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Capital Markets : Best Practices India CFO Summit 2005 – Mumbai 25 Nov

Capital Markets : Best Practices India CFO Summit 2005 – Mumbai 25 Nov. Alok Misra, Group CFO MphasiS BFL. Corporatization.

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Capital Markets : Best Practices India CFO Summit 2005 – Mumbai 25 Nov

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  1. Capital Markets : Best Practices India CFO Summit 2005 – Mumbai 25 Nov Alok Misra, Group CFO MphasiS BFL

  2. Corporatization • Corporatization is a form of economic reform which takes services from the direct control of the government, and places them in the control of government-owned corporations. • This is often seen as a step towards full-scale privatization • Impacts • Unlock value • Introduction of higher standards of corporate governance • Capital market behavior • Better regulation of commercial and business transactions • Consumer protection. • These steps will all contribute to the nourishment and strengthening of the private sector • Examples • VSNL / BSNL • ONGC & other Oil PSUs • Maruti

  3. Demutualization • The process of changing corporate structure from a mutual fund company to some other form, such as a limited liability or corporation • Demutualization in exchanges refers to the change in the legal status of the exchange from a mutual association with having one vote per member (with possibly consensus based decision making) into a company limited by shares, with one vote per share (with majority based decision making) • Demutualization also offers potential opportunities for • strengthening governance • offering alternate business models of exchanges • raising capital and • improving operational efficiency • Challenges • Regulatory framework • Conflicts of interests

  4. Demutualization • Asian Stock Exchanges corporate structure

  5. Demutualization • Market data

  6. The India Feel Good Factor • Capital markets & foreign investments • free currency flows • foreign investments for Indian companies • regulatory nuisance factors • a capital markets Code of Conduct • Accounting and taxation essentials • Accounting standards • Presentation and disclosure of financials • Taxation of foreign companies • Taxation of foreign investments • Corporate governance & the pivotal role of the Board

  7. Board Structures*

  8. Board Structures* * Crisil Ratings

  9. Integration of Stock exchanges / Regionalisation • The challenge for each capital market: • Increase of liquidity, avoid marginalisation. • Preconditions: Economic stability, economic growth, issuers, company structure, governance and results • Remote members and cross membership & Cross listing • Linked trading systems and Links on execution side (clearing, settlement, registry) • Regulatory framework supervision, transparency & Role of market participants • The benefits of a regional integration of stock exchanges : • Diversified risk in a wider market • More efficient and competitive markets – larger players • Lower costs & higher returns by increased cross border capital flows • By pooling the resources of fledgling and fragmented capital markets, regionalization could boost liquidity and the ability of these markets to mobilize local and international capital for private-sector and infrastructural development • Investors would gain access to a broader range of shares; issuers would gain access to a larger number of investors • Prevent large capital outflows from the region

  10. Working with shareholders and management • Disclosures • Financial Statements • Clause 35 • Clause 41 • Transparency / Governance • Clause 49 • Governance rating • Accountability / Internal Control • CEO/CFO Certification • Enterprise Risk Management • SOX-ing the Listing Agreement • Compliance • Internal audits • Statutory Compliance processes - global • Issues • Company Law v SEBI Guidelines v Listing Agreements

  11. The Way Forward For India • A single regulator for • Banking • Securities/stocks • Insurance • Asset management • With a thematic approach to • eCommerce • the impact of the Internet • the foreign investor • the growing retail investor

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