The company holds 350 acres of land in its portfolio, and is adopting a strategy of selling land parcels outright rather than develop them
Emerald Acres Pvt Ltd, a land bank company owned by Madhur Bajaj, vice-chairman of Bajaj Auto, is planning to enter the market in the next four months and sell the land that it owns.
Currently, the company holds 350 acres of land in its portfolio and plans to add more land after selling its current holdings. Emerald Acres has no connection with the Bajaj Group. The company has hired proerpty consultant Cushman & Wakefield and RBSA, a valuation firm for evaluating two different land parcels. They will come up with the prices shortly.
"We will come into the market in the next three-four months. We took time to enter the market because we were making sure that all the required permissions are in place before we sell the land. Developers can start work right from day one," said Madhur Bajaj, chairman, Emerald Acres.
Initially, the company is planning to sell a 70-acre plot at Murbad near Thane in the next four months. It owns land in the stretch along the Mumbai-Pune Highway and its largest holding-122 acres-is located at Lonavala, a hill station near Pune. But the company has no plans to venture into real-estate development and would rather sell parcels of land outright to developers.
"Cushman & Wakefield is evaluating the Murbad land and RBSA is evaluating the Lonavala land. As soon as they are done with evaluations we would be able to fix the price of these two pieces of land," said Mr Bajaj.
Bajaj's Pune holding is so large that it can be used to build an entire township. The land is spread across more than 100 acres. It has to be seen at what price the company sells the land parcels. Recently, Mumbai witnessed a land deal at the Wadala Truck Terminal (WTT) located in central Mumbai. The Lodha Group won the bid at Rs5,723 crore while MMRDA had set a reserve price of Rs50,000 per sq metre and was seeking a minimum price of Rs1,980 crore for the property.
Many developers have made their money buying land cheap, holding on to it for a few years and building and selling homes on these properties subsequently, after prices have tripled or quadrupled. Currently, developers are cautious over buying land as sales have slowed down in the industry.
However, developers have slowly started buying land after last year's slowdown in the industry. After the slowdown in 2008, DLF, Unitech Ltd and Omaxe Ltd had decided to follow a conservative policy if expandint their land bank, after having spent vast sums of money in the previous two years and bidding for parcels of land that have fetched record prices at land auctions.
The planned new US law regulating banking and financial services firms puts severe restraints on their functioning and profitability. Since Indian software companies derive most of their revenues from this segment, will it impact them?
The Obama-led US administration is up in arms against the unbridled and reckless growth of US financial services giants. The banking and financial service sector in the US is in the midst of a regulatory turmoil that will see its wings being clipped to some extent if the proposed reforms become law. Already, the US House of Representatives has passed a package of sweeping reforms to the financial system and it now awaits the approval of the US Senate, which will decide the matter on 12th July.
Would the headwinds in the US regulatory climate have any bearing on Indian software companies? It is common knowledge that the fortunes of software or IT-ITeS companies in India are intricately intertwined with those of companies and financial institutions in the US. For instance, India's largest and most reputed software services company Infosys derives more than 90% of its revenues from the US. Revenue growth from North America for Infosys is correlated with US GDP growth by 98%, reports research firm BRICS Research. And almost 35-40% of their revenues are derived from the banking, financial services & insurance (BFSI) segment.
There is a concern that, with the anticipated clamp-down on the freedom of financial institutions, it would lead to a shrinkage in the size of the BFSI segment in the US and also Europe. This would also force such institutions to cut down on costs to stay competitive. This could have a bearing on the business of Indian IT services companies.
Saumil Parekh, managing director of PIMCO recently remarked, "The way things are progressing in the US and Europe, we believe financial sectors will be forced to become smaller as a percentage of their respective economies."
PIMCO, in its Secular Outlook had pointed out that the rising trends of re-regulation and de-globalisation are slowly manifesting themselves into 'state capitalism'. They had stated that balance sheet deleveraging-in combination with structural imbalances-is forcing markets to take that back seat.
Prakash Diwan, head-institutional business, Networth Stock Broking, believes that earnings won't get dramatically impacted, but the earnings profile will undergo a change. "While the immediate impact of the austerity drive triggered by the US administration could potentially inhibit the growth of the BFSI segment, it may not necessarily and significantly reduce the kind of business opportunities for IT vendors within the operations of the BFSI segment."
Mr Diwan feels that as companies in this area tighten their belts and reduce expansionary spends, there would be a constant emergence of other opportunities for IT service providers. He further believes that this potential contraction in business could be offset by the Obama administration's ambitious drive to improve its service delivery within the healthcare value chain. "So what the BFSI takes, the healthcare segment could give, in the broader sense," said Mr Diwan, adding that he expects the more dextrous players to switch to the newer opportunities within the emerging healthcare segment, amongst other opportunities.
