Panel may weigh IDBI-IFCI merger
Volvo-Mitsubishi trucks to hit Indian roads
Kumaramangalam’s ad push to power reforms
Mamata juggles with please-all budget
Telco scrip surges on hiveoff rumours
Equity deal at Kopran

 
 
PANEL MAY WEIGH IDBI-IFCI MERGER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 22 
A process of restructuring is being initiated at Industrial Finance Corporation of India, the beleaguered financial institution. A committee is likely to be appointed to come up with suggestions in this regard and it may even be asked to consider the possibility of a merger with the Industrial Development Bank of India (IDBI).

The Union government has already decided to invest around Rs 600 crore in the Delhi-based financial institution. This will be done through a Rs 400 crore assistance in the form of subscription to preference shares of IFCI for a period of 20 years.

The Centre has also decided to provide around Rs 190 crore as a “grant’’ to the institution. These moves are expected to shore up its Tier-I capital and enhance its capital adequacy ratio to over 9 per cent.

IDBI chairman G.P. Gupta confirmed that a “restructuring exercise’’ was being initiated for IFCI, but refused to spell out the terms of reference of such a committee. When asked about the possibility of a merger of IFCI with IDBI (the latter holds over 28 per cent in IFCI), he said, “The committee may look at the possibility of a merger. However, it is too early at this point of time to comment on this.”

Gupta, who was talking to reporters today after launching IDBI’s second tranche of Flexibonds in the current fiscal, justified the financial institution’s decision to subscribe to the Delhi-based FI’s rights issue which entailed an outgo of Rs 101 crore.

He said this was done only after the Union government agreed to provide assistance worth Rs 400 crore by subscribing to its preference shares.

“Moreover, IFCI has worked out a business strategy to reduce its non-performing assets. We feel that it is on the recovery path and that is the reason why we invested in the institution,” he added.

IDBI has one representative on the board of IFCI at present. Gupta said its representation may be increased, but that would be a part of the restructuring exercise for the Delhi-based FI.

Gupta said the IDBI board had cleared a proposal to invest in the secondary equity market. Here, he added that IDBI would invest to a maximum limit of 5 per cent of its total assets which stands at around Rs 70,000 crore.

Gupta revealed that the forthcoming Flexibonds issue would be for Rs 300 crore with an option to retain oversubscription up to a similar amount. The issue will be open for subscription from February 25 to March 10.

The four instruments offered in the Flexibonds umbrella include IDBI Regular Income Bond, IDBI Growing Interest Bond, IDBI Floating Rate Bond and IDBI Infrastructure Bond. While the regular income bond offers a return of 11 per cent annualised for a period of five years, the growing interest bond has a built-in step-up interest rate that rises from 9.75 per cent in the first year to 10.50 per cent in the fifth year.

On the other hand, the floating rate bond is an instrument where the investor receives interest at a spread of 50 basis points above the benchmark rate, which is the average yield on the 364 day treasury bills.

The infrastructure bond will receive interest at 10.25 per cent payable annually for three years.

Gupta revealed that as against the earlier practice of two Flexibonds offerings in a fiscal, the institution may come up with more such issues in the next financial year.    


 
 
VOLVO-MITSUBISHI TRUCKS TO HIT INDIAN ROADS 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb 22 
AB Volvo and Mitsubishi Motor Corporation are planning to jointly introduce medium duty trucks and buses in India.

Anton Freiselben, vice-president (marketing) of Volvo India said, “We are thinking of introducing medium duty trucks and buses in India. We also have plans to manufacture construction equipment in the country. India is a major market for us.”

Mitsubishi Motor Corporation and Volvo entered into a strategic alliance recently to develop and market medium duty trucks and buses in Asia, South Africa, New Zealand and Australia.

Mitsubishi will form a separate division for trucks and buses which will be subsequently hived off to a separate subsidiary. Volvo will have a 19.9 per cent stake in that subsidiary. Both partners have planned to roll out the products by 2001.

Volvo is the world’s second largest manufacturer of large, high-capacity buses and bus chassis.

