IFCI rights issue sails through
Import curb phaseout offers revenue bounty
Essar Cellphone’s knotty offer
Stanchart steps on gas to win car finance race
Balrampur Chini to buy Chilwaria
Wipro races past new milestone
Foreign Exchange, Bullion, Stock Indices

 
 
IFCI RIGHTS ISSUE SAILS THROUGH 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb 18 
With just a day to go before the extended deadline for the rights issue of Industrial Finance Corporation of India (IFCI) comes to an end, Industrial Development Bank of India (IDBI) formally decided to subscribe to its portion of the flotation.

The Rs 352.3 crore issue of IFCI was originally scheduled to close on February 14 but seeing the poor response the Delhi-based finacnial institution decided to keep the offer open till February 19.

IDBI, which has 28.74 per cent stake in IFCI, will fully subscribe to its portion at an approximate cost of Rs 101 crore.

“We will subscribe to our portion of the rights issue. We have decided that,’’ IDBI chairman and managing director G.P Gupta told The Telegraph.

In December last year, IFCI offered a 1:1 rights at Rs 10 per share to improve its capital adequacy ratio, which stood at about 8.3 per cent, and lower its debt-equity ratio which was at 11.9:1.

The FI’s share has plumbed the depths and is currently being traded at about Rs 10.50 per share.

IDBI’s decision is significant because other financial institutions and banks, like LIC, GIC, UTI and SBI, which hold stakes in IFCI, have also not subscribed to the rights issue, waiting for IDBI to take the plunge.

“We are waiting for IDBI to make the first move. We will release our money only after IDBI does so,” a source in SBI said.

With IDBI deciding to subscribe to the rights issue, analysts expect others to follow suit.

IFCI has been able to muster only ten per cent of aggregate subscriptions, and without IDBI’s support the rights issue would have come unstuck. Sources said with IDBI subscribing to its share, if aggregate mobilisation be in the region of 50 per cent of the target then its holding in the company will go up to about 40 per cent.

Gupta did not comment on the proposed bailout package, envisaging investments of Rs 200-400 crore, prepared by IDBI for improving IFCI’s balance sheet.

On the reported move of the government to infuse Rs 400 crore in IFCI—this is in addition to the rights issue, Gupta was silent.

While IDBI holds a 28.74 per cent stake in IFCI, Life Insurance Corproation, GIC and its subsidiaries together hold a 13.05 per cent stake. On the other hand, banks hold 16.65 per cent and UTI 2.43 per cent.

The public holding in IFCI is 36.32 per cent and foreign institutional investors (FIIs), mutual funds and other corporate bodies together hold 2.81 per cent.

The net profit of the institution fell 93.66 per cent from Rs 370.5 crore in 1997-98 to just Rs 23.5 crore. IFCI had also made a provision of about Rs 600 crore on bad assets and about Rs 200 crore towards interest reversal, showing Rs 300 crore in the balance sheet and drawing the rest from reserves.    


 
 
IMPORT CURB PHASEOUT OFFERS REVENUE BOUNTY 
 
 
FROM R. SASANKAN
 
New Delhi, Feb 18 
Finance minister Yashwant Sinha has a splendid opportunity before him to collect higher customs revenue next year by taking advantage of the removal of quantitative restrictions (QRs) on imports.

Ultimately, the tariff rates should fall in line with the commitments made to the World Trade Organisation (WTO). However, he can use the budget to impose customs duty on several items which may find their way to Indian market for the first time. The quantitative restrictions will be lifted from April 1.

Former finance secretary and the present member secretary of the Planning Commission, Montek Singh Ahluwalia, had estimated a customs revenue of Rs 4,000 crore per annum if the import of consumer goods are allowed.

Sinha has to take a decision on the import of used cars as well. He is under tremendous pressure from the domestic automobile lobby not to allow such imports. Indications, however, are that the government may allow used car imports with a 50 per cent duty.

Sinha can tap as many as 1,429 tariff items, including hundreds of agro-based items and fast moving consumer goods. Be it apples, grapes or kiwi fruits or milk power and foodgrains, the country’s creamy layer will be exposed to the next stage of globalisation.

With the government having reached agreements with the EU and the US on these items, the budget for 2000-2001 will decide the import duty for them. Sinha has the option to raise the duty from 0 to 40 per cent.

He is keen to prune customs duty rates from five to three—10 per cent, 25 per cent and 40 per cent. While inputs for local firms may be allowed to be imported at 10 per cent, items which will compete in the Indian market would attract a rate of 25 per cent. However, finished products and fast moving consumer goods would attract the peak rate of 40 per cent.

