Friday, 26 February 2016

Simplicity of tax breaks for long-term gains from shares


Long-term capital gains on sale of listed shares has now been exempt from tax for more than 10 years, since it was implemented in October 2004. The exemption applies in cases where the Securities Transaction Tax (STT) has been paid, and therefore effectively applies to all transactions of sale of listed shares on a recognised stock exchange. In recent years, the scope of the exemption has been effectively extended to a couple of more types of transactions, not by amending the provision governing the exemption, but by bringing the transactions within the net of STT.
One such type of transaction is the public offer for sale of shares. A public offer could be of two types (or a combination of these two)—one, an offer where the company issues shares to the public by allotting new shares, and second, an offer made by the existing shareholders of the company (which may be promoters, venture capital funds, private equity funds, or others) to the public of existing shares held by them in the company.
Till June 2012, such an offer for sale by existing shareholders to the public did not attract STT, and the transfer of shares by the existing shareholders to the public gave rise to taxable capital gains. Such transactions of sale of unlisted equity shares under an offer for sale to the public in an initial public offer, where the shares are subsequently listed on a recognised stock exchange, have been made subject to STT with effect from 1 July 2012. Therefore, such transfer by the existing shareholders is now exempt from long-term capital gains tax, if the shares are long-term capital assets on the date of sale. This exemption is available even though the shares which are being transferred are unlisted at the time of sale, since they get listed only a few days after the allotment under the public offer is completed.
Interestingly, since the shares being offered are unlisted shares at the time of sale, the holding period in order to qualify as long-term capital assets would be a period of more than 36 months, and not 12 months as applicable to listed shares. Therefore, if the shares that are being transferred by the existing shareholders have not been held by them for more than 36 months, the long-term capital gains arising on such transfer would not be exempt, but would be subjected to a concessional rate of tax applicable to short-term capital gains at 15%. It is only if these shares have been held for more than 36 months that the gains would be long-term capital gains, which would be exempt from tax.
Another interesting aspect is that STT applies only to shares being offered under an initial public offer, as defined under the relevant regulations of the Securities and Exchange Board of India (Sebi). It would not apply to a follow-on public offer, which is different from an initial public offer (IPO). An IPO is the first public offer made by a company to list its shares. A subsequent public offer made by the company to offer more shares to the public is a follow-on public offer. It is possible that the existing shareholders, such as promoters or funds, may offer some of their shares even in a follow-on public offer, in which case, though the shares that are being transferred are listed shares, the gains arising on the transfer of such shares would not qualify for exemption of long-term capital gains, but would be subjected to tax at the concessional tax rate of 10% without cost indexation.
The second type of transaction, which now qualifies to be long-term capital gains for the exemption with effect from July 2015, is the tender offer for acquisition of shares under takeovers, buybacks and delisting. Earlier, such an offer could be effected by the acquiring shareholder or company by making an offer to other shareholders to purchase their shares through an open offer under which the shareholders tendered their shares to the acquirer or company, and received the sale proceeds directly from the acquirer or company.
Sebi has amended the rules for such offers from 1 July 2015, whereby the offers can be made through the stock exchange mechanism as an alternative to the existing procedure. Instead of the direct tendering of shares, the shares have to be offered through a broker, who issues a contract note for sale to the tendering shareholder after the acceptance of the offer is completed by the offeror or company. STT is, therefore, charged on such transaction. Since the sale transaction is subject to STT, the shareholder gets the benefit of long-term capital gains exemption or concessional rate of tax of 15% for short-term capital gains, as the case may be.
The scheme of charging of STT and simultaneous exemption or concessional taxation of capital gains has certainly benefited most public shareholders, given the simplicity of the exemption. It has freed shareholders from the hassle of keeping detailed and accurate records and documents regarding date of acquisition and cost of shares. One hopes that the rumours of likely extension of the period of holding of listed shares to qualify as long-term capital assets to 36 months do not become a reality, as that will increase the problems of record-keeping for shareholders, though it may serve the government’s purpose of ensuring that only long-term investors get the benefit, and not all investors.

