Mitsubishi may give up IPCL quest
Bharti Tele slots ADR issue after March
Third cellular player in city from May
London passengers can fly Air-India to US
FIPB clears Satyam proposal
Dollar premia drop on hint of cut in interest rate
Haldia Petro set to tap market in April
Japanese investors keen on Bengal
Cup of woe from Lanka tea
Foreign Exchange, Bullion, Stock Indices

New Delhi, Feb 3 
Mitsubishi Trading may withdraw from the race for the public sector Indian Petrochemicals (IPCL), highly-placed industry sources say. The government has been trying to identify a strategic partner for IPCL who will pick up the 26 per cent stake it plans to divest in the company.

Normally, reputed Japanese companies do not act as a front for others. Industry circles say if the Mitsubishi group is genuinely interested in IPCL, it should have fielded its chemical unit, Mitsubishi Chemicals, not Mitsubishi Trading. Mitsubishi Chemicals is already present in India with its PTA unit at the Haldia Petrochemicals complex. The Japanese corporate giant, inexplicably, chose to field its trading unit as a way of expressing its interest in becoming IPCL’s strategic partner.

The manner in which Mitsubishi Trading conducted due diligence on IPCL surprised industry circles. The Japanese are, by nature, more cautious than others. However, it took only a week for Mitsubishi to complete the job while Reliance Industries took two to three weeks to do it. More important, the present state of the Japanese economy does not allow its corporations to invest in an outdated and over-manned company like IPCL.

Industry circles say the government should not consider Mitsubishi Trading as a serious contender for IPCL. Its exit is certain at some stage, they say. Though Mitsubishi Trading has been dealing with IPCL, it has not been its policy to own manufacturing companies.

In the event of Mitsubishi’s pullout, the contest will narrow down to Reliance Industries and IOC-DCG Petrochemicals. IOC formed a joint venture company with the US-based D Chatterjee group, an affiliate of international financier George Soros, already in the running for IPCL. IOC did not get the government’s permission to bid for IPCL. Strangely again, the government has not responded to the interest shown by IOC—which has joined hands with the Soros group.

IPCL could be a nightmare for any multinational. The only consolation in an otherwise dismal IPCL are its units at Nagothane and Gandhar. Both IOC and Reliance are extremely keen to acquire IPCL since it provides them a captive market for naphtha. The Baroda plant of IPCL is outdated and the total work force is estimated to be 16,000. The bidding process has already been delayed. The government is yet to finalise the draft shareholder agreement. After seeking the bidders’ comments, the final draft agreements, along with bid documents, will be released.

The IOC management has shown unusual doggedness in pressing its claims to become IPCL’s strategic ally. When the bureaucracy tried to scuttle its chances despite the strong support it got from the Disinvestment Commission, IOC teamed up with the Soros group.

Initially, the present petroleum secretary was not enthusiastic about IOC’s diversification plans. However, he seems to have given up his reservations after IOC boss M.A. Pathan explained to him the management’s perception about the benefits of diversification.    

Mumbai, Feb 3 
Bharti Televentures, the holding company for the Bharti group’s telecom initiatives in the country, is considering a large equity flotation in the US after March.

If the plan goes through, it will become the first telecom service provider to hit the foreign equity markets to raise funds. Six leading global investment banks with offices in India made a pitch this week to bag the mandate for managing the issue.

“It is too early to decide on the size and the pricing of the issue ,” a source said. The Bharti group has decided to go abroad for funds to finance a spate of recent acquisitions. These included the majority stakes it purchased in Chennai cellular operator Skycell and J T Mobile, a firm which provides services in Karnataka and Andhra Pradesh. The acquisition of Skycell cost the company around Rs 125 crore.

The Mittals control 80 per cent of Bharti Televentures while E M Warburg Pincus holds the rest. The foreign fund had acquired the stake for a consideration of $ 80 million. There is speculation the planned overseas flotation will be priced better than it was in the case of Pincus.

Bharti Televentures is the largest cellular operator in the country.

The company’s recent acquisitions have given it licences to operate in Andhra Pradesh, Karnataka and Chennai. Apart from this, it is the only cellular operator in Delhi which is making a profit.

Bharti is also credited with being the first private sector firm to set up and operate basic telephone services when it launched its operations in Madhya Pradesh.

Bharti Televentures has a 51 per cent stake in its Delhi cellular firm; it controls 51 per cent and 46.5 per cent in Skycell and Jasmine Telecom respectively.

Recently, the group raised Rs 200 crore from Infrastructure Development Finance Company (IDFC) for investments in its telecom companies. It is also tapping the domestic debt market for funding new projects.

Funds from IDFC will be used to restructure part of the old loans, and for the purpose of vendor financing. The projects are being appraised by IDBI and ICICI.    

New Delhi, Feb 3 
The department of telecom services (DTS) — the service-providing wing of the department of telecommunications—will launch cellular services in Calcutta in May as the third operator after Modi Telstra and Usha Martin Telekom.

