Sensex rockets 352 points
IPO norms relaxed for media, telecom firms
Clearance for mortgage bonds
Loan rider to Telstra’s exit
NIIT reviews stock option scheme
CIL to seek partner for two projects
UTI tech fund fully subscribed
Star Alliance keen to rope in Air-India, IA
Foreign Exchange, Bullion, Stock Indices

 
 
SENSEX ROCKETS 352 POINTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 7 
The tax fears squelched, Dalal Street decided to erupt into a celebration today. It was a buying binge that propelled the sensex 352.47 points to 5219.20 in what was its third-highest single-day increase and drove up the combined market capitalisation of all shares listed on the Bombay Stock Exchange (BSE) by a mind-boggling Rs 50,668.89 crore to Rs 8,90,433.14 crore from Rs 8,39,764.25 crore.

The best part of the surge lay in its breadth: it covered shares across the spectrum, not just the Big Daddies of infotech. It was also a rally driven by all-round buying, though it was the tax-happy foreign institutional investors (FIIs) who set the scorching pace and tempted the bulls out of their lairs.

But what was the cataclysmic cause that set the market afire? First and foremost, Thursday night’s declaration by the finance ministry that income tax cases of Mauritius-based FIIs would not be re-opened. Second, Thursday’s 98-point rally in the Nasdaq composite index, and third, Sebi’s directive that brokers’ additional cash deposits be refunded before May 1.

Even as the indices soared in downtown Mumbai, finance minister wondered in Delhi if the markets were behaving rationally. “No responsible market should behave on the basis of unfounded and exaggerated rumours. It is unfortunate that Indian stock markets often react the way they have done in the recent past,” Sinha said on the sidelines of the annual conference of Institute of Internal Auditors.

On the income-tax notices to a few Mauritius-based FIIs, he said the whole issue centred on a bilateral treaty between India and Mauritius in which certain provisions needed to be clarified. “That is all that the tax department has done,” he added.

On Thursday, the government clarified that the capital gains of FIIs who hold a certificate of residence from the Mauritian government would be taxed only in that country. The announcement came after heads of foreign funds warned Sebi officials that close to 70 per cent of the inflows would be affected if the income tax claims were not withdrawn.

The government, already spooked by Tuesday’s 360-point BSE crash triggered by the I-T department’s move, did a volte-face and withdrew the Rs 8.67-crore tax demand on the five FIIs.

Sebi chairman D R Mehta said in Delhi that the market watchdog would keep close tabs on the markets in the wake of Tuesday’s turmoil. At the same time, he reassured investors that there was no imminent danger of a payments crisis. “Sebi is monitoring the markets constantly. We are duty-bound to look into unusual movements.”

Providing figures on just how significant the Mauritius link was for the future of portfolio inflows to India, Mehta said of the net inflows of $ 11.4 billion, $7 billion comes via that country.

Earlier in the day, the BSE saw the return of local financial institutions and speculators bourses to ignite a frenzy that pushed share values across the board. “This rally was broad-based, covering all sectors of the industry,” said Pradeep Verma of Skindia Finance.

Today’s gains were also fuelled by the $ 51-surge in the Infosys scrip to $ 248 on the Nasdaq on Thursday. Among major infotech gainers were Infosys, Wipro, Digital, Global Telesystems, HFCL, Satyam and NIIT. Among the pivotals, ITC, L&T, MTNL, M&M, Ranbaxy, Grasim and Reliance sizzled. On the NSE, Lever, Tata Steel and Hindalco were big draws.

The sensex opened with a wide gap at 4987.10, flared up further to its intra-day high of 5222.80 before closing 7.24 per cent higher at 5219.20 as against Thursday’s finish of 4866.1.

Such was the upsurge that a third of the specified scrips were locked in their upper-end filters in the early hours of trading, leaving little for speculators to trade in for the best part of the session. The spurt is expected to continue on Monday, the day when the sensex will be reconstituted. Dealers say the fresh batch of annual results will also keep the sentiment strong.

However, the volume of business was very thin at Rs 1607.69 crore compared with Thursday’s turnover of Rs 2931.39 crore. In specified group, 59 scrips, including all infotech and media stocks, hit their upper-end price bands. In the cash segment, almost 100 software scrips were locked in their upper filters.

Reliance clocked the highest turnover of Rs 285.59 crore followed by Himachal Futuristic (Rs 118.21 crore), State Bank (Rs 108.76 crore), Satyam Computer (Rs 85.08 crore) and HLL (Rs 61.37 crore).

Infotech giants are not worried over the fact that their shares have been scalded in the stock market volatility of recent days.

