Reena Zachariah & Kala Vijayraghavan
Mumbai: Diageo Plc mayhave to make another open of-fer to the shareholders ofUnited Spirits (USL) as capi-tal markets regulator Sebiviews the world’s biggest dis-tiller's $75-million settlementlast year with embattled busi-nessman Vijay Mallya for hisexit from the Indian companyas a change in management
control.“Our view
is that beforethe settle-ment agree-ment was en-tered into,there wasdual controlof Mallyaand Diageoin USL, butnow there isa change of
control,” a senior official atthe Securities and ExchangeBoard of India (Sebi) told ET.
On February 25, 2016, Diag-eo, the maker of Smirnoffvodka and Johnnie Walkerscotch, entered into a settle-ment agreement with Mal-lya as per which he agreed toresign as the chairman anddirector of USL and also asdirector in other USL groupcompanies. Besides, Diageo
and USL agreed with UnitedBreweries Holding Limited(UBHL) and Kingfisher Fin-vest India to terminate theshareholder's agreement en-tered into between the par-ties on November 9, 2014.
According to India’s take-over regulations, a changeof control in a listed compa-ny requires the incumbentto make an open offer topublic shareholders.
The regulator has givenDiageo three weeks to re-spond to its “communica-tion of findings”, said an-other person familiar withthe development.
No Change of Control: Diageo��16
IN CONTROL OF INDIAN CO SINCE JULY ’14: MNC
Diageo may Have to Make AnotherUSL Open Offer Pact with Mallya for
his exit from United
Spirits a change in
control, says Sebi
On Feb 25, 2016, Vijay Mallya signs $75m settlement with Diageo to exit United Spirits
Mallya agrees to resign as USL’s chairman & director and as director in other USL group cos
Sebi says the agreement resulted in a change in management control
Rules say a change ofcontrol in a listed co necessitates an open offer
Diageo, however, saysthere was no change ofcontrol in Feb 2016
It contends it has been in control of USL since itstarted consolidatingUSL results in 2014
Changing Equations
Sebi hasgiven Diageothree weeksto respond toits commu-nication offindings, saida personfamiliar withthe deve-lopment
80% VOTES IN FAVOUR OF OUSTER FROM TATA SONS BOARD Noel Tata & mother Simone back Ratan Tata;
Minocher Tata’s children abstain; Cyrus Mistry & brother Shapoor skip meeting; battle shifts to NCLT
Our Bureau
Mumbai:Tata Sons removed for-mer chairman Cyrus Mistryfrom its board on Monday, bring-ing to a close another chapter inthe battle for control at India’soldest and largest conglomera-te that erupted with his drama-tic ouster as chairman on Octo-ber 24 last year.“The shareholders of Tata
Sons, at the extraordinary gene-ral meeting (EGM) held today, pas-sed, with the requisite majority, aresolution to remove Cyrus Mist-ry as a director of Tata Sons,” thecompany said in a press release.
The 80% vote in favour of the de-cision put the seal on the foun-
ding Tata family’s control ofthe group holding compa-ny after Mistry had re-belled against his ouster.
The result was never in
doubt, despite the Mistry fami-ly’s 18.4% stake in Tata Sons asthat’s trumped by the two-thirdsholding of the Tata Trusts run byRatan Tata.
At the EGM on Monday, the Tatafamily put up a united front, saidpeople aware of the matter. Tatamatriarch Simone (wife of the la-te Naval Tata) and her son NoelTata issued proxies in favour ofRatan Tata. There had been somespeculation about his vote as No-el Tata is married to Cyrus Mist-ry’s sister.
“It was a foregone conclusion,”a source close to Mistry said.
Vera Farhad Choksey and herbrother Jimmy Tata abstained.They are the children of MinocherTata, a descendent from the Sak-latvala family line. Tata Sons de-clined to comment on voting pat-tern of individual shareholders.
Mistry Failed to Seek Stay on EGM��23
Joining Hands, House of TatasCloses Door on Cyrus Mistry
IT’s Time to PayBack: InvestorsStress on BuybackIT cos get calls to
boost shareholder
returns as growth
prospects weaken
and Infosys have cut theirgrowth targets while Mindtreehas warned of slower growth.Analysts have also cut theirprice targets for IT stocks to fac-tor in the tougher business envi-ronment.
In his letter addressed to theCognizant board and CEO JesseCohn, Elliott’s senior portfoliomanager suggested that the ITservices company should “im-mediately institute a long-termcapital return program with acommitment to return 75% of USfree cash flow to shareholders.”
Cognizant in Talks with Elliott��16
Bengaluru: Indian outsourc-ing companies are beset withrising demands from investorsfor a buyback of shares even asthey grapple with slowinggrowth and the spectre of risingprotectionism in the UnitedStates — their largest market.
Inspired by the demand lastNovember by hedge fund ElliottManagement for an increase inshare buybacks at Cognizant,both domestic and foreign insti-tutional investors are seekingsimilar action from other infor-mation technology servicescompanies, according to seniorexecutives.
“After the Elliott letter, we alsogot some questions about this,especially because the sector isnot growing as fast as it was,”said Milind Kulkarni, chief fi-nancial officer at Tech Mahin-dra after the company’s third-quarter results last week.
