Reliance Industries to team up with EIH for developing hotels

RIL had last year picked up 14.8% stake in EIH that operates hotels and resorts under Oberoi and Trident brands to ward off a potential take over threat from ITC which currently holds 14.9% stake in EIH

Kolkata: Within a year of foraying into the high growth hospitality sector, Mukesh Ambani-led Reliance Industries (RIL) will team up with EIH to set up hotels in India at an estimated investment of Rs700 crore, reports PTI.

“In all probability we will develop the Bangalore and Goa projects in association with RIL,” EIH chairman and chief executive PRS Oberoi said on Tuesday on the sidelines of the company’s AGM here.

RIL had last year picked up 14.8% stake in EIH that operates hotels and resorts under Oberoi and Trident brands to ward off a potential take over threat from ITC which currently holds 14.9% stake in EIH.

The Securities and Exchange Board of India (SEBI) has however raised the threshold trigger for offers from 15% to 25%.

Addressing the company's shareholders, Mr Oberoi said: “I assure you ITC will not take over (EIH). We wanted a friendly investor and now Mr Ambani who is a friend of mine is an important and friendly shareholder.”

Reacting to the new takeover code, ITC chief YC Deveshwar at his company’s AGM last month had said the company was open to it (raising stake in EIH) if the opportunity was good.

Asked if RIL would raise its stake after the revision in the takeover code, Mr Oberoi replied, “We will be happy if they raise the stake.”

EIH is also open to offer a berth on its board to RIL but it was up to the latter to decide.

Providing details of the proposed joint hotel projects Mr Oberoi said the property in Bangalore would have 250 rooms, the one in Goa will have 100 rooms and both will be managed by EIH.

“We have land in both locations...We have 8.2 acres in Bangalore and 55 acres in Goa. Currently, each room costs Rs2 crore for Oberoi brand hotels without land,” Mr Oberoi said.

The combined investment for both properties is estimated to be around Rs700 crore.

Mr Oberoi neither provided details of the proposed shareholding of the two companies in the projects, nor did he comment on whether a separate company would be floated for the same.

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Govt permits QFIs to invest up to$13 billion in MFs

The aggregate investments by QFIs in equity schemes of the mutual funds under direct and indirect routes shall be subject to a ceiling of $10 billion. QFIs can invest up to an additional amount of $3 billion in the units of mutual fund schemes, which invest in infrastructure debt

New Delhi: The government on Tuesday allowed foreign investors, in its newly created Qualified Foreign Investor (QFI) category, to invest up to $13 billion in equity and debt schemes of mutual funds, a move aimed at enhancing depth in the capital market, reports PTI.

The announcement comes at a time when there are concerns over the flight of foreign capital and is expected to provide much needed succour to the markets.

“It has been decided that the aggregate investments by QFIs in equity schemes of the mutual funds under direct and indirect routes shall be subject to a ceiling of $10 billion,” a finance ministry statement said.

Similarly, QFIs can invest up to an additional amount of $3 billion in the units of mutual fund schemes, which invest in infrastructure debt of minimal residual maturity of five years in corporate bonds issued by infrastructure companies, it said.

QFI is an individual, group or association, resident in a foreign country that is compliant with the Financial Action Task Force (FATF) standard.

It is to be noted that QFIs do not include foreign institutional investors or sub-accounts as these are already permitted to invest in equity and debt markets in India.

This would enable QFIs to have direct access to the Indian mutual funds. It would widen the class of investors participating in the Indian capital market, help increase depth and reduce volatility in the market, it said.

Both Reserve Bank of India and Securities and Exchange Board of India (SEBI) issued enabling notifications in this regard.

Dividend payments on units held by QFIs would have to be directly remitted to the overseas accounts of the QFIs by the domestic mutual funds and dividend payments to QFIs would not be allowed as an eligible credit to the single rupee pool bank account, the RBI said in its notification.

SEBI in a separate notification said QFIs can buy units of equity or debt funds in the primary market, but cannot trade in the secondary market.

The capital market regulator also said that when the cumulative QFI investment reaches $8 billion in equity schemes, SEBI would auction the remaining limit to foreign investors who can then buy the units from funds of their choice.

A similar process will be followed when the investment in debt hits $2.5 billion.

The QFI limit for debt will be within the overall ceiling of $25 billion, including FIIs, set by the RBI in corporate debt issued by infrastructure companies.

