Shackles on overseas float removed
Murugappa forms profit centres
Operators can make cellular incoming calls free
Govt sees strong rupee signals
More tax sops on housing loans
ACC slips into the red in third quarter
Foreign Exchange, Bullion, Stock Indices

New Delhi, Jan 19 
The finance ministry today relaxed the rules on raising funds abroad, allowing Indian companies to tap the global depository receipt (GDR) and American depository receipt (ADR) markets through the automatic approval route.

To raise funds through this route, companies need not seek the finance ministry’s permission; they only have to inform the Reserve Bank of India (RBI) which can, however, stall the exercise under certain circumstances.

The existing rules on retention of foreign currency funds raised through ADR/GDR issues will, however, remain unchanged.

Private placement of ADRs/GDRs would also be eligible for automatic approval provided the issue is lead managed by an investment banker registered with the Securities and Exchange Board of India (Sebi) or with the regulatory authorities of the UK, Europe, Singapore or Japan.

Companies can tap the automatic approval route provided they had underlying real equity issued to expand their existing capital base.

The automatic route would also cover employee stock options offered by Indian information technology companies and the issue of ADRs and GDRs arising out of business reorganisation.

Merger and demerger would also be governed by the automatic route subject to guidelines issued by the department.

The ministry also stipulated that ADRs and GDRs, being part of foreign direct investment (FDI), can only be raised by companies belonging to sectors where FDI is allowed; the issues must also conform to existing FDI rules.

A press note issued by the ministry also clarified that foreign currency convertible bonds (FCCB) were not covered by this round of liberalisation. Officials handling foreign investment policies in the ministry said rules on FCCB issues were not relaxed as the Indian economy is not in a position to handle any huge spurt in bond conversions.

The note also states that certain prior approvals in related matters must be taken by the company, including mandatory approval requirement under the FDI policy; approvals under the Companies Act; approvals for overseas investments/business acquisition where ADR and GDR proceeds are utilised for overseas investments, among other things.

The company issuing the ADRs/GDRs would also need to gain approval from the RBI under the provisions of Foreign Exchange Regulation Act (Fera) and Foreign Exchange Management Act (Fema) prior to the overseas issue.

After completing the transactions, the companies would be required to furnish full particulars to the ministry of finance, department of economic affairs and the exchange control department of the RBI in Mumbai, within 30 days of completion of such transactions.

The note says the scheme for issue of foreign currency convertible bonds (FCCBs) and ordinary shares (through depository receipts mechanism) was notified by the government in November 1993 and added that revisions and modifications in the operative guidelines for Euro-issues are announced from time to time.    

Mumbai, Jan 19 
The Murugappa conglomerate today said it will hand over operational control of various divisions within the group to nine chief executive officers (CEOs) who are now serving as senior managers.

The creation of separate business units is part of the restructuring effort now under way in the Rs 3,100-crore group which has a presence in industries ranging from cement to ceramics to fertilisers.

The Murugappa group had recently made two key changes in its governance structure. At the group level, a new Murugappa corporate board has been constituted. The new statutory board will take decisions aimed at improving governance standards, strategy formulation and bolster capabilities across the group.

The move, which will see members of the Murugappa family taking a back seat and stepping down as chief executive officers (CEOs) of various group companies, is widely seen as a trend-setter among family-owned businesses in the country.

The new board, which has eight members at present, is headed by M V Subbiah. Other executive members are M A Alagappan, A Vellayan, M M Murugappan, M M Venkatachalam and Partho Datta who, incidentally, is the only non-family member on the board.

The group’s finance functions will be under the charge of a professional member of the board. Datta will look after the legal aspects and financial re-engineering of the group’s portfolio.

The five promoter-members, so far in executive charge of various businesses, have relinquished operational control and assumed group-level responsibilities that include monitoring and taking steps to improve functional efficiency.

According to a Murugappa release issued today, fertilisers will be headed by R S Nanda while Tube Investments will be under V A Raghu. Financial services will be controlled by M Anandan and the sugar business by P Rama Babu. Ceramics will be under V Natarajan, abrasives under Ramesh Agrawal and confectionery under N C Venugopal. Ram Bajekal and Ishwinder Singh will oversee plantation and ambadi respectively.

The group is also restructuring its inter-company cross-holdings under the recast drive. In a move aimed at boosting shareholder value, non-core investments in flagship companies — EID parry and Tube Investments — have been transferred to other group firms. The money generated from it is being utilised to strengthen core businesses.

Earlier, the group had hired McKinsey & Company to evaluate its business portfolio.

