CA Online

Promoters  loss is PEs  gain Private equity (PE) players are getting ready to bid for stressed assets, which they expect to bag at attractive valuations after an ordinance amended the Insolvency and Bankruptcy Code (IBC). The ordinance has practically barred most promoters of the defaulting companies from bidding for their assets in the bankruptcy auction. PE players have raised distressed assets funds totalling over Rs 4 billion in the past two years, sensing an opportunity in the increasing number of bad assets in the banking system. These include a Rs 1.04 billion fund raised by Brook field and SBI in July 2016 anda Rs 1 billion fund raised by Piramal Group and Bain Capital in August 2016. The change in the IBC comes at a time when 11 of the 12 cases mandated by the Reserve Bank of India (RBI) for early bankruptcy proceedings are in an advanced stage of auctioning assets. "One can expect that prices that would be realised through these auctions may be on the lower side ...

RBI relaxes equity holding norm for asset reconstruction companies Move to encourage foreign funds scouting for bad assets to tie up more with domestically incorporated ARC The Reserve Bank of India (RBI) on Thursday allowed asset reconstruction companies (ARCs) with a minimum net owned fund of Rs 100 crore to convert debt into equity worth more than 26 per cent. This gives ARCs greater control in a distressed asset and would encourage foreign funds scouting for bad assets to tie up even more with domestically incorporated ARCs, said an executive with an asset reconstruction company.ARCs typically convert their acquired debt into equity in case they find the company can be nursed back to health. The central bank had so far put a cap of 26 per cent of equity holding in such companies. The RBI also put additional conditions on such ARCs, such as at least half of the board of the directors of such firms should be independent, and any policy on debt to equity conversion should be...

High GST may hit Make-in-India electronics goal Prime Minister Modi’s flagship Make In India plan could be hurt by the GST rates that have been set for electronics as some rates make it cheaper to import goods, industry players have said, possibly putting a damper on the government’s goal to achieve zero imports in electronics by 2020. The Manufacturers’ Association for Information Technology (MAIT), the apex body representing India’s IT hardware sectors and certain manufacturers, expressed concern over tax slabs under  GST regime related to printers, monitors and data cables. Speaking to ET, Anwar Shirpurwala, Executive Director, MAIT said that although GST has reduced the number of taxes, the rates in some cases make it cheaper for importers than for smaller companies manufacturing in the country. For example, the pre-assembled desktops are charged at 18% but standalone monitors that are mostly manufactured in the country are charged at 28%. “All IT products should be in ...

Defaulting promoters set to lose their companies Wilful defaulters and borrowers with NPAs for a year or more cannot bid NOT ELIGIBLE FOR BIDDING An ordinance amending the and Bankruptcy Code (IBC) barred promoters of undergoing the resolution process for their own companies when auctioned as part of bankruptcy proceedings.Besides, sister concerns and corporate will also not be eligible to these companies. The ordinance, promulgated Thursday, added Section 29A to “Aperson shall not be eligible to resolution plan if such person, or person acting jointly with such any person who isapromoter or control of such person, insolvent.” This prohibits promoters or sister of companies with non performing more than a year from bidding for these companies In order to bid, promoters will have to make the NPAs standard assets by paying the principal and interest.However, even this is not allowed once the National Company Law Tribunal (NCLT) has accepted an insolvency petition. None of the...

GST Council revises rates for 66 items India's most comprehensive indirect tax reform — the goods and services tax (GST) — is inching towards a July 1 rollout with the GST Council cutting the rate on household goods and other essential items, raising the threshold for the scheme that requires lesser compliance and approving another key set of rules relating to audit and accounts. At its meeting on Sunday in the Capital, the council revised rates on 66 items such as pickles, sauces, fruit preserves, insulin,  cashew nuts, insulin, school bags, colouring books, notebooks, printers, cutlery, agarbattis and cinema tickets, following representations from industry. Restaurants, manufacturers and traders having a turnover of up to Rs 75 lakh can avail of the composition scheme with lower rates of 5%, 2% and 1%, respectively, with lower compliance, against Rs 50 lakh previously. A GST rate of 5% will be applicable on outsourcing of manufacturing or job work in textiles and the gems...