According to the statement, the announcement incorporates the suggestion made by captains of India Inc during meeting with finance minister Pranab Mukherjee on 1st August to allow investment from QFIs up to $3 billion in for debt schemes in the infrastructure sector.

As the scheme has now been expanded to include debt schemes investing in infrastructure sector, it is expected to give a new momentum to the debt instruments in this priority sector, it said.

The QFI scheme, it said, will make it easier for the overseas investors to participate in the infrastructure sector projects in India, and therefore would provide an additional source of overseas long term debt funding.

The move follows the announcement of finance minister Pranab Mukherjee on the issue in the last Budget.

“Currently, only FIIs and the sub-account registered with SEBI and NRIs are allowed to invest in the mutual fund schemes.

To liberalise the portfolio investment route it has been decided to permit SEBI registered mutual funds to accept subscriptions from foreign investors who meet the KYC requirements for equity schemes,” Mr Mukherjee had said in the Budget speech.

“This would enable Indian mutual funds to have direct access to foreign investors and widen the class of foreign investors in India equity market,” the finance minister had said.

The average assets managed by the MF industry, consisting of 40 players, stood at Rs7.28 lakh crore as of July 2011.

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HC asks SEBI if it can accept MCX undertaking on equity holding

The suggestion was made by the high court while hearing a petition filed by MCX-SX against SEBI for not allowing it to start equity trading despite complying with all regulations. SEBI representatives responded by saying that they would seek instructions from the regulator’s board in this regard

Mumbai: The Bombay High Court on Tuesday asked the Securities and Exchange Board of India (SEBI) whether it would accept an undertaking from the promoters of MCX Stock Exchange (MCX-SX) that they would maintain their equity holding at 5% and not exercise the option of converting warrants into equity, reports PTI.

The suggestion was made by justice DY Chandruchud and justice Anoop Mohata, who were hearing a petition filed by MCX-SX against the market regulator for not allowing it to start equity trading despite complying with all regulations.

SEBI representatives responded by saying that they would seek instructions from the regulator’s board in this regard.

As per the SEBI guidelines, no promoter of a stock exchange can hold more than 5% equity stake.

In the above case, Financial Technologies (FTIL) and Multi Commodity Exchange (MCX), promoters of MCX-SX, had reduced their equity stake to 5% by evolving a method wherein they gave warrants to 18 PSU banks.

They assured the court that the warrants would not be converted into equity.

FTIL concluded its arguments yesterday, while MCX will give its submissions today. Thereafter, additional solicitor general Darius Khambata will argue on behalf of the SEBI.

In a petition filed on 19th July last year, Jignesh Shah-led MCX-SX had urged the high court to direct SEBI to grant clearance for commencing operations in the equity segment as it had complied with the guidelines issued by the regulator.

Three days prior to filing the petition, MCX-SX came out with a public notice expressing anguish at the delay in getting license and also at the misinformation campaign launched by rivals.

MCX-SX pleaded that although it had complied with all SEBI regulations and norms to commence operations, it was not given the permission to commence equity trading. It also alleged that the market watchdog was favouring a rival stock exchange.

In an advertisement earlier, MCX-SX, without naming the National Stock Exchange, had alleged that its rival was killing competition by offering free trading in currency derivatives, and thus making it difficult for it to get business and investors.

“There have been attempts by some elements at spreading misinformation to create doubts among our shareholders and to undermine our reputation and business for their benefit,” MCX had said.

In an apparent attack on SEBI, it had said the go-ahead for doing full-fledged business was elusive despite MCX-SX having taken all the necessary steps to make it compliant to the relevant regulations about trading in equities, equity derivatives, interest rate derivatives, mutual fund and debt market among other instruments.

Although MCX-SX became operational in October 2008, it is offering only currency derivatives products at present.

The stock exchange had said that one of the key conditions put on it was related to bringing down promoters’ stake and it did so with a ‘capital reduction-cum-arrangement’ scheme and that SEBI was informed about the same, way back in December 2009.

While the scheme was already approved by the board and shareholders, it also got the nod of the Bombay High Court in March 2010 and the same was also notified to SEBI on 7 April 2010, MCX-SX said.

But the exchange has got ‘no response from SEBI in this regard’ as of July 2010, it had noted in the public announcement.

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