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PE funds’ buyout deals may attract higher tax; More support for Raghuram Rajan

06 June, 2016

India’s tax department has issued a circular that gives tax officers freedom to determine whether buyout transactions are liable for higher tax.

According to a report in The Economic Times, the May 2 circular of the Central Board of Direct Taxes says that local tax officials could have freedom to determine whether sale of unlisted shares can be treated as business income in three categories. One such category is when a PE firm holding a majority or controlling stake in a company sells its entire stake to a third party along with control of the underlying business.

The circular has given rise to the fear that assessing officers could scrutinise PE deals. The uncertainty has also caused some PE players to delay exits from investments, the report said.

Most PE players in India earlier focused on buying anywhere around 15% stake. But since 2013 many PE firms such as KKR, TPG and Blackstone have been actively concluding deals where they hold a majority stake or have plans to do so, the report said.

KKR to invest Rs 600 crore in dairy firm Kwality

Private equity firm KKR India is set to invest about Rs 600 crore in dairy company Kwality Ltd, the Mint newspaper reported citing two people close to the development.

The PE firm will invest through a structured debt transaction, it said. 

The funds will help the Delhi-based Kwality strengthen its own brand and expand its more profitable retail business. The company gets more than 70% of its revenue by selling its products to companies such as Hindustan Unilever Ltd, ITC Ltd and Britannia Industries Ltd.

Fosun makes $1.27 bn bid for KKR-backed Gland Pharma

Shanghai Fosun Pharmaceutical (Group) Co has emerged as the highest bidder for KKR-backed Gland Pharma at $1.27 billion, The Economic Times reported citing three people aware of the negotiations. 

Fosun came from behind in a closely fought race that saw US giant Baxter and private equity fund Advent make firm offers in early May, the report said. Baxter earlier bid $1.1 billion for the Hyderabad-based drugmaker, it added.

Final negotiations are planned for next week and a formal announcement is expected in the third week of June, the report said. Gland Pharma’s founders and KKR together own about 96% of the company.

Markets will be hit if Rajan is not given second term: Mohamed El-Erian

The financial markets will not respond well if Raghuram Rajan is not given a second term as Reserve Bank of India governor, Allianz SE’s chief economic adviser Mohamed El-Erian has said.

“He is rightly deemed as one of the very best central bank governors in the world,” El-Erian said in an email interview to The Economic Times. “Indeed, few can match his expertise, experience and knowledge.”

Rajan’s three-year term is set to end in September and the government has said it will only take a decision on the RBI governor’s post closer to September.

Retain Rajan chorus grows on the web

The Internet is abuzz over RBI governor Raghuram Rajan’s tenure, with at least seven online petitions doing the rounds in support of a second term for him, according to a Press Trust of India report on Firstpost.com.

The petitions have together garnered nearly 60,000 signatures so far, the report said. It added that at least two petitions are making a case against extending Rajan’s term, but they have got relatively little support so far.

A former chief economist of the International Monetary Fund, Rajan was appointed RBI governor by the previous UPA government. In case he is not given an extension, Rajan would be the first RBI governor since 1992 to not have a five-year term.

Finance ministry to keep a tab on key ministries’ spending

The finance ministry has put in place a stringent monitoring system to keep tabs on expenditure by key ministries as part of the government’s efforts to boost public spending, The Economic Times reported citing a ministry official it didn’t name.

This comes after the finance ministry wrote to ministries to expeditiously start implementing budget announcements and spend their allocated budgets, the report said.

The focus, at present, is on ministries such as road transport and highways, shipping, railways, rural development and agriculture that have large capex plans. The move is part of the Narendra Modi government’s plan to boost growth as private investment is yet to pick up. 

Monsoon likely to hit Kerala coast in 1-2 days

Monsoon rainfall is likely to hit Kerala’s coast around June 7-8, the weather office said, according to a report in The Economic Times

Monsoon clouds have become stronger over Bay of Bengal in the past few days and moved toward the subcontinent on June 3 and 4 after remaining static for some days. Several parts of south and central India are already getting good rains, the report said.

India, Qatar to share intelligence on hawala transactions

India and Qatar has agreed to share intelligence to combat ‘hawala’ transactions and terror financing, according to a Press Trust of India report

The two countries signed seven agreements during Prime Minister Narendra Modi’s visit and decided to move beyond the trading relationship and get into strategic investments, the report said. The two sides highlighted the need to “isolate” the sponsors and supporters of terrorism and agreed that urgent action against all such entities must be taken, it added.

To help banks, go after defaulters: Jaitley

Finance minister Arun Jaitley has promised greater capital support to banks and warned that defaulters will not be allowed to “sleep well”, according to a Press Trust of India report on hindustantimes.com. 

“You cannot indefinitely have a situation where people who owe money sleep well and bankers have to worry. I think the people who owe these monies will also have to act,” Jaitley said during a visit to Japan.

He said that all non-performing assets were not frauds and that many bad loans resulted from business losses or on account of sectoral losses.

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PE funds’ buyout deals may attract higher tax; More support for Raghuram Rajan

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