Saturday, December 20, 2008

Budgeting and the arrogance of bureaucracy after 2,063 years?

 

“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.”

— Cicero, 55 BC

Tuesday, December 16, 2008

Bernard Madoff, former Nasdaq Chairman...Ponzi King!

Wow, this takes the cake. The man even went on to become the Chairman of Nasdaq under the very nose of the great SEC. We have still to get over the shock of the sub-prime crisis, the downfall of numerous organisations that had overleveraged themselves and now we have another situation resulting from the lack of oversight on behalf of the regulator. I am not sure who out of the Big Four is the Auditor of the US $ 50 billion empire of Mr Madoff but I am sure the Auditor too will have a lot to explain. Not to mention the rating agencies that must have been part of the big scheme spun by the spin doctors at his companies. What to say of the due diligence process carried out by the great investment bankers using their best practices for recommending investment  in these schemes!

A number of red flags were raised, and some newspapers even carried stories on the credibility of growth story spun by Mr Madoff, however, nothing came of it and now we are faced with another big scandal.

Thursday, November 27, 2008

Helpless India looks on…… and waits for the Home minister’s usual spiel!

Its more of anger and frustration that pushes me to write this post. I am sure that a major part of the country is today looking on with helplessness as we see the terrorist attacks in Mumbai unfold and the death toll goes to 87 with another 185 plus injured.

We will again have our Home Minister come out and give us his usual spiel on how he will let us know as soon as he finds out more about the attacks (as he was sleeping throughout the night and could not be briefed on the same). We will also have the usual noises from the rest of the polity. However, as this time the attacks are on the elite hotels and foreigners staying therein, maybe, there will be greater pressure on the government to come out of its slumber and act!

Tourism advisories are sure to come out from most countries abroad which will effect the tourism industry. In any case what locus standi does India have to call off the cricket tour to Pakistan when its own Financial Capital is under attack!

Sunday, November 16, 2008

Slowdown....lets jump the competition!

What I have said many a time, and strongly believe in, tough times are the best times to jump the competition and rapidly expand your marketshare. This the time when your marketing dollar (or rupee) gets you a getter bang for the buck as everybosy else goes into a huddle. Some interesting surveys have been done and reported here in this article.

Crisis, a word when written in the chinese alphabet, represents both Danger and Opportunity.

Darrell Rigby, head of Bain's global retail practice and Steve Ellis, Bain's worldwide managing director, said: "The tumultuous events of the past few weeks have battered financial markets and created uncertainty that companies will be reckoning with for months. But in the turbulence lies opportunity.

"Like dangerous curves on a racetrack, economic downturns create more opportunities for companies to move from the middle of the pack into leadership positions than any other time in business.

"Unlike straightaways, where leaders can thrive on raw power alone, steep curves require strategic finesse. That often results in dramatic differences in performance as leaders steer out of the curve."

Another characteristic of companies that do well from a downturn, say the two Bain executives, is: "They make bargain acquisitions to build up their core, even when it means taking calculated financial risks. As markets improve, they are well-positioned to accelerate." The latest example: Bank of America's planned acquisition of Merrill Lynch, which may turn out to be "the strategic opportunity of a lifetime," says Ken Lewis, Bank of America's CEO.

So are we all ready to take the plunge!

Work/life balance....control and impact

“What we’ve learned over the years is work/life balance has to be defined at the individual level. It means different things to different people at different times in their lives. What is universally true is the importance of two key factors—control and impact. If our teams are working in an environment where they have an appropriate level of control over their schedule and their work is clearly having measurable impact, they can achieve their definition of work/life balance.” Steve Ellis, Managing Director, Bain & Company

Coming from a leader whose company has been consistently ranked in the top 10 of the best “places to work” in (Consulting Magazine), it is indeed very relevant and insightful. After having put in more than 27 years, post qualification, and seen different businesses from different angles and perspectives over the years I truly relate to his thought of work/ life balance meaning different things to different people at different times in their lives.

Without taking away anything from the concept of ‘control’ – all of us like to have some control over what we do, how we do it and when we do it, however, I also believe that a person will be ready to cede control to some extent in case he/ she is able to get the satisfaction of seeing the positive impact of the work being done by him/ her, whether at work or in personal life, and be appreciated for it.

