THE IMPACT of the state government’s IT-friendly move to offer a 90 per cent cut in stamp duty to IT companies is said to be analysed in detail by the local IT industry here, but some of the larger players — both in the state and outside — are already looking ahead at increasing their activities to derive the full benefit of the relief.
While training and software development company, Aptech, expects the move to benefit mergers and acquisitions, Bangalore-based Wipro is looking to take advantage of it to expand its network of development centres in the state.
The stamp-duty relief is an additional benefit to what the IT industry already enjoys. Under the present laws, IT companies enjoy a zero stamp-duty benefit if they acquire real estate for facilities in software parks promoted by the state government.
An instance of this is the SEEPZ complex in Andheri. The same is true for any facility that is set up by an IT company on MIDC-owned land.
Tata Infotech regional director-Asia Pacific Suhas Pathak said: “Buying of property for expanding business will definitely become easier now. Many companies, which had been deterred from doing so in the past, will revisit their expansion plans.
There will also be a fair number of companies from other cities like Bangalore and Chennai, who will be keen on setting up a base here. Tata Infotech will draw up its own plans in this regard after it has worked out the full implications of the government’s offer.”
Wipro is looking at further expanding its network of development centres in the state, apart from the two it already has in Pune and New Mumbai. While the Pune centre, which is already in the first stages of becoming operational, will not derive any benefit from the relief, the company is yet to acquire land for the Navi Mumbai centre.
“This is a very welcome move, particularly since we have a larger gameplan to set up more development centres in the state. To begin with the Navi Mumbai centre will be the first beneficiary of the stamp duty relief,” said Wipro vice president-corporate finance Suresh Senapathy.
However, the biggest benefit of the stamp duty relief would be felt in the case of mergers and acquisitions, said Aptech chief financial officer Harshad Shah.
“In any merger and acquisition scenario, the transfer of assets that take place are usually divided into fixed assets and balance assets. The balance assets typically account for 95 per cent of the total assets that are transferred or merged in the course of the whole exercise,” said Shah.
The stamp duty presently levied on balance assets is 0.7 per cent of the value of the assets. In the case of fixed assets, which usually comprises of real estate, the stamp duty levied is 10 per cent of the value of assets.
Karnataka guaranteed paper upgraded to A+
increasing share of the tertiary sector in the state’s economic output has added stability to the state’s economy
AT A time when several state governments have seen their ratings downgraded, the Karnataka government-guaranteed papers have been upgraded to A+ (so) (adequate safety with relatively higher standing within the category).
This puts Karnataka in the same league as Gujarat, which currently has the same implicit rating outstanding from Crisil.
It may be recalled that in the past one year or so, Crisil has downgraded the implicit ratings of two state governments: Orissa and Maharashtra twice.
Speaking to ET, Crisil’s head of infrastructure ratings, Sharad Jain said, “Karnataka has maintained fiscal prudence, as is reflected in its low deficit levels, debt to revenue receipts ratio and higher interest coverage levels, as compared to other states. Besides, Karnataka did not have to resort to ways and means advances from the Reserve Bank of India in the past three years.”
Crisil has upgraded the ratings assigned to eight bond issues, worth a total of Rs 2,479.2 crore, issued by Krishna Bhagya Jala Nigam from A (so) to A+ (so). The rating agency has also assigned an A+ (so) rating to a Rs 1,200-crore fresh bonds programme of the state government undertaking.
The ratings are based on the credit enhancement mechanism, in the form of an unconditional guarantee by the government of Karnataka, to meet the debt servicing obligations on the bonds and tripartite agreement between KBJNL, GoK and the trustees to the bondholders, facilitating timely payment of dues to bondholders.
KBJNL’s own revenues are not expected to be sufficient to meet its debt servicing obligations in the short to medium term.
The interest and principal repayments on the rated bonds are expected to be met through budgetary support provided by GoK to KBJNL.
Therefore, the ratings reflect the ability of GoK to service the debt obligations on the rated bonds, said a Crisil release.
