Telecom firm says difficult to understand rationale in the $2 billion tax demand that the department itself describes as a test case
New Delhi: Telecom giant Vodafone today said it has filed a petition in the Supreme Court seeking protection against penal action by the income-tax authorities in the $2 billion tax case relating to acquisition of Hutchison's stake in Indian joint venture Hutchison-Essar.
"Vodafone International Holdings BV has filed a petition in the Supreme Court seeking to protect itself against a notice recently received from the Indian tax authorities initiating penalty proceedings against it," the company said in a statement. The petition follows an Income-Tax notice to Vodafone a few weeks back, saying penal action would be initiated against the company in the tax case, PTI reports.
The Income-Tax department had raised a demand of about $2 billion on Vodafone as it failed to deduct (withhold) tax at the time of purchase of majority stake of Hutchison in Hutchison-Essar in 2007 for over $11 billion. The tax case has been pending in the Supreme Court and will come up for hearing on 19th July.
With regard to the petition filed by Vodafone to pre-empt penal action by the Income-Tax department, the company said, "it is difficult to understand the rationale behind the tax authorities seeking to impose penalties on a matter which the tax authorities have, themselves, described as a test case".
Seeking penalties on a "test case" involving a major infrastructure investor, it said, "highlights the unpredictable nature of India's taxation policy. This move is only likely to raise further concerns amongst potential investors into India".
All the advice received by Vodafone during and since the acquisition, the company said, "is that there is no tax, or therefore penalty that arises, and Vodafone will take all appropriate steps to defend itself and its investors against this latest unwarranted action from the tax authority".
The established tax laws are "being reinterpreted in a completely new way" and there are no previous examples of such taxes being imposed in India on an overseas share transfer such as this, it added.
IDFC Securities says engineering firms should perform the best on healthy execution of orders; it expects sustained growth in oil & gas, infrastructure and construction; but feels metals and cement are constrained by input costs and overcapacity
The fourth quarter earnings of the just-concluded financial year 2010-11 is expected to be a real test for domestic companies, due to pressures from rising crude prices in the wake of the ongoing turmoil in the Middle East and North Africa, the devastating earthquake that struck Japan last month and continuing worries about the debt crisis in the Euro zone. On the domestic front, high inflation along with high interest rates weighed on corporates.
According to a research report by IDFC Securities, earnings of Sensex companies are likely to witness a 17.5% year-on-year (y-o-y) growth in Q4FY11, led by non-commodities. Earnings of commodity-related commodities are likely slow down on account of a de-growth of 16.2% in metals.
While it is expected that sectors like telecom, power equipment and metals would see a fall in their margins, sectors like financials, oil & gas and automobiles are expected to have robust margins.
In the core sector, engineering companies are likely to post 29% y-o-y growth in Q4FY11 on the back of healthy execution of orders across companies. Better revenue mix is expected to spur operating margins, while companies are expected to post higher other income on better working capital management and generation of free cash flows. Net earnings (pre-exceptionals) for engineering companies are estimated to expand by 59% in the fourth quarter of 2010-11. Names like Voltas, Thermax India, Havells India, Engineers India and Elecon Engineering figure in the engineering segment.
Cement companies are expected to report a 4%-12% growth in revenues on the back of higher volumes. Margins are expected to expand sequentially on improved realisations. However, EBITDA per tonne is expected to fall sharply due to higher cost of raw materials, especially imported coal. IDFC Securities holds a bearish view on the sector, with Grasim as the outperformer and ACC, Ambuja and UltraTech as underperformers.
Construction companies are expected to post a revenue growth of 19% y-o-y for the quarter under review. On the other hand, operating margins are expected to remain flat. Higher interest could dent the improved operating performance of companies in this segment. A 15.5% growth in earnings is projected for construction companies. IDFC is positive about Jaiprakash Associates, IVRCL Infra and Nagarjuna Construction.
According to the research report, infrastructure developers should register 25% revenue growth, while EBITDA is expected to see a 42% expansion on improved operating performance. Earnings of infrastructure developers (pre-exceptional) are likely to be muted. MPSEZ and GIPL have been named as possible outperformers, while GVK has been rated as an underperformer.
In the metals sector, higher steel prices following product price hikes in the first two months of the quarter is expected to result in a sequential growth in realisations for companies. Higher product prices along with sequential growth in raw material prices will boost EBITDA margins. Increase in merchant power tariffs will enhance the top line for Jindal Steel & Power and Sterlite Industries. On the other hand, iron ore volumes for Sesa Goa are likely to decline 14% y-o-y to 6.3 million tonnes, in line with macro headwinds. On a positive note, average spot prices for 58%fe iron ore fines have increased by 20% q-o-q.
