Banking and Financial News – 26 June 2014

In Vodafone Tax Dispute, a New Appeal in Supreme Court (NDTV Profit)

• The Supreme Court has been asked to stop the government from arbitration proceedings with Vodafone in a tax case worth Rs. 20,000 crore.

• A Public Interest Litigation or PIL says the top court should order an end to the arbitration process and ask the government to recover dues. The Supreme Court has not yet decided whether it will hear the petition.

• In May, Vodafone Group Plc began an international arbitration against the Indian government, toughening its stance in a long-running dispute that has dented foreign investor sentiment for India.

• The British mobile phone operator's talks with the Indian government failed to find a solution last year.

• The tax dispute stems from Vodafone's acquisition of Indian mobile assets from Hutchison Whampoa in 2007. The deal made the British company India's largest overseas corporate investor.

• In 2012, India's Supreme Court ruled that Vodafone was not liable for payment of any tax on the acquisition. The Indian government later that year changed the rules to enable it to tax deals that had already been concluded.

• Vodafone rejected the tax claim and said that, even if tax was due, it should be paid for by the seller rather than the buyer.

• Vodafone's Indian mobile services business is the country's second-biggest by users and revenue.

• The international arbitration proceedings will take place under a bilateral investment agreement.

• In April this year, Vodafone took full ownership of its India unit after buying the 15.5 per cent it did not already own.

• Uncertainties over policy in India have unsettled investors, and tax claims on foreign companies have been a major concern. IBM Corp, Royal Dutch Shell Plc and Nokia Oyj are among foreign firms contesting local tax claims.

Blackstone, others gear up to list REITs as India finalises rules (Reuters)

• Blackstone Group (BX.N) and its partner, Embassy Group, are laying the groundwork to cash in on their property holdings by setting up India's first real estate investment trust (REIT) and listing it on one of the country's stock exchanges.

• Finance ministry is expected to clarify tax rules for REITs in the coming budget.

• Listing REITs gives companies like Blackstone, The Xander Group, an emerging markets investor, an attractive option to exit some of their investments.

• India issued draft regulations for REITs in 2008, but was forced to shelve the plans after the global financial crisis dried up investor interest and an economic downturn dimmed the outlook for real estate investments.

• If REITs are approved, India will follow China, where regulators in April approved the first property trust. The absence of REITs in China and India made Singapore and Hong Kong the preferred markets for listing property assets in the region.

• REITs, listed entities that invest mainly in leased office and retail assets and distribute most of their income to shareholders as dividends, will give developers a new avenue to raise funds by allowing them to sell finished commercial buildings to investors and list them as a trust.

Sebi warns MF industry to comply with investor-holding norms (Mint)

• Securities and Exchange Board of India (Sebi) chairman U.K. Sinha, on Thursday, warned mutual funds to stop breaching certain basic investor-holding norms to avoid being penalized by the market regulator.

• Sinha was referring to a Sebi norm which requires mutual fund schemes to have at least 20 investors with no single investor holding more than 25% of the scheme’s assets.

• Another area of concern that Sebi discovered was investments by mutual funds in short-term deposits of banks, Sinha said. “An investor does not go to a mutual fund for parking his money in fixed deposits of banks. An investor expects better appreciation of his money over a period of time.”

Proposal to allow EPFO to invest in equity market (The Hindu)

• Finance ministry has proposed allowing retirement & gratuity funds to invest up to 30% of their money in equity market.

• The suggestion is likely to be opposed by labour unions.

A goal without a plan is just a wish. ~ Antoine de Saint Exupéry

Courtesy : NDTV Profit , Reuters , Mint , The Hindu