Friday 29 Mar 2024
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KUALA LUMPUR (Nov 25): Public Investment Bank (PIVB) says Axiata Group Bhd's NPR21.1 billion (RM762.3 million) capital gains tax arising from the purchase of Ncell Private Ltd by Axiata Investments UK could pose a downside risk to Axiata's performance.

The Supreme Court of Nepal ruled that Ncell will remain liable for the outstanding capital gains tax, although the amount was almost halved to NPR21.1 billion (RM762.3 million) versus the original amount of NPR39.1 billion.

In a note today, PIVB analyst Eltricia Foong said the research house's core earnings forecasts remain unchanged, although the news could pose a downside risk to Axiata's FY19 and FY20 headline profit if the group makes a provision for the tax liability or is pressured to settle the tax.

"Although this news of halving the tax burden could be viewed positively, we remain wary of the high investment risk attached to Axiata's operations outside Malaysia," said Foong.

Meanwhile, the analyst pointed out that Ncell and Axiata have filed a request for arbitration with the International Centre for the Settlement of Investment Disputes pursuant to the agreement between the government of the UK and Nepal for the promotion and protection of investments.

The basis of the arbitration is that the transaction involved the transfer of shares outside of Nepal in a non-Nepalese company and therefore should not be subject to capital gains tax, and that neither Axiata nor Ncell made any capital gains from the transaction.

Axiata had in June 2017 announced that it had made an advance deposit of NPR13.6 billion to the Nepali tax authority following the purchase of Ncell from TeliaSonera Norway in December 2015.

The tax issue was thought to have been fully resolved then, but the Supreme Court in February 2019 had ordered Ncell and Axiata to pay NPR61 billion in tax.

At 10.48am, Axiata shares fell 2 sen or 0.46% to RM4.34, giving a market capitalisation of RM39.77 billion.

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