Delay over appointment of one independent director to meet SEBI listing requirements
New Delhi: The government has pushed back the Rs 11,500 crore share sale of state-owned Oil and Natural Gas Corporation (ONGC) to the next fiscal and the public offering is now slated to open on 5th April, a senior official said today.
The follow-on public offer (FPO) was originally scheduled to open on 15th March, but has now been rescheduled. “The rescheduling is partly because of delay in appointment of independent directors on ONGC board to fulfil Sebi’s listing requirement,” he said.
As per the schedule now drawn, the FPO would open on 5th April and close on 8th April, reports PTI.
The government is selling its 5% stake or 427.77 million equity shares in the FPO that in today’s closing price of Rs269.85 on the Bombay Stock Exchange (BSE) will fetch over Rs11,540 crore. Post offer, the government stake in ONGC would come down to 69.14% from the current 74.14%.
Roadshows to promote the share offering in the nation’s biggest explorer and highest profit earning company, which were to be held in India and aboard from 2nd March to 9th March, have now been rescheduled to begin on 21st March.
The official said ONGC was ready with its red-herring prospectus (RHP) for the FPO but is awaiting appointment of at least one independent director on its board to meet market regulator SEBI’s listing requirement. ONGC has six functional directors, besides the chairman. It also has two government nominee directors taking the total strength of functional/promoter directors to nine. Against this, the company, at present, has four independent directors and needed five more to meet SEBI’s listing norm of having equal number of executive and non-executive directors.
However, since ONGC is without a permanent chairman and the vacancy of director for human resources has not been filled, the effective strength of full-time functional directors together with government-nominee directors is down to seven. To meet the SEBI norm, three independent directors need to be appointed, which given the timelines is not possible. So, the government plans to withdraw its two nominee directors, bringing down the strength of functional directors to five.
The file pertaining to appointment of one independent director is already with the cabinet committee on appointments and once that is cleared, ONGC would meet the SEBI norm, he said.
ONGC last month received the report of independent auditors who certified the company's oil and gas reserves, a mandatory requirement for explorers making public offers.
A group of ministers headed by finance minister Pranab Mukherjee would decide on a price band for the FPO on 1st April. Bank of America Corp, Nomura Holdings, HSBC Holdings Plc, JM Financial Services, Citigroup Inc and Morgan Stanley are managing the FPO.
The Indian market has rallied strongly over four days. It may pause now
The local market opened in the red as concerns about high crude prices led investors to book profits early in the day, halting the three-day gains. It remained in negative territory for most part of the morning. However, news of a possibility of a solution to the crisis in Libya lifted the indices above the neutral line and up to the day's high.
The market was range-bound till around 2pm, after which selling pressure pushed the benchmarks lower. Volatile trade continued in the late session leading to a close with marginal gains.
The Nifty, which had hit an almost eight-month closing low of 5,226 on 10 February 2011 (starting 16 June 2010), has almost retraced the latest fall from 5,600 on 18th February. In the current rally the indices have made higher highs and lower lows each day which is one indication of its strength.
Today's trading session was an extremely volatile one. The Sensex and Nifty opened gap down at 18,318 and 5,478, respectively. During the initial hours of trading, the market fell to its intra-day low of 18,254 and 5,468. However, in the morning session itself, both the indices hit intra-day highs of 18,604 and 5,571, reacting to the news that the Libyan situation is likely to reach a peaceful solution. A sharp sell-off, however, followed immediately and the market went into the red in the afternoon. Eventually, the Sensex closed 43 points up at 18,490, while the Nifty rose 14 points to 5,536. The advance-decline ratio on the National Stock Exchange was 809:898.
The market breadth on the Sensex and Nifty favoured the gainers with the Sensex closing with 16 advancing stocks and 14 in the red, while the Nifty had 27 gainers and 23 losers. Among the broader markets, the BSE Mid-cap index gained 0.33% and the BSE Small-cap index rose 0.21%.
In the sectoral space, the BSE Capital Goods index (up 2.35%), BSE Auto (up 1.86%) and BSE Consumer Durables (up 0.45%) were the top gainers. The major losers were BSE Metal (down 0.79%), BSE Oil & Gas (down 0.67%) and BSE TECk (down 0.66%).