Initially, DTS will launch global system for mobile communications (GSM) technology-based cellular services in Calcutta, Patna, Chennai and Hyderabad. Later, it will be expanded to cover 15 more cities.

“We decided to launch our mobile phones in Calcutta and Patna and their neighbouring areas since the services now offered there are not good. Chennai and Hyderabad have been chosen for their untapped potential,” DTS secretary P. S.Saran said here today.

The department has invested around Rs. 45 crore in the project under which 30,000 lines are expected to be opened in the four cities. Apart from mobile phones, DTS will launch voice over telephony — as distinct from the illegal internet telephony— in Calcutta, Chennai, Delhi, Mumbai Bangalore and Pune.    

New Delhi, Feb 3 
India and Britain today hammered out an air services agreement under which Air-India flights to the US will be allowed to pick up passengers and freight when they stop over at London. Earlier, London was just a point of disembarkation on these long-haul flights. As a trade-off, British Airways has been allowed to terminate all its 16 flights per week in India. Currently, only 11 of its 16 flights terminate in the country.

With the UK allowing India to pick up passengers on the busy London-US leg, India will now be in a position to increase the number of trans-Atlantic flights and target the large number of passengers flying on this route. Currently, India has three flights to Chicago and seven to New York via London. Air-India has the rights to operate flights to Washington, Los Angeles, San Francisco and Houston, but has not been able to use up all its slots because of the restrictions on embarkation in Britain.

However, no decision was taken on Britain’s demand for increasing the number of flights to India to 22 from 16 at present. All that India has conceded is termination rights to the 16 British Airways flights a week. Britain has been demanding the renegotiation of the bilateral agreement as air traffic between the two countries has gone up significantly in the last few years.

Among other decisions taken during two days of talks, India has decided to remove the restrictions on the number of flights that the UK carriers can operate to Chennai. Previously, British Airways was allowed to fly only four flights to Chennai.

India and the UK have also entered into an in-principle agreement on third country code share. This would mean that an airline registered in one country operates to a second and gets a certain number of seats for its passengers to a third country on the aircraft of a carrier from the second country. For example, Air-India can terminate its flights in London and book its passengers on a British carrier on the London-New York leg.

The two governments have also decided to liberalise the way that the UK and Indian carriers can route their flights, carrying passengers and freight, to and from the UK and India and beyond the UK and India. For example, flights from London to Delhi can operate via Kuwait and pick up passengers from there.

India has been demanding better time slots at Heathrow airport, but there has been no change in the schedule.

Alan Briggs, British Airways’ general manager for South Asia, said he was pleased with the outcome of the talks which had taken place after a long gap of six years. He said both countries now had greater freedom to operate flights.    

New Delhi, Feb 3 
The Foreign Investment Promotion Board (FIPB) today cleared foreign direct investment (FDI) worth Rs 402.42 crore, including that of Satyam Computer Services Ltd for increasing its equity stake.

Satyam will increase the foreign stake in its software development company to 40 per cent, from the existing 27.05 per cent by infusing Rs 7.28 crore.

Among other proposals, the US-based Surinder International has been allowed to set up a wholly-owned subsidiary for manufacturing and marketing herbal-based nutritional and personal care products. Infinity Technology Trustee was given the go-ahead to bring in Rs 107.50 crore for its investment company in India.

However, Reliance Industries’ proposal to set up two liquefied natural gas (LNG) receipt terminals was deferred.

BHP World Explorations has been allowed to set up a 100 per cent subsidiary in India for the prospecting and exploration of minerals. In the infotech sector, the government has cleared a proposal of Chrysalis Capital for a 100 per cent subsidiary.    

Mumbai, Feb 3 
The governor of Reserve Bank of India Bimal Jalan today said that the conditions were favourable for a cut in interest rates as inflation was low and the economy is on an uptrend.

Jalan’s statement, made at a Ficci seminar on bank reforms, sent the foreign exchange and government securities market into a flurry of activity with the six-month forward premia on the dollar easing to 3 per cent from 3.07 per cent yesterday, and yields on government securities falling by around 10 basis points.

Jalan said the RBI wants to make the interest rate structure more flexible, though he did not elaborate on this.

He said the RBI would look into the possibility of a cut in the bank rate at an appropriate time.

The RBI governor said the interest rate rigidity of the Indian banking system was a hurdle to the growth of credit to the corporate sector.

He said, “There is ample room for growing financial savings in the banking system as currently they constitute only 10 per cent of the domestic savings rate of 25 per cent of national income.’’

He said reforms in the banking sector cannot be made in isolation and must necessarily cover the capital, debt, bond, money and foreign exchange markets. “What happens in one segment of financial markets will have tremendous impact on other segments and so reforms have to be mutually reinforcing and not competing.’’

The former RBI governor M. Narasimham urged the government to repeal the Bank Nationalisation Act and the State Bank Act to turn public sector banks into companies.

