SEBI makes pledged shares disclosure mandatory news
Will reveal true extent of promoters' ownership in their companies
In the wake of the Satyam Computers scam, the Securities and Exchange Board of India has
made it compulsory for promoters to disclose to stock exchanges the details of their shares
pledged with lenders.
The details of disclosure, which should be made in two stages–event-based and periodical–
will be notified shortly after amending the relevant regulations and listing agreements, SEBI
Chairman C B Bhave said after a board meeting in Mumbai.
The event-based disclosure would have to be made at the time of pledging the shares, subject
to certain limits. Under the periodic disclosure, the lender would have to disclose details of
every single share pledged with lenders.
It may be recalled that Satyam promoter Ramalinga Raju had pledged nearly all his shares –
whose prices he had inflated by falsifying profits.
When the promoters were not able to meet their margin calls after the fall in the value of
shares, the lenders sold the pledged shares in the market, which brought the promoters' stake
in the company even lower to virtually negligible levels.
The disclosure must include shares pledged by the promoters and the selling of the pledged
shares by the lenders, if any. Promoters will make the disclosure first to the company, which
in turn would inform the public through stock exchanges.
A S Murty is new Satyam CEO
Satyam board is also considering buyout options
The government-nominated board of Satyam Computer Services has appointed A S Murty, a
Satyam veteran of 15 years, as the chief executive officer (CEO) of the scam-tainted
company. The board, chaired by C Achuthan, also appointed Homi Khusrokhan — former
managing director of Tata Chemicals — and Murugappa Group's former director (finance)
Partho S Datta as special advisors to the board to help in management and finance
respectively.
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The special advisors, along with Boston Consulting Group, will work pro bono and help the
newly-named CEO and the board in defining priorities and executing them effectively, stated
a company release.
The government had hinted at appointing an insider as CEO after many outsiders declined to
join the tainted company. Experts welcomed the appointment of an insider as it would have
taken some time for a CEO from outside the company to take stock of a new business.
Another requirement was a CEO who understood the client market closely. Murty fitted the
bill nicely.
The Satyam board is also seriously mulling the buyout options that emerged with the interest
of numerous suitors in the company.
The names include that of Larsen & Toubro and B K Modi-owned Spice group (both asking
for management control), Mahindra & Mahindra, Hinduja group, Essar group (Aegis BPO),
HCL Technologies and Tech Mahindra. However, most of these suitors are believed to have
asked for time before they present a concrete proposal. Besides, they are also waiting for the
Securities and Exchange Board of India (Sebi) to issue details about the relaxed norms in
case of an open offer for Satyam-like cases.
But problems persist. National Australia Bank is the latest client to suspend new outsourcing
contracts awarded to Satyam. Last month, Satyam said US-based State Farm Automobile
Insurance had terminated its outsourcing contract.
Govt launches ethanol blending on pilot basis
Objective is to reduce the extent of dependence on imported crude
The Union government has launched 10% ethanol blending programme on a pilot basis in
Belgaum in Karnataka and Bareilly in Uttar Pradesh–despite a sharp decline in crude oil
prices.
The purpose behind this pilot initiative is to study the impact of ten per cent blending on twowheelers
before introducing it commercially. Domestic oil marketing companies (OMCs) are
keen to continue biofuel blending programmes even after the recent crash in crude oil prices.
Blending of ethanol is crucial from the viewpoint of import substitution in crude oil.
The Indian basket of crude has crashed from a high of $142 a barrel in July 2008 to $43.13
(as on February 4), a decline of over 69%. "In the last two-three months, we have seen a
phenomenon of declining crude oil prices but that should not deter us from blending of
biofuels. Even at $40 a barrel, mixing of ethanol is going to be economically feasible", said
Petroleum Secretary R S Pandey.
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The OMCs are procuring ethanol at a price of Rs 21.50 a litre from the sugar mills. While a
number of purchase contracts are scheduled to end in October this year, the OMCs are learnt
to have asked the mills to renew contracts at the existing rate. Some mills have accepted the
proposal.
In October 2007, the Cabinet Committee on Economic Affairs had approved ten per cent
ethanol blending on a mandatory basis from October 2008 across the country excluding J&K
and the North-Eastern states. The deadline, however, has lapsed and as of now only five per
cent blending is under implementation. The five per cent blending was introduced in
November 2007.
