Sebi widens price bands to offer more trading scop
SmithKline, Glaxo scrips flare up on merger talks
CSE badla rates dip
Larsen & Toubro sets the recast ball rolling
Net plunges in third quarter
Maruti revs up to launch three models this year
Trucks, buses hit the fast track

Mumbai, Jan 14 
The Securities and Exchange Board of India (Sebi) today relaxed the circuit-filter norms by increasing the existing price-bands from 8 per cent to 12 per cent.

The decision, which will be effective from January 24, means shares can now fluctuate to the extent of 12 per cent either way before circuit filters are activated to suspend further trading in them.

Initially however, the enhanced limits will be enforced only for the top 100 scrips to be identified jointly by the Bombay Stock Exchange and the National Stock Exchange; the selection of these shares will be based on their degree of liquidity and volatility.

The relaxation of 4 per cent will be allowed both ways. Shares, after they hit the existing price-band of 8 per cent, can be traded again after a 30-minute cooling period. The interval will enable investors and brokers to enter or exit from a scrip, Sebi sources said.

This process will be repeated every time the share hits the the current limit in the course of a day’s trading. However, if the 8 per cent limit is breached during the last 30 minutes of a trading session, the cooling period will be reduced to 15 minutes. “If the relaxation is applicable to a scrip on the NSE or BSE, other exchanges can follow suit,” Sebi said.

The decision was taken at a meeting of the capital markets regulator with bourses which comprise the inter-exchange surveillance group. It comes at a time when exchanges felt Sebi should take a second-look at the system under which trading in a share is halted for the entire session once it hits the 8 per cent ceiling/floor. Also, there was a strong feeling in market circles that the limit is unrealistic and out of sync with soaring indices and dizzy valuations. Therefore, the move to allow greater room in the way circuit filters are activated is expected to help legions of investors and brokers who find themselves ‘locked’ in a share which hits the 8 per cent ceiling just when trading begins for the day.

In another significant decision, the capital market regulator rationalised the limit after which a share attracts additional volatility margins. In order to focus on scrips with higher volatility, it was decided that volatility margins will now be applicable if a scrip fluctuates more than 60 per cent; at present, margins are imposed on the basis of a 20 per cent swing. To keep out rogue companies from bourses, Sebi has decided that trading in scrips of companies identified as ‘vanishing’ would be suspended by exchanges. Also, bourses will slap a show-cause on non-banking finance companies which have had their registrations cancelled by the Reserve Bank of India. If necessary, their scrips would be suspended indefinitely.

At today’s meeting, Sebi also reviewed the implementation of its earlier decision that made it compulsory for brokers to collect margins from their clients. However, it raised the exemption limit from the present Rs 50,000 to Rs 1 lakh.

Four exchanges —BSE, NSE, CSE, DSE — and the Ahmedabad and Ludhiana bourses informed the regulator that they had collected total margins of more than Rs 5,200 crore against marginable exposure of Rs 15,600 crore as on January 11.

The BSE sensex today closed at 5471.27 points in a modest gain of 26.45 points on the back of selective buying by FIIs and financial institutions in key scrips like SSI, Infosys, Satyam, Wockhardt, Glaxo and Smithkline Pharmaceuticals. The BSE-100 index edged up by 3.89 points to 2749.12 from its previous close of 2745.23.

With the last day of the current settlement, punters resorted to unloading in a bid to square up positions during the session. However, the market saw a turnaround in the last half hour as Calcutta operators took fresh positions following reports of low badla rates, between 24 and 27 per cent, on the CSE.    

Mumbai, Jan 14 
Talks between SmithKline Beecham and Glaxo Wellcome on a possible merger were renewed today and analysts said the deal, if clinched, will strengthen Glaxo India’s position further as the largest pharmaceutical entity in the country with over 10 per cent market share.

While the new entity is expected to result in a combined turnover of more than Rs 1,200 crore, it would give Glaxo India — already the number one company—an unassailable lead in several segments.

The announcement pertaining to renewal of merger talks was greeted on the BSE today with a lot of enthusiasm with both scrips hitting the upper-end circuit filters. While Glaxo India initially dipped to Rs 702 after opening at Rs 714, it later closed firmly at Rs 766.

