Govt considering setting up I-T office in UAE

Dubai: Plans to set up an income tax office in the UAE are in the pipeline, reports PTI quoting India’s ambassador to the UAE, MK Lokesh.

Mr Lokesh confirmed to PTI that further to a decision taken by the government of India, efforts are being made in this direction and such a centre's scope and functions are being determined.

“It is still at a preliminary stage and might take some time. However, the suggestion did not go from the embassy but was taken in New Delhi,” he said.

Reports in the local media earlier said that New Delhi wants to set up an Income Tax office in Abu Dhabi to keep an eye on investments made by wealthy Indians in the UAE, which is among seven countries chosen for the project.

According to reports, similar offices will operate in the US, the UK, Germany, France, the Netherlands, Japan and Cyprus, while two already exist in Mauritius and Singapore.

The ambassador said that once the proposal materialises, several approvals will have to be taken including those of the local authorities.

Mr Lokesh also said that such proposals are unrelated to recent debates in India regarding the taxation of expatriates.

He pointed out that a taxation agreement between the two countries already exists.


HC quashes govt notice asking Tata to supply power to R-Infra

Mumbai: The Bombay High Court on Tuesday set aside a Maharashtra government directive that asked Tata Power to supply 360MW power to Anil Ambani led Reliance Infrastructure (R-Infra), reports PTI.

A division bench of justices Dhananjay Chandrachud and Anoop Mohata held that such a directive was “ultravires” to the provisions of the Electricity Act.

The state government had issued a directive last year to state load dispatch centre to continue to supply power to R-Infra from Tata Power.

Last year, the company said it would stop selling 360MW power to R-Infra following which the Ambani-owned power supply company sought the state’s intervention.

The government issued the directive saying that if Tata discontinues power supply to R-Infra, the suburbs of Mumbai would face acute shortage or be burdened with higher tariffs as it would have to buy electricity from outside the state.

Hence, the government said it was stepping in and asking Tata Power to maintain status quo in the matter of power supply to R-Infra.

Tata Power moved the high court challenging the directive. It argued that in keeping with the provisions of the Electricity Act, the government cannot issue such a directive compelling it to supply power to a particular distributor.

The high court had last year refused to grant interim relief to Tata Power against the directive to supply power to R-Infra. It had said that the dispute could be settled by Maharashtra Electricity Regulatory Commission.


Q3FY11 analysis: Big boys TCS, Axis, L&T record good growth

Yet another strong quarter from TCS leads to upgrades; Axis overcomes asset quality and margin concerns; order booking weakness a major worry for L&T

Tata Consultancy Services (TCS)

The dollar revenue for the country’s top software services exporter, was exactly in line with estimates at $2.14 billion, up 7% quarter on quarter (q-o-q). Revenue in rupees was about middle of the expectations spectrum at Rs9,663 crore, up by 4% q-o-q.

Business in North America grew by 7%, in the UK by 12%, and in the Asia Pacific by 19% q-o-q. The Banking, financial services and insurance (BFSI) segment grew by 8% and retail by 7%. Volume growth was strong at almost 6% and pricing showed some improvement.

TCS has outperformed Infosys Technologies—the country’s No.2 software exporter—for the seventh consecutive quarter on year-on-year EBITDA and net profit growth.

EBITDA margins improved to above 30%, partly aided by bad debt reversals; the margins gap between TCS and Infosys is now only about 300 basis points against a peak of 830 basis points two years ago. Margins have risen as a result of better sales productivity and control of manpower costs.

Net profit was much higher than expected at Rs2,330 crore, up almost 11% q-o-q.

Other positives include broad-based growth (except in telecom), a pick-up in clients’ discretionary spend and a positive commentary on the deal pipeline and pricing outlook.

The fact that TCS hired over 20,200 people (over 7,700 lateral hires) in the quarter (after hiring nearly 19,300 people in the previous quarter) suggests that it is preparing for a big year ahead. Attrition has come down from 20% in the second quarter to 17%.

Axis Bank

Net interest income beat the higher end of the expectations spectrum. Provisions were almost 16% lower y-o-y.

The CASA (current account savings account) ratio improved q-o-q but it was still lower y-o-y. Profit also beat the higher end of the expectation spectrum.

Asset quality improvement and margin expansion were the highlights of the quarter. Net interest margin (NIM) was at 3.8%, up 13 basis points on the quarter, against expectations of flat to slightly lower margins.

Fresh slippage ratio (as a percentage of previous years’ loans) moderated to 1.6% (compared to 2.2% in the past two quarters). Loan book growth was at 46%, again slightly higher than expectations. Over the next few quarters, loan growth could moderate as the bank grapples with a high base.

Fee income growth at 21% was good. This came mainly from the large corporate segment (up 36%) and retail banking (up 21%). But fee income from business banking, capital markets and agri/SME banking continues to be under pressure. A slight concern is that in recent quarters the gap between fee growth and loan growth has been expanding, with fee growth lagging loan growth.

Treasury profits were at Rs130 crore, up from Rs110 crore in the second quarter, and came in mainly from fixed income portfolio.

Larsen & Toubro (L&T)

Revenues came in much higher than expected for the country’s biggest engineering company. Net profit was also above the higher end of expectations. However, margins were much lower than expected due to a huge increase in the cost of goods and services.

Raw material costs went up 73% on year, subcontracting charges were up 39% and construction material charges were up 32%. Margins were also impacted as for some orders execution had started but had not entered the ‘margin recognition phase’. Most brokers expect margins to pick up at least slightly in the next quarter.

Order booking was a major disappointment, down 25% y-o-y and 35% q-o-q. Even so, L&T has maintained its full-year inflow guidance of 25% with caveats of slippages in FY12. The company said that a lot of the expected orders are likely to be booked only in March 2012. L&T said various scams, split up of large projects, politics, land acquisition issues and delay in allocation of coal blocks were some of the reasons for order bookings getting delayed.

The order backlog is up 26% on year and flat on the quarter. The current order backlog is probably enough to provide revenue visibility for a couple of years.

Infrastructure and power are likely to have contributed a larger chunk of L&T’s segmental revenue in the third quarter compared to the first half, believes institutional brokerage Kotak. The share of oil and gas would also have increased substantially.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife.)


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