Sensex dives 361 on double jolt
Ministry denies FII crackdown
Mittals eye majority stake in Command
Sterlite to merge Malco, hive off telecom wing
New rail freight policy to focus on port connectiv
Govt extends capacity hike offer to foreign
Tata Sons stake in Tisco rises to 24%
Phase V update programme on
Foreign Exchange, Bullion, Stock Indices

Mumbai, April 4 
Mauritius and Microsoft spooked Dalal Street into a crash today. On a day that saw sellers jostling for space and cash, the BSE sensex bled 361. 48 points, leaving the infotech majors battered and investors— many of whom saw their value of their shares evaporate in the space of hours — looking for ways to flee a rudderless market.

The 30-scrip index opened weak at 4907.41 and plumbed its intra-day low of 4666.95 before closing a shade higher at 4691.46 in a 7.15 per cent loss — the second-largest in BSE’s history.

Reports that the income tax authorities had issued notices to FIIs which have routed investments through Mauritius sent a wave of panic across the market and set off a selloff.

The clarification by the finance ministry around noon that the government would not revoke or modify the agreement on avoidance of double taxation with Mauritius failed to calm nerves.

Microsoft was pronounced guilty of monopolistic practices late on Monday, sending the tech-stacked bourse into a 297.02 point (7 per cent) slump to 3926.66 in mid-day trading on Tuesday. Together with the 7.6 per cent fall on Monday, it saw gains made over a year being wiped out in just two sessions.

The BSE was stalked by early-session fears that actually arose from Monday’s losses on the Nasdaq but it was compounded by reports that the a handful of FIIs registered in Mauritius would have to cough up large amounts as taxes.

Yesterday’s favourites like Infosys, Satyam, Wipro, SSI and a host of other infotech scrips took it on their chins, their shares locked in the the lower-end price circuit filters from the early hours of trading itself.

The size of the fall worried marketmen and regulators, who feared the selloff might trigger a payments crisis on bourses. The National and Calcutta stock exchanges are believed to be more vulnerable. “This may happen because many operators will get stuck with open positions. Today’s sharp losses gave several of them no time to salvage themselves,” a dealer said. The extent of the crisis could not be gauged as the top brass — R H Patil and Ravi Narain — were abroad.

In the specified group, 55 scrips including all infotech and pharmaceutical shares were locked in their lower-end circuit filters.

However, HDFC, BASF, Colgate and Bharat Forge were the surprise gainers, standing tall amid the ruins.

The volume of business was low at Rs 1442.40 crore. Reliance clocked the highest turnover of Rs 443.41 crore followed by ACC at Rs 94.19 crore.

Reliance shed Rs 25.60 to close at at Rs Rs 300.30, ACC dropped by Rs 7.65 at Rs 143.95, Infosys by Rs 655.15 at Rs 7534.65, Lever by Rs 210.80 at Rs 2424.35, L&T by Rs 23.95 at Rs 276.05, Bhel by 10.45 at Rs 120.80, BSES by Rs 17.50 at Rs 201.30 and Glaxo by Rs 36.10 at Rs 415.40.    

New Delhi, April 4 
The finance ministry today scrambled to stabilise jittery stock markets by trying to quell fears raised by a media report that the taxman was preparing to crack down on foreign institutional investors who have been routing investments into the country through `shell investment firms’ in Mauritius.

The ministry said it had no intention of reneging on its double taxation treaty with Mauritius. It admitted that some notices had been issued to erring firms but that these pertained to cases that had been pending for years. The violations were specific to these companies and no generalisation ought to be drawn from them.

“There is no move on the part of government to revoke or modify the agreement on avoidance of double taxation with Mauritius which would take away the benefits conferred on investors by this treaty,” the finance ministry clarified. It described market fears that all FII investments out of Mauritius will soon become taxable as “totally unfounded.”

The CBDT officials, however, vowed to continue their probes into two-tier investments through Mauritius-based shell companies by foreign multinationals, which they described as “mere tax avoidance gimmicks.”

The Indo-Mauritius treaty allows Mauritius-based firms to be taxed according to their home county’s tax laws and Mauritius laws prescribe zero capital gains tax. Income tax on the isle is 15 per cent and the tax treaty allows companies to seek up to 90 per cent rebate in taxes payable to Indian authorities on claims that they have paid taxes in Mauritius.

“Right now we have served notices only to financial and banking firms who have set up what we feel are shell companies in Mauritius through which they are routing investments into India to save on capital gains tax. But we may also check out manufacturing firms which have adopted similar ruses,” officials warned.    

Calcutta, April 4 
Calcutta’s relatively sleepy cellular market is abuzz with signals about a new arrival. Bharti Telecom — the telecom titan that straddles the space between the apple orchards of Himachal Pradesh and corporate boardrooms in Chennai’s Anna Salai — is heading for the east.

Usha Martin Telekom (UMTL), the Jhawar-controlled company which provides cellular services in the city under the Command brandname, is considering a sale of its majority stake to Sunil Mittal — the Delhi-based chief executive of Bharti Telecom who has put his company at the vanguard of the revolution sweeping the country’s telecom and infotech sectors.

