Heady growth forecast, over to the weatherman
Fast-track industry eyes high road
Sensex sheds 285, ICE scrips break
Air-India piles up Rs 1000 cr loss
UB spirits in McDowell bottle
Infar buys land for new unit
Foreign Exchange, Bullion, Stock Indices

 
 
HEADY GROWTH FORECAST, OVER TO THE WEATHERMAN 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 2 
Here is some pyschological boost for a resurgent economy. The National Council for Applied Economic Research (NCAER) — one of the country’s foremost institutions of economic research and forecasting — has just unwrapped a set of heady predictions for a recovery-bound economy, the highlight of which is that the growth rate of gross domestic product (GDP) during the current financial year will be a robust 6.4 per cent-7.2 per cent.

“The forecast is based on the assumption of a good performance of agriculture, which, in turn, depends on the monsoons,” the council said in its review, which slots the overall inflation in a narrow range of 4.5 per cent and 5 per cent. If there is a 5 per cent depreciation in the exchange rate — or the value of the rupee — the trade and current account deficits will be 2.5 per cent and 2 per cent respectively.

For the national exchequer, there is a lot in the document to take heart from. The Centre’s fiscal deficit is predicted to be in line with the Budgeted estimate of 5.1 per cent, provided there are no expenditure overruns, serious shortfalls in the divestment of the government’s shares in public sector undertakings, and the targeted GDP growth rate is attained.

“The fiscal deficit relative to real economic gross domestic product (GDP) will be close to 5 per cent only if the overall GDP growth remains above 6.5 per cent,” the review states.

The industry in 2000-01 will be driven by gains in sunrise and high-growth sectors of information technology and telecom. On the other hand, the country is expected to sit pretty as far as supply of foodgrains is concerned. The council says the agriculture ministry’s target of 212 million tonnes will be achieved, but again, only if monsoons behave.

“The achievement of these targets depends on the performance of rainfall and its distribution over time and various regions of the country. Given this uncertainty, it appears to be a difficult target of 212 million tonnes,” says the NCAER.

With wheat procurements expected to surpass 16 million tonnes, food stocks with the government are likely to swell above 40 million tonnes on July 1. This is much higher than the minimum buffer requirement of 24.3 million tonnes, and 30 million tonnes at the beginning of March 2000.

“On balance, normal monsoons, coupled with more than adequate level of food stocks, signify a comfortable supply situation for the economy during the current year,” the review states.

However, low foreign direct investment (FDI) flows in 1999-2000 continues to be a matter of concern. According to the council, the government must create an atmosphere conducive to attract foreign capital given that the level of capital inflows affects overall growth. “Since the real interest rates in the domestic economy continue to be high, higher FDI inflows can be a catalyst for new investments, particularly if they can ease the potential pressures on infrastructure services,” the review adds.    


 
 
FAST-TRACK INDUSTRY EYES HIGH ROAD 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 2 
Evidence that economic recovery is now spreading to more areas is available in the Associations Council of the Confederation of Indian Industry (Ascon) survey which shows that 17 sectors have recorded excellent growth rates of over 20 per cent in 1999-2000. Industry is also bullish about the current year’s outlook.

Out of the 125 sectors surveyed, 42 sectors have recorded high growth rate of between 10 and 20 per cent, 41 sectors have recorded moderate growth of less than 10 per cent. Only 25 sectors have registered negative growth.

The automobile industry has shown healthy growth with medium and heavy commercial vehicles growing by 39 per cent during the period April-March 1999-2000 over the same period last year. The growth for cars was 48 per cent, multi-utility vehicles 10 per cent, motorcycles 29 per cent and mopeds 8 per cent during the same period. Only scooters and three-wheelers showed negative growths of -4 per cent and -2 per cent respectively.

Some of the other sectors which recorded low to negative growth are crude oil, petrol, diesel, nylon filament yarn, transformers, wagon, machine tools and tea.

The outlook for the next six months (April-September) indicates that auto components, cellular services, consumer electronics, housing finance and personal computers will register a growth figure of more than 20 per cent. Sectors which are expected to record negative growth in the next six months are leasing and hire purchase, machine tools, tea.

Sectors like wagon, air and gas compressors, automobiles, casting, cast iron spun pipe, cement, ceramics, construction industry, consumer durables, drugs and pharmaceuticals, electronic components, industrial furnace, sugar, telecom cables, telecom equipment, vanaspati, will notch up growth rates ranging between 10 and 20 per cent.