Volvo India, the 100 per cent subsidiary of Volvo Sweden manufactures heavy duty trucks, trailers and tippers at its Bangalore facility.

The Bangalore facility has a capacity of manufacturing 4,000 trucks. Last year the company manufactured 340 trucks. “This year we expect to manufacture 500 trucks. We will be able to achieve 100 per cent capacity utilisation in four years’ time,” said Freiselben.

He said that the company has registered 75 per cent repeat purchases. He was in the city to introduce Volvo tipper used in construction and mining industry and multi-axle Volvo tractor-trailer.

“In the last 18 months, we have expanded our marketing and support programme in a phased manner, to ensure that we can provide a complete solution to our customers wherever we sell. We are now prepared to do so in the east. We expect that 50 per cent of our tipper sales will come from the eastern region,” he said.

Volvo is also sourcing equipment from Indian companies for its other production facilities in the world. The company has 59 production facilities across six continents.

Volvo, which already has introduced tippers and multi-axle trailers-tractors is also planning to introduce car carrier applications in India soon.    


 
 
KUMARAMANGALAM’S AD PUSH TO POWER REFORMS 
 
 
FROM M. RAJENDRAN
 
New Delhi, Feb. 22 
As the aftershocks of resistance to reforms resonate in the country’s creaky power sector, power minister P. Rangarajan Kumaramangalam has decided he needs the services of ad professionals to sell the idea that privatisation is the only cure for ailing state electricity boards (SEBs).

Rashtriya, Sobhagya and MCS are the three agencies that have been chosen as vehicles for the publicity blitzkrieg which aims, among other things, to create a conducive atmosphere for the March 26 power ministers’ meeting.

A budget of Rs 5.5 crore has been fixed for the current financial year but the kitty will be enhanced to Rs 10 crore in the next. MCS will get the largest slice of the pie, Rs 3 crore, while Sobhagya and Rashtriya Advertising will be given Rs 1.5 crore each.

“The power reforms undertaken by the power ministry have not been properly reflected in the media. There is a need to educate the public about the need for power reforms,” said a senior executive with Rashtriya Advertising.

Kumaramangalam knows it is not easy for states to press ahead with power reforms, and is also aware of the problems the Centre might face when they decide to bite the bullet.

The wave of protests by employees of Uttar Pradesh State Electricity Board (UPSEB), and the support it generated from their counterparts in other regions of the country, still haunts him.

“The ministry wants to send across a loud and a clear message to states and SEB employees before ministers leave for Delhi to attend next month’s meeting,” the Rashtriya official said.

The power ministry also wants to revamp the corporate communications department of public sector power agencies and to turn them into effective tools for selling the official line — in this case the need to clean up the mess in SEBs.    


 
 
MAMATA JUGGLES WITH PLEASE-ALL BUDGET 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Feb. 22 
Mamata Banerjee, the custodian of the biggest public sector enterprise on wheels, is trying to keep the railways on the fast track but ensure that it remains cheap enough for people who put her in the driver’s seat.

Not an easy task, but Bengal’s loudest voice in Delhi is not giving up her quest to present a railway budget that raises adequate money to keep a lumbering giant afloat and generates sufficient political steam among Bengal’s suburban commuters to put her on course to Writers’ Buildings — the final destination on the long route to her political destiny.

Her tightrope walk, as she pieces together her maiden budget, is likely to lead to a series of compromises: no change in second class and suburban train fares, even though these are services that lose more money than they make.

In the case of freight rates, Banerjee is likely to juggle a bit. There are growing expectations that rates on a large number of commodities will be rationalised. In other words, some will be hiked while others may be reduced marginally.

The overriding objective will be to take the battle for marketshare into the camps of truckers who have long stolen a march over an enterprise that has been treated by wily demagogues as the biggest welfare, non-profit, organisation in town.

While some Rs 900-950 crore will come from fare (sleeper and upper class) and freight hikes, Rs 3,500 crore will be raised from bond issues, own-your-wagon schemes and build operate lease and transfer (BOLT) of goods and tourist trains.