There are reports that Telekom Malaysia, which holds 49 per cent in Usha Martin Telekom, and the Jhawars, who hold 20 per cent, are locked in intensive negotiations. If the pace of things is an indication, the deal could be done soon, even though UMTL officials declined to comment on the affair.

However, Mittal issued a disclaimer. “There are no talks going on as of now. Sometime ago, we did have discussions with the Jhawars through our bankers where we clearly said we were not interested in a minority stake. We are always on the look out for opportunities that will help us expand out operations,” he told the Telegraph. Asked if they would be interested in sewing up a deal with the Jhawars, Mittal said, “Sure, provided we can agree on the terms and conditions.”

Signals that Mittals could snap up Command come from Usha Martin vice-chairman Prashant Jhawar, who has been told to study the business opportunities in the mobile telephony market.

“I have been authorised by the shareholders of Usha Martin Telekom — Telekom Malaysia Berhad, Telecom Venture Group of Hong Kong and Usha Martin — to submit my recommendations in the next two months.” This means the proposals would be ready by the first week of May.

Bharti’s interest in Command must be seen in the context of the wave of consolidation and alliances buffeting an industry that leaves little room for small players. Also, the ambitions of bigger players in the area of long-distance telephony is shaping new configurations and forcing the Big Daddies like Bharti and Hutchison Max to wade into new areas.

Mittal is keen on getting a foothold in eastern India and enlarge Bharti’s countrywide presence further. On the other hand, Command has tried to forge alliances with cellular operators in other metros for domestic long distance telephony to keep pace with the consolidation and ensure a better valuation.

In many ways, both the city’s operators are soft targets. Telstra quit Modi Telstra and sold its 49 per cent stake as part of a recast plan drawn up at its headquarters in Australia.

The Usha Martin group is in the midst of a restructuring programme proposed by PriceWaterhouseCoopers. Group officials have indicated in the past that the Jhawars will keep their options open on whether to pull out or remain in the mobile telephony business.    

Mumbai, April 4 
Sterlite Industries (India) Ltd is demerging its existing telecom business into a separate company. Post demerger, group concern Madras Aluminium Company Ltd (Malco) is to be merged with Sterlite, creating a focused non-ferrous mining and metals company.

Based on a restructuring proposal recommended by Arthur Andersen India (Pvt) Ltd, Sterlite has decided not to undertake any greenfield projects, preferring instead to grow through acquisitions and low cost expansions.

At a board meeting held today, the company also decided to divest investment in its Rs 109 crore paper project, as it does not form part of its core competency, Anil Agarwal, chairman & managing director, Sterlite told newspersons here today.

The board also recommended an interim dividend of 110 per cent for the 1999-2000 fiscal, involving a total outgo of Rs 60.37 crore.

Arthur Andersen had concluded that the bundling of diversified businesses in Sterlite meant that individual business strengths were not being utilised for future value creation, leading to an incorrect market perception and valuation.

In the telecom sector while Sterlite has so far remained a manufacturer of optical fibre, optical fibre cable and jelly filled cables, Agarwal said it would now move up the value chain, emerging as a telecommunication infrastructure provider with optical fibre as the core foundation. Here, the key new business areas that have been identified include telecom turnkey solutions, network bandwidth and telecom software.

The new entity is likely to be named Sterlite Telecom Systems Ltd.

According to senior company officials, the telecom venture will also encompass creation of telecommunications infrastructure for the department of telecommunications (DoT), Mahanagar Telephone Nigam Ltd (MTNL) and other public sector units, turnkey telecom networks for basic service providers, backbone for cellular operators & internet service providers and large integrated voice and data networks.

“Sterlite aims to be a technology driven leader in optical communications and a total solutions provider with an expected turnover of over Rs 3,000 crore by 2003,” Ashok Panjwani, chief executive officer, telecom business said.

The telecommunication business achieved a turnover of Rs 544 crore in the previous fiscal and it stood at Rs 413 crore in the first half of the current financial year.

Panjwani said that the group is contemplating a Nasdaq listing by 2001.    

New Delhi, April 4 
The railway ministry today announced a new freight policy with a focus on strengthening high density networks and to provide connectivity to ports.

The freight policy will also focus on the restructuring of freight traffic and would concentrate on picking up piece-meal goods traffic.

Announcing the new freight policy, railway board chairman V. K. Aggarwal said, “An integrated transport policy was likely to be finalised very soon providing for a complementary inter-model relationship, instead of competition, between rail and road traffic.”

Further, in another major move, railway minister Mamata Banerjee announced that train services between India and Bangladesh, would start soon. “All arrangements have been made for starting train services between India and Bangladesh, but a decision to this effect has to be taken at the political level.”

Banerjee said goods traffic will be introduced first, while passenger services will follow later. A memorandum of understanding is likely to be signed between the two countries.

Earlier, the railway minister said the railways carried over 456 million tonnes of freight during 1999-2000, which saw the highest ever increase of 35 million tonnes in a year. The previous highest annual growth was 25.73 million tonnes in 1995-96.    

