Infotech scrips push sensex up 142
Debt mutuals fear redemption rush
1:12 swap ratio for Dr Reddy’s, ARL merger
Promoter’s stake in Hotel Leela to go up
Phillips Carbon plans Rs 75-cr plant in Lanka
EC tradeoff offer links green issues to trade
Promoter’s stake in Hotel Leela to go up
R S Software to sell stake via private
Ficci helpline for states’ fiscal prudence
Foreign Exchange, Bullion, Stock Indices

 
 
INFOTECH SCRIPS PUSH SENSEX UP 142 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 6 
The Bombay Stock Exchange (BSE) sensex today surged 142.42 points in a rally fuelled by infotech majors. Trading was volatile with key shares witnessing a sharp difference in their intra-day peaks and troughs.

The 30-scrip index opened higher at 5662.29 and hit an intra-day high of 5692.97 in the early hours of trading, marked by a sharp gains in the shares of index heavy weights like Hindustan Lever and Infosys Technologies.

Later, the sensex plumbed an intra-day low 5459.61 due to a bout of profit-taking by operators and local institutions. The selloff stripped pivotals like Lever, NIIT, Tisco, Reliance and Hindustan Petroleum of some of their early gains.

Late in the afternoon, speculators and foreign institutional investors (FIIs) returned to the trading ring to make heavy purchases in what is now referred to as the old-economy stocks. This lifted the sensex from its intra-day low and took it to a close of 5520.69 in a 2.65 per cent increase over Friday’s finish of 5378.27.

Bargain hunting by institutions in companies like Tata Steel, Reliance and Bajaj Auto helped these companies recover a part of their losses suffered in last week’s clobbering.

“The mood was bound to be good given that the Nasdaq and Dow Jones had ended Friday’s trading on a bullish note,” a dealer said. Even as the New York Stock Exchange and the tech-heavy Nasdaq soared on Friday, stock exchanges at home went through successive days of steep losses.

Today, a strong positive factor was the relatively low badla rate of 16-17 per cent, coupled with a sharp decline in net outstandings at Rs 3,622 crore.

The movement in the Himachal Futuristic share intrigued many in the market. First, it fell to its lower-end circuit filter, and then shot up to record an impressive gain at the close.

There was a section of the market which felt big players were driving out smaller ones, and causing sharp variations in the scrip.

“Punters who could not stomach the losses in the share when it hit the lows would have disappeared at the first opportunity,” a dealer said.

“Small players are totally confused because only a handful of shares are moving up. Other scrips are either dormant or are hitting new lows in the market,” another dealer said.

A dealer at Sanat Dalal described the market’s situation ‘very fluid’. Last week’s crash put many operators in trouble as they were forced to sell and book profits in some shares to pay back dues in others. This, dealers say, is the only way to explain the polarisation in old and new economy stocks.    


 
 
DEBT MUTUALS FEAR REDEMPTION RUSH 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 6 
Debt mutual funds fear heavy redemption pressures next fiscal following the hike in tax on income, from 10 per cent to 20 per cent, which was announced in the budget.

This proposal, along with removal of benefits under Section 54EA and 54EB of the Income Tax Act, will lead to selling pressure while the spreads of corporate paper over gilts may widen, an analyst with I-Sec said.

There are few bidders for bonds and debentures and yields are expected to rise in the next few weeks, the analyst said.

He said yields on corporate bonds have already shot up by 20 to 25 basis points as mutual funds have started unloading corporate paper. “The yields on a five year AAA rated paper have gone up to around 11.15 per cent from around 10.70 per cent earlier.”

U.R. Bhat, director and chief investment officer at Jardine Fleming, however, said the implication would be long term in nature rather than the near term. Bhat said the softening of prices of debt instruments has more to do with expectations prior to the budget. Before the budget, the general impression prevailing in the money markets was that interest rates will come down. “However, soon after the budget it became abundantly clear that the prevailing interest rates are here to stay,” Bhatt said. This resulted in a correction taking place in the debt market.

However, he conceded that the implications for mutual funds would be felt more in the long term for debt oriented mutual fund schemes.

The mutual fund industry is said to have an exposure in the region of around Rs 65,000 crore in debt oriented schemes, and even a small five-to-ten percent redemption pressure would be a cause for concern, an AMFI official said.    


 
 
1:12 SWAP RATIO FOR DR REDDY’S, ARL MERGER 
 
 
OUR BUREAUX
 
March 6 
Dr Reddy’s Laboratories (DRL), the Hyderabad-based pharma major, today approved the merger with American Laboratories (ARL) at a swap ratio of 1:12.