Tuesday, November 11, 2008

India’s Corporate lawyers court riches

Well, I guess my last post on the topic of CAs and lawyers having a good time despite a slowdown in the economy and some job losses across the board today got support from an article in the FT which goes on to say -

While the world economy sags, India’s lawyers are enjoying a boom. Lead partners at the country’s commercial law firms are now earning over $1m a year.

“Corporate [lawyer] salaries have ex ploded. They are going up by 20 to 40 per cent,” says Anand Prasad, a partner at Trilegal, a law firm with offices in Delhi, Mumbai and Bangalore.

With rates for domestic corporate lawyers averaging $400 an hour, even junior corporate partners at top firms earn surprising sums – sometimes up to $250,000 before bonus es. Desai & Diwanji, for example, a firm with offices in Mumbai and Delhi, increased its staff remuneration this year by 200 per cent.

While liberalisation of the Indian economy began only in 1991 – making the modern practice of corporate law in India just 15 years old – the profession is already reaping huge benefits from a period of economic growth that will be slowed, but is unlikely to be halted, by the global downturn.

The shift has some painful ramifications, both for foreign law firms prevented from sharing in the bonanza locally by protectionist regulation and large corporations that are unable to use a single international law firm for all their work.

Global law firms such as Clifford Chance see India as ripe with possibility and the “missing link” in their worldwide coverage. There are clear advantages for the UK’s leading firms: India’s legal code has roots in British law, its language of business is English and its economy has been growing by 8 per cent for the past three years.

Yet for now they are shut out. Strict Bar rules prevent large international law firms opening offices or practising Indian or foreign law in the country.

As well as raising the costs of Indian legal services for incoming multinationals, this creates other problems. Lesley Jackson, chief financial officer at United Breweries in Bangalore, says she must work with foreign law firms out of hotel rooms, shuttling back and forth to sign documents in Singapore, and having two law firms (one Indian and one foreign) on every deal. “It makes it difficult not to be able to instruct legal one-stop shops, especially on global deals where it is important to have a brand name,” she says.

Indian corporate lawyers with the right skills to serve such clients are also thin on the ground. Bharat Vasani, general counsel at Tata Group, says: “Outsiders can be deceived by the overall size of Indian law firms. There are actually very few partners capable of doing top level corporate work.”

The profession faces a struggle to service India’s growing corporate sector and foreign investors. According to India Today magazine, the country requires 3,000 new corporate lawyers a year to keep pace with demand. Multinationals such as IBM and Hewlett- Packard and Indian corporations such as Infosys and Reliance have responded by expanding their in-house legal departments. Promod Rao, general counsel of ICICI Bank, says: “Our referrals to domestic firms are few. We even parachute our own guys in to do due diligence work.”

For foreign law firms that need to serve their global clients in India, the Indian Bar restrictions create tortuous logistical challenges. Ashurst, a UK law firm, has a liaison office in Delhi but the firm’s visiting partners say they are careful not to meet clients or give legal advice at these premises, which are more akin to a personal apartment than a law firm office.

Sandeep Katwala, Linklaters’ India head, spends a lot of time working out of his “house hotel”, the Oberoi in Mumbai. Various other hotel suites double up as offices, not only for lawyers but for other professional firms such as Morgan Stanley and Nomura.

Linklaters is one of the most active law firms in India and has advised underwriters on some of India’s largest public listings, such as Cairn India’s IPO and that of DLF, India’s largest real estate company. Last year it formed a referral relationship with a recently established Mumbai law firm, Talwar Thakore & Associates.

Although independent, the firms refer work to each other, share training and run secondments. Kunal Thakore, whose father Shobhan is one of TTA’s named partners, is a partner in Linklaters’ Hong Kong office. Mr Katwala says: “We probably still work as much with other Indian law firms [as with TTA]. But on the Vodafone-Essar transaction, for example, working with TTA allowed us to offer the client an integrated team approach.”

To ensure they gain access to leading domestic lawyers, multinationals and foreign law firms have similar relationships with Indian law firms, such as Amarchand & Mangaldas and AZB & Partners. However, nearly everyone wants to instruct the top partners at these firms, so availability of talent is a problem. For example, during the demerger in 2005 of Reliance Industries, one of the country’s biggest conglomerates, Amarchand & Mangaldas acted for each of the Ambani brothers and their mother.