Jaiprakash Associates (up 3.31%), BHEL (up 3.30%), Reliance Communications (up 3.27%), Larsen & Toubro (up 3.17%) and Tata Power (up 3.09%) were the key performers on the Sensex. Reliance Infrastructure (down 3.30%), Bharti Airtel (down 2.12%), Infosys Technologies (2.02%), Tata Steel (down 1.72%) and Sterlite Industries (down 1.70%) settled at the bottom of the list.
Food inflation declined by more than a percentage point to 10.39% for the week ended 19th February from 11.49% in the previous week and 21.62% in the corresponding period a year ago. The fall in food inflation has been attributed to a reduction in prices of onions, potatoes and pulses. However, prices of fruit, milk and vegetables as a group continued to remain high. The decline in the prices of certain food items will have a favourable impact on headline inflation in February.
Headline inflation, as measured by the wholesale price index (WPI), stood at 8.23% in January, much above the comfort level of 5%-6%.
Recovering from steep losses incurred in the previous session, markets in Asia-with the exception of the Shanghai Composite-closed with modest gains, as the recent market decline made stocks cheaper for investors. However, concerns about the turmoil in the Middle East and the fall-out on crude prices made market participants nervous. The South Korean benchmark rose following an increase in industrial output in January, mainly on exports. On the other hand, speculation over another round of rate-tightening pushed the Chinese market lower.
The Hang Seng advanced 0.32%, the Jakarta Composite rose 0.24%, the KLSE Composite gained 0.51%, the Nikkei 225 surged 0.89%, the Straits Times was up 0.33%, the Seoul Composite jumped 2.20% and the Taiwan Weighted ended 1.37% higher. On the other hand, the Shanghai Composite declined 0.34%.
Oil slipped for the first time in three days in New York after reports that Venezuela has offered to mediate a resolution to the crisis in Libya. Crude for April delivery slid as much as $1.86, the biggest decline since 24th February to $100.37 a barrel in electronic trading on the New York Mercantile Exchange. It settled at $102.23 a barrel on Wednesday, the highest since 26 September 2008.
Brent crude for April settlement fell as much as $3.26, or 2.8%, to $113.09 a barrel on the London-based ICE Futures Europe exchange, the biggest decline since 12th November.
Gold, which touched a record $1,440.32 an ounce on Wednesday in London, is expected to ease on news that Libya's Muammar Qaddafi and Venezuelan president Hugo Chavez have discussed steps to resolve the crisis.
Back home, foreign institutional investors were net buyers of stocks worth Rs418.51 crore on Tuesday. Similarly, domestic institutional investors were also net buyers, pumping in Rs95.64 crore in the equities segment that day.
Siemens Healthcare Diagnostics has received approval from the Gujarat High Court for its merger with Siemens (up 0.64%). The company had already received similar approval from the Bombay High Court on 28 January 2011.
Siemens is the Indian arm of Siemens AG, a German infrastructure solutions company, which recently announced an open offer to buy a 20% stake in Siemens at a price of Rs930 per share, translating into a total cost of Rs6,200 crore.
Media firm NDTV (up 2.47%) has completed the process to sell 49% stake for $40 million (about Rs180 crore) in its arm NDTV Lifestyle Holdings Pvt Ltd (NLHPL) to Astro All Asia Networks Plc. By a subscription of shares for $40 million, Astro All Asia Networks now has an effective indirect stake of 49% in NLHPL.
Last September, NDTV had announced it was entering into a strategic alliance with South Asia Creative Assets Ltd (SACAL), a subsidiary of Astro All Asia Networks Plc, for lifestyle channels in India.
Panacea Biotec (up 1.27%) has signed a non-exclusive marketing agreement with Uruguay's Laboratorios Clausen SA, allowing the Latin American firm to market the Indian company's organ transplant drug, Pangraf in Europe.
The deal which will begin from the first quarter of the next fiscal is expected to rake in about $12-15 million over the next two years. With this agreement, the Delhi-based firm will be able to explore further opportunities in new global markets.
