Centre plans to restrict RBI’s role
Wipro Tech moves to Silicon Valley
Gillette merger move to gain an edge over rivals
Sensex leaps 160 points on heavy FII buying
Ban on new urea projects
BFL, Mphasis agree to merge in all-stock deal
Indian Organic bags Ciba deal
Durgapur Steel smells profit
Foreign Exchange, Bullion, Stock Indices

 
 
CENTRE PLANS TO RESTRICT RBI’S ROLE 
 
 
FROM NITHYA SUBRAMANIAN
 
New Delhi, Feb 7 
The government is considering a proposal to restrict the Reserve Bank of India’s (RBI) role in banks to that of a regulator and policy supervisor in a move aimed at giving them more operational autonomy to take key decisions on investment and credit quickly.

“The RBI, as the regulator, must disassociate itself from participation in the board or management of public sector banks,” sources in the central bank said. At present, all banks have representatives of the RBI and the government on their boards, which, in turn, set up committees to evaluate decisions.

According to the proposal, these functions must be left to the management of banks while the government and the central bank should have smaller roles. “The idea is to make banks independent and reduce government interference in their day to day functioning,” the sources said.

The plan is to have a regulator which does not participate in the actual governance and routine functioning of public sector banks, just as watchdogs in other sectors do not meddle in the way companies are run on a daily basis.

Instead, the government seems to be in favour of banks recruiting several outside directors on their boards. Independent non-executive directors — as these outsiders are called — would then be given a larger role to play, the sources said. “In fact, banks must be board-managed and should consider the option of offering employee stock option schemes to their staff,” the source said.

Another reason is that public sector banks, which face the daunting task of having to compete with their nimbler private-sector rivals, should be given a level playing field. One way of doing that, says the source, is to ensure they are not hobbled by a whole panoply of rules and regulations.

Sources say PSU banks operate under various regulations rules and directions of the government. “When private holdings in public sector banks increase, these rules would have to be reviewed,” the source said.

Also, the government could consider converting the public sector banks as companies under the Companies Act to make their operations more transparent. Earlier, the Narasimham committee report had suggested there was a need to raise the level of disclosures now being made by banks.

Meanwhile, the finance ministry is considering a reduction in government equity in strong PSU banks to levels below 51 per cent, and later, bring it down to 26 per cent.

The government has already decided not to provide budgetary support to weak banks. If the proposal to cut the stake is implemented, it would lend more flexibility and autonomy to banks.    


 
 
WIPRO TECH MOVES TO SILICON VALLEY 
 
 
OUR BUREAU AND AGENCIES
 
Mumbai, Feb 7 
Wipro Technologies, the software services division of Bangalore-based Wipro Corp, is shifting its headquarters to Silicon Valley. A formal announcement is expected to be made in Santa Clara, California, later today.

“We’ve got to be where the action is,” said Wipro Technologies CEO Vivek Paul from his offices in Santa Clara. “This is the crucible of high tech business and we don’t want to miss out.”

The decision to move the group’s most crucial division — it accounted for 54 per cent of Wipro Corp’s third quarter income of Rs 567.8 crore — halfway round the world to the mecca of information technology was always on the cards.

“The fast growing demand for complex, value-oriented IT services, especially those revolving around e-business enablement, makes the US an ideal location to focus Wipro’s growth strategy,” said Paul.

Analysts say the move would be a prelude to a listing on the US bourses. However, the company officials based in Bangalore said a listing on the US bourses was still a long way off.

Last July, Wipro was convulsed when Ashok Soota and a couple of other veterans who had nurtured the infotech business of the cooking oil-to-computers conglomerate left the organisation.

Vivek Paul, who was head hunted from General Electric of the US where he headed their Global Computerized Tomography (CT) business, was then named CEO of Wipro Technologies. At that time, it was announced that Paul would be based in Santa Clara.

However, the shifting of the headquarters would not necessarily mean that Wipro employees will be transferred to Santa Clara. “They ( the employees based in Bangalore) will remain here,” a Wipro spokesperson said.

“We can do business for at least 30 per cent less in India than here,” said Paul.

The decision to shift base followed soon after the company appointed a noted public relations firm based in the US. “We would like to be noticed in the US,” said an official who preferred not to be quoted.

Wipro has 15 offices in the US and the Santa Clara office has a strength of over 800 software professionals with 20-25 marketing professionals. A major portion of its income is derived from the US market, with Europe and Japan ranking a distant second and third respectively. In the third quarter ended December 31, 1999, Wipro Technologies raked in an income of Rs 265.3 crore.

For the nine-month period ended December 31, the software services business brought in Rs 706 crore out of the group’s total income of Rs 1562 crore.

