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Ujjivan Small Finance Bank IPO To Open On Monday

Ujjivan Small Finance Bank or USFB will launch its initial public offer (IPO) for subscription on December 2. The public offering will be open for subscription for three days from December 2 to December 4. The bank has fixed issue price band at Rs. 36-37 per share. Ahead of the IPO, USFB raised Rs. 250 crore in a pre-IPO round earlier this month. Ujjivan Small Finance Bank has branches across 24 states and a customer base of 49 lakh as of September 30, 2019. The bank's parent microfinance lender Ujjivan Financial Services went public in 2016 after receiving an in-principle licence from the Reserve Bank of India to start a small finance bank.

Here's you need to know about the Ujjivan Small Finance Bank IPO:

The IPO of Ujjivan Small Finance Bank comprises a fresh issue of equity shares aggregating up to around Rs. 750 crore for subscription, and a portion of the issue, aggregating up to Rs. 75 crore has been made available for the eligible Ujjivan Financial Services (UFSL) shareholders on a proportionate basis.

"For this purpose, individuals and HUFs (Hindu Undivided Families) who are the public equity shareholders of UFSL as on the date of the red herring prospectus (RHP) which is, November 22, 2019 are the eligible UFSL shareholders," the bank said in a regulatory filing.

These shareholders will also get a discount of Rs. 2 per share on the final issue price.

The bank had filed its draft prospectus for the IPO on August 14 and received market regulator Securities and Exchange Board of India's or Sebi's approval for the issue on October 16.

The bids can be made for a minimum of 400 equity shares and in multiples of 400 equity shares thereafter.

RCom creditors refuse to accept Anil Ambani's resignation

On the day Reliance Communications (RCom) announced the quarterly losses of Rs 30,163 crore, its chairman Anil Ambani resigned as the director of the insolvent telco, which effectively meant resignation from chairmanship as well. Prior to and along with Ambani, five other directors of RCom had also resigned from the telco, including Ryna Karani, Chhaya Virani, Manjari Kacker, Suresh Rangachar and Manikantan V.

The committee of creditors (CoC) has rejected the resignations saying these cannot be accepted. It asked the directors, including Ambani, to perform their duties until the insolvency proceedings are concluded. However, the resignation of the other director Manikantan V., who had put in his paper on October 4, was accepted and Viswanath Devaraja Rao replaced him as director and CFO (chief financial officer).

But why did CoC reject the resignation of Ambani and four other directors? Do they have the powers to do so and how? The company law experts say that working directors or wholetime directors can be removed or resign as per the terms of their appointment, which is subject to the approval of the board. But since RCom has been admitted for insolvency, the power of the board ceases to exist, and those powers are now vested with the (RP) resolution professional (Anish Nanavaty of Deloitte). Through RP, the CoC has the authority to accept or reject resignations of the wholetime directors.

However, that is not the case with independent directors who can resign at any time without needing a formal approval from the board or CoC.

"While the execution is done by RP, the ultimate powers are with CoC. In case of RCom, as the board has no powers, the CoC is the decision-making agency currently. The executive directors have a contractual obligation, and they simply cannot walk out of the company," says Manoj Kumar, partner and head (M&A and insolvency) at Delhi-based Corporate Professionals.

The reason why CoC rejected the resignation of RCom directors is because these directors are required to attend the meetings while insolvency proceedings are underway. While they are not allowed to vote in those meetings, they are supposed to provide clarifications when sought by the CoC. If these directors are no longer holding a title in the company, they cannot be invited in the CoC meetings. Once they demit the (director's) office, they can argue that they are no longer associated with the company. So it seems logical that CoC rejected the directors' intent to exit the telco.

"If there's a need for any clarification, the committee member may ask the directors. It's a basic understanding that they should cooperate in the process, and whenever they are called, they should come and attend the meeting. The general stand is that after the company is admitted to insolvency, none of the directors should be allowed to demit the office, otherwise the purpose of insolvency gets defeated. That is the stand which might have been taken by RCom's CoC. That is a legal position, beyond that nothing is written neither in the company law or nor in the IBC (insolvency and bankruptcy code)," says a company law consultant.

There have been similar instances in the past. In 2017, for instance, two of the insolvent Amtek Auto directors had resigned from the board, but they were brought back later to ensure that they continue to handle operations. RCom, which posted record net losses of Rs 30,163 crore in the second quarter of 2019/20 owing to provisioning for AGR (adjusted gross revenues) dues, is going through insolvency proceedings after it failed to find a buyer for its assets.

Anil Ambani's Bankrupt Reliance Naval Up 600% In Record Winning Streak

Reliance Naval and Engineering Ltd., part of the indebted Anil Ambani-led group, is enjoying a renaissance -- at least on India's stock market.

The penny stock hasn't declined for a single session since September 9 in a rally that has lifted it to Rs. 7.31 from its record-low close of 95 paise. That's the longest winning streak since the company's trading debut in 2009.

The revival of the shipyard is crucial for Anil Ambani, who is betting on cash flows from government defense contracts as Prime Minister Narendra Modi plans to spend billions of dollars on national security. Brokers say the stock's parabolic advance is likely driven by speculators, rather than by a change in the company's fortunes.