This type of arrangement would unsettle most western lawyers. “Conflicts in India are scary,” says Mukesh Bhavani, general counsel at Essar Group, the Indian conglomerate. He feels that although the Indian legal market is maturing, it still has some way to go before lawyers can claim to have put proper Chinese walls in place.

Foreign firms, meanwhile, are beating legal restrictions by developing India practices outside the country – and picking off the brightest graduates to staff them. Rajesh Begur, managing partner at ARA Law, a Mumbai-based firm, says he is already feeling the pinch of foreign competition in graduate recruitment. “I went to Jodphur just after [UK law firm] Herbert Smith had been there and I could not recruit one law student.”

The inroads made by foreign firms, however, can spark passionate opposition. Lalit Bhasin, head of the Society for Indian Lawyers, says: “UK Magic Circle firms want to emasculate the Indian legal profession in what amounts to a hostile takeover.”

Such sentiments contributed to the Indian Bar Council’s rejection of liberalisation proposals in November 2007. Firms believe it will be anything from three to five years before India opens up its legal market. For now, international law firms must look on with envy as the country’s local lawyers enjoy the rewards of exclusivity.

Copyright The Financial Times Limited 2008

Tuesday, November 04, 2008

4 Secrets of the Successfully Self-Employed

Sometimes one comes across an article which immediately strikes a cord as it is on a topic which is being discussed somewhere in your life at that very moment – at work or at home with the family.

One such short note is by Marc and Angel and, I think, it is most relevant for all the young professionals who are now setting up practices in their professionals fields. Once this concept of Time and Money is clear to them then at least they will be in a position to set goals which would help them plan their life. Enjoy.

#1 – We Only Have 2 Products: Time and Knowledge

No matter how you make a living or who you think you work for, you only work for one person, yourself.  Likewise, you only have 2 products to sell, your time and your knowledge.  Here are a few example scenarios:

  • Migrant Farmer – Sells hours of his/her life to pick fruit or vegetables for a farmer in exchange for money.  A perfect example of trading hours for dollars.
  • Doctor – Sells hours of his/her life to perform medical treatments based on the knowledge stored in his/her brain.  A perfect example of trading hours and knowledge for dollars.
  • Best-Selling Author – Spends time crafting a book based on his/her knowledge or intellectual capacity and then sells the book (knowledge) many times over.  A perfect example of trading knowledge for dollars.  The key benefit here is residual, passive income.

In almost all cases of the self-employed, the small business owner is taking information out of his or her brain and spending the necessary time to convert it into a product of value.  This concept confuses some people, and to others it seems obvious.  The bottom line is that customers pay you for your time and knowledge.  Success is achieved by properly crafting the two into one convenient bundle that can be sold many times over (think of products vs. services).

What knowledge do you have in your brain that provides value to others?  How can you extract this information and sell it?

#2 – The Implementation of Knowledge is Power

Knowledge alone is not power!  The implementation of knowledge is power.  Knowledge is simply a commodity; it’s a product like any other that has the potential to be sold.  How knowledge is organized, packaged, presented, shared, and received by others is what makes knowledge so powerful.

Knowledge is useless unless it’s effectively shared with others.  Your ability to educate others in a way that allows them to effectively apply the instruction is what makes knowledge an asset… something worth buying.

#3 – Time is More Valuable than Money

One of the most important points to understand is the fact that there are two basic forms of currency, money and time.  Of the two, time is the most valuable, for it cannot be replenished.  A surplus of time, and the unfettered liberty to do with it as you choose, is the true measure of success.

Your time must be extracted from the formula of making money.  No matter how skilled you are at transferring your knowledge to others, if you are paid on an hours for dollars basis, your ability to expand your business will eventually plateau.  You will run out of time.

The successfully self-employed have made this realization and concentrate the majority of their time and effort on the single greatest secret of self-employment: generating passive income.  Passive income is achieved by applying what you know into a package that can be designed and built once, and then repeatedly sold over and over again.  Finding a unique way to promote and sell this knowlege is the key.

Passive Income Examples: Useful books and guides, time saving computer applications, etc.

#4 – Success is About Knowing What You Want

Self-employed success is not the byproduct of working your way up from the ground up.  It’s based on knowing what you want, understanding your abilities and implementing them diligently to achieve your goals.  There are plenty of people who get laid-off from their 9 to 5 day job and end up making millions in a few short years of self-employment.

