Grant Thornton - India Watch Issue 16 - Indian companies listed on the London Markets


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Grant Thornton - India Watch Issue 16 - Indian companies listed on the London Markets

  1. 1. In association withISSUE 16 APRIL 2012India WatchWelcome to the Spring edition of GrantThornton’s India Watch, in association with theLondon Stock ExchangeIn this issue we highlight that Grant Thornton Our overview of the Indian economy thisIndia Watch Smaller Caps Index outperformed all quarter shows that it is proving difficult formajor indices between January and March 2012, the Indian government to support and developclosing at 24% up. It appears market watchers the economic potential of the country. Thewere right to be optimistic. recent state elections have now further dented The first quarter 2012 witnessed M&A deal the Government’s ability to push throughactivity of US$18 billion, in line with activity the economic reforms required. In addition,levels seen during the corresponding periods the recent Indian Budget 2012 has, in manyin 2010 and 2011. However, the focus in Q1 economists’ views, failed to implement suitable2012 was domestic deals, particularly internal measures to encourage foreign investment andrestructuring and mergers. Private Equity has also sustainable economic growth.continued to witness sustained momentum with Our guest contributors, Saket Somani andUS$2 billion worth of deals in Q1 2012 led by Sumir Bhardwaj, Partners at Churchgate Partners,Healthcare, IT ITES, Banking and Real Estate. outline the elements of a successful investor relations programme. Indian corporates more than ever need to proactively attract and maintain the attention of increasingly selective global fund managers in order to attract public capital. Lastly, Nidhi Gupta, tax manager at Walker, Chandiok & Co, gives us an update on the India Budget 2012 and the headline tax proposals that the Indian government announced in March. If you would like to discuss any of the matters arising in this issue or how Grant Thornton’s South Asia group can help you please contact me.Anuj ChandePartner, Corporate Financeand Head of South Asia GroupGrant Thornton UK LLPT +44 (0)20 7728 2133E
  2. 2. India Watch - Issue 16 April 2012The turning tide forIndian smaller caps?It appears market watchers were right to beoptimistic. Having fallen 11.27% during 2011,the Grant Thornton India Watch Smaller CapsIndex outperformed all major indices betweenJanuary and March 2012, closing at 24% upahead of the previous quarter compared to theFTSE 100’s 4% rise.130120110100 –– GT India Watch – ALL 90 –– FTSE 100 –– FTSE AIM ALL-SHARE 80 –– GT India Watch – smaller caps 70 –– FTSE ASEAN –– FTSE AIM 100 60 –– FTSE AIM UK 50 50 40 30 Dec 11 Jan 12 Feb 12 Mar 12Source: Thomson Datastream2
  3. 3. India Watch IssueIndia Watch - Issue 16 i c u April 2012 April 2012 r 012In a very strong turnaround for Q1 2012, the improved performance among Indian small caps. * The India Watch Index consists of 31 IndianIndia Watch Smaller Caps Index was up 12 points Against a backdrop of small signs of recovery in companies listed on AIM oron FTSE AIM UK 50 Index and ahead of global the US, some steadying of Europe’s eurozone the Main Market (excluding GDRs). We only considersmall cap indices (FTSE AIM All-Share Index crisis, and the Indian government’s efforts to companies to be Indian ifand FTSE AIM 100 Index). This gain suggests reduce interest rates and stabilise inflation, Indian they are domiciled in India and/or foreign companiesinvestor appetite for Indian SMEs remains strong. SMEs should remain an attractive option for holding Indian assets or Investment companies Many of the leading performers in Q1 2012 investors in Q2 and beyond. with Indian promoters. Theare in the agriculture and energy sectors. Nandan index has been created via Datastream, a ThomsonCleantec is a case in point. The rapid growth of Reuters product and isthe India-based biofuel producer is reflected in its weighted by Market Value. To avoid distortion of indexshare price: up from 60p in October 2011 to 98p trends, the two largestat the end of March 2012. And Nandan is forecast market cap entities, Essar Anuj Chande Energy and Vedantato grow by at least 25% a year until 2014-15 due Partner, Corporate Finance Resource, are strong demand for its high-yielding variety of and Head of South Asia Group ** Data sourced from Thomson Reuters.oilseeds. Grant Thornton UK LLP T +44 (0)20 7728 2133 Other energy companies dominating the E spots include Oilex, Indus Gas and