A BRICS Research report states that these regulatory changes would impact earnings growth of US companies and force them to reduce cost to maintain profitability. This presents an opportunity for Indian IT companies by leveraging offshore cost advantages. Commenting on the impact of the Healthcare Bill on US pharma companies, the BRICS report says, "We believe the pressure to cut costs and show profitability growth by way of aggressive outsourcing of IT functions will only go up. There may be additional demand for IT services as the Act will bring 32 million more Americans under healthcare products and services."
Rohit Anand, IT sector analyst at Pioneer Investcorp Ltd, agrees that these reforms will be coupled with some opportunities as well. "Implementing these reforms will require some sort of investment in IT infrastructure from US companies. If their business is impacted, then the resulting cost pressure may bring about an increase in outsourcing requirement."
Another IT sector analyst, Pralay Das of Elara Capital said, "I don't believe this shrinkage will come about overnight; but if it happens, it will definitely put more pressure on costs, translating into a need to save on costs and therefore more outsourcing to India."
Charitable organisations collect a substantial proportion of funds through donors who prefer not to reveal their identities—the government’s ban is eliminating their sources for finance
Non-governmental Organisations (NGOs) have been crying out against the government's diktat on taxing anonymous donations for some time now. The finance ministry had clamped down on anonymous donations to (non-religious) charitable organisations to prevent money laundering. However, a number of NGOs say that because of a few isolated incidents, many charitable entities have been affected.
Noshir Dadarwala, chief executive, Centre for Advancement of Philanthropy, has sent a petition to the Parliament of India Committee on Petitions (dated 29 June 2010), asking for the curbs on anonymous donations to be repealed.
Section 115BBC was introduced for the first time in the Finance Act, 2006, to tax anonymous donations to charitable organisations at the maximum marginal rate of 30%. Subsequently, a degree of relief was granted under the Finance (No 2) Act, 2009, that such anonymous donations aggregating up to five years of the total income of an organisation or a sum of Rs1,00,000-whichever is higher-will not be taxed.
"We are of the view that Section 115BBC, even after the amendment made by Finance (No 2) Act 2009, is a deterrent for genuine charitable organisations to mobilise funds for welfare and developmental work from the general public or ordinary citizens who are motivated to give for altruistic and not money laundering reasons," said the petition sent by Mr Dadarwala.
Mr Dadarwala, along with other NGOs, has met members of the Parliament of India Committee on Petitions in Mumbai to discuss the scrapping of taxes on anonymous donations.
NGOs argue that a number of leading charitable organisations mobilise their funds by placing their donations in collection boxes at shopping malls, airports, hotels and other public places where a number of ordinary citizens feel motivated to contribute money for a good charitable cause, be it for senior citizens, the
visually-impaired, impoverished street children or cancer patients.
"We are however of the view that a very large number of genuine charitable organisations and NGOs raise funds through collection boxes and people who put money into these boxes mainly comprise children and ordinary citizens of this country who may have heard about 'black money' but don't have any and contribute to charitable institutions only out of a genuine charitable impulse," added Mr Dadarwala.
Schools and colleges also raise money for various charitable causes with students going from door to door or requesting ordinary citizens in the streets to put money in collection boxes. According to Mr Dadarwala, NGOs which cater to orphans, cancer patients, and the mentally disabled are the ones who are most affected, as these organisations get nearly 30% of their annual donations from charity boxes.
"Leading NGOs collect lakhs of rupees annually through such collection boxes. Now, thanks to Section 115BBC of the Income-Tax Act, several NGOS have been forced to pull out these collection boxes," he added.
According to Shailesh Mishra, the founder of Silver Lining, an NGO which looks after senior citizens larger NGOs are affected by the provisions as they receive more anonymous donations, while smaller NGOs may not be affected.
The change of rules regarding anonymous donations had come about in 2006, when the then finance minister P Chidambaram made anonymous donations taxable by framing a new law under Section 115BBC of the I-T Act. At that time, he had said that anonymous donations to wholly charitable institutions needed to be taxed at the highest marginal rate, whereas donations to partly religious and partly charitable institutions or trusts could be taxed only if the donation is specifically for an educational or medical purpose. However, donations to wholly religious institutions and religious trusts were not to be taxed.
"Since the advent (of the new provisions) to the I-T Act in 2006, we have raised very limited funds through anonymous donations," said Kreeanne Rabadi, regional director, Child Rights and You (CRY).
Before the regulation was passed, charitable institutions and organisations were exempt from paying any tax if they claimed in their I-T returns that they had received secret donations. According to some, this allowed people to donate black money to a trust and then take grants against it, thereby making their black money legitimate.
In January 2008, various NGOs-which included HelpAge India, AccountAid, Oxfam Trust and the National Foundation for India-had sent a letter to Mr Chidambaram, Montek Singh Ahluwalia (deputy chairman, Planning Commission) and Indira Bhargava (chairperson, Central Board of Direct Taxes).
In these letters, these NGOs made the recommendation that the I-T authorities can get details of the anonymous donor from his banker and anonymous donations should not be made taxable as there are a lot of individuals and organisations who would like to remain anonymous while giving for charity.
"The government is trying to curtail crime, but it is a huge problem for people who want to remain anonymous," Mr Mishra said.