On the other hand, the SmithKline Pharma counter also showed similar movements. While it opened at Rs 300, the scrip declined to an intra-day low of Rs 296 before news about the merger filtered in. It later closed higher at Rs 323.95.

The Bangalore-based SmithKline Beecham Pharma is heavily into vaccines.    

Calcutta, Jan 14 
The average badla rate on the Calcutta Stock Exchange hovered around 16 per cent during the last settlement. An exchange official said the rates were low because most of brokers refrained from taking long positions in a volatile market. The unofficial badla quotes, however, ranged from 24 per cent to 30 per cent. Badla rates were 15.96 per cent for Reliance, 15.95 per cent for Satyam and 15.64 per cent for Ranbaxy Laboratories during the last settlement.    

Mumbai, Jan 14 
The much awaited restructuring package of engineering major Larsen & Toubro Ltd (L&T) is finally out.

Aimed at transforming the company into a knowledge-based premium conglomerate, the plan involves “divisionalising” its cement business, which may be carved out into a separate company at a later date, and an entry into the fast growing internet and telecom businesses.

Based on the recommendations of management consultants Boston Consulting Group (BCG), the blueprint foresees L&T’s portfolio to comprise an “engineering core and two thrust areas:cement and information technology and communication,’’ L&T managing director and CEO A.M. Naik announced here today.

He said that while cement and information technology has been identified as thrust areas, the construction, engineering projects, heavy engineering and electrical & electronic businesses have been identified as core areas.

The restructuring process also involves a close scrutiny of small businesses which contributes less than 10 per cent to the company’s turnover.

While the company is planning to evaluate these businesses, it has decided to reduce its exposure to those where targets are not met. L&T officials added that to begin with, it would reduce its exposure in the packaging business.

L&T presently has a 100 per cent subsidiary in information technology. Naik said that an initial public offering (IPO) for this business has been planned for 2001. However, he added, the company has not yet decided on whether to look at international listing or tap the domestic markets.

On L&T’s cement business which has been the topic of intense debate, Naik said that to begin with, the company would “divisionalise’’ the cement section and there is a possibility that the company could also go for a subsequent listing of this division.

Naik said: “The consultants recommended that the cement business be transferred into a subsidiary which could lead to potential listing and/or partnerships.

“A subsidiary should be created subject to finding a tax efficient model and legal considerations. Subsequent steps could include listing and/or offering a stake to shareholders, public and/or strategic/financial partner to release value,’’ he added.

He said BCG has recommended hiring appropriate agencies to evaluate the scope, financial structure and timing of subsidiarisation from the point of maximising shareholder value.

“The L&T board has agreed with the consultants recommendations in principle and the management will appoint appropriate agencies for this purpose,’’ he said.    

Mumbai, Jan 14 
Larsen & Toubro today reported disappointing results for the third quarter of the financial year ended December 31 1999, when net profits plunged by 70 per cent to Rs 19.34 crore, as against Rs 63.56 crore in the previous corresponding period.

Net sales showed a similar trend in the period under review, declining to Rs 1718.55 crore as against Rs 1789.26 crore in the previous corresponding period.

Naik attributed the decline in profits to a rise in interest burden consequent to the commissioning of a cement plant in Andhra Pradesh, and the dip in sales to a fall in growth of the capital goods segment.

While other income fell to Rs 26.02 crore (Rs 19.53 crore), the gross profit was at Rs 182.8 crore (Rs 168.45 crore).    

New Delhi, Jan 14 
Maruti Udyog Ltd is planning to beat the competition, generated by a flurry of car launches during the AutoExpo, by rolling out three new cars this year.

“We will launch the Baleno Estate station wagon as a family fun car and two new cars on the 800 cc and 1,000 cc platforms in this year,’’ MUL managing director Jagdish Khattar said here today. MUL officials said one of the cars will be a modified version of the Alto being sold abroad by Suzuki.