The companies’ board which met separately today in Hyderabad fixed the swap ratio at one share of Dr Reddy’s for every 12 shares of American Remedies, a joint statement said.

On the Bombay Stock Exchange (BSE), the Dr Reddy’s scrip today witnessed some volatility, while closing marginally higher. Opening at Rs 1300, the scrip shot up to an intra-day high of Rs 1345 before some correction resulted in the counter slipping to Rs 1275. However, it later closed higher at Rs 1313. The ARL scrip too showed some movements. Opening at Rs 135, it rose to a high of 139 and finally finished at Rs 138.75.

Dr Reddy’s Laboratories had acquired an 84 per cent stake in American Remedies beginning with a 45 per cent stake in November-end last year followed by market purchases through an open offer.

Both the companies would soon be approaching the high courts of Chennai and Hyderabad respectively to complete the legal formalities for the amalgamation, effective from April 1, 1999.

With this amalgamation, domestic formulation sales of Dr Reddy’s are expected to cross Rs 350 crore for the period ending March this year to make it among the top five pharmaceutical companies in India based on the ORG rankings.

American Remedies, which clocked sales of Rs 75 crore for the nine-month period ending December 1999 commands 60 per cent of the nutraceutical market. Its main brands are Mucolite, Antoxid, BioE, GLA and Optisulin.

Stating that it was a “win-win situation” for American Remedies, company director S.R. Ramaswamy Iyer said, “the company can demonstrate its expertise in marketing and concept selling in successfully launching new medicines from the research pipeline of Dr Reddy’s.”    


 
 
PROMOTER’S STAKE IN HOTEL LEELA TO GO UP 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 6 
Leela Scottish Lace Ltd (LSLL), the promoter of Hotel Leela Venture Ltd is hiking its stake in the latter through a preferential allotment of shares. Consequent to the allotment, the latter would become a subsidiary of LSLL as its stake would rise to 67 per cent from the existing 43 per cent. In a notice, Hotel Leela Venture informed the stock exchanges today that the preferential shares would be issued for an amount of Rs 73.40 crore, at a price of Rs 31 per share. “After the proposed issue, the promoter company, LSLL’s shareholding in the company would increase from the existing level of 42.99 per cent to 66.92 per cent. This being higher than 51 per cent, the company would become a subsidiary of LSLL.”

On the Bombay Stocxk Exchange (BSE) today, the scrip closed at Rs 21.60 after opening at Rs 21.45 and rising to an intra-day high of Rs 22.65.

Hotel Leela Venture has now called an extra-ordinary general meeting on March 29 to seek shareholders’ permission for the preferential issue. LSLL, which is controlled by the Nairs, is an unlisted company. Though the reasons for the preferential allotment are not known, it is understood that the proceeds from the issue may be used to fund the company’s expansion projects. Leela Venture had initially announced four projects, which includes setting up of the Leela Palace in Udaipur.

Apart from this, Leela Hotels Ltd, a subsidiary of Hotel Leela Venture, had in the previous fiscal, indicated that is setting up a five-star hotel project in New Delhi to be operational in the winter of 2000. To be built at an investment of Rs 484 crore, this hotel will have about 300 rooms. In Mumbai too, the company had planned a 150-room garden/boutique to its existing hotel, The Leela Mumbai.

The company, which reported total earnings of over Rs 117.33 crore for the year ended March 1998, has however, come under pressure on the bourses in the recent past due to uncertainties over its expansion plans. Apart from expanding its existing chain hotels and resorts, Leela Venture is looking at acquisitions as a means to further growth. While the company was believed to be in the race for acquiring Hotel Corporation of India (HCI), senior company officials have indicated that they would also be interested in ITDC.    


 
 
PHILLIPS CARBON PLANS RS 75-CR PLANT IN LANKA 
 
 
BY OUR SPECIAL CORRESPONDENT
 
Calcutta, March 6 
Phillips Carbon Black Ltd (PCBL), an RPG group company, is planning a Rs 75-crore manufacturing unit in Sri Lanka.

Speaking to reporters after the company’s 39th annual general meeting, chairman Sanjiv Goenka said: “The plant will have an annual capacity of 20,000 tonnes. A global consultant will shortly be appointed to make a market survey.”

PCBL’s thrust in Sri Lanka will create tremendous synergies with Ceat Tyres, another RPG group company, which has acquired two companies in Sri Lanka — Associated Ceat Pvt Ltd and Kelani Tyres—and now controls 83 per cent of the tyre market of the island nation.

In addition, Sri Lanka does not have any indigenous carbon black manufacturing capacity, which should augur well for PCBL.