A strong quarter is forecast for oil & gas companies on strong volume growth across upstream, refining and petrochemicals, along with transmission & distribution, government payout to settle subsidy dues of state-owned oil retailing companies, strong realisations of private upstream and refining companies and ongoing strength in the domestic petrochemicals business.
Overall the oil & gas sector is expected to witness a 5% y-o-y growth in revenue and 18% rise in profit after tax. Reliance Industries is expected to see a 21% rise in profit after tax while ONGC is expected to post 37% growth in its fourth quarter earnings. This is despite a higher subsidy burden for ONGC at Rs69 billion for the quarter in focus, compared to Rs50 billion in Q4FY10. Higher refining margins are estimated for RIL ($10.3 per barrel) and Essar Oil ($7 a barrel).
Oil marketing companies are expected to post subdued numbers on account of huge under-recoveries (net profit de-growth of 23% y-o-y for the quarter). Gas transmission major GAIL is expected to witness transmission volumes of 122 million metric standard cubic metres of gas per day and profit-after-tax growth of 11% y-o-y. Gujarat Gas Company's net profit is estimated to grow over 10%, while Petronet LNG's net profit at more than 67%. Gujarat State Petronet's net profit is estimated at 30%, but sequential volumes will remain steady at 37.5 mmscmd.
IDFC Securities points out that power utilities will witness a 16% y-o-y growth in revenues and EBITDA should increase by 19% on an annual basis on the commissioning of new capacities, but lower contribution from operating plants. Net earnings (pre-exceptional) will fall by 3% y-o-y, due to higher interest and depreciation costs from new capacity additions.
IDFC has outlined a dismal picture for the realty sector in the fourth quarter of 2010-11. A 5% de-growth in top line and flat profit after tax due to higher interest costs, will offset operating margins of realty companies.
Among realty companies, DLF revenues will be boosted by Gurgaon plot sales and Unitech is expected to grow 22% q-o-q. Godrej Properties revenue recognition could be subdued as new launches reach recognition threshold in H2FY12. Sunteck Realty will see revenues coming from leasing income only, with no recognition from residential projects due to its accounting policy.
Apex court ratifies earlier HC order confirming the dismissal; another petition by directors supporting Yunus comes up tomorrow
Dhaka: Bangladesh's Nobel laureate Muhammad Yunus today lost his final legal battle to remain as the chief of the micro-lending Grameen Bank he founded nearly three decades ago, as the Supreme Court rejected his appeal against the sacking, capping his month-long dispute with authorities.
"Dismissed", chief justice ABM Khairul Haque pronounced, after the rejection of his appeal by a seven-member Appellate Division of the Supreme Court, which upheld an earlier High Court verdict, validating his sacking as managing director of Grameen Bank by the central Bangladesh Bank, during a four-hour hearing.
Earlier on 8th March, a two-member High Court bench, after three days of hearing, had rejected 70-year-old Mr Yunus' writ challenging his removal from the pioneering micro-lending agency that he founded in 1983.
Mr Yunus was not present at the apex court when it delivered the verdict, while his Grameen Bank postponed a press briefing they called immediately after the judgement, sighting no reasons, reports PTI.
But Grameen Bank lawyers said another petition filed by nine directors of the micro-finance institution, who stood by Mr Yunus, would come up for apex court's consideration tomorrow, though several legal experts feared it was unlikely to bring any different result.
The verdict came as reports earlier this week said negotiations to resolve the Yunus issue outside the court progressed towards a "positive direction" amid growing international criticism of his unceremonious dismissal from the micro-finance bank.
No progress of the negotiation process, however, had been reported by either of the sides yet, but finance minister AMA Muhith had earlier said the government looked for ways for an amicable settlement of the issue, who visibly rallied huge international support behind him after his removal.
Mr Yunus last week appeared before a five-member government committee constituted in January this year to "review" the Grameen Bank transactions, which, however, was not directly linked to his removal.
The committee's chair Monwar Ahmed Khan at that time said Mr Yunus told them that he was now thinking how he could be associated with the Grameen Bank in an "alternative way".
The apex court had earlier adjourned until 4th April the hearing on Mr Yunus' appeal, allowing both sides to take more time to reach a compromise, as insisted by the United States and other major development partners.
Bangladesh Bank, which is nominally independent from the government, fired Mr Yunus on 2nd March this year, as it found that that his appointment in 2000 as the micro-lending agency's executive chief was faulty, because the central bank's mandatory approval was not obtained at that time.