Wipro has been in the news lately for racing ahead of heavy weights like Hindustan Lever and Infosys to attain pole position as the country’s largest market cap company. Wipro Technologies will now be the group’s third venture based in the US. Earlier, it had floated Enthink and Alopa Networks, the latter a joint venture with American venture capitalist Prakash Bhalerao which is designed to create solutions and services for high speed internet access.

Silicon Valley is home to more high-tech company headquarters than any other region in the world, as well as to 61 of the 500 fastest growing technology companies in the US. Last year alone, venture capitalists invested more than $ 6 billion in local businesses, many started by recent graduates of Stanford University.

Wipro Corp — India’s largest publicly traded company, worth about $ 21 billion — is headed by former Stanford student Azim Premji, whose studies were cut short by the death of his father more than 20 years ago.

A recent study by joint venture showed that corporate executives choose Silicon Valley over other regions to access a talented pool of employees and to create partnerships with other companies.    


 
 
GILLETTE MERGER MOVE TO GAIN AN EDGE OVER RIVALS 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Feb 7 
Gillette, the $ 10 billion Boston-based multinational, has proposed to merge its three Indian subsidiaries—Indian Shaving Products (ISP), Duracell and Wilkinson Sword.

The move is aimed at consolidating its Indian operations, particularly in the areas of personal grooming products for men and batteries.

Confirming the proposed amalgamation move, an ISP official said the company board would meet on Wednesday to finalise the details.

US consulting major KPMG has been appointed to carry out the due diligence for the proposed merger.

“KPMG will submit its final report on the valuations of the assets of the three companies before the ISP board on Wednesday,” the official said.

The proposed merger is also aimed at capturing both the upper and lower segments of the shaving blades market through ISP’s strong marketing network, the official added.

Sources, however, pointed out that the key factor in the merger was that companies where Gillette has a partnership with the Poddars are being brought together.

Earlier, Gillette had plans to set up a wholly-owned subsidiary in India to launch its major global brands. However, the plan failed to materialise due to various reasons, including stiff opposition from its joint venture partners.

“Gillette has now dropped its plan for a wholly-owned subsidiary and wants to strengthen its market-share through ISP,” the official said.

The official has also not ruled out the possibility of Gillette raising its stake in the merged entity.

“We are looking forward to the KPMG report, based on which the holding pattern in the new company will be worked out,” the official said.

ISP, which manufactures a wide range of shaving products including the 7 O’clock brand, was jointly promoted by Gillette and the House of Poddar Enterprises, with the former holding a 51 per cent stake.

The company went onstream in 1986 with a safety razor production capacity of 180 million per annum.

The company also entered into a long term licence agreement with the parent to sell its products in the Indian market. Last year, following import relaxations, the company launched the entire Gillette series of products comprising shave gel, shave foam, after-shave lotion, conditioners and deodorants.

ISP registered a sales of Rs 102 crore and a net profit of Rs 8.5 crore during the six months ended June 1999.

While Wilkinson and ISP are in similar businesses, Duracell does not have any such link.

Duracell India produces alkaline batteries while Wilkinson, which was acquired by the Gillette in 1994-95, produces the Wiltech brand of blades to address the lower and medium segments of the market.

Gillette, which acquired the Duracell brand globally for $ 8 billion currently has a 25 per cent share in the world’s alkaline battery market.    


 
 
SENSEX LEAPS 160 POINTS ON HEAVY FII BUYING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 7 
The Bombay Stock Exchange (BSE) sensitive index surged 160.41 points on the back of strong buying by foreign institutional investors (FIIs) and fresh purchases by speculators on a day the bourse saw record new-account volumes.

Opening with a wide gap at 5431.55 points, the 30-scrip index hit an intra-day high of 5518.29 before closing at 5,474 as against Friday’s finish of 5,313. The BSE-100 index also flared up by 59.75 points to 3181.05 from its previous close of 3121.30.

The bullishness in the market followed Saturday’s spurt in kerb prices and the leap in the ADR price of Infosys Technologies on the Nasdaq composite index.

Software stocks were once again in the spotlight with several companies witnessing impressive gains in their stocks.

Operators say fresh funds pouring into the markets were channelled into making fresh purchases in this sector. FIIs were reported to be net buyers in Infosys Technologies, NIIT, MTNL and Sterlite. There was little interest in economy stocks, which, analysts say, is largely due to the wait-and-watch attitude investors were adopting before the budget.

Hints by the finance minister Yashwant Sinha last week about harsh measures in the forthcoming budget created a feeling among operators that these will hit most companies, except those in the infotech sector. However, a section of marketmen said they would only be confined to the disinvestment programme for public sector undertakings (PSUs).