MytrahEnergy, which gained 47.06%, 46.85% and23.66% respectively. The petroleum and naturalgas industry in India has attracted foreign directinvestment worth US$3,332.78 million betweenApril 2000 and December 2011, according todata from the Department of Industrial Policyand Promotion. The industry saw a furtherinvestment of US$196 million between April 2011and the start of 2012, according to the India BrandEquity Foundation. The first quarter of 2012 wasn’t so kind toWest Pioneer Properties. Its delayed reactionto tightening of monetary policy in 2011 meantit performed poorly in Q1. But the company’sefforts to position the Kalyan mall, near Mumbai,as a leading leisure destination should bolsterits fortunes. The Indian real estate industry as awhole should see its prospects improve, thanks topolicies to counter the inflationary issues that ledto its decline. Even for companies suffering poor results,the news is positive compared to 2011, signalling 3
  4. 4. India Watch - Issue 16 April 2012Domestic deal activity bucksthe trend - Overall dealmomentum sustainedThe quarter witnessed M&A deal activity of US$18 billion, in line with activitylevels seen during the corresponding period in 2010 and 2011. However, thefocus in Q1 2012 was domestic deals, particularly internal restructuring andmergers comprising approximately US$13 billion of the total M&A deal value.The focus on mergers and internal restructuring activities, a trend which gainedprominence in 2011, appears to have intensified in 2012 driven by VedantaGroup restructuring, estimated to be worth over US$12 billion.Deal summary: January – March 2012Q1 Deal Summary Volume Value (US$ billion)Year 2010 2011 2012 2010 2011 2012Inbound 23 26 36 1.12 13.75 1.26Outbound 46 34 26 13.26 1.73 0.69Cross Border 69 60 62 14.39 15.47 1.96Domestic & Internal Restructuring 119 82 115 3.05 2.40 16.32M&A 188 142 177 17.44 17.87 18.27PE 59 75 118 1.56 2.61 2.01QIP 9 2 2 0.87 0.53 0.1Grand Total 256 219 297 19.87 21.01 20.35It may be too early to conclude a trend based border deals in the past, i.e. Bharti Airtel – Zainon Q1 2012 cross border activity but deal worth US$10.7 billion in Q1 2010 and BP –values have significantly declined in the quarter Reliance Petroleum worth US$7.2 billion andwhen compared to earlier years. While Indian Vodafone Group Plc – Vodafone Essar worthcompanies trade at a premium to their developed US$5 billion in Q1 2011, and we expect more bigmarket counterparts on the basis of multiples ticket deals in the coming quarters. However,and valuation ratios, the combination of India’s outbound acquisitions will be approachedgrowth story and a weakened currency means cautiously, given the prevailing debt crisis inthat India still remains to be a favoured deal Europe and recent proposals outlined in thedestination. Indian 2012 Budget (see article Indian Budget Indian companies may view European 2012: round up).businesses as potential targets at relatively lowvaluations in order to gain access to advancedtechnology and markets; we have seen large cross4
  5. 5. India Watch - Issue 16 a Watch Issue Watc tch sue su Apr 2012 April 2012 pril 012Top M&A deals: Q1 2012Acquirer Target Sector US$ MillionSesa Goa Ltd Sterlite Industries Mining 11,927.80Tech Mahindra Satyam Computer Services IT & ITeS 1,400.00Piramal Healthcare Vodafone Essar Telecom 618.00Sesa Sterlite - To be formed Vedanta Aluminium Metals & Ores 473.00TV18 Broadcast Eenadu Television Network Media, Entertainment & Publishing 395.00Watson Pharmaceuticals Ascent Pharmahealth Pharma, Healthcare & Biotech 393.00Sesa Sterlite - To be formed The Madras Aluminium Company Power & Energy 363.00Binani Industries 3B - fibreglass Co Manufacturing 360.00Nippon Life Insurance Reliance Capital Asset Management Banking & Financial Services 290.00Sky City Foundation STel Pvt Ltd Telecom 174.50 M&A sector focusTop M&A sectors: January – March 2012 A wide range of sectors have contributed to M&A activity in Q1 2012, led by Mining and IT &ITES followed by Telecom, Pharma, Metals and Media & Entertainment. The Vedanta internal restructuring deal in the mining sector constituted 65% of M&A values for the quarter. Other top sectors in terms of deal value were IT ITES and Pharma which also witnessed steady volumes, in line with corresponding periods in past years. Telecom witnessed a sharp decline in deal value in the quarter with less than a billion dollars’ worth of deals, when compared to US$ 5 billion in Q1 2011 and over US$13 billion in Q1 2010. Mining [65%] However, this is a sector that is set to enter a consolidation phase post the easing of M&A IT & ITeS [9%] norms in the telecom sector allowing merged Telecom [4%] entities to have a market share of up to 60%. The recent ruling issued by the Supreme Court for Pharmaceuticals, the cancellation of 122 2G licences has affected a Healthcare & Biotech [4%] few foreign players such as Telenor, Sistema and Etisalat. Metals & Ores [3%] M&A activity in retail and civil aviation sectors Others [15%] remain muted with the Budget not providing 5
