Mumbai: The Ministry of Corporate Affairs (MCA) has decided to relax the norms for companies to maintain minimum paid-up capital. According to the Companies Act 1956, the minimum paid-up capital for a private company is Rs 1 lakh and for a listed company Rs 5 lakh. According to official sources, while a company can be set up with any amount, but within a time-frame of two years it should raise the capital to Rs 1 lakh and Rs 5 lakh for unlisted and listed companies, respectively.
If a company fails to do so in accordance with the existing provisions of Section 560 of the Companies Act, the company will be deregistered and declared defunct.
Now it may be a good news for the companies that such entities may not be declared defunct immediately as is done now. Under a scheme prepared by the ministry, such companies may opt for an option to exit business without attracting any penal provisions under the Act.
Alternatively, they may negotiate some more time with the regulator for raising the capital and continue with their business. In the process, earlier penal provisions may not apply.
Sources said that the scheme could be a big relief to the both listed or unlisted companies. “This is because once a company is declared defunct, the Registrar of Companies (RoC) can start criminal prosecution against the company,” said the source.

This relief may come as part of the comprehensive scheme being worked out by the ministry to avoid criminal prosecution for delay in filing one’s balance-sheet with RoC.
At present, any company which has prepared a balance sheet for a given financial year is bound to file it with RoC by October of that financial year. Not doing so attracts criminal proceedings under Section 610 of the Companies Act 1956, plus a structure of penalties.

The proposed scheme is being termed ‘Immunity from period of delay in filing returns and prosecution’ and meant for all companies, public and private, listed or unlisted, and even subsidiaries or Indian arms of foreign companies operating in India. It is aimed at companies who are functional but have failed to comply with the requirement of mandatory filing of these returns with RoC.

The idea is to do two things. First, make the present penalties more lenient. Second, remove the liability for criminal prosecution. Another feature of the draft being discussed is that once a company opts for this scheme, the ministry is to advise RoC to withdraw legal suits filed against the company for prosecution.

Mumbai: The Securities and Exchange Board of India (SEBI) has relaxed share-listing norms for small and medium enterprises (SMEs) by allowing them to disclose their financial results every six months instead of three months, as is the norm for bigger companies.

Companies listed on the SME exchange will not be required to send a full annual report to their shareholders and also need not publish their financial results as required in the main stock exchange. “Companies listed on the SME exchange may send to their shareholders a statement containing the salient features of all the documents,” the regualtor said in its circular. But these companies will have to maintain a public shareholding of at least 25% of the total number of issued shares at all times. In other words, the promoters’ stake cannot exceed 75%.

A company listed on the SME exchange, having post-issue capital between Rs 10 crore and Rs 25 crore can migrate to the main exchange provided it meets the listing requirements of the stock exchange. For this purpose, the company must first make a proposal to list the specified securities and obtain the prior approval of its shareholders.

“The issue shall be 100% underwritten and the merchant bankers shall underwrite 15% in their own account. Merchant bankers can also enter into an agreement with nominated investors to subscribe to the unsubcribed portion of the issue,” the SEBI circular said.
A stock broker of the main exchange need not seek fresh registration for trading on the SME platform. Similarly, a sub-broker also need not seek fresh registration, where s/he is affiliated to stock broker who is eligible to trade on SME platform. SEBI has also decided to grant approvals to only corporatised and demutualised entities for operating as an SME exchange,unlike earlier when it had decided to give time to entities to comply with the regulations.

Besides having a balance sheet net worth of Rs 100 crore, it must also have nationwide trading terminals and an online screen-based trading system. The exchange must also have an online surveillance capability which monitors positions, prices and volumes in real time to keep a tab on market manipulation. “It shall have adequate arbitration and investor grievances redressal mechanism operative from all the four regions of the country,” the regulator said.

New Delhi: According to the estimates by the Ministry of Statistics and Programme Implementation, the Indian economy has registered a growth of 7.4 per cent in 2009-10, with 8.6 per cent year-on-year (y-o-y) growth in its fourth quarter. The growth is driven by robust performance of the manufacturing sector on the back of government and consumer spending. GDP growth rate of 7.4 per cent in 2009-10 has exceeded the government forecast of 7.2 per cent for the full year.

According to government data, the manufacturing sector witnessed a growth of 16.3 per cent in January-March 2010, from a year earlier. The farm output rose at an annual rate of 0.7 per cent during the quarter on the back of a good winter harvest. The expansion in the March quarter was driven by government spending, manufacturing and services. The government estimates the economy to grow at a rate of 8.5 per cent in 2010-11 driven by better farm output and a global recovery. The Finance Minister, Mr Pranab Mukherjee said that growth would exceed the government's estimate for the current fiscal. The farm sector, which constitutes nearly 17 per cent of the economy, is expected to perform well on the prediction of normal monsoon this year.

