The Ministry of Finance has signed a Tax transparency Memorandum of Understanding with the Dubai Multi Commodities Center. The U.A.E’s largest and fastest-growing free trade zone, at the Ministry’s Headquarters in Dubai, which will assist in ensuring international standards of transparency in the exchange of information for tax purposes.

The MOU was signed by HE Younis Haji Al Khouri, Undersecretary of MOF and Ahmed bin Sulayem, who is the Executive Chairman of DMCC. The MOU agreement will implement transparency and a clear exchange of information between the MOF and the DMCC, ensuring that a principled process is applied to tax legislation that affects both companies and individuals.

The agreement’s aims is to strengthen the cooperation between the competent authorities responsible for the exchange of information for tax purposes, elevating the U.A.E’s tax practices in line with a global benchmark.

Commenting on the MOU, to support the national economy, the Ministry is committed to work with like-minded partners. This commitment is reflected through the signing of the MOU with DMCC. Also  the MOF continuously seeks to strengthen its cooperative relationships with various federal and local government entities in the U.A.E in order to attract more investments and guarantee prosperity in the U.A.E, which in turn will contribute to the U.A.E’s GDP.

Commenting on the importance of the MOU, as the international hub for trade and enterprise, DMCC, the U.A.E’s largest and fastest growing free zone, has and will continue to increase the flow of trade through Dubai and continue to make a significant contribution to the growth of the economy.

“At DMCC we always look at ways of improving efficiencies. Signing a MOU with the Ministry of Finance will further enhance collaboration across both Government entities to increase foreign direct investment and GDP contribution as we continue to demonstrate our commitment to his Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President, Prime Minister of the U.A.E and Ruler of Dubai’s vision to establish Dubai as the main global economic hub.”

The Ministry of Finance has been already set about ensuring key stakeholders in the U.A.E become acquainted with the legal framework on the exchange of information related to tax, as recommended in the “Evaluation of the U.A.E” report. To guide the various stakeholders in the implementation of the legal framework and its recommendations, the Ministry has organized and will host a series of meetings with the various stakeholders.

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An Inter-Governmental Agreement has been signed between Mauritius and the United States for the implementation of the Foreign Account Tax Compliance Act (FATCA), as well as a bilateral tax information exchange agreement (TIEA).

The signing ceremony for the two agreements was held on December 27, 2013, in Port Louis and the signatories were the Mauritian Vice-Prime Minister, Minister of Finance and Economic Development. Xavier-Luc Duval and the US Ambassador to Mauritius, Shari Villarosa.

FATCA, enacted by Congress in 2010 and taking effect on July 1, 2014, is intended to ensure that the US obtains information on accounts held abroad at foreign financial institutions (FFIs) by US persons. Failure by an FFI to disclose information on their US clients, including account ownership, balances and amounts moving in and out of the accounts, will result in a requirement to withhold 30 % tax on payments of US-sourced income.

To address situations where foreign law would prevent an FFI from complying with the terms of an FFI agreement, Treasury has developed model IGAs.

Under the terms of the Model 1 IGA between Mauritius and the US, Mauritian FFIs will be required to report their information to the Mauritius Revenue Authority, which will then automatically exchange the information with the US, according to the TIEA.

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MUMBAI | NEW DELHI: India Inc’s quest for growth in what is now the world’s fastest-growing major economy is starting to show some results. Its entrepreneurs are becoming richer as cash-hungry private equity firms chase ambitious start-ups and ecommerce firms; consumers are happier as discount deals become a daily, predictable affair rather than an annual or semi-annual event; and the much sought-after, talked-about right sizing of corporate balance sheets is becoming a reality as hard-nosed len ders crack down on bad loans and promoters become more pragmatic in selling assets.Ending months of soul searching, Suzlon promoter Tulsi Tanti decided to lighten up Suzlon’s stretched balance sheet by selling his German crown jewel Senvion for over a billion bucks a few weeks ago. A fortnight later, Anand Mahindra looks all set to bulk up his defence sector presence through a strategic acquisition of Pipavav Defence BSE 6.66 %