  6. 6. India Watch - Issue 16 April 2012Top PE deals: Q1 2012Investor Investee Sector US$ millionAccel Partners & Tiger Global Flipkart Online Services IT & ITeS 150.00Temasek Godrej Consumer FMCG, Food & Beverages 137.00General Atlantic LLC Fourcee Infrastructure Equipments Logistics 125.00Olympus Capital DM Healthcare Pharma, Healthcare & Biotech 100.00Government of Singapore Investment Vasan Healthcare Pharma, Healthcare & Biotech 100.00Morgan Stanley Real Estate Sheth Developer’s Mumbai project Real Estate 90.00Providence Equity, Macquarie Bank Hathway Cable & Datacom Media, Entertainment & Publishing 72.00Airro Mauritius Nandi Infrastructure Corridor Infrastructure Management 65.003i India Supreme Infrastructure Infrastructure Management 61.00Warburg Pincus AU Financiers Banking & Financial Services 50.00NYLIM Jacob Ballas Religare Finvest Banking & Financial Services 40.00Fidelity Growth Partners Aptuit Laurus Pharma, Healthcare & Biotech 40.00clarity on FDI in these sectors adding to the woes hands of SEBI registered PE/VC companies With specialof investors. or funds, thereby aligning with the true intent thanks for their Q1 2012 witnessed sustained momentum of pass though status for the PE/VC funds/ contribution toin overall M&A deal making, however, the companies. At present, only investments in nine Ankita Aroraremaining part of the year will largely depend on specified sectors are eligible for tax exemptions. and Sowmyathe aforementioned regulatory implications. The removal of the sector restrictions will foster Ravikumar of the the creation of a more robust domestic venture Grant ThorntonPE capital and private equity industry as most funds India DealtrackerPrivate Equity has continued to witness sustained that invest in India operate as foreign investors team.momentum with US$2 billion worth of deals in from tax-friendly, offshore locations such asQ1 2012 led by Healthcare, IT ITES, Banking Mauritius or the Cayman Islands.and Real Estate sectors. The quarter saw Morgan The quarter witnessed negligible activity onStanley Real Estate Investment (MSREI), the IPO and QIP front, a continuation of theinvesting US$90 million in a realty project after trend seen in 2011. It remains to be seen how dealmore than four years out of the Indian market. activity in the rest of the year will trend, given continued uncertainty in the European economy,PE Exits impact of tax regulations introduced in the BudgetWe can expect a surge of exits likely in the coming and lack of clarity on the FDI and regulatoryyears as funds raised post 2005 reach the end of front. Nevertheless, we believe increased domestictheir investment cycles, thus creating enormous activity and sustained PE momentum augurs wellpressure for exits for this invested capital, for overall deal activity for the rest of the year.if investors are to maintain or increase theirallocations to India. Considering the fact that thevolatile stock markets are not expected to aid exitsthrough IPOs, secondary PE deals could becomeone of the favoured transaction routes. The quarter saw PE major Warburg Pincusexiting from Kotak Mahindra Bank Ltd, garneringover US$0.6 billion marking the largest exit byWarburg Pincus after they exited Bharti Airtel, byencashing US$1.8 billion on their original US$290million investment in 1999. Karthik Balisagar In what we consider a major boost for the Valuations Manager and AssistantIndia PE/VC space, the Union Budget 2012-13 Head of Valuations South Asia Group Grant Thornton UK LLPhas proposed positive initiatives such as 100 per T +44 (0)20 7865 2475cent tax exemption on income from exits in the E