Source: The Hindu Business Line

New Delhi: The rise in consumer demand in India over the last two to three quarters driven by a recovering economy and a booming middle class has put the spotlight back on the Indian consumer sector which is witnessing heightened levels of interest from both a private equity (PE) and M&A (mergers and acquisitions) standpoint, says an Ernst & Young transactions report.

“This heightened level of PE interest is evidenced by three PE deals which have happened in the consumer space in quick succession in the last few months — Henderson Equity Partners' investment in Genesis Colors, IL&FS' private equity investment in The Mobile Store and investment by Bain Capital & TPG Growth in Lilliput Kidswear,” Mr Ajay Arora, Partner, Transaction Advisory Services, Ernst & Young, said.

“Another emerging aspect of the Indian M&A landscape is increasing outbound interest by Indian companies looking to access new markets especially in the emerging economies of Africa and South East Asia. Recent acquisitions by Marico, Emami and Godrej Consumer Products in Singapore, Egypt and Indonesia respectively, are cases in question,” said Mr Arora.

Volumes
According to the report, globally too consolidation, deal value and volume in the consumer products sector went up in the first quarter of 2010, with deal volumes up by 33 per cent and value by 334 per cent, compared with the last quarter of 2009. Consumer Products Deals Quarterly reveals that total deal value went up in Q1 2010 to $43.2 billion from $10 billion in Q4 2009, with five deals above $1 billion - the largest deal being the acquisition by Kraft Foods, Inc. of Cadbury Plc. for $19.2 billion.

Building scale
Mr David Murray, Global Consumer Products Transactions Leader, said, “In the current market, many consumer products companies are focusing on growth and looking to diversify by building scale in faster growing markets to counteract stagnation in their domestic markets.”

Chennai/ Bangalore: On the back of its value proposition and infrastructural investments by the government, the domestic market in India for engineering R&D services (ER&D) is expected to witness robust growth. It is estimated that almost 10-15 per cent of India’s total ER&D services market could come from its domestic market by 2020 when the country is expected to capture a revenue of $40-45 billion.

According to a report by Nasscom and Booz and Co, the Indian ER&D services market has shown a compound annual growth rate (CAGR) of more than 45 per cent from $1.5 billion in 2004 to $8.3 billion in 2009.
Sectors such as telecom, semiconductors and automotive have been the biggest revenue generators for the industry with embedded software design contributing almost 40 per cent to the revenue base. An indicator of this growth is the increase in the number of offshore development centres (ODC) that provide dedicated ER&D services, which has gone up significantly since 2006.

Core engineering
“From the demand side, India is becoming an integral part of the value chain and Indian companies are developing many core engineering works for their global customers. So clearly, we see Indian companies are now moving from volume to value-based offerings and developing a lot more IPs now,” said Vikas Sehgal, Partner, Booz & Company, a management consultancy firm.

He said engineering and R&D services providers in India including the captives of global firms, who were primarily catering to the requirement of their global customers are now looking at India as a market in a big way. This is happening as a lot of spending is taking place in infrastructure development, energy, telecommunication and roads and building in the country.

“We are seeing companies like Infosys, HCL, Tata and Mahindra Satyam gearing up their sales force in a big way to focus on the local market,” he added. Honeywell Technology Solutions (HTS), the R&D and innovation division of technology giant Honeywell in India, is now developing products catering to local markets. HTS started focusing on developing products for its Indian customers almost 3-4 years ago.

Experienced professionals
Another key focus area in recent times has been hiring experienced professionals from the US, Europe and within India itself to boost ER&D product development capabilities. “Engineering requires a completely different mindset to address the market. It requires tremendous domain knowledge to service customers,” said BVR Mohan Reddy, chairman and managing director of Infotech Enterprises.
As a result, it is learnt that the total number of engineers with over 10 years of experience increased from 15 per cent in 2006 to 25 per cent in 2009 in India. Overall, India has a base of one million engineers, majority of whom are employed by large Indian conglomerates.
“From our perspective, there is a definite trend where we develop products for the Indian markets. This is not necessarily for Indian companies, but for our global customers who wants to develop products for Indian market,” said GH Rao, corporate vice president, Engineering and R&D services of HCL Technologies. HCL, for example, is developing base stations to be used in rural pockets in India for one of its global customers.

Global footprint
Indian service providers have also invested considerably in expanding their global footprint to service geographically distributed customers. They have established sales teams in North America and Europe and delivery centres in China and Japan for closer interaction with customers in the former and to co-ordinate efforts with existing manufacturing facilities in the latter. Within India, companies have begun to move to Tier-2 cities to take advantage of lower costs of operations and to access a large graduating pool of engineers.