"This could be a purely speculative move by certain market operators with a vested interest as there is no change in fundamentals of the company, which is reeling under various troubles," said Arun Kejriwal, director at KRIS, an investment advisory firm in Mumbai. "It is quite easy to create such triggers on shares as prices are too low."

The company didn't immediately respond to calls and emails seeking comment.

Meanwhile, the bankruptcy tribunal is considering putting Reliance Naval in bankruptcy as lenders led by IDBI Bank Ltd. have decided not to restructure the company's debt. Even after the recent gains, the company's shares are down 50 per cent for the year.

PM Modi's Labour Reform Push May Remove Key Hurdle For Investors

Prime Minister Narendra Modi is finally attempting to overhaul India's most controversial labor laws to attract investment and make it easier to do business in a country where changing archaic rules is a challenge for any government.

After a long struggle, his government will push a crucial industrial relations bill allowing companies to hire workers on fixed-term contracts of any duration. The legislation, to be tabled in parliament's current winter session, does not seek to change stringent laws on hiring and firing, but allows the government the flexibility to relax the conditions through an executive order.

Unlike his last term in power, when PM Modi decided against bringing this labor reform bill to parliament, this time around he knows he has the numbers needed. The current changes are part of a process to streamline 44 different labor laws into four codes, another step to formalise the $2.7 trillion economy.

It comes on the back of several recent reforms announced by PM Modi's government to boost investment, including aggressive cuts in corporate taxes, relaxation of foreign investor rules and the biggest privatization drive in more than a decade.

"It's a positive signal of reforms agenda as well as a step toward making India attractive, in the context of the golden opportunity of manufacturing shift from China," said Gautam Chhaochharia, a strategist at UBS Group AG in Mumbai, adding over the medium term it might change the way companies hire and fire.

Asia Push

With the US-China trade dispute disrupting global supply chains, governments in the region are trying to lure investors with more business-friendly policies. In Indonesia, President Joko Widodo has promised to make changes to his country's difficult hire and fire laws by the end of the year. The amendments to the labor law would be limited to new hires in order to defuse opposition from the unions.

PM Modi's cabinet on Wednesday approved the Industrial Relations Code bill, which empowers the government to change the ceiling on employee count for a company to retrench workers without government approval. While the current upper threshold limit of 100 workers has not been changed, the bill allows the government to amend this number without seeking parliament's approval.

Even though successive governments have agreed that labor reforms are necessary to provide employment to the nearly 1 million job-seekers entering the market each month, the fears of a trade union backlash and partisan politics have been a deterrent to major reforms.

PM Modi's second term in office has been marked by an ability to push through controversial legislation, including repealing the constitutional autonomy of Kashmir through a majority in parliament. His party has been voted back to a second term in power with a bigger mandate and is closer to having a majority in the upper house of parliament.

Rigid laws on downsizing labor and cumbersome compliances currently force companies either to remain small, employ fewer workers or use capital-intensive methods of production. Restrictive labor regulation in the country is associated with a 35% increase in firms' labor costs, according to a research paper by University of Kent economists Amrit Amirapu and Michael Gechter of the Pennsylvania State University.

India ranks 103 out of 141 countries on the competitiveness of its labor market, according to the World Economic Forum.

Not everyone agrees that the proposed law will draw in investors.

There isn't much scientific evidence to show that a relaxation in labor laws will make much difference in terms of attracting foreign capital, said K.R. Shyam Sundar, a professor at the Xavier School of Management in Jamshedpur. "It will rather lead to uncertainty."

The government will also need to convince labor unions of the benefits of the proposed changes. The country's major trade unions plan to hold a general strike to protest the bill on Jan. 8.

GST notices from small-town tax officials scare financial services companies

Tax officers based in small towns have started sending notices to many financial services companies seeking information regarding these firms' organisational structures, revenues and Goods and Services Tax (GST) paid.

A spurt in such written queries has scared companies that fear an increase in their compliance burden. Businesses that have come under the radar of indirect tax offices are as distant as Kolhapur, Rajahmundry, Vijaywada, Mysore and Mangalore.

Companies under the GST structure are required to have a registration in every state. In case of any queries, the tax officials based in the city where a firm is registered send the notice.

However, small-town tax officers are hiding behind a specific section in the GST structure they have interpreted to understand that any indirect officer can send query notice to any transaction by any company from any part of the country.

"Provide brief note of organisational structure, details of turnover whether taxable, exempt, nil rated or non-GST turnover.. details of place of supply," read a written query sent to a financial services company in Mumbai.

Meanwhile, the industry trackers said that in many instances companies are complying and furnishing details to tax officials based in the capital of the same state, the report said.

"The compliance requirements in GST for service providers are significantly higher than the erstwhile service tax regime and the need to respond to inquiries from various parts of the country leads to additional pressures on businesses. A single authority should be empowered to enquire/investigate all GST issues of a service provider instead of multiple authorities, which will lead to efficiencies on both sides," MS Mani, partner, Deloitte India said.

In case of Andhra Pradesh, all companies operating in the state are registered in Hyderabad but are receiving notices from indirect tax officers from smaller towns in the state.


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