SEBI mandates Rs. per share dividend declaration

In a good move, the Securities and Exchange Board of India, SEBI, has asked listed companies to declare dividends on a per share basis rather than on a percentage basis. For example, a company having shares of face value Rs. 10, and declaring a dividend of Rs. 5, will have to say that it has declared a dividend of Rs. 5 per share and not a dividend of 50%.

This is meant to bring more clarity to an average investor who sometimes gets caught up in the jugglery of percentages and values when companies declare dividends. Thus, it will bring uniformity in the declaration of dividends by listed companies.

The move will clear the confusion among share holders whether the dividend declared was a percentage of the face value or the market price. It also becomes relevant when companies reduce the face value of shares over a period of time, which some investors might not be able to track.

Also, the calculation of actual returns in terms of Rupees becomes much easier, when the dividend information is available on a per share basis. Share holders will just have to multiply the number of shares they own by the dividend per share amount that the company declares. And for the mathematically inclined, they can just go ahead and calculate the dividend percentage if they want.

The change will be with immediate effect. More news here.

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Top 10 financial centers of Asia

According to the six-monthly Global Financial Centers Index (GFCI) compiled by Z/Yen Group, the top 10 financial centers of Asia are,

1. Singapore
2. Hong Kong
3. Tokyo
4. Shanghai
5. Taipei
6. Kuala Lumpur
7. Mumbai
8. Bangkok
9. Beijing
10. Seoul

More details here.

Related Articles
- Top 10 companies of India
- Best banks of India

Highest paid CEOs in India

The global economic crisis is holding strong and CEOs across the world are taking pay cuts (forced, or by their own free will) as a means to cut costs. Back in India, how the CEOs are dealing with the situation? Are they following the path of their western counterparts?

Rediff has compiled this list of the highest paid CEOs in India. Have a look!

HDFC Bank MD Aditya Puri is CNN-IBN Indian of the Year 2008 (Business)

HDFC Bank Managing Director Aditya Puri is the CNN-IBN Indian of the Year 2008 (Business category). Given in six categories - Politics, Sports, Business, Entertainment, Public Service, and Global Indian - these awards “recognize, celebrate and honour Indians who have contributed to our country and in turn have strengthened our society and contributed to building Brand India in 2008”, says the official CNN-IBN website.

”This year's awards are even more significant as they personify the undying spirit of a billion free Indian minds, in the wake of terror, natural disaster and economic challenges," the website adds.

Each category had six nominees. Mssrs Ratan Tata, Baba Kalyani, C.B.Bhave (SEBI), S.Ramadorai (TCS) and Uday Kotak (Kotak Group) were the other nominees in the Business category.

Mr. Puri won, as CNN IBN puts it, for “steering HDFC Bank well in a tough time, ensuring growth without taking risks and leveraging his customer-base well.”

The winners in the other five categories are Nitish Kumar (Politics), Abhinav Bindra (Sports), Aamir Khan (Entertainment), G. Madhavan Nair & Team Chandrayaan (Public Service) and A.R. Rahman (Global Indian).

In December 2008, leading financial daily Business Standard declared Mr.Puri as Banker of the Year (2008) for successfully leading his bank in tough times.

Indian Industrial growth rate at 7.1%

The Industrial Production Index grew to 7.1% in the month of July far exceeding expectations set from 4 to 6%.

This is indeed great for the economy which has been performing badly for a few months now. As a result of the unexpected growth rate, the Industry demanded a rate cut in interest rates to enhance investments further.

More news here.

Best banks of India

The Financial Express has released their annual “India’s Best Banks Awards”, which is based on the performance of Indian banks on various parameters such as Strength and Soundness, Growth, Profitability, Efficiency/Productivity and Credit Quality.

The top two banks in the following categories:
Nationalised
• Indian Overseas Bank
• Indian Bank
• State Bank of Hyderabad

New private sector
• AXIS Bank
• HDFC Bank

Old private sector
• Karur Vysya Bank
• Federal Bank

Foreign banks
• Bank of America
• HSBC

Best performance on the following parameters:
Strength & Soundness
• Canara Bank

Growth
• Deutsche Bank AG

Profitability
• Standard Chartered Bank

Efficiency
• Bank of America

Credit Quality
• Yes Bank

Via and more details here.

How India contributes to global oil price increase?

The price hike on petroleum products in India, barring kerosene, seems to have settled down comfortably into Indian minds. But, like I have written previously, the global crude oil price increase has not been completely transferred to a price hike in retail prices of petrol and diesel. Subsidies still rule Indian petroleum retailing!

The actual plunge is softened by the cushion made on the back of oil companies, central government and state governments. They suffer heavy losses through regulatory restrictions and tax cuts to make petrol available cheap for the common populace. As a consumer, one would feel great about the cushioning, but is it good for the global petroleum price? I would say no!

Economics says, whenever there is an increase in price of any commodity, its demand comes down forcing it to be sold at a lower price. That is, the increase in price is brought down by a decrease in consumption. Similarly, in an ideal case, when crude oil price increases, people start using it less making its demand go down, there by decreasing its price.