The company which has followed a conservative policy while launching new cars, with just two models introduced in the last ten years, has now moved on the overdrive rolling out two cars — the tall boy Wagon R and upmarket family sedan Baleno — in the last month itself.

The company, meanwhile, is launching tomorrow upgraded versions of Maruti 800, Esteem and Gypsy, which will be complying with Euro II standards with multipoint fuel injection systems.

With this, the Gypsy’s break horse power (bhp) will go up from 58 to 82, while the bhp of Maruti 800 will jump from 38.5 to 44 and of Esteem from 65 to 85. Maruti 800 which had 4 gears till now will also have an additional fifth gear. Khattar said the company is not charging extra for these Euro II compliant models.

Khattar said the company is yet to work out the prices of the new models; the aim is to bring about commonality in auto components to keep prices low and competitive, he added.

Sources said the new 800 cc model will be priced in the range of Rs 2.5 lakh to Rs 3 lakh; the 1,000 cc model would cost between Rs 3 lakh to Rs 4 lakh, while the Baleno Estate will have a price tag of around Rs 6 lakh.

MUL is likely to add extra features to the 800 cc model such as power steering, side impact beams, reclining back seats, rear window wiper and washer. “One contender for this slot is the Cervo C small car which is popular in Japan; but its a 657 cc car and in India buyers for some strange reason equate the engine capacity with a car’s strength,’’ MUL officials said.

The two new vehicles “are important for our (Maruti’s) survival as market leaders, especially after the unnecessary ruckus over Euro norm compliance,’’ the officials added.

MUL’s market share has been falling over the years, from nearly 85 per cent in the early 1990s to 79 per cent last fiscal.    

New Delhi, Jan 14 
With car wars hotting up, automobile giants are zeroing in on the less glamourous truck and bus market.

Cashing in on a resurgent economy, major players in this segment, like Tata Engineering, Mahindra and Mahindra (M&M), Ashok Leyland and Eicher Motors Ltd, are confident of a steady 15-20 per cent growth for the next three to four years.

The medium commercial vehicles (MCV) and heavy commercial vehicles (HCV) segment grew by nearly 68 per cent in April-November last year.

Tata Engineering, which led with 71 per cent growth in that period, was upbeat on the sector.

“The economic slump had resulted in indifferent growth in this sector. Now that the economy is looking up, the HCV and MCV segment is bound to grow and will continue to do so for another three to four years,” said Ravi Kant, senior vice-president (commercial vehicle division), Tata Engineering. The company will launch a luxury bus primarily for inter-city travel. It has also developed a special bus for urban transportation, with a lower chassis than the standard bus. The bus has a capacity for 44 seated and 66 standing passengers and the engine is mounted at the back to reduce cabin noise.

It will also launch a new intermediate commercial vehicle LPT 1109, an LPT 709 turbo dumper placer and an SFC 709 turbo cherry picker.

Ashok Leyland which recorded a 64.5 per cent growth in April-November 1999, is also eyeing a greater share of the market. “The growth will have to be sustained by a similar growth in the economy,” said R. Seshasayee, managing director, Ashok Leyland.

Eicher Motors Ltd, which recorded a sales growth of 22.1 per cent during April-November 1999, will open its account in the HCV category with the Eicher 20.16.

Eicher Group chairman Subodh Bhargava said, “We have set a target to capture an 8-10 per cent share of the HCV market.” The 20.16, with a payload capacity of 16.2 ton will be rolled out in three variants and would be commercially available by the end of 2001.

M&M, which posted a 14 per cent growth in the light commercial vehicle (LCV) segment in April-November 1999, has lined up the Mahindra load king, a 3.5 ton load carrier.

“We are confident of increasing our market share in this sector and launching new models and upgrading existing ones will help us to do that, supported by customised services,” said Alan E Durante, executive director and president, automotive sector.

While foreign players like Volvo and Tatra are yet to catch up due to the high prices of their products, their wide range of models has made Indian companies take them seriously.

Volvo India has launched its FMC series trucks, priced between Rs 22-38 lakh. Managing director, Ravi Uppal said, “The company has already achieved 40 per cent indigenisation in most of its vehicles.”    


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