The upgrade in KBJNL’s ratings is based on GoK’s sustained fiscal prudence leading to a consistently sound fiscal performance, as reflected in relatively lower revenue and fiscal deficits, low debt levels, high interest coverage and healthy liquidity position, as compared to other states.
The ratings are supported by a healthy growth in GoK’s revenues and outstanding tax effort, the release added. GoK’s relatively high per capita developmental expenditure is expected to lead to economic betterment in the medium term.
The increasing share of the tertiary sector in the state’s economic output has added stability to the state’s economy with a decline in dependence on the primary sector and a rise in per capita income levels, said Crisil.
KBJNL acts as a financing and implementing agency for the completion of Upper Krishna Projects in the state of Karnataka. The UKP was envisaged to tap the potential of the Krishna Basin for the purpose of irrigation and generation of hydro-electric power.
KBJNL is the nodal agency for the completion of the unfinished irrigation projects in the state in order to meet the Bachawat award, which addresses the issue of water sharing between the states of Karnataka, Andhra Pradesh and Maharashtra, the release said.
Power regulators increasing risks: Crisil – Mumbai
THE SETTING up of regulatory commissions has exposed power utilities to higher regulatory risks. This assumes greater significance in view of the fact that power utilities in India are operationally not very efficient, said rating agency Crisil.
The setting up of regulatory commissions in several states has been a welcome feature that is expected to make the power sector more efficient. The regulatory commissions are primarily conceived as tariff setting bodies that are expected to play a balancing act where the interests of all stakeholders are to be taken into account.
This is illustrated from the marginal tariff increases along with stipulations to reduce high level of Transmission & Distribution losses granted to power utility companies in Maharashtra and Orissa.
Crisil believes that states like Maharashtra and Gujarat, that are excessively dependent upon costlier power purchases from IPPs, are thus exposed to higher regulatory risks. This is because, the regulatory commissions factor the cost of power purchase to determine the extent of tariff hike, based upon the concept of merit order dispatch.
This has influenced the tariff award given by Maharashtra Electricity Regulatory Commission, wherein the regulator has asked Maharashtra State Electricity Board to cut down power purchase cost by following merit order dispatch.
Crisil expects the regulatory risk to continue to be one of the key rating determinants in the power sector, in the short-medium-term. This view arises from the fact that certain states have been facing delays in their respective regulators granting tariff increases.
Canadian MF to expand Indian operations @ New Delhi
CANADA-BASED mutual fund major Dundee is expanding its India operations
CANADA-BASED mutual fund major Dundee is expanding its India operations in a big way in line with its focus on wealth management for non-resident Indian clients.
To start with, the holding company for the group in India, which is registered as a non banking financial services company with the Reserve Bank of India, namely, Dundee Bancorp, has applied to the RBI for a full-fledged money changers licence.
The holding company currently has a restricted money changers licence from the RBI.
“Currently, we are catering to the investment and money management needs of our NRI clients via Dundee MF and our other group concerns. The idea is to broaden this focus to complete wealth management solutions,” Dundee Mutual Funds president Sunil Joseph told ET.
On the mutual funds side, the AMC is planning to launch a pure growth scheme and an index fund in the next two months in addition to introducing a cheque writing facility for its gilt and liquid funds in the next three weeks.
“At Dundee Capital Markets we are focusing on building a business of distributing mutual fund products. We will also offer segregated account wealth management facilities, ie portfolio management schemes for offshore clients and onshore clients under the aegis of Dundee Investment Management & Research, the investment manager for Dundee Mutual Funds in India,” Joseph said.
Once the regulatory issues are resolved, another group company Dundee Securities Company, is planning to set up trading terminals in London and Dubai to offer stock trading facilities for NRI clients. To facilitate this, the company has already acquired seats on the Bombay Stock Exchange and the Inter Connected Stock Exchange of India.
Other initiatives on the mutual fund front include setting up of a two-tier e-commerce enabled website and providing one-business-a-day redemption facility to investors in its Liquid fund.
Currently, Dundee Mutual Fund offers three open end debt-oriented schemes and two open-end equity oriented schemes in India.
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