Sensex in record-breaking spree
ECB end-use norms relaxed
ITC, Infobank strike deal for e-commerce
Basu to seek withdrawal of tax sharing formula
Coke to crush 2 Cadbury brands
Three Gillette arms merge
Hoteliers, tour operators clash
Mahindras to part redeem convertible forex bonds
Tea Board certification must for Darjeeling tea

 
 
SENSEX IN RECORD-BREAKING SPREE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 9 
Less than twenty four hours after an all-time high, Dalal Street returned to work on a day that saw the BSE sensex race to another record of 5756.87 but lose much of those early gains to profit hunters in a 38.54-point increase over Tuesday’s close.<

>The 30-scrip index opened at 5704.01, hit the record and looked set to surge past the 5800-mark, but ran out of steam and closed at 5649.10. The BSE-100 index firmed up 34.64 points to 3241.20 from its previous close of 3206.56. <

>On the NSE, the S&P CNX Nifty index touched an all-time high of 1731.65. The Nifty started firm at 1666.95 and after touching an all-time high of 1731.65 closed at 1689.65, showing a remarkable rally of 26.90 over its last close of 1662.75.<

>The highpoint of the day was the comeback of three index heavyweights and one-time favourites — FMCG major Hindustan Lever, ITC and MTNL. They sizzled even as infotech and cement companies bore the brunt of the late-session profit-taking that sent their share values on a tumble.<

>Marketmen say all three companies that carried the day have new stories to tell and new things to offer. While ITC has announced its infotech foray, MTNL is waiting for its debut on US exchanges. VSNL, another telecom major, was also a big draw with investors today.<

>Dealers attributed the pre-noon surge to reports that the finance minister is ready to signal an interest rate cut after a budget — which contrary to fears that it would be a harsh one — is unlikely to impose new additional taxes on businesses or individual incomes.<

>Meanwhile, figures released by Sebi show that net FII investments between January 1 and February 8 stood at Rs 939.4 crore. In the week ending February 8, it was pegged at Rs 742.9 crore. This means portfolio inflows swelled by a staggering Rs 196.5 crore in first seven days of this month.<

>Earlier in the day, the market sentiment was strong in view of the sustained upsurge in technology stocks on the Nasdaq where the composite index soared to a new record of 4427.5 in a 105.7-point leap late on Tuesday. <

>Analysts say the new levels on the BSE are unprecedented and, therefore, players will take time to adjust. “One has to pause for breath at such heights because the air gets rarefied,” said a dealer affiliated to a leading brokerage in remarks that almost seemed he was out on a mountaineering expedition.<

>Late in the afternoon, the sensex slipped from its new peak as local institutions and a few foreign funds booked profits in counters which have scored impressive gains in recent times. <

>Unit Trust of India (UTI) led the selling spree in the later half of the day along with local institutions and mutual funds to book profits. These institutions are reported to have sold sizeable volumes in key software scrips like NIIT, Digital Equipment, Pentamedia and Satyam Computers.<

>“We will pause a while before we make a fresh foray in the days to come to test the higher points,” said an institutional dealer. “Bargain hunting will start afresh as investors book profits at higher levels,” warned a BSE stock broker. BSE’s volumes were, however, lower than those recorded on Tuesday. It fell below Rs 5,000-crore mark to Rs 4962.62 crore. <

>Today’s record-run also belied fears that the inclusion of 156 more scrips in the rolling settlement would provoke a negative market reaction. <

>“The companies with poor antecedents should fall by the wayside while those with stronger fundamentals should recover lost values soon. It is good for the market,” brokers said. They cited the case of Visual Soft which regained losses suffered when it was put on the rolling settlement in last month.    


 
 
ECB END-USE NORMS RELAXED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb 9 
The finance ministry today announced that funds raised through external commercial borrowings (ECBs) can be deployed in all sectors except real estate and secondary capital markets. The finance ministry has also enhanced the equity investment limit for ECB funds in downstream infrastructure projects from $ 50 million to $ 200 million. The ECB approval process has also been simplified. Regional offices of RBI have been allowed to take loan agreements and documents on record of all ECB approvals once they have been cleared by the government. The RBI will send a copy of the loan documents to the Department of Economic Affairs.

Previously, the borrower had to approach the government twice: first to obtain in-principle approval and second to submit loan agreements for taking on record (TOR). After TOR, the borrower had to take Fera approval from the RBI and permission for draw down. In addition, default interest not exceeding two per cent over the applicable rate will now be incorporated in the approval letter itself. The ministry has also allowed infrastructure projects to raise 50 per cent of their fund requirements through ECBs. For the power sector, this limit will be higher than the 50 per cent level.