PCBL managing director S. Sahgal told The Telegraph that a detailed feasibility study has been conducted and possible locations shortlisted.

“The board will take a final view on the proposal and clear the name of the consultant. This could not be done today as members were otherwise involved in company matters,” he said.

The RPG group will be entering Sri Lanka in a big way in three sectors, though it has decided to put off its investment plans for China.

Apart from carbon black and tyre, the company will possibly make a foray into the entertainment sector.

PCBL is set to benefit from the upswing in the international market with carbon black prices going up by 20 per cent from $ 350 per tonne some months back to $ 420.

The company is also confident of facing the competition from importers as it has implemented a cost-cutting programme with the help of Andersen Consulting.

PCBL has found the going tough for some time, suffering a fall in the growth rate of its sales turnover while dividends fell from 35 per cent to 10 per cent.

The company had to combat the twin spectre of a supply glut, created by the south east Asian crisis, and falling demand from tyre producers. Rising feedstock costs added to PCBL’s woes as it eroded the company’s margins further.

However, the company has started doing well now with domestic sales growing 15 per cent in the first five months of this year—PCBL’s accounting year is October to September — while it continues to maintain its thrust on exports. The company shifted its focus to exports in 1998-99 to offset the recession in the domestic market.

The company now exports to 24 countries; plans are afoot to push up the domestic capacity of the existing plants by about 15,000 tonnes. “As the company stabilises its finances and cash flows increase, the interest burden of Rs 28 crore, which is a worrying factor, will be brought down by gradually paying off expensive debt,” Goenka told shareholders.    


 
 
EC TRADEOFF OFFER LINKS GREEN ISSUES TO TRADE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March 6 
The European Commission is offering developing countries like India, a tradeoff over trade.

It is ready to favourably consider demands put forward by the developing nations, like market access for service providers, reduction in textile tariff peaks, updating World Trade Organisation (WTO) rules to make them more transparent and a new round of talks which would address these issues comprehensively. However, in return, it wants India and others in the Third World to bring environmental standards in their trading system — a move which India has been consistently opposing.

At a luncheon meeting organised by the Confederation of Indian Industry (CII), EC trade commissioner Pascal Lamy said, “Societies remain concerned over the potential influence of the trading system on the social and environmental dimension of economic development, on public health and consumer protection and seek answers that both safeguard the trading system and address these societal concerns. Our motives are to bring greater predictibility and clarity into international trade rules.”

He however made it clear that such standards would not have protectionist outcomes.

“We will need to work harder to demonstrate that our agenda will not lead to protectionist outcomes.”

He said the WTO comprehensive round needs to look into the issue of market access for products and services, to increase economic growth.    


 
 
PROMOTER’S STAKE IN HOTEL LEELA TO GO UP 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 6 
Leela Scottish Lace Ltd (LSLL), the promoter of Hotel Leela Venture Ltd is hiking its stake in the latter through a preferential allotment of shares. Consequent to the allotment, the latter would become a subsidiary of LSLL as its stake would rise to 67 per cent from the existing 43 per cent. In a notice, Hotel Leela Venture informed the stock exchanges today that the preferential shares would be issued for an amount of Rs 73.40 crore, at a price of Rs 31 per share. “After the proposed issue, the promoter company, LSLL’s shareholding in the company would increase from the existing level of 42.99 per cent to 66.92 per cent. This being higher than 51 per cent, the company would become a subsidiary of LSLL.”

On the Bombay Stocxk Exchange (BSE) today, the scrip closed at Rs 21.60 after opening at Rs 21.45 and rising to an intra-day high of Rs 22.65.

Hotel Leela Venture has now called an extra-ordinary general meeting on March 29 to seek shareholders’ permission for the preferential issue. LSLL, which is controlled by the Nairs, is an unlisted company. Though the reasons for the preferential allotment are not known, it is understood that the proceeds from the issue may be used to fund the company’s expansion projects. Leela Venture had initially announced four projects, which includes setting up of the Leela Palace in Udaipur.

Apart from this, Leela Hotels Ltd, a subsidiary of Hotel Leela Venture, had in the previous fiscal, indicated that is setting up a five-star hotel project in New Delhi to be operational in the winter of 2000. To be built at an investment of Rs 484 crore, this hotel will have about 300 rooms. In Mumbai too, the company had planned a 150-room garden/boutique to its existing hotel, The Leela Mumbai.

