Govt sucks Rs 244 crore out of Balco
Govt to name 108 errant NBFCs
Sensex spurts 140 as ally gathers pace
17% higher revenue target for this fiscal
NHPC rules out merger with thermal twin
HSBC unveils India plan
SSI foreign investment hike before Cabinet
Haldia Petro in campaign mode
Foreign Exchange, Bullion, Stock Indices

 
 
GOVT SUCKS RS 244 CRORE OUT OF BALCO 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, May 5 
In a last-minute accounting sleight aimed at avoiding a fiscal embarrassment, Bharat Aluminium Company (Balco) was made to buy back half of the equity held by the government for a staggering Rs 244.43 crore.

That the deal was used to paper over a yawning fiscal deficit is evident in Cabinet notes prepared on the issue. These documents are candid enough to say that the move ‘will help meet expectations of the government towards disinvestment’.

The buyback was consummated on March 30, just two days before the end of the fiscal year, in indecent haste. This is a strong pointer to the desperation of a government trying to pad up its fiscal deficit, if only by a few hundred crores.

This devious method, performed in the twilight hours of a fiscal year which had been disappointing for the government, has fuelled fears that it will be repeated in the case of other PSUs this year.

“Public sector banks, which do not have capital adequacy problems but have sufficient reserves, will be allowed to buy back their shares from the government. Power and engineering majors like NTPC and Bhel can also be given this option,” a top finance ministry official said.

“The result could be a win-win situation for the companies and us. We get money while they (the PSUs) restructure their assets, increasing their earnings per share (EPS). A higher EPS will help them fetch better prices for their shares when these are sold in the open market,” the official added.

However, the ‘win-win’ expression is a rather benign description employed by fund-foraging mandarins to justify their jugglery. It hides the real costs to the company. For one, the Rs 900-crore Balco had a comfortable savings kitty of Rs 437 crore, almost as much as its total equity base of Rs 488 crore — an enviable situation for any company to be in.

The buyback, in one stroke, shrinks its reserves to Rs 193 crore, and pushes up its debt-equity ratio from just 4:96, before the money was siphoned out for the government’s shares, to 11:89 after the transaction.

This means the company will now have to borrow from the market for future expansion or modernisation, instead of .y dipping into its reserves. No doubt, its EPS, which was 1.6, will now go up to 3.2.

This might attract investors when they are given a chance to buy the company’s stock.

Having said that, it is clear that Balco is up for divestment soon. The Cabinet cleared the selloff last year despite opposition from Trinamool Congress leader and railway minister Mamata Banerjee. She argued that since Balco manufactures a secret alloy used in nuclear bombs and ballistic missiles, the government should not disinvest its shares in the company.

Others like Bhel, NTPC and several public sector banks are expected to come up before the Cabinet this year for possible selloff. Opposition to this move from the Opposition as well as from BJP’s allies is expected to mount. Against this backdrop, a stop-gap method to siphon away funds under the guise of capital restructuring is a tempting proposition. The actual selloff can proceed after the resistance peters out.

Bhel, for instance, has reserves worth Rs 3,320.48 crore and an equity base of 244.76 crore. Its Rs 10-share now sells for Rs 107, down from its 52-week high of Rs 350. The government could easily take out Rs 1,000 crore by asking the engineering giant to restructure its equity base and ‘improve EPS’.    


 
 
GOVT TO NAME 108 ERRANT NBFCS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 5 
In a bid to bring defaulting non-banking finance companies (NBFCs) to book, the department of company affairs (DCA) along with the Reserve Bank of India (RBI) will make public the list of names of about 108 defaulting NBFCs and their directors.

“After a meeting with RBI officials yesterday, a decision was taken to make public the list of 108 defaulting NBFCs, as part of precautionary measures and to increase public awareness about these companies,” DCA secretary P. L. Sanjeeva Reddy said at a conference organised by the Association of Certified Fraud Examiners.