After staying shut for several months, PayPal has decided to follow RBI guidelines for online payment services while Plimus has discontinued the direct purchase option for India-based vendors
Several online payment gateways like PayPal and Plimus, which have facilitated the sale of goods and services by Indian exporters, are choosing to shut their services rather than follow the guidelines by the Reserve Bank of India (RBI). However, this may have left several small services providers like software programmers in lurch, as they are unable to receive any payment for their work or services rendered to overseas customers. In addition, they might have to opt in for costlier options to receive payments from abroad.
The central bank has said in an email to Moneylife, "While Plimus has not given any specific reasons for removing the direct purchase option for purchases from India-based vendors, it is presumed that this is a direct consequence of the card companies imposing restrictions on foreign payment gateway service providers acquiring payment transactions for Indian merchants through foreign acquiring banks, in compliance with the laws of the country as well as their operating guidelines."
"These service providers acquired and settled all card transactions in foreign currency (irrespective of whether the card is issued in India or abroad). Further, the guidelines issued by the Reserve Bank of India on 16 November 2010 on the processing and settlement of export-related receipts facilitated by online payment gateways may also have resulted in many of such services being stopped," the RBI stated.
PayPal, which facilitated sale of goods and services by Indian exporters, also conducted money transfer business without any specific authorisation from the RBI. According to the Payment and Settlement Systems Act, 2007, money transfer is defined as a payment system and therefore requires the permission of the central bank. "This was brought to the notice of PayPal and they were advised to stop their money transfer business. Further, so far they have not applied to RBI for authorisation to do this business," the central bank said in the email.
Although PayPal provided money transfer service to and from India, neither the company nor its account holders paid any tax on the transactions. According to comments posted on techcrunch.com in February last year, many Indian account holders ask the payee to make the payment as a 'gift', rather than payment for services, to avoid PayPal fees. One such comment said: "A lot of business must be transacted in India via PayPal-business done with personal transactions. So a money-hungry Indian government is aggravated at some perceived revenue loss (taxes, customs, etc) and (has) put pressure on PayPal to stop the payments either directly or indirectly." (Read: PayPal services to and from India to remain suspended for months )
In January this year, PayPal's spokesperson Dickson Seow, wrote in a blog that beginning 1 March 2011, any balance in and all future payments into the PayPal account of an Indian may not be used to buy goods or services and must be transferred to a bank account in India within seven days. He regretted the inconvenience caused specially to global users, starting 1 March 2011, in their purchases from and payments to Indian merchants valued at over $500 per transaction. "For purchases or payments above this transaction value, you will have to use an alternative payment method," Mr Seow wrote.
The service models of some online payment gateway service providers (OPGSPs) have facilitated not only conclusion of cross-border export transactions from India, but also permitted exporters to retain the export proceeds abroad without repatriation, resulting in violation of provisions of the Foreign Exchange Management Act (FEMA), 1999. For transactions routed through online payment service providers, export proceeds are required to be repatriated within seven days of the receipt of confirmation from the importer. This condition is not applicable for export transactions under FEMA, where the proceeds need to be repatriated immediately once realised. In addition, there were concerns about these service providers holding export proceeds till repatriation. In view of the need to protect exporters and ensure that they do not unwittingly violate the provisions of FEMA, the RBI has restricted the transaction value of exports to $500 and mandated that the proceeds should be placed in a Nostro account of an Indian bank by the service providers.
A Nostro account is that account with a bank in a foreign country, usually in the currency of that country. Banks usually prefer to keep a Nostro account so that they do not have to make a currency conversion (which brings with it a foreign exchange risk) should an account holder make a deposit or a withdrawal in the foreign currency.
The RBI has also asked online payment service providers to open liaison offices in India, with the central bank's approval, within three months from the issue of the guidelines. (The guidelines were issued in November, so the deadline for opening liaison offices has passed.)
Some of the service providers may have found adherence to the RBI guidelines tough and costly and so they have decided to shut services for Indians. With fewer firms remaining in the fray, the user may now have to pay more for services.
(Read more: The payment processing industry-I, ;
The payment processing industry-II, The payment processing industry-III, )