The proposed deal between Bharti and MTN to combine their businesses fell through over the weekend. Although the principal reason for the fallout appears to be disagreement over who would control the combined entity, that was aided by problems with structuring the deal from a regulatory perspective. As The Economic Times reports: “In addition, there are other factors that may have contributed to...
Regulating Hedge Funds
I have uploaded an abstract of a working paper titled Analysing India’s Approach to Hedge Fund Regulation on SSRN, which is reproduced below: “Hedge funds tend to employ aggressive investment strategies, and they highly leverage their funds. While hedge funds infuse liquidity into the financial markets and enhance market efficiency, they also engage in complex financial transactions that...
Miscellaneous: Commodities futures, FDI, Exchange-traded funds
The following are some key developments in the corporate sector over the last couple of days that are worth noting: 1. Commodities FuturesWe had earlier discussed on this blog the preliminary findings of the Expert Committee under the chairmanship of Dr. Abhijit Sen, which failed to find a clear causation between commodity futures and the price rise in agricultural commodities. However, the...
SWFs and Capital Flows
The Indian Government’s latest position on sovereign wealth funds (SWFs) can be gathered from a recent speech delivered by the Governor of the Reserve Bank of India, Dr. Y.V. Reddy at a session on ‘The Role of Government-owned Investment Vehicles in Global Capital Flows’ in the International Capital Markets and Emerging Markets Roundtable held at Washington DC on April 14, 2008. His speech covers...
Foreign Investment in the Small Scale Sector
The small scale sector has continued to receive protection from the Government when it comes to foreign investment, despite liberalisation pervading in the economy generally. It is time to alter that position, argues an editorial in today’s Financial Express: “Foreign direct investment (FDI) in small-scale industry (SSI)? It could be just what the sector needs. In fact, the government’s reported...
Inadequacies of the FII Regime
One of our guest contributors, Somasekhar Sundaresan, has a well-argued column in the Business Standard in which he calls for an overhaul of the regulations that govern foreign institutional investors (FIIs) in India. Here it is: The regulatory regime for foreign institutional investors (FIIs) is the Indian capital market’s window to the outside world which often gives the first impression of how...
Pitfalls in Emerging Market Investments
A recent unsuccessful bid by Singapore Airlines (SIA) and Temasek to take a 24% stake in China Eastern Airlines is symptomatic of several pitfalls that exist in large investments in emerging markets. Knowledge@Wharton carries an interesting analysis of that case, a synopsis of which is as follows: “It was a perfect deal and it had approval from the top levels of the Chinese government. Singapore...
Changes in FDI Policy
There were some significant changes to the foreign direct investment (FDI) policy earlier this week. The Department of Industrial Policy & Promotion issued as many as six press notes on March 12, 2008 (available here). The changes are in the following sectors: 1. Credit Information Companies;2. Commodity Exchanges;3. Industrial Parks;4. Civil Aviation Sector;5. Petroleum & Natural Gas...
Foreign Investments into India: Tax Structuring
Foreign investors invest funds into Indian companies in anticipation of financial returns. These returns usually take the form of dividend payment by the Indian companies, interest payment (in case of debt securities that are yet to be converted into equity) and capital gains on sale of investment. Although all three types of returns are liable to tax in India, foreign investors are presented...
FCEB Taxation
In an earlier post on this blog, we analysed foreign currency convertible bonds (FCEBs). Although there was nothing on this count in the Finance Minister’s budget speech, the Finance Bill contains provisions clarifying the taxation position on FCEBs and the shares that arise out of conversion.
Today’s Hindu Business Line carries an article describing the Finance Bill provisions on FCEBs.
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