Posts Tagged ‘capital markets’

IFRS: THE IMPACT ON INDIAN CORPORATE

International Financial Reporting Standards (IFRS) has gained huge momentum in recent years across the world as it is used as a universal financial  reporting language. Almost 100 countries have adopted it while few other countries have declared their willingness to adopt or converge with IFRS over the next two-three years.

.

In the world of globalization, world has become more dependent on each other, which forces more and more countries to open their doors for businesses expansion across borders and to foreign investment. A large number of multi-national companies are establishing their businesses in various countries especially in emerging countries; as a result the companies in emerging countries are increasingly accessing the global markets to fulfill their capital requirement by getting their securities listed on the stock exchanges outside their country. Few Indian companies are also being listed on overseas stock exchanges, but different countries follow their own accounting frameworks, which create a great confusion for users of financial statements, finally it leads to inefficiency in capital markets across the world.

.

Therefore, there is a requirement for a single set of high quality accounting standards that should be spoken by all of them across the globe, to meet the increasing complexity of business transactions and globalisation of capital, which has prompted many countries to go for convergence of national accounting standards with IFRSs.

.

In this changing scenario, India cannot cut off itself from the developments taking place worldwide. At present, the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) formulates Accounting Standards (ASs). Complex nature of IFRSs and the differences between the existing ASs and IFRSs, the ICAI is of the view that IFRSs should be adopted for the public interest entities such as listed entities, banks and insurance entities and largesized entities from the accounting periods beginning effect from April, 2011. Convergence to IFRS would mean India would join a league of more than 100 countries, which have converged with IFRS. Converging to IFRS by Indian companies will be very challenging and on the contrary it could also be rewarding too.

.

Benefits to corporates in the Indian context World Class Peer Standards for Financial Reporting: IFRSs will surely enhance the comparability of financial information and financial performance with global peers and industry. This will result in more transparent financial reporting of a company’s activities which will benefit investors, customers and other key stakeholders in India and overseas. The adoption of IFRS is expected to result in better quality of financial reporting due to consistent application of accounting principles and improvement in reliability of financial statements.

.

Investors: It will be a great help for those investors who wish to invest outside their own country and looking for a Financial statements, which prepared by using a common set of accounting standards IFRS provides them better comprehensible investment opportunities as opposed to financial statements prepared using a different set of national accounting standards. For better understanding of financial statements, global investors have to incur more cost in terms of the time and efforts to convert the financial statements so that they can confidently compare opportunities. Investors’ confidence would be well-built if accounting standards used are globally accepted. Convergence with IFRSs contributes to investors’ understanding and confidence in high quality financial statements.

.

The industry: It will be easier to raise capital from foreign markets at lower cost if the industry can create confidence in the minds of foreign investors that their financial statements comply with globally accepted accounting standards. The burden of financial reporting is lessened with convergence of accounting standards because it simplifies the process of preparing the individual and group financial statements and thereby reduces the costs of preparing the financial statements using different sets of accounting standards.

.

The accounting professionals: Convergence with IFRSs also create more business opportunity to the accounting professionals in a great way that they are able to sell their services as experts in different parts of the world, it offers them more opportunities in any part of the world if same accounting practices prevail throughout the world. They are able to quote IFRSs to clients to give them backing for recommending certain ways of reporting.

.

Challenges to Indian Corporate Laws and regulations: There is a need to bring a change in several laws and regulations governing financial accounting and reporting system in India. In addition to accounting standards, there are legal and regulatory requirements that determine the manner in which financial information is reported or presented in financial statements.

.’

Lack of adequate professionals: There is a lack of adequate professionals with practical IFRS conversion experience and therefore many companies will have to rely on external advisers and their auditors.

.

Replacement and Up gradation in systems: Conversion to IFRS will require extensive upgrades or total replacement of major system. With sufficient planning, upgrades and replacements can occur as part of the overall strategic technology planning and procurement process.