It is likely that the 10 per cent surcharge on basic customs duty, imposed in 1999 in lieu of 5 per cent special customs duty in 1998, may be abolished. Instead, the basic duties will be reworked as 10 per cent, 25 per cent and 40 per cent. The government is committed to imposing the lowest duty on raw materials, medium rates on intermediates and the highest on finished products. Major sectors like petrochemicals, textiles, capital goods, bulk chemicals pharmaceuticals and industrial raw materials have already started lobbying the North Block with representations. Sinha is expected to reconcile the conflicting interests to the best of his ability.    


 
 
ESSAR CELLPHONE’S KNOTTY OFFER 
 
 
FROM M RAJENDRAN
 
New Delhi, Feb 18 
It’s yet another warning beep for cellular firms. Not long after the industry emerged from a bruising battle with the government over licence fee dues and free incoming calls, Essar Cellphone has set the cat among pigeons by announcing an alternative tariff plan that runs foul of the norms laid down by the Telecom Regulatory Authority (Trai).

Essar Cellphone, one of the mobile telephone operators in the capital, today launched Listen More, an optional tariff structure, apart from the standard package already available to customers.

The alternative tariff package offers an incoming call for a rupee while an outgoing call is charged at the rate of Rs 8 — a call is 60 seconds — on a monthly rental of Rs 525.

On the other hand, under the company’s standard tariff package, a customer has to pay a monthly rental of Rs 475, airtime charges of Rs 4 on an outgoing call — for the first 30 seconds — and Rs 2 for subsequent calls of 30 seconds each.

The tariff order issued by Trai on March 9 last year makes it clear that even the alternative packages cannot offer rates higher than the ceilings fixed in standard tariff packages.

“In the alternative tariff packages, the tariff ceilings cannot be exceeded. Items for which a particular amount is specified, such as rentals and airtime, may have a different price in the alternative tariff package, subject to the general reporting requirement,” the telecom tariff order of 1999 states.

Further, the general reporting requirement stipulates that service providers must submit the proposed tariffs to the regulator five working days before they are implemented.

However, Essar Cellphone dismissed the argument that the rates under its Listen More package violate norms.

“We have taken permission from Trai and the package is in conformity with the telecom tariff order of 1999. There is no conflict,” the company’s legal consultant, Sandeep Kathuria, claimed.

According to him, the general reporting rules require a company planning to offer an alternative tariff package to inform and submit its proposed package to Trai five working days in advance.

However, an operator can launch the service on the sixth day if the regulator is silent on the proposal.    


 
 
STANCHART STEPS ON GAS TO WIN CAR FINANCE RACE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 18 
The ongoing rate war in the car finance segment hotted up today, when Standard Chartered Bank (SCB) announced a massive 100 to 150 basis point reduction in interest rates on car loans.

The premium car segment (Honda, Lancer and others) saw interest rates being reduced to 15 per cent from 16.5 per cent, while in the mid-segment (Zen, Santro and others), rates were slashed to 15.5 per cent from 17 per cent. Interest rates in the economy segment (Maruti 800 & Omni) stand lowered at 16 per cent from 17 per cent.

Industry circles said that while the aggressive reduction in car finance rates by SCB would force others to follow suit, players like Kotak Mahindra have already thrown their hat in the ring, slashing their rates to 15 per cent from a high of 18 per cent.

The reduction in car finance rates has largely been attributed to the undercutting initiated by ICICI, the new kid on the block. ICICI, with its aggressive plans to emerge as a significant contestant, was the first to reduce interest rates to 16 per cent.

Apart from Kotak Mahindra, ICICI and SCB, the other notable participants in the sector include Citibank and ABN Amro, which took over the retail assets of BankAm.

Speaking to The Telegraph, an SCB spokesperson said that the rate cut is aimed at taking advantage of the expected rise in car sales prior to the forthcoming Union Budget.

Apart from the reduction in interest rates, SCB is also dangling concessions before its credit card and account holders. The bank announced that card holders would get a further 0.25 per cent concession on car loans.

“Thus if an SCB credit card holder wishes to obtain car finance, he will have to pay an interest rate of 14.75 per cent in the premium segment,” SCB officials added.    


 
 
BALRAMPUR CHINI TO BUY CHILWARIA 
 
 
 
 
By Pallab Bhattacharya Calcutta, Feb. 18 Balrampur Chini, the city-based sugar major, is set to acquire Chilwaria Sugar for Rs 55 crore.

This is the first major buyout the Rs 300-crore company will execute after it snapped up Tulsipur Chini last year. A senior company official confirmed the development, and said the acquisition will be completed within a fortnight.