New Dehi, April 4 
The civil aviation ministry today extended its offer to international airlines flying out of India to temporarily hike their capacity by 15 days.

The offer to increase the number of flights and upgrade the type of aircraft flown, for a limited period up to March 31, was made after passengers complained of large scale off-loading by airlines in February and March this year.

“We managed to attract very few major airlines. Cathay Pacific was possibly the only important airline to take up our offer,” DGCA officials said.

The big names like Lufthansa, British Airways and Air France preferred to wait and watch the long-term measures that the government was contemplating to meet the demand-supply gap.

“Now, we have been approached by bigger players too and feel some of them are sure to take the bait,” officials said.

“We are studying the situation and agree that a proper analysis is needed on realistic long-term demand projections. Once this is done then we can re-work bilaterals,” they added.

International big timers are holding out for that extra bit of bilateral capacity, knowing fully well that Air India, the official Indian carrier, which would get half the flights allocated to any destination to or from India, is in no position to take up the opportunity.    

Jamshedpur, April 4 
The Tatas have raised their stake in Tata Iron and Steel Company (Tisco) by 5 per cent to 24 per cent through the creeping acquisition route. This proviso allows a promoter to raise his stake by buying 5 per cent of the company’s shares from the market a year without having to make an open offer to shareholders.

The steel major has set an ambitious target of achieving of Rs 10,000 crore in four years, a steep increase over the current level of Rs 6,000 crore.

Tisco managing director J J Irani confirmed the increase in promoters’ stake and said the Tatas will continue to buy shares from the market till they have raised their holding in the company to 26 per cent. He indicated that the stake in other group companies will also increase.

“Sebi does not permit a promoter to acquire more than five per cent in a company through creeping acquisitions,” Irani told a press conference called to announce the company’s annual sales and production performance here today.

However, he refused to disclose the price at which the shares were purchased from the market or the investments made for the acquisition of these shares. All he would say was that the prices were market related.

Irani, however, ruled out buying back shares from the market to boost the scrip’s price and give shareholders a better return on their holdings. “Our company is performing well and paying dividends to shareholders. We have also taken measures to improve our bottomline by improving our operational efficiency and pricing our products competitively,” he said.

Talking about the production performance, Irani said the increase in turnover will be achieved by rolling out more value-added products. “With the 12-million-tonne cold-roll mill set to be commissioned on schedule, we will be able to make more value-added items, get better price realisations and tap new opportunities,” the Tisco chief said.

The company, which has invested Rs 1,073 crore last year to complete the CRM project, has embarked on a massive cost-cutting exercise, including job reductions.

Irani said his company will achieve a new record by commissioning the cold-roll mill in April — two months ahead of schedule. In a significant announcement, he said Tisco was looking at acquisitions because the Jamshedpur was already operating at the optimum capacity.

In 1999-2000, the steel major’s sales jumped 5 per cent over the previous year to 2.79 million tonnes. Exports during the year rose 14.6 per cent to 0.47 million tonnes.

Under the current mix, flat products constitute 61 per cent of the production while long and semi-finished varieties of steel make up 24 per cent and 15 per cent respectively.    

Jamshedpur, April 4 
The Tata Iron and Steel Co (Tisco) has launched Phase V of its ongoing modernisation programme for the Jamshedpur plant, with an emphasis on intellectual capital accumulation and e-commerce. Tisco managing director J. J. Irani said once the physical modernisation of the plant is over, the real exercise will be the “modernisation of the mind.”

The steel major has appointed a team consisting of a dozen executives from its marketing, materials, information technology and procurement divisions. The team will explore possibilities for developing an e-commerce division. The company is conducting the in-house exercise under the advice of Michael Dertouzos, director of MIT Laboratory of Computer Science. A company spokesperson said Tisco may promote a separate company for the purpose at a later date.

Through its foray into the knowledge-based sector, Tisco aims to leverage internal and external expertise, exploit its intangible assets including brand name and technical know-how, reinforce its performance focus for identifying growth opportunities and underpin new organisational paradigms.    

Foreign Exchange
US $1	Rs 43.62	HK $1	Rs 5.55*
UK £1	Rs 69.71	SW Fr 1	Rs 26.05
Euro	Rs 41.64	Sing $1	Rs 25.05
Yen 100	Rs 41.40	Aus $1	Rs 25.95*
*SBI TC buying rates; others are forex market closing rates


Calcutta		Bombay
Gold Std (10gm)	Rs 4485	Gold Std (10 gm)	Rs 4440
Gold 22 carat	Rs 4235	Gold 22 carat	Rs 4110
Silver bar (Kg)	Rs 7800	Silver (Kg)	Rs 7975
Silver portion	Rs 7900	Silver portion	Rs 7980

Stock Indices

Sensex	4691.46	-361.48
BSE-100	2637.40	-202.83
S&P CNX Nifty	1428.10	-106.65
Calcutta	122.23	-9.52
Skindia GDR	1040.48	-92.89

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