Business Line - 28th September

Submitted by
Suchita Sood
Swati Sharma


Vodafone may face tax demand for Rs 12,000 cr

Vodafone is likely to get a tax bill of “Rs 12,000 core-plus within the next four weeks” for its $11.1-billion deal with Hutch in 2007.
The Chairman of Central Board of Direct Taxes, Mr S.S.N. Moor thy, said on Monday, “We will be raising a demand on Vodafone for Rs 12,000 core-plus.
This only relates to the tax and the interest component. The order relating to the withholding tax will be presented to the Supreme Court within four weeks.”
the Supreme Court directed on Monday asking the I-T Department to determine and quantify, within four weeks, the tax liability of Vodafon
The ruling, coupled with earlier rulings of Bombay HC, proves that I-T authorities in India have acted lawfully. This, together with the fact that India has received the highest ever
foreign direct investment in the current fiscal, belies apprehensions regarding the impact of such action of the I-T Department on foreign investments in india

Re at 4-month high ;sensex ; nifty up
A mildly positive sentiment prevailed across the financial markets. The rupee rose to a over four-month high to close at Rs 45.01 to a dollar appreciating by 25 paise after a volatile
day's trading session backed by strong FII inflows.
With foreign institutional investors pumping in a net of Rs 1,137 crore into equity on Monday, the Nifty and Sensex, rose by 0.29 per cent and 0.36 per cent respectively.
Though domestic institutions were net sellers for Rs 1,054 crore, Nifty closed above the 6,000 mark and the Sensex above the 20,100 mark.
Barring the CNX IT and the Bank Nifty, all indices closed in the green on NSE. The same indices along with the FMCG index closed in the red on the BSE.
Gold too went up marginally by 30 cents over its previous close of $1,295.95/troy ounce. Only crude oil eased, to below $76 at $75.62 a barrel.


Garlic price shoot up on rise in export ,ban on chinese imports
Garlic, which had hardly cost Rs 15 a kg until February 2009 at retail outlets, has now galloped over dozen times, thanks to rising export demand and a ban on Chinese garlic.
Garlic that was quoted at Rs 550 a quintal at the Agra terminal market in March 2009 is now quoted at Rs 7,000.
Earlier this year, the prices dropped from a high of Rs 5,400 in February to Rs 2,500 in May on higher arrivals. Since then, garlic has moved only one way — up
. The rise has been sharp in the last couple of weeks and within this month, the increase has been 60 per cent.
Imports from China have stopped after the Government imposed a ban two years ago due to a disease in the Chinese garlic,” said Mr R.P. Gupta, Director of the National Horticultural Research and Development Foundation. “This year, domestic production is good,” he said.
According to the Spices Board, exports in April-August have increased by 327 per cent to 13,250 tonnes valued at Rs 498 crore from 3,100 tonnes valued at Rs 63.22 crore in the same period last year.
Trade sources said China has turned a net importer this year as its garlic crop has been affected by hot weather first and floods thereafter.
No details are available on Indian production for this year, though estimates put it around 10 lakh tonnes. Garlic is sown during September-October and harvested during March.
But garlic farmers have not reaped the full benefit of the surge in prices. They had sold at around Rs 3,500/quintal in April


IDFC to issue tax-saving, long-term infrastructure bonds to raise Rs 3,400 cr

Infrastructure finance company IDFC Ltd is planning to raise up to Rs 3,400 crore through a retail issue of infrastructure bonds.
Investment of up to Rs 20,000 in these bonds will be tax exempt. This is over and above the tax exemption available on investments of Rs 1 lakh in other tax-savings schemes.
Having a face value of Rs 5,000, the bonds will have a maturity of 10 years and will be issued in four series. The coupon rate is 8 per cent payable annually or 7.5 per cent with a buyback option.
Subscription norms
Investors have to subscribe to a minimum of two bonds (or Rs 10,000). Investors also have the option to pledge the bonds after a lock-in period of five years.
These bonds will be listed on stock exchanges – BSE and NSE – and can be traded after five years. In Series 3 and Series 4, there is a buyback option after five years.


The bonds are not guaranteed but are secured against receivables. IDFC is looking to triple its balance sheet from Rs 35,000 crore to Rs 1 lakh crore. It has a net worth of Rs 10,000 crore and a capital adequacy of 26 per cent, Mr Lall added.Overseas borrowings
IDFC is also planning to raise funds through overseas borrowings. It has headroom to raise around Rs 3,000 crore through overseas borrowings, said Mr L K Narayan, Group
Chief Financial Officer.
In August, IFCI had raised Rs 100 crore through a similar retail infrastructure bond issue, which offered a coupon rate of 7.95 per cent. LIC is the third financial institution
mandated by the government to raise long term retail infrastructure bonds.



