Deloitte has recommended options like reforming Coal India and its nine subsidiaries through internal changes in structure, systems and roles
Consultancy firm Deloitte Touche Tohmatsu India Pvt Ltd, which was selected to study the restructuring of Coal India Ltd (CIL), has recommended options like reforming the coal producer and its nine subsidiaries through 'internal changes in structure, systems and roles.'
The consultancy firm also suggested to the coal ministry to set up independent mega regional companies, or to create independent entities in a phased manner, with the continuation of the holding company during the transition, according to a coal ministry document. (Read: Restructured Coal India may help increase production )
The coal ministry had appointed Deloitte on 16 September 2013, to study the need for restructuring Coal India. The mining company, which accounts for over 80% of domestic coal production, has repeatedly failed to achieve its output target.
Deloitte also made certain recommendations to be implemented throughout the organisation, irrespective of the restructuring exercise, according to the document.
These include greater use of private public participation in mine development and operations, and technology adaptation through joint ventures and collaborations with global companies, the document said.
Deloitte also suggested restructuring options for Central Mine Planning and Design Institute Ltd (CMPDIL), Coal India's consultancy unit.
Deloitte said CMPDIL should either become an autonomous body under the coal ministry or a Coal India subsidiary with a sector planning department.
CIL controls nine units, Eastern Coalfields Ltd (ECL) - Sanctoria, West Bengal, Bharat Coking Coal Ltd (BCCL), Dhanbad, Jharkhand, Central Coalfields Ltd (CCL), Ranchi, Jharkhand, South Eastern Coalfields Ltd (SECL), Bilaspur, Chhatisgarh, Western Coalfields Ltd (WCL), Nagpur, Maharashtra, Northern Coalfields Ltd (NCL) Singrauli, Madhya Pradesh and Mahanadi Coalfields Ltd (MCL), Sambalpur, Odisha.
Coal India produced 462 million tonnes of coal in 2013-14, missing its target of 482 million tonnes. In 2012-13, Coal India's output was 452.5 million tonnes, short of its target of 464 million tonnes.
Ajay Piramal-led Piramal Enterprises paid Rs1200 per share or Rs790 crore to buy 10% stake in Shriram City Union Finance, a unit of Shriram Group
Piramal Enterprises Ltd said it acquired 9.99% stake in Shriram City Union Finance Ltd for Rs790 crore. Shriram City Union Finance is the retail focused non-banking financial company (NBFC) of the Shriram Group.
The acquisition, by way of a preferential allotment of shares by Shriram City Union, was at a price of Rs1,200 per hare, taking the total capital paid at Rs790 crore, Piramal said in a regulatory filing.
"This capital infusion will support Shriram City Union's present business model and help further its growth plans over the next few years," Ajay Piramal, chief of Piramal Enterprises said.
In April, Piramal Enterprises had announced that it proposed to acquire 9.99% stake in NBFC firm Shriram City Union Finance for about Rs790 crore.
Shriram City Union Finance, a deposit-accepting NBFC specialises in retail finance, has assets under management (AUM) worth Rs15,800 crore. The lender offers multiple loan products to small business owners and for acquiring assets such as two wheelers, commercial vehicles, passenger vehicles, consumer durables, and homes.
Last year in May, Piramal also invested Rs1,636 crore to buy 9.9% equity in Shriram Transport Finance Company Ltd, one of the listed NBFCs of the Shriram Group.
Piramal Enterprises closed Thursday 1% higher at Rs709 on the BSE, while the 30-share benchmark ended the day marginally up at 25,019.
Income Tax department has alleged that NDTV concealed material facts from the High Court, including its move to reduce its capital, merger between two subsidiaries and mortgaging property worth Rs50 crore without the I-T dept's knowledge
Updated 11 June 2014
On 6 May 2014, The Delhi High Court judge, Justice Sanjeev Sachdeva issued a notice to the National Stock Exchange (NSE), BSE and market regulator Securities and Exchange Board of India (SEBI) following a submission by the Income-Tax (I-T) department in its Rs450 crore tax demand from New Delhi Television Ltd (NDTV). In its submission the I-T department has alleged that NDTV concealed material facts from the High Court, including a move to reduce capital to Rs351.96 crore from Rs507.70 crore. The tax department also objected to the merger between NDTV's two subsidiaries and the company's property mortgage worth Rs50 crore without the I-T department's knowledge.