Most firms say their fundamentals will see them through the storms on bourses. Nor, does the Nasdaq slump does not bother them much. “We are continuing with our software development projects with strong support from our investors. The market volatility is temporary in nature and will not in any way impact on our business,” a Wipro spokesman said in Bangalore today.

A spokesman for Infosys Technologies — a company whose stock bounced back to Rs 8,400 on the BSE today after plumbing Rs 7200 on Tuesday — expressed the confidence that the rally would continue over the next few days.

In fact, when the price of Infosys’ ADS on Nasdaq had zoomed to over Rs 12,000 in February, the company chairman N.R. Narayanamurthy had issued a statement saying it had no relation to any new corporate development. Aztec software CEO G. Balakrishna said the Microsoft-type situation was unlikely to happen in India given that MRTP laws are stringent enough not to allow any company to have monopoly over products or services.    


 
 
IPO NORMS RELAXED FOR MEDIA, TELECOM FIRMS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 7 
The Securities and Exchange Board of India (Sebi) today liberalised public issue norms by allowing media, entertainment and telecom companies to float as little as 10 per cent of the company’s equity through an initial public offering (IPO) against the existing minimum level of 25 per cent.

Although the market regulator has relaxed the IPO norms to prevent market manipulation, it has stipulated that at least 10 per cent of the post-issue capital comprising a minimum of 20 lakh securities should be offered to the public and the size should not be less than Rs 50 crore.

“This will ensure that there is enough floating stock in the market,” Mehta said. He added that these relaxations would be subject to the conditions that the source of revenue and profit (not less than 75 per cent) shall come from these sectors. Currently these relaxations are available to companies in the information technology sector.

In order to strengthen the book-building process, Sebi is permitting companies to raise the entire money from the primary market through the book-building process. It has also said that the bidding would take place at all stock exchanges instead of a select few exchanges.

While 25 per cent of the shares would be available to small investors at a fixed price, Sebi has stipulated that not more than 60 per cent of the book built process would be allocated to institutional investors. About 15 per cent of the book built portion would be allocated on proportionate basis to non-institutional investors applying for more than 1000 shares.

The board also decided that corporates would be permitted to announce their results half an hour before the markets opened. Sebi had earlier barred companies from announcing their results during trading hours to prevent price manipulation.    


 
 
CLEARANCE FOR MORTGAGE BONDS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 7 
The Securities and Exchange Board of India today permitted mutual funds to invest in securities backed by mortgages — opening the doors to a new cash trove that real estate companies can access funds from.

There is a caveat though: these securities should have a credit rating of not below investment grade and represent investments in real estate mortgages or loans secured by real estate collateral and not directly in real estate. The securities will have to be listed on the exchanges.

Sebi chairman D.R. Mehta said the move could be seen as a step towards the creation of real estate mutual funds. He said these securities backed by a financial asset (housing loan receivables) and underlying collateral of a physical asset are considered comparatively safe and are unlikely to be vulnerable to short-term fluctuations in the financial environment in view of their long-term underlying mortgages.

Sources in Hudco said the move would precipitate a fall in interest rates because the market will be awash with funds The mortgages will be sold in the secondary market as pass-through certificates or derivatives and will be traded as liquid assets. “More and more mutual fund companies, banks and real estate companies will invest in these securities,” said an Hudco official.

Cheap housing loans

P.R. Swarup, director of Construction Industry Development Corporation(CIDC), said the government’s move would prompt the non-banking finance companies (NBFCs) to funnel funds into the real estate instead of concentrating as they now do on financing consumer durables.

“The interest rate on housing loans will certainly come down by a maximum of 1 per cent,” Swarup added.

Reacting to Sebi’s announcement, Raghu Parekh, vice-president of Hometrust Housing Finance said, “This is a welcome step for the housing industry. It will open a new source of funds for this sector. We expect the mutual funds to route a large chunk of their investments into this sector.”    


 
 
LOAN RIDER TO TELSTRA’S EXIT 
 
 
BY RENU M R KAKKAR
 
Calcutta, April 7 
The exit of Telstra International of Australia from Modi Telstra, the city’s cellular operator, hinges on the company’s ability to sew up a long-term loan of Rs 67 crore.

These loans are currently being negotiated with banks in India keeping Telstra firmly in the picture till such time “as the financial deal is sealed”, top officials in the company said.

Modi Corp and its associates have time till the end of May to pay up Telstra after which the multinational will be free to find another buyer. If the payment is made, the cellular operator will be able to use the Telstra brand name for specific period of time.

Modi Telstra needs the funds to start its operations for wireless application protocol (WAP), which is designed to take the mobile phone to the next stage where subscribers will be able to access the internet. A part of the cash will also be used to meet working capital needs.

A sum of Rs 40 crore has been earmarked as capital investment into acquiring an intelligent network (IN) platform and WAP technology, acquiring 35 more base stations and expanding the switching capacity to help the company double its customer base from its present level of 50,000.