“But this is something ourboard will have to take a deci-sion on,” he said.
The outsourcing industry hasseen a steady dip in growth in re-cent times. The National Associ-ation of Software and ServicesCompanies (Nasscom) has cutthe industry’s growth target forfiscal 2017 to 8-10% from 10-12%for the same year.
Companies such as Cognizant
COGNIZANT INVESTOR OPENS FLOODGATES
TUESDAY, 7 FEBRUARY 2017BENNETT, COLEMAN & CO. LTD.THE ECONOMIC TIMES
WWW.ECONOMICTIMES.COM
India to Play a Part in PartnershipAnnounced by Suzuki and ToyotaIndia will be part of a partnership Toyota and
Suzuki announced on Monday to explore possi-
bility of cooperation in areas including environ-
ment, safety and information technology, and
mutual supply of products and components.
Brands & Companies ��8
llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll
Digital Drive Tilts Pay Hike Scale in Favour of Fintech StartupsFinancial technologies and learning solutions
startups may emrge the best paymasters this
appraisal season, aided by the government’s
drive toward digital transactions.
Careers: The Fast Track��18
Inside story
Snapdeal’s head of corporate development Abhishek
Kumar has resigned, becoming the second senior exec-
utive to leave after Sandeep Komaravelly in January.
Former Housing.com CEO Jason Kothari, whom Snapdeal hired as
chief strategy and investment officer, will take on Kumar’s role.��6
New Role for Kothari at Snapdeal
5.69
4.88
1.9
4.48
Under Pressure
($ Billion)
Cash & Cash Equivalents and Investments(as of December 31, 2016)
TCS
Wipro
Infosys
HCL Tech
IT companies sayinvestors asking about share buybacks
Mindtree saysevaluating optionsto enhance share-holder value
Elliott has asked Cognizantto boost buyback and starta dividend
Our Bureau
New Delhi: The Telecom Com-mission has questioned the in-dustry regulator’s methodologyand its basis for recommendingcumulative penalties of .̀ 3,050crore on Bharti Airtel, Idea Cellu-lar and Vodafone for allegedly“failing” to provide adequate po-ints of connectivity to RelianceJio Infocomm, which led to call fa-ilures. It has even asked whetherthe authority has the powers torecommend such penalties.
It has sought around 12 clarifica-tions from the Telecom Regulato-ry Authority of India (Trai) onmultiple aspects relating to thepenalty which the regulator re-commended last year on the in-cumbent telecom operators, saidpeople aware of the matter.
“The commission has soughtclarifications from Trai on multi-ple issues and the regulator nowhas 15 days to respond,” a seniorgovernment functionary told ET.
The Telecom Commission (TC),the highest decision-making bo-
dy of the telecomdepartment, meton Monday to dis-cuss the regula-tor’s penalty re-commendations.The commissionis headed by thetelecom secreta-ry and comprises
the Department of Industrial Po-licy and Promotion secretary, eco-nomic affairs secretary, Niti Aay-og chief executive officer and ITsecretary as members.
Questioning Methodology��16
Trai Gets Earful from Telecom Panelfor Penalty Call to Incumbent TelcosTC questions Trai’s basis for slapping .̀ 3k cr fine on Airtel, Idea & Voda for ‘failing’ to provide POIs to Jio
TC has askedTrai if it evenpossessespowers underthe Trai Act torecommendsuch penalties
Seeking ExplanationTELECOM COMMISSION HAS
Asked the regulator if it even pos-sesses the powers to recommend a penalty
Asked Trai why it computed congestion on a daily basis instead of monthly basis
Asked reasons for examining viola-tions under licence agreement and not draft inter-connect agreement
Sought to knowfrom when did Trai count the period of 90 days, within which in-cumbents are obliged to provide required points of interconnection
Sought a
12-pointclarifi cation from Trai over its basis for recommending penalty
Vodafone India is ringing in organisational changes with top-level
rejigs and some exits as the No. 2 telco prepares for a dogged fight
amid talks with Idea for creating the country’s largest telco.��10
Top-Level Rejig at Vodafone
Deepali Gupta & Sneha Shah
Mumbai:Talks to sell a controlling stakein Bharti Infratel to a consortium of KKRand CPP Investment Board seem to havehit a snag over valuation, with the tele-com tower company’s shares taking adeep dive following news of a potentialIdea Cellular-Vodafone India merger.
A 17% drop in the share price of BhartiInfratel in just two trading days last weekeroded its market value by .̀11,400 crore,thus denting the potential deal value, ex-ecutives in the know of the talks said.
Bharti Infratel has communicated to theprivate equity firm and the Canadianpension fund that the premium for cedingmanagement control is significantlyhigher than the .̀ 340 a share offer theymade, the executives said. The negotia-tions, though, are ongoing, they added.
The tower unit of Bharti Airtel is look-ing to sell a 41% stake along with manage-ment control. Bharti Airtel owns 71.96%of the company while the rest is held bypublic shareholders. The consortiumsubmitted its bid late last week.