.

.Convert historical data: Historical data from recent prior periods will have to be recast for comparative purposes. This is necessary to permit accurate and comparative trend and ratio analysis. Record retention requirements should be reviewed to ensure that data currently being retained is detailed enough to permit proper restatement of prior-period financials.

.

Coordination of Conversion System: For many organizations, the conversion to IFRS will be a multi-year exercise with numerous changes to technology infrastructure and systems. Development of new technology systems should be carefully examined so IFRS requirements can be incorporated.

.

Conclusion

.

Convergence to IFRS will greatly enhance the transparency of Indian companies which will surely help them to project themselves in global map, which will help Indian companies benchmark their performance with global counterparts. But companies will need to be proactive to build awareness and consensus amongst investors and analysts to explain the reasons for this volatility in order to improve understanding, and increase transparency and reliability of their financial statements. However, the responsibility for enforcement and providing guidance on implementation vests with local government and accounting and regulatory bodies, such as the ICAI in India will play a vital role. The ICAI will have to make adequate investments and build infrastructure for awareness and training program.

.

Successful implementation of IFRS in India depends on the regulator’s immediate intention to convert to IFRS and make appropriate regulatory amendments.

.

OUR Websites: http://www.smcindiaonline.com , http://www.smccapitals.com , http://www.smctradeonline.com , http://www.smcwealth.com

Downward Movement Hits Indian Equities Markets

Downward Movement Hits Indian Equities Markets

Downward Movement Hits Indian Equities Markets

Indian equities markets entered into a consolidation zone with analysts terming the downward movement as long expected.

A benchmark index fell 5.44 percent from its last weekly close and ended trade below the 16,000-mark.

😦

The 30-share sensitive index (Sensex) ended 914.53 points, or 5.44 percent lower, at 15,896.28 points at the weekly close Friday, as opposed to the previous week’s close at 16,810.81 points.

The broader S&P CNX Nifty of the National Stock Exchange (NSE), too slipped, closing at 4,711.7 points, down 5.7 percent from its last weekly close.

However, companies with large-to-medium market capitalization saw greater selling with the BSE midcap index ending 7.36 percent lower and the BSE smallcap index losing 8.01 percent over the last week.

“This consolidation was expected anyways as the valuations were not commensurate with the earnings of corporates. To an extent a correction in valuations was warranted,” said Jagannadham Thunuguntla, equities head of brokerage and capital markets consultancy SMC Capital.

The markets started on a cautious note Monday ahead of the Reserve Bank of India‘s mid-year policy review Tuesday.

The Sensex ended a volatile day at 16,740.50 points — 70.31 points or 0.42 percent lower than Friday’s close.

The Nifty followed a similar trajectory and ended in negative at 4,970.9 points, down 0.52 percent.

Both benchmark indices nosedived Tuesday as the RBI indicated in its policy review that it would start tightening the monetary policy and look at exiting the stimulus measures.

🙂

Data with markets watchdog Securities and Exchange Board of India (SEBI) showed that foreign funds were net sellers during the week, having sold scrips worth $12.8 million.

The top gainers this week on the Sensex were

Tata Motors (up 7.2 percent),
Ranbaxy Labs (up 4.8 percent),
Wipro (up 2.9 percent),
Grasim (up 1.6 percent) and
Hindustan Unilever (up 1 percent).

The top losers were :

DLF (down 18.5 percent),
Reliance Capital (down 14.5 percent),
Reliance Infrastructure (down 14.2 percent),
Hindalco (down 13.9 percent) and
Reliance Power (down 12.9 percent).

“Broadly speaking only about one percent of the quarterly results show a sound top line growth. Profits might have increased, but that is not because of increase in core operations – cost cutting and other income have contributed towards it,” said Thunuguntla.