In India, since the government and companies suffer losses to maintain petrol/diesel prices low, people are not experiencing the actual effect of the price rise. As a result the demand for oil is not coming down (people are not reducing consumption) in the way it should have. For example, if petrol price was 10 rupees more than its current price, more people than now would resort to public transport than taking their own vehicle and the consumption would have come further down. In that case, India would have imported less oil, reducing global demand for oil and hence the price.

Along with the demand problem mentioned above, when you consider the fact that India is a fast growing and highly populated economy, you would know how much impact will it have on global crude oil demand and thus its price.

Reports say that oil products sales grew by 10.9 percent in India for the year ended February 2008, which is funded by an estimated oil subsidy of 200,000 Crore! China, which is a similar economy as India (fast growing and highly populated) had a 7.8 percent growth in oil consumption during the same period. And these two giants could easily contribute to the increase in crude oil prices as the demand supply conundrum is not allowed to happen ‘freely’ in these two countries.

Petrol price vis-à-vis diesel and kerosene prices

The price of crude oil has touched $132 a barrel. As 1 barrel is 159 litres, assuming a rupee/dollar exchange rate of 42, cost of crude oil (or petrol) per litre should have been around 35 rupees (plus manufacturing and transportation costs, profit). But petrol is sold at Rs. 56 per litre!

The main reasons for such a difference are two.
1. Import duties/sales tax on crude oil/petrol by central and state governments
2. Petrol price is increased disproportionately for the cross subsidization of kerosene and diesel as the later two are common man’s fuels

Kerosene is used by millions of poor in India and a rise in kerosene price would affect them severely. Diesel is used in trucks and trains which do mass transportation of essential commodities. Since a huge hike in these two would affect the concerned and the common populace very badly, government usually refrains from increasing their prices, or if increased, less compared to that of petrol.

But there are few things that need to be considered. One, kerosene is widely used for adulterating petrol as there is a price difference between them. Two, most of the (luxury)cars nowadays have diesel variants to exploit the price difference meant for a different cause. But then the sheer number of Indian common man may justify government’s decision to continue subsidizing kerosene and diesel.

PS:
Did you know that petrol sells at Rs. 113.30 a litre in Turkey, while it is just Rs. 2.12 a litre in Venezuela?

After the recent surge in global oil prices, and a subsequent increase of petrol/diesel prices in India, Rediff has compiled this great article about world’s costliest and cheapest petrol.

Outsourcing of transaction tax compliance

Over the years companies have found outsourcing of important business processes such as recruitment, payroll, finance, training, HR etc. as a strategic and effective alternative that saves time, money and resources. Outsourcing of taxation related processes in companies to third party vendors is the next big thing happening in the outsourcing arena.

Transaction tax compliance is a burdensome process for companies. To give you an example, in the United States alone, there are more than 13,000 tax jurisdictions and each year the tax laws change more than 1,000 times. This makes it extremely difficult for companies to track tax rates and manage tax payments to the government for various transactions done at various jursidictions having different tax laws. Thus, while making sales in a particular geography, a company (that is operating over multiple geographies) should know about the prevailing sales tax, use tax and tax laws of that geography so as to account it in the tax amount to be paid to the government.

Failing this (or variations happening in tax payments due to not accurately tracking sales tax and use tax rates), companies have to face penalties, audits and other legalities from the tax authorities. This shows how important it is to ensure transaction tax compliance by a company, eventhough the process is unwieldy. That's where taxation compliance outsourcing becomes important.

A good example of a firm that do outsourced transaction tax compliance is Sabrix, with it's Managed Tax Service (MTS) that offers tax compliance solutions to small business and mid-market companies (they also have a demo of the application at http://www.sabrix.com/smb/demo/).

Outsourcing tax compliance to firms like Sabrix has lot of advantages. It would eliminate the hassles (tracking tax rates of various geographies etc.) associated with tax compliance. The payments to tax authorities will be accurate and timely due to the expertise of the firm as it is dealing only with such things (core competency). Above all, there is a cost advantage to it. As a result companies can concentrate more on its core business. Few more reasons to outsource transaction tax compliance can be found here.

Top 10 companies of India

Rediff.com has compiled a list of the top 10 companies of India, based on FY 2007 sales revenues. Not surprisingly, the list is dominated by oil companies.

According to them, the top 10 companies are,

1. Indian Oil Corporation – Rs 201,493.85 Crore*
2. Reliance Industries^ – Rs 111,264.23 Crore
3. Bharat Petroleum Corporation – Rs 97,189.37 Crore
4. Hindustan Petroleum Corporation – Rs 93,912.34 Crore
5. Oil and Natural Gas Corporation – Rs 75,529.12 Crore
6. Steel Authority of India Limited – Rs 34,390.93 Crore
7. National Thermal Power Corporation – Rs 33,875.70 Crore
8. Tata Motors – Rs 31,999.47 Crore
9. Tata Steel – Rs 25,117.78 Crore
10. Sterilite Industries – Rs 24,376.83 Crore

*1 Crore is equal to 10 million
^Reliance Industries doesn’t include all the reliance group of companies