Sandip Ginodia , Director
We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .


Tax treatment of Unlisted Securities



At present, listed shares enjoy concessional tax treatment both in terms of holding period and the tax rate, while they, unlike other asset classes, are subjected to the STT.
The tax on capital gains on equity shares held in a company listed on a recognised stock exchange and equity-oriented mutual funds is zero if the stock is held for more than 12 months, while gains made in a shorter period would attract 15% tax.
However, in the case of unlisted shares, the tax rate is 20% (with indexation) if held for more than 36 months (considered as long-term) and 30% for domestic companies and 40% for foreign companies for holdings less than three years.
“The need of the hour is encourage investments into companies (whether listed or unlisted) to meet the capital needs of the aspirational programmes of the government. A contrarian approach would be to bring in parity between listed and unlisted companies and reduce the (long-term period) for unlisted companies from 36 to 12 months, at par with the term for listed securities,” said Girish Vanvari, partner and head of tax, KPMG in India.
The rationale for the move to narrow the tax waiver window for listed securities is that capital gains tax is levied for all other types of assets held for comparable periods. Currently, the period of holding for all asset classes (except listed securities) is three years to qualify as a long-term capital asset. Thus, if shares are held in an unlisted company, or a residential house or a commercial office space, if the asset is held for more than three years, then the seller is entitled to treat such asset as a long-term capital asset. Accordingly, the tax is charged at a lower rate.
In the case of listed shares, however, an exception has been carved out with a lower holding period for the waiver.
Despite the reduction in STT over the years, it constitutes a large percentage (next only to brokerage fee) of the total cost of trading.
Sandip Ginodia , Director
We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .

Bharti Telecom plans to increase stake in Bharti Airtel


Bharti Telecom Ltd is planning to raise its stake in Bharti Airtel to over 50 per cent through open market purchases, according to reports.
Report says that the company intended to acquire stake from Indian Continental Investment Ltd (ICIL) that owns 6.65% stake in Bharti Airtel. 
Bharti Airtel Ltd ended at Rs. 324, up by Rs. 3 or 0.93% from its previous closing of Rs. 321 on the BSE.
The scrip opened at Rs. 322 and touched a high and low of Rs. 325.3 and Rs. 318.6 respectively. A total of 2492777(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs. 129515.76 crore.
The BSE group 'A' stock of face value Rs. 5 touched a 52 week high of Rs. 452.45 on 21-Jul-2015 and a 52 week low of Rs. 282.3 on 29-Jan-2016. Last one week high and low of the scrip stood at Rs. 334.8 and Rs. 316.15 respectively.
The promoters holding in the company stood at 65.62 % while Institutions and Non-Institutions held 25.4 % and 8.93 %.

Sandip Ginodia , Director
We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .

Wednesday, 24 February 2016

Otis Elevator signs agreement with Mantri Developers

Otis Elevator Company (India) has finalised an agreement with Mantri Developers to provide more than 1,000 elevator and escalator units for the builder's residential, commercial, retail and villa projects over the next few years. 

Otis India is a unit of United Technologies Corp. It has the largest elevator and escalator service network in the country, covering about 300 cities and towns with its 80-odd centres. 

"Mantri is a well-respected, future-focused developer and we are delighted with this agreement," said Sebi Joseph, president, Otis India. "At Otis, we find that working with the customer allows us to offer solutions that positively impact their business." 



In a move to strengthen its presence in the country, Otis India last year announced the expansion of its Bengaluru manufacturing facility, where most units for the Mantri projects will be made. The Bengaluru factory supports Otis focus on local innovation and continued investment in manufacturing and research, as part of its commitment to "Make in India." 


