crop as well. Needless to say, a significant damage has already been done to the Kharif crop.
As far as the damage of poor rainfall on the economy is concerned, these seem to be early days yet to make any meaningful estimates. Fortunately, things don't seem as bad as they were during the drought of 2002. For one, we are having a large buffer stock of wheat and rice that may help in curbing runaway prices and secondly, with the government running many pro-poor schemes like the NREGS (National Rural Employment Guarantee Scheme), damage to an average farmer's income could also be minimised. Even some well known economists are not willing to downgrade India's growth just yet. Having said that, the CMIE has reduced its forecast for India's GDP growth from 6.6% to 5.8% for the current year. We second that view and believe that the drought that India is facing will certainly have a negative bearing on economic growth this year.
» US$ 39 bn to be mopped up in stake sale
» US$ 39 bn to be mopped up in stake sale
Remember the government's plan of bringing the public shareholding in all listed companies to a minimum of 25%? Well, as per Bloomberg, this could lead to as much as Rs 1.9 trillion (US$ 39 bn) in stock sales by controlling shareholders, almost five times more than the average amount companies in India have raised through IPOs over the past few years. Obviously, the selling will have to be done in a phased manner since the markets may not able to absorb the sale of such a magnitude over a short period of time.
As per reports, the average public float in Indian listed companies is less than 15% currently, making them vulnerable to manipulation, scams and abuse by majority shareholders. Hence, raising the limit to 25% will not only reduce the odds of an abuse considerably it will also bring Indian regulations at par with markets like the US, UK and Hong Kong. Incidentally, the top 10 companies that may have to sell stakes are the PSUs accounting for a significant 80% of the total value to be offloaded. Currently, the proposal is in the process of seeking public comment on a government website with the Government planning to take up the issue after completing 100 days in office.
Remember the government's plan of bringing the public shareholding in all listed companies to a minimum of 25%? Well, as per Bloomberg, this could lead to as much as Rs 1.9 trillion (US$ 39 bn) in stock sales by controlling shareholders, almost five times more than the average amount companies in India have raised through IPOs over the past few years. Obviously, the selling will have to be done in a phased manner since the markets may not able to absorb the sale of such a magnitude over a short period of time.
As per reports, the average public float in Indian listed companies is less than 15% currently, making them vulnerable to manipulation, scams and abuse by majority shareholders. Hence, raising the limit to 25% will not only reduce the odds of an abuse considerably it will also bring Indian regulations at par with markets like the US, UK and Hong Kong. Incidentally, the top 10 companies that may have to sell stakes are the PSUs accounting for a significant 80% of the total value to be offloaded. Currently, the proposal is in the process of seeking public comment on a government website with the Government planning to take up the issue after completing 100 days in office.
» India suffers due to poor customer service
» India suffers due to poor customer service
It appears that Indian companies are paying the price of ignoring the most basic marketing mantra - "Customer is King" and are losing as much as Rs 116 bn in revenues every year on account of abandoned transactions due to poor customer service. According to a survey conducted by Genesys Telcom Labs (a part of Alcatel-Lucent), Indian companies lose huge sums of money as customers fail to reach through to the company over the web, in the contact center or through mobile devices.
India together with Australia and New Zealand, the other two countries being surveyed, stand to lose a total of Rs 280 bn in abandoned transactions and customer churning. Having to repeat information again and again, long waits, random call transfers and poorly-trained customer service executives do no good to appease the annoyed customer. We believe it is high time that companies start investing in high-end technology to improve Indian customer service which is nowhere close to its developed counterparts.
It appears that Indian companies are paying the price of ignoring the most basic marketing mantra - "Customer is King" and are losing as much as Rs 116 bn in revenues every year on account of abandoned transactions due to poor customer service. According to a survey conducted by Genesys Telcom Labs (a part of Alcatel-Lucent), Indian companies lose huge sums of money as customers fail to reach through to the company over the web, in the contact center or through mobile devices.
India together with Australia and New Zealand, the other two countries being surveyed, stand to lose a total of Rs 280 bn in abandoned transactions and customer churning. Having to repeat information again and again, long waits, random call transfers and poorly-trained customer service executives do no good to appease the annoyed customer. We believe it is high time that companies start investing in high-end technology to improve Indian customer service which is nowhere close to its developed counterparts.
Wednesday, August 12, 2009
Govt looks to implement new I-T law from 2011
13 Aug 2009, 0548 hrs IST, ET Bureau (Extract from Economic Times)
The government on Wednesday unveiled the draft of a brand new direct tax law, which will replace the four-decade Income-Tax Act, " …to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base", said finance minister Pranab Mukherjee.