🙂

MCX Stock Exchange Targets Bottom of the Pyramid

MCX Stock Exchange drawn up a strategy to lower costs significantly to take on established players :)

MCX Stock Exchange drawn up a strategy to lower costs significantly to take on established players 🙂

The MCX Stock Exchange (MCX-SX), which is still some distance away from launching trade in equities, has already drawn up a strategy to lower costs significantly to take on established players.

🙂

Exchange, promoted by the Financial Technologies group, is waiting for approval from the market regulator.

But the blueprint is aimed at doing what the National Stock Exchange (NSE) did to the capital markets 15 years ago.

MCX-SX is planning to significantly lower :

1) the Entry Cost,

2) the Cost of Transaction, and

3) the Cost of Technology.

Under the plan, there will be many more segments to trade.

Mutual funds and Initial Public Offers might also be distributed.

🙂

In Other major Agri Updates :

FMC open to debate on extended trading hours:

The Forward Markets Commission (FMC), the commodity markets regulator, says it is willing to discuss the issue of extending trading hours, in line with what the equity markets regulator, the Securities andExchange Board of India (Sebi), did last week.

Sebi has allowed trade timing in equities to be extended, from 9 am to 5 pm; the current hours are 9:55 am to 3:30 pm.

Currently, agri commodities are traded on the exchanges between 10 am and 5 pm.

Market participants have urged the regulator on various occasions to extend trading time till at least 7.30 pm, to capture the sentiment of late evening trades.

🙂

Note : For More Latest Industry, Stock Market and Economy News and Updates, please CLICK HERE

Centre To Go Ahead With PSUs Disinvestment :)

Prime Minister Manmohan Singh reiterated that Centre will go ahead with the disinvestment in public sector undertakings (PSUs).

Prime Minister Manmohan Singh reiterated that Centre will go ahead with the disinvestment in public sector undertakings (PSUs).

While efforts will be made to recover loss-making units, the Centre will go ahead with the disinvestment in public sector undertakings (PSUs) stated Prime Minister Manmohan Singh.

However, this is said :

–  to unlock the true value of a company,

– improves its corporate governance standards and

– also help it in raising resources for funding future expansion plans.

🙂

Additionally, several PSEs are entering the capital markets striving to become active global players.

At the same time several PSEs got their shares listed on the markets in the last 2 years and many more want to do so, showing they are not shying away from market scrutiny and are ready to face new challenges.

🙂

Further, stressing the need for strengthening the public sector, MMS said that the government was committed to restructure and recover sick and loss-making PSUs.

Moreover, amount of Rs. 15,250 crore is provided by the government in the last 5 years as cash and non-cash support to 36 such enterprises.

🙂

On the other hand, stating that the Centre was committed to giving PSUs flexibility and autonomy to operate effectively in a competitive environment, MMS stated that they have delegated more powers to the boards of Navratna and Miniratna companies.

This was done in order to facilitate improvement in their performance, implemented revised salaries for executives of public sector enterprises and introduced innovative measures like performance related pay.

🙂

PE-backed Companies Queuing up the Market with IPOs :)

pressure from PE players is forcing companies to take the IPO route :)

pressure from PE players is forcing companies to take the IPO route 🙂

The buoyancy in the capital markets over the past few weeks has seen a spate of initial public offerings (IPOs) hitting the market.

Sectors such as infrastructure, power and real estate are the ones that have been most bullish.

🙂

However, most companies that are taking the IPO route for raising funds are the ones that have strong private equity (PE) backing.

And in most cases, it is the pressure from these PE players that is forcing these companies to take the IPO route.

🙂

Recently, four real estate companies – Emaar MGF Land, Lodha Developers, Sahara Prime City and Ambience Ltd – filed draft red herring prospectuses (DRHPs) with the market regulator Securities and Exchange Board of India (Sebi) to launch their IPOs.

All the four together are looking to mop up over Rs 11,000 crore.

🙂

Said Jagannadham Thunuguntla, equity head, SMC Capitals Limited, “Several companies are filing their IPO prospectuses with Sebi, with the confidence provided by the strong capital market bounceback and the healthy subscription levels seen by the IPOs of Adani, NHPC and OIL.”