The notice said, “...the Disputes Resolution Panel (DRP) -II has passed an order on 31 December 2013 and a demand has been raised by the Assessing Officer on 21 February 2014 of about Rs450 crore. It is noticed that the no objection/approval of BSE, NSE has been received on 4 September 2013 prior to the order of DRP-II. In my view, it would be in the interest of justice to issue notice to BSE, NSE and SEBI.” The notices are returnable on 24 September 2014.
In the submission dated 6 May 2014, the I-T department alleged that NDTV's move to reduce its capital was proposed with 'malafide intention of defrauding' the revenues of its legitimate tax dues.
NDTV had filed for a reduction of capital from Rs507.70 crore to Rs351.96 crore under sections 100 to 104 of the Companies Act, 1956. The I-T department alleges that the proposal did not disclose a crystallised tax demand of about Rs450 crore. "...reduction of share capital against accumulated losses and no payment made to the shareholders will result in erosion in the value of the investment held by the shareholders and ultimately may result in capital loss in the hands of shareholders," the I-T department alleged in its submission.
"...the facts and circumstances of the case necessitate piercing the corporate veil for ascertaining the real purpose underlying the reduction of share capital as the same has been actuated with an intention of defrauding the revenue and thwart the recovery of taxes," the tax department alleged in its submission before the Delhi HC.
On 7 February 2014, NDTV informed BSE that its board of directors has in-principle approved merger between NDTV Labs Ltd with NDTV Convergence Ltd, its subsidiaries.
Responding to this, the I-T department alleged, "NDTV Convergence owns brand NDTV.com, which is valued at about Rs1,000 crore, while NDTV Labs is a loss making company. The announcement of this proposed merger has also not been disclosed by the Petitioner (NDTV). It reinforces that the Petitioner (NDTV) company has not disclosed material facts before the Court while seeking approval of capital reduction. This establishes that the Applicant company (NDTV) has not approached the Court with clean hands."
Opposing the petition filed by NDTV in the HC, the I-T department said, "...the petitioner has sought to utilize its surplus funds lying in the share premium account towards an entirely non-essential activity, which is dressing up of its Balance Sheet by adjusting surplus funds against accumulated losses. Thus the petitioner's (NDTV) ability to pay off the crystallized demand would be adversely affected and prejudice the right of the I-T department to recover the legitimate dues due to the department and would be against the public interest."
"...it has come to the knowledge of the Objector (I-T dept) that during the pendency of the assessment proceedings, the Petitioner (NDTV) has mortgaged its properties 1) Plot No FC-10, Sector 16A, Noida and 2) Second Floor, W-17, Greater Kailash-I, New Delhi, worth Rs50 crore to Syndicate Bank. The transfer is void in view of provisions of Section 281 of the Income Tax Act."
The I-T department also accused the company of using 'pre-mediated colourable device' and 'round tripping' to evade taxes. "...the Applicant Company (NDTV) has used the colourable device of incorporating foreign subsidiaries, entering into sham transactions of issue of shares through these subsidiaries and introduction of money into its account books while subsequently buying back the shares at extremely low prices, which resulted in booking of losses by third parties and laundering of money in the case of petitioner company (NDTV). During the assessment proceedings for AY2009-10 in the case of petitioner company (NDTV), the corporate veil was lifted and the income was taxed in the petitioner company's (NDTV) hands and this action of the Assessing Officer was confirmed by the Dispute Resolution Panel (DRP), which also further enhanced the additions. The Income Tax Appellate Tribunal (ITAT) has also not granted stay to the petitioner company (NDTV) as requested by it. The Objector (I-T dept) further submits that if instead of using colourable device, the assessee company (NDTV) had introduced money into its account books, the same would have attracted tax under the provisions of I-T Act, 1961. Thus by way of the said pre-mediated colourable device, the tax has been evaded, which is clearly against the public interest. Further, there are serious allegations of 'round tripping' for the purpose of evasion of taxes, in the cases of the petitioner company (NDTV) for the assessment year 2010-11 and 2011-12, which are being investigated."
As reported by Moneylife in the past, financially beleaguered NDTV India pulled off a coup by getting deep-pocketed ‘strategic’ investors and top-flight private equity investors to abandon their stiff standards and pick up big chunks of its equity. In April 2011, DE Shaw group, a $20 billion investment and technology development company, picked up a 14.2% stake in NDTV providing an exit to Goldman Sachs, another blue-chip investor, which probably exited at a loss. After this, NDTV acquired a significant investor—Abhay Oswal, who owned nearly 15% of its equity but seems to have no presence on NDTV’s board of directors. Mr Oswal happens to be the father-in-law of Navin Jindal, an industrialist and Congress leader.