The Centre will chip in with a Rs 3,500-crore budgetary support while Rs 1,800 crore is expected to come from internal resource generation. Even so, Banerjee knows she needs more money than she can get from the government and passengers.

She is believed to be looking at several fund-raising options, such as hawking space and setting up shopping malls, restaurants and fast-food joints at stations. Hiring out billboard space at level crossings to firms, who might even be persuaded to maintain it, is another key idea. She may even allow railway space to be leased out to new telecom companies for laying a countrywide fibre optic cable network.

But then, like all smart politicians, she also knows that land-lease and sale deals can serve as canon fodder for political opponents. So, these are likely to be looked at cautiously.

Of the Rs 9,700-crore railway plan outlay, a major chunk must be devoted to track renewal to keep the system from falling apart and her trains running safely.

As a matter of fact, the Railways plans to spend a record Rs 3,000 crore on this head, 50 per cent more than what it did last year.

The immediate need to invest on what is otherwise a politically unattractive area stems from a harsh reality.

Most ministers over the last twenty years have neglected this important task in favour of more attractive schemes that get them more votes. As a result, the country is in a situation where the whole rail track system threatens to crumble.

In all probability, Banerjee will not skip the now-familiar political gestures: new trains and lines, including plans to extend the Calcutta Metro.

A host of other facilities for Bengal and other states key to the ruling NDA alliance will also form a part of the package. Some 21,000 new wagons will also be bought for more than Rs 4,000 crore in 2000-2001.

Built for the most part in Bengal, these orders are sure to please wagon-makers in Hooghly, Howrah and Burdwan districts of Bengal. Starved of orders over the last few years, many of these firms were struggling to pay workers and stay afloat.

Politically, these wagon factories could be a key tool for Trinamool Congress in next year’s assembly polls in Bengal.

With jobs more secure and regular salaries, happy workers may help her breach these one-time red fortresses and threaten those now controlling Bengal from the echelons of Writers’ Building.    


 
 
TELCO SCRIP SURGES ON HIVEOFF RUMOURS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 22 
The Tata Engineering and Locomotive Company’s (Telco) shares surged on premier bourses today on rumours that its car division would be hived off into a new company.

According to the market grapevine, the automobile major may strike an alliance with DaimlerChrysler, the US giant with whom the Tatas already have a partnership to manufacture Mercedes Benz cars in India. DaimlerChrysler also holds a small stake in the Indian auto major.

Telco shares were trading at Rs 179.10 on the Bombay Stock Exchange (BSE), up from the previous day’s close of Rs 165.85. The flare-up in the counter is significant when compared with last week, when its shares were quoting at Rs 153.

Today, the share attracted 2,106 deals involving 8.83 lakh shares on an impressive turnover of Rs 15.75 crore.

However, sources close to the automobile major denied the company had any hive-off plans. Earlier, there were reports that the axles division may also be spun off into a separate subsidiary, after which the company would hunt for a partner.

Tata group chairman Ratan Tata had hinted in last year’s annual report at the possibility that Telco could join hands with international car and component manufacturers to adopt and add specific new technologies in its products.    


 
 
EQUITY DEAL AT KOPRAN 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 22 
The sleepy Kopran counter today surprised marketmen rising spectacularly to hit the upper ceiling on a blockbuster negotiated deal in the Bombay Stock Exchange (BSE).

A whopping 10 lakh shares is believed to have been placed with a clutch of investors including foreign institutional investors (FIIs) at a price of Rs 152 per share.

While the deal is said to have been brokered by Khandwala Securities, a local brokerage firm, informed sources said that the money raised from the deal to the tune of around Rs 30 crore will be used by the promoters of the company (the Somanis) to clean up the company’s balance sheet and bring in more products to improve Kopran’s topline.

It is learnt that the promoters are also planning to invest more in the Smyle brand, a recognised mouth ulcer formulation, by launching various line extensions. Sources close to the company added that the promoters are also contemplating to reduce their exposure in some of the group companies.    

 

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