Sectors like alcoholic beverages, aluminium, automotive tyre, boilers, chemicals (alkali), cigarettes and tobacco, cold rolled steel strips, diesel engines, earthmoving construction & mining equipment, electrical cables and wires, electrical machinery, electric power generation, fertiliser, glass industry, instrumentation, lead and lead alloy malted food, oil & natural gases and oil & gas equipment, paints, welding consumables equipment are expected to record moderate growth. On the export front out of 53 sectors, 10 sectors recorded excellent growth, 13 sectors have recorded high growth, 14 sectors have recorded moderate growth while 16 have recorded negative growth.    


 
 
SENSEX SHEDS 285, ICE SCRIPS BREAK 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 2 
The Bombay Stock Exchange (BSE) sensitive index was today battered 285.33 points and market capitalisation of all listed scrips knocked down by a staggering Rs 48,223 crore after operators dumped their favourite ICE stocks in reaction to fresh margins and declining excise collections that raised new doubts about the economic recovery.

The 30-scrip index opened on a strong note at 4736.02 points and rose to a high of 4737.68. Later, across-the-board selling pushed it to its day’s low of 4344.51. It closed at 4372.22, down 285.23 points from last Friday’s close of 4657.55. Shareholder wealth, or market cap, shrunk to Rs 7,07,691 crore as against Friday’s figure of Rs 7,55,914 crore.

Yesterday’s favourites were shunned. Ranbaxy, for instance, earned the dubious distinction of hitting the enhanced 12 per cent circuit filter. Soon, infotech scrips joined it as they plumbed their permissible lows in quick succession.

HFCL, Digital, Global Telesystems, Wipro, Pentasoft, DSQ, Zee Telefilms were among the big ICE losers — trading in all of them had to be stopped to prevent further losses.

“Nobody in the markets had a clue to what happened today. I am still trying to understand,” said a bewildered Jayesh Sheth, director at Kantilal Chhaganlal Securities, a leading BSE brokerage.

Pradeep Verma of Skindia Finance blamed it on the wider price bands. “Increasing the circuit filter from 8 to 12 per cent did not work well for the market,” he said.

Some dealers said foreign funds like Morgan Stanley were major sellers, but this was not borne out of Sebi figures, which showed that net purchases by FIIs today were Rs 278 crore.

What then were the real causes of the selloff? A report — later denied —that the finance ministry has ordered investigations against some software firms created a bit of panic. Also, brokers said additional margins imposed by exchanges forced operators to unload their open positions.

“It will take a long time for retail investors to return,” Priya Agarwal of Triumph Securities said.

The slump occurred in spite of strong fundamentals, low badla charges and a fresh rise in the Nasdaq composite index. However, there some reports that excise collections declined in April, sparking fresh worries over whether the economic turnaround was sustainable. The drought in many parts of the country also weakened sentiment, as did reports of rising border tensions.

In the specified group, thirteen of the 120 losers were locked in their 12 per cent expanded circuit filters at the close. Only 18 scrips, including Raymond, P&G and Hindalco showed moderate gains.    


 
 
AIR-INDIA PILES UP RS 1000 CR LOSS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, May 2 
Air-India’s (A-I) accumulated losses have crossed Rs 1,014 crore after it closed the 1999-2000 fiscal with a loss of Rs 89.75 crore, the fifth consecutive year it has been in the red.

The national carrier’s financial strategists have estimated that it will end the current fiscal with a loss of over Rs 100 crore. Last year’s financial figures, which are still provisional, will be placed before the airline’s board soon after they have been finalised.

The airline lost out this year because of higher interest and depreciation costs, reduction in yield due to higher discounts, besides depreciation in the value of the rupee and high staff costs, officials said. The airline has one of the highest employees per aircraft ratio at 700 employees to an aeroplane.

It also ran up unexpected losses of about Rs 150 crore due to higher fuel costs and Rs 103 crore which had to be kept aside as a possible pay-out to Caribjet with whom the airline is locked in an arbitration case.

The airline had leased aircraft from Caribjet in a deal which led to huge losses and attracted adverse comments and strictures from government auditors.

The airline needs a Rs 1,000 crore capital infusion to wipe out its accumulated losses and to start life anew.

But the central government has refused to part with either this money or provide fresh loans to buy the badly needed long-range aircraft.

The Union cabinet had instead decided to bring in a private partner which it felt, would nurse the airline back to health.

The government is planning to dry lease ten aircraft to augment Air India’s ageing fleet, civil aviation minister Sharad Yadav told the Rajya Sabha today. The move would help the restructuring of the airline, the minister said.