Of the total investment, Balrampur Chini has to pay financial institutions (FIs) Rs 40 crore. Earlier, the FIs funded Chilwaria Sugar’s greenfield sugar factory with a production capacity of 2,500 tonnes daily.

“We are now in talks with financial institutions to work out a flexible repayment system for the loan after the acquisition,” the official said.

The Chilwaria plant was funded by the Industrial Development Bank of India, ICICI and Standard Chartered Bank.

The acquisition of Chilwaria Sugar, a wholly owned subsidiary of Simboli Sugar, will help Balrampur Chini emerge as one of the largest sugar makers in the country.

“The buyout will also raise our production capacity from the existing 21,000 tonnes daily to 23,500 tpd.

Besides, the Chilwaria unit is located close to our sugar factory in Balrampur,” the official said.

Initially, Chilwaria Sugar was a 50:50 joint venture between Simboli Sugar and the UK based Tete & Lyle plc. The plant was set up in 1996-97.

“However, the plant could not be made commercially viable because of the recession in the sugar market for the past five years. The UK company, after failing to start the factory, sold off its entire stake to Simboli Sugar last year,” the official said, adding the company could set up a new factory with a similar capacity by investing the same amount of money.

“However, the Chilwaria factory is a new unit, which can be used for production immediately,” he said.

The company had invested Rs 19 crore to pick up a 70 per cent stake in Tulsipur Chini last year.

“ We had pumped in another Rs 40 crore to double the capacity of the plant to 5000 tpd,” the official said. With the acquisition of Chilwara, the company will have four factories, the other three located in Balrampur, Tulsipur and Bagnan.    


 
 
WIPRO RACES PAST NEW MILESTONE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 18 
Wipro’s market capitalisation surpassed the Rs 2,00,000-crore-mark today when its Rs 2 paid-up share hit the upper price band for the fifth consecutive session on the Bombay Stock Exchange (BSE).

At Rs 2,04,209.31 crore, the infotech major’s market cap zoomed ahead of index heavyweights like Infosys and Hindustan Lever, which notched up figures of Rs 65,000 crore and Rs 52,000 crore respectively.

The Wipro share — known for its illiquidity — gained a whopping Rs 660.10 to close at Rs 8911.60 in a surge that left analysts and marketmen groping for explanations. Even the Bangalore stock exchange has written to Wipro’s compliance officer asking him to explain the reasons for the phenomenal rise.

The Wipro share is not represented in the BSE sensex because of its illiquidity — a result of chairman Azim Premji’s 75 per cent holding in the company.

Analysts say the inclusion of the scrip in the Morgan Stanley’s MSCI emerging market India Index — popular among fund managers — a week ago has helped fuel the spurt. The inclusion means foreign fund managers must include the share in their portfolios.

In another development, HCL Technologies’ Rs 4 paid-up wrested the number five slot from petro-major Reliance Industries. HCL Technologies’ market-cap in early-session deals today was pegged at Rs 38,822.76 crore while Reliance’s was put at Rs 37,155.58 crore.

Wipro’s share value now makes up 12 per cent of the market cap of all shares listed on the BSE. Premji, by virtue of the surge in his company’s share value, is now worth a mind-boggling Rs 1,53,000 crore.

The meteoric rise in Wipro’s market cap follows the splitting of a Rs 10-scrip into five shares of Rs 2 each. In a strange twist, the company’s market value had dropped 25 per cent within a month of the stock split, but it later gained ground on heavy demand from institutional investors.

Analysts say the premium on Wipro shares has more to do with the low liquidity, than anything else. This can be gauged by the fact that the share hit the upper-end circuit filter in only 385 deals on a modest volume of 30,804 crore shares. Wipro is now known more as a software services major than a edible oil and a soap maker. The company’s net profit in 1998-99 zoomed to Rs 170.20 crore; net profit in the quarter ended December 1999 vaulted 215.8 per cent to Rs 84 crore.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.61	HK $1	Rs. 5.55*
UK £1	Rs 70.09	SW Fr 1	Rs. 26.55
Euro	Rs 43.05	Sing $1	Rs. 25.25
Yen 100	Rs 39.33	Aus $1	Rs. 27.20*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4810	Gold Std (10 gm)	Rs 4780
Gold 22 carat	Rs 4540	Gold 22 carat	Rs 4420
Silver bar (Kg)	Rs 8150	Silver (Kg)	Rs 8215
Silver portion	Rs 8250	Silver portion	Rs 8220

Stock Indices

Sensex	5721.65	-113.50
BSE-100	3679.50	+30.13
S&P CNX Nifty	1717.80	-24.30
Calcutta	147.16	+2.41
Skindia GDR	NA	NA
   
 

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