Saatchi, Hyundai part ways
Finance panel to chart states’ fiscal reforms
First flush stirs bitter brew forDarjeeling tea
Gautier range in city
Six investment arms of SWC set to merge
HDFC Bank net profit up 46%

 
 
SAATCHI, HYUNDAI PART WAYS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 14 
Saatchi & Saatchi today signed off as Hyundai’s advertising agency in a surprise departure that added a new twist to the fusillade of vicious car industry campaigns.

While the move is widely seen as a fallout of the string of tawdry advertisement campaigns — especially the insinuations and asides at Daewoo’s financial woes — Saatchi & Saatchi managing director V. Shantakumar tried to play down the link, saying his agency had given up the Rs 20-crore account due to ‘internal reasons’.

Ruling out financial causes, he said the decision was not precipitated by the raging row over Hyundai’s ads and the larger issue of car wars. He would only say the timing of the resignation was an unfortunate coincidence — nothing more.

Industry sources, however, say there had been some differences between the Korean car company and the advertising agency, but Shantakumar denied having bagged any account from its rivals.

“It is with great reluctance that we have accepted their resignation. The agency had requested us to accept its resignation in January. But we had requested them to complete the assignment in accordance with the terms of the annual contract,” Hyundai director (marketing and sales) B.V.R Subbu said.

That call appears to have been answered with Saatchi & Saatchi saying it will continue to work with the Korean car maker till it makes alternative arrangements. In fact, a new ad featuring Shah Rukh Khan will be released next week. Saatchi’s exit means the auto major will soon have to find a fresh pitch and select a new agency that will craft a communication strategy in tune with the one drawn up by Bates — the ad major which handles Hyundai’s account worldwide.

Saatchi & Saatchi, which bagged the Hyundai account in late 1997, splashed the Santro ad campaigns featuring Shah Rukh Khan in a series of TV commercials to introduce Indian consumers to Hyundai Motors and push the brand. The ad went on to win several awards like the Advertising & Marketing Effectiveness in the product introduction category at the New York Festival early this year. Subsequently, the two sides worked on launching the campaign for Accent.

Meanwhile, rival Daewoo Motors India (DMIL) said today it is planning to move the courts to claim damages for a chain of misleading and disparaging advertisements released by Hyundai in the print media.

“We are seeking legal opinion on moving the criminal or civil courts for damages and the loss of reputation to the company caused by these advertisements,” DMIL chairman S G Awasthi told PTI.

The move comes after the MRTPC issued an ex-parte injunction against the ads, one of which was brutal — “Kar apke ghar, kampani sarak par (car at your house, company on the road) in an obvious reference to the woes of Daewoo Motors which has been put on the block.

Hyundai and American car giants GM and Ford have already carried out due diligence exercises at the Daewoo plants before they bid for the ailing car maker. It is believed that Daewoo’s unit in India will be sold along with the Korean parent’s operations to the successful bidder.    


 
 
FINANCE PANEL TO CHART STATES’ FISCAL REFORMS 
 
 
FROM R. SASANKAN
 
New Delhi, April 14 
The finance ministry has extended the terms of reference of the Eleventh Finance Commission by asking it to draw up a fiscal reform programme for states which can be monitored effectively.

In future, all non-plan revenue grant to states will be linked to fiscal performance — a reversal of the existing scheme which benefited those with maximum revenue gaps on the non-plan side. This amounted to penalising states with good track records on fiscal management.

According to official sources, the finance ministry has stalled the release of a Rs 11,000-crore non-plan revenue grant announced in the 2000-01 budget. This was recommended by the 11th Finance Commission in its interim report.

The ministry wants to release the funds on the basis of a new allocation formula. This has to be worked out by the commission in its final report, expected in June. The delay in releasing the grant has hit several states, especially the weak ones for whom this year has turned out to be exceptionally difficult.

The finance commission’s final report will have to be vetted by the finance ministry and then approved by the Cabinet. On present reckoning, a final decision on its report is unlikely before August-September.

The ministry has told the Finance Commission that non-plan grants to cover the assessed revenue deficits should be tied to the implementation of the fiscal reform programme.

The programme will include items such as additional resource mobilisation, expenditure control, reform of PSUs, the revamp of SEBs and road transport corporations. The states are not expected to follow a uniform criteria.

For instance, if a particular state decides to subsidise power for agriculture, it will not be penalised for that. If it performs well in other areas, its overall fiscal performance will be seen as an improvement. There is a long list of reform measures, an official source said.

States like Gujarat, Maharashtra, Karnataka and Tamil Nadu have been performing well on the fiscal front. As a result, they can now look forward to a reasonable share in the non-plan grants.

The Eleventh Finance Commission, headed by A.M Khusro, was set up in July 1998. It was actually supposed to be constituted in December 1997. It submitted the interim report on January 16 to enable the finance minister to implement the proposals.    


 
 
FIRST FLUSH STIRS BITTER BREW FORDARJEELING TEA 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, April 14 
Darjeeling tea planters may have another hard year ahead of them if the production of premium first flush tea is any indication. The production is already lower than that recorded in the previous year.

Senior Darjeeling planters said the unfavourable weather in the opening months of February and March, resulted in lower production. “We have not yet received the final figures. But according to initial reports coming in from the gardens, the production of first flush tea is down,” said a senior official of the Darjeeling Planters’ Association.

After a dormant phase in the winter months, in February and March the bushes offer delicate new shoots which produce light clear liquor.

