Hindalco snaps up Indal
Rules for overseas buyouts relaxed
Safety net for PSU staff likely
Dr Reddy’s plans $200 m ADS
Norms revised for power distribution
DoT deadline for Aircel dues payment
US firms seal flurry of deals
Foreign Exchange, Bullion, Stock Indices

Mumbai, March 23 
Hindalco Industries today announced it plans to acquire Indian Aluminium Company (Indal) from Alcan Aluminium (Alcan) for Rs 738 crore in the largest-ever cash buyout by an Indian company.

The Aditya Birla group firm will acquire the 54.6 per cent stake that Alcan holds in Indal and then make a mandatory open offer that could eventually raise its holding in the company to 74 per cent. The total acquisition could cost it Rs 1008.2 crore.

The 54.6 per cent stake, comprising 38.84 million shares, will be purchased at a price of Rs 190 per share. The open offer for an additional 20 per cent stake, involving 14.22 million shares also at Rs 190 per share, will cost Hindalco Rs 270 crore.

Alcan’s divestment in Indal — after having fended off a hostile takeover bid by Sterlite — surprised the industry, which had only begun to digest the implications of an August 1999 global merger between Alcan, the US-based AlusuisseLonza (Algroup) and Pechiney of France to form a $ 25 billion monolith.

Not surprisingly, Sterlite Industries was one of the suitors for the stake even though Alcan representative T M Tracy said confidentiality clauses prevented him from revealing the details of bidders. The industry is also amazed that the entire Rs 1008.20-crore deal will be sealed with liquid funds and internal surpluses at the disposal of Hindalco.

Alcan executive president Brian Sturgell said his company’s focus had now shifted to fortfying its upstream aluminium position, and on serving advanced flat-rolled products. The terms of the agreement include a non-compete commitment from Alcan for three years, with a provision to extend it by two years. While DSP Merrill Lynch advised Hindalco on the deal, Alcan consulted JM Morgan Stanley.

The acquisition will give the A V Birla firm a foothold in Utkal Alumina — the $ 1 billion private greenfield project in Orissa. Officials say Hindalco will pick up Alcan’s 35 per cent stake in the project if the Canadian major divests even a part of its holding in the project. Indal holds 20 per cent in Utkal Alumina while Norsk Hydro controls 45 per cent.

“We will become a vertically integrated player with a leading positions in alumina production to foil-making. The acquisition will enhance the value for Hindalco’s shareholders. Aluminium has been one of the core businesses for the group, and has an enormous growth potential. Indal’s strengths in downstream products will complement Hindalco’s strong presence in metal processing,” Aditya Birla Group chairman Kumar Mangalam Birla said.

“The buyout will strengthen Hindalco’s position in a rapidly consolidating global market. Together with our brownfield expansion, it will help Hindalco meet the emerging challenges in the domestic market more effectively,” Birla said. The gains of this buyout to Hindalco will flow in the areas of product rationalisation, production planning and proximity to key markets, Hindalco president A K Agarwala said.

Meanwhile, investors seemed to relish the announcement of the deal with the Indal scrip racing to Rs 129.60 on the Calcutta Stock Exchange at the close compared with Rs 120 on Wednesday.

Tracy said his company’s interest in the country remains unchanged. At the same time, both Alcan and Hindalco indicated they may pick up stakes in Balco and Nalco when the government divests its holding in these PSU firms.    

New Delhi, March 23 
The government today liberalised overseas investment norms, permitting Indian companies to make acquisitions overseas through the ADR/GDR stock swap.

The government has also increased the ceiling under the automatic route for overseas investment from $15 million to $50 million.

Government has however decided to increase overseas acquisition cap through stock swap to $100 million for sectors like pharmaceutical, biotech companies, software and increased the overseas investment limit for all other sectors to $50 million.

However, the committee on overseas investment would be considering investments beyond this limit.

Proposals for direct investment in a joint venture or a wholly owned subsidiary abroad by either a private or public limited company would be entitled to automatic approval without prior RBI reference, provided the company has made profits during the preceding three years and the investment proposal is related to the company’s core activity.

The government has said that the funding of such investments could be either through balances in the EEFC accounts of the investing companies, 50 per cent of ADR/GDR realisation or through domestic resources including loans, equity and other contingent liabilities like guarantees which should not exceed 25 per cent of the net worth of the investing company.    

New Delhi, March 23 
The government is preparing a safety net for workers in addition to voluntary retirement schemes for them, according to Arun Jaitley who heads the disinvestment ministry.

“The safety net will be over and above the comprehensive voluntary retirement scheme which the government has put in place recently for PSUs,” Jaitley said at the Indo-US trade and investment meet organised by the CII.

Sources said the government is planning to insert a clause in the shareholding agreement that will make issue of ESOP mandatory.

The shareholding agreement signed by the government with HLL on the takeover of Modern Foods stated the VRS scheme offered to workers should be at least as good as the one which existed previously. HLL had acquired 74 per cent of the PSU at a price of Rs 105 crore with the option to buy the balance a year later.

Outlying the government’s disinvestment plans, Jaitley said each PSU would be taken up individually. He reiterated there would be no more adhoc disinvestment, adding the strategy of divesting minority shareholding in loss making units to raise revenue is now gone.

On the disinvestment commission, Jaitley said it will be reconstituted when the need arises. “We are still studying the reports of the earlier commission. There is no point reconstituting the commission when its recommendations will be implemented only two years later. May be those recommendations will loose its relevance as the market place will change then.”    