"We have done business with Otis India before and are pleased to strengthen our business relationship," said Sushil Mantri, chairman and managing director, Mantri Developers. 

Otis is the world's largest manufacturer and maintainer of people-moving products, including elevators, escalators and moving walkways. Founded more than 160 years ago by the inventor of the safety elevator, Otis offers products and services through its companies in more than 200 countries and territories, and maintains more than 1.9 million elevators and escalators worldwide 



Sandip Ginodia , Director
We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .

Competition Commission of India approves Reliance Communications-Sistema Shyam merger

The Competition Commission of India (CCI) has approved the proposed merger of Sistema Shyam Ltd's operations into Reliance Communications, paving way for the first major consolidation in the intensely competitive sector since 2009.

ET had first reported in May last year, that RCom was in talks with SSTL for a possible takeover in an all-stock deal, worth around Rs 4,500-5,000 crore that could give the latter's shareholders a stake of around 10 per cent in the merged entity.

Prior to the approval, the Bombay High Court has admitted an application seeking a merger between RCom and SSTL, the telecom unit of Russia's Sistema JSFC, after which the the court had asked RCom to convene a meeting of shareholders on March 8.

The deal will give India's fourth-largest carrier access to airwaves in the 850 Mhz band which can be used for 4G services that it plans to start later this year. Moreover, it will be able to extend the validity of its licenses by 12 years in eight high revenue generating circles like Delhi, Gujarat, Karnataka and Tamil Nadu. On the other hand, holders in SSTL, which has been struggling to grow its CDMAbased telecom business, will get to be a part of a stronger company. 

The deal will give India's fourth-largest carrier access to airwaves in the 850 Mhz band which can be used for 4G services that it plans to start later this year. Moreover, it will be able to extend the validity of its licenses by 12 years in eight high revenue generating circles like Delhi, Gujarat, Karnataka and Tamil Nadu. On the other hand, holders in SSTL, which has been struggling to grow its CDMAbased telecom business, will get to be a part of a stronger company. 
Sandip Ginodia , Director 

We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .

Saturday, 13 February 2016

CSB rising NPA's


Thrissur-based Catholic Syrian Bank (CSB), though not a listed bank, reported a net loss of Rs 53 crore in fiscal 2014-15 on a total income of Rs 1,672 crore and capital adequacy ratio of 11 per cent. In the first half of 2015-16, CSB reported a net loss of Rs 41 crore on total income of Rs 814 crore.
 It seems that the bad loans of Kerala-based banks have increased significantly over the years.
According to latest data, listed banks based in Kerala have total non-performing assets (NPAs) worth Rs 6,024.14 crore. As at December 31, 2014, the value of bad loans was Rs 5,649.27 crore, compared to Rs 5,364 crore recorded on December 31, 2013.

Sandip Ginodia , Director 

We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .



MSTC provides auction support for Orissa Mines



Seven steel majors including a central PSU have participated in the e-auction process to bag Odisha’s Ghorhaburhani-Sagasahi iron ore block with a total reserve of around 100 million tonne, officials said on Thursday.
The auction platform is provided by MSTC Ltd while SBI Capital Markets Ltd (SBI Caps), a fully owned subsidiary of State Bank of India, is the transaction adviser for conducting mineral e-auction. The transaction adviser will assist the state government in fixing floor price for the auction.

The state government has already formed a committee under the development commissioner for the smooth conduct of mines auction in the state. 


Long term Capital Gain time frame for Unlisted Shares

Industry trackers say that the issue arose after representations were made that investment in unlisted companies be treated on a par with those in listed space. By that the contention was that there would be no tax on investments in unlisted companies if the investment is held for a year.

"The industry wants the government to clarify the law for unlisted shares and explicitly reduce the holding period for unlisted shares from 3 years to 1 year," said Rajesh H Gandhi, partner, tax, Deloitte Haskins & Sells."Given that market participants are acutely sensitive to tax policy changes, any review of the policy should be calibrated, backed by a broader medium to longterm policy objective and should follow extensive stakeholder consultation," said Sameer Gupta, partner and leader, financial services, tax and regulatory.