Modi Telstra’s total investment till now is about Rs 200 crore of which Rs 133 crore is by way of equity capital.

Since the January 21 expression of intent for the acquisition of the 49 per cent stake by Modi Corp and associates, there has been one new addition to this group - Prudential of the UK - which bought over 15 per cent of Spice Telecom’s equity in Bangalore. Of this 15 per cent, a little over 10 per cent was bought from Motorola. The other associates continue to be Distacom and AIG Asian Infrastructure Fund.

Modi Telstra has yet to firm up plans for long distance telephony Company officials believe that it is too small a player to visualise even a separate corridor kind of arrangement with players in other cities — like the one being conceived by Command, the other cellular operator. Modi Telstra reckons that such a plan cannot really work given the larger dynamics of huge licence fees involved. The only regional alliance it can have is with Reliance Telecom which has the licence for Bengal (excluding Calcutta). If the company officials are talking to the telecom industry’s dark horse, they are not telling. It however remains true that any national alliance in domestic long distance telephony can hardly exclude Modi Telstra. The reason is that it has a 60 per cent market share in Calcutta.    


 
 
NIIT REVIEWS STOCK OPTION SCHEME 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 7 
NIIT has reviewed the terms of its present employee stock option scheme and the grants made thereunder.

The company has taken this decision in view of the recent developments in the Indian capital markets.

Previous grants made by the company will now be replaced by the new grant at an exercise price of Rs 1,593, this being the closing price on the Bombay Stock Exchange (BSE) today.

The decision is subject to approval by the company’s shareholders.

The recommendation of a variation in the terms of the NIIT ESOP is as per clause 7 of the Securities and Exchange Board of India (Sebi) Act, relating to ESOP scheme and in accordance with Employee Stock Option Scheme guidelines, 1999.

“The step has been taken with the objective of enhancing the values and effectiveness of the scheme for NIIT employees,” a company spokesperson said.

“NIIT has endeavoured to create an environment that enhances employees satisfaction levels. The decision of the company is very significant for NIIT employees since it has enhanced the value and effectiveness of ESOP at NIIT,” he said.    


 
 
CIL TO SEEK PARTNER FOR TWO PROJECTS 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, April 7 
Coal India Ltd (CIL) has decided, for the first time, to form a joint venture to develop two projects in Central Coalfield at an estimated investment of Rs 3000 crore.

The two projects are at Amrapali and Magadh, which are lying in the North Karanpura coalfield area under the CCL.

The public sector coal behemoth has already appointed ICICI as its consultant for the projects.

Confirming the decision, chairman P. K. Sengupta said Coal India would have a 51 per cent in the project while the joint venture partner would hold the rest.

Sengupta hinted that the company may also opt for a minority stake in the joint venture if the government approves.

The coal company has also received the government’s approval for the projects.

Sengupta said the ICICI would prepare a detailed financial structure of the proposed company and help the CIL to find a joint venture partner.

Once we receive the ICICI report, we will go in for global tendering to select a partner, Sengupta added.

The announcement comes a day after the government announced its decision to re-open coal mining to the private sector after a gap of almost 27 years. This will be possible by amending the Coal Mines (Nationalisation) Act 1973 to enable full-scale mining and exploration of coal and lignite by Indian companies.

The coal ministry is also planning to introduce a separate bill that will allow state-owned coal companies to rope in private partners to form joint ventures to exploit mines and coal-bearing blocks that they own.

The CIL subsidiary, Coal Mine Planning and Development Institute (CMPDIL), has been assigned to prepare a report on the two coal blocks, which have power grade coal deposits.

The projects would cater to the two proposed power plants of National Thermal Power Corporation in Bihar, one at Brar and the other at North Karanpura. Sengupta said the two power plants will have capacities of 1000 MW each. The coal linkage agreement with the NTPC has also been signed.

Sengupta said the two mines would take about five years time to be developed. The production capacities of the two mines would be around 20 million tonnes per annum, he added.

Sengupta said the decision to go in for a joint venture had been taken as CCL was not in strong financial health.

Another senior CIL official said it is very difficult for the CCL to mop up fund from its own resources for the two projects as it has been making heavy losses over the past few years.

Sengupta, however, said the joint venture would be treated as a test case. If the proposed venture succeeds, a similar route may be adopted in future for other projects as well.

“With the coal sector opening up, we can take less than 51 per cent stake subject to the government’s approval and the offers we receive from the bidders,” he said.

During the current year, CIL has set an investment target of Rs 2790.32 crore against last year’s level of Rs 2676.19 crore.

The company will generate Rs 890.35 crore from internal resources while the rest will come from the World Bank and from suppliers’ credit.

