Sensex rallies from sub-4000 level
Dutch giant buys out Advani stake in ORG-Marg
Essar Steel weighs cold rolling mill
Global oil majors vie for IOC Haldia contract
Escorts to exit Communications
Tough norms set for NBFC insurance foray
Court restraint on Sahara directors
Chambers favour Maruti selloff

 
 
SENSEX RALLIES FROM SUB-4000 LEVEL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 15 
The Bombay Stock Exchange (BSE) sensex today tumbled below the crucial 4,000-mark to 3912.95 but clawed back to close 105 points higher at 4212.53 in a roller-coaster session.

The 30-scrip index fluctuated by a massive 336 points before UTI, foreign funds and speculators covered their positions and triggered the turnaround. The smart recovery was not enough to drive away fears among operators who said the market was in for a long spell of volatility. There is growing speculation that the US Federal Reserve will hike interest rates on Tuesday in a move that could send stock markets across the globe into a tailspin.

Brokers say though the markets have discounted the hike, things could turn nastier if Fed governor Alan Greenspan raises rates by over 50 basis points. “The market expects Greenspan to raise rates by 50 basis points. That has been discounted. But, if he were to raise it above this level, then we would be heading for a freefall,” a trader said.

Another potential mover this week could be the announcement of Morgan Stanley’s weightage for India. There are growing expectations among brokers that the Fund will scale down its weightage for the country, even as it rates China as a better investment destination. “If Morgan Stanley were to reduce its India weightage, then the markets are certainly due for a massive pounding,” an analyst said.

The, there are mounting concerns over the domestic economy, especially the devastating drought in western India. Many fear this could stoke inflation and prevent the country from achieving the 6.5 to 7 per cent GDP growth forecast by RBI and the government. In such a scenario, some pessimistic traders say the sensex could even test 3450 levels.

Earlier in the day, the sensex opened sharply lower at 4024.66 due to heavy selling by domestic operators. The decline in values were the sharpest in the ICE shares with majors like Zee Telefilms locked in their lower-end circuit filters. The fear of a US rate hike drove the index down to the day’s low of 3912.95. Later, it flared up to its intra-day high of 4249.45 before closing at 4212.53 as against last Friday’s finish of 4107.14, netting a rise of 105.39 points or 2.57 per cent. This is the first time in 11 months that the sensex dipped below 4000-mark. It had touched a low of 3876.56 on June 16, 1999.

UTI is believed to have made purchases to the tune of Rs 200 crore. Operators were also seen enlarging their positions in line with short-covering on the NSE with low badla rates of about six per cent and a sharp fall in net outstandings, which stood at Rs 1,628 crore.

Zee Telefilms was the most actively traded scrip with a turnover of Rs 567.50 crore. The share gained Rs 45.20 to close at Rs 526.00.

On the CSE, a technical fault in its online trading system led to utter confusion and massive losses to brokers as transactions were concluded at Friday’s post closing rates. Normally a bid placed in the post closing session or for that matter in normal session also, if not executed on the same day, stands as automatically cancelled on the subsequent trading day. Those who had made bids for purchasing on Friday in the post closing session had to suffer huge losses as their bids were not cancelled.

The rupee also staged a turnaround after dipping below 44 against the dollar. It was rescued to 43.96/98 at the close by State Bank’s dollar sales after it plumbed 44.03/06 earlier in the session. The currency was still weaker by two paise over Friday’s finish of 43.94/96.    


 
 
DUTCH GIANT BUYS OUT ADVANI STAKE IN ORG-MARG 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 15 
VNU, the Dutch publishing company, today raised its stake in ORG-Marg, the country’s largest market research company, to 85.2 per cent after acquiring the 50.2 per cent stake held by the Advanis of the Business India group in a deal believed to be valued at $ 22 million. The remaining 14.8 per cent of ORG-MARG’s shareholding is controlled by the company’s chairman & CEO, K M S (Titoo) Ahluwalia, who will continue to head ORG.