Take a look at some of the success stories around you that emerged from nowhere.  These success stories were not initiated by people paying their dues to someone else’s initiatives.  These success stories revolve strictly around perception and choice.  The people in these stories know their capabilities, what they’re doing, and what they want.  Once people make this realization, and the conscious choice to act on it, the possibilities for success are limitless.
Photo by: TeeJe

Wednesday, October 29, 2008

Job loss? Not for Chartered Accountants and Lawyers

With the economy slowing down there is a definite fear amongst professionals of various categories of either loosing their jobs or facing a cut in their salaries. However, there is one category of professionals who continue to be in high demand and that is my tribe of warriors, namely Chartered Accountants. Despite the slowdown the world still has to compile its accounts (which are on increasingly complex IT systems) and get them audited and that is where the CA scores over a number of other professions in a slowdown.

Further, with the regulatory environment becoming stricter and more complex by the day there is a distinct need for more professionals with hands on experience of ERP systems, taxation, auditing and now with IFRS implementation looming on the horizon – persons with knowledge of IFRS.

Similarly, lawyers too are in a good position as with increased regulatory control and, businesses increasingly facing problems due to the tight money market conditions, legal issues are cropping up everyday which are generating more work for the profession. Increased amount of legal work being generated in the developed economies, due to the mortgage crisis, is also a good sign for the LPO (legal process outsourcing) Industry.

SEBI Takeover Code - creeping acquisition norms eased for persons holding 55% and above but below 75%

In a bid to help the market sentiment SEBI has eased the creeping acquisition norms so as to allow promoters to increase their holding beyond 55%, upto 75%, through creeping acquisition of upto 5% per annum. The earlier limit of 5% per annum still remains and only promoters who are currently holding more than 50% would benefit in the near term as they are the ones who will be able to increase their holding beyond 55% immediately, the others who are currently holding say, 40% or so will take at least 3 years to go beyond the 55% mark and as such their share prices, at this juncture, do not get any support because of this move.

It may be noted that Sebi has mandated that such acquisitions could be done only though open market operations and not via bulk, block deal, or through preferential offer.

Further, till now, for any increase in the holding of promoters pursuant to buy back, exemption under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations was required to be sought. SEBI has now decided to automatically exempt increase/consolidation up to 5 per cent per annum as a result of buy back by a company.

I am not sure how much of an effect this is going to have in the current tight liquidity scenario as, although the promoters have a great opportunity to increase their shareholding beyond 55%, but do they have the hard cash to do so, is the moot question.

Tuesday, October 28, 2008

Nomura offers up to 130% retention bonus to Lehman employees in India

Despite tough market conditions retaining talent is still a challenge, especially if you are one of the failed Investment Banks.

Ensuring business continuity is the biggest challenge in a situation as the one faced by Nomura after its takeover of Lehman assets. However, with Investment Banking itself going through a tough phase it does take a lot of conviction and foresight to be able to take the calls as the ones taken by Nomura. Hats off to them as despite all the gloom and doom the world is actually not going to come to an end and these assets would pay off big time over the next few years.

Friday, October 24, 2008

Bar Council now amenable to Opening up of the Legal sector

The Economic Times today quotes BCI member Jagdev:

“We have told the law ministry that we would consider applications of UK-based law firms only if they allow our lawyers to practice in their country. A stricter set of reciprocity rules would be laid out before we actually set out to start operations,”

The commerce Minister, Mr Kamal Nath, had spoken of this sometime back during his parlays at the WTO, however, there was no movement forward as the Bar Council was dead against it.

A number of UK based firms have already got a tie-up with Indian firms in the form of client referral arrangements such as Allen & Overy and Linklaters which have client referral arrangements with Trilegal and Talwar, Thakore & Associates, respectively. Others like Clifford Chance have liaison offices in India.

However, for the above to actually happen on the ground, it would need a legislative change, but now, it seems, it is only a matter of time.

Thursday, October 23, 2008

India is the highest recipient of remittances from abroad

The Minister of Overseas Indian Affairs, Shri Vayalar Ravi told the Rajya Sabha today that India is the highest recipient of remittances from abroad. About 40% of this is the estimated remittances received from overseas Indian workers including from semi-skilled and unskilled workers in the gulf.

