Companies & Sectors
Three independent directors quit Sahara companies’ boards

The resignations come at a time when the Sahara group is fighting an intense battle with market regulator SEBI over issues related to refund of over Rs24,000 crore to an estimated three crore bondholders of its two companies

Amid a fierce regulatory battle with the Securities and Exchange Board of India (SEBI), diversified conglomerate Sahara group has seen three independent members exiting from the boards of its various companies.


Those having relinquished their association with the Sahara group include RBI’s former deputy governor Amitabha Ghosh, retired Supreme Court judge S Mohan and New India Assurance Company’s former chairman A C Mukherjee.


Ghosh was on the board of group’s life insurance venture Sahara Life and real estate entity Sahara Prime City, besides being on the Board of Trustees of Sahara Mutual Fund.


AC Mukherjee was an independent director on the board of Sahara Life, while S Mohan was an independent member on the Board of Trustees of Sahara Mutual Fund.


The resignations come at a time when the Sahara group is fighting an intense battle, within and outside the courts, with market regulator SEBI over issues related to refund of over Rs24,000 crore to an estimated three crore bondholders of its two companies—Sahara Housing Investment Corporation (SHICL) and Sahara India Real Estate Corporation (SIRECL).


While none of the three persons who resigned from their positions with Sahara group could be reached for their comments, sources said that all of them have cited personal or family reasons for their resignations.


However, sources said exits could have happened because of Saharas’ legal and public spat with SEBI.


About one of the three persons, Sahara said that he was on many boards of different corporates and these corporates had strong objection of his continuing with Sahara.


ISF seeks rollback of securitisation tax proposal

Even though the budget exempts securitized vehicles from the ambit of income tax, they will be taxed if they distribute income to stakeholders. This will scare away entities investing in such instruments, which will otherwise broaden the scope of the financial markets in India, particularly fixed income market, feels the Indian Securitisation Foundation

Just when India is seeking to broaden the scope of the fixed income market in India that has remained stagnant for more than a decade, the 2013 Budget proposal to tax income distribution by securitisation, special purpose vehicles (SPVs) could scare away investors who are seeking to invest in a more stable source of revenue and income.
Vinod Kothari, director designate of the Indian Securitisation Foundation (ISF), said, “While a complete pass through treatment of the SPV is well agreed upon, the Budget proposals bring a distribution tax on securitisation cash flows, which is a body blow to securitisation investors.”
The securitisation industry has sought a pass-through status for securitisation vehicles, whereas Budget 2013 imposed a tax on distribution of tax by such vehicles. “Indeed, the finance minister accepted the proposal but the Budget fine print told a different story! Instead, securitisation vehicles will come under the ambit of taxation vis-à-vis distribution (rather than being tax-free), and thus equating them with collective investment vehicles like mutual funds even though both are structured very differently. This will hurt the securitisation industry,” he said.
Mr Kothari added, “Clearly, what has been done in the Budget is to promote securitisation. However, the actual drafting of the provisions has resulted in a distribution tax. The distribution tax, being on gross income, completely disregards the actual income of the investor, and depending on the refinancing used by the investor, may be even higher than the net profit of the investor. If the investor has losses in the net, the distribution tax still disregards the same.” 
An SPV vehicle will have to pay as much as 25%-30% tax on income distributed, according to new budget proposals. The fine print of Section 115TA of the Income Tax Act states: “Notwithstanding anything contained in any other provisions of the Act, any amount of income distributed by the securitisation trust to its investors shall be chargeable to tax and such securitisation trust shall be liable to pay additional income-tax on such distributed income at the rate of—(i) twenty-five per cent on income distributed to any person being an individual or a Hindu undivided family; (ii) thirty per cent on income distributed to any other person”. However, it is ironic that mutual funds investing in SPVs will be free of distribution tax as they fall into exempt category of investors.
According to ISF, while securitisation trusts will be exempt from income tax, the decision to tax an SPV’s distribution may have unintended consequences. Instead of distributing income to investors and acting as a conduit, the SPV may just accumulate income (since it does not have to pay tax) and, perhaps, put it back into a project or completely elsewhere. Investors, who invested in an SPV by way of shares or debt instruments issued by the SPV, will be simply waiting for their income. There will be zero cashflow for them. When there is zero cashflow for them, they will stay away from SPVs or even fixed markets and seek income elsewhere, the Foundation said in a release.
According to the representation paper titled “Detailed post-Budget representation on securitization tax” drafted by ISF, the whole nature of “special purpose vehicles” will get distorted and such vehicles will get into the realm of operating entities rather than special purpose entities. The representation paper seeks to remove the ambiguity and inequity imposed on securitisation vehicles. Instead, ISF contends that securitised vehicles ought to be treated the same way as venture capital (i.e. Section 115TU), in which income is tax in the hands of their investor, regardless of whether it is distributed or not. 
The representative paper states: “If a provision equivalent of Section 115U is applied in case of securitisation, there is no duplication of taxes; at the same time, there is no apprehension of revenue leakage since most of the investors are regulated entities. Even if there are unregulated investors, their particulars may be declared by the trustee—which serves to create a trail. It is unlikely that an investor investing in such instruments will be able to escape the tax net.”
The representative paper also adds that developing fixed markets is crucial. It states, “While mutual funds investing in securitisation vehicles will be free from the distribution tax, we cannot miss the point that professed objective of the country is to develop the fixed income securities market, and therefore, to bring more investors into securitized debt instruments.”
Securitisation, in India, is partly used by banks to meet their priority sector lending requirements. Banks which are unable to originator qualifying priority sector loans by themselves acquire the same from others by way of securitisation. Hence, securitisation is essential to the idea of financial inclusion. In addition, securitisation is also essential to promote housing finance markets. Housing finance, in line with the international practices, is funded substantially by way of securitisation. Infrastructure operators in India also use securitisation as a device of takeout financing.
The Indian Securitisation Foundation (ISF) is body representing securitisation industry in India, consisting of banks, non-banking finance companies, micro finance institutions, and other stakeholders. 


Govt extends deadline for barcode on medicines by one more year

A barcode helps in tracking and tracing of origin of drugs, which in turn helps in minimising the chances of genuine drugs being considered spurious, sub-standard or counterfeit.

The Indian government has extended the deadline for affixing barcodes on primary level packaging by pharmaceutical companies till July 2014.


In a notice, the Directorate General of Foreign Trade (DGFT) said, “Earlier the requirement of affixing barcodes on Primary Level packaging was to take effect from 1 July 2013. Now this date has been deferred to 1 July 2014”.


A barcode helps in tracking and tracing of origin of drugs, which in turn helps in minimising the chances of genuine drugs being considered spurious, sub-standard or counterfeit.


The government had asked pharmaceutical companies to build “track-and-trace” capability for their exported medicines using barcode technology at three levels of packaging primary, secondary and tertiary.


Primary level packaging is the first-level product packaging such as the bottle, can, jar, tube, that contains the item sold.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)