The company’s announcement in the media last week follows a fresh order by the Reserve Bank of India, asking it to bring down its aggregate liability to zero by 30 June 2015 and repay its depositors on maturity
A recent announcement by Sahara India Financial Corporation Limited (SIFCL) that it would repay its total liabilities by December 2011, four years ahead of the deadline, has come under the scanner of the Reserve Bank of India (RBI). According to sources, the apex bank is examining the company's claim and the legitimacy of the announcement that was published in the media last week.
The advertisement has set off a discussion on whether the RBI should formulate rules about disclosures in advertisements issued by regulated entities. For instance, this particular Sahara advertisement does not have the logo of the company and the signatory has been identified only by the designation.
Its claims of deposits of Rs73,000 crore till June 2011, conveys the impression that it will repay this stupendous volume four years ahead of the due date and this conveys a false and misleading impression of the financial strength of the company.
A Mumbai-based chartered accountant and social activist thinks that regulators like the RBI and the Securities and Exchange Board of India (SEBI) should have strict rules about the format for such financial advertisements. "There should be more transparency such as the name and the signature of company officials, mention whether the entity is a company as per the Companies Act or whether it is an NBFC or a residual NBFC," he explained.
It is reliably learnt that the company's total liability is around Rs5,000 crore. But even this may not be a cash repayment, and may well be a transfer of deposits to another entity.
Sources, requesting anonymity, said that at this juncture the RBI is examining the company's claim about repaying its total liabilities. The central bank is also looking into the trail of the deposits as well as the authenticity of the print advertisement.
In 2008, the RBI had directed SIFCL, which is a residual non-banking finance company, not to accept any deposits and to repay the depositors on maturity, after it found that the company was not complying with the rules and regulations that are laid down for this activity.
The company, however, challenged the directive of the RBI and the matter went up to the Supreme Court, which asked the apex bank to provide SIFCL a personal hearing and make a fresh order.
Subsequently, the RBI issued a fresh directive to SIFCL, asking the company to bring down its aggregate liability to depositors to zero by 30 June 2015 and repay its depositors on maturity.
SIFCL asked depositors (through the advertisement) to contact its service centres to receive repayments.
An e-mail message to SIFCL requesting details about the repayment procedure, its call centre and the total liability that has to be repaid, was not answered till the time of publishing this report.
In June this year, SEBI also restrained two other entities of the Sahara group, Sahara Commodity Services Corporation (earlier known as Sahara India Real Estate Corporation) and Sahara Housing Investment Corporation, from accessing the securities market to raise funds till payments are made to the satisfaction of the market regulator. It directed these entities to return the money collected from millions of investors through an instrument named Optionally Fully Convertible Debentures (OFCD), citing violation of regulatory norms. The company has appealed against the SEBI order which is being heard before the Securities Appellate Tribunal.
Sudarshan Venu is a graduate with honors at the Jerome Fisher Program in Management and Technology at the University of Pennsylvania, US
Sundaram-Clayton Ltd (SCL) said that it has appointed Sudarshan Venu, son of Venu Srinivasan, managing director of SCL and chairman of TVS Motor Company Ltd (TVSM), as an additional director.
Sudarshan Venu is a graduate with honors at the Jerome Fisher Program in Management and Technology at the University of Pennsylvania, US. He also obtained a Bachelor of Science Degree in mechanical engineering from the school of engineering and bachelor of science in economics, both from the Wharton School, University of Pennsylvania. He recently completed his Masters in International Technology Management from the Warwick Manufacturing Group, an academic department at the University of Warwick in the United Kingdom.
While pursuing his Masters, he underwent on-hands training in Die Casting Division of SCL and in TVS Motor Company Ltd.
ONGC, which had appointed SBI Caps to do an independent valuation of Cairn India, has interpreted the valuation report to conclude that Cairn India is worth much less than the Rs355 a share price that London-listed mining group Vedanta is paying
New Delhi: State-owned exploration major Oil and Natural Gas Corporation (ONGC) is unlikely to exercise its pre-emption rights to acquire Cairn India as it finds the reduced price of Rs355 a share that Vedanta Resources is paying for the company still too high, reports PTI.
ONGC had appointed SBI Caps to do an independent valuation of Cairn India and a few weeks back, it got the draft valuation report, sources privy to the development said.
The report outlines Cairn India's valuation under different scenarios of production and crude oil prices. ONGC, they said, has interpreted the valuation report to conclude that Cairn India is worth much less than the Rs355 a share price that London-listed mining group Vedanta is paying.
This is despite the fact that UK's Cairn Energy, which is selling most of its 52.11% stake in its Indian unit to Vedanta, has agreed to share royalty and pay oil cess on the company's lucrative Rajasthan block, making Cairn India an attractive acquisition target for the state explorer.
Cairn agreeing to make the royalty that the state-owned firm pays on its 30% share as well as Cairn India's 70% share of production from the Rajasthan field cost-recoverable will help ONGC get back two-thirds of the payout it shouldered on its partner's behalf earlier, which had made the Rajasthan fields a losing proposition for it.
Also, Cairn has agreed to absolve ONGC from the payment of a Rs2,500 per tonne cess on its 70% share of production from the Rajasthan block, which will add to ONGC's profitability.
Sources said despite these two positives and also Vedanta lowering the acquisition price from Rs405 per share when the $9.6 billion deal was announced in August last year to Rs355 apiece, ONGC does not find Cairn India attractive enough to acquire.
ONGC, they said, is likely to take the SBI Caps report and its interpretation of it to the company board on 27th September. Once the board-which also includes officials of the oil ministry that are now eager to see the Cairn-Vedanta deal conclude soon-decides to let the pre-emption right lapse, ONGC will formally give a no-objection to the deal.
ONGC, which holds a stake in eight out of the 10 oil and gas properties Cairn India has in the country, holds pre-emption, or the right of first refusal, over its partner's participating interest in the fields.
Sources said Cairn Energy has already informed ONGC that it is accepting the government conditions on royalty and cess and will make its Indian unit agree to it through a shareholders' vote by 14th September.
Thereafter, it will formally write to ONGC for a no-objection certificate.
Till recently, Cairn Energy had denied the existence of any ONGC pre-emption rights over the deal and that its deal to sell a 40% stake in Cairn India triggered such rights.
However, the government approval for the $9 billion deal was subject to the condition that Cairn obtained a no-objection certificate from ONGC.
Cairn Energy managing director and CFO Jann Brown had on 16th August written to ONGC, asking it to begin the process of deciding on its consent so that the NOC could be granted by 21st September.
At present, Cairn India does not pay any royalty on its 70% interest in the Rajasthan fields. Royalty, as per the contract, is paid by ONGC, which got a 30% stake in the 6.5 billion barrel field for free.
However, the royalty like other project costs and taxes is recoverable from revenues earned from the sale of oil.
Sources said ONGC had paid about Rs2,000 crore in royalty on its share and that of Cairn India up to 31 March 2011.
Once royalty is made cost recoverable, two-thirds of it will come back to ONGC.