Air-India currently has a fleet of just 26 planes and is unable to service many of the destinations to which it has flying rights, simply because it does not have any planes to fly to these cities.    


 
 
UB SPIRITS IN MCDOWELL BOTTLE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 2 
Initiating a long awaited restructuring process within the UB group, chairman Vijay Mallya today announced the consolidation and reorganisation of various group companies engaged in the spirits business into a single entity. Consequently, McDowell & Co Ltd and 6 others will be amalgamated to form a new flagship spirit company, McDowell Ltd.

The second stage of the restructuring, according to Mallya, would either be the “bifurcation or trifurcation of UB Ltd,” primarily resulting from the spin-off of its beer business. “We want to build focused spirits and beer companies,” he told newspersons here today.

Mallya added that UB’s other interests, such as investments and real estate, may be spun off into a separate entity. While UB holds an over 40 per cent equity stake in McDowell, it also has stakes in other companies, including Mangalore Chemicals and Fertilisers Ltd, Hoechst, UB Engineering, AgrEvo India among others.

Following the reorganisation of all the spirit companies, shareholders of McDowell & Co Ltd will receive one share in the new company, McDowell Ltd, for every one share held. Company officials added that the new firm will adopt accounting policies incorporating the best international practices with a view to move towards US GAAP over a couple of years.

Ravi Nedungadi, president & chief financial officer, UB group, told The Telegraph, that the reorganisation is expected to chart the course for an overseas listing. However, he disclosed that such a listing will be possible only after two years. Nedungadi added that McDowell has also appointed Deliotte to be its auditors as part of this effort.

Describing the process as “beginning on a clean slate,” Mallya stated that the group’s restructuring would be completed by December 2000. “We wanted to have a clean and new look for McDowell. With this, many of the stumbling blocks for an overseas listing have been removed,” he added.

The other spirit companies which are being amalgamated include Serampore Distillery and Chemicals Co Ltd, Vitari Distilleries Ltd, Udaipur Distillery, Mysore Wine Products, McDowell Properties and McDowell Spirits Ltd.

Apart from the advantage of consolidation, the turnover of the company is also expected to improve by about Rs 70 crore and in the process, McDowell will acquire capacities in Rajasthan and Madhya Pradesh, where it has had no distilling facilities of its own. In fact, capacity is expected to be enhanced by 2.3 million cases.

Regarding UB Ltd, company officials said that while the restructuring process would be finalised next fortnight, its efforts have been complicated due to taxation issues. However, they pointed out that the group was committed to clean up and divest non-core business within the company. Here, company circles hinted that UB may sell off its stake in companies such as Hoechst, AgrEvo India and MCF at a later date.

Meanwhile, McDowell & Co Ltd has posted a 33 per cent rise in net profits for the year ended March 2000. Net profit rose to Rs 25.21 crore from Rs 18.84 crore in the previous year. During the year, the company recorded a turnover of Rs 1100 crore, a rise of 21 per cent over that in the previous year.    


 
 
INFAR BUYS LAND FOR NEW UNIT 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, May 2 
Infar (India) Ltd, the subsidiary of Dutch pharmaceutical giant Akzo Nobel, is setting up a factory on the Kona Expressway in Howrah at an investment of Rs 75 crore.

Sources said the company has already acquired eight acres for this purpose near the new truck terminal at Kona, and plans to buy another three acres later at a total cost of Rs 5 crore.

“The factory will be fully operational in three years,” sources said. A senior technical executive from Organon Business Unit — Akzo’s formulations division — will arrive soon to oversee the setting up of this new factory.

Sources say the factory, the capacity of which is yet to be fixed, will make a host of new high-value formulations, besides its existing line of products.

The company plans to close down its factory at AJC Bose Road in Calcutta, which was taken over from Martin & Harris in 1973.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.64	HK $1	Rs 5.55*
UK £1	Rs 68.25	SW Fr 1	Rs 25.25*
Euro	Rs 39.76	Sing $1	Rs 25.15*
Yen 100	Rs 40.18	Aus $1	Rs 25.15*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4400	Gold Std (10 gm)	Rs 4350
Gold 22 carat	Rs 4155	Gold 22 carat	Rs 4025
Silver bar (Kg)	Rs 7800	Silver (Kg)	Rs 7915
Silver portion	Rs 7900	Silver portion	Rs 7920

Stock Indices

Sensex	4372.22	-285.33
BSE-100	2232.38	-163.84
S&P CNX Nifty	1333.45	-73.10
Calcutta	114.02	-6.95
Skindia GDR	NA	NA
   
 

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