The company has 51 ongoing projects, of which the Eastern Coalfield has eight, Bharat Coking Coal Ltd four, CCL 10, Northern Coalfield two, Western Coalfield eight, South Eastern Coalfield 16 and the Mahanadi Coalfield three.

The company is also awaiting approvals from the government for one under ground mine and 14 opencast mines. These 15 mines will add fresh capacity of 45 million tonnes per annum to the CIL.

The company has set a production target of 267 mtpa against last year’s 260.69 mtpa and an offtake target of 268.50 mtpa against 263.03 mtpa.    


 
 
UTI TECH FUND FULLY SUBSCRIBED 
 
 
FROM SATISH JOHN
 
Mumbai, April 7 
Unit Trust of India’s (UTI) new offshore fund — the internet, media and communications fund (ICM Fund) — has been fully subscribed to the tune of $ 60 million (Rs 261 crore).

“The fund has been fully subscribed and attracted quality investors from Europe and the US. It will be listed on the Irish Stock Exchange in Dublin on Monday,” UTI executive director S K Basu said.

Industry circles were surprised that the Trust’s new offshore fund found takers at a time when the share prices of ICE stocks were being pounded.

“It reflects the faith of overseas investors in the Indian capital markets, particularly the ICE sector, despite the recent volatility on local bourses,” UTI officials said.

However, industry watchers say the secret of the fund’s success lay in the fact that it was conceived and launched very quickly. UTI officials say it took them only five weeks to conceive and launch the fund.    


 
 
STAR ALLIANCE KEEN TO ROPE IN AIR-INDIA, IA 
 
 
FROM JAYANTA ROY CHOWDHURY
 
Singapore, April 7 
The 11 member Star Alliance, one of the three global airline groupings, is interested in inducting either Air-India or Indian Airlines as a member.

Rono J. Dutta, president United Airlines, the largest Alliance member, said here today, “While both China and India are witnessing rapid growth, our network has several gaps. Hence, we have had preliminary discussions with airlines in India.”

“Ideally we would like an integrated A-I and IA to join us. Otherwise both are potential candidates,” he added. He ruled out inducting smaller private airlines in India as Alliance members.

Further, Dutta, who took over last year as president of UA which has a fleet of nearly 600 aircraft, said, “India is making a big mistake by not integrating the two airlines. You can’t compete globally without integrating domestic and international services.”

“With its present strengths, A-I can do well as a regional player. To be global it must get into the global gameplan,” he pointed out.

The UA chief was present here today with chief executives of ten other top airlines to welcome Singapore International Airlines into the grand alliance.

“There are few areas left in the world where Star Alliance doesn’t have a significant presence,” said Cheong Choong Kong, CEO of Singapore Airlines.

“But big is not necessarily beautiful. What matters is more benefits to customers, a convenient global network, more travel options and seamless and convenient connections.”

But the expansion of the alliance was not without the undercurrents of tension.

SIA’s biggest rival in the region — Thai Airways — is reportedly unhappy with Star for taking on SIA as a member.

Analysts estimate Thai will lose up to $ 10 million as a result. Thai Airways chief Thamnoon Wanglee however, denied these reports.

But Wanglee faces a major public outcry over the issue back home where the usually tame Thai press has turned it into a prestige issue, since Singapore Airlines and other Star members have proposed to pick up a stake in the state-owned airline

However, the $ 354.9 billion alliance which has Lufthansa, Ansett Australia, All Nippon Airways, Air Canada, Air New Zealand, SAS and Varig of Brazil as its members, is aware of the importance of national identities, despite the ‘cartelisation’ of the skies.

Dutta pointedly stated at the meet, “There has to be diversity, even as we try to harmonise our standards and efficiency levels.”

The alliance which competes with ‘One World’ and ‘Wings,’ is set to welcome two more members in July — British Midland and Mexicana Air.

Choong indicated that SIA may push its newly acquired partner Richard Branson’s Virgin Atlantic Airways towards membership of the alliance.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.62	HK $1	Rs 5.55*
UK £1	Rs 69.03	SW Fr 1	Rs 26.20*
Euro	Rs 41.79	Sing $1	Rs 25.15*
Yen 100	Rs 41.49	Aus $1	Rs 25.85*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4505	Gold Std (10 gm)	Rs 4475
Gold 22 carat	Rs 4255	Gold 22 carat	Rs 4140
Silver bar (Kg)	Rs 7900	Silver (Kg)	Rs 8020
Silver portion	Rs 8000	Silver portion	Rs 8025

Stock Indices

Sensex	5219.20	+352.47
BSE-100	2879.72	+195.95
S&P CNX Nifty	1557.15	+104.20
Calcutta	133.93	+8.85
Skindia GDR	NA	NA
   
 

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