When a public sector unit (PSU) floats an ECB loan, the government will henceforth no longer give a guarantee that it will continue to hold at least 51 per cent in the entity. This has become necessary because the divestment programme will lead to the government holding coming down below 51 per cent in the case of many PSUs.

The government has also relaxed the pre-payment norms for ECBs. Corporates can repay in full their dues from the export earners foreign currency (EEFC) accounts. The present norm specifies full pre-payment through foreign equity provided residual maturity is up to one year.

In case foreign exchange is spent in trying to garner ECB, but the foreign loan does not materialise, th expenditure will be allowed subject to a cap. The RBI will issue separate guidelines on this soon.

The government has allowed 100 per cent export oriented units (EOUs) to have foreign currency exposure of up to 60 per cent of the project cost. The government has also decided that henceforth denomination of debt service in a post default situation will be in rupees or in forex as envisaged initially in the contract document. Previously, the liability of an Indian company was denominated in Indian rupees and debt servicing was done in equivalent foreign exchange funds.    


 
 
ITC, INFOBANK STRIKE DEAL FOR E-COMMERCE 
 
 
BY OUR SPECIAL CORRESPONDENT
 
Calcutta, Feb 9 
Tobacco to hotels major ITC Ltd is all set to provide e-commerce solutions to domestic corporates.

ITC Infotech, a wholly owned subsidiary of the group, has signed up with UK-based Infobank, an e-commerce solutions provider with market capitalisation of over £ 740 million.

Under the agreement announced in London today, the two companies will work with ITC’s Information Systems Division to provide B-2-B (business to business) solutions using the InTrade e-Hub.

Sanjay Verma, chief executive of ITCs Information Systems Division said: “With ITC developing world class offshore facilities, the company is uniquely positioned to address the e-commerce requirements of its customers globally.

“Infobank is one of the fastest growing solution providers in e-commerce and this collaboration will bring in really world class services to India,’’ Verma said.

Graham Sadd, Infobank CEO said: “ITC is a major player in India and through this agreement they have demonstrated their strong position in the Indian business to business e-commerce market.”

An ITC release said ITC Infotech and Infobank will jointly offer to third parties an off-the-shelf multinational community infrastructure with hosted InTrade e-Hub trading community software, hardware, technical support and maintenance and integration services. This will save the third party the trouble of having to source technical skills and requirements from a large range of suppliers by enabling them to establish business-to-business trading communities on a fast track.

ITC Infotech and Infobank will also collaborate on future development of an entire array of Intrade business to business e-commerce software. The two companies will become an Intrade channel partner enabling ITC to strategically market Infobank’s premium software products—InTrade Purchaser, InTrade Supplier and InTrade e-Hub, in the Indian subcontinent.

Intrade e-hub is Infobank’s trading community software. It enables organisations to create customised on-line (trading) communities of buyers and suppliers by focusing on inter-business transactions. This helps participating organisations to dramatically reduce the costs of purchasing and supply and removes the problem of developing and managing their internal electronic purchasing and supply solutions.

The added advantage is that the product offers the facility of trading in 50 languages and currencies from a single hub.    


 
 
BASU TO SEEK WITHDRAWAL OF TAX SHARING FORMULA 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb 9 
Chief minister Jyoti Basu will write a letter to Prime Minister Atal Behari Vajpayee, urging him to withdraw the central government’s decision to allocate 29 per cent of the net proceeds of all central taxes to the states.

Stating this today, state finance minister, Asim Dasgupta said West Bengal will rally support from other state governments to persuade the Centre to revoke its decision.

The new formula for devolution of central taxes to states which was recommended by the Tenth Finance Commission, was approved by the Union Cabinet yesterday.

Under the existing formula West Bengal gets approximately 27 per cent of the gross collection of central taxes. A gross amount of Rs 10,000 crore is collected by the Centre from West Bengal, of which the state receives Rs 260 crore.

Dasgupta said the state government’s share is bound to go down if it was calculated on the basis of net tax receipts.

“This has a dangerous implication. Once this is implemented, the state governments will be deprived of Rs 2000 crore at a single stroke,” said Dasgupta.

Dasgupta also charged the Centre with having grossly flouted the recommendations of the Tenth Finance Commission by approving the new tax-sharing formula.    


