Italcementi buys 50% in Zuari unit
Tisco stuns with 50% jump in net profit
Sebi wants tighter surveillance
Loan fears whip stocks
Deepak Atal quits as Rossell MD
Reliance ally acquires DCL Poly
Stock pileup to force 5-day shutdown at Batanagar
Foreign Exchange, Bullion, Stock Indices

 
 
ITALCEMENTI BUYS 50% IN ZUARI UNIT 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, May 17 
The K.K.Birla group-owned Zuari Industries has sold a 50 per cent stake in its Andhra Pradesh-based cement plant to European major Italcementi.

Ashish Guha of Lazard Capital, who advised Italcementi on the deal, said: “We can’t talk about the sale price.” Stock exchange officials, who were in the know about the deal, said “the cement unit is valued Rs 740 crore.”

Zuari has already spun off its cement division into a separate company in which a 50 per cent stake will now be held by Italcementi. The Italian firm has been trying to enter the Indian cement market for some time.

The Italcementi group has been making slow inroads into the Asian market with acquisitions in Thailand of Jalaprathan Cement in 1998 and Asian Cement in 1999. The deal with Zuari will now give it a toehold in the Indian cement market, the third largest in the world, in combination with a very important partner.

With a staff of about 18,000 people, the Italcementi group is an industrial group with a presence in 13 countries. The group activity is focused on cement and is integrated with ready-mixed concrete and aggregates activities.

In 1999, the Italcementi group had registered sales of 3,400 million euros, its operating income was 510 million euros, and its cash flow 541 millions euros.

With 57 cement plants, 165 quarries and 533 batching units, the Italcementi group is the largest European cement producer and one of the leaders in the world, with one of the most advanced technical and research centres.

When Zuari Industries Ltd spun off its 1.7 million tonne cement division into a separate company, the move was widely seen as a signal that it would either exit from the cement business or take on a partner in an industry which was getting increasingly competitive and witnessing a spate of mergers and acquisitions.

It was also seen as sign that the K K Birla promoted company would eventually concentrate on its core business which is fertilisers.

Consequent to this, the industry was rife with rumours of global cement giant Cemex SA De CV Mexico, the third largest cement company in the world leading the list of suitors. Apart from Cemex, other cement giants that were believed to be in the fray included Lafarge and Holderbank. Recently reports had also suggested that Ciments Francaise was also one of the suitors.

Zuari had recently completed a Rs 357 crore exercise in expanding the capacity of its cement unit from 500,000 tonnes per annum to around 1.7 million tonnes. The company’s core business was identified as fertilisers and it promoted Chambal Fertilizers.

Zuari made a foray into cement by taking over the cement division of its group company Texmaco. The transfer price that the engineering company Texmaco received was in the region of Rs 135 crore.    


 
 
TISCO STUNS WITH 50% JUMP IN NET PROFIT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 17 
Signalling a smart turnaround in its fortunes, Tata Iron and Steel Company (Tisco) today unveiled a better-than-expected 50 per cent surge in its net profit for 1999-2000 at Rs 422.59 crore. The gains came on the back of a 10 per cent increase in sales at Rs 6,890.87 crore.

Basking in the glow of the sparkling results, company managing director J J Irani told a press conference that better numbers were the result of cost reductions, value added items, higher productivity and firm international prices.

“Those who are efficient and controlled costs will survive in the steel industry. After the liberalisation of the economy, the cycle that exists in this industry the world over has started affecting us,” he said.

The annual turnaround was helped by a strong performance in the last quarter, facilitated by increased production at its hot-strip plant, seasonal increases in demand and buoyant international prices. An analyst affiliated to a local brokerage said the profits were higher than his forecast of Rs 350 crore.

According to him, much of the company’s problems in the past were rooted in domestic over-capacity, price cutting, increased administered costs of essential services such as power and railways, and the lack of government spending. He made it clear that his company would reduce the number of its workers to 48,000 by offering early separation schemes to 4,000 employees. Irani claimed that the 78,699 workers in 1993 has been brought down to 52,167 in 1999-2000. Tisco is planning to restructure its tubes business, but Irani denied there were plans to divest the business.

The board of the steel major met here today but decided not to recommend a final dividend given that a 40 per cent interim payout has already been announced earlier for 1999-2000.

The net profit includes an extra-ordinary income from the sale of net assets of the company’s cement division to Lafarge for Rs 125.26 crore and profits from the sale of long term investments worth Rs 10.22 crore, Tisco said in a statement.

The company incurred an extraordinary expense of Rs 157.99 crore on account of employee separation costs, up from Rs 115.46 crore last year. Similarly, interest costs were also high at Rs 359.96 crore as against Rs 301.56 crore in the previous year.

Production jumped 7 per cent to 32,62,000 tonnes while the volume of sales swelled 9 per cent to 32,10,000 tonnes.    


 
 
SEBI WANTS TIGHTER SURVEILLANCE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 17 
The Securities and Exchange Board of India (Sebi) has asked stock exchanges to tighten surveillance by strengthening their infrastructure, information systems and quality of monitoring to ensure that markets function in a fair and transparent manner.

At a meeting of the inter-exchange market surveillance group (ISG) here today, bourses decided to focus on investigations and follow-up measures in order of priority.

Also, the procedures of surveillance needs to be documented in a systematic manner to ensure transparency, objectivity and accountability in surveillance.

