Boost for banks’ insurance foray
Sensex drops 147 ahead of long weekend
VSNL, indiainfo in 3-year pact
Rs 435-crore SSI overseas float cleared
SAIL sets terms for wage talks
Cherokee launch next year
Foreign Exchange, Bullion, Stock Indices

 
 
BOOST FOR BANKS’ INSURANCE FORAY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 16 
Commercial banks’ proposed plan to make a big bang entry into the insurance sector received a shot in the arm today with the Reserve Bank of India deciding to dilute the crucial criterion on non-performing assets (NPAs).

Earlier, the central bank had stipulated that any bank wanting to start insurance business must have a net NPA level that is one percentage point below the industry average. Today it diluted that stringent stipulation saying the level of NPAs of banks should be “reasonable”.

The previous criterion would have clearly debarred all banks, excluding Corporation Bank and Oriental Bank of Commerce, from making a foray into insurance business.

Apart from the change in its stand on NPAs, the modified RBI guidelines saw few improvement on other fronts. Stipulations pertaining to net worth, capital adequacy of the bank, net profits remain unchanged.

Significantly, the central bank has prescribed that any subsidiary of the same bank will not be allowed to join the insurance company on a “risk participation basis”, though it allowed such subsidiaries to invest in an insurance company.

Clarifying the definition of subsidiaries, the RBI said this would include bank subsidiaries undertaking merchant banking, securities, mutual fund, leasing finance, housing finance business.

“For this purpose, the associate banks of the State Bank of India (SBI) will be reckoned as a subsidiary where the SBI is a partner,” a press statement issued by the RBI said.

In such cases, it said banks which are not eligible as joint venture participant, can make investments up to 10 per cent of the net worth of the bank or Rs 50 crore, whichever is lower, in the insurance company for providing infrastructure and services support.

“Such investments will be on a one-time basis and without any contingent liability for the bank. Such contributions will be treated as an investment,” it said, adding that the criteria for the banks will be that their capital adequacy should not be less than 10 per cent, the level of NPAs should be reasonable and the bank should have a net profit for the last three continuous years.

As far as other stipulations for banks, the RBI had prescribed that while the net worth of the bank should not be less than Rs 500 crore, the capital adequacy ratio should not be less than 10 per cent and that the bank should post net profits for the last three consecutive years. The RBI also ruled that the “track record of the performance of the subsidiaries, if any of the concerned bank should be satisfactory.”

While the RBI would give permission to banks on case-to-case basis, “keeping in view all relevant factors, including the position in regard to the NPAs of the applicant bank”, it said there should be an arms length relationship between the bank and the insurance outfit.

The revised guidelines have been drawn on the basis of discussions with the representatives of banks and the government.

Earlier, after the Reserve Bank of India had come out with its regulations which were perceived to be extremely stringent, a string of banks had made presentations to the RBI as well as the ministry of finance seeking dilution in the guidelines.    


 
 
SENSEX DROPS 147 AHEAD OF LONG WEEKEND 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 16 
With the extended weekend starting tomorrow, the stock market slipped into the holiday mood today and operators chose to lie low reducing exposures in select counters which took a heavy toll on the bellwether index of the Bombay Stock Exchange (BSE).

The 30-share BSE index surrendered 147 points to close at 5102.41 from its overnight close of 5249.76, a loss of over 2.81 per cent.

The day, however, started on a promising note with the sensex opening in a strong fashion. It opened steady at 5249.98 and rose to an intra-day high of 5301.44 with FMCG major Hindustan Lever putting up an impressive show.

However, the rally could not be sustained as operators sold heavily later, pushing the sensex down to 5077.33 before closing at 5102.41. The BSE-100 index, too, collapsed by 123.96 points to 2875.41 from its previous close of 2999.37.

Infotech major Infosys Technologies led the reactionary trend that pushed the sensex in the wake of fresh selling spree generally termed as squaring up ahead of the four-day long weekend.

With the market closed tomorrow and on Monday on account of Bakr Id and Holi festivals respectively, operators turned cautious in the light of second successive fall in the Nasdaq composite index last night and wound up their positions on the last day of the current settlement.

Things worsened because of the fact that today was the last day of settlement for both BSE and CSE. “Usually operators shift positions from BSE to CSE and vice versa, but today they were caught in a bind,” a BSE dealer said.

At the fag end, however, squaring up in the form of shortcovering helped some counters, including select key cyclicals, to score impressive gains.

The big bull returning after an overseas holiday failed to improve sentiments. Counters like HFCL, Infosys, PentaSoft were losers.

Foreign institutional investors (FIIs) were reportedly heavy buyers in Hind Lever and a few others. Financial institutions lent support to Indian stocks, particularly SBI, RIL, Tisco, Telco, NIIT, Hindalco and few others.    