 
 
COKE TO CRUSH 2 CADBURY BRANDS 
 
 
FROM CHAITALI CHAKRAVARTY
 
New Delhi, Feb 9 
Coca-Cola India is planning to phase out Crush and Canada Dry, two popular Cadbury Schweppes brands but has said it will retain Schweppes mixers like Tonic Water and Bitter Lemon because they complement its range of carbonated soft drinks.

After Coca-Cola took over the UK-based speciality soft drinks manufacturer, Cadbury Schweppes, in May after which Coke had been reviewing Schweppes’ brands in India.

Analysts say it does not make sense for Coke to retain Canada Dry and Crush as it already has soft drinks in these segments — the clear lemon Sprite and orange Fanta.

Coke is unlikely to keep Schweppes’ mineral water either, a segment dominated by Bisleri. Earlier, Hindustan Lever and Nestle launched their brands in this segment but had little success. More important, Coke already has a global brand in this segment, Bon Aqua, which it wants to launch in India.

The company feels the two brands from the Schweppes stable are not money-spinners but mixers like Tonic Water and Bitter Lemon in 250 ml non-returnable bottles were the speciality drinks major’s inherent strengths it would like to cash in on.

With a new integrated portfolio, Coke can now give hotels, restaurants and airlines a package deal which includes tonic water and bitter lemon — popular with alcoholic beverages.

Schweppes set up shop in the country in 1994 but its efforts always fell short of the high-pitched battle between Pepsi and Coca-Cola. After the takeover, Coke held a meeting with bottlers of Cadbury Schweppes in December, telling them it could not invest or produce more.

Schweppes’ had 11 plants, of which nine have shut shop. Two plants, one in Jammu and the other in Pune, produce Schweppes’ drinks on an ad hoc basis and supply them all over India.

Coke took over Schweppes bottlers in Mumbai - McKoy Bottling and Company, much before the merger. Its bottlers in Delhi, Pure Drinks Ltd, fell out with Schweppes.

Daruhera-based Allied Beverages, which was supplying Schweppes drinks to Delhi till this time, said it could not bottle any more due to lack of funds. IFB, the bottlers in Calcutta, lost interest.

Industry sources say Coke would not like to take over Schweppes’ bottlers even though it has a policy of acquiring their plants world wide.

The company has already invested $ 700 million but is not doing very well in India. It has already announced a VRS and uncorked plans to cut 100 jobs.    


 
 
THREE GILLETTE ARMS MERGE 
 
 
OUR BUREAU
 
New Delhi, Feb 9 
Indian Shaving Products Ltd (ISPL), a subsidiary of the $ 10-billion Boston-based multinational Gillette, has approved the merger of two of its siblings Duracell (India) Pvt Ltd (DIPL) and Wilkinson Sword India Ltd (WSIL) with itself.

The ISPL board met today to clear the merger and the swap ratio has been fixed at one share of ISPL for every 13 shares of DIPL and 9 shares of WSIL. The merger will be effective from January 1 this year.

Indian Shaving Products manufactures a wide range of shaving products, including the premier 7 O’clock brand.

The company also entered into a long term licence agreement with Gillette 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. It also distributes Oral-B oral care products, Braun small electrical appliances and select writing instruments.

DIPL is engaged in the business of manufacture and sale of Duracell alkaline batteries. WSIL is engaged in the manufacture and sale of Wilkinson Sword blades and razors, Geep batteries and torches and distribution of Duracell alkaline batteries.    


 
 
HOTELIERS, TOUR OPERATORS CLASH 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb 9 
The hotel industry has threatened to stop credit facilities to tour operators across the country if they do not clear their dues by February 29, setting the stage for a showdown that could leave the two sides bruised and customers inconvenienced.

Tour operators have returned the fire by saying they will boycott hotels which withdraw the credit facilities.

They say the move, entirely illegitimate, is a fig-leaf to recover massive losses suffered by hotels and a ploy to hold them to ransom.

The Hotel Association of India (HAI) has sent a notice to tour operators/agents asking them to follow norms on vouchers, decrease in group strength, delayed settlement of bills and application of telegraphic transfer rates. The Oberoi Group, The Taj Group of Hotels, WelcomGroup Hotels, Bharat Hotels, Apeejay Surendra Hotels, Cindrella and Hotel Pankaj are among the major chains to have read out the riot act to the tour operators.

They have warned all transactions will have to be settled in cash if they do not follow these rules.

“Tour operators/travel agents have to discipline themselves. These issues have serious financial implications for us. They have to abide by these rules from now on, otherwise we will accept payments only in cash,” Oberoi group chairman P. R.S. Oberoi said.