  7. 7. India Watch - Issue 16 April 2012Indian economy –Prospects for slower growthHeadlines in both the UK and India have been dominated by theirrespective budgets in the last few weeks and, while much has beenwritten in the UK about George’s Osborne’s address to parliamentand the subsequent meetings with the Treasury Committee, weshould take this opportunity to look at how Asia’s third largesteconomy has fared and reacted to its own budget.On 16 March, India’s finance minister, PranabMukherjee, announced India’s latest budget andhas faced increasing criticism for delivering whathad been widely considered a weak and, in somecases, a failed budget. In many economists’ views,Mr Mukherjee failed to address the level of India’spublic spending as well as failed to implementsuitable measures to encourage foreign investmentand sustainable economic growth. Mr Mukherjee forecast a fiscal deficit of 5.9per cent of GDP in the financial year to the end As an example of this, and while appreciatingof March against a previous target of 4.6 per cent. that it is rather biased to pick on a single policyHe also predicted that the deficit would fall to 5.1 in particular, it is difficult to see any real benefitper cent of GDP for the year ending March 2013. in respect to the introduction of a retrospective While the budget didn’t contain any major tax on offshore transactions involving India assetssurprises or grand reforms, it also didn’t shut – a move clearly made with Vodafone in mind.down the increasing number of doubters in The policy is surely only going to deter externalrespect to India’s economic growth outlook by investment into India further. It is policiesputting forward a brave plan to revitalise growth like these, however, which are symptomaticin the country and encourage much needed of the current government and their prioritiesforeign investment. concerning economic reform. 7
  8. 8. India Watch IssueIndia Watch - Issue 16 dia di Watc tch Issusue April 2012 April 2012 p 012 As noted in the Financial Times, the weak go into the details in this economic update, thereeconomic data received from the manufacturing were comments from the political oppositionand mining sectors (two of India’s largest sectors) party which said that the irregularities couldover the last few months has accelerated the shift eclipse the 2G telecom licence scandal which hasof India’s economy to lower growth. India now been at the forefront of political and economicfaces the possibility of a worse performance in debate in India for over a year and a half.this current fiscal year in terms of growth than it It is, therefore, clear to see that there continuesdid in the fiscal year of the global financial crisis. to be substantial and persistent governance issues To further highlight India’s economic within Indian politics. The number and scale ofmismanagement, the country’s economic growth the political scandals which have come out ofrate dropped to 6.1 per cent in the quarter ended India in a relatively short space of time is totally31 December 2011. Whilst it should be noted that, unacceptable for an economy which is now verya growth rate of 6.1 per cent is still significantly much in need of external finance and investment.more impressive than some of the more developed What’s more, whilst there will always be a longeconomies in the West, it is India’s slowest rate in list of countries, companies and individualsthree years. Unfortunately, the recent economic looking to increase their exposure to the Indianand political reforms have just not been able to economy, the risk level might just have increasedsupport and develop the economic potential of a little too far for some.the country. The recent state elections have now furtherdented the Government’s ability to pushthrough the economic reforms required. Out Anuj Chandeof the five state polls in early March, Congress Partner, Corporate Financesecured a victory in the politically insignificant and Head of South Asia Groupstate of Manipur only, while in India’s most Grant Thornton UK LLPpopulous state, Uttar Pradesh (c. 200m), the T +44 (0)20 7728 2133 E floundered in fourth place. With more stateelections to come and a general election in 2014,things are not looking particularly good for thecurrent Government. Furthermore, and to makematters worse, the Indian government’s troublesover recent months have not just revolved aroundthe economy or the run up to state elections.There were fresh attacks following a leaked draftreport by the state auditor which warned ofUS$20 billion of state losses on the sale of Indiancoal assets. According to the Times of India, the 110page report said that the losses were incurred byallocating coal blocks between 2004 and 2009outside of an auction process. While we won’t8