Paddy arrivals begin to flood markets; rice rules stable

With the weather turning favourable for the trade, over 60,000 bags of various paddy varieties arrived in the several mandies in North India, particularly on Monday.
Traders are expecting the arrivals to touch the one-lakh-bags-a-day mark from the beginning of October.
In the rice market, with sluggish demand, basmati and non-basmati varieties continued to rule stable.
Waiting for the start of the new season, aromatic rice prices ruled unchanged, while the prices of non-basmati varieties ruled firm with little movement.
Pusa-1121 (steam) ruled around the levels of Rs 5,300 a quintal; Pusa-1121 (sela) at Rs 4,350; Pusa-1121 (raw) around Rs 5,350. Pusa (sela) quoted at Rs 3,300-3,350 a quintal and Pusa (raw) at Rs 4,200.
Basmati sela ruled at Rs 6,200 a quintal, while basmati raw was quoted at Rs 7,150-7,200.
The Sugandha-999 sela was quoted at Rs 2,725 and PR14 (old) was at Rs 2,200-2,235; Sharbati sela at Rs 2,725 and Sharbati steam at Rs 2,900.
PR11 sela quoted around Rs 2,200, PR11 (raw) at Rs 2,180 and PR (steam) at Rs 2,280-2,300 a quintal. Brokens such as Tibar ruled around Rs 3,700 a quintal; Dubar at Rs 2,600
and Mongra around Rs 2,000.
Around 35,000 bags of different paddy varieties arrived in the Karnal mandi.
Except the prices of RS-10 variety, the prices of all other paddy varieties witnessed a downtrend. Following the good quality, price of RS-10 variety rose by Rs 25 a quintal and was
quoted at Rs 1,200-1,250.Prices of PR-14 ruled between Rs 1,000 and Rs 1,060 a quintal, PR was quoted at Rs 981-1,040 a quintal, while the PR-13 was at Rs 900-940 a quintal. Sharbati paddy ruled around
Rs 1,300-1,380 a quintal against the Rs 1,300-1,425 last weekend. Prices of Sugandha-999 dropped Rs 50 a quintal and ruled at Rs 1,450-1,550 against Rs 1,525-1,600 last week
The stock was lifted by the rice millers.

KPIT Cummins to acquire US-based CPG Solutions

Pune-based KPIT Cummins Infosystems will acquire US-based CPG Solutions, a provider of Oracle consulting services to manufacturing and supply chain companies, for Rs 60 crore.
CPG Solutions, which has around 50 employees and revenue of $11 million this year, will enable KPIT Cummins to deepen its Oracle consulting portfolio.
“Our revenue from Oracle consulting practice is around $27 million. The acquisition will take it to $40 million and we aim to build it to $100 million over the next three years,”
Mr Ravi Pandit, Chairman of KPIT Cummins, said. Of the consideration of Rs 60 crore, Rs 27 crore will be paid upfront with the balance to be paid as a milestone-based
consideration over three years.
The acquisition was approved by the board on Friday and will be implemented over the next two or three days. It expects to add another $6 million in revenues from this buy for
the current fiscal.
Funding
The entire deal will be funded through the internal accruals of KPIT Cummins. The company has been scaling up its enterprise consulting practice in the last few years.
In 2009, it agreed to buy SAP specialist Sparta Consulting for up to $38 million (around Rs180 crore), giving it access to a higher revenue-generating platform in the US.
KPIT is focused on the manufacturing, energy and utilities industry which accounts for 85 per cent of its revenues.
The acquisition of CPG will further strengthen its position as a preferred Oracle partner for manufacturing companies and is designed to complement KPIT's strengths
in global ERP rollouts, implementation and support and maintenance services.
Sparta has been generating revenues to the tune of $11 million with EBITDA (earnings before interest depreciation and amortisation) margin of 13 per cent.
The KPIT Cummins scrip hit an intraday low of Rs 170 before ending the day at Rs 172, 0.9 per cent lower than Friday's closing price on the BSE.

Kuwait keen on strategic stake in IndianOil

Kuwait's Oil Minister, Sheikh Ahmad al-Abdullah al-Sabah, has said that Kuwait would be keen to buy strategic stake in public sector Indian Oil Corporation (IOC), subject to economic
feasibility.
He told newspersons here after his luncheon meeting with the IOC management that “I have come to know that the Indian Government is divesting some of its share in IOC.
If it is offering a certain per cent
to strategic investors, we are interested in such a proposal, subject to feasibility studies and economics of such an offer.”
The Centre has proposed a 10 per cent divestment of its stake in IOC. Alongside the stake sale, IOC plans do a public offer of its 10 per cent expanded equity to raise close to
Rs 9,000 crore for part-financing
its capital expenditure. IOC's follow-on public offer is likely in January.
“It has to be a strategic investment,” the Kuwaiti Minister said. Asked about investments in refineries in India, he said that any investments by Kuwait will depend on economic feasibility.
Collaboration
Kuwait and IOC discussed collaboration in research and development, training, petrochemicals and exploration and production activities. IOC also sought long-term crude oil supplies
from Kuwait.
Currently, IOC buys 9 million tonnes crude oil from Kuwait Asked about crude oil prices, the Kuwaiti Oil Minister said, crude oil prices are likely to be between $75 and $80 a barrel
in the first quarter of 2011. Kuwait's current oil output is 2.2 million barrels a day.
The Kuwaiti Minister is expected to meet the Petroleum Minister, Mr Murli Deora, on Tuesday.