Investments available to NRIs--

The government gives non-resident Indians (NRI) the opportunity to open rupee-dominated accounts in India for repatriating funds. The most popular among these are the NRE and NRO accounts. Non-Resident Indians (or NRIs) are treated as a special category of investors, given their Indian antecedents and their growing importance as a significant source of foreign capital in India. The government including regulators like the Reserve Bank of India and SEBI have been formulating and regulating investments by NRIs in Indian securities. It is therefore imperative for NRIs to understand the rules that would have bearing on their investment-making process.

NRIs can invest in shares and convertible debentures of Indian companies listed on NSE/BSE under the Portfolio Investment Scheme (PIS) route.Under this route, an NRI is permitted to invest up to a maximum of 5% of the paid-up share capital / value of each series of convertible debentures of listed Indian companies on repatriation and non-repatriation basis. The aggregate investment by all NRIs cannot exceed 10% of the paid-up share capital / value of each series of convertible debentures of the company. The aggregate ceiling of 10% can be raised to 24%, if shareholders of the Indian company pass a special resolution to that effect.

NRIs may also, without any limit, purchase on non-repatriation basis dated government securities, treasury bills, units of domestic mutual funds, units of money market mutual funds. NRIs are not permitted to make investments in Small Savings Schemes including PPF.

Another indirect mode of investment available to NRIs is by investing in India-focused offshore funds that invest as Foreign Venture Capital Investor (FVCI), Foreign Institutional Investor (FII) or Foreign Direct Investor.

Economic Crisis & Satyam Saga : Boon or Bane for India

It may sound cruel to say this, but the current economic crisis in the West might have brought some unintended benefits to India. This is best illustrated by the case of Satyam. Former chairman Ramalinga Raju has already confessed to having cooked the books, and shown vastly inflated profits and cash. 

This confession letter was sent on January 7 to his Board as well as the whole world. The letter came two weeks after an aborted attempt by him and his Board to inject $1.6 billion of Satyam’s cash into a real estate company owned by his family. Investors were upset, and unleashed their fury by selling Satyam stock, destroying several billion dollars of stock value. 

Hastily, the company reversed its decision. Subsequently, we learnt that Raju and family had pledged their Satyam shares for huge loans, possibly to make investments in real estate. As the stock market crashed, Satyam shares crashed too. And since these shares were kept as collateral with lenders, they wanted more collateral from Raju and family. Or just cash. Nothing was forthcoming, and hence lenders were forced to liquidate the collateral (which was already degraded in value).

Extension of 5-yr tax holiday to 5-star hotels--

ET reports: Industry body Assocham has asked the government to extend tax holiday for all hotel categories, including five-star, specially in the national capital keeping in mind the requirements for the 2010 Commonwealth Games. In the Budget of 2007-08, five-year tax holiday was given to two, three and four star hotels and convention centres with a seating capacity of not less than 3,000 in the NCR. "This facility needs to be extended to all categories of hotels, including five-star hotels, so that their capacity expansion takes place at a desired speed to accommodate large number of tourists expected during 2010 games," it said.

The hotel infrastructure, specially in five-star category in Delhi and NCR where majority of tourists are likely to stay, is still not taking off and therefore to speed up their capacity, five years tax holiday schemes requires to be extended, it added. As per estimates, the Commonwealth Games in 2010 is expected to attract 50,000 foreign visitors to Delhi and about 30,000 rooms would be required to accommodate these visitors. The National Capital Region, currently, has about 10,500 rooms and an additional 15,000 to 18,000 rooms are required to take care of the foreign tourists during the event.

Cramdown--

Cramdown is not a word that appears anywhere in the Bankruptcy Code. Yet it is a well-known and often employed bankruptcy concept, which means, simply, obtaining confirmation of a Chapter 11 plan of reorganization over the objection of one or more dissenting classes of creditors.Cramdown allows the bankruptcy courts to modify loan terms subject to certain conditions in an attempt to have all parties come out better than they would have without such modifications. The conditions are mainly that the new terms are fair and equitable to all parties involved.

During the financial crisis of 2008, cramdown was used to help troubled mortgage borrowers by allowing the bankruptcy courts to alter mortgage terms, subject to certain conditions, in an attempt to keep borrowers from foreclosure when one or more tranches of the mortgage did not agree to loan modification.