The remittances from Overseas Indians for the year 2007 were estimated at US $27 billion. These are in the nature of private funds transferred by individuals for various purposes including to meet consumption expenditure of their families back home. The data in this respect is maintained by the Reserve Bank of India.
With the Foreign Exchange reserves rapidly dwindling due to the rapid increase in demand for dollars (owing to the FIIs selling and taking their money out of the country as well as the high cost of fuel), this could be a blessing in disguise and a route that should be encouraged by the government so as to balance the outflow of foreign exchange.

Finally, some movement on the Limited Liability Partnership Bill

As reported across several papers, Shri Prem Chand Gupta, Minister of Corporate Affairs, in the government on Tuesday introduced the revised Limited Liability Partnership Bill, 2008 in the Rajya Sabha. The Bill provides for the formation and regulation of limited liability partnerships and for matters connected therewith or incidental thereto.

With the imminent opening up of the accounting and legal and other professional services sectors this Bill will play an important role in creating a level playing field for the professionals of India. The Institute of Chartered Accountants of India, has already made the necessary amendments allowing its members to partner with members of other professions. The other professional bodies are also making similar amendments to facilitate the process. This will help in creating larger multi-disciplinary firms which can service clients across domains.

Limited Liability Partnership (LLP) as proposed in the Bill, 2008 is a new corporate form that enables professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner. In India, this need has long been recognised for businesses which may require a framework that provides flexibility suited to requirements of service, knowledge and technology based enterprises.

Services sector is playing a major role in the national economy and there is a growing diversity in the range of services being offered. The services sector would also find this form very useful. The advantage of the LLP form would be that it will not impose detailed legal and procedural requirements intended for large widely held companies on such enterprises. In this way it will also be useful for small enterprises.

The need for LLP legislation has been recognized for a very long time. Various committees and Expert Groups have, from time to time, recommended introduction of LLP legislation in India.  In the last decade itself, Abid Hussain Committee (1997) had recommended this legislation in the context of SSIs. The Naresh Chandra Committee on Regulation of Private Companies and Partnerships (2003) and Dr. Irani Committee on New Company Law (2005) had also made recommendations for a separate  LLP Legislation.

However, it is the recent initiative of the Ministry of Corporate Affairs that has enabled this legislation to be finalized and tabled in the Parliament.

Government had earlier introduced the Limited Liability Partnership Bill, 2006 in the Rajya Sabha on 15th December, 2006. It was later referred to the Department Related Parliamentary Standing Committee on Finance for examination and report. The Committee submitted its recommendations in its report to both Houses of Parliament on 27th November, 2007. The present Bill, 2008 has taken in view the recommendations made by the Standing Committee and other relevant inputs.

The salient features of the LLP Bill, 2008 are as follows:

(i)         The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.

(ii) The Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.

(iii) While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

(iv)        LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs. Since LLP shall be in the form of a body corporate, it is also proposed that the relevant provisions of the Companies Act, 1956 may be made applicable to LLPs at any time in the future by Notification by Central Government, with such changes or modifications as appropriate.

(v) An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. Since tax matters of all entities in India are addressed in the Income Tax Act, 1961, the taxation of LLPs shall be addressed in that Act.

(vi) Provisions have been made in the Bill for corporate actions like mergers, amalgamations etc.

(vii)       While enabling provisions in respect of winding up and dissolutions of LLPs have been made in the Bill, detailed provisions in this regard would be provided by way of rules under the Act.

Prior to introducing the LLP Bill, 2008, Shri Prem Chand Gupta withdrew the earlier Limited Liability Partnership Bill, 2006.

Wednesday, October 22, 2008

Crystal ball gazing, where are we headed from here?

"Your next-door neighbour can likely predict what is going to happen as accurately as we can." - Steve Jobs

This accurately sums up the debate today. In India everybody has an opinion about everything but the fact is that nobody knows where we are headed and what’s in store over the next couple of years. Today, on TV, there is a story of a couple killing themselves due to a set back suffered in the market. One day the market jumps 600 points and promptly the next day there is selling pressure bringing it back to the same or lower levels. The pundits who, at the beginning of the year, were talking of the sensex hitting 25,000 (some had even started talking of 50,000) are now asking ordinary investors to ‘have faith’ and keep invested for the ‘long run’. Try explaining this to a guy who had put in his life’s savings in the stock market and his corpus is now down 70%. What a mess, and we still have no clue as to where the bottom is, as we really don’t know how many more skeletons are yet to pop up across the world. Who all are guilty for this is another story, but as Jack and Suzy Welch said, quoting Agatha Christie, in Murder on the Orient Express, I guess, everybody is guilty in one way or another.