The deal brings the curtain down on a bitter dispute between the promoters of the market research giant over the role of VNU which had a 35 per cent stake in the company. The crisis had reached a flashpoint when the two joint presidents of ORG-Marg, Ashok Das and Amit Roy, threatened to quit along with 21 other senior executives if the Business India group went ahead with its plans to bring in financial investors in place of VNU.

After today’s deal, the board of ORG-Marg is set to be restructured as both Ashok Advani and Rajkumar Advani have resigned. Titoo Ahluwalia told The Telegraph that the exact composition of ORG’s board would be decided after a board meeting to be held next week. Apart from Ahluwalia, other directors include marketing expert Shunu Sen, former head of the NCAER S L Rao, chartered accountant P R Khanna and noted psephologist Dorab Sopariwala.

Ahluwalia told this correspondent that with VNU consolidating its position, the company has framed ambitious expansion plans both in India and abroad. “We now have the technology, financial muscle and international network to deliver these plans,” he added.

The ORG-Marg chairman said the agency will now extend its consumer panel services to the urban areas as well. It will also start new services like database marketing which is a “big activity’’ for VNU internationally. Such a service will tell manufacturers of various products and services where to focus their marketing efforts based on the consumer profile.

The Business India group had formally pledged their 50.2 per cent stake against a loan worth $ 22 million, guaranteed by VNU three years ago. Last year, the two parties reached an agreement which prevented VNU from taking control of the Advani shareholding.    


 
 
ESSAR STEEL WEIGHS COLD ROLLING MILL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 15 
Essar Steel Ltd, the Ruias’ flagship is contemplating setting up a cold rolling mill (CRM) facility at its hot rolled coils (HRC) unit at Hazira in Gujarat.

Though developments on this front are only at a preliminary stage, the CRM unit is not only expected to bring about value addition in Essar Steel’s product portfolio, but also integrate the company’s domestic operations. Presently, the company has a CRM facility in Indonesia with a capacity of over 150,000 tonnes. In this regard, sources disclosed that Essar may import an entire CRM plant built by the Japanese firm Hitachi. Investment for the CRM unit is estimated to be at around Rs 200 crore.

The company has in the meantime hiked its HRC target for the current year to 2.4 million tonnes, largely through in-house technological innovation. Earlier, production stood at 2 million tonnes, which was subsequently enhanced to 2.2 million tonnes.

Briefing newspersons at its facility in Hazira, John Parker, director (operations), said that Phase II of the HRC expansion plan would see the capacity touching over 3 million tonnes.

Parker further added that the company was also contemplating setting up a fourth hot-briquetted iron (HBI) module which would drastically enhance steel production in the complex.

However, he added that the company was in a position to bring about a hike in production even without instituting the module, by incorporating certain innovations in the unit.

For the previous year, while the company’s HBI plant produced 1.6 million tonnes, the target is to hike production to 3 million tonnes either through the addition of the fourth module or implementing ‘the innovations,’ he added.

Parker also stated that while reputed consultancy firm Ernst & Young has valued Essar Steel’s intangible assets at over Rs 1,400 crore, the company is now benchmarking itself against world majors like Thyssen of Germany and the Holgen group of Holland. It will select one of these for being Essar’s benchmarking partners for all its downstream productions. He further said that with international prices of steel having recovered to around $ 330 per tonne for the current year, Essar Steel plans to export 50 per cent of its production.    


 
 
GLOBAL OIL MAJORS VIE FOR IOC HALDIA CONTRACT 
 
 
BY OUR SPECIAL CORRESPONDENT
 
Calcutta, May 15 
Chevron, Shell and Mobil are in the fray to bag the contract for providing technology to the Rs 1,450-crore hydro-cracker unit at Indian Oil Corporation’s (IOC) Haldia refinery.