The company, which reported total earnings of over Rs 117.33 crore for the year ended March 1998, has however, come under pressure on the bourses in the recent past due to uncertainties over its expansion plans. Apart from expanding its existing chain hotels and resorts, Leela Venture is looking at acquisitions as a means to further growth. While the company was believed to be in the race for acquiring Hotel Corporation of India (HCI), senior company officials have indicated that they would also be interested in ITDC.    


 
 
R S SOFTWARE TO SELL STAKE VIA PRIVATE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, March 6 
The promoters of city-based R S Software, are planning to offload five to seven per cent of their stake to an American company through private placement.

A company official, while confirming the move, said negotiations were at an advanced stage with three US companies, adding private placement would be completed by July this year.

The dilution of stake will earn the promoters around Rs 21 crore at the current price of the scrip, the official said. The promoters equity will also come down to 28 per cent from 35 per cent after the exercise is complete.

The official, however, refused to divulge the names of the companies which are vying for the stake. The final decision on the price has also not been finalised.

R S Software is expected to complete the current financial year with a net profit of Rs 11.5 crore on a turnover of Rs 70 crore, compared with a net profit of Rs 6 crore on a turnover of Rs 40 crore last fiscal.

The city based company has also entered recently into a 60:40 joint venture with the US based Hanover Direct.

The official said the company was looking for similar joint ventures in some other countries as well.

The company, which currently has 24 clients, of whom 16 in the US, is also setting up a technology centre at Salt Lake with an investment of over Rs 2.5 crore.

The official said the company was in the process of beefing up its staff with additional software engineers.    


 
 
FICCI HELPLINE FOR STATES’ FISCAL PRUDENCE 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, March 6 
The Federation of Indian Chamber of Commerce and Industry (Ficci) will tell states how to manage their messy finances — the first time ever that a trade body will diagnose and prescribe cures for a problem that lies at the heart of the country’s fiscal quagmire.

To begin with, the chamber will interact with three states. President G.P. Goenka is cagey about naming them except saying Ficci will interact with chief ministers of states which are ‘pro-active and do not have a pre-determined mind-set’. He will personally meet the chief ministers — two of them this week itself — and submit a concept paper.

The chamber will also rope in experts, including economists, and renowned professionals who will interact with the state government officials, bureaucrats and ministers to glean relevant data and information on their finances.

This will help them formulate a policy for fiscal management and suggest ways of mobilising more revenues. They will then work out a policy for proper fiscal management. “The states should take a relook at their finances for augmenting revenues,” Goenka said.

The Ficci president feels the states’ fiscal blight is one of the weakest links in the economy. It does not have a direct impact but the problems have a cascading affect on several sectors.

“If the finances of states are managed properly, the funds released can be invested in developmental projects,” Goenka added. Ficci has applied itself to the issue in the past but the exercise was restricted to a rudimentary level.

According to the Reserve Bank of India’s handbook of statistics on the Indian economy published last year, the gross fiscal deficit of states is expected to soar to Rs 77,894 crore this fiscal from Rs 44,200 crore in 1997-98. At the same time, their combined outstanding liabilities will shoot up to Rs 4,09,258 crore in this financial year from Rs 2,43,525 crore in 1997-98.

Apart from proper states’ fiscal problems, Ficci has identified two other long-term issues it can work on — evaluate the system of governance, and a safety net for employees. “These are some of the inherent weaknesses in the system and we have to bring in a fundamental change in the way we resolve them,” he said.

Ficci, which recently signed up software star Infosys as a member, is organising a major seminar in April that will discuss the issue of the safety net. MPs from all political parties will participate. “Employees need a proper safety net which may call for changes in the labour policy. After a discussion with Parliamentarians, we will come up with specific suggestions for the government,” Goenka said.

Ficci is also examining the quality of governance in India and trying to identify the weaknesses inherent in a Parliamentary democracy. It will also bring international experts and law-makers from other countries to study the problems in the Indian system of governance and to suggest remedies.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.57	HK $1	Rs. 5.55*
UK £1	Rs 68.74	SW Fr 1	Rs. 25.60
Euro	Rs 42.06	Sing $1	Rs. 24.95
Yen 100	Rs 40.52	Aus $1	Rs. 26.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4605	Gold Std (10 gm)	Rs 4580
Gold 22 carat	Rs 4345	Gold 22 carat	Rs 4235
Silver bar (Kg)	Rs 7950	Silver (Kg)	Rs 8030
Silver portion	Rs 8050	Silver portion	Rs 8035

Stock Indices

Sensex	5520.69	+142.42
BSE-100	3418.25	+105.07
S&P CNX Nifty	1688.50	+32.50
Calcutta	127.90	-0.09
Skindia GDR	1503.90	-41.03
   
 

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