SEBI eases P-Note regulations

Unregulated entities already been issued these can continue use, says regulator

The Securities and Exchange Board of India (Sebi) has said unregulated entities which have already been issued participatory notes (P-Notes) can continue to make use of these, despite the new regulations banning use of the instrument.

P-Notes or offshore derivative instruments (ODIs) are used by foreign investors wishing to invest in the Indian markets without registering with Sebi. The regulator had restricted their use to well-regulated entities under the new rules for foreign portfolio investors (FPIs).

“ODI positions under FII (foreign Institutional Investor) regulations can continue under the FPI regime,” according to a document dealing with ‘Frequently asked questions’ about the FPI regime on the Sebi website. “Also the subscribers who have subscribed to ODIs under FII Regulations can continue to subscribe to ODIs under the FPI regime,” it added.

Suresh V Swamy, executive director, tax & regulatory services, at PricewaterhouseCoopers, said: “There was some ambiguity on the status of existing P-note holders. This lends clarity to their position, grandfathering them into the new regulations, a positive for existing holders of P-Notes.”

Even existing entities which did not have positions through P-Notes, can continue to be issued these instruments, so long as they were registered as clients. Changes in investment managers would also not have an impact on their ability to make use of P-Notes, according to the document.

“ODI issuers may continue to issue ODIs to those subscribers even if there is a change in their investment manager, provided the incoming investment manager is a regulated entity,” it said.

The FPI regulations had limited the use of P-Notes by entities which were not well-regulated. “Those unregulated broad-based funds that are classified as Category-II FPIs by virtue of their investment manager being appropriately regulated shall not issue, subscribe to or otherwise deal in offshore derivative instruments, directly or indirectly,” went the notification on the new FPI regulations .

The new FPI regime replaced the earlier FII regulations and classifies foreign investors into three categories. Category-I deals with entities backed by foreign governments. Category-II is for entities regulated by Sebi’s counterparts in foreign jurisdications, such as their mutual funds. Those outside these two are in Category-III.

Foreign investors held Rs 2.07 lakh crore through the P-Note route, according to Sebi data for March.

Source: http://www.business-standard.com/article/markets/sebi-eases-p-note-regulations-114043001398_1.html

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Real estate majors' stocks crack under political pressure

DLF, Unitech shares drop 8% each

DLF Ltd

• On BSE 140.25-13.30 (-8.66%)
• On NSE 140.15-13.60 (-8.85%)

 Shares of New Delhi-based realty majors DLF and Unitech came under heavy selling pressure on Wednesday, falling eight per cent each, the most in three months.

Market players said the sell-off could have been sparked by apprehensions of a Bharatiya Janata Party (BJP) -led alliance likely forming the next government.

While Robert Vadra, son-in-law of Congress President Sonia Gandhi, has been under a lens for his alleged land deals with DLF, Unitech has faced action from the Central Bureau of Investigation during the second term of the United Progressive Alliance government. Also, Unitech Managing Director Sanjay Chandra was in judicial custody over alleged arbitrary spectrum allocation to his company's telecom arm.

"It's logical to believe a BJP regime will be tough on Vadra, as well as DLF," said an analyst who did not wish to be named.

Unitech has exited its telecom business and is now focusing on real estate. Analysts say, uncertainty over which party might form a government and what its stand could be on the telecom scam probe might have caused a decline in the Unitech stock price.

The DLF shares ended 8.66 per cent lower at Rs 140.25, while Unitech slipped 8.32 per cent to Rs 15.86. The two stocks pulled BSE's realty index five per cent down on Wednesday, even as the benchmark Sensex recouped most of its losses to end 0.2 per cent lower than the previous close.

Both DLF and Unitech refused to comment. BJP leaders, however, have earlier said on record that they do not believe in being vindictive.

Analysts said profit-taking after a sharp run up in recent months could also have led to a fall. In the past two months, realty stocks have outperformed the broader market by a wide margin. Since March, the BSE realty index rose 22.5 per cent until Tuesday, against a 6.4 per cent rise in the Sensex.