“We have been operating in a situation where one side has continued to benefit for far too long,” Ajoy Misra, director (sales), Taj Group of Hotels, said.

However, tour operators led by the Indian Association of Tour Operators (IATO) say the credit facilities enjoyed by them are part of an agreement reached between the International Hotel & Restaurant Association and the Universal Federation of Travel Agents Association.

“They have no legal jurisdiction to take such a step. We will boycott these hotels if need be. These are mere excuses to cover up losses. According to the international agreements, payment has to be settled in local currency,” IATO president Subhas Goyal said.

HAI, on the other hand, argues that all transactions settled in ways other than cash or travellers cheques qualify for conversion at telegraphic transfer rates. Most travel agents clear dues in cash/TC rates while hotels raise bills at TT rates.

Hotels say this difference means substantial losses, estimated by them at Rs 100 crore every year.

Also, the delays in payments beyond the credit period of 30 days pushes up outstandings by Rs 60-70 crore.

According to HAI guidelines, the voucher and a rooming list must reach the hotel 30 days before the guest checks in. A reduction factor of up to 10 per cent in group bookings is offered provided the hotel is given a 10-day notice.

If the number of rooms finally reduced is more than 10 per cent of the booking, a one-night retention charge is levied on every room dropped.

If the bookings are cancelled less than 10 days before the group’s arrival, retention charges will be charged on the entire duration of the stay.    


 
 
MAHINDRAS TO PART REDEEM CONVERTIBLE FOREX BONDS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 9 
Mahindra & Mahindra (M&M) has invoked the option to make a call to redeem $ 25.378 million of its foreign currency convertible bonds (FCCBs).

The call will provide bond holders with an option to convert their holdings into GDRs at the conversion price of $ 11.935 per GDR. M&M had made a FCCB issue of $ 100 million with a green shoe option of 15 per cent aggregating $ 115 million at an annual coupon rate of 5 per cent.

The company has been redeeming portions of the FCCB proceeds over a period of time. It has now decided to make a call to redeem bonds worth $ 25.378 million of the total outstanding of $ 27.866 million.

The company informed the exchanges through a notice that bonds will be selected “individually by lots, as the trustees shall deem fit and appropriate”.

The last date on which conversion option may be exercised by selected bond holders is March 6, and the company would redeem the balance out of the bonds called for redemption on March 10.

The M&M share price closed at Rs 529 down from the previous day’s close of Rs 551.80.

M&M’s ability to make a call on the FCCBs comes at a time when the company is in the process of making a major investment in the Scorpio project.

The project is expected to involve an investment of over Rs 450 crore in Nashik, in Maharashtra. The company will also invest another Rs 150 crore towards development of facilities in the other two locations where it operates namely Igatpuri and Kandivali.    


 
 
TEA BOARD CERTIFICATION MUST FOR DARJEELING TEA 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb 9 
To curb the sale of fake tea under the ‘Darjeeling’ tag, the Tea Board has introduced a certification mark scheme for Darjeeling teas.

The scheme will make it mandatory for all producers, packers, exporters and overseas importers to seek certification from the Tea Board for using the Darjeeling label.

Addressing a press conference here today, Tea Board chairman S.S. Ahuja said, “All producers, packers, exporters and overseas importers of Darjeeling tea, who wish to use the word ‘Darjeeling’ with regard to tea or any of its derivatives produced, grown, cultivated and manufactured in the scheduled tea gardens will have to apply to the Tea Board for the certification mark.”

This is in addition to the Darjeeling logo, which has been internationally registered under the certification trade mark laws. Besides, the board has identified 87 gardens in Darjeeling under the Geographical Indication of Goods (Registration and Protection) Act, 1999. In order to use the mark, a producer/trader of Darjeeling tea will have to obtain a recommendation from the Darjeeling Planters’ Association, or the Calcutta Tea Traders’ Association, or the Siliguri Tea Auction Committee.

The Tea Board will issue a user licence to the applicant after scrutinising the information furnished. A licensee will have to pay an annual fee of $ 250 (Rs 10,000) for the use of the trade mark. Further, a holder of the user licence has to apply for a consignment-wise certificate of origin from the Tea Board, whether for export purposes or for selling in the domestic market.

Regarding the production scenario this year, Ahuja said that the season has started on a good note and there has been rainfall in north and south India. “We have already received a 5,000 tonne export order from Iraq under the food-for-oil programme,” he added.    

 

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