Win-win situation for local arms
Crisil buys market research firm for Rs 7 crore
ICICI slashes prime lending rate to 12.5%
Bihar pulls plug on Usha Beltron

Mumbai, Jan 17 
The merger of Glaxo Wellcome and SmithKline Beecham would create a Rs 1,400 crore pharmaceutical giant in India with each company’s product range being complementary to one another. The products of the merged entity would span over the areas of gastroentrology, antibiotics, pain management, vitamins, vaccines and dermatology.

“We can call it the merger of perfect ones. As products of both the companies are complementary, it would not involve portfolio restructuring,’’ C. Srihari, senior analyst at Khandwala Securities Ltd said.

Analysts said, the problems associated with corporate restructuring, inevitable when two companies come together, would also be avoided in this case as both Glaxo and SmithKline have a similar work culture and operational set up. “We even don’t foresee much difficulties on the personnel front as cultures of both the companies are similar. Therefore, there wouldn’t be much of a culture shock,’’ another analyst with a foreign brokerage said.

However, the merger is expected to benefit SmithKline more than Glaxo which registered discouraging results over the past one year due to stiff competition and cheaper competitive products in the vaccine segment and in Iodex, its over-the-counter product.

A similar feeling was mirrored on the stock exchanges as well: the Glaxo scrip took a sharp beating after news of the merger got flashed across the screens. The scrip opened at Rs 786, shot up to a high of Rs 810, but fell sharply to Rs 705. The SmithKline scrip was stuck at the upper circuit limit throughout the day. It opened at Rs 347.40, declined to a low of Rs 343.70, only to close strongly at Rs 349.85.

However, analysts said the merger has been announced only at a global level. It remains to be seen how the two companies come together in India.

Such apprehensions have arisen because in India, for example, Rhone Poulenc and Hoechst Marion have not merged despite the coming together of their overseas parents; similar is the case with Glaxo and Burroughs Wellcome.

When contacted, officials from both Glaxo and SmithKline said “it was too premature” to comment on how the merger would unfold in the country. The merger is expected to keep Glaxo India at the top of the domestic pharmaceutical ladder and the gap between the company and others would only increase. The merged entity is projected to have a market share of around 8 per cent as per ORG data.

Glaxo India has only recently announced a strategic restructuring process in its sales and marketing structure that would result in the creation of seven business units. The new structure which is based on a therapy area focussed approach, would be anchored in the areas of gastroenterology, dermatology, respiratory, pediatrics & neurology, gynaecology & surgery, intensive care, cardiovascular & diabetes.    

Mumbai, Jan 17 
The Credit Rating Information Services of India Ltd (Crisil) has acquired Infac, a brand owned by Information Products and Research Services (India) Pvt Ltd (IPRS) along with the business of the company for an overall consideration of Rs 7 crore.

Infac was promoted in 1995 and has a 50-member strong team in areas of research, marketing , systems and information storage & retrieval. The company has a revenue base of Rs 3 crore.

The acquisition is expected to consolidate Crisil’s position as a leader in the growing business of value added research as Infac is a major provider of research on Indian Industry. Its canvas of research covers more than 30 industries, including sunrise sectors such as internet and retailing. It has a wide client base, which includes domestic and foreign banks, corporates, FIIs, consulting firms and government.

R Ravimohan, managing director of Crisil +said: “Combined, we would undisputedly be the most resourceful research base for providing analytical support to decision makers. ”

Crisil has reported a lower net profit of Rs 9.92 crore for the nine-month period ending December 31, 1999 as against Rs 10.01 crore in the corresponding period of last year. The total income of the rating agency also stood lower at Rs 29.06 crore as against Rs 29.49 crore in the previous period.    

Mumbai, Jan 17 
ICICI today cut its prime lending rates — the interest at which the best clients get loans —to 12.5 per cent in a move that could lead to similar reductions by financial institutions and banks. The cut comes days after the government slashed interest rates on provident fund to signal a low interest rate-regime.

The long-term prime rate (LTPR) has been reduced by one percentage point while the short-term (STPR) and medium term prime rates have been lowered by 0.50 per cent each. All three rates have, therefore, been aligned at 12.5 per cent.

ICICI’s decision seems to have been spurred by Industrial Development Bank of India (IDBI), which said it has called a meeting of its asset-liability management committee on Tuesday. The panel is expected to review interest rates, fuelling speculation that the process could culminate in rate cuts.