Currently India has a double taxation avoidance treaty (DTAA) with Mauritius and Singapore, which effectively means investors coming through the route are exempted from most taxes. Though this too may be nearing to an end due to the changing regulatory environment in India and globally.


Sandip Ginodia , Director 

We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .

Tuesday, 9 February 2016

Top Award for Tamilnad mercantile Bank

The Tamilnad Mercantile Bank has been adjudged as the best performing bank under “Atal Pension Yojana Scheme” in the private sector banks category. M Gunasekaran, General Manager, Tamilnad Mercantile Bank Ltd, in a release said Union Minister of State for Finance Jayant Sinha presented the award to Tamilnad Mercantile Bank Managing Director & CEO HS Upendra Kamath at function held at New Delhi on Thursday. 

Sandip Ginodia , Director 

We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .


Market Rout compels 6 firms to delay IPO



Concerned over the recent volatility in the domestic stock markets, six companies have reportedly put off their initial public offering (IPO) plans.
The companies that are looking for stabilisation in markets to launch their IPOs include L&T Infotech, Parag Milkfoods, Catholic Syrian Bank, AGS Transact, Thyrocare Technologies and Bharat Matrimony.

The last month's sell-off in the domestic stock markets weighed heavily on the stock prices of companies that had hit the markets during late last year, with some of them falling by around 20% in a month compared to about 6% decline in the benchmark indices.
Some firms might even contemplate trimming their issue sizes either by cutting the price band or by reducing the number of shares to be issues in public offers, sources told The Financial Express.


Infrastructure firm Dilip Buildcon has already reduced its IPO size to Rs 430 crore from Rs 650 crore as planned earlier, the company said in a refiled draft prospectus to the Sebi.
"Primary markets are complimentary to secondary markets and hence any corrections in stock markets would have impact on the IPOs," Prithvi Haldea, chairman, Prime database told the daily.
However, two recent IPOs of Precision Camshafts and TeamLease Services witnessed positive response from the subscribers despite the prevailing uncertainty in the markets. The two companies plan to raise nearly Rs 400 crore each.
Additionally, Quick Heal Technologies, a Pune-based anti-virus provider, is set to issue its IPO next week. The company plans to raise just over Rs 400 crore through the offering.
Last year, 21 companies got listed on the Bombay Stock Exchange (BSE). Of those, 12 companies managed to gain anywhere between 1.3% and 102% after their listings, while eight have declined by roughly 1.76% to 35.28%.


Sandip Ginodia , Director 

We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .

High Court admits RCOM-SSTL merger application

The Bombay High Court has admitted an application seeking a merger between Reliance Communications (RCom) and Sistema Shyam Teleservices, the telecom unit of Russia's Sistema JSFC. The court has asked RCom to convene a meeting of shareholders on March 8, the Anil Ambani-run company said in a release on Monday. RCom plans the merger with Sistema, which operates the only CDMA network in the country, as the first of a series of consolidation exercises. 

The transaction will add high data users to RCom's client base and give the company sufficient airwaves to move its CDMA customers and free up existing airwaves for trading. RCom recently paid the Department of Telecommunications Rs 5,384 crore to liberalise airwaves it is currently using for CDMA so that it can trade them with Reliance Jio Infocomm. 


The airwaves can be used for 4G LTE technology more effectively than those operators have at the moment, because they are in the 800MHz band, which travels farther than higher frequencies. 

RCom had previously announced plans to merge SSTL with itself with the latter's shareholders getting a 10% stake in the combined entity. After this transaction, RCom plans to sell its telecom tower business, lower debt and thereafter merge with Aircel. 


Sandip Ginodia , Director 

We deal in over 60 unlisted companies with 15 years of experience .
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .