Sensex falls 240 points as banks deny funds to bro
HLL board clears stock split, net vaults 33%
Export zones to be unshackled
New round of oil hunt bids to start soon
Saffron lobby for SSI list review
Japanese team coming on Haldia mission
Cadila to test Viagra clone in 3 months

 
 
SENSEX FALLS 240 POINTS AS BANKS DENY FUNDS TO BRO 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 23 
The Bombay Stock Exchange (BSE) sensitive index surrendered much of the gains it had piled up over the past week as it lost a whopping 240.87 points to close at 5642.46 in a selloff that mauled most pivotals, including infotech shares.

The immediate cause for what was the sixth-largest fall in the history of the exchange was the refusal by banks to extend loans to brokers for meeting their margin requirements.

The 30-share index opened strong at 6002.49 but fluctuated by a massive 421.43 points as pivotals like Lever, Infosys Tech, Reliance and NIIT were hammered. The BSE-100 index also tumbled 179.09 points to 3583.27 from its previous close of 3762.39.

There was confusion when Bank of India (BoI) — the main bank for most BSE brokers — tightened norms for loans meant to meet margins. A broker said this was done without any prior intimation while BoI said they had been told to do by the topbrass.

Later however, BSE executive director A N Joshi said the lending facilities would be restored soon. “We were in touch with bank authorities and they informed us by late evening that the lending lines to broking houses have been restored. It was only a temporary glitch,” he told the Telegraph.

Brokers claimed 50-to-60 terminals were de-activated. However, Joshi said the exchange had pulled the plug on only three to four brokers in what was a normal feature. The connections, he said, would restored as soon as the brokers clear their dues.

Operators also moved out of long positions ahead of Thursday, the last day of the current settlement on the Calcutta Stock Exchange (CSE). This was reflected in BSE’s high net outstanding position of Rs 4,700 crore.

According to a leading BSE broker, the markets went into a tailspin in the morning as banks affiliated to the premier exchanges turned down requests for loans to meet margin requirements, weakening the general sentiment in the market.

“Money being the most important commodity nowadays, any news of money supply shrinking will immediately affect the market sentiments. Anyway, a technical correction was long overdue,” Jayesh Sheth of Kantilal Chhaganlal Securities said.

The impact of these negative factors was so harsh that market even discounted a good piece of news: the Lever stock split.

According to Sebi figures released today, FIIs were net sellers on Tuesday for the first time after 17 trading sessions since January 28, offloading shares worth Rs 10.9 crore. Satyam Computer remained the top traded scrip with a turnover of Rs 821.08 crore on a total market volume of business of Rs 5334.38 crore. Other actively traded shares were Zee Telefilms (Rs 553.69 crore), Himachal Futuristic (Rs 457.01 crore), Global Telesytems (Rs 388.31 crore) and Pentamedia (Rs 313.32).

Banks cautioned

The Reserve Bank of India (RBI) today asked banks to exercise caution while building assets through loans against shares and IPO financing. The move followed a meeting between the central bank and top bankers here today.

Even though the talks were of a routine nature and no decision was taken, sources said the warning was issued because the RBI felt some foreign banks were over-exposed to a volatile market.

Bankers who attended the meeting said they were already cautious about funding against equity, saying they were only accepting shares of blue-chip companies as collateral.    


 
 
HLL BOARD CLEARS STOCK SPLIT, NET VAULTS 33% 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 23 
Hindustan Lever Limited (HLL)today unwrapped a sterling 1999 performance when it said it net profit surged 32.8 per cent to Rs 1,069.94 crore over the previous year.

The company declared a final dividend of Rs 17 per share. The final dividend, combined with an interim dividend of Rs 12, takes the total payout for the year to an impressive Rs 29 per share.

The board meeting recommended a stock split in the ratio of 10:1, saying the move will enable small retail investors to participate in the company’s equity capital and boost liquidity in the scrip.

The 50.5 per cent increase in fourth-quarter profit at Rs 345.12 crore helped the FMCG major recoup the ground it had lost in the preceding quarters.

Full-year pre-tax profit at Rs 1387.94 crore (Rs 1130.44 crore in 1998) takes into account a restructuring cost of Rs 90.55 crore. Sales during the year rose 7 per cent to Rs 10,142.49 crore. The growth, though modest by Lever standards, was attributed to the declining cost of raw materials in a low-inflation scenario.

“The company continues to focus on growth through innovation, market development and distribution. During the year, the domestic home & personal care business have recorded good sales growth in a market that saw demand slackening ,” Lever chairman K B Dadiseth said after the meeting.

Talking about the growing competition from companies like Nirma, Henkel Spic, the Lever chief said: “It is strong players like these who spur us to catch them and then, beat them.”

Dadiseth was said while growth ambitions for the current year remain high, much will depend on the budget, trade policy and the monsoons. “Our growth ambitions remain intact.”

In 1999, Lever’s food portfolio, excluding tea and oils & fats, performed well. There were gains in market-share in most key segments, something the company says was achieved through consumer innovations and emphasis on low-unit price packs that deepen penetration. The domestic tea is now looking up after a decline in the first half.

E-commerce plans

Lever said it has launched several e-commerce initiatives aimed at bringing e-business to the heart of the company’s operations as part of a larger vision to ‘connecting, attracting and fulfiling’ customers. In the first phase, the company says it will link 3,000 stockists, 30,000 retailers and 100 suppliers spread across 1,000 locations to integrate its supply chain.

Success in e-business will depend on three factors: technology, consumer insight and customer satisfaction, the company said.    


 
 
EXPORT ZONES TO BE UNSHACKLED 
 
 
FROM NANDITA ROY
 
New Delhi, Feb. 23 
The government will soon do away with regulatory mechanisms in export processing zones (EPZ). Instead, EPZs will now act as free trade zones (FTZs) with little interference from the customs department.

The proposal which has been cleared by the finance ministry is expected to be announced in the forthcoming exim policy on March 31.

The proposal, which has been in the pipeline for several months, was stalled by the customs department since it wanted to retain control over these zones.

However, the department finally had to agree because FTZs would not result in any revenue loss for the government. Instead, now the department can charge full customs duty on the value of the finished goods being sold in the domestic tariff area (DTA).

At present, such units are allowed to sell 25 per cent of their production in the DTA at a concessional rate of customs duty.

The FTZs which would function on the lines of the Jebel Ali Free Zone in Dubai and the Fujairah Free Zone will be manned by the customs authorities at the exit and entry points only. Consequently, units can expect full operational flexibility in the zone. It will also considerably reduce documentation work.

Further, the government plans to encourage the private sector for setting up EPZs as well.

The new concept will also vest many powers in the hands of the development commissioners of each zone who will provide single window clearance for all units functioning in these zones. Each commissioner will also be responsible for preparing a business guide for his zone.

Unlike the current practice, neither will a minimum value addition norm be prescribed for the zone units, nor will there be any minimum export obligations, since the duty-free imported material is utilised in the zone itself.

A unit in the zone would also be allowed to be set up purely for trading activity as well, for instance imports of products will be permitted for re-exporting them.

Further, no prior permission or intimation will be required for transfers from one unit to another unit in the FTZ.

Under the export-import policy 1997-2002, units that export their entire production of goods and services, excepting sale in the DTA, as permissible under the provisions, may be set up under the EPZ scheme.    


 
 
NEW ROUND OF OIL HUNT BIDS TO START SOON 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Feb. 23 
The second round of bidding under the new exploration licensing policy (NELP), which includes several deep-water blocks on the west coast, is expected to be kicked off within a few months, petroleum minister Ram Naik said.

Addressing the third international conference of Society of Petroleum Geophysicist here today, Naik said the Directorate General of Hydrocarbons (DGH) is taking steps to upgrade the data and information for the blocks. The government, he said, will create a policy environment conducive to infusion of technology and capital.

Private companies and those which have joint ventures with public sector firms in the upstream petroleum sector now contribute 9 per cent to the total oil production of the country. The exploration and production policy has already started paying dividends but what may be required is a departure from the business-as-usual approach to a more aggressive and radical strategy, Naik said. Indigenous production should be increased to cut down import dependence, he added.

The intensification of exploratory efforts in less tapped and poorly explored sedimentary basins is required in the next decade.

At present, low exploration input in such basins is the result of various factors, including difficult logistics, geological complexities and technological challenges.

ONGC chairman B.C. Bora said an area of concern for his company was that of improving recovery from its existing fields and finding ways to bring on line a number of marginal fields. In addition to implementing enhanced oil-recovery schemes, what is needed today is re-access marginal fields. The final picture can be obtained by integrating technologies, disciplines and expertise.

Speaking on the occasion minister for state for petroleum E. Ponnuswamy said with the government move towards dismantling the administered price mechanism (APM) there was a need to implement an early post-APM structure for regulation of the oil industry.    


 
 
SAFFRON LOBBY FOR SSI LIST REVIEW 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Feb. 23 
The BJP may seek a review of the list of sectors reserved for small scale companies following the relaxation of import restrictions on consumer goods which is the exclusive preserve of this sector.

The move comes at a time when the party is seeking budgetary reliefs and cheap loans to help the sector cope with competition.

“One cannot disallow domestic medium and large scale industry from manufacturing goods which are open to import. There is therefore a need to re-examine reservation for SSIs,” Jagdish Shettigar, BJP ideologue and head of the party’s think tank on economic issues told The Telegraph.

Currently, 834 products are reserved for small and tiny sectors with medium and large-scale units barred from manufacturing what are mainly consumer and food products.

Within the government, plans are already afoot to prune this list and open up many product areas to competition from large scale companies which can bring efficiencies of scale.

However, Shettigar added, the party wanted the coming budget to provide fiscal reliefs to the small-scale sector and provide cheap credit to it. “On a long term basis, we think there is also need to work towards ancillarisation of SSI units to help them cope up with market forces,” he said.

While the coalition government, in which the BJP is the largest entity, is not bound to accept the party’s position on economic issues, finance ministry officials say these largely colour the government’s budgetary agenda to a great extent.

Shettigar said he wants the finance minister to protect the domestic industry since nearly 700 products will be taken off the quantitative restriction (QR) list by end-March while another 700 items will be off this list by March 2001.

“We have to think up ways of raising tariff walls up to WTO bound rates especially as most of the items being opened up are farm products and consumer goods,” Shettigar said.

Shetttigar urged the government to tread cautiously on this issue. “Some measures we took to protect domestic industry like the four per cent special additional duty (SAD) on imports and floor pricing for steel imports are already being disputed by other countries.”

“All that we can really do is give some industry segments a few years breathing space. We can’t shut out competition from the rest of the world. Also we cannot ignore consumer interests (in getting quality goods at reasonable prices) for all time to come.”

The party will also recommend tough steps against errant corporate borrowers. In the event of a default by a single group company, the party wants a bar on loans to the entire group plus offsetting non-performing assets (NPAs) with group assets. This will help public sector banks reduce dead loss loans on their books. “We cannot ask the common man to accept subsidy cuts when we let celebrities get away with crores of rupees in default,” he said, adding: “unless you tackle this problem you cannot get popular goodwill to bring in second generation of reforms.”

The BJP would also like the government to rework its FDI policy to make it simpler so that the need for institutions like FIPB is reduced.

The party would like FDI to be given priority so that flows are encouraged in sectors which need technology, or which are export intensive or vital to infrastructure.

The BJP also wants changes in foreign direct investment (FDI) policy to curb the powers of the Foreign Investment Promotion Board (FIPB). The FDI policy should help the country access technology, boost exports and develop infrastructure. “There is always a scope for cuts (kickbacks) when you have such policing organisations,” Shetttigar said.    


 
 
JAPANESE TEAM COMING ON HALDIA MISSION 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Feb 23 
A 150-member Japanese business delegation will meet the commerce and industry ministers in April in an interface that could lead to agreements on setting up units in Haldia Petrochemicals’ (HPL) downstream sector.

There are expectations that many of the firms in the team will show interest, and actually carry up a few contracts in their bags.