  9. 9. India Watch - Issue 16 April 2012An investor relationsprogram: realising your fullvaluation potentialDespite the strong recent flows of Foreign At Churchgate Partners we believe there are 4Institutional Investors (FII) capital into the building blocks for a successful IR program:Indian equity markets, Indian corporates morethan ever need to proactively attract and maintain 1 Communication materials: Deliver best inthe attention of increasingly selective global class communication materials that truly reflectfund managers. This applies equally to Indian the investment case and equity story of thecompanies listed in London. Leaving investors identify the future outperformers in each A quarterly earnings release needs to beindustry sector, without management having geared towards the financial markets andthe opportunity to best present their specific not the press (which is a separate release).investment case, has direct value implications. Explaining the ‘story’ for the quarter isThese potentially include having to issue equity critical: what mix of pricing and volumes haveat relatively unattractive valuations for ongoing driven revenues, why operating margins maydeleveraging, financing future growth plans have changed, updates on expansion plans,and meeting upcoming minimum free float commentary on the economic environmentrequirements. Ultimately a successful investor and a soft view on the performance outlook torelations (IR) programme should achieve guide the research analysts’ thought processan appropriate trading valuation based on a (without financial guidance). This quarterlycontinuous and open communication with the earnings release then weaves into the earningsfinancial markets. Shareholders recognise the presentations, introduction scripts for investorappointment of an international IR adviser as part conference calls, corporate presentations andof management’s ongoing commitment to bridge eventually shapes the management discussionany market valuation discount. and analysis (MD&A) and Directors For a CEO to internally prioritise an IR value Report for the annual report. Detail, focusmaximisation program, dedicated corporate and consistency across all communicationresources are a pre-requisite. As CFO’s have platforms (and captured on the IR website tab)limited time that can be allocated to this role, an are essential. Although the application of socialexternal IR adviser provides a head of IR not only media for IR programs and online reputationwith operating leverage but ‘fresh’ perspectives management is evolving, it needs to be anbased on international best practices. A quarterly integrated part of the plan.results press release and attending non dealinvestor conferences regularly, whilst helpful, are 2 Research analyst engagement: Drivefar from a differentiated strategy. Furthermore, dialogue with a select group of researchpublic relations should not be confused with analysts who have recognised industryinvestor relations. expertise and are backed by a strong equity sales force. Meeting with research analysts on a regular basis, and ideally in a one on one setting, to update them on business developments 9
  10. 10. India Watch - Issue 16 April 2012 is key to building sell side support. It also engagements in say Singapore, Hong Kong, helps research analysts in cases where they London, Frankfurt or New York. are either too bullish or too bearish in their forecasts. This is particularly important during 4. Market perception study: Proactively difficult and volatile times, where visibility collecting feedback through a structured on management’s strategy and operational process on a regular basis provides context focus is essential for their ongoing dialogue from which to refine and enhance an IR with their institutional investor clients. Any program. sense of lack of management commitment to Analysing how the market (buy and a regular relationship is likely to be hindrance sell side) perceives the company, allows to the publication of any initiation research management to more actively manage note or may result in an unnecessary rating research analyst and investor relationships. downgrade. Limited research coverage is often Benchmarking communication materials and viewed as a ‘red flag’ by investors. Although key financial/operating metrics with global a comprehensive research report is the ideal peers identifies areas where financial disclosure outcome from such a relationship, this can and transparency may be improved. A well- often take longer than expected due to the constructed market perception study allows current resource pressures at brokerage firms. management and IR teams to better understand A management meeting note or a sales force market views and be more effective in their briefing may also be effective alternatives to time