As a result of the report, which recommended that it should stick to its core businesses, the group has decided to confine itself to areas where it can generate profits and emerge an industry leader.

The restructuring exercise will see the group withdrawing from, or reducing exposure to, sectors like electronics, seeds, granite, construction, refractory. It will, however, pursue emerging business opportunities in bio-pesticides.

The Murugappa group has a number of listed companies like Tube Investments, EID Parry, Carborundum Universal, Coromandel Fertilisers, Cholamandalam Investment & Finance, Parry Agro, Parrys Confectionery and Wendt. It also has several unlisted firms within its large fold.    

New Delhi, Jan 19 
Cellular phone operators can offer free incoming calls to their subscribers of their own accord. In a clarification issued today, the Delhi high court said its order quashing the Telecom Regulatory Authority of India’s calling party pays regime would not trammel the right of an individual cellular service operator to offer the facility of free incoming calls.

A division bench comprising chief justice S. N. Variava and Justice S. K. Mahajan told the counsel of Cellular Operators Association of India that, “if an individual operator wants to introduce the scheme on its own, he is free to do so.” The bench clarified that the operators had to pass all those benefits to consumers which were given to them by the government under the new telecom package.

This includes reduction of rental charges from Rs 600 to Rs 475 per month and airtime per minute call charges from Rs 6 to Rs 4.

The clarification was issued by the court in response to a query raised by the COAI. Later, COAI officials were reluctant to comment on whether the court’s ruling would spur the growth of the cellular networks.

“It will be difficult for cellular operators to offer free incoming calls without a feasible interconnection agreement. Both the fixed line operators and the cellular operators will have to work out some formula before the CPP can be introduced,’’ said T.V.Ramachandran, COAI’s executive vice chairman.

In the meantime, sources close to Calcutta’s two cellular operators — Modi Telstra Limited and Command — said both of them have their own free incoming call schemes which have proved to be a great hit, increasing subscriber base as well as revenues.

With the Delhi high court shooting down CPP, the hopes of sharing revenues with the basic operators has, however, been lost. The Calcutta cellular operators, it seems are prepared to stomach the cost of free incoming call schemes because it induces the public to go cellular.    

New Delhi, Jan 19 
With a steady increase in the inflow of dollars, an expected downturn in oil prices and a consistent growth in exports, there will be an upward pressure on the rupee in the coming months.

The situation, however, could change in the second half of 2001-2002 if the dismantling of the quantitative restrictions on imports begins in March next year. This would put almost all items under the open general licence (OGL), resulting in a large outflow of dollars.

India’s oil import bill this year is expected to almost double to $ 13 billion over last year. For the first time since 1981, the OPEC members stuck to their quota ceiling, triggering the price surge.

Government officials say the immediate outlook for the rupee is bright. This is based, largely, on the belief among market watchers that the US may soften its stand against Iraq and allow it enter the market. This could push down the prices to a level below $ 15 a barrel. India, one of the largest importers of crude in this part of the world, could benefit from such a development which, in turn, should strengthen the rupee.

The strength of a currency is related to the rate of inflation. In other words, it means the currency should depreciate in tune with the rate of inflation. In rupee’s case though, the fall has been prevented by the large inflow of dollars. Exports have been strong this year, and are expected remain so in the coming months. Export growth for the current year should be close to 12 per cent as against the negative growth last year. This is another factor that would bolster the rupee but that could be a strong disincentive to exporters.

The rupee can be allowed to depreciate only if the RBI begins to buy dollars. This will inevitably increase money supply because purchase of dollars means pumping matching amount of rupees into the market.

The government will have to suck in the excess liquidity by floating bonds which, in turn, may increase its interest burden. The options before the Centre, therefore, appear fairly limited.    

New Delhi, Jan 19 
The revenue department is considering a proposal to extend the period over which tax rebates can be claimed against interest paid on housing loans.

The proposal, if cleared, will meet a long-standing demand of the housing industry and stimulate construction, widely seen as a sector that has the potential to drive up growth in other core-sector firms because of its backward linkages.

At present, annual interest payments up to Rs 75,000 can be deducted from the taxable income under section 24 (2) of the Income Tax Act but these are limited to houses purchased or built after April 1, 1999.

Housing societies have made representations to the government, saying this tax rebate should also cover dwellings built earlier. They have argued that the time-lag between getting a loan and taking possession of a flat or a house is often four to five years. Therefore, it is only fair that tax savings should be available to more people over a longer period of time.