"Going ahead, one needs to be cautious. A rational view suggests one should take an investment call in these stocks after election results, rather than taking a plunge now. The markets are already factoring in a positive poll outcome to some extent," said Vaibhav Sanghavi, director (equities), Ambit Investment Advisors.

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SEBI may act on PwC's MCX audit

Regulator likely to write to BSE, corporate affairs ministry on alleged violations of listing norms

The Securities and Exchange Board of India (Sebi) will soon direct the BSE to independently check for violations of listing agreement norms at Multi Commodity Exchange (MCX), following PricewaterhouseCoopers’ adverse findings, said sources.

The capital market watchdog is also likely to approach the Union ministry of corporate affairs to probe allegations of breach of various clauses in the Companies Act, they said.

Separately, the commodity markets regulator, the Forward Markets Commission, on Wednesday sent the PwC audit report to MCA and the Enforcement Directorate (ED). The ED is going to examine allegation of money laundering at MCX, sources said.

The special audit report by PwC, a summary of which was made public on Tuesday, has highlighted serious corporate governance lapses and non-compliance with regulations. For instance, the audit revealed MCX had only disclosed names of 235 related party entities, while PwC’s background checks revealed at least 670 more known or related parties. (PWC AUDIT REPORT POINTS TO SEVERAL ADVERSE FINDINGS AGAINST MCX OPERATIONS)

Also, the PwC audit summary noted payouts to trading members or related parities worth millions “without adequate substantiation”.

BSE will have to verify whether any of the PwC findings breach any listing agreement clauses. The latter agreement is a contract between a stock exchange and a listed company. It comprises a little more than 50 clauses — on corporate governance and information-based disclosures such as filing of results, shareholding data and related party deals — which listed companies have to follow.

Failure to disclose related party business dealings is a violation of Clause 32 of the listing agreement.

MCX is the country’s only listed commodity bourse. It is listed solely on the BSE; it also trades on the National Stock Exchange, under the permitted to trade category.

At present, ensuring compliance with the listing agreement has to be done by the exchanges. Typically, they order suspension of trading in companies for repeated violations of the agreement. Violators also face a penalty of up to Rs 25 crore under the Securities Contracts Regulation Act. “Sebi will not like to undermine the authority of BSE and will want the exchange to verify facts before taking any action on the alleged violations,” said a person in the know.

Corporate governance experts said the role of independent directors and the audit committee at MCX can be questioned, given the adverse findings in the PwC audit.

Shares of MCX on Wednesday ended at Rs 533.55, down Rs 40.55, or 7.1 per cent.

Source: http://www.business-standard.com/article/markets/sebi-may-act-on-pwc-s-mcx-audit-114043001185_1.html

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At 2.5%, March infrastructure sector growth slowest in a decade

Core sector growth slowed to 2.5 per cent in March from 7 per cent in the same month last year as the output of fertiliser, crude oil and natural gas declined.

The eight core industries — coal, crude oil, petroleum refinery products, natural gas, fertiliser, steel, cement and electricity — have a combined weight of 37.90 per cent in the Index of Industrial Production (IIP).

In January and February, their output grew 1.6 per cent and 4.5 per cent, respectively.

For 2013-14, core sector growth slowed to 2.6 per cent from 6.5 per cent in 2012-13, official data released by the Commerce and Industry Ministry showed.

This is perhaps the lowest annual output growth for these industries in a little over a decade, industry observers said.

In March, crude oil, natural gas and fertiliser output declined 1.6 per cent, 9.3 per cent and 6.1 per cent, respectively.

While cement output remained unchanged in March, electricity output increased to 5.4 per cent (3.5 per cent).

Growth in the production of coal, petroleum refinery products and steel slowed to 0.7 per cent (1.7 per cent), 2.8 per cent (24.3 per cent) and 5.4 per cent (11.6 per cent), respectively.

Source: http://www.thehindubusinessline.com/todays-paper/at-25-march-infrastructure-sector-growth-slowest-in-a-decade/article5964347.ece

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