The IOC board has already cleared the expansion of the refinery from 6 million tonnes to 7.5 million tonnes. Lurgi GMBH of Germany will soon submit a detailed project report (DPR).

This investment is part of the Rs 3,500 crore outlay that the company has earmarked for various projects aimed at augmenting the infrastructure and marketing network in Bengal. The investments will be made over a period of three years.

In specific terms, Rs 400 crore will be invested in strengthening the marketing network. In all, Rs 85 crore will be pumped into building 20 new retail outlets (petrol pumps), 7 jubilee retail outlets (petrol pumps with motel, dhaba, recreation centre, parking space for truckers), and also to modernise 17 retail outlets.

Of the 419 retail outlets that IOC now has in the state, thirty have been upgraded so far. The smart cards, which are now being used at the company’s petrol pumps in Delhi, will be introduced in the city this year.

IOC executive director (eastern region) M. C. Sachdeva told reporters today that his company will clear the entire 1.05 lakh waiting list in the state for LPG connections by December 31. The company has 219 Indane (LPG) distributors in the state, which cater to 18.01 lakh customers. Of them, 73 per cent have the facility of double cylinders.

IOC is investing in setting up a Rs 180-crore LNG-import facility at Haldia in association with Petronas.

It is also building LPG bottling plants at Raninagar and Malda with a capacity of 11 TMPA at a cost of Rs 64 crore.

The capacity of the Chandanagar bottling plant will be raised to 88 TMPA at an estimated cost of Rs 48.50 crore.

On the other hand, Rs 650 crore will be invested in pipelines of which Rs 472 crore will go into the 437-km Haldia- Barauni project expected to be completed by 2002.    


 
 
ESCORTS TO EXIT COMMUNICATIONS 
 
 
OUR BUREAU/AGENCIES
 
New Delhi, May 15 
The Escorts group has decided to sell off its entire holding in Escorts Communications Ltd (ECL) to Korean Chaebol LG’s communication arm — LG Information and Communication Ltd (LGIC) — over the next three months, ECL chief executive officer Rajan Swaroop said.

“We have decided to exit the venture and just concentrate on our other two telecom businesses — Hughes Escort Communications Ltd (HECL) and Escotel,” Swaroop said here today.

Though he refused to divulge financial details of the transaction, Swaroop said with this deal, Escorts would move out of the telecom hardware manufacturing business.

LG’s investment plans gain significance since Escorts Communications, a 100 per cent subsidiary of the Rs 3,200 crore Escorts group, had approached BIFR following a complete net worth erosion due to accumulated losses.

“Under ECL, Escorts was manufacturing PBX and rural automated exchanges. However, the company had eroded its net worth and came under the purview of the Board for Industrial and Financial Reconstruction (BIFR). But now, with the LG group company having already picked up close to a 49 per cent stake in the venture, the company has changed its product portfolio to include CDMA-based wireless in local loop (WiLL) equipment. Since that is LGIC’s proprietary technology, we feel that we would not have much to do there and hence have decided to move out of it,” he added.

Esconet, a 100 per cent subsidiary of Escorts, has tied up with Vistaar and i2 Technologies to develop automatrixindia.com, a B2B marketplace for the automotive industry.

Esconet also plans to invest about Rs 40 crore in other e-initiatives in healthcare, mobile services and in its internet service provider venture. Escorts will provide an initial equity of Rs 25 crore to its subsidiary.

The automatrixindia portal will cater to all trading requirements of original equipment manufacturers, suppliers, dealers, independent installers, logistics providers and banks.    


 
 
TOUGH NORMS SET FOR NBFC INSURANCE FORAY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 15 
The Reserve Bank of India (RBI) today prescribed tough norms for the entry of non-banking finance companies (NBFCs) into the insurance sector, stipulating a minimum of Rs 500 crore as the eligibility criteria for a joint venture participant.