The infused leaf has a prominent lime greenish brightness and a floral scent. “These are the spring teas which earn good revenue for the industry,” the planters said.

The DPA official said that if the rains fail this year, production of the second flush tea which has a ‘muscatel’ flavour, will also be hard hit. “The second flush tea is the maximum revenue earner for the industry,” he said.

“Lower production in the initial months will have a cascading effect on the overall production of Darjeeling tea. This will have a negative impact on the bottomline of the companies. Already most Darjeeling tea companies, with a few exceptions, are in deep-trouble due to low profitability,” planters said.

Last year, when the tea industry was hard hit by a severe drought, production of Darjeeling tea went down to nearly 9 million kg. The average production of Darjeeling tea hovers around 10 to 10.5 million kg.

Monsoon teas which are produced from mid-July to September are sold at a price which is much below the cost of production.

Meanwhile, about 60 Darjeeling planters have applied to the Tea Board of India for getting the certification trade mark.    


 
 
GAUTIER RANGE IN CITY 
 
 
BY A STAFF REPORTER
 
Calcutta, April 14 
Gautier India Ltd, in collaboration with Groupe Seribo of France, launched the ‘Gautier’ brand of French furniture in the city today.

The company has set up a Rs 60 crore, fully-automated, state-of-the-art furniture plant near Chennai. The plant has the capacity to produce 200,000 units of panel-based furniture per year. It has also invested Rs 3.5 crore to set up a finishing plant .    


 
 
SIX INVESTMENT ARMS OF SWC SET TO MERGE 
 
 
BY AMIT CHAKRABORTY
 
Calcutta, April 14 
Shaw Wallace and Company (SWC) will merge six of its investment subsidiaries as part of the second stage of its restructuring plan.

The company received the much-awaited clearance from the Calcutta high court recently, and has decided to hold shareholders’ meeting on May 12 to complete the formalities of the merger.

The directors say the merger is aimed at de-layering the business structure and achieving synergies to get ‘a healthier and a more transparent balance sheet’.

Earlier, it had merged 14 investment subsidiaries, a large number of which were allegedly involved in the unauthorised transfer of funds abroad in 1998.

That the need for corporate ‘thinning’ has become pressing for Shaw Wallace promoter and chairman Manu Chhabria is evident in some of startling figures on these subsidiaries in the group’s balance-sheet for the accounting year ended June 30, 1998.

Five of the six companies taken up for merger in the current move have an aggregate paid-up equity of Rs 860. These are :

Alakananda Manufacturing and Finance with a fully paid-up share capital of Rs 450 of 45 equity shares of Rs 10 each

Bankshall Investment with a fully paid-up capital of Rs 130 of 13 fully paid-up shares of Rs 10 each

Jose Investment and Ripon Finance, each with a fully paid up capital of Rs 70 of seven equity shares of Rs 10 each

Vibhavari Finance and Investment with a paid up capital of Rs 140 with subscribed capital of 14 equity shares of Rs 10 each

The largest investment subsidiary taken up for merger in the current stage is Malleswara Finance and Investment with a paid-up equity of Rs 40.02 lakh with a 40,002 paid-up equity shares of Rs 10 each

While SWC holds 20,000 shares as a parent in Malleswara, the balance Rs 20-lakh equity is equally shared between Vibhavari Finance and Alakananda Manufacturing and Finance.

Alaknanda’s board disclosed a loss of Rs 6.93 lakh as on June 30 1998, (the latest SWC balance-sheet) and the carried-forward loss was Rs 16.37 lakh. Bankshall Investments disclosed a profit of Rs 19.9 lakh and the undistributed profit carried forward was Rs 8.6 lakh.

Jose Investment showed a profit of Rs 18.38 lakh and the carried forward loss was Rs 3.78 lakh. Malleswara Finance recorded a loss of over Rs 4 lakh and the carried forward loss was Rs 9.65 lakh. Ripon Finance disclosed a profit of Rs 19.76 lakh and the carried forward loss was Rs 4 lakh. Vibhavari Finance’s profit was Rs 21.66 lakh but when set off against the accumulated loss of Rs 11.33 lakh, the SWC subsidiary was left with a loss Rs 11.24 lakh.    


 
 
HDFC BANK NET PROFIT UP 46% 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 14 
HDFC Bank has registered a 45.7 per cent increase in net profit at Rs 120 crore for the financial year ended March 31 compared with Rs 82.4 crore in the corresponding period of the previous year.

Total income was Rs 805.2 crore as against Rs 444.2 crore for the previous year, a growth of 81per cent. The bank provided Rs 74.8 crore for income taxes ( Rs 34.5 crore).

In a press statement, the bank said with the amalgamation of Times Bank and HDFC Bank from February 26 this year, the profit and loss account figures reflect the standalone HDFC bank’s revenues and expenses till February 25 and those of the merged HDFC Bank from February 26 to March 31.

Aditya Puri, managing director, said: “The bank is well positioned for growth, both in its existing core businesses and in relation to the opportunities presented by the new economy”.

Blue Star declares 45% interim

Blue Star Ltd (BSL) has declared a 45 per cent interim dividend for the year ending March 31 against 35 per cent during the previous year. The dividend would be payable on the reduced capital after pruning the company’s capital base, as per the scheme of arrangement between bsl BSL and Blue Star Infotech Ltd (BSIL), the company said in a release here today.    

 

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