The 20-25 per cent decline in sugarcane acreage across major producing states has impacted
the production of molasses, the raw material for ethanol. This could impact ethanol
availability and delay the launch of ten per cent blending on a national scale.
RBI releases advanced Basel roadmap for banks
Basel norms promote prudential practices in banks' operations
The Reserve Bank of India (RBI) has worked out the roadmap for the Indian banks to
graduate from the simpler approaches of the Basel II framework to more advanced ones.
Basel II is the second among Basel Accords, which are primarily, recommendations on
banking laws and regulations issued by the Basel committee on banking supervision. It sets
up rigorous risk and capital management requirements aimed at ensuring that a bank holds
capital reserves appropriate to the risk it exposes itself to through its lending and investment
practices.
Since March 2008, foreign banks operating in India and Indian banks having presence outside
the country have migrated to simpler approaches under Basel II framework. Other
commercial banks are required to migrate to these norms by March 31, 2009.
These include:
Standardised approach for credit risk which arising from default by borrowers
Basic indicator approach for operational risk (arising from day to operations of the banks
such robbery or power failure)
Standardised duration approach for market risk (arising from fluctuations in interest rate
and share prices) which affects the investment and market portfolio of the banks
Under the standardised approach, a bank's activities are divided into eight business lines:
corporate finance, trading and sales, retail banking, commercial banking, payment and
settlement, agency services, asset management and retail brokerage.
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Within each business line, gross income is a broad indicator for the scale of business
operations and so, the scale of operational risk exposure within each of these business lines.
The capital charge for each business line is calculated by multiplying gross income by a
factor. Currently, banks are using the basic indicator approach as per which they must hold
capital for operational risk equal to the average over the previous three years of a fixed
percentage of positive annual gross income.
For credit risk, banks can use internal ratings-based approach which allows them to develop
their own model to estimate the probability of default for individual clients or groups of
clients. Currently, banks use standardised approach where they are required to use ratings
from external credit rating agencies to quantify the required capital for credit risk.
Govt waives FDI commitment for Pepsi
100% FDI in food processing is now permitted through the automatic route
PepsiCo's wait for a waiver of a special disinvestment condition imposed in 1997, is finally
over. The Cabinet Committee on Economic Affairs (CCEA) has deleted the condition of
divestment of 49 per cent stake in its downstream bottling arms, to Indian parties. Pepsico
India Holdings was granted an approval in 1994 to set up a 100 per cent holding company
that would invest in Indian subsidiary company or a joint venture or would directly engage in
manufacturing and distribution of beverages.
The government, subsequently, imposed special conditions that stipulated that if the company
established wholly-owned downstream subsidiaries in the future, it would have to dilute 49
per cent equity in the company within five years. Participation in equity of franchise bottlers,
or taking over the operations of franchisee bottlers would also attract a similar clause.
PepsiCo, through its subsidiary company Aradhana Beverages and Foods Company, took
over the business of Dillon Kool Drinks and Beverages (January 2003), triggering-off the
clause for dilution of equity by January 2008. In addition, the company also acquired the
business of Charminar Bottling Company thereby requiring a similar divestment by June
2011.
PepsiCo approached the Government in April 2007 requesting deletion of the condition of
divestment since 100 per cent FDI was now permitted through the automatic route in the food
processing sector.
Court lifts sale ban on KG basin gas
The ban restrained RIL from selling gas to any party other than RNRL and NTPC
The Bombay High Court has allowed Mukesh Ambani-led Reliance Industries Ltd (RIL) to
sell gas from the Krishna-Godavari basin at $4.20 per million British thermal unit (mBtu).
The HC has however reserved final judgment on the case brought by Anil Ambani-run
Reliance Natural Resources Ltd (RNRL).
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RNRL has been seeking gas from RIL on the same terms it had agreed with state-run power
company NTPC Ltd — at $2.34 per mBtu.
The court vacated an interim order that restrained the company from selling gas to any party
other than RNRL and NTPC. RIL can now sell gas to government-nominated companies or
public sector units in line with the gas utilisation policy approved by an empowered group of
ministers (EGoM).
The timing of the order is opportune for RIL, which is slated to begin gas production next
month on the east coast of India. The order will give a major fillip to power and fertiliser
plants, which consume 70 per cent of the gas available in the country and are on top of the
government's priority users. The gas will bring down the cost of the power by 60 per cent.
