India Inc upbeat on growth trend
IFC to focus oninfotech, pharma
One-third of India is poor
RBI steps in to ease liquidity crunch
National Power, Videocon inequity recast
BPL plans production unit in Europe
TV-18 sizzles on BSE debut
Baptism for barons on the Web
Foreign Exchange, Bullion, Stock Indices

New Delhi, Feb 16 
Corporate India believes there are better times ahead. This is the essence of a Ficci survey which shows that the index of business confidence has improved from 25.6 points in October last year to 27.8 points this month.

This means the 427 companies covered in the survey, the sixth in a series, are looking forward to a year in which they can reap the gains of a rapid-fire economic recovery. They have also pinned hopes on a budget that is expected to stimulate growth, keep inflation in check, hasten PSU disinvestment and narrow — if not eliminate — a growing fiscal deficit.

Those asked to voice their opinions came from a wide spectrum of firms from consumers goods, capital goods, pharmaceuticals, steel, cement and services. Their confidence is rooted in expectations that the GDP growth this year will be higher at 6.8 per cent , industry will fare better and stock markets will remain buoyant.

They also see strong macro-economic fundamentals like a benign rate of inflation, stable exchange rates and adequate foreign exchange reserves. More important, a raft of crucial economic legislations, waiting for Parliamentary approval, are expected to sail through.

Companies, says the survey, expect some bold decisions in Budget 2000. While 79.4 per cent of the respondents feel the government will identify more PSUs for disinvestment, 45 per cent say sick state-owned companies will be put on the block.

On the question of taxing rich farmers — an incendiary issue that politicians of all hues would like to steer clear off — a sizeable 50 per cent of the respondents are betting the government will make a beginning.

On downsizing the government, 30 per cent say they expect the budget to take a step forward in this direction.

The recent boom has raised the level of expectations from the stock market. In all, 74 per cent feel the BSE sensex will stay above the 5500 mark in the current financial year; 17 per cent reckon it will fluctuate between 4500 and 5000. This is a marked improvement over the last survey in which only 21 per cent expected the index to touch the 5000 mark

The outlook on the fiscal situation remains worrying. In all, 64 per cent of the respondents see a spurt in the fiscal deficit to 6-7 per cent. Last year, 65 per cent had expected a figure of 5-6 per cent. The summer skirmish in Kargil and the Orissa super-cyclone are considered the two key factors responsible for this.

However, a section of the firms feels the fiscal deficit as a ratio of the GDP could decline following the upward revision in the growth forecast (quick estimate) to 6.8 per cent as against the advance estimate of 5.8 per cent.

In all, 62 per cent of the respondents feel the industrial growth will be in the range of 6 to 8 per cent in the current financial year; 18 per cent expect a figure of 8-10 per cent. In contrast, the previous survey showed 53 per cent betting on a 4-6 per cent growth; only 30 per cent said it would be 6-8 per cent.

The picture on lending rates is less clear. While 44 per cent expect a prime lending rate (PLR) of 12 to 13 per cent 41 per cent say it will stay below 12 per cent; only 12 per cent foresee a PLR higher than 13 per cent.

In the previous survey, 20 per cent had said the benchmark lending rate could rise above 13 per cent.

However, there was a large chunk (57 per cent) which linked better economic prospects to the passage of the IRDA and Fema Bills.

Industry out the Companies Bill on the top of the pile of pending legislations that it wanted Parliament to pass immediately. The Patents Bill, amendments to the Contract Labour Regulation and the Sick Industrial Companies Acts are seen as the other high-priority legislative items.

Besides legislation, there are a few key issues companies want the government to resolve in a three-year time-frame. Effective management of fiscal deficit, restructuring and privatisation of PSUs, reduction in lending rates and more tax reforms are among the jobs they feel should be accomplished in a year.

Within the next two years, they want the development of common market in India, and legal, administrative and labour reforms. Agricultural reforms can be carried out over a longer period of three years.    

New Delhi, Feb 16 
The International Finance Corporation (IFC) will not take anymore exposure in the Indian manufacturing sector and would invest in the information technology, pharmaceuticals, healthcare and education sectors. IFC will also invest in small and medium enterprises and concentrate on micro-lending. The company will pump in $ 200 million in the country by June.

IFC executive vice president Peter Woicke said the shift in focus was “because India has already reached a certain level of development. We now want to focus on fresh areas where traditional investors, banks and finance companies would not be interested but which are highly viable and yet require crucial doses of investment.”

Woicke felt the country would be developed enough in the next ten years to forsake IFC assistance, but to reach that stage the multilateral financial institution must re-focus its strategy.

He said IFC was also keen to help out the government in restructuring the banking sector by investing in asset restructuring companies.