 
 
VSNL, INDIAINFO IN 3-YEAR PACT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 16 
Internet portal network indiainfo.com plans to come out with a $ 50-100 million initial public offering (IPO) later this year. The proceeds from the issue will be utilised to fund acquisitions and strengthen the company’s internet presence.

Stating this, Raj Koneru, chairman, indiainfo.com, added that the company is yet to work out details regarding the issue, on whether it should look to the international markets or tap the domestic one for the IPO.

He was speaking to newspersons on the occasion of the company announcing a strategic partnership with Videsh Sanchar Nigam Ltd (VSNL), with the latter taking up a 30 per cent equity in indiainfo.com.

Earlier, indiainfo.com signed a memorandum of understanding (MoU) with VSNL which would be binding on both the parties for a period of three years. Under the agreement, indiainfo.com will become the default home page for all current and future VSNL subscribers.

VSNL and indiainfo.com will promote vsnl-indiainfo.com, the co-branded portal that will offer all indiainfo.com content, commerce, utilities and services to all VSNL subscribers.

VSNL will also have a 20 per cent share in the revenues generated by the portal, with a minimum commitment of Rs 200 crore over the three-year period of the agreement. The partnership is expected to significantly drive up indiainfo’s e-commerce revenues in the areas of business-to-business (B2B), business-to-consumer (B2C) and advertising. According to Koneru, this will result from access to VSNL’s subscriber base and consequently increased number of page views and registered users.

“This is a significant deal in the Indian internet space. VSNL is the largest ISP in the country and access to their subscriber base will catapult indiainfo.com to the position of the number one Indian site. Indiainfo.com was till now one of the largest non-ISP internet companies in India both in terms of size and revenue. Now, with VSNL backing us, we have the opportunity to be the largest internet company in India in terms of size, revenue and page views,” he said.

VSNL has over 3,50,000 subscribers, all of whom will now be registered on to indiainfo.com’s utilities. Similarly, VSNL, which has so far focused on providing internet access, will get both the best content and e-commerce facilities in the Indian Internet space.

Nimesh Kampani, chairman and managing director, JM Morgan Stanley Ltd, which advised indiainfo.com on the deal said, “The transaction is a win-win deal.”    


 
 
RS 435-CRORE SSI OVERSEAS FLOAT CLEARED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March 16 
The government has cleared foreign direct investment (FDI) proposals worth Rs 802.90 crore, including the Rs 435 crore Global Depository Securities (GDS) issue of software major SSI Ltd.

SSI Ltd will float its GDS issue for developing software products and e-commerce.

The 46 proposals cleared also include Swiss confectionery major Nestle SA’s proposal to hike its stake by 5 per cent in its Indian subsidiary. This will increase its holding from 51 per cent to 56 per cent by bringing in a minimum of Rs 19.28 crore.

The FDI proposals cleared this week cover diverse sectors like processed foods, non-banking finance activities, power cables, software and healthcare.

Commerce and industry minister Murasoli Maran gave his seal of approval to the proposals, based on the recommendations of the Foreign Investment Promotion Board (FIPB), an official release said.

Citicorp Finance (India) Ltd will acquire 74 per cent equity in an unnamed downstream venture by bringing in Rs 14 crore.

ABB Holdings (South Asia) Ltd’s proposal to act as a holding company for ABB Switzerland’s investments in India was also given the go-ahead.

US lubricant major Caltex Inc, has been allowed to increase its paid-up capital by bringing in Rs 180 crore for issue of fresh shares in the Indian venture.

The fresh infusion of funds is for setting up various infrastructure projects for imports, storage and distribution of LPG.

Universal ABB Power Cables will issue 13 per cent cumulative redeemable preference shares worth Rs 30 crore for expanding its activities into insulated power cables with accessories.

US-based Dana Corporation has been permitted to set up a 100 per cent subsidiary with an investment of Rs 30 crore for design, manufacture, contract for buying and selling, export and import of highway components. The US-based internet startup Chaitime Inc’s proposal to set up a wholly-owned subsidiary was cleared.    


 
 
SAIL SETS TERMS FOR WAGE TALKS 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, March 16 
The Steel Authority of India Ltd (SAIL) has set the acceptance of its business restructuring plan by the unions as a precondition to wage negotiations, slated to resume on April 5.

Sources said the SAIL management had “unofficially” conveyed this message to the unions last week.

“Our current wage bill accounts for around 16 per cent of the total turnover, while the new entrants in the steel industry have a wage component of 5 to 6 per cent,” a senior SAIL official said.

The company, which has a staff of 1.57 lakh, will have to cough up annually an additional Rs 300 crore if it implements the recommendations of the Justice Mohan Commission on wages of public sector units (PSUs).

“We cannot really bear this additional burden if we fail to restructure certain areas which are suffering from huge losses,” the official said.