March 23 
Dr Reddy’s Laboratories Ltd (DRL) plans to raise up to $ 200 million via an American Depository Shares (ADS) issue, making it the first pharmaceutical company in the country to tap the US markets. The proceeds of the issue will primarily be used to fund its massive research and development (R&D) activities, for undertaking clinical trials. The company’s board of directors met in Hyderabad today where they passed an enabling resolution to raise $ 200 million through an ADS issue, inclusive of the green shoe option. The company will decide the exact size of the ADS at the time of the issue, a company spokesperson said. The board also declared an interim dividend of 25 per cent for the current fiscal.A company statement said that the entire issue is “scheduled to be completed within a span of six months.”

Meanwhile, group company Cheminor Drugs today declared a 25 per cent interim dividend for the current fiscal. The total payout will come to Rs 391 lakh.    

New Delhi, March 23 
The Union government today announced a potentially controversial power distribution policy for upcoming PSU power utilities, which does away with norms providing states with free power from hydel projects and fixed quotas from thermal and nuclear power projects.

Under the current policy, regions which host hydel power plants are promised 12 per cent of the power generated free of cost and another 73 per cent assured power on payment. For thermal and nuclear projects, 10 per cent power on payment is assured to host states and another 75 per cent to the region where it is located.

However, in a major decision tonight, the Cabinet Committee on Economic Affairs (CCEA) decided that these norms will merely be ‘guidelines’ for all future central power projects and the actual amount of power allocated to states will depend solely on the power purchase deals concluded with them by central power utilities.

Announcing the decision, the information technology minister Pramod Mahajan categorically ruled out any free power demands by host states.

With a nation-wide power grid being slowly built up, this means a hypothetical scenario where power generated on Bihar’s Son river could be sold totally to Karnataka or Tamil Nadu, with the host state getting next to nothing for its troubles in hosting the project.

The committee cleared another controversial issue — the transfer of 1,100 acres of prime land along the coast from the Vizag steel plant to a private sector firm chosen by the Andhra Pradesh government, for building a port project. In return for the prime land, the Vizag steel plant will get 1,100 acres of land somewhere in the interior of the state.

The committee also decided to sell off the assets of the Indian Steamship Company Ltd to part pay off the sick company’s huge debts.

The CCEA set up a group of ministers headed by finance minister Yashwant Sinha, to study the problems of rural electrification.    

New Delhi, March 23 
The government has issued letters to Aircel Digilink India Ltd to pay up its outstanding licence fee for restoration of its cellular mobile telephone licences for the Rajasthan and Haryana telecom circles. In separate letters issued to the company, the department of telecommunications (DoT) has asked it to pay up a minimum of 40 per cent or more of its outstanding by March 31. The company has to pay about Rs 250 crore for migrating from the licence fee system to revenue sharing arrangement.1

Aircel hold licences for three circles—Uttar Pradesh East, Haryana and Rajasthan, but has so far paid only Rs 15 crore for the Haryana circle. The company has to pay an outstanding licence fee of Rs 175 crore for the two circles. This includes the liquidated damage charges along with interest, as per the terms of the licence.

Company executives claimed that they would be able to make the payment before the March 31 deadline.    

New Delhi, March 23 
Indian companies and US firms today signed 13 agreements valued at more than $ 1.4 billion in key areas ranging from information technology, power, environment and tourism.

“These agreements are win-win deals for both countries. This is what trade is all about — applying US technology to improve the quality of life in developing countries, creating economic opportunities at home and abroad,” US commerce secretary William Daley told reporters after the agreements were clinched.

The Chennai-based DSQ Software signed three of the four agreements signed in the infotech sector, teaming up with IBM, NeuVis Inc and BancAmerica in areas like e-business and financial services.

Another agreement, forged between ModiCorp and InfoDream, aims at creating an innovative web portal dedicated to service-oriented enterprises.

In the power sector, four agreements were signed, including the one between Ogden Energy and Balaji Power Corporation to build own and operate a 106 MW power project in Tamil Nadu. The US major also reached a pact with the Madhya Pradesh power board to set up a $ 500 million hydel project in the state. Synergics Energy Development signed an understanding with Power Finance Corporation (PFC) to finance the Srinagar hydroelectric Power project in UP.

US Energy Association and CII entered into an understanding to form an Indo-US private sector trade and investment working group which will promote commercially viable, clean-energy options.

Major agreements clinched in the area of environment technology were those between the US-based Global Market Resources and Healing Medicaids for waste management, LightStream Technologies and Subhash to introduce chemical-free, high-powered, lightwater disinfection technology. Water Systems International signed a pact with Haryana State Industrial Development Corporation (HSIDC) to set up modern water-purification units.

In the tourism sector, US firm World Corporate Club reached an agreement with Flex group of companies to carry out a feasibility study for building an international business club in New Delhi.

CBay caveat

US entrepreneur and president of CBay Systems, Donald L Conover, lamented that the Indian government was not creating the policy environment for infotech firms to grow faster. He said the government was being complacent in setting targets in the high-growth area of e-commerce activities.

“According to Goldman Sachs, the e-commerce industry is expected to grow to over $1.1 trillion by 2002. Yet, many officials think India has made a major achievement by bagging less than $ 3 billion worth of infotech deals in 1999,” Conover said.

He said in a world that uses over $ 300 billion of software development services, India’s fair share is close to $ 150 billion, not the $ 3-5 billion that many Indian officials feel is enough in 2000. Conover felt that the lack of free market for Internet in India means that the country’s best asset — its technical elite — is being held back in world market. In the US, there are about 24,000 internet service providers, none of which are licensed. The government, he said, must remove all impediments to investment in internet infrastructure. “In the new world of e-commerce, bandwidth is everything,” the CBay boss said.    

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