The tax code makes radical changes in all areas of taxation: it lowers the incidence of tax on corporate and individual incomes but reintroduces wealth tax and capital gains tax, albeit at lower levels. It also proposes to bring a uniform pattern of taxation on all long-term savings in the form of EET—exempt at the stage of contribution, exempt during accumulation and taxed during withdrawal.
Releasing the draft direct taxes code, Mr Mukherjee said if a reasonable level of discussion happens on the code, a bill could be placed in the winter session of Parliament. The government is hoping to implement the new code from 2011.
Home minister P Chidambaram, who during his tenure as finance minister had initiated work on the Code and was intensely involved with its drafting, said this was a brand new Code written from scratch. Mr Chidambaram also said the underlying philosophy behind the Code is the philosophy of the government, which is wedded to a well-regulated free market system.
The code proposes to exempt income up to Rs 1,60,000 a year from tax. Income up to Rs 10 lakh will be taxed at 10%, 10-25 lakh at 20% and beyond Rs 25 lakh at 30%. Currently, there is no tax till Rs 1,60,000 of income in a year. However, there is a 10% tax on income between Rs 1,60,000 and Rs 3 lakh, 20% between Rs 3 lakh and Rs 5 lakh, and 30% beyond Rs 5 lakh.
But under the new tax law, an individual’s gross salary would also include perquisites such as value of rent-free accommodation, medical reimbursements and leave travel encashment. Taxpayers will also not be able to claim tax benefit on interest repayment on housing loans. However, the benefit would be available if the house is rented.
All savings schemes would also come under EET, implying that they would face tax at the time of withdrawal. However, tax exemption would be available to the Public Provident Fund and other pension fund schemes on withdrawals of amounts accumulated up to March 31, 2011.
The Code further proposes abolition of STT. Capital gains on shares and securities has been proposed to be taxed as income, added to other income after indexation with base year 2000. “The capital gains regime is proposed to be simplified by eliminating the distinction between long-term and short-term capital assets,” Vikas Vasal, executive director, KPMG.
Wealth tax provisions are proposed to be overhauled. Net wealth, which would include all wealth of an individual in excess of Rs 50 crore, will be chargeable to wealth tax at the rate of 0.25%. One of the key changes suggested by the Code includes giving supremacy to the Indian tax law in case of a dispute between provisions of a tax treaty and the Code, and introduction of a general anti-avoidance rule to combat tax avoidance.
This would help the tax authorities deal with cases such as Hutch-Vodafone, where if they infer that a tax treaty was being abused for tax benefits, those case be denied.
Besdies, a massive overhaul is suggested for corporate taxation besides slashing the corporate tax rate to 25%. The new rate would not have any surcharge or cess unlike present. Moreover, the current profit-linked tax incentives for businesses will be replaced with investment-linked incentives.
To put it simply, a company would be able to enjoy tax benefit only to the extent it invests. But, all the tax exemptions such as those available to Special Economic Zones would be given time to adjust to new regime. A minimum alternate tax on assets of companies is being proposed as it provides incentive for efficiency at the rate of 2%. It also proposes rationalisation of tax provisions for amalgamations and demerger so that tax remains neutral when businesses reorganise.
Dividend distributed by companies would be taxed at the rate of 15%.
In move that would have major impact on foreign companies or companies that have made investments in foreign countries, the code is proposing to treat a company as an Indian resident even if it is partly controlled in India. Presently, a company is treated an as Indian resident and taxed, only if full control of that company lies here. the measure is primarily aimed at preventing escape of any income from taxation.
“The thrust of the code is to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base,” Mr Mukherjee said.
The government on Wednesday unveiled the draft of a brand new direct tax law, which will replace the four-decade Income-Tax Act, " …to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base", said finance minister Pranab Mukherjee.
The tax code makes radical changes in all areas of taxation: it lowers the incidence of tax on corporate and individual incomes but reintroduces wealth tax and capital gains tax, albeit at lower levels. It also proposes to bring a uniform pattern of taxation on all long-term savings in the form of EET—exempt at the stage of contribution, exempt during accumulation and taxed during withdrawal.
Releasing the draft direct taxes code, Mr Mukherjee said if a reasonable level of discussion happens on the code, a bill could be placed in the winter session of Parliament. The government is hoping to implement the new code from 2011.