The need to make the names public arose because a large number of NBFCs have been defaulting in repayment of fixed deposits even after the order passed by the Company Law Board (CLB), he said.

On whether the DCA has taken up the issue of more powers to the CLB with regard to repayment of fixed deposits of NBFCs, Reddy said the matter was being discussed with the RBI.

Reddy said that large sums have been siphoned off by the NBFCs, adding that various regulators like the RBI, DCA, CLB and the Securities and Exchange Board of India (Sebi) were looking into the matter.    


 
 
SENSEX SPURTS 140 AS ALLY GATHERS PACE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 5 
The Bombay Stock Exchange (BSE) sensex today closed at 4693.88 in a 139.96-point gain driven by renewed buying in the shares of infotech, communications, and entertainment (ICE) companies. The rally was broadbased with both local operators and foreign institutional investors (FIIs) making heavy purchases through the day.

The 30-share index opened firm at 4600.64 and gradually moved up to the day’s high of 4731.94 before ending at 4693.88, netting a sharp gain of 3.07 per cent over its previous finish.

FIIs made aggressive purchases and were reportedly net buyers in key scrips like Digital Equipment, HFCL, SSI, Global Tele, Satyam Computer, Infosys, Pentamedia, NIIT, Silverline and few others in the cash section.

The tax sops announced by the government caught the bears on the wrong foot. They were suddenly forced to cover their short positions and to cut losses. Also, several scrips entered the ‘no delivery period’, which allowed traders to postpone the payment or delivery.

The no-delivery position accentuates the situation in the market, dealers said. It has helped operators to take exposures once again in the no-delivery stocks from the ICE sector.

Domestic financial institutions also joined the buying, picking up stocks which have been generally neglected in the current rally. Shares like HDFC, which bucked the recent spell of selloffs and emerged unscathed, did a somersault and notched up sharp gains.

The rally notwithstanding , broking circles were wary about predicting about the course of the market, especially for technology, media and telecom sectors. This happened even in the face of buying interest and incentives showered on these industries.

The BSE today relaxed the circuit filter limits to 12 per cent in 91 instances. The additional four per cent lower circuit filter limit was relaxed in the case of three shares. Two shares were transacted at the 12 per cent lower price band.

Of the 90 gainers in the specified group, Digital Equipment, Global Telesystems, Himachal Futuristics, Satyam Computer, SSI, HCL Infosys, Silverline, Sun Pharma, and Bombay Dyeing were locked in their upper-end 12 per cent circuit filters at the close.

However, Grasim almost hits its lower price band. Other losers included Grasim, Indian Hotel, HPCL, BPCL, GACL and Cipla.

Satyam Computer flared up by Rs 350.75 at Rs 3274.05, Mahindra & Mahindra by Rs 29.80 at Rs 300, Dr Reddy’s Laboratories by Rs 56.90 at 1339.90, Lever by Rs 30 at Rs 2540 and Infosys Technologies by Rs 328 at Rs 8500.    


 
 
17% HIGHER REVENUE TARGET FOR THIS FISCAL 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 5 
Minister of state for finance, V Dhananjay Kumar today said the government has set a direct and indirect tax collection target of Rs 2,00,000 crore for this fiscal, a growth of over 17 per cent.

Elaborating on the break-up of the estimated tax collection for 2000-01, Kumar said that of the indirect tax collections of Rs 1,99,674 crore, excise and customs are expected to contribute Rs 1,27,569 crore, while direct taxes are expected to contribute Rs 72,105 crore.

He said excise collections are put at Rs 70,967 crore, customs Rs 53,572 crore and service tax at Rs 3,030 crore.

In direct taxes, corporate tax collections would be Rs 40,040 crore and personal income tax Rs 31,590 crore.

Estimating an overall growth rate of 17.37 per cent, he said direct tax collections would average around 25 per cent while indirect tax collections will be around 13.36 per cent. He added that this was contrary to the criticism of a fall in direct taxes, by opposition parties.

