Regulations
SEBI settles charges against power sector venture capital fund

In its consent order, dated 1 November 2012, SEBI said its High Powered Advisory Committee has accepted the consent terms involving a payment of settlement charges of Rs37.5 lakh


Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has agreed to settle charges against power sector private equity fund “Small is Beautiful” for alleged violation of venture capital investment rules, after payment of Rs37.5 lakh by the fund as settlement charges, reports PTI.

 

“Small is Beautiful” was established in 2004 as the country’s first private equity fund focussed on investments in power generation assets and is registered with SEBI as a venture capital fund.

 

SEBI had initiated an enquiry into alleged violation of its investment guidelines for venture capital entities by the Rs231-crore fund, which had garnered contributions from as many 21 public sector banks, financial institutions and insurance companies including Life Insurance Corporation of India (LIC).

 

However, the fund sought settlement of these proceedings through SEBI’s consent mechanism, wherein a case can be settled after payment of certain charges.

 

In its consent order, dated 1 November 2012, SEBI said its High Powered Advisory Committee has accepted the consent terms involving a payment of settlement charges of Rs37.5 lakh, which was later agreed upon by the regulator’s panel of whole-time members as well.

 

Accordingly, the “enquiry proceedings initiated against the appellant (Small is Beautiful) for the alleged violation” of SEBI’s venture capital regulations has been settled upon the payment of these charges, the SEBI order said.

 

The alleged violation by the private equity fund was brought to SEBI’s notice by the Income Tax Department.

 

The fund had a total committed corpus of Rs231 crore, out of which Rs226 crore was contributed by state-run banks, insurers and other financial institutions and the balance Rs5 crore by its investment manager KSK Energy Ventures.

 

Other contributors included IDBI Bank, Power Finance Corp, REC, Andhra Bank, SIDBI, PNB, Bank of Baroda, Oriental Bank of Commerce, Syndicate Bank, UCO Bank and Union Bank of India.

 

In its income tax returns for assessment year 2007-08, the fund had sought exemptions amounting to Rs11.84 crore. During assessment proceedings, the additional commissioner of Income Tax, Hyderabad observed the fund had violated SEBI's investment guidelines for venture capital funds.

 

Under these regulations, a venture capital fund is restricted from making investment in its associated companies.

 

However, it was noted that, during the period of 2005-07, the fund had made investment in its three associated companies, Arasmeta Captive Power Company, Sai Regency Power Corporation and KVK Energy Infrastructure.

 

The matter was brought to the notice of SEBI by the tax department in March 2011, after which the market regulator initiated enquiry proceedings by the issuance of show cause notice on 9 August 2011 into the affairs and dealings of the fund for alleged violation of these regulations.

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COMMENTS

Anil Agashe

4 years ago

What due diligence was done by banks and insurance companies who are major contributors. SEBI must fine all these entities as well seperately.

Buying Gold? Moneylife Foundation offers the options

In its 135th seminar, Debashis Basu, trustee Moneylife Foundation, gave the participants a detailed explanation—supported by historical facts—whether gold is good for investment and what are the safe options for an average saver

Gold is unlike any other financial asset, explained Debashis Basu, Moneylife Foundation trustee and editor of Moneylife magazine. Come Dhanteras the demand for gold as investment and jewellery goes up. But should gold be a significant part of your investment? In nominal terms the price of gold has more than tripled in the last 20 years, this makes it a very attractive asset class. “It has risen from $250 to $1,750 in 10 years. But that is not the reason to jump into it without analysing what causes a rally in gold,” cautioned Mr Basu.
 

Mr Basu gave the participants a detailed view of the history of gold, establishment of gold standard, explained why gold is such a unique commodity and then further explained how gold was used as money. But if you want to buy gold for large returns, be careful what you wish for. It does not pay interest or dividend. Besides, in inflation-adjusted terms gold has not been a great performer. When interest rates are higher than inflation, gold is not preferred because it pays no interest. So, the moment there is a reasonably safe asset class that seems to offer a stream of income—and does seem strong enough to withstand economic risks—money will flow into that asset, deserting gold. Investors embrace gold as an asset when they have no asset to turn to—a period of negative real interest rates. In inflation-adjusted terms gold has not been a great performer.
 