Woicke said IFC will work with commercial banks and institutions to lend to small and medium enterprises (SMEs). “Most traditional banks refuse to lend to SMEs as they insist on asset based collateral. But our experience is that small entrepreneurs do not have bankable assets, consequently the way out is to lend on the basis of future income flows based on an appraisal of their investment idea.”

Woicke held wide ranging discussions today on aid to SMEs with Planning Commission officials.

In a move to bridge the growing digital gap, IFC is joining hands with Softbank of Japan to help the developing countries.

However, since India is already advanced in IT technology, it might not come within the ambit of this $ 550 million joint initiative.

On IFC’s forays into the insurance sector, Woicke said the corporation would come in only if there is inadequate response from the private sector. But as a strong player in the global financial market, IFC has expressed interest to develop the Indian bond market and go into the entire gamut of the capital market, he said.    

New Delhi, Feb 16 
The World Bank has estimated the number of poor in India at 300 million, or nearly one third of the country’s population.

In a new study released today, the multilateral funding institution said high food prices in the 1990s had severely undermined poverty mitigation efforts during the post-liberalisation period.

The study said that despite high GDP growth rates, poverty reduction efforts in India’s rural hinterland was hampered by a higher-than-average inflation rate, especially in food prices.

While labour intensive farm sector growth in the 1970s and 1980s were major reasons for decline in poverty during these two decades, new cropping patterns and more capital intensive agricultural growth in the 1990s saw a slowdown in the rate of increase in real wages in the rural areas.

The Bank said states like West Bengal, Andhra, Gujarat, Kerala, Maharashtra, Tamil Nadu and Punjab had fared better in poverty reduction. The Bimaru states —- Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh — as well as Orissa had badly lagged behind. While this has been true even in the 1970s and 1980s, the difference in the poverty reduction rates between the two groups had widened considerably in the 1990s.

Poor infrastructure, poor human resources indicators, slower GDP growth, law and order problems weak legal and regulatory apparatus and state-level fiscal problems have been cited as reasons for the poorer state of affairs in the Bimaru states.

The Bank has suggested a second wave of reforms in order to alleviate poverty.

Reforms, it feels, should reduce the risk of macro-economic instability, increase the access of poor to human development, improve demand for labour and ensure better governance and fiscal management by states.

Almost repeating Nobel Laureate Amartya Sen’s formula, the World Bank report suggests basic education, health and infrastructure need “better and more public spending.” To do so, however, the Bank suggests the government should pull out of non-core areas like airlines and hotels and prune its bloated bureaucracy.    

Mumbai, Feb 16 
Call rates today shot up to 25 per cent, indicating the tight liquidity position caused by last week’s twin auctions of government paper worth Rs 5,000 crore and yesterday’s open market sale of another Rs 2,000 crore of securities.

To prevent the liquidity squeeze, the RBI today announced it would make secondary market purchases of treasury bills only from primary dealers.

This had its impact on call rates, which slipped to 16 per cent after opening at a high of 20 per cent.

The RBI also said it would be purchasing treasury bills maturing on December 14, 2000, December 27, January 11, 2001, January 25, and February 8 at yields of 9.35 per cent, 9.40 per cent and 9.45 per cent respectively.

An RBI official told The Telegraph that “one of the major objectives of the purchase is to inject liquidity at the shorter-end”.

The call money market was very volatile today, opening at 20 per cent, moving up to touch an intra-day high of around 25 per cent but later stabilising between 16 to 18 per cent for a significant part of the day. The call rates finally finished in the 10 to 14 per cent range, indicating the tightness that is still prevalent in the system. Despite the recovery, dealers feel the rates will remain tight tomorrow.

“I expect that call money rates would tomorrow open in the range of 10 to 15 per cent, while most deals are likely to be done at around 12 per cent,’’ said Ashish Vaidya of HDFC Bank.    

Mumbai, Feb 16 
The equity structure of the Videocon group’s power project in Chennai is being recast, following the exit of ABB, with National Power of UK raising its stake to 49 per cent and Videocon to 51 per cent.

National Power will now be investing $ 195 million as its equity contribution to the 1,050 mw coal-based power project.

Under the earlier equity pattern, National Power’s share in the equity was 36 per cent, Videocon group’s share was 38 per cent and ABB’s share was 26 per cent.

With ABB indicating its decision to pull out as an equity holder, though it will continue to be the engineering, procurement and construction (EPC) contractor to the project, the equity structure had to be recast with Videocon taking the majority stake.

Though the precise reasons behind ABB’‘s pull-out is not known, senior officials from the company explained it was the decision of ABB Power Ventures based in the US which determines the group’s global investment in power projects.

Rajkumar Dhoot, director Videocon group, told The Telegraph that the Rs 6,000 crore project would be financed through equity and debts of Rs 4,200 crore to be given by domestic and foreign institutional investors (FIIs).

The Videocon group’s contribution to the equity is Rs 870 crore, while National Power will be bringing in $ 195 million.