Kumar said the government would not spare any efforts to collect the mounting tax arrears which stood at Rs 55,000 crore.

According to the minister, healthy tax collections have been reported right at the beginning of the current fiscal. In April, the preliminary figures show that tax collections stood at Rs 7,410 crore, which was up by Rs 500 crore from Rs 6,920 crore collected in April last year. Direct tax collections were growing rapidly with the introduction of the one-by-six formula for the mandatory filing of tax returns, he added.    


 
 
NHPC RULES OUT MERGER WITH THERMAL TWIN 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 5 
The National Hydroelectric Power Corporation Ltd (NHPC) has effectively ruled out a merger with the National Thermal Power Corporation (NTPC), owing to the absence of any synergy between their operations,

Announcing the financial results of NHPC, chairman and managing director Yogendra Prasad said, “NHPC and NTPC cannot be merged as there is no synergy between functions of both the power PSUs.”

He also refuted that the Prime Minister’s Trade and Industry Council report has suggested the merger of the two.

“I have read the report, there is no mention of such a merger,” he said. However, when he was shown the report in which the council has suggested such an option, he claimed, “I have yet to see an official notification.”

The hydro power PSU is likely to re-evaluate the terms and conditions for setting up its proposed joint venture to undertake power projects in the North East and other areas.

NHPC has received proposals from 21 companies for setting up a joint venture. However, NHPC has been unable to take a decision because of the major demands from the private companies.

“Most of the private companies are keen on management control, which is not feasible since the government policy does not provide for a majority stake. A few companies specialising in the manufacture of equipment for hydro power projects wanted to be partners in the venture till the construction of the project. Many such problems were discussed at the board and we may have to change the terms of tender for the joint venture,” sources in NHPC said.

NHPC has recorded a 27.5 per cent jump in net profit during 1999-2000 at Rs 417.90 crore as against Rs 302.80 crore during last year.

PFC mopup plan

The Power Finance Corporation will raise $ 150-200 million by June through the external commercial borrowing (ECB) route.

PFC has received the quotations from three agencies and is in the process of evaluating them. The public sector power unit will take a decision on the agency for the ECB by next month.

Announcing this, chairman and managing director of PFC, Uddesh Kohli said, “The board’s decision will have to be put up before the ministry of power, which will be vetted by the finance ministry before we finalise the agency for the ECB.”    


 
 
HSBC UNVEILS INDIA PLAN 
 
 
BY OUR SPECIAL CORRESPONDENT
 
Calcutta, May 5 
The Hongkong and Shanghai Banking Corporation (HSBC) has drawn up a three-year India-specific strategic plan envisaging an increase in its credit card subscription to 1.5 million, spinning off its Rs 700 crore consumer loan business into a separate NBFC, including India in the first phase of internet banking and the launch of debit cards.

HSBC, with a balance-sheet of Rs 13,000 crore for India, is taking a relook at its network of 27 branches across nine cities and plans to increase the number of ATMs to 200 (from 70-75 at present) by 2003.

Addressing a press conference in the city on the launch of its fully integrated investment advisory and private banking services, ‘Private Clients’, Zarir J Cama, HSBC’s chief executive officer said the Calcutta market is expected to generate a business of Rs 100 crore in the first phase.    


 
 
SSI FOREIGN INVESTMENT HIKE BEFORE CABINET 
 
 
FROM NANDITA ROY
 
New Delhi, May 5 
The government is considering a move that may free the small-scale sector from the shackles of a system which restricts the flow of foreign investment.

The Group of Ministers (GoM), set up to review ceilings in different sectors, has decided to raise the foreign direct investment (FDI) cap in the SSI sector from 24 per cent to 49 per cent.

The views of the GoM have now been placed before the Cabinet. The government’s decision is expected to help the SSI sector survive in the absence of quantitative restrictions on imports.