To read about other seminars held by the Foundation, click here.

There are many complex and global factors that are embedded in the price of gold. Most importantly, there is little transparency in the large physical demand and supply of gold involving central banks, hedgers and actual users. Gold rises on demand and supply factors such as central banks which hoard lots of gold decide to sell, thus depressing prices. But as a thumb rule, it is the expectation of higher inflation worldwide that pushes up the price of gold.
 

In India, the price of gold is mainly based on the movement of the dollar and the rupee. One of the two has always supported the price of gold. Therefore, a fall of 70% in 21 years between 1981 and 2001 did not affect us. The rupee had depreciated from Rs8 in 1980 to Rs46 in 2001. This more than negated the fall of gold. So, a weak rupee offers a natural support for gold.
 

Gold will only go up and down on inflation, interest rates, dollar and rupee, explained Mr Basu. And the movement of these is too complex to understand—leave alone predict. For those who want to buy gold, Mr Basu explained the pros and cons of the different modes of investing. For those who don’t believe in e-gold then physical gold is the best option for them. However, apart from ensuring the authenticity of gold there is a fear of theft and storage costs, etc.
 

To read more about investing in gold and also about gold loan companies, click here.
 

When it comes to gold ETFs (Exchange Traded Funds), it is easy to buy or sell only if there are high volumes. This would even draw a fee or expense ratio of 1%-1.5% per year apart from your demat account maintenance charge. In many of these schemes the liquidity is low. Even for gold mutual fund schemes investing in ETFs, there is a high liquidity, however, the charges are higher. Jeweller gold deposit schemes and purchasing gold in instalments from jewellers hold an element of risk as these schemes are not regulated. Before investing in such schemes one should read the fine print carefully.
 

Membership to Moneylife Foundation is free of cost where members get access to such informative seminars and can utilise the state-of-the-art facilities at the Moneylife Knowledge Centre, to empower themselves. If you are not a member of Moneylife Foundation yet, please visit the membership form here.

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COMMENTS

Srikanth Shankar Matrubai

4 years ago

EQUITY IS THE BEST INVESTMENT. NOT GOLD, NOT DEBT, NOT FDs, NOT EVEN REAL ESTATE. If you had invested Rs.100 in 1980 in both Gold and Equity (Sensex), the value of gold now would be Rs.1314 and that of Equity (Sensex) would be Rs.15600/- The most important thing is the proper asset allocation.Both equity and gold mutual funds have a place in a portfolio.For long term investment equity mutual funds should form core of the portfolio with gold funds acting as a hedge to balance and add stability to the overall portfolio.

prakash jasani

4 years ago

Excellent seminar and in a proper way explain by Mr.Debashis Basu Sir.

Uptrend on BSE Sensex, Nifty may gain further strength: Wednesday Closing Report

Watch out for previous day’s low for a possible change in direction
 

The market settled higher for the sixth straight day on global support following the re-election of Barack Obama as president of the US, ending days of uncertainty. Today the Nifty managed to make a higher high and higher low for the second consecutive day and closed above the resistance of 5,750. We may now see the upmove continuing unless the index closes below the previous day’s low. The National Stock Exchange (NSE) saw a volume of 69.99 crore shares and an advance decline ratio of 1083:640.

 

The Indian market opened on a soft note as the world waited for the outcome of the US presidential polls. Opinion polls suggested that President Obama and challenger Governor Mitt Romney were neck-and-neck. Overnight US stocks settled higher as the world’s largest democracy went to vote to decide its next president.

 

The Nifty opened at 5,719, down five points, and the Sensex started off 14 points lower at 18,803. The indices soon fell to their lows with the Nifty at 5,711 and the Sensex slipping to 18,786.