The KG basin gas is expected to cost $7 per mBtu, after adding transport and taxes.
BSNL rolls out Internet TV services
Plans to cover to 98 cities by the end of 2009
Bharat Sanchar Nigam Ltd has launched its Internet Protocol Television services, which will
enable consumers to watch TV channels using their fixed telephone line at home. The
company has launched the service in 10 cities, including Gurgaon in Haryana.
IPTV is a system where an interactive digital television service is delivered over a broadband
connection instead of the traditional way of transmitting through a cable network. Users will
also get new services such as video on demand where they can watch their favourite movies
for a fee. They can also pause, fast forward and rewind live and recorded content stored on a
remotely located server by the service provider. Since IPTV delivers TV channels in digital
form, the quality of TV viewing is expected to be much better as compared to analog
transmission.
BSNL has partnered Smart Digivision Pvt Ltd, a company promoted by Mahendra Nahata,
Chairman, Himachal Futuristic Communications Ltd, to roll out the service in 54 cities. The
Smart TV Group, consisting Smart Digivision Pvt Ltd and Smart Broadband Services Pvt
Ltd, has entered into long term contracts with MTNL and BSNL for providing co-branded
interactive video services in 54 cities.
Microsoft steps up browser battle
Internet Explorer browser 8 has web slices that keep track of changing content
Microsoft has stepped up the battle to win back users with the latest release of its Internet
Explorer browser 8.
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The software giant says IE 8 is faster, easier to use and more secure than its competitors.
Recent figures have shown that Microsoft's dominance in this space has been chipped away
by competitors.
At the end of last year, data from Net Applications showed the software giant's market share
dropped below 70% for the first time in eight years to 68%. Meanwhile Mozilla broke the
20% barrier for the first time in its history with 21% of users using its browser Firefox.
IE 8 offers performance upgrades to speed up page loading, new navigation features and tab
isolation so that if you hit a bad site only that tab closes and not the whole browser.
WebSlices will give users a way to keep updated about a particular item on a web page like
stock prices, the weather or an eBay auction.
Accelerators let users access Web services like maps or translations in a small window
without having to leave the page. Microsoft has claimed that features in IE8 make it 'the most
secure browser on the market.'
These include 'InPrivate Filtering' which means users can see
and block when a third-party content provider might be
tracking their activities on the Web in an effort to target
advertisements. Web publishers and online advertisers have in
the past expressed concern over this feature because it could
'frustrate the business model'.
'InPrivate Browsing' is also being touted as a major
improvement which allows a user to start a browsing session during which the history of sites
viewed will not be recorded. This feature keeps online activity a secret and prevents those
with access to a PC from seeing where other users of the same PC have been.
Online privacy advocates like the Centre for Democracy and Technology have called the
features 'a great step forward in terms of giving users more control'.
So will this be enough to persuade defectors to return to the IE fold? Microsoft does have the
advantage of its browser being shipped with its operating system. The EU recently accused
Microsoft of harming competition by bundling its IE browser with its Windows operating
system.
Experts say if the product delivers, users will stick with it and others may well return. At the
end of the day if IE8 has the functionality and features people want, they will respond to it.
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Editorial row engulfs Wikipedia
The call for flagged revisions came from Wikipedia founder Jimmy Wales
The online user-generated encyclopaedia Wikipedia is considering a radical change to how it
is run. It is proposing a review of the rules that would see revisions being approved before
they were added to the site. The proposal comes after edits of the pages of Senators Robert
Byrd and Edward Kennedy gave the false impression both had died.
The editing change has proved controversial and sparked a row among the site's editors.
Wikipedia's founder, Jimmy Wales, is proposing a system of flagged revisions, which would
mean any changes made by a new or unknown user would have to be approved by one of the
site's editors, before the changes were published. This would mean a radical shift from the
site's philosophy that ostensibly allows anyone to make changes to almost any entry.
Britannica reaches out to the web
Wikipedia is put together entirely with the help of its volunteer experts
The Encyclopaedia Britannica has unveiled a plan to let readers help keep the reference work
up to date. Under the plan, readers and contributing experts will help expand and maintain
entries online. Experts will also be enrolled in a reward scheme and given help to promote
their command of a subject.
However, Britannica said it would not follow Wikipedia in letting a wide range of people
make contributions to its encyclopaedia.