But this was not the only investment NDTV had swung. In March 2011, it sold a 49% stake in NDTV Lifestyle Holding Pvt Ltd, to Malaysia’s Astro All Asia Networks for $40 million. Here, too, Astro All Asia was stepping in after NDTV terminated a previous agreement with Scripps Networks to sell a higher stake.
As Moneylife reported, Prannoy Roy-led NDTV, was served a Rs450 crore demand notice by income tax (I-T) in February this year but did not inform the BSE or National Stock Exchange (NSE) about this, which is an alleged violation of listing norms.
UPDATE: This article has been updated on 11 June 2014.
For the sake brevity, we have removed references from this article to matters other than the I-T department's submission in the Delhi HC in the NDTV case.
After four days, on 10 June 2014, Ajay Mankotia, president for corporate planning & operations at NDTV, responded to our queries. Officials from BSE and NSE still have not responded to our mails sent on 5 June 2014. We would incorporate their views as and when we receive it.
Here is the response provided by NDTV...
I-T department claims that NDTV had filed for reduction of capital from Rs507.70 crore to Rs351.96 crore under sections 100 to 104 of the Companies Act, 1956.
NDTV's Response: The proposal for reduction of capital (Securities Premium account) under section 78 read with sections 100 to 104 of the Companies Act, 1956 (“the Act”) was duly approved by the board of directors of NDTV on 19 March 2013 pursuant to which all relevant approvals were sought by the Company. NDTV had, after receiving all requisite approvals, filed a petition for approval of the proposal before the Delhi High Court on 9 December 2013. The purpose of the above mentioned proposal is solely to give a true and fair view of the financial statements of the Company to its shareholders.
I-T department alleged that the proposal does not disclose a crystallized tax demand of approx. Rs450 crore.
NDTV's Response: As on the relevant date, on which the abovementioned reduction of capital had been approved by the board of directors of NDTV, there was no tax demand of approx. 450 Crore pertaining to the assessment year 2009-10 (Financial Year 2008-09). Further, even as on the date of filling of the petition before the Delhi High Court, such a liability did not exist. Therefore, the question of disclosing any such liability does not arise. In fact, even as of date, tax demand of Rs.450 crore alleged by the tax authorities is not enforceable against NDTV. The alleged demand has been challenged and is presently sub-judice before the appellate authorities, i.e., before the Income Tax Appellate Tribunal (“ITAT”). Further, the ITAT has already granted an interim stay on the alleged tax claim made by the authorities on payment of Rs. 5 crore only, which further substantiates that there is a strong prima facie case made out by NDTV that the tax claims are incorrect, illegal and devoid of any merit. Accordingly, there was no requirement for NDTV to disclose such a claim, which was neither enforceable nor binding and payable upon the Company, as of date. Therefore, any disclosure of the same, as alleged or otherwise, is not required.
I-T department claims that mortgage of Rs50 crore of property allegedly not disclosed.
NDTV's Response: The allegation that a charge of Rs50 crore was created and not disclosed by NDTV is an incorrect and baseless allegation. NDTV has throughout and always made all necessary legal compliances to relevant authorities.
The I-T department claims, information to the BSE on 7 February 2014 about merger of NDTV Labs with NDTV Convergence. NDTV convergence allegedly owns the brand NDTV.com, which is allegedly valued at Rs1,000 crore while NDTV Labs is a loss making Company. The proposed merger has allegedly not been disclosed by the Company although it is material information, in the application for reduction of capital.
NDTV's Response: The proposed merger of NDTV Labs Ltd with NDTV Convergence Ltd is only in the process of being initiated and at this moment remains a proposal. Any reference to the same as requiring disclosure to the Income Tax department is unwarranted and premature. Further, the merger of NDTV Labs with NDTV Convergence and Capital Reduction process of NDTV, are two separate processes and absolutely unrelated. It may be noted that the said merger does not impact the process of Capital Reduction of NDTV itself in any manner and, hence, is neither material information, nor required to be disclosed in the application for reduction of capital, filed by NDTV before the Delhi High Court.
Lastly, the Company will abide by the process specified for the merger, including a reference to the Income Tax Department, at the relevant stage, when we take a decision to go ahead with the proposal.
You may also want to read...
Why NDTV did not disclose Rs450 crore tax notice to exchanges
NDTV's company secretary & compliance officer resigns!
NDTV rewards management with ‘excess’ remuneration despite heavy losses
Allegations of NDTV’s Many Shenanigans
NDTV threatens to sue its shareholder Sanjay Dutt of Quantum Securities
Media: NDTV continues to find buyers