Companies & Sectors
Why TIL's proposal to hive off its Caterpillar business is anti-shareholder
The decision of TIL (formerly Tractors India Ltd) to hive off its Caterpillar dealership business, which is spread over India, Nepal and Singapore, to Delhi-based Goodearth Minetech Pvt Ltd (GMPL) for Rs350 crore is not in the interest of shareholders, as there is a conflict of interest. A managing director of TIL's unit is also director on the buyer company, a clear conflict of interest and should have been questioned by the regulators and exchanges. Shockingly, this example of poor corporate governance is being set by Sumit Mazumder, managing director of TIL who is the immediate past President of industry body Confederation of Indian Industry (CII). 
 
Mumbai-based Stakeholders Empowerment Services (SES), the proxy advisory firm, said, the main reason for its advice to shareholders for voting against TIL's proposal was lack of disclosure about performance and financials of companies to be sold as well as details of buyer and inherent conflict of interest.
 
The transaction involves sale of Tractors India Private Ltd (TIPL), which housed Caterpillar's dealership of earthmoving and road construction equipment, along with two overseas ventures. The company expects to earn additional revenues from the sale of its Nepal and Singapore businesses.
 
However, according to SES, the conflict of interest is very wide and open and thus must be questioned by shareholders. Sunil Chaturvedi, the managing director and chief executive of TIPL is also one of the directors of GMPL, the buyer of the company's Caterpillar dealership business. 
 
SES says, "A managing director of a subsidiary is allowed to set up a private firm, GMPL (incorporated 1 March 2011) and then manages to convince the company (TIL) to sell the subsidiary to his own firm... reflects absolute failure of governance. How come GMPL with a paid-up capital of Rs1 lakh is going to support a business, which is being sold at a price of Rs350 crore plus. And if it is being supported by the current managing director, shareholders would certainly like to know his source of funds."
 
According to a report from the Business Standard, Life Insurance Corp of India (LIC) is the largest public shareholder with 10.38% stake in TIL. State-owned general insurers General Insurance Corp of India (1.99%) and Oriental Insurance (1.2%) are among large minority shareholders. Some mutual funds and financial institutions together hold around 1%, the report says.
 
TIL has been carrying on the business of dealership of products of US-based Caterpillar Inc for the past six decades in North and East India, Nepal and Bhutan. 
 
While TIL itself reported a net loss of Rs29 crore, TIPL is part of the business that earned the company a significant profit of Rs37 crore in FY15.
 
SES had recommended that shareholders reject the transaction and ask for forensic audit of subsidiaries, especially TIPL and ensure that business being conducted by TIPL under Chaturvedi was above Board in all respects.
 
The ballot closed on 23 May 2016. Sumit Mazumder, managing director of TIL told the newspaper that the Board of Directors recommended the sale of the dealership business, after much deliberation. “They firmly believe that TIL should focus on the manufacturing aspect and unlock all possible funds to invest in manufacturing” he was quoted in the report. 
 
TIL closed Tuesday 1.85% up at Rs294 on the BSE, while the 30-share benchmark ended the day marginally up at 25,305.

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Setting up of data centres should not be mandatory: Amitabh Kant
A decision to set up data centres in the country cannot be mandatory and it will be not be conducive for the eco-system, Niti Aayog CEO Amitabh Kant said on Tuesday.
 
"Decision to set up data centre in the country cannot be mandatory and it will be not be conducive for the eco-system. I will initiate a dialogue with departments like IT, Telecom and Energy to create the best possible infrastructure for data centres," Kant said.
 
He was speaking at the launch here of a report "Make in India - Conducive Policy & Regulatory Environment to Incentivise Data Centre Infrastructure" by Internet and Mobile Association of India (IAMAI).
 
According to the report, India's data centre infrastructure market will be around $7 billion by 2020.
 
The Indian data centre infrastructure market is valued at $2.2 billion and is poised to be the second largest market for data centre infrastructure within the Asia Pacific region by 2020.
 
The IAMAI report highlights the opportunities for India to become a leading player in the global data centre market if conducive policy and regulatory frameworks are adopted. 
 
The paper highlights key measures to increase innovation and stimulate innovation in what is widely considered to be one of the fastest growing technology segments at present.
 
The paper urged the government to facilitate data centre operations in India through clear policies to facilitate trans-border flow of data and tax incentives to woo foreign players.
 
At the same time, the paper warns against the dangers of forced localisation of data, adding that the same would reduce competitiveness, affect gross domestic product and harm India's fledgling reputation as an emerging data centre hub.
 
"India has the potential to capture a big share in the Global Data Centre market," said IAMAI president Subho Ray.
 
To fully realise this potential, India needs to "address some of the risks and barriers to data centre operations in the country today and create the right incentives for businesses to build effective data centre infrastructure," said Ray.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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13 cities win fast track Smart City competition
The Urban Development Ministry on Tuesday announced 13 winners of the fast-track Smart City competition, with Lucknow topping the list.
 
These cities can now compete to be a "Smart City" in the next cycle of "India Smart Cities Challenge". 
 
Announcing the list, Urban Development Minister M. Venkaiah Naidu said Lucknow, which could not make it to the first list of 20 mission cities last year, had improved the quality of its Smart City plan. Twenty-three cities participated in the fast track competition.
 
The other cities that made it to the next round are Warangal (Telanagana), Shimla, (Himachal Pradesh), Chandigarh, Raipur (Chhattisgarh), New Town Kolkata (West Bengal), Bhagalpur (Bihar), Panaji (Goa), Port Blair (Andaman & Nicobar Islands), Imphal (Manipur), Ranchi (Jharkhand), Agartala (Tripura) and Faridabad (Haryana).
 
The minister said these 13 cities were selected based on the marks scored by them in the fast track competition and the benchmarks set by the top performers in the first cycle of the challenge.
 
Only 12 states and UTs were represented in the first list of 20 mission cities announced in the first cycle of "India Smart Cities Challenge" on January 28.
 
The first 20 cities were selected from 98 mission cities.
 
Meanwhile, there was a tie between Meerut and Rai Bareli in Uttar Pradesh and Jammu and Srinagar in Jammu and Kashmir, which will be resolved by allowing them to participate in the next round and one city from each of these two states will be selected based on the quality of Smart City plans.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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