“Taking the capital market bounce-back as a good exit opportunity, several PE-backed companies are queuing up with their prospectuses.

While this trend of PE-backed companies filing prospectuses can be seen across industries, it is quite prominent in the real estate industry,” he added.

According to him, “Several companies which have filed their prospectuses in the past three to four days have PE backing at the corporate or SPV levels.

The recent capital market bounce-back is giving a fresh breath of life to PE players” he added.

🙂

This trend of PE-backed companies going to the market with IPOs is not a surprise. PE firms are keen to capitalize on the buoyant financial markets and exit certain investments.

🙂

G-5, G-8..Not Anymore..Its G-20 Now !!

G20-world-economy

For the world, apparently, eight is no longer enough.

😉

The G-8 group of powerhouse economies, which expanded from the original G-5 one by one over three decades, stepped off center stage Friday with the ascension of the G-20 into the role of overseeing the global economy.

🙂

The Group of 20 will take on the role of caretakers of the global economy.

The shift toward multilateral decision-making is sure to please some emerging economies — China and India in particular — and irritate those Americans who believe the United States shouldn’t be handing off its power to international institutions.

🙂

Heading into the second day of a summit aimed at ensuring the world economy emerges from its worst recession in generations with better safeguards against another crisis, the G20 also vowed to keep emergency economic support in place until a recovery is secured, according to the draft obtained by Reuters.

🙂

The document said G20 countries had a “responsibility to the community of nations to assure the overall health of the global economy” and pledged to try to secure next year a deal in long-running world trade talks.

🙂

Larger G-20 would take over — a council that, by simple virtue of a membership that unites more than 80 percent of the global economy, and would be a force to be reckoned with.

🙂

The group, which also accounts for 90 per cent of the world’s economic output, also agreed to rein in financial industry excesses that triggered the credit crisis two years ago, and to tighten rules on how much capital banks must have to absorb losses.

The new rules aimed at improving the quality and amount of capital should be ready by the end of 2010 and will be phased in in the following two years, the draft said.


Bharti-MTN Deal May Hit Turbulent Weather with New Takeover Norms in Place!!

MTN-Bharti-Deal-in-Danger1

The $23-billion equity swap deal proposed by Bharti Airtel and South Africa’s MTN may hit turbulent weather with India’s capital markets watchdog amending the merger and takeover norms involving international transactions, experts said Tuesday.

😦

In a move that surprised the corporate sector, the Securities and Exchange Board of India (SEBI) Tuesday said the mandatory open offer norm will be triggered even if the overseas equity holdings, in the form of global depository receipts or American depository shares, exceed 15 percent of the total paid-up capital of the target company.

🙂

Earlier, the open offer was mandatory only when the acquisition of shares in the target company exceeded 15 percent during transactions entered into within the country, either through stock market operations or through preferential deals.

🙂

In the Bharti-MTN deal, the two sides proposed to exchange shares in addition to payout of cash that exceeds 15 percent.

🙂

Bharti had proposed to buy 36 percent of the South African company by offering shareholders half a Bharti share, whereas MTN was to get a 25 percent stake in the Indian telecom major for $2.9 billion by issuing global depository receipts.

🙂

“In its existing form, the Bharti-MTN deal will become more complicated because of this amendment. The dynamics have changed and both MTN and Bharti will have to go back to the drawing board to see the deal through,” said SMC Capitals equity head Jagannadham Thunuguntla.

🙂

As per the existing provisions of the SEBI takeover code, no acquirer can buy shares of 15 percent or more in a listed company without making an open offer to acquire a minimum of 20 percent of such listed company’s shares from the public shareholders.

😦

Announcing the changes in the takeover code, SEBI chairman C.B. Bhave also said that there would be no retrospective effect on earlier deals because of this amendment.

🙂