allocation to IR. An experienced IR explore in addition to a full research report. adviser should be able to provide insights on the market’s perception of areas including:3. Global investor access: Access to and strategy, operational strengths and weaknesses, feedback from leading global EM and sector- financial performance, management and focused investors, India dedicated funds and IR effectiveness. Soliciting this feedback is portfolio managers to HNI’s. viewed extremely positively by the financial Market capitalisation and average daily community. trading volumes are key criteria which often limit what type of investor a company can Overall, IR success is measured by a number attract. It is not uncommon for the largest of different metrics. In addition to how the global funds to be restricted from investing company trades on a valuation multiple basis, in companies with trading volumes less than the development of a diverse long-term investor $5 million per day. As a result of the dramatic base, an appropriate mix of FII and domestic growth in investor appetite for the emerging investors, the number of analysts actively markets in recent years, there is a wide and covering the stock, a base of shareholders who growing selection of funds which are able to are supportive of management’s strategy and invest in mid/small cap Indian stocks with reduced share price volatility are all indicators attractive rerating potential. Actively soliciting of positive results. To successfully attract public and tracking feedback from previous investor capital and achieve some of these goals requires a meetings and conference calls attendees enables combination of management commitment and the a company to widen and strengthen its investor implementation of a specifically designed relationships. Whilst preparing for investor IR program. conferences, corporates should work more closely with their IR adviser in selecting those Saket Somani investors they would like the host brokerage Partner firm to specifically target. Churchgate Partners Working with an international adviser also enables the promoter, CEO or CFO to Sumir Bhardwaj meet with global investors at short notice Partner should they have time in between businesses Churchgate Partners sumir@churchgatepartners.com10
  11. 11. IndiIndia Watch IssueIndia Watch - Issue 16 dia at Issu sue April 2012 April 2012 pril 012India Budget 2012: Round-upThe ruling Indian government presented the budget proposals for thefinancial year (FY) 2012-2013 before the lower house of the IndianParliament on March 16th. The Direct Tax Code (DTC) was plannedto substitute the existing Indian Income Tax Act, however, this hasbeen deferred, with the Finance Minister re-affirming enactment ofDTC at the earliest opportunity.The government announced certain significant of a sort of ‘look through’ provision would bedirect tax proposals which were part of DTC in accelerated, given that the Indian tax departmentthe 2012 Budget. These proposals lay emphasis lost one of the biggest tax litigation cases witnessedon anti-avoidance measures, addressing money anywhere in the world, however, what was notlaundering issues and tracing the source of expected, was the retrospective operation of thisfunds in circulation. The budget proposals will provision. The retrospective amendment has, oncetranscend into statute sometime in May 2012 again stirred up the debate on consistency in taxafter Parliamentary discussion and the Indian policy amongst industry, tax professionals andPresident’s assent. even political circles. Below, we summarise the headline tax proposalsalong with the possible impact on offshore merger Codification of General Anti-Avoidanceand acquisition transactions, foreign trade and Rules (GAAR)foreign investments into India. GAAR has been legislated as a doctrine of ‘substance over form’ to check aggressive taxTaxation of cross-border deals with planning through use of sophisticated structures.Indian assets GAAR, as the language suggests, is proposedThe DTC contains a provision for the taxation of to ring-fence round trip financing, transactionsindirect share transfers outside India where at least lacking commercial substance or having malafide50% of the value of underlying assets located in intention. These rules would apply regardless ofIndia are owned by the transferor of the shares. treaty provisions. GAAR will be invoked after The budget proposals have incorporated a examination at two levels – Commissioner levelsimilar provision albeit in a more sweeping way. and Approving Panel’s level.The