Most of the NBFCs, barring a few like Kotak Mahindra, Sundaram Finance and HDFC, are unlikely to qualify for a licence under this provision.The RBI however added that any NBFC registered with the RBI and with net owned funds of Rs 5 crore, would be permitted to undertake the insurance business as agents of insurance companies. It said all NBFCs registered with the RBI which satisfy the eligibility criteria will be permitted to set up a joint venture company to undertake insurance business with risk participation.The maximum equity contribution such an NBFC can hold in the joint venture company will normally be 50 per cent of the paid-up capital of the insurance company.    


 
 
COURT RESTRAINT ON SAHARA DIRECTORS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, May 15 
The Delhi High Court today gave an ex-parte interim injunction against Sahara Airlines chief Subroto Roy, his brother J.B. Roy and Sahara Airlines’ director U.K. Bose, ordering them not to sell any of the personal assets they had listed as guarantees while leasing Boeing aircraft from PLM Transportation Equipment Corporation.

These directors had stood individual guarantees, undertaking to pay PLM Transportation Equipment Corporation, a US-based leasing company, in case of default in paying lease dues along with another Sahara group company, Sahara India Mass Communications.

Among the assets listed as guarantees were Sahara Airlines shares.

PLM counsel Ramji Srinivasan contended the guarantors had failed to pay a sum of $ 5 million despite various notices issued to the directors. He also argued that Sahara which had flown the aircraft for the last 5 years had deliberately failed to obtain Reserve Bank of India’s permission for the guarantees.

However, sources in Sahara Airlines said the airline could get the case struck down easily as PLM had already filed an international arbitration proceedings against it at San Francisco.

“Section 8 of the Indian Arbitration Act is very clear—you can’t fight a case on the same issue till the arbitration proceedings are over,” they said.

PLM has a long history of fighting legal battles to get back lease rentals from private airlines in India. It fought legal fights with East West, Damania and NEPC.    


 
 
CHAMBERS FAVOUR MARUTI SELLOFF 
 
 
FROM CHAITALI CHAKRAVARTY
 
New Delhi, May 15 
Little remains different between the country’s two top chambers when it comes to the divestment of government’s stake in Maruti, the country’s top car maker. Both Ficci and CII are on the same plane, echoing the same message: the government has no business making cars, hence it should sell out to whoever pays the highest — local or foreign.

Today, Ficci, the chamber known for its passionate espousal of all things swadeshi, shed its veneer and said it wants the government to sell its stake in Maruti to anybody who offers it a good deal. Rival CII has always maintained that the government should not be in the car business.

“The government should sell its shares to the highest payer, and if the company happens to be a foreign company, so be it. There are so many foreign car manufacturers in the country, the addition of one more will not make any difference to the industry,:” Ficci president G P Goenka said. Ficci is clear Maruti is a non-priority area for the government, and that its shares in the company should be put on the block.

The core group of secretaries which met here last week to discuss the divestment programme of the government postponed a decision on Maruti because the heavy industries ministry needed time till the auto policy is finalised. The panel, however, cleared the divestment proposals of some 15 public sector units, including Rashtriya Ispat Nigam Limited.

Ficci views on the Maruti divestment come at a time when its president, along with Nusli Wadia and Rajeev Chandreshekhar, has just submitted a report on PSU selloffs as members of the Prime Minister’s council on trade and industry.

The report has proposed that the government disinvest shares worth Rs 52,000 in the next two years. It wants process to begin with stronger PSUs to create an appetite for future offerings. One of its recipes of divestment suggest that government retain only 26 per cent in efficient companies which function in a competitive market and have low social obligations.

The swadeshi chamber had also lobbied the government openly to allow the import of second-hand cars. Goenka’s argument is that cars, like other items, should be imported freely. However, on this count, Ficci and CII were far apart. CII had opposed the policy tooth and nail on the grounds that it would sound a death-knell for the domestic industry. It fears global auto majors will offer used cars at bargain-basement prices and snare India’s price-conscious customers.    

 

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