Govt proposes relaxing FDI rules governing JVs

New Delhi: Proposing a major relaxation in a 12-year foreign direct investment (FDI) rule, the industry ministry today made a case for allowing foreign investors to bring in fresh money and technology to India irrespective of the impact on local partners in any existing joint venture (JV), reports PTI.

Under the present dispensation, a foreign player who entered India before 12 January, 2005 has to take government approval and "demonstrate" that fresh investment in the same field would not affect interest of his domestic joint venture partner.

The FDI rules proposed to be relaxed was not applicable to the joint ventures entered after 12 January, 2005. Thus, the changes would help foreign investors who entered JVs after this date.

Suggesting abolition of this rule, the Department of Industrial Policy and Promotion (DIPP) said in a discussion paper, "There is a need to examine whether such conditionality continues to be relevant in the present day context." It has invited comments from the stakeholders till 15th October.

It said that in an era of globalisation, where a number of free trade agreements are in place, the domestic industry has to increasingly become more competitive.

"Competition today is not only between domestic players inter-se but also between international and domestic players.

If an industry is discouraged from being set up in India, it could be set up in a neighbouring country, with whom a trade agreement exists or is being negotiated," it said.

In the last one year, India has entered into market-opening trade pacts with ASEAN and South Korea. Besides, it is also a leading member of SAARC pact comprising nations of Indian sub-continent.

The discussion paper also mooted that whether the government policy should intervene in the commercial sphere and override contractual terms agreed to between the parties, given the need to promote healthy competition and ensure sustained long-term economic growth.

"It can be argued that the government should not be concerned about commercial issues between two business partners," it said.

The concept paper said that the existing measure discriminates between the foreign investors who had shown confidence in India, by investing in the country prior to 2005, and those who invested later.

"The condition may be restricting a number of investors, who may not be able to reach agreement with their Indian partners on their future investment plans, thereby restricting the inflow of foreign capital and technology into the country," it said.

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Govt limits number of commodity bourses at eight

New Delhi: The government has decided to cap the number of national commodity exchanges at eight to foster sustained growth of the commodity futures market, reports PTI.

"The consumer affairs ministry in consultation with the sector regulator Forward Markets Commission (FMC) has decided to allow only eight commodity exchanges to function at the national level," a senior official told PTI.

At present, four national exchanges - MCX, NCDEX, NMCE and ICEX are operating at national level, while the rest two - Ahmedabad Commodity Exchange (ACE) and the Universal Commodity Exchange (UCE) are yet to be launched.

Recently, Gontermann Peipers (India), promoted by Pramod Mittal of the Ispat group, has placed an application with FMC for setting up a national commodity exchange.

The consumer affairs ministry frames policies for commodity futures market, while the Forward Markets Commission (FMC) regulates the functioning of four national and 19 regional exchanges.

"If UCE and Gontermann get permission from FMC, then there would be a total of seven national commodity exchanges in the country," the official said, noting that the number of national commodity bourses are higher as compared to three stock exchanges in the securities market.

Though there is no such cap for stock exchanges in the equity market, the regulator Securities and Exchange Board of India (SEBI) has permitted only NSE, BSE and MCX-SX to function at the national level, the official said.

Meanwhile, an FMC official said: "It was felt that the mushrooming of national commodity exchanges would not be a good sign as quality growth was more necessary than just having a mere number of exchanges."

So, it was necessary to put a cap as there was rush of applications to set up a national commodity exchanges in the last few months, the official said.

The official further said that the ministry has also decided to set up a committee to review the performance of the existing national commodity exchanges.

According to FMC, the turnover of 23 commodity exchanges was a record Rs 70 lakh crore in 2009 and is expected to rise further by 15% to Rs 80 lakh crore this year-end.
 

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PE deals zoom seven-fold to over $1 billion in Aug

New Delhi: Private equity firms have invested over $1 billion in Indian companies in August, more than 7% from the year-ago period, with investors increased preference towards telecom and financial services sector, reports PTI.

"Total private equity (PE) investment in India grew 7.5 times to $1.3 billion as against $179 million in August 2009," according to data compiled by deal space research firm VCCEdge.

While comparing from July, deal value in August was up 60% due to some large deals during the month.

"August 2009 had seen the lowest monthly deal value since the beginning of 2009, with the exception of March '09 which was at $136 million. Since then an upward trend has been witnessed with deal value peaking during August 2010, suggesting a recovery from last year's slowdown," the report noted.

Upturn was also witnessed in terms of the number of deals recorded in the last month. In August this year 35 PE transactions were posted, against 24 deals registered in same period in 2009.

As many as 35 companies saw PE investment pouring during the period, while PE firms made an exit from 18 other companies.

PE firms generally exit from their investment through buyback of shares by promoters, open market transactions, merger and acquisitions and public offers.

During the month, industrial, telecom and finance were the most targeted sectors for investment with deals valued $309 million, $304 million and $298 million, respectively.

Two of the largest investments in the month were made by Macquarie-SBI Infrastructure Fund. It invested $304 million in Viom Networks and $200 million in GMR Airports Holding.

Besides, other large deals include the $290 million investment made by Blackstone Advisors in Moser Baer Projects.

At the same time, there were 18 exits worth $249 million in August 2010. These included private equity firms - Kubera Cross Border Fund Ltd, Walden International, Global Internet Ventures - $100 million exit from Venture Infotek Global and Citi Venture that exited its investment in Emaar MGF Land Ltd.
 

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