Scrips hitting the upper price bands included Infosys, Global Telesystems, Hoechst Marrion, Tata Tea, HCL Info, ITC, MTNL, DIG equipment and ICICI. On the other hand, E Merck, SSI and Dr Reddy’s Laboratories were hammered in the selling pressure and remained locked in their lower-end circuit filters. The BSE-200 index and the dollex were quoted sharply higher at 701.17 and 267.69 points compared with Friday’s close 689.45 and 263.21 respectively. Satyam Computers was the most active scrip with a turnover of Rs 695.48 crore.    


 
 
BAN ON NEW UREA PROJECTS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb 7 
In a bid to check subsidy overruns, the government today banned the setting up of new urea projects for the next three years as the country has achieved near self-sufficiency in agro-nutrient production. Consequently, no new grassroot urea project can be set up in the public, private or the co-operative sector till the year 2003-04.

Following discussions between chemicals and fertilisers minister Suresh Prabhu and ministry officials, it was decided that the government will review the position on the creation of new capacities only on April 1, 2001, in view of the gestation period of three years for commissioning new urea plants.

New units will get no guarantee on the continuance of the existing retention pricing scheme on a long-term basis. They may however get subsidy support from long-term marginal costs worked out on the basis of LNG/gas as feedstock.

Urea is under the retention pricing scheme and any new unit entails a heavy outgo from the exchequer by way of subsidies. In the current fiscal alone, the government has extended around Rs 8,000 crore by way of subsidies to this sector. The issue is gaining urgency as the gap between demand and supply has been reduced.

The high-powered review committee (HPRC) on fertiliser pricing policy had recommended that new urea units might be justified only on the strategic consideration of a desirable minimum level of self sufficiency. This is because India presently has no comparative cost advantages in urea production. While import of one tonne of urea costs about US $100, production in the country will cost anything between $ 130-2,500.

The cabinet had earlier given an in-principle clearance to two urea projects each of the Indian Farmers Fertiliser Co-operative (IFFCO), Krishak Bharti Co-operative (Kribhco) and one of Rashtriya Chemicals and Fertilisers (RCF).

However, the public investment board (PIB) had returned the proposals for re-consideration.

Today’s decision would not affect these projects, ministry sources said, since proposals for public sector and co-operative projects put up earlier for consideration would be exempted from this ban.    


 
 
BFL, MPHASIS AGREE TO MERGE IN ALL-STOCK DEAL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 7 
BFL Software (BFL) and the US-based Mphasis Corporation (Mphasis) today announced they were forming a common entity in all-stock deal — globally the most preferred option of buying out companies in recent times.

BFL will issue 6.5 million equity shares of BFL Software on a preferential basis in exchange for common stock equivalents of Mphasis Corporation.

Based on the share price of the BFL scrip — which remained locked in the upper-end circuit filter at Rs 1,348.90 on the BSE — Mphasis has been valued at a whopping Rs 876 crore. The board of directors of BFL is meeting on February 14 to consider the proposal, a company release said.

Jaithirth (Jerry) Rao, one of the promoters of Mphasis, will be the chairman of the merged firm. Rao had earlier headed Citibank’s development division and Transaction Technology Inc.

Barings, which holds 52 per cent of BFL’s paid-up capital, is also an investor in Mphasis. As a result, it will continue to control a significant chunk of equity in the combined entity.

“The deal offers a wealth of synergies to the combined entity by bringing together the front-end capabilities and marketing expertise of Mphasis. This will be complemented by economies of scale arising from BFL’s well-established operations,” a joint release issued by Mphasis and BFL stated.

BFL is a software services company which earns about two-thirds of its revenues from off-shore development. Based in Bangalore, BFL delivers software services and products to its international clients, which include an array of Fortune 500 companies.

Mphasis investors include Barings and Richard Braddock, CEO of Priceline.com, director E-Trade, and chairman of the Mphasis advisory board. It has raised funds in the US with significant investments by venture capital firms.

Mphasis has special domain expertise in the financial vertical section, an area which has one of the highest IT spends. The internet and e-commerce shares of this segment is expected to grow exponentially and the combined entity is well positioned to take advantage of this opportunity, the joint release said..    


 
 
INDIAN ORGANIC BAGS CIBA DEAL 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Feb 7 
The Mumbai-based Indian Organic Chemicals (IOCL) has clinched a Rs 80-crore contract manufacturing deal with Ciba Geigy of Switzerland for the next five years.

The entire production will be exported back to Ciba’s plants in the European Union. Industry circles say the export order has given a boost to IOCL’s chemical business, which had been plagued by the dwindling fortunes of alcohol based chemical industry.