Most of the m&a activities spurred by lender pressure

In between, Alibaba’s Jack Ma smelled an opportunity in the booming mobile commerce space and committed a $575-million cheque to debut in India with an investment in Paytm while India’s largest private sector insurer ICICI Prudential Life got busy prepping up in anticipation of a liberalised foreign investment regime to raise additional funds and create a valuation marker of $6 billion prior to its IPO in the near future. These are some examples of how India Inc is trying to prepare for a future laden with opportunities and challenges. Rightsize, downsize, sell loss-making assets, buy growth wherever possible and raise money in a market which was the world’s second-best performer in dollar terms in 2014. It’s just 2 months into the new year and deal street has already shrugged off its ennui. The buzz is most certainly back.

This month alone, nearly five deals either got announced or were close to being concluded in the past week. Star TV announced that it is buying Telugu entertainment channel MAA for over Rs 2,000 crore, while Economic Times broke the story that several pharma firms are in the race to buy Claris Life Sciences’ injectable business for Rs 2,500-3,000 crore. Singapore’s Sembcorp announced that it will buy 60% in IDFC-backed Green Infra for over 1,000 crore while Dilip Shanghvi of Sun Pharma BSE -2.52 % announced a personal investment of 1,800 crore into Tulsi Tanti-promoted Suzlon. Rainmakers insist that it’s not just episodic M&A but in general, activity levels are picking up even in debt and equity capital markets. This after a roaring 2014 when the value of announced M&A deals involving Indian companies rose to $37 billion, a 25.5% increase compared with 2013. This value was the highest since 2011, according to data culled by Thomson Reuters. The average deal values too climbed as more number of bigger deals ($500-million-and-above) were announced. Experts and rainmakers believe this is just the beginning and deal activity will pick once the economy starts growing and companies regain confidence in demand projections. The perception of India among global investors has undergone a dramatic change over the past 12 months with a strong RBI governor delivering lower inflation and a stable exchange rate, feels Frank Hancock, Managing Director, Corporate Finance, at Barclays.

“Meanwhile, the stable new administration at the Centre has reasserted policy stability, thereby reversing the flight of capital. The debt market in particular is now very active, and Indian companies are taking advantage of both equity and debt-raising opportunities to refinance high-cost debt and create acquisition war chests,” he adds. Obviously, much of the activity has been spurred by lender pressure. Record high NPAs and pressure on profits means banks are no longer willing to tolerate business-as-usual stance of promoters with high debt and no meaningful downsizing strategy. They are pushing promoters to sell projects and companies even if it means a loss. Suzlon recently sold its German wind business for one billion euros after buying it for about 1.4 billion euros in 2009.

“This is the consolidation phase in power, cement, steel or infrastructure. This is the first sign of optimism as some amount of confidence and trust is coming back in India Inc. The second phase will see rollout of new plants and capex. But that is still 1-2 years away once policies fully unfold. In a way, these takeovers are also a kind of capex for the acquirers,” says Sushil Maroo, CEO, Essar Energy. These takeover talks have multiple catalysts. As regulators, lenders as well as investors tighten their screws, stressed companies are pro-actively looking to pare assets to cut debt. From Jaypee to Kesoram and Bharti; or from Lanco to Crompton Greaves – cutting across sectors and scale of business, India Inc has prioritised portfolio rebalancing through hive-offs, asset or business sales.