Home minister P Chidambaram, who during his tenure as finance minister had initiated work on the Code and was intensely involved with its drafting, said this was a brand new Code written from scratch. Mr Chidambaram also said the underlying philosophy behind the Code is the philosophy of the government, which is wedded to a well-regulated free market system.
The code proposes to exempt income up to Rs 1,60,000 a year from tax. Income up to Rs 10 lakh will be taxed at 10%, 10-25 lakh at 20% and beyond Rs 25 lakh at 30%. Currently, there is no tax till Rs 1,60,000 of income in a year. However, there is a 10% tax on income between Rs 1,60,000 and Rs 3 lakh, 20% between Rs 3 lakh and Rs 5 lakh, and 30% beyond Rs 5 lakh.
But under the new tax law, an individual’s gross salary would also include perquisites such as value of rent-free accommodation, medical reimbursements and leave travel encashment. Taxpayers will also not be able to claim tax benefit on interest repayment on housing loans. However, the benefit would be available if the house is rented.
All savings schemes would also come under EET, implying that they would face tax at the time of withdrawal. However, tax exemption would be available to the Public Provident Fund and other pension fund schemes on withdrawals of amounts accumulated up to March 31, 2011.
The Code further proposes abolition of STT. Capital gains on shares and securities has been proposed to be taxed as income, added to other income after indexation with base year 2000. “The capital gains regime is proposed to be simplified by eliminating the distinction between long-term and short-term capital assets,” Vikas Vasal, executive director, KPMG.
Wealth tax provisions are proposed to be overhauled. Net wealth, which would include all wealth of an individual in excess of Rs 50 crore, will be chargeable to wealth tax at the rate of 0.25%. One of the key changes suggested by the Code includes giving supremacy to the Indian tax law in case of a dispute between provisions of a tax treaty and the Code, and introduction of a general anti-avoidance rule to combat tax avoidance.
This would help the tax authorities deal with cases such as Hutch-Vodafone, where if they infer that a tax treaty was being abused for tax benefits, those case be denied.
Besdies, a massive overhaul is suggested for corporate taxation besides slashing the corporate tax rate to 25%. The new rate would not have any surcharge or cess unlike present. Moreover, the current profit-linked tax incentives for businesses will be replaced with investment-linked incentives.
To put it simply, a company would be able to enjoy tax benefit only to the extent it invests. But, all the tax exemptions such as those available to Special Economic Zones would be given time to adjust to new regime. A minimum alternate tax on assets of companies is being proposed as it provides incentive for efficiency at the rate of 2%. It also proposes rationalisation of tax provisions for amalgamations and demerger so that tax remains neutral when businesses reorganise.
Dividend distributed by companies would be taxed at the rate of 15%.
In move that would have major impact on foreign companies or companies that have made investments in foreign countries, the code is proposing to treat a company as an Indian resident even if it is partly controlled in India. Presently, a company is treated an as Indian resident and taxed, only if full control of that company lies here. the measure is primarily aimed at preventing escape of any income from taxation.
“The thrust of the code is to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base,” Mr Mukherjee said.
Thursday, August 6, 2009
Buy Gold... Now.
How bad can it get?
A lot has been talked about the unprecedented money supply growth and its eventual translation to inflation. In History, there have been episodes of currency crises in different parts of the globe on account of run away increase in money supply resulting from printing more money. A few of the occurrences turned really worse and were identified as era of "hyperinflation". To recall a few, Zimbabwe experienced hyperinflation for much of this decade and not to forget the well-known Germany’s Weimar Republic hyperinflationary period in the 1920s.
Hyperinflation is just inflation at an extremely high rate. Usually this also means the inflation is out of control and its level is not precisely predictable.
There is no precedent for the current world money order. The magnitude of increase in money supply has been much higher this time around. However, history provides us some insights to how worse can it get.
Hyperinflation - Germany’s Weimar Republic (1921-23)
When it comes to Hyperinflation, Germany’s Weimar Republic era of 1921-23 serves as perhaps the best documented cases in modern history. While there is a lot of information in the public domain, this was recently described in a recent article by Peter Krauth. Many are unaware of the dire consequences of hyperinflation; a glimpse at what happened in Germany can be hair-raising.
During the World War I in 1914, Germany opted to finance the war by borrowing rather than increasing taxes. The German policy makers chose borrowing because they expected to win the war and intended to force the losers to pay for the cost of the war. It was thus logical to the policy makers to use borrowing rather than taxation.