On their part, revenue officials admit there are sections in the Act which recognise that a construction time of three years is acceptable for purposes of granting tax rebates.

“We are recommending that the period for which the scheme operates be extended till further notice. In other words, the deductions should be allowed regardless of when the construction starts. At the same time, the period over which these adjustments are allowed should be at least three years,” officials said.

The package, coming at a time when the finance minister is busy crafting the budget and picking up policy tools that will shape the country’s economic destiny in the new millennium, is expected to keep tax payers happy and speed up construction-led growth. Besides the Rs 75,000 special scheme, other clauses in the Income Tax Act allow tax deductions for capital repayments up to Rs 10,000 annually; deductions against interest repayments up to Rs 30,000 is also permitted over longer periods.

Revenue officials said another proposal being considered is an amendment in the Income Tax Act to ensure that rent arrears are taxed in the year they are received.

At present, in case of landlord-tenant disputes over the amount of rent, arrears for several years are paid by the tenant, lumpsum or in installments, if the courts rule in favour of the landlord. However, earlier high court rulings have interpreted the Income Tax Act in a manner which keeps these payments out of the tax net. Therefore, say officials, there is strong need to introduce a suitable amendment which plugs this loophole and checks revenue losses in future.    

Jan 19 
The Associated Cement Companies (ACC) today slipped into the red, reporting a net loss of Rs 19.79 crore for the third quarter ended December 31 compared with a net profit of Rs 34.02 crore in the corresponding previous period. Admitting there had been a sharp downturn in its performance, ACC said price realisations slipped even though volumes increased by over 5.8 per cent over the same period of the previous year.

However, a closer analysis of the performance revealed that spiralling costs were the main problem. Operating expenditure shot up 8.16 per cent to Rs 626.53 crore from Rs 579.22 crore. For the nine-month period, the expenditure jumped to Rs 1,842.40 crore from Rs 1,652.81 crore in the same period of 1998-99.

During the third quarter, net sales rose 4.5 per cent to Rs 662.06 crore as against Rs 633.58 crore in the same quarter of the previous year. For the nine-month period, the figure was Rs 1990.25 crore, up from Rs 1827.20 crore in the same period last year.

In terms of volumes, the sale of cement was placed at 24.38 lakh tonnes compared with 23.05 lakh tonnes a year ago. Production in third the quarter stood at 23.96 lakh tonnes (12.18 lakh tonnes) while it was 72.41 lakh tonnes for the nine-month period. In three quarters of 1998-99, the figure was 65.07 lakh tonnes.

During the third quarter, other income slipped to Rs 9.69 crore (Rs 46.33 crore). ACC added that non-recurring items included in this category is mainly on account of refund received/receivable from the government on account of service tax.

On the BSE today, the ACC scrip opened at Rs 213.90, shot up to Rs 225, then slipped to Rs 211 but recovered to close at Rs 219.

During the third quarter, while profit before interest, depreciation and tax declined to Rs 53.05 crore (Rs 107.83 crore), interest expenses were lower at Rs 41.25 crore (Rs 43.65 crore) and gross profit was at Rs 11.80 crore (Rs 64.18 crore). Depreciation on the other hand was pegged at Rs 31.59 crore (Rs 26.17 crore).

ACC also added that captive power plants of 25 mw each at Jamul and Kymore were commissioned on November 1 last year.

Pharma major Nicholas Piramal India Limited (NPIL) today reported a 23 per cent increase in net profit at Rs 11.23 crore on a 12 per cent rise in sales of Rs 113.7 crore for the third quarter ended December 31, 1999, compared with the corresponding period last year. For the nine months ended December 31, it reported a 22.5 per cent rise in net profit at Rs 36.80 crore on a 12 per cent jump in sales at Rs 350.81 crore compared with the similar period last year, according to the unaudited financial results of the company released here.

In the third quarter, it posted other income of Rs 93 lakh (Rs 70 lakh in the similar period last year) and a total expenditure of Rs 94.50 crore (Rs 85.99 crore). R&D expenses stood at Rs 1.61 crore (rs 1.46 crore).

ICICI Bank has posted a 101 per cent increase in net profit to Rs 28.26 crore during the quarter ended December 31, 1999, compared with the corresponding quarter last year.

Birla Ericsson Optical Limited today reported a net profit of Rs 1.88 crore during the third quarter of current financial year against Rs 4.07 crore in the same quarter of previous fiscal. Net sales during the quarter dipped to Rs 41.96 crore from Rs 54.97 crore, while other income remained higher at Rs 0.16 crore (Rs 0.09 crore).    

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