SAIL, which is facing whopping losses of over Rs 2000 crore during the current fiscal, aims at raking in Rs 5000 crore to Rs 6000 crore through the proposed restructuring exercises.

The restructuring plan includes hiving off the three captive power plants in Durgapur, Bhilai and Bokaro into a joint venture; selling the oxygen plant in Bhilai and fertiliser plant in Rourkela. The company has also decided to divest its stake in Salem Steel Plant, Alloy Steels Plant and Visvesvaraya Iron & Steel Plant.

While SAIL is expecting a “responsible reply” from the trade unions to its proposal, the latter seems to be unwiling to tow with the management line.

S. Debroy, joint secretary of the Citu-affiliated Hindustan Steel Employees Union, said the management’s proposal is unfortunate and totally uncalled for.

“ The restructuring exercises, if in place, will further affect the company’s prospects in the long run. Moreover, what will happen to the people of the plants, which will be sold off,” Debroy said.

Debroy feels the company would be better of by making some very small investments both in Salem Steel Plant and in ASP to make them viable.

Debroy has threatened “stiff opposition” to any management’s decision to divest stake in the company. “We have discussed the matter with all other unions to put up a joint resistance,” he said.    


 
 
CHEROKEE LAUNCH NEXT YEAR 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March 16 
DaimlerChrysler, the $ 112 billion German-US automaker, is planning to launch its famed S-class convertibles and the Cherokee Grand jeeps from the Chrysler stable in India next year.

‘’We have initiated a study to finalise the perfect model for India as part of drive to expand our current portfolio here. We are looking at models in the S-class, C-class, M-class and A-class for possible roll-outs in India. Although the M-class multi-utility vehicles would fetch a good demand here, I feel the S-class already has a known brand value and so would be among the first ones to be introduced in India next year,’’ said Juergen Zeigler, managing director of Mercedes-Benz India Limited. He said the existing E-200, E-230 and E-250 (diesel) models will be phased out.

Mercedes Benz India is a joint venture between DaimlerChrysler AG of Germany — the sixth largest automaker in the world — which holds 86 per cent and Tata Engineering Locomotive Company (Telco) with 14 per cent. The company also does not plan to change the share holding pattern. “Both partners are happy with the present arrangement and there is no need to change it,” said Zeigler.

The feasibility study is expected to come out with a decision on the final model by the end of this calendar year and the first roll-out is expected after April 2001.

The Chrysler models that are being closely evaluated at present include Cherokee, Cherokee Grand, Voyager and Neon, he said.

“I expect the Cherokee Grand to be the model most likely to hit the Indian roads.’’ The Cherokee Grand is a 4-litre intermediate utility vehicle with a horsepower of 195 at 4600 rpm. The five-seater vehicle retails between $ 25,126 and $ 34,345 (depending on the model and features) on the world markets.

The German carmaker today launched two more variants of its E-Class sedan in India. The company launched the E240 (petrol) and E220 Commonrail Direct Injection (CDI) (diesel engine) with about 1,800 changes.

While the company officials were tight-lipped about the price of upgraded cars, sources said, “It would be priced between Rs. 30-Rs. 35 lakh.”

The E220 CDI has a four cylinder common rail diesel injection engine with turbocharger, the latest in diesel technology. The E240 has V6 cylinders with a six speed manual and five speed automatic gears. The car also has a 11-hole alloy wheel, high gloss rear and fog lights.

“In India, we as Daimler Chrysler have decided to enter the high-end market to take initiative with calculated risks. This was the underlying philosophy for the foundation of Mercedes Benz in India. We feel the investment we made in India is enough to sustain our operations. As and when we feel the need we will bring in necessary investment ,” said Zeigler.

Speaking at the launch of the two new Mercedes models, Zeigler said: “The company plans to increase the indigenisation level of Mercedes soon. Currently, it is about 50 per cent; we will soon raise that. However, this will depend on the increase in sales.”

Zeigler claimed the company had produced 10,000 units in India at its plant in Pune. Out of this, about 4,000 cars have been sold in India. The rest have been exported to more than 20 countries including Singapore, Malaysia, South Africa and Cyprus and even Germany.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.58	HK $1	Rs. 5.55*
UK £1	Rs 68.49	SW Fr 1	Rs. 25.75
Euro	Rs 42.23	Sing $1	Rs. 25.10
Yen 100	Rs 41.38	Aus $1	Rs. 26.40*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4605	Gold Std (10 gm)	Rs 4575
Gold 22 carat	Rs 4350	Gold 22 carat	Rs 4230
Silver bar (Kg)	Rs 7925	Silver (Kg)	Rs 8025
Silver portion	Rs 8025	Silver portion	Rs 8030

Stock Indices

Sensex	5102.41	-147.35
BSE-100	2875.41	-123.96
S&P CNX Nifty	1652.20	-57.90
Calcutta	124.77	-1.99
Skindia GDR	1275.25	+5.19
   
 

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