The delegation will comprise top officials of Mitsubishi Chemical Corporation, Mitsubishi Corporation, Nissho-Iwai Corporation, Tomen Corporation, Sumitomo, Sumikin Bussan Corporation, Itochu Corporation, Mitsui & Company Limited, Mitsubishi Chemical Engineering and Mitsubishi Heavy Industries.

“Since top officials of Marubeni, Itochu, Mitsui and Sumitomo are coming, we are planning to discuss the issue of marketing of petro-products with them,” HPL sources said.

These companies will arrive on April 10 and attend the inauguration of Mitsubishi Chemical Corporation’s (MCC) Rs 1,600-crore PTA (purified terephthalic acid) plant at Haldia the next day.

Mitsubishi Chemical Corp’s experience in West Bengal might prompt other Japanese majors to invest in the state, said a senior official of West Bengal Industrial Development Corporation (WBIDC). The company has chosen Haldia because the liquid handling capacity facilities at the port here are considered better than those in the area from Indonesia to Iran.

The PTA plant, which has an annual capacity of 3,50,000 tonnes, will go on stream from February 26 — on schedule. MCC, as the promoter, holds a 66 per cent stake in the project, which is called MCC PTA India Corporation Private Limited.

Other Japanese companies like Marubeni Corporation and Mitsubishi Corporation also have small holdings. West Bengal Industrial Development Corporation is another equity partner and has invested Rs 32 crore to pick up a 5 per cent stake in a project on which work started in September 1997. The company is targeting an annual turnover of Rs 950 crore and has generated 300 jobs.

The Mitsubishi Chemicals project is expected to provide opportunities for the development of the downstream units such as polyester filament yarn and fibre (used by garment industry), PET resin and its downstream derivatives (bottle, containers) and polyfilms.

“We are hopeful that some project proposals will be made by the team. But, the Japanese take time to decide. In the case of Mitsubishi Chemicals, some of the executives involved in the preliminary appraisal visited Haldia 30 times before the project was even put up to their board for final consideration,” WBIDC managing director D P Patra told The Telegraph.    


 
 
CADILA TO TEST VIAGRA CLONE IN 3 MONTHS 
 
 
FROM CHAITALI CHAKRAVARTY
 
New Delhi, Feb. 23 
Zydus Cadila Healthcare is working on a home-grown elixir to drive away bedroom blues. So, those who missed out on Viagra because the love-drug was too expensive, or out of reach, may soon have a more affordable alternative.

The company says it will carry out clinical tests of Penigra, its anti-impotency drug, on human beings within three months. “We hope to clinically test our anti-impotency drug on humans in the next three months.

The government was apprehensive in the beginning because the drug was hyped as a recreational drug. Now, after a year-and-a-half years of talks, the Centre has recognised it is a serious drug meant to cure erectile dysfunction,” Zydus Cadila president Ganesh Nayak said.

After Pfizer’s Viagra became a blockbuster drug in the US and helped the company rake in the mega bucks, Indian drug firms like Cipla, Orchid Chemicals, Dr Reddy’s Labs have developed new processes to manufacture sildenafil nitrate — the chemical that makes Viagra work. Most of these Indian firms want to export their Viagra-type drugs to the 150 countries where Pfizer does not have patent rights.

Viagra was discovered when scientists led by Simon Campbell were working on a drug to treat a heart ailment called angina. Wall Street analysts have already dubbed it a lifestyle drug, which could gross over $ 5 billion in the years to come.

Zydus Cadila has other ambitious plans, which include the launch of an anti-arthritis drug in the next 10 days and another molecule which treats nicotine marks.

It also plans to compete in the domestic over-the-counter (OTC) market for medicines and cosmetics.

The company’s sales in 1998-99 stood at Rs 361 crore while profits were over Rs 30 crore. It expects a turnover of Rs 474 crore in the financial year 2000.

IPO priced at Rs 250

Zydus Cadila announced an initial public offer (IPO) comprising 14,88,600 shares (10 per cent of the issue) at a fixed price of Rs 250 per share today. Investors can apply for a minimum of 50, and a maximum of 500 equity shares.

The fixed price portion of the issue follows a book built portion, which was oversubscribed more than seven times.    

 

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