Economy
Cabinet approves setting up of Coal Regulatory Authority
The regulator will be empowered to specify the principles and methodology for determination of price of raw coal and washed coal and any other by-product generated during washing
 
The government on Thursday approved setting up of Coal Regulatory Authority which will be empowered to specify methodology for determining coal prices.
 
“The Cabinet yesterday gave its approval to the draft Bill on the Coal Regulatory Authority,” a source said. The draft Bill was prepared based on recommendations of various committees and expert groups. A Group of Ministers (GoM) had earlier approved the draft Bill which seeks to set up an independent regulatory authority for the coal sector to address contentious issues like supply and quality.
 
Settling the issue of fixing coal prices, the GoM had earlier decided that the proposed regulator will not determine fuel rates, a job that will continue to be vested with producers.
 
The regulator will, however, be empowered to specify the principles and methodology for determination of price of raw coal and washed coal and any other by-product generated during washing. The regulator will also regulate methods for testing for declaration of grades or quality of coal, specify procedure for automatic coal sampling and adjudicate upon disputes between the parties, monitor closure of mines and approval of mining plans among others.
 
The coal ministry had earlier expressed confidence that the draft Bill on Coal Regulatory Authority will be approved by the Cabinet soon.

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Immigration Bill to hit global competitiveness of US cos: USIBC
The immigration reforms bill, which has been passed by the US Senate, would have an adverse impact on the global competitiveness of US companies,  USIBC president Ron Somers said
 
The landmark immigration reforms bill, which has been passed by the US Senate, would have an adverse impact on the global competitiveness of US companies and badly hit Indian IT companies, according to a top American business advocacy organization.
 
These concerns arise mainly because the bill retains several harsh provisions, particularly those related to the H-1B visas, which allow US employers to temporarily employ foreign workers in specialty occupations.
 
“The Bill unfairly targets American companies trying to remain globally competitive by reducing their ability to contract with global IT service providers and restricting their access to the international expertise they need,” US-India Business Council (USIBC) president Ron Somers said.
 
“Such restrictions could stifle US innovation, slow local job creation and force companies to move jobs overseas,” Somers warned after the Senate passed the bill, which was hailed by president Barack Obama as bringing one closer to fixing the broken immigration system.
 
Early this month, USIBC had announced the establishment of the Coalition for Jobs & Growth to help ensure that American businesses of all types have access to the international expertise they need to continue to drive forward economic growth and job creation.
 
It hired the services of major law firm Patton Boggs for lobbying at the scale of the US-India civil nuclear advocacy effort, augmented by a public relations campaign spearheaded by APCO Worldwide.
 
“The USIBC Coalition prefers H R 2131, the SKILLS Visa Act, that was passed out of committee in the House today, which does not follow the problematic approach of the Senate Bill, which will hamper American companies’ competitiveness,” said Somers.
 
Specifically, the Border Security, Economic Opportunity, and Immigration Modernization Act (S 744) imposes new and onerous restrictions and higher fees on H-1B and L1 visa programs on the international IT services sector and would create an uneven playing field that will harm US clients, including the majority of Fortune 500 companies.
 
Members of the Coalition for Jobs and Growth (CJG) are now working with the Obama administration and Congress to eliminate narrow protectionist provisions in the current legislation that will hamper economic growth and impede American competitiveness by creating unnecessary bureaucracy.
 

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Buy-back procedures: Protect the investor for subsequent delisting
During the buy-back period, the promoters will not be allowed to do any transaction on or off the market, as such a move may influence the price
 
Early this year, SEBI (the Securities and Exchange Board of India), brought out a discussion paper in order to ensure that the buy-back norms are not misused but, in fact, help investor to be rewarded when companies have adequate cash reserves.
 
The new rules announced by SEBI now restricts the time-frame of the buy-back period to six months (as against 12 months hitherto); the companies now cannot raise fresh capital for a period of one year and minimum buy-back should be at least 50% of the offer amount, and if they fail to achieve this, they would forfeit 2.5% of the offer.
 
At the same time, during this buy-back period, the promoters are not allowed to do any transaction on or off the market, as such a move may influence the price.
 
In the past, such buy-back announcements were used as a tool to manipulate the sagging market price of the shares when the same was kept open for one a year and yet the companies did not actually indulge in buying up the shares.  The new regulation will put an end to this.
 
Has the buy-back schemes really worked well? Hard to say and it is dependent on the corporate intentions of the management particularly when companies take this route before de-listing their shares from the market. Let’s take a look at this new angle, which is not covered in the regulation.
 
In the past, there have been a number of companies that went through the procedure of buy-back and got their shares delisted from the stock exchange. Shareholders who failed to take advantage of the scheme are still receiving dividends, but have no other right!  They have no means to know the fair market price for their shares as these are not traded and companies do not respond on such matters.
 
However, some brokers keep getting in touch the shareholders, who failed to encash during the buy-back period, and ask them to make a bid; they want you to make an offer on the phone, or offer at a price, with the attitude, “take it or leave it”!
 
There may be many such companies whose shares are no longer traded but yet can be ‘sold’ through some brokers. One can name such companies as Bharat Hotels, Syngenta, etc, for a start, and the shareholder is at the mercy of the management through such brokers.
 
The very idea of fixing the buy-out price, based on the market price as recorded for the past few months may be one means of establishing the “fair price”, but what about the book value, regularity of dividends, bonus given, profitability and so on?  The whole issue of fixing a “fair price” and the procedure set to reach this figure is debateable.
 
Anyway, take the case of Crompton Greaves, whose board plans to meet on 28th June to decide on the buy-back proposal. According to the statistical data available, after the news hit the market, the share price jumped by about 10% to reach Rs84.35 after having touched a year’s low of Rs71.70 against a peak of Rs 141.70 last year in October. The company has a wide range of products and its past record has been satisfactory.
 
In the case of Hindustan Unilever, shareholders have the option of selling their holdings in the open market at about Rs588, against the offer price of Rs600 given by Unilever Plc, which has a war-chest of Rs29,000 crore to be able to increase its holdings to 75% from the current 52.5%, and take the advantage of not paying capital gains tax, if they had held the shares for more than one year. But short-term holders, if they took the route to buy, when this bid began a couple of months ago, would have to pay the tax!
 
Also SEBI should now follow up this regulation with proposals relating to de-listing as a sequel to buy-back, and ensure that the investors are protected suitably.  
 
Readers of Moneylife who have cases involving buy-backs, delisting and their inability to dispose off their holdings may write full details so that some common means can be adopted to redress the grievance.
 
Finally, when buy-back proposals are approved by SEBI, why not they stipulate that ‘x’ percentage of the shares held by the promoters also be ‘bought’ back under the same scheme by the company, which is awash with funds?
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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COMMENTS

arun adalja

3 years ago

author is not sure what he want to say?buy back and delisting both are different issue.company buy back while listing and they announce some price limit for buyback and ask brokers to buy certain quantity everyday and with daily price limit.this is nothing but eyewash.they give higher price but they never buy that price,

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