The SSI sector, which would otherwise have been badly mauled in a post-QR regime, may now get a breather. The hike in FDI cap will enable them gain greater access to foreign technology and equity, as the 24 per cent cap on FDI was not enough to lure foreign investors to invest in an SSI unit.

Moreover, with an increased investment limit in plant and machinery, it has become necessary to modernise and upgrade technology. However, the amount of FDI attracted by a 49 per cent cap remains to be seen because most investors prefer majority control.

The contribution of the SSI sector to the GDP was 6.92 per cent and 6.71 per cent in 1997-98 and 1998-99 respectively. While exports from the SSI sector stood at Rs 44,442 crore in 1997-98 and Rs 48979 crore in 1998-99, the share of the sector to total exports was about 35.19 per cent and 34.59 per cent in the years 1997-98 and 1998-99 respectively.

According to industry ministry officials, of the 3 million SSI units registered under the Development Commissioner (excluding the cottage and handloom industries), nearly 97 per cent are tiny units who are unlikely to withstand the onslaught of competition once QRs are removed.

Already, over the last two years more than 80,000 units have closed shop, taking the number to an all time high of 4 lakh.

The SSI sector has repeatedly alleged that the sector is being choked by financial constraints like collateral requirements of banks, time taken by them to clear loan applications, high interest rates, and paperwork.    


 
 
HALDIA PETRO IN CAMPAIGN MODE 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, May 5 
Having failed to rope in a significant number of local investors in its downstream projects, Haldia Petrochemicals, along with the West Bengal Industrial Development Corporation and the Indian Chamber of Commerce, is now taking the presentation route to woo investment. It will make presentations to chambers of commerce across the country, the first time that the HPL management has decided to make such countrywide presentations for attracting investors.

To begin with, the HPL management will take the help of ICC’s countrywide counterparts. In Delhi, presentations will be made before members of the Federation of Indian Chamber of Commerce and Industry (Ficci). Similarly in Mumbai and Chennai, HPL will make a presentation before the members of the Mumbai Indian Chamber of Commerce and Southern Indian Chamber of Commerce respectively.

Confirming the development, Nazib Arif, secretary general of ICC said, “We are now firming up the dates with our counterparts so that we can make the presentation. ICC has asked both the HPL management and WBIDC to be ready with their presentations. A general awareness has to be created about HPL across the country. Unfortunately, in some parts of India people are not aware of the fact that HPL has already started production.”

IPCL had made such countrywide presentations for marketing its products some years back.

Top officials of WBIDC said that full-fledged production will begin by this month or early next month. HPL’s initial products will be ethylene, propylene, carbon black feedstock, HDPE and LLDPE (linear light density polyethylene).

HPL sources said that the company will undertake a major campaign for marketing its products in the south and west. The company also plans to export its products to Bangladesh.

“More importantly, HPL should get investors for downstream projects. With the glut of petro products in the domestic market, selling its produce in the domestic market is not a good idea,” industry watchers feel.

Industry sources said that there was hardly any investment in downstream units after the state government rolled back the incentive scheme. “The state government should have given the investors time to register themselves with the directorate of industries before rolling back the incentive. The absence of incentives has acted as a barrier to the downstream projects,” they said.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.64	HK $1	Rs 5.55*
UK Ł1	Rs 67.14	SW Fr 1	Rs 24.80*
Euro	Rs 39.16	Sing $1	Rs 25.05*
Yen 100	Rs 40.29	Aus $1	Rs 25.60*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4480	Gold Std (10 gm)	Rs 4480
Gold 22 carat	Rs 4230	Gold 22 carat	Rs 4025
Silver bar (Kg)	Rs 7875	Silver (Kg)	Rs 8000
Silver portion	Rs 7975	Silver portion	Rs 8005

Stock Indices

Sensex	4693.88	+139.96
BSE-100	2389.13	+87.87
S&P CNX Nifty	1422.40	+41.85
Calcutta	121.12	+3.14
Skindia GDR	NA	NA
   
 

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