IOCL has a plant at Khopol, near Mumbai, which manufactures alcohol-based chemicals like acetic acid, ethyl acetate and acetic anhydride. The project was set up in 1962.

Anticipating that alcohol-based chemicals had no future, the company diversified into the manufacture of phenyl glycine and its derivatives required in the manufacture of ampyciline and amoxciline, based on in-house R & D at an investment of Rs 50 crore.

However, it could not compete with cheap imports from monopoly producers of PG salts and its critical inputs. The project, therefore, met with the same fate as Alpha Drugs and Dauruala Organics.

The IOCL management claims to have salvaged the investment partially by undertaking contract manufacture of PG salts for Kaneka, a leading Japanese bulk drug manufacturer. With the completion of this contract, IOCL has been on the look out for other opportunities in contract manufacturing.

With this objective in mind, IOCL set up a new R&D centre for taking up contract research and chemical synthesis.

The efforts have borne fruit now, with the Ciba-Geigy selecting IOCL as the source for manufacture of speciality intermediates for the EU.

The financial support for additional investment required in plant and machinery and quality-control equipments will be extended by Ciba.

IOCL will utilise its R&D and surplus manufacturing capability to manufacture speciality chemicals which would then be exported to Ciba’s units.

IOCL has a PSF manufacturing facility near Chennai with a capacity of 36000 tonnes per annum. It is a 100 per cent subsidiary of IOCL, engaged in the export of PET resins to Pepsi in the US. Indian Organic posted a profit of Rs 8.72 crore during the period April-December 99 on an equity of Rs 33.48 crore compared with a profit of Rs 12.31 crore in 1998-99.    


 
 
DURGAPUR STEEL SMELLS PROFIT 
 
 
FROM SUTANUKA GHOSAL
 
Durgapur, Feb 7 
With the modernisation programme in place, Durgapur Steel Plant (DSP) expects to earn a cash profit in the financial year 2000-01 — after a gap of twenty-three years. DSP had last booked a net profit in 1977.

S.B. Singh, managing director of DSP said, “Though our rated production has reached 100 per cent capacity utilisation, we will not be able to achieve a cash profit in this financial year because of the low net sales realisation (NSR). The NSR at present is Rs 10,300 per tonne.” He is, however, optimistic that the plant will make some cash profit in the next fiscal. “We are hoping to bag the entire locomotive wheels order from Indian Railways in the next fiscal. This will substantially boost our bottomline.” Indian Railways had been importing the entire requirement of loco wheels before DSP developed it, he added.

“We are planning to supply over 11,000 loco wheels during the current financial year,” he said.

Owing to a lack of sufficient machining capacity to meet the railways’ demand, the plant has tied up with Mohta Coal Company and Bardhaman Wheels and Axles for machining, Singh said.

The wheels and axle plant was modernised under DSP’s modernisation programme, at a cost of Rs 142 crore.

Singh said that the plant has recorded all-round improvement. Productivity has increased from 45 tonne per man per year to 90 tonne per man per year. “The quality of products have improved and techno-economic parameters have also shown a consistent improvement,” he added. Post-modernisation, the plant has been performing above the rated capacity for the past two months. It achieved 110 per cent capacity utilisation in its billet production during last month. “The new method has also enabled us reduce costs by Rs 1,000 per tonne,” Singh said.

The plant was able to prune costs to the tune of Rs 125 crore in a cost cutting exercise in 1998-99 and is targeting savings in the region of Rs 155 crore this fiscal. However, one of the major problems facing the plant, as outlined by the DSP management, is excess manpower. The manpower has been brought down to 21,000 after the recent voluntary retirement package.

“There will be another round of VRS this year. Ideally, a plant of this size should be run by a workforce of 4,000. But at present, that is a tall order,” Singh said.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.61	HK $1	Rs. 5.55*
UK £1	Rs 69.64	SW Fr 1	Rs. 26.30*
Euro	Rs 42.79	Sing $1	Rs. 25.45*
Yen 100	Rs 40.25	Aus $1	Rs. 27.50*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs. 4795	Gold Std (10 gm)	Rs 4825
Gold 22 carat	Rs. 4525	Gold 22 carat	Rs 4465
Silver bar (Kg)	Rs. 8325	Silver (Kg)	Rs 8335
Silver portion	Rs. 8425	Silver portion	Rs 8340

Stock Indices

Sensex	5474.00	+160.41
BSE-100	3181.05	+59.57
S&P CNX Nifty	1636.60	+35.85
Calcutta	140.02	+0.96
Skindia GDR	1311.59	+44.95
   
 

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