But Germany lost the war and the victors imposed heavy reparation payments upon her. The reparation payments were perceived as unfair in Germany and the social democratic government was reluctant to impose the burden of their payment upon the German population.
The government, strapped for funds, resorted to printing money. The value of the mark relative to other currencies fell thereby increasing the cost of imported goods. Prices rose increasing the cost of running the government. This necessitated the printing of even more money. Prices rose further and the exchange rates for the mark dropped even more. The result was hyperinflation.
At first, Germans reacted to the higher prices by economizing and reducing their consumption. But when they realized that it was not just a matter of some things being more expensive but instead that the mark was losing value they reacted by spending their marks as fast as possible. This meant that there was little constraint on prices.
There were winners as well as losers in this hyperinflation. Those on fixed incomes and who were owed a specific amount of money found that the real value of their holdings reduced to zero. But those who owed money found their debt effectively wiped out.
The German mark devalued significantly in terms of gold prices. The paper mark/gold mark ratio went from a one-to-one ratio in 1921, all the way to a one-to-1.0 trillion ratio in 1923.
Just imagine what would happen to gold in any remotely comparable situation involving the U.S. Dollar. The dollar acts as a world reserve currency. There has been an unprecedented and explosive growth in money supply. The dollars are being created just by printing more of them without any asset backing it. They are nothing more than pieces of paper with black ink.
The U.S has been accumulating deficits over years. The deficit is likely to increase over $2 trillion; worrying its creditors. The dollar holds its value only as long as the greenback’s holders maintain their faith in the currency. The moment people decide they don’t want your dollars, they become worthless, or at least worth much less.
As seen in the above example on Germany, currencies lost value as their quantity of the money in system increased considerably. In that case, it will take a lot more dollars today to buy the same thing one bought with fewer dollars earlier.
There have been evidences of currency losing their entire value creating a hyper inflationary scenario. Like in Zimbabwe, people carried sacks full of notes to pay for their daily purchases. Also, during the Weimar mark inflation, people pushed wheelbarrows full of German marks to the bakery just to purchase a loaf of bread.
Is the US a banana republic?
A currency meltdown occurs when governments face overwhelming gaps between revenues and expenditures; foreign investors abandon the currencies as they race for the exit, leaving a trail of worthless paper.
A decline in the value of dollar will affect the entire global economy. The US dollar acts as the world reserve currency and most of the world trade happens through exchange of dollar currency. China with USD 2 trillion* of US Dollar notes will be the worst affected. That is why the Chinese government is buying hard assets - including gold. (*Source: Bloomberg)
Gold is the only time-tested currency that can act as a store of value during times of hyperinflation. Are we certain that the US dollar will collapse? Nothing is definite, and neither do we know when such an event could occur. But better to buy your "insurance" - in the form of owning gold.
We recommend that you allocate at least 10-20% of your investments to gold and insure your wealth from being eroded from a possible inflationary threat.
Buy Your Portfolio Insurance... Buy Gold... Now.
A lot has been talked about the unprecedented money supply growth and its eventual translation to inflation. In History, there have been episodes of currency crises in different parts of the globe on account of run away increase in money supply resulting from printing more money. A few of the occurrences turned really worse and were identified as era of "hyperinflation". To recall a few, Zimbabwe experienced hyperinflation for much of this decade and not to forget the well-known Germany’s Weimar Republic hyperinflationary period in the 1920s.
Hyperinflation is just inflation at an extremely high rate. Usually this also means the inflation is out of control and its level is not precisely predictable.
There is no precedent for the current world money order. The magnitude of increase in money supply has been much higher this time around. However, history provides us some insights to how worse can it get.
Hyperinflation - Germany’s Weimar Republic (1921-23)
When it comes to Hyperinflation, Germany’s Weimar Republic era of 1921-23 serves as perhaps the best documented cases in modern history. While there is a lot of information in the public domain, this was recently described in a recent article by Peter Krauth. Many are unaware of the dire consequences of hyperinflation; a glimpse at what happened in Germany can be hair-raising.
During the World War I in 1914, Germany opted to finance the war by borrowing rather than increasing taxes. The German policy makers chose borrowing because they expected to win the war and intended to force the losers to pay for the cost of the war. It was thus logical to the policy makers to use borrowing rather than taxation.
But Germany lost the war and the victors imposed heavy reparation payments upon her. The reparation payments were perceived as unfair in Germany and the social democratic government was reluctant to impose the burden of their payment upon the German population.