proposal seeks to tax transactions involving The Finance Minister has assured that GAARthe transfer of offshore companies’ shares between will only be triggered where legal structures haveone non-resident of India and another where the been superimposed to camouflage impropercompanies’ shares derived their value substantially motive and genuine overseas investors should notfrom assets located in India. These proposals lead worry. Yet, stringency in GAAR could impactto taxation in the country of operation (i.e. India) bone-fide business structures and lead to arbitrarytreating it as a country of source. application since the onus to prove genuineness is It was widely anticipated that the introduction on the taxpayer. 11
  12. 12. Introduction of Advance Pricing up to 5 per cent of the transaction price availableAgreements (APA) to the taxpayer. The 2012 Budget has proposed toPolicymakers introduced APA in the 2012 Budget restrict this tolerance limit to a maximum ofto deal with the increasing litigation relating to 3 per cent of the transaction price fromtransfer pricing (TP) adjustments and to provide FY 2012-13. We may witness a notification withcertainty to multinationals involved in transactions industry specific tolerance limits not exceedingwith their related parties. 3 per cent of the transaction price. This proposal APA is an agreement between a taxpayer indicates the intention of tightening the availableand a tax administrator on an appropriate TP benefit to the taxpayer and moving towards a moremethodology for a set of transactions. stringent TP regime. Although the detailed rules and guidelines The business community needs to watchfor application will follow in due course, the the developments closely once these proposalsintroduction of APA, meets the long-standing translate into a law. It should actively engagedemand of multinational enterprises with in a dialogue with the government to presentfootprints in India. APAs are expected to alleviate businesses’ point of view so that there is andisputes between taxpayers and the Indian tax effective and efficient implementation of thedepartment in respect of foreign transactions new tax laws.attracting TP regulations.Calculation of arm’s length price (ALP):Revision of tolerance limitIndian TP regulations follow an arithmetic mean as Nidhi Guptaopposed to an interquartile range used by various Manager, Tax & Regulatory servicesjurisdictions worldwide to calculate ALP, where Walker, Chandiok & Cothere is more than one ALP. There is, however, a T +01 11 42787050safe harbour in the form of permissible variance E About us Grant Thornton UK LLP established a dedicated South Asia Group in 1991 to serve Asian owned businesses in the UK as well as those investing into and from the Indian subcontinent. We are proud to be one of the first UK accountancy firms to focus on this region. We are widely recognised as one of the leading international firms advising on India-related matters and have been in involved in every IPO involving an Indian company on AIM, with the exception of the real estate sector. For those clients requiring advice in both the UK and India we offer a seamless service building on the already strong and close relationship© 2012 Grant Thornton UK LLP. All rights reserved. between Grant Thornton UK LLP and Grant Thornton India.‘Grant Thornton’ means Grant Thornton UK LLP, a limitedliability partnership. International and emerging markets blogGrant Thornton is a member firm of Grant Thornton International Ltd As part of our commitment to remaining at the forefront of changes(Grant Thornton International). References to ‘Grant Thornton’ are to the and developments in regards to UK-India relationship we will be usingbrand under which the Grant Thornton member firms operate and refer this space to post original thought leadership and research relevant toto one or more member firms, as the context requires. Grant Thornton the industry. The idea is to encourage discussion around these issuesInternational and the member firms are not a worldwide partnership.Services are delivered independently by member firms, which are not and to open up new areas and debate.responsible for the services or activities of one another. Grant ThorntonInternational does not provide services to clients. To participate: publication has been prepared only as a guide.No responsibility can be accepted by us for loss occasionedto any person acting or refraining from acting as a result of More information about our South Asia Group can be found at:any material in this publication.