Week in Review, April 18

A round up of some of the week's most significant corporate events and news stories.

India on collision course with investors over $6.4bn tax target

Global fund managers investing in India received a nasty shock this week, as Arun Jaitley, finance minister, confirmed for the first time that his government planned to collect as much as $6.4bn in tax payments by targeting thousands of foreign institutional investors, writes James Crabtree.

The dispute is the latest in a succession of protracted altercations over tax between international businesses and Indian revenue authorities, including high-profile rows with companies such as Royal Dutch Shell and Vodafone.

Over the past month, international funds had become increasingly worried that they too would be drawn into a disagreement, over what is known as the minimum alternative tax (MAT), a charge typically levied on Indian domestic companies but not foreign entities.

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But while Mr Jaitley had already changed the law to confirm that the MAT would not be payable from April 1 2015, this week he appeared to confirm that all foreign funds would be liable for previous years, potentially raising more than $6bn.

Facing a growing backlash from investors, hopes that India might now intervene to quash these older cases also appeared to be dashed on Thursday. Speaking at an event in Washington DC, Mr Jaitley reiterated that global funds had the right to launch an appeal against the tax claims, but that they could not expect him to scrap the charges entirely.

"For the future, I have abolished it," he said. "Their expectation is that, having lost the case, the state must now intervene. That looks a little difficult from my point of view."

? Related FT view: Modi must tame tax system

Fines fail to spur banks into action on client cash

The UK's finance regulator handed out record fines this week in two of its ongoing probes, in a sign that the watchdog will not go lightly on companies repeating others' mistakes.

Bank of New York Mellon, the largest custody bank, was fined £126m for failing to comply with rules on ringfencing client accounts, while Clydesdale Bank was fined £21m for failings around selling payment protection insurance.

The Financial Conduct Authority's fine against BNY Mellon, for failings over a six-year period, was the eighth-largest imposed by the regulator. No clients suffered any loss, the bank said.

Custody rules are intended to keep customer money safe in case a bank collapses, an issue that came to light after Lehman Brothers' insolvency led to years of litigation over commingled accounts.

Clydesdale's offences included staff falsifying information on its policies, and in some cases, deleting them. The bank's PPI handlers, starting in mid-2011, also failed to take into account some relevant documents when deciding how to deal with cases, according to the regulator.

Banks have set aside a total of £24bn as compensation to date, underlining PPI as the costliest financial mis-selling debacle in the UK. Redress costs have been worse than expected, rising to £424.5m in January this year - the highest level for 14 months. Clydesdale has set aside a total £806m for PPI complaints, of which £291m had been used as of October last year.

Both banks co-operated with the FCA's probes.

? Related FT Alphaville: BNY Mellon, an expensive case

Buyout groups still exerting themselves on fitness chains

All but the most dedicated of gym-goers will have forgotten their New Year's resolutions by now, but private equity interest in health and fitness chains shows no sign of abating, writes Kadhim Shubber.

Guy Hands entered the race to secure the remainder of LA Fitness's struggling business, while South African retail billionaire Christo Wiese splashed £682m on an 80 per cent stake in Virgin Active.

The Virgin Active deal, in which CVC Capital Partners exited the business and Richard Branson's Virgin Group more than halved its stake, came as the global chain of 267 gyms was preparing to float next month.

Breit, the investment company majority owned by Mr Wiese, said the deal gave Virgin Active an enterprise value of £1.3bn. It would help Virgin Active open between 12 and 15 gyms a year, the health and fitness chain said.

LA Fitness now has at least three possible suitors, with Terra Firma competing against gym operators Pure Gym and Fitness First for 43 gyms in London and the southeast of England valued at up to £80m.

The business, which underwent a company voluntary arrangement last year and sold 33 gyms to Mike Ashley's Sports Direct, has been squeezed by the rise of discount gyms and, at the top of the market, by specialised health chains.

However, the sale may attract the attention of competition authorities. Pure Gym's merger with The Gym Group was blocked last year, and while the discount gym chain has little overlap with LA Fitness's estate, rival Fitness First is more exposed.

? Related FT news: The must-have extras in the race to fitness

Mayer pushes Yahoo deeper into search

Marissa Mayer, Yahoo's chief executive, has been trying to turnround the ageing internet company for almost three years - but so far, has not been able to change its search business, which contributes over a third of the revenue, writes Hannah Kuchler.

This week, she announced a renegotiated agreement with Microsoft, which provides the search engine Bing to Yahoo users while allowing Yahoo to control the advertising that appears next to it. The new deal will allow Yahoo to experiment with up to 49 per cent of its search traffic in the next five years.

Many analysts had expected a more dramatic deal - potentially abandoning a pact with Microsoft - but the settlement was greeted mostly positively.

Ms Mayer was hired to head Yahoo because of her flair for product design and experience, which she pursued at her former home of Google, focusing on search. She could now invent a whole new way of searching the web, for example, using the anticipatory service Aviate that Yahoo bought last year, which predicts what a user will want in real time.

The biggest move she could make would be to send that 49 per cent of traffic to Google, the dominant player and the best at monetising search. A Yahoo-Google deal was previously blocked by antitrust concerns but both companies have lost some market share to Bing since then, so it could be possible.

For Microsoft the deal means its premium advertising sales team will be able to build links with marketers, with faster feedback for its search product from the people who pay for it.

And finally . . . the lighter side of the news

? In the movies, good always prevails. It will typically be with just seconds to spare, but you can rest assured that the hero will succeed. However, it seems cyber criminals haven't read the script. This week, tech groups Verizon and Symantec said hackers were running rampant, holding companies to ransom - creating a vibrant black market in digital skulduggery. It seems that the devil has IT support to go with all the best tunes.

? You have to feel for McDonald's employees in Japan. Even five-star burger flippers are in danger of carrying the can for the chain's waning sales and increasing losses. Those not caught by the axe falling on 131 restaurants will be subject to increasingly stringent performance-based pay regimes. As the performance of the daily fryer degreasing looms, some might find "I'm lovin' it!" is not quite the phrase that springs to mind.

? It is an indecent proposal worthy of Carry On Banking: 'Is that a share certificate in your pocket or are you just happy to see me?' Ashley Madison, the Canadian matchmaker for adulterous affairs, is eyeing up London's exchanges with the aim of raising $20m. It is a bold move for a group more hung up on secrecy than Apple's R&D labs. Of course, it is targeting a main market listing: the bigger the bourse, the bigger the player.

? It's a dilemma for gym bunnies: where do you put the cash for your kale and goji berry smoothie when clad from head to toe in Lycra? How about using the fitness tracker welded to your wrist to make a contactless payment instead? But be warned: the technology could be put to more Orwellian ends. Tapping to pay a bus fare instead of finishing that 10k run could lead to reprisals if the data gets downloaded to your digital drill sergeant.

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