Managerial Economics

MMS-I
Div A

NEWS ANALYSIS

Mahalakshmi Krishnan
Darshit
Devang
Shyamsunder
Smith
Miloni Sanghrajka
VODAFONE - HUTCH
CASE 1
DEAL
 Headline

High Court says Vodafone

must pay tax on Hutch Buy
 Case Background

Vodafone signed a $ 11.1 billion deal in 2007 acquiring

majority stake in Hutchison International

Indian I-T department issued a show cause notice to Vodafone

Vodafone challenged the case before the Bombay High Court which
dismissed the petition

Case was challenged again in the Supreme Court but was sent back to
the I-T Department
 Two Parts to the Deal

52% stake acquired in the deal which was done at Cayman Islands

15% stake held by Analjit Singh and Asim Ghosh in India

 I-T Department

Since all the underlying assets are in India,

the whole 67% acquisition is liable to tax
Only 15% stake has links with India,
therefore only 15% is liable to tax
 Effect of the Verdict
Vodafone might have to pay Rs. 12,000 cr as tax

Foreign investors to think twice before entering India

Impact on similar deals happened in the past

 Similar Deals
US based General Atlantic & Oak Hill Partners bought stake in Genpact

UK based Vedanta group and Sesa Goa

Idea cellular stake sale by AT&T to TATA Group

SABMiller – Foster Deal

French drug maker Sanofi Aventis bought major stake in Shantha Biotech
 PM v/s
CASE 2 SC
on the matter of foodgrains
 Headline

PM differs with SC on food issue,

asks it not to make policy
 Some Stats
Between 1997-2007, 1.83 lakh tonnes of wheat, 6.33 lakh tonnes of rice, 2.2
lakh tonnes of paddy and 111 lakh tonnes of maize rotted !!!

As on January 1st this year, 10,688 lakh tonnes of foodgrains were found
damaged in the depots of FCI

Storage losses in 2009-10 amounted to Rs. 228.39 cr and transit losses

amounted to another Rs. 182.46 cr
 Case Background
The requirements of TPDS were being computed at 27.5% of the population
(1993-94)

Overlooked the calculation of the Sakena Committee and the Tendulkar

Committee

The FCI had a buffer stock of 57.8 million tonnes as of June 1st 2010, against
a the buffer norm of 31.9 million tonnes
 Stalling Tactics
Suggestion by Dr. M S Swaminathan

Supreme Court’s order to Government

Stalling tactics by Mr. Pawar

 Overflowing Godowns
Overflowing granaries : thanks to the policy of FCI

Rotten and inedible wheat will be passed to the BPL cardholders

Amount of edible wheat is small as compared to the official wheat reserve

 Manmohan Singh to SC
Not to get into the realm of Policy Formulation

Not possible to give free foodgrains

No incentive to produce more

The Government has announced that the BPL cardholders will be given at
rates lower than the MSP
 Effects
Not enough clarity of distribution

Subsidy Component

It is been decided to allocate an additional quantity of 25 lakh tonnes of

wheat/rice to BPL for the next 6 months

The court has now given the PUCL one week to file a reply to the
governments submissions

The Government has declined to distribute

Ohio
CASEBan
3
 Headline

Ohio Bans offshoring of IT projects

by Government Departments
Facts on Indian IT Industry
Off shoring work to India is a $50 billion dollar industry

India’s total IT-BPO exports business - $60 billion

Share of US in India’s IT –BPO biz – 61%

Global government spending in 2013 - $ 39.8 billion

Companies that will be affected – TCS, Infosys, Wipro and Mindtree

 Indian Global Delivery Centers serving
Foreign Location from US
NGTON
MFORD
ER
REN3
MBUS
1
2
ANSISCO
RWATER
GO
 Facts on Indian IT Industry

Unemployment

Elections in US
 Why offshoring is banned in Ohio?

Ohio governor Ted Strickland dissatisfied with quality of offshore services

Obama says tax breaks should go to companies that create jobs in the US and
not overseas

Nasscom said the ban was more to do with election rhetoric

 Impact on Indian IT
TCS the only Indian company in Ohio, employing around 300 people

US IT firms like IBM, Accenture and HP likely to get affected more

Financial impact-very marginal

Setting a wrong trend, where more US states could give in to the

pressure
 India protests Ohio offshoring
ban
Decision violates the commitment made by G20 countries to
fight protectionism

The issue will figure prominently in the India-US trade policy

forum meeting later this month
Companies may have to invest 2% of net
profit in Corporate Social Responsibility
(CSR)
What is CSR?
• A concept whereby companies decide to
voluntarily contribute to a better society
and a cleaner environment
• Companies implementing CSR
 Tata Sons
 Godrej
 ITC
 HUL etc.
The Govt proposal
• Govt is considering to make it mandatory for all
companies to invest 2% of their net profit during
3 immediately preceding financial years in CSR
• Specific disclosures of social spends to be
made by all companies in their annual report
• To be incorporated in new Companies Bill
• Proposal tabled in the Parlimentary Standing
Committee
• Passage of bill expected in the Winter session
Applicable to..
• Companies having
A net worth of 500 cr or
 A turnover over 1000 cr or
A net profit of over 5 cr in a year
Corporate view
• Many private companies oppose any
mandatory social spending
• Forcible action will not deliver desired
results: Sunil Mittal
Thank You