However, commercial banks have asserted they have no plans reduce rates immediately. Official in nationalised banks said they were awaiting a reduction in Bank Rate by the Reserve Bank of India (RBI) this week. “Banks are looking forward to a Bank Rate cut from the RBI. It is likely to occur any time now. Once that happens, we could see lending-rate cuts by banks,” bank officers said.

In a statement issued today, ICICI said its decision to reduce the prime lending rates has been taken to provide the full benefit of anticipated reductions in borrowing costs to clients.

“Following reductions in rates on small saving schemes, market rates are expected to show a downward trend. The reduction in the returns on long-term savings instruments is likely to have a larger impact on the long-term interest rates,” ICICI said.

The institution said the cuts in PF and small saving schemes should push down its own borrowing costs. Therefore, the decision to cut lending rates is meant to reduce cost of funds for borrowers.

On Saturday, ICICI announced it was withdrawing its safety bonds launched to mobilise Rs 600 crore at an 11.7 per cent annualised returns on four of the five options under the tax-saving issue. Officials said they will now float the bond issue at lower rates.

Banks have been reluctant to take a decision on either reducing their lending or deposit rates, pointing out that if rates are lowered, there would be a flight of deposits from banks to mutual funds.

Among banks, only ICICI Bank, a private sector player, is considering a cut in deposit rates. Sources say the bank, along with others in the sector, will now have to look at its prime lending rates if the RBI announces a Bank Rate cut this week.

Meanwhile, HDFC has reduced interest rates on loans to NRIs to 12 per cent for five years and 13 per cent for seven years. The interest rates on loans for home improvement and land have also been slashed.    

Calcutta, Jan 17 
The Bihar State Electricity Board (BSEB) cut off power supply to Usha Beltron’s Jamshedpur-based steel-melting shop since Friday on grounds of ‘power theft’.

The company has refuted the charges and moved the courts against the decision which is believed to be costing it Rs 70 lakh daily in lost revenues. The halt in power supplies has lead to a sudden closure of the plant, which employs 4,000 employees and has a daily turnover of a little more than Rs 3 crore. According to BSEB’s first information report, the company ‘steals’ worth Rs 10 crore annually.

The dispute actually centres on the quantum of power consumed to produce a given unit of steel. BSEB’s calculations are based on the assumption that 100 per cent of the power drawn by the factory is used for cold-charge operations.

Therefore, the board claims that the company owes it more than the annual Rs 60 crore that it now pays as charges. However, in doing so, BSEB has chosen to ignore the actual recordings at its Gamharia sub-station and the readings on meters installed in the Usha Alloys factory. What is intriguing is that the charges have been made after BSEB admitted in a CAG report the supply figures recorded at Gamharia almost match metre readings at the Usha Alloys plant.

Usha Beltron officials, on the other hand, say the consumption pattern in the melting shop is 65 per cent for hot metal and 35 per cent for solid-charge activities. “How can BSEB unilaterally calculate power consumption based on 100 per cent solid-charge melting?,” they complained. Contrary to BSEB’s claim on the pattern of power consumption, Usha Martin Industries executive director P. Bhattacharya told The Telegraph that the mix of hot metal and solid-charge operations has actually reduced the plant’s power consumption per tonne of steel produced from around 400-600 kilowatt/ hour to 170 kwh. He cited the case of Japanese steel giants like DAIWA (Mizushima) and Mitsubishi Steel Muroran Inc which have fine-tuned their melting processes in a way that cuts power consumption to 100 kwh per tonne — even lower in some cases.

BSEB has marshalled its own set of arguments to justify the power cut. It says Usha Beltron rolled out 1,98,000 tonne of wire/rods but their billet production is below 1,60,000 tonnes. The SEB’s argument is that the difference between the two figures is the amount of production that came from ‘stolen power’.

Usha Beltron officials have countered this charge by saying the company ‘purchased and received’ 55,000 tonnes of steel billets from Tisco, RINL, Durgapur Steel Plant, Alloy Steel Plant and British Steel for conversion.

To buttress its case, UBL says it is ready to allow independent team comprising reputed audit, power and steel firms like NTPC, Mecon, SAIL and CEA to verify the company’s version on the efficiency of the metering system, steel production and power consumption.

The Usha Beltron group has invested around Rs 1,000 crore in its Bihar plants. The turnover from its three units — rope/wire and the jelly-filled cable factories in Ranchi, and a steel plant in Jamshedpur —is close to Rs 900 crore.    


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