 

The news of Barack Obama winning the US presidential elections was cheered by the Indian market, which recovered from its initial losses. The benchmarks gained strength as trade progressed with all sectoral indices, except oil & gas, trading higher.

 

A positive opening of the European markets also lent support to the local market. The upmove enabled the indices hit their intraday highs in noon trade with the Nifty rising to 5,777 and the Sensex scaling 18,973.

 

However, market came off the highs as the benchmarks pared some gains but stayed in the green in post-noon trade. The market settled in the positive on gains in realty and banking stocks. The Nifty closed trade at 5,760, up 36 points (0.62%), and the Sensex ended the day above the 18,900 level mark at 18,902—a gain of 85 points (0.45%).

 

Among the broader indices, the BSE Mid-cap index surged 0.79% and the BSE Small-cap index climbed 0.73%.

 

Barring the BSE Oil & Gas index (down 0.31%), all other sectoral gauges settled higher. The gainers were led by BSE Realty (up 2.76%); BSE Bankex (up 1.07%); BSE IT (up 0.66%); BSE Auto (up 0.62%) and BSE TECk (up 0.56%).

 

Twenty three of the 30 stocks on the Sensex closed in the positive. The chief gainers were HDFC (up 1.92%); State Bank of India (up 1.91%); BHEL (up 1.70%); Hindalco Industries (up 1.02%) and ICICI Bank (up 0.96%). The main losers were Tata Power (down 2.44%); Bharti Airtel, Coal India (down 0.88% each); Reliance Industries (down 0.58%) and Cipla (down 0.19%).

 

The top two A Group gainers on the BSE were—Apollo Hospitals Enterprise (up 7.56%) and Unitech (up 6.88%).

The top two A Group losers on the BSE were—Cadila Healthcare (down 3.10%) and Adani Ports (down 2.56%).

 

The top two B Group gainers on the BSE were—Clutch Auto (up 20%) and VBC Ferro Alloys (up 20%).

The top two B Group losers on the BSE were—Intec Capital (down 12.67%) and Software Technology Group International (down 9.97%).

 

Out of the 50 stocks listed on the Nifty, 38 stocks settled in the positive. The key gainers were Jaiprakash Associates (up 5.52%); Bank of Baroda (up 2.65%); Punjab National Bank (up2.44%); IDFC (up 2.43%) and DLF (up 2.42%). Tata Power (down 2.87%); Coal India (down 0.97%); RIL (down 0.89%); Bharti Airtel (down 0.79%) and Siemens (down 0.72%) were the main losers on the index.

 

Most markets across Asia settled higher on the outcome of the US presidential elections which showed that Barack Obama was re-elected president as he defeated Republican Mitt Romney.

 

The Hang Seng surged 0.71%; the Jakarta Composite climbed 0.84%; the Straits Times advanced 0.79%; the Seoul Composite gained 0.49% and the Taiwan Weighed settled 0.70% higher. On the other hand, the Shanghai Composite and the KLSE Composite slipped 0.01% each and the Nikkei 225 lost 0.03%.

 

At the time of writing, the key European indices were up between 0.55% and 0.69% and the US stock futures were trading with gains.

 

Back home, foreign institutional investors were net buyers of shares totalling Rs174.62 crore on Tuesday whereas domestic institutional investors were net sellers of equities amounting to Rs221.85 crore.

 

Hinduja Group firm Gulf Oil Corp on Wednesday said it will acquire US-based speciality chemicals maker Houghton International Inc for $1.05 billion (about Rs5,670 crore). In the second-biggest acquisition by an Indian company this year, Gulf Oil will buy 100% stake in Houghton, whose chemicals and lubricants are used in the metalworking and automotive industries, from an unnamed US-based private equity fund. Gulf Oil declined 1.71% to settle at Rs86 on the NSE.

 

State-owned, Power Grid Corporation of India has decided to float an overseas arm, along the lines of energy major ONGC's overseas arm OVL. Through this initiative, the company will grab opportunities in the global market. The stock rose 0.25% to settle at Rs119.95 on the NSE.

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