Britannica plans to do more with the experts that have already made contributions. They will
be encouraged to keep articles up to date and be given a chance to promote their own
expertise. Selected readers will also be invited to contribute and many readers will be able to
use Britannica materials to create their own works that will be featured on the site.
However, it warned these would sit alongside the encyclopaedia entries and the official
material would carry a "Britannica Checked" stamp, to distinguish it from the user-generated
content.
Alongside the move towards more openness, will be a re-design of the Britannica site and the
creation of the web-based tools that visitors can use to put together their own reference
materials.
Britannica has unveiled a beta, or trial, version of what will become the finished Britannica
Online website.
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Department of Telecom permits sale of calling cards
Consumers get the freedom to choose their long distance telephone operator
The Department of Telecom has decided to allow long distance players to sell calling cards
directly to telephone users.
Long distance tariffs are likely to come down by at least 60-70 per cent once the STD
operators have direct access to the end-subscribers. At present telephone users do not get to
choose their long distance provider. For example, an Airtel mobile subscriber is forced to
make STD or ISD calls on Bharti Airtel's own long distance network.
Once the calling cards are introduced in the market, subscribers can buy one from a retail
outlet just like they buy a pre-paid mobile card. The card will have a 16-digit coded number,
which the subscriber will have to punch it on his mobile or fixed line telephone. This will
take subscriber directly to the operator's long distance network from where the STD or ISD
call can be made.
There are only four operators that have a pan-Indian long distance network. These are Bharti
Airtel, Reliance Communications, Tata Teleservices and Bharat Sanchar Nigam Ltd.
Calling cards could benefit other companies that have a long distance telephony licence. For
example BT, AT&T and Cable &Wireless have a long distance telephony licence but do not
offer any service directly for the retail customers in India. Calling cards could give these
companies an opportunity to enter the voice-based long distance segment in India as well.
The proposal on Internet telephony will allow subscribers to make domestic calls to a mobile
or fixed line phone using their laptop or PCs. At present, this is allowed only for international
calls. Consumers will, however, have to wait to take advantage of this service since DoT has
sought TRAI's views on security-related issues.
Microsoft launches Windows Marketplace
Google is set to follow with Android Market
Microsoft is launching a service to rival Apple's popular mobile App Store with a similar
service of its own, called Windows Marketplace at the Mobile World Congress in Barcelona,
Spain recently. The Mobile World Congress is the cellphone industry's version of the
Consumer Electronics Show.
Windows Marketplace, which has almost 20,000 applications already developed for its
Windows Mobile operating system, will be launched towards the end of the year, leaving
Microsoft lagging behind its rival.
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Windows Marketplace is a comprehensive, easy-to-use shopping and download site that helps
Windows customers discover, try out, and acquire partner products and solutions. Customers
can access Windows Marketplace through the Windows operating system and Internet
Explorer. Google is also set to launch its own store, called Android Market, to allow
developers to sell applications designed for mobiles running its Android smartphone
software.
Microsoft also unveiled Windows Phone that will include new "touch" features to rival
Apple's iPhone. Microsoft's new service called MyPhone will allow people to sync their
photos, contacts, videos and other files to a personalised website they can access from
anywhere. And analysts predict a glimpse at Windows Mobile 6.5, an updated version of the
company's operating system for handsets.
Microsoft and Google won't be alone competing with Apple. Research in Motion, which
makes the Blackberry, is also expected to launch a store of its own, as are various mobile
phone handset manufacturers including Samsung and Nokia.
Android Market will allow developers to set their own price for their apps.
Health insurance business set to boom
Only 2 per cent of the total population is covered
IRDA has forecast entry of more standalone health insurers in the race for grabbing a chunk
of the general insurance pie. Only two standalone insurers — Chennai-based Star Health and
Allied Insurance and Apollo DKV Insurance — are
operating in this sector, which is poised to clock Rs
28,000 crore by 2015.
According to the Insurance Regulatory and
Development Authority's data in 2007-08, the health
insurance segment was estimated to be around Rs 5,152 crore, with only 2 per cent of the
total population being covered. Realising the potential and advantages — the segment has
been growing at 37 per cent since 2002 — both life and non-life insurers have already started
offering health insurance products.
For instance, health insurance in 2007-08 accounted for 0.2 per cent of the individual regular
premium for life insurance companies in India. For non-life insurers, it formed a significant
proportion of the business accounting for around 18 per cent of the total gross written
premium, according to a KPMG study.
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