“Well-meaning promoters, who are at a group level strapped for liquidity due to various reasons, particularly policy inaction — are seriously considering divesting assets. These promoters have a serious intent to reduce their leverage position,” says Sanjay Nayar, CEO and Country Head of KKR India. This in turn has triggered large-scale domestic consolidation in sectors as diverse as power and multiplex. Secondly, larger Indian groups like Mahindra and JSW are taking steps to increase their domestic exposure after the government’s positive measures. For the insurance players like ICICI Pru Life or HDFC Standard Life, the new regulatory regime also gives hope to rework the equity structure of their JVs and capitalise their business. Inbound deals too are gaining momentum as many cash-rich multinational companies are looking to increase their India presence or even enter India and finally ambitious domestic players are gaining confidence to shop for assets overseas.

“With improved business sentiment, typically you will first see activity in the capital markets followed by domestic M&A and inbound deals, and then outbound acquisitions,” says Kaku Nakhate, president and country head, Bank of America Merrill Lynch. The capital market revival is already a one-and-a-half-year-old story but very few companies have attempted to cash in on it through share sales, IPOs and other forms of fund-raising. In 2015 so far, that is already changing. In the beginning of this month, HDFC Bank BSE 0.75 % raised about Rs 10,000 crore by selling American Depository Receipts and India-listed shares to qualified institutional investors in the largest follow-on offer by a private sector firm. Even Reliance Industries hit the forex debt market second time in as many weeks to raise about $1 billion in a benchmark 30-year paper — a first from Asia since 2003. This was within 10 days of another billion-dollar refinancing via 10-year bonds.

If the story is good, global investors are once again willing to bite. Even selling the India infrastructure theme has become easier – GMR Infrastructure flagship Delhi International Airport raised $289 million through a considerably oversubscribed bond issue just last month which saw $5-billion interest from investors. After a lull, blue-blooded private equity and sovereign wealth funds like Temasek are also back in the mix. By the end of this month, several large trades – CMS, Destimoney — are also due to get announced. With a soaring Sensex, the prospects for many of these funds to exit their portfolio companies have also improved. So over the next 3-6 months, from entertainment parks to diagnostic chains; from wellness players to toll road operators and agri-warehouses, IPOs are set to flood the capital markets. “There is cautious optimism all around and the Budget is expected to provide direction for accelerated growth and investment. While waiting for private and foreign strategic capital to be invested in new projects, the government can spur growth by spending on infrastructure and encouraging public sector companies to undertake capital expenditure. Investment by private sector and multinationals will follow when they witness sustained economic recovery and growth opportunities” argues Ravi Kapoor, Head of Corporate & Investment Banking at Citigroup India.

The biggest beneficiaries have been ecommerce firms and start-ups in other sectors. Online retail firms have been aggressive fund-raisers in the past two years as they wanted to invest to capture growth. The industry in India has grown at a swift pace in the last 5 years from around Rs 15-billion revenues in 2007-08 to Rs 139 billion in 2012-13, translating into a compounded annual growth rate (CAGR) of over 56%, rating agency Crisil BSE 1.17 % said in a report on February 2014. The nine-fold growth came on the back of increasing internet penetration and changing lifestyles, and was primarily driven by books, electronics and apparel. Crisil Research expects the buoyant trend to sustain in the medium term, and estimates the market will grow at a healthy 50-55% CAGR to 504 billion by 2015-16. India’s largest online retailer Flipkart’s value rose to $7 billion (including the $1-billion fund raise) in August when it received $1 billion in fresh capital while it was valued at less than $3 billion in May. It has received $1.8 billion since it started out in 2007, including $1.57 billion over the past 15 months.Its rival Snapdeal’s valuation rose to a billion dollars after it raised $100 million from Blackrock, Temasek and other investors. Tata Group’s former chairman Ratan Tata is an investor in the etailer. Most expect M&A activity to pick up further in the second half of the year. But for that to fructify, a confidence trigger like an investor-friendly budget is a must. “As share prices rise, the Indian M&A market will start to see another reversal of sentiment. From being the buyer’s market over the past few years, I expect to see the gradual re-emergence of India’s outbound M&A paradigm as companies will seek new technologies and markets, in healthcare, technology, and industrials,” adds Hancock.

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