On Monday, the company’s shares closedat .̀ 304.60 on the Bombay Stock Exchange,valuing it at over .̀ 56,000 crore ($8.3 bil-lion). The stock, which hit a year-high of.̀ 412.55 in July last, has recovered margin-ally after last week’s meltdown.
Aspokesman for Bharti Enterprises, thegroup holding company,declined to comment onthe talks. KKR and CPPIBdidn’t respond to emailsseeking comment.
Amerger between Voda-fone India and Idea is ex-pected to significantly af-fect demand for towersites, as the second andthird largest telecom op-
erators will seek to rationalise the re-quirement of infrastructure by avoidingoverlaps as a combined entity. That, inturn, will hurt the long-term profitabilityof the company. Analysts at JM FinancialInstitutional Securities estimate the po-tential damage to range between .̀ 40 and.̀ 53 a share for Bharti Infratel.
Infratel, Indus Vulnerable to Consolidation��23
Bharti Infratel’s Stake-SaleTalks Hit a Valuation BumpSharp drop in share price dents potential deal value
Co tells KKRand CPPIB thepremium forceding controlis much higherthan the .̀ 340 ashare offerthey made
New Delhi: Coca-Cola and PepsiCo,the world’s largest sellers of softdrinks, are viewing the growingpopularity of a slew of smallerregional brands in India as a threat. For the first time, the colamultinationals are setting up specialised groups to track theseB-brands, which are stealing marketshare from them.
“The teams looking at these brandsare separate from the ones trackingrural markets or counterfeits,” said atop official from one of the colacompanies.
There are at least 50 such fizzy
drink brands that are sold in thecountry with little spending onmarketing. The regional drinks areabout 20% cheaper than the globalcola brands.
From Bovonto in Tamil Nadu and
Jayanti cola made by Jayanti Be-verages in Alwar to Xalta Cola madeby a New Delhi-based company andGujarat’s Hajoori & Sons, which sellsdrinks branded Sosyo, Ginlim andLemee, to City Cola sold by Delhi-
based Rahul Beverages — the threatis ominous. According to industrydata, the consolidated market shareof these regional brands is 15-17%.
That’s a sizable chunk of the organi-sed soft drink market, which is esti-mated at over .̀ 14,000 crore. Thesebrands are riding on almost no mar-keting spends and high trade mar-gins, with some of them supplyingtheir products directly to retailers.
A Coca-Cola spokesperson said thecompany was competition-aware butnot competition-focussed. “We stayinformed of new products, newbrands and emerging consumerpreferences.”
Local Brands Behind TN Boycott��16
Cola Giants’ Bottled-up Fears of Smaller Rivals Bubble UpCola majors set up specialised groups to track smaller regional brands that are stealing market share
The Telecom
Disputes Settle-
ment and Appel-
late Tribunal (TDSAT) has
asked Telecom Regulatory
Authority of India (Trai) to
submit clarifications on
Reliance Jio Infocomm’s
free voice and data ser-
vices, including whether
the company had kept the
watchdog in the loop on its
promotional offers, re-
ports Our Bureau. This
followed the Trai clearing
Jio’s free ‘Happy New Year’
voice calling and data plan
last week.��10
TDSAT SeeksDetails from Traion Jio Offers
The initial
public offer
(IPO) of DMart
owner Avenue Super-
marts, which is likely to be
floated soon, is expected
to command a valuation
of .̀18,000 crore, much
higher than the earlier
expectation of .̀ 7,000
crore, reports Jwailt
Vyas. According to sourc-
es, including investment
bankers and analysts, the
company received good
response at its road-
shows, being India’s most
profitable retailer —
online and offline. ��11
D-Mart maySeek .̀ 18k crIPO Valuation
Infrastructure
could be the
next popular
theme on Dalal Street with
the government empha-
sising that money should
be used to build assets.
Mutual funds are pushing
distributors to ask clients
to invest in funds focussed
on infra companies, which
have been laggards in the
stock market since 2008,
reports Prashant Ma-
hesh. “Infra is one sector I
would recommend for the
next one year,” said S
Naren, executive director,
ICICI Prudential MF. ��11
MFs PushInfra SchemesPost Budget
Will penalising cash transactions above .̀ 3 lakh help check the black economy?
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The Supreme Court on
Monday directed the
attachment of Sahara’s
Aamby Valley in Pune to
force the group to pay up a balance of
.̀14,799 crore owed by it to the
Securities and Exchange Board of
India. This is the balance of the princi-
pal amount so far not paid by the
group. The case will come up for
hearing again on February 27.��16
Apex Court OrdersAttachment ofAamby Valley
Rebuffing comments by UP
CM Akhilesh Yadav that the
Union Budget was dis-
appointing for the poll-bound state,
Niti Aayog has put together data to
show how the state has benefitted
from various allocations. The think
tank has blamed the state govern-
ment for failing to take proactive
action to avail of all the funds offered
under different schemes.��19
Niti Aayog Puts OutData to Counter UP CM
ANIRBAN
ARINDAM
MUMBAI | 24 + 4 PAGES OF ET PANACHE | * .̀ 3.00 OR .̀ 7.00 ALONG WITH THE TIMES OF INDIA