The only saving grace of being in India is that we are nowhere near a ‘recession’ and should grow between 6-7% even this year despite the global crisis. All of us who are getting regular calls from NRIs in the west should brace up for handling a greater influx of returning Indians this year, the only catch being – are these returning Indians capable of delivering under the Indian conditions? If not, just like a number of others, they will soon be going back to the west as soon as things improve a bit.

PS. Wipro has just announced its numbers and has cautioned about the future but TCS is still gung ho!

Tuesday, October 21, 2008

Section 79 of the Income Tax Act definitely needs to be amended!

Was again faced with a situation where another client incurred the wrath of Section 79 and is loosing the right to carry forward substantial genuine business losses just on account of taking on a new (majority) shareholder.

Till 1989, before clause (b) was deleted from Section 79, there was the possibility for a genuine loss making company to take on a majority partner/ shareholder and still claim set off of losses in subsequent years so as to mitigate some of the hardship suffered earlier. The object of clause (b) was to ensure that the assessee was not deprived of the benefit of carry forward of losses unless the change in shareholding had been made with a view to avoid or reduce the tax liability. However, as the section stands to day, there is no discretionary power in the hands of the assessing officer to do anything in the matter and in all cases where there is a 51% or greater transfer of beneficial shareholding the right to carry forward and set-off previous years’ genuine losses is lost. This is downright unfair, and hard, on genuine entrepreneurs who have, firstly, lost a lot of their money in the venture and have to now doubly suffer on account of this stricture of law.

It just goes to show the lack of trust that the government has in its own administrative machinery and instead of trying to plug the loopholes for the misuse of Section 79, it has simply taken the easy way out and done away with the discretionary powers given to its officers, in the process putting all genuine business owners at loss. Looking at it in the context of the overall direct tax collection of the government, I don’t think this kind of set off would have had any material impact on the same, however, from the company’s point of view the impact is huge on each such company that is put to a genuine hardship (loss) on this account.

Monday, October 20, 2008

Circumventing the Takeover Code

Kudos to the CNBC reporter, Sajeet Manghat, who has correctly analysed the scheme adopted by RIL to effectively circumvent the SEBI Takeover Code. The transcript, from the CNBC website, is as under:

“Delivery-based selling in RIL has gone up to 57.4% from 22.3% on Wednesday and there is also an increase in delivery volumes. The main reason why the stock is under pressure is because RIL has reclassified promoter shareholding ahead of warrant conversion. RIL has nearly 14% of its equity under treasury stock and classified under promoter and PAC. The treasury stock is held under petroleum trust and eight corporate bodies. RIL has converted eight corporate bodies into its subsidiaries. Subsidiaries lose promoter status and voting rights under regulations. RIL promoters converts warrants at Rs 1402 per share and infuses Rs 15141 crore. Promoter stake has fallen to 44.8% from over 51%. Post warrant conversion, RIL promoter stake has gone up to 49%. RIL promoter voting right also goes up to 52%. Warrant conversion has infused over Rs 15,100 crore into RIL funds”.

As per Section 42 of the Companies Act a subsidiary cannot hold shares in a holding company, however, a company which is not a subsidiary at the time it purchases the shares of the holding company and becomes a subsidiary later, due to the acquisition of its shares by the holding company, is exempt form the provisions of Section 42 (sub section 3). However, such a subsidiary then looses its voting rights (which in any case is irrelevant for a promoter who is already holding a high stake). Further, the subsidiary also looses its promoter tag under the Takeover Code and thus creates space for the promoter to acquire additional shares.

Would definitely like to someday connect with Sajeet and get more of these inside stories!

Monday, May 05, 2008

Shortage of labourers plagues India's construction industry

The Wall Street Journal carried a timely story on the current shortage being faced by the India Construction and Infrasructure Industries. Till now it was the middle and senior level managerial personnel who were being wooed back and in what was labled as a 'reverse brain drain' but now we can see it happening at the bottom of the pyramid where some skills are in such short supply that the salaries have more than doubled!