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Sebi frames new rules for re-classification of promoter as public investor

Press Trust of India

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Mumbai : Markets regulator Sebi has announced new rules for re-classification of a promoter as a public investor, wherein an outgoing promoter will have to relinquish special rights as well as control over the affairs of the listed firm and will not be allowed to hold over 10% stake.

The promoter would not be allowed to have any representation on the board of directors or act as a key managerial person in the listed entity.

The promoter seeking re-classification must not be a wilful defaulter or a fugitive economic offender, the Securities and Exchange Board of India (Sebi) said in a notification dated November 16.

These norms will prevent the outgoing promoters from continuing to exercise their control on the company directly or indirectly.

The norms, aimed at simplifying, streamlining and bringing greater clarity in existing regulations, come after Sebi’s board in September approved a proposal in this regard.

The Kotak panel on corporate governance had suggested that there should be a mechanism to enable such re-classification to ensure persons who may have been promoters but are no longer in the day-to-day control of management and have a low shareholding should have the option to be re-classified.

Under the new rules, in the case of a promoter seeking re-classification as a public shareholder, Sebi said the promoter group and persons acting in concert will not hold over 10% of the total voting power in the listed entity and exercise control over the affairs of the entity directly or indirectly and will not have “any special rights with respect to the listed entity through formal or informal arrangements”.

In order to ensure that only compliant listed entities are eligible to apply for re-classification, Sebi said such listed firms need to be compliant with 25% minimum public shareholding requirement; their shares should not have been suspended from trading and they must not have any outstanding dues to the regulator, exchanges and depositories.

In all cases of re-classification of promoters, including the recommendation of the board, the proposal would be required to be placed by the listed entity before the shareholders in a general meeting and approved through an ordinary resolution.

With an aim to avoid conflict of interest, Sebi said that the specific promoter who has requested such reclassification, its promoter group and persons acting in concert would not be permitted to vote on such resolution.

If any public shareholder seeks to re-classify itself as promoter, an open offer will have to be made.

In order to have greater clarity in case of transmission, succession, inheritance and gift of shares held by a promoter, Sebi said the recipient of such shares will be classified as a promoter immediately on occurrence of such event.

The regulator said that a listed entity will be considered as a ‘listed entity with no promoter’ if due to re-classification, the entity does not have any promoter.

Earlier, such firms were termed as ‘professionally managed’.

In July, the regulator had come out with a draft proposal for re-classification of promoters and had sought public comments on it.


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Business

WPI inflation falls to 4.64 pc in November on softening food prices

Agencies

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New Delhi: Inflation based on wholesale prices fell to a three-month low of 4.64 per cent in November, as prices of food articles, especially vegetables, softened.

The Wholesale Price Index (WPI)-based inflation stood was 5.28 per cent in October and 4.02 per cent in November last year.

According to the government data released , food articles witnessed softening of prices with deflation at 3.31 per cent in November, against 1.49 per cent in October. Vegetables, too, became cheaper with deflation at 26.98 per cent in November, compared to 18.65 per cent in the previous month.

Inflation in the ‘fuel and power’ basket in November continued to rule high at 16.28 per cent, but was lower than 18.44 per cent in October. This was on account of lowering of prices of petrol and diesel.

Individually, in petrol and diesel it was 12.06 per cent and 20.16 per cent, respectively, and for liquified petroleum gas (LPG) it was 23.22 per cent during October.

Among food articles, potato prices continued to rule high with 86.45 per cent inflation in November.While onion witnessed deflation of 47.60 per cent; the same for pulses stood at 5.42 per cent. The 4.64 per cent inflation is the lowest in three months, and a lower inflation than this was last seen in August at 4.62 per cent.

Data released earlier this week showed that the retail or consumer price index-based inflation for November also fell to a 17-month low at 2.33 per cent. The Reserve Bank of India (RBI) mainly takes into account retail inflation data while formulating monetary policy.

In its fifth monetary policy review for the fiscal, released last week, the Reserve Bank kept interest rates unchanged, but held out a promise to cut them if the upside risks to inflation do not materialise.

The central bank lowered retail inflation projection to 2.7-3.2 per cent for the second half of the current fiscal, citing normal monsoon and moderate food prices.

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Reduce number, weight of government mandates for PSBs: Rajan

Agencies

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New Delhi: Former RBI Governor Raghuram Rajan on Friday said there is need to reduce uncompensated government mandates imposed on public sector banks (PSBs).

“This is lazy government – if an action is worth doing, it should be paid out of budgetary resources. It also is against the interests of minority shareholders in PSBs,” he said here.

The government should incentivise all banks to take up activities it thinks desirable, not impose it on a few, especially as the privileges associated with a banking license diminish, he said.

Along these lines, requirements that banks mandatorily invest in government bonds (the SLR requirement) should continue to be reduced, substituting instead with the liquidity coverage ratios and net stable funding ratios set by Basel, he added. He further said public sector banks still not adequately professionalised and there is a need to substantially improve risk management.

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Petrol, diesel prices unlikely to flare up ahead of 2019 polls

Agencies

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New Delhi: Consumers may be spared big spike in auto fuel prices ahead of the 2019 general elections with state-owned oil marketing companies planning to absorb a portion of the anticipated hike while deciding on retail rates of petrol and diesel.

Sources said these companies built a buffer during the recent fall in global crude and product prices by effecting less than proportional decrease in retail prices of fuel. It means prices have not been lowered in real terms. The buffer could be put to use once prices begin to rise again when global markets starts to feel the impact of the latest Opec announced production cuts.

“The idea is to prevent fuel prices from touching record highs again. Crude prices, which have fallen about 25 per cent since mid-October, are likely to cross $70 a barrel soon. The buffer would be used to see that increase in retail fuel prices could be paused on few days while quantum of increase could be lowered on others,” said a government official privy to the development.

Retail price of petrol touched an all-time high of Rs 84 a litre and diesel Rs 75.45 a litre in Delhi (over Rs 91 a litre in Mumbai) on October 4 due to rise in global oil prices from around $50 a barrel in early part of the year to over $80 per barrel in September. The spike attracted wrath of public and severely dented the government’s image over its ability to contain price rise. The Indian basket of crude fell to a low average of $65.40 a barrel in November. But with Opec, including Russia, announcing to take 1.2 million barrels per day of production off the market for the first six months of 2019, crude is expected to start nearing $80 a barrel soon.

This could take petrol and diesel prices closer to October 4 levels, which the government wants to avoid especially ahead of general elections. If we look at the November data, petrol was being retailed at Rs 78 a litre and diesel Rs 72 a litre in the national capital even when crude price in the Indian basket was about $69 a barrel. At this level in April this year, petrol was being retailed at Rs 73-74 a litre and diesel Rs 65-66 a litre. And auto fuels’ price was high despite the government having reduced excise duty on them by Rs 1.50 a litre in October.

It would mean even if crude touches $80 a barrel, the retail price of fuel would be well below that the October highs.

Officials of OMCs disagree over higher cuts in retail price of fuel saying the current scenario should be viewed in the context of sharp fall in the rupee against the dollar making oil purchases expensive.

Oil prices have fallen over 25 per cent in last one and half months due to easing of supply pressures, particularly from Iran. The US waiver for oil imports from Iran to major oil importers has eased the situation. But analysts believe once Iran oil exports starts getting wiped out from next year, there could be supply issues and a resultant price rise. The Opec cuts only have added to price worries.

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