Financial closure is expected to be over by April 31, following which the project would go on stream immediately, Dhoot added.

The promoters are raising 60 per cent of the debt from overseas sources, with ABN Amro and a German financial institution Hermis pledging assistance, while the rest will be raised from local financial institutions.

The coal for the project will be sourced from Talcher. However, there are major disadvantages of using coal as a fuel. First, coal-based projects have gestation period ranging from 38 to 40 months. Secondly, Indian coal has high ash content and low calorific content. Further, relying on domestic coal can mean additional investment in coal washeries, making the power plants a costly proposition.    

Bangalore, Feb 16 
Having tasted success in the European market, the Rs 4500 crore consumer durables major BPL is planning to set up a manufacturing facility in Europe to give a greater thrust to its exports.

Ajit Nambiar, chairman and managing director of BPL, told reporters today that buoyed by a significant increase in the sales of its colour television sets, computer monitors and alkaline batteries in the European and US markets, the company is “very seriously studying” setting up a manufacturing unit abroad.

“We have not yet finalised the location, but it could most probably be located in eastern Europe as that’s where we expect the markets to grow in a big way,” said L. H. Bhatia, director, international operations.

He said BPL exported 120,000 CTVs this year, registering a 100 per cent increase over last year and sold over 130 million alkaline batteries.

“We have also successfully sold all critical components to Japanese CTV manufacturers in south-east Asia and Europe,” he added.

The company hoped to double CTV sales this year, besides increasing the battery exports to 20 million during 2000-01.

Nambiar stated BPL was already exporting a wide basket of consumer electronics, home appliances and soft energy products to more than 30 markets world-wide, with CTVs, refrigerators and audio products gaining increasing popularity in West Asian markets and also Sri Lanka.    

Mumbai, Feb 16 
Television Eighteen (TV 18) made an impressive debut on the Bombay Stock Exchange (BSE), gaining almost 826.16 per cent to close the day at Rs 1667.10, as against its initial offer price of Rs 180.

The share opened at Rs 1950 and touched an intra-day high of Rs 1990 before profit booking pulled it down to Rs 1490. The stock finally closed the day at Rs 1667.10 attracting 4646 trades for 4.51 lakh shares in the BSE. The stock attracted a turnover of Rs 75.45 crore, on its debut.    

New Delhi, Feb 16 
Barons need lessons. Especially, if they’re the kind who run corporations but feel they have failed to keep pace with technology in a digital-driven world. Failure to do so would mean being logged out — of jobs and markets.

For more on this, ask the 35-odd CEOs and senior executives who trooped into a Ficci-organised tutorial — the first in a series — aimed at giving them an insight into the rarefied realm of internet and e-commerce.

It is a different matter that the chamber decided to keep it a hush-hush affair and refused to divulge the names of those who took lessons. “We don’t want to give away the names because it was an exclusive affair. We encourage our members to be frequent Web users. Hence, we wanted them to be at ease while they absorbed a few lessons from NIIT chairman Rajendra Pawar,” a Ficci official said.

CEOs tip toed into the new-knowledge society, remained behind doors the entire day, except for an hour-long lunch break. They were led by no less a luminary than Ficci president G P Goenka himself.

Those who attended the tutorials were Y K Modi of Rossell Industries, MRF corporate manager Krishnan Veerappan, Duncans group managing director V Kausik, J K Corp vice-president S K Mukherjee, Narang Industries managing director Devin Narang, Howe India director D D Agarwal, Cosmos International director Arun Agarwal, Birla VXL president and managing director B Rathke and RPG transmission vice-president (marketing) Sunil Gupta.

According to sources, some fuddy-duddy CEOs had kept their junior officers in tow, a move that could have helped these subordinates learn the nuances of internet to carry out the work delegated by their less technology-savvy bosses. But, 20 such ‘hangers on’ were denied the delights of the Web on the ground that the whole idea was to equip only the CEOs themselves. Ficci plans similar programmes in other cities soon.

“Get eReady or get extinct,” was the NIIT chief Pawar’s terse message, as he talked about the changing nature of companies. “From a society obsessed with brick and mortar companies, we are now moving to an environment where we have click-and-portal, and pure Web ventures.” Pawar attempted to answer the crucial question of who would ultimately survive in the new knowledge-based society — a brick and mortar company belonging to the real world, or a click-and-portal organisation of the cyber world. He also dealt with questions like the internet hype and suggested simple ways in which companies can navigate their vessels in the choppy waters of the cyber world.

To succeed in the cyber world, companies need an e-strategy. Surveys have revealed that e-commerce initiatives often fail because organisations lack an e-commerce strategy.

“Companies need to go through the complete cycle to achieve success in the on-line world. An e-strategy, accompanied by a business plan, will make up an e-business vision. These will have to be followed up with an implementation plan, an e-commerce solution design and, finally, the implementation,” the NIIT chief told a pack of curious honchos.    

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