BRISK OUTLOOK

Well India’s rating has been downgraded by S&P from stable BBB to -BBB, making situation more worse for the economy. Several measures on the fiscal side has been announced by the government reducing the excise duty by 2% and service tax by 2%. Concerns have been raised that the domestic firms will face problems while raising the money from abroad with the downgrading but I feel the affect will be negligible or 50/50. because looking at the current situation across the glob its equally difficult to raise the money from abroad because money has become a scarce commodity in the world. Several stimulus packages have been announced by the various governments bailing out the sectors.The situation has been conflagration from financial sector to the manufacturering sector which is said to be the growth engine for the economy.Lay offs and stocks lying in the go-down are common seen every where. Its time to better watch the things and then react because every day is a event day for economies.

ALL SET FOR LIMITED LIABILITY PARTNERSHIP

Finaly the revolution in the Indian partnership has come and from April 1st 2009, the partnership undergo a huge transformission and the liability of the partnership will be limited to the shares they hold in the firm.

Limited Liability Partnerships (LLP), is the format that will allow professionals, traders and even producers of goods to conduct their business without worrying about losing their personal assets due to lapses of other partners. 

An LLP would be taxed for its income while the income of individual partners would be tax free; a benefit that is not available to companies. Companies pay tax on their profits and again pay dividend distribution tax when they distribute profits among shareholders. The LLP format protects partners from double taxation. 

NEW FDI NORMS? ARE THEY IN FAVOUR OF INDIA

The Indian corporate is facing a severe liquidity crisis – evidences of which are well known as pledging of shares for the loan. The central government has eased the norms of FDI and it could go up to maximum 99.5% in most of the sectors. Some see it as an election pro move and critics have there opinion that the government has opened the can of worms.

The cap has been kept at 99.5% because 100% subsidiaries of foreign companies forego tax benefits of combined FDI and FII investments.

According to the Department of industrial policy and production (DIPP) any company will be projected Indian owned if the foreign company has less than 50% beneficial ownership in the company.

For example RANAJN PVT LTD, registered in India as an Indian company where a foreign company holds 49% stake and its Indian partner hold 51%. Ranjan pvt ltd investment in any sector will be considered Indian Investment, regardless of whether the sector is one in which FDI has been capped like telecom.

Well there have been certain issues like beneficial ownership has been brought in to the notice?  It’s expected that DIPP will give clearance on Monday over it. There are some more issues which are not cleared it seems the decision has been taken more in a half hazard manner. For the time being don’t eat your head wait to see some clarifications on Monday.

SEBI ON THE AWARENESS SIDE FOR PLEDGING

With the debacle of Satyam Chairman SEBI had made useful amendments in the month of January. SEBI has provided for disclousre norms when the promoters of the listed company pledged there shares. The amendments mandates that the promoter should disclose to the company the details of the pledged shares.

The Disclosure shall be made to the stock exchange in any quarter if the total no. of shares pledged by the promoters exceeding 25000 shares or 1% of the company which ever is lower.

Steps taken by SEBI are commendable but these are some of the dark areas which could have been considered:

1.       The amendments do not made compulsory in the event of indirect pledging of shares of the listed company promoters.

2.       The mandated disclosure for share pledging are restricted to the promoters, it could be extended to others also.

3.        Negative pledging situation has been covered or not yet to be disclosed.

4.       The time frame of 14 days is longer than the time frame mandated for other disclosure under the take over.

 

SEBI did a commendable job with the disclosures after the Satyam Saga we hope to see SEBI being the one of the world’s best regulator in the future.

 

INFECTIOUS GREED

I am back on my blog after a long gap of 24 days . In fact I was very much in the Mumbai but some how couldn’t able to contiue with the writing . Well Infectious greed in a great book to read, the author of the book is Frank Partnoy who has also written FIASCO : Blood in the water on Wall Street.

Infectious greed consists of grear literature on the financial engennering, financial innovation focused on structural finance and ofcourse the misuse of the derivatives over the time by the street smart bankers. The Book insist on how the Financial market was polluted by the various exotic instruments, which where introduced with the hope of making market efficient. The concept of efficient market was also challenged in the 1990’s and even in the previous market disasters.

The Book is a great read focusing on the traders like Andy Krieger, legends like John Meriwether and Paul Mozer Krieger, high profile collpases such as Barings bank (Nick Leeson) and LTCM Long term Capital Management . The book documents how each level of financial risk, loss of control and complexity obscured the sickness of companies in question and pushed individuals to ever more ingenious deceptions.

Mr Partony did offers a clear vision of how the financial market reached at epidemic stage and how the control could be regained before furher damge is done. Unfortunately the book was published before the SUBPRIME MESS which has changed the whole scenario of the financial market and the risk management control of the financial institutions.