He said foreign equity should be allowed in nationalised banks if the government decides to bring down its shareholding to 33 per cent.

“A measure of foreign ownership will help in operational and technological modernisation and provide greater access to international funding.’’    

Calcutta, Feb 3 
With the capital market looking up, Haldia Petrochemicals is planning to come out with its maiden public issue in April. A company official said Credit Rating & Investment Services Ltd (Crisil) has been asked to rate the issue.

The date of issue and its size have not been decided yet. The issue is intended to bridge a gap of Rs 500 crore in the company’s total equity base of Rs 1979 crore, the official added.

The HPL board is meeting on February 25 to discuss the issue details.

Meanwhile the two financial institutions, ICICI and Industrial Development Bank of India (IDBI), have sanctioned around Rs 370 crore as bridge loan to the company, sources said.

While IDBI has sanctioned Rs 300 crore, ICICI has sanctioned Rs 40 crore against debenture convertible preference shares and Rs 30 crore to be adjusted against the company’s modvat credit. HPL has also recently mopped up around Rs 270 crore through an issue of optionally convertible debentures.

“These exercises have helped us finalise our financial closure which will be declared soon,” the official said. An HPL board member said the public issue option arose following the company’s failure to rope in a fourth promoter for the project. The company’s three existing promoters, the West Bengal Industrial Development Corporation, the Tatas and the Chatterjee-Soros (Mauritius), have fully subscribed to their share of the equity capital in the project. The total commitment of the three companies is around Rs 1,100 crore.    

Calcutta, Feb 3 
The largest Japanese trade delegation ever to visit the city has evinced a keen interest to invest in the state.

The 23-member delegation led by N. Kawamoto, chairman of the Japan-India Business Co-operation Committee, is on a trip to the country, with just Calcutta and New Delhi on their itinerary. Kawamoto is advisor to auto giant Honda.

In a series of discussions held with Governor Viren Shah, chief minister Jyoti Basu and his senior colleagues, the delegation discussed opportunities for Japanese investment in the state.

The Governor told the delegation that he was keen to see increased Japanese banking presence in the state.

Showcasing the state as a south-east Asian industrial hub, West Bengal Industrial Development Corporation (WBIDC) chief Somnath Chatterjee said that the city had air links with all countries of the region.

Addressing the delegation comprising a majority of Japan’s industrial big guns, Chatterjee said that once direct linkages were put in place, investments should come in without delays.

He also appointed Tanmoy Chatterjee, a Japanese citizen, as the honorary trade representative of West Bengal in Tokyo.

The Japanese corporates which formed part of the delegation, outlined their investment plans for various sectors in the state. While representatives of Toshiba and Mitsui expressed their desire to invest in the power sector, Itochu has already been negotiating for setting up a food processing unit in the state.

Finance minister Asim Dasgupta said that Mitsui Corporation was interested in building a ship-breaking yard near Haldia.    

Calcutta, Feb 3 
India will permit the import of 11.25 million kg of tea from Sri Lanka this year, under the compromise deal reached with Sri Lanka yesterday to iron out the glitches in the free trade pact concluded last year. The maximum limit that can be imported is 15 million kg.

Tea will be imported under a fixed tariff preference of 50 per cent under the terms of the deal. Further, the provision in the free trade pact for a three-year phase-out of the import duty has been dropped.

However, the Indian tea industry is not happy with the compromise deal scheduled to come into effect from March 1.

The industry is apprehensive that this will put pressure on Indian tea prices, which already faced a downturn last year. They are of the opinion that the government should not have allowed any imports from Sri Lanka at a time when the Indian market has enough stocks.

“Today the environment is not conducive for bringing in tea from Sri Lanka. We are already saddled with enough tea,” said a senior member of the Calcutta Tea Traders’ Association.

Sri Lanka, it is expected, will push cheaper tea into the Indian markets, priced much lower than the good orthodox Indian teas.

P.K. Bose, managing director of Warren Tea said, “The rumours of huge tea imports alone depressed Indian tea prices in the months of November and December, so much so that the tea companies had to withdraw tea from the auctions. Now that tea imports from Sri Lanka have actually been allowed, there will be more pressure on tea prices.”

However, the imports will really benefit the blenders and packers who will be able to blend the cheaper Sri Lankan orthodox tea with their own and fetch better prices. Bulk tea producers argue that the consumers will suffer the most as they will have to pay higher prices for cheaper quality of tea.

Tea Board officials however, said they would keep a close watch on the quality of tea that is being imported from Sri Lanka. The Tea Board of India and the Sri Lankan Tea Board will constantly monitor the movement of tea between the two countries.

The imports will come through two ports — Calcutta and Cochin. However, minor details regarding the imports still remain to be sorted out.

A senior official of Duncans Industries said, “We do not know whether the Tea Board will import the teas and distribute it to the interested parties on a first-cum-first serve basis, or whether the companies will be permitted to import the tea on their own.”    

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