The government, strapped for funds, resorted to printing money. The value of the mark relative to other currencies fell thereby increasing the cost of imported goods. Prices rose increasing the cost of running the government. This necessitated the printing of even more money. Prices rose further and the exchange rates for the mark dropped even more. The result was hyperinflation.
At first, Germans reacted to the higher prices by economizing and reducing their consumption. But when they realized that it was not just a matter of some things being more expensive but instead that the mark was losing value they reacted by spending their marks as fast as possible. This meant that there was little constraint on prices.
There were winners as well as losers in this hyperinflation. Those on fixed incomes and who were owed a specific amount of money found that the real value of their holdings reduced to zero. But those who owed money found their debt effectively wiped out.
The German mark devalued significantly in terms of gold prices. The paper mark/gold mark ratio went from a one-to-one ratio in 1921, all the way to a one-to-1.0 trillion ratio in 1923.
Just imagine what would happen to gold in any remotely comparable situation involving the U.S. Dollar. The dollar acts as a world reserve currency. There has been an unprecedented and explosive growth in money supply. The dollars are being created just by printing more of them without any asset backing it. They are nothing more than pieces of paper with black ink.
The U.S has been accumulating deficits over years. The deficit is likely to increase over $2 trillion; worrying its creditors. The dollar holds its value only as long as the greenback’s holders maintain their faith in the currency. The moment people decide they don’t want your dollars, they become worthless, or at least worth much less.
As seen in the above example on Germany, currencies lost value as their quantity of the money in system increased considerably. In that case, it will take a lot more dollars today to buy the same thing one bought with fewer dollars earlier.
There have been evidences of currency losing their entire value creating a hyper inflationary scenario. Like in Zimbabwe, people carried sacks full of notes to pay for their daily purchases. Also, during the Weimar mark inflation, people pushed wheelbarrows full of German marks to the bakery just to purchase a loaf of bread.
Is the US a banana republic?
A currency meltdown occurs when governments face overwhelming gaps between revenues and expenditures; foreign investors abandon the currencies as they race for the exit, leaving a trail of worthless paper.
A decline in the value of dollar will affect the entire global economy. The US dollar acts as the world reserve currency and most of the world trade happens through exchange of dollar currency. China with USD 2 trillion* of US Dollar notes will be the worst affected. That is why the Chinese government is buying hard assets - including gold. (*Source: Bloomberg)
Gold is the only time-tested currency that can act as a store of value during times of hyperinflation. Are we certain that the US dollar will collapse? Nothing is definite, and neither do we know when such an event could occur. But better to buy your "insurance" - in the form of owning gold.
We recommend that you allocate at least 10-20% of your investments to gold and insure your wealth from being eroded from a possible inflationary threat.
Buy Your Portfolio Insurance... Buy Gold... Now.
Confusion reigns at Satyam
Confusion still prevails at Satyam as the convoluted series of events continues to take further twists and turns. Even as an investment association representing 300,000 investors and partially funded by SEBI has filed a class action suit against Satyam, it has now come to light that there may have been a diversion of funds to the tune of Rs 12 bn from Maytas Infra to Satyam.
Even though Satyam's accounts are expected to be restated by the end of this calendar year, Tech Mahindra, the new owners of Mahindra Satyam, has asked for an extension by 3 months. To add to it, engineering major L&T, which had earlier enthusiastically taken a 12% stake in Satyam and later bid for the company when it was put for sale, now seems to be rather unsure of its holding in Satyam. It now wants to unload its stake in a hurry and is seeking a waiver of the six month lock-in period. Considering the extremely speculative nature of the situation after the fraud was first uncovered, we wonder what prompted such reputed companies to dip their hands into such a mess in the first place.
Even though Satyam's accounts are expected to be restated by the end of this calendar year, Tech Mahindra, the new owners of Mahindra Satyam, has asked for an extension by 3 months. To add to it, engineering major L&T, which had earlier enthusiastically taken a 12% stake in Satyam and later bid for the company when it was put for sale, now seems to be rather unsure of its holding in Satyam. It now wants to unload its stake in a hurry and is seeking a waiver of the six month lock-in period. Considering the extremely speculative nature of the situation after the fraud was first uncovered, we wonder what prompted such reputed companies to dip their hands into such a mess in the first place.
IPO SEASON
As per a leading business daily, Godrej Properties and Lodha Developers are planning IPOs in the next three to four months. While Godrej Properties is looking to raise about Rs 5 bn, Lodha Developers is looking to raise about Rs 20 bn by the year end.
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