Private sector may get government funding to promote tourism The government plans to partly finance private sector expenditure on promoting tourism in India and may offer leading hotels, travel agencies, online travel portals and airlines as much as 50 per cent of their annual marketing budget as a fixed contribution, based on their credibility The proposal, which will be a winwin proposition for stakeholders, is aimed at pushing government initiatives such as development of tourist circuits and zones, islands and beaches. It will add to  It will add to the country's foreign exchange earnings and create much-needed jobs. Private ventures will have more funds for promotion, with a sustained contribution from the government. The government is discussing the idea with stakeholders and assessing the annual cost of the initiative, a senior government official told ET."The amount of financing to private players will depend on the star-rating and size of hotels as well as tra...

GST rate cut Restaurant body to meet govt over pricing The National Restaurant Association of India (NRAI) is likely to make a representation to the government over the next two days regarding the passing on of benefits of the lower goods and services tax (GST) rates to consumers.NRAI has the country´s top fast food chains, among others, as its members. The government on November 10 had slashed the GST on AC and nonAC restaurants —excluding fivestar hotels —to 5 per cent from the earlier 18 per cent and 12 per cent, respectively.But the input tax credit was withdrawn with the rate revision, prompting restaurant chains, including McDonald´s, to with hold passing the full benefit of the tax cut. Their argument was that the non availability of input tax credit pushed up costs by 1012 per cent, implying that the 13 per cent GST cut was taxneutral.“While we welcome the move by the government to cut GST, it may have to relook the issue pertaining to input tax credit,” said NRAI Preside...

Trigger in Banking Regulation RBI and public sector bank’s failure triggers the Banking Regulation Amendment Bill Common consumers, farmers, small traders and educated unemployed youths need credit facilities and banks are expected to provide them as per the Union and State Government schemes and policy. But while corporate giants who have tremendous influence on the banking sector are getting ample credit facilities and concessions in recovery of dues, the very principle of equity is crushed. Both the RBI and banks failed to maintain the balance with the result that they are almost compelled by the new Amendment to recover the dues by way of liquidation of the assets of the big and willful defaulters. While the Amendment in the Banking Regulation Act that went through Parliament in Monsoon Session, the ordinance was issued first on 4th May when the Parliament was not in session. The said ordinance and now the bill while stressing the need for the amendment points out that th...

Cabinet clears changes to plug loopholes in insolvency code Govt to amend insolvency and bankruptcy rules via ordinance, will block promoters deemed wilful defaulters from regaining control of firmsThe Union cabinet on Wednesday approved amendments to the Insolvency and Bankruptcy Code (IBC) to plug potential loopholes in the new corporate turn around regime and to ensure rescued companies remain in reliable hands. Finance minister Arun Jaitley said changes to the IBC have been proposed through an ordinance that’s awaiting presidential assent.One of the changes proposed is to ensure that promoters deemed wilful defaulters do not eventually end up taking control of the company again. The exact nature of the amendment and its scope will be known only after the text of the ordinance is available after the president gives his assent, a person familiar with the development said on condition of anonymity. “Some changes have been proposed in the Insolvency and Bankruptcy Code. Since t...

Lenders plan to send more companies to NCLT Tightening of the Insolvency and Bankruptcy Code (IBC) to keep willful defaulters from bidding for assets has given lenders a short in the arm.Banks, armed with the new rule, are gearing up to send more accounts to the National Company Law Tribunal (NCLT), especially those that have gone through the strategic debt restructuring (SDR) process in the past two and a half years but failed to find a resolution. Since the Reserve Bank of India (RBI) issued the SDR guidelines, banks have converted debt into equity in 20 companies but managed to divest stake only in one company— Adhunik Power.“The SDR scheme failed as there are no buyers for the stressed assets Promoters are still running the companies but with lower debt burden.Bankers have not found any takers after they converted their loans into equity,” said a lender.Of the total 26 companies, Alok Industries, Monnet Ispat and Electrosteel Steels are on the first list sent to the NCLT. ...

TASK FORCE TO DRAFT NEW DIRECT TAX LAW The government has brought back the main author of the now junked Direct Taxes Code (DTC) as a convenor of the task force to review the decade sold provisions of the IncomeTax Act and draft a replacement. The government has, however, already implemented many provisions of the draft DTC, such as the General Anti Avoidance Rules (GAAR) and on Place of Effective Management. The government has constituted a six member panel to take forward Prime Minister Narendra Modi´s call for replacing the ITAct,aweek after it notified an overhaul of the goods and services tax (GST). The panel has been asked to submit report within six months. Arbind Modi, member (legislation) of the Central Board of Direct Taxes (CBDT), is convenor of the task force. Chief Economic Advisor Arvind Subramanian will be a permanent special invitee.Rajiv Memani, chairman and regional managing partner, India region, EY, who was named member of the task force, said,"The gove...