Cramdown is accomplished by convincing the court that a plan is fair and equitable even though one or more creditors have voted against it. For a secured claim, a plan may be found to be fair and equitable if, at a minimum, it provides that the lender will retain its lien and receive deferred cash payments equal to the present value of the collateral securing the loan (i.e., a market rate of interest).

Samurai-- the market or the battlefield ??

Samurai market is usually used by non-residents of Japan, with a reference to the iconic Japanese warrior - the samurai. It is the slang term for the stock market in Japan. This market is where non-Japanese entities can launch public bond issues to raise yen finance.Issuance in the samurai bond market has more than tripled over the past several years. Some observers have attributed this growth to a systematic underestimation of credit risk in the market.

This Tokyo Foreign Bond Market(the so-called Samurai market)was created in 1970,with a public offering of yen bonds by the Asian Development Bank. Japan was then one of the largest debtors of the World Bank. Supported by consecutive current account surpluses, the government decided to create the Samurai market, graduating from the World Bank and becoming a capital-exporting country.

Japan's Samurai bond market is in danger of degenerating into a junk market. The traditional dignity of the Samurai title is being threatened by the influx of dubious issues and speculative instruments into the Tokyo market.

Industry's loss is academia's gain...

ET reports: Universities which until last year lost out to corporates when it came to hiring IITians can now able to get the candidates they wanted. Among the many universities shopping for faculty members is the Alfaisal University in Saudi Arabia. It has landed up at IIT-Bombay, Kanpur, Chennai and Delhi and offered an annual compensation of 1.3 lakh Saudi riyals (approximately Rs 17 lakh), apart from housing and other facilities, to students who will soon complete their master's or PhD. "Several universities from across the globe have invited our students to take up teaching assignments. About 40 to 50 PhD and master's students have taken up such offers,'' said B K Mathur, placement chairman at IIT-Kharagpur.

In contrast to the annual compensation of around Rs 19 lakh that international universities offer, at most IIT campuses an Indian educational institute recruiting students for a teaching position typically offers an annual salary of Rs 7 lakh. Texas A&M University, seeking to recruit for its Qatar campus, is scouting IIT-Madras, as is the Hyderabad-based Indian School of Business, to recruit engineers for research activities. Lt Col (Retd) Jayakumar, deputy registrar (training and placement) at IIT-Madras said that so far, "ICFAI Institute of Science and Technology has recruited 19 students and the two Middle Eastern universities are likely to declare their selection lists soon.'' IIT-Roorkee's placements chairman P K Jain said some private Indian universities like ICFAI and Thapar University, Patiala, were also among campus recruiters. . In fact, soon the IITs themselves will get busy recruiting faculty for the new institutes they are mentoring. Already, IIT-Guwahati has recruited 19 PhD qualified faculty members for the institute it is mentoring, IIT-Patna. Other mentor IITs will soon begin recruiting. None of them, however, will be able to match petro dollar salaries.

Foreign Direct Investment--

Foreign direct investment refers to the investment made by an entity in an enterprise located in a different country. By virtue of making this investment, the investor gains a certain degree of influence or control over the management of the enterprise.FDI can be both outward and inward. In the case of inward FDI, the investor can enter the country by incorporating a company, either by getting into a joint venture with an Indian company or setting up a wholly owned subsidiary. Alternatively, he could retain the status of a foreign company and simply set up a liaison, project or branch office in India.

Benefits:FDI comes with benefits for both the investor and the economy where the investment in made. For the investor, this could be a chance to tap markets where he could make profits. For the economy, FDI has provided a muchneeded push in terms of injecting liquidity apart from bringing in better technology, creating more job opportunities and so on.

Difference between FDI & FII :The most visible difference would be that while FDI includes investment directly into a particular company. Foreign Institutional Investors (FIIs) are known to invest either in the primary or secondary markets, in stocks, mutual funds or via instruments such as participatory notes, dated government securities , commercial papers etcetera. There is also a greater perception of stability that is associated with FDI. In periods of market instability , FIIs are known to beat a hasty retreat leaving the market in a lurch.

Source:ET