Sebi said in a statement that the staff strength for surveillance and monitoring was not adequate. Therefore, it has been decided that exchanges would immediately review their manpower resources and take steps to meet the shortfall.

The group also discussed the need for co-ordination among exchanges in the matter of surveillance and follow-up investigations. The functioning of the price-band mechanism and the recent relaxation of price bands by 4 per cent — beyond the 8 per cent that already exists — after a 30-minute cooloff.

Meanwhile, Sebi has asked the National Stock Exchange (NSE) to provide detailed information on its automated lending and borrowing mechanism (ALBM) scheme, to determine whether it is similar to the carry-forward system.

“We have asked the NSE to provide some qualitative and quantitative information on the scheme within a week, so that we can study the issue,” Sebi executive director Pratip Kar told reporters here today.

The Bombay Stock Exchange last week wrote to the regulator saying the NSE’s ALBM was similar to its erstwhile badla system called Chalu Upla. It argued that NSE’s scheme was nothing but carry forward trading bereft of additional margins and exposure limits.

On the other hand, the NSE claims its ALBM scheme, launched in February this year, under the Sebi Scheme on Securities Lending and Borrowing, 1997, was meant to facilitate sophisticated trading.    


 
 
LOAN FEARS WHIP STOCKS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 17 
It was a double whammy for the sensex today: Reports about border skirmishes and words of doubt from the finance minister about loans against shares.Though it closed a tad higher than Tuesday’s finish of 4230.13, the 30-scrip index gyrated in a massive 172-point range after it opened strong at 4306.01 points.

Apart from rumours about mounting Indo-Pak border tensions, finance minister Yashwant Sinha’s statements that a technical committee is being constituted to consider the banks’ role in capital markets in the wake of recent stock swings, triggered a selloff that sent the sensex to its intra-day low of 4195.19, before it closed higher at 4234.23.

Key ICE counters, and several old-economy stocks such as Dr Reddy’s, MTNL and Hindalco, were hammered. Analysts said the market had discounted the US Fed’s decision to hike interest rates by 50 basis points. So, that was not a mover today.

A few shares, including those of refineries, gained on continued buying by local institutions and funds. Satyam Computer clocked the highest turnover of Rs 498.69. It lost Rs 74 to close at Rs 2,900.

Infosys firmed up by Rs 63.25 to Rs 6993.25, Reliance by Rs 1.85 to Rs 318.85, Bajaj Auto by Rs 9 to Rs 359, Grasim by Rs 13.40 to Rs 236, HPCL by Rs 12.60 to Rs 125, NIIT by Rs 16 to Rs 1805 and Tisco by Rs 2.55 to Rs 105.

Zee Telefims declined by Rs 20.75 to Rs 501, Silverline by Rs 19.40 to Rs 375.60, Dr Reddy’s by Rs 10 to Rs 1345, Hindalco by Rs 20 to Rs 740, ITC by 3.95 to Rs 617.05, MTNL by Rs 3.85 to Rs 184.65 and Ranbaxy by Rs 14.90 to Rs 530.    


 
 
DEEPAK ATAL QUITS AS ROSSELL MD 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, May 17 
Deepak Atal has quit Rossell Industries Limited (RIL), which is in the process of being taken over by Unilever.

Atal joined Rossell as its managing director in April 1996. Before joining the company, he was associated with Duncans Industries for more than two decades, and became its whole-time director.

Senior Rossell officials confirmed the development and said H. S. Sidhu has taken charge as a whole-time director. The new board, comprising Unilever representatives, took control of the company on April 26.

However, the company is yet to get the approval from Foreign Investment Promotion Board (FIPB) to acquire up to 74 per cent of Rossell’s issued and subscribed capital. The 37,00,000 fully paid up shares of Jokai Tea Holdings of UK has been transferred to Unilever Overseas Holdings (UOH). Jokai’s holding in Rossell is 36.56 per cent. However, the remaining shares which belong to Y. K. Modi and his associates are yet to be transferred to UOH.

The company has already started consolidating its operations at the gardens, where operations are being computerised to obtain daily data. The accounts are being centralised at tea estates to monitor the garden-wise performance. Rossell has seven gardens within its fold, which employ about 4,000 people.

Sources said there are plans to shift Rossell’s office from its present address at Bally High on Ballygunje Park Road to Brooke House on Shakespeare Sarani. However, the officials refused to comment on the matter. There is a general apprehension among employees that Unilever may reduce staff strength at its registered office in Calcutta. But the company has not yet sounded its employees.

Rossell had produced 7.15 million kgs of tea in 1999. The production went down from the previous year’s 9.5 million kgs due to severe drought. The company also sold Koilamari tea estate, which produced around 1.5 million kgs of tea.    


 
 
RELIANCE ALLY ACQUIRES DCL POLY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 17 
Reliance Industries Ltd (RIL), through an associate company, has acquired DCL Polyesters Ltd (DCL) which will make it the fourth largest producer of polyester filament yarn (PFY) in the world.

Synergy Synthetics Pvt Ltd (SSPL), a business associate of the Ambani flagship, has agreed to acquire a 25 per cent stake in DCL from its promoters, the Rajus and associates. SSPL will thereafter make an open offer to buy another 20 per cent of DCL’s equity from the public and other shareholders through the tender method.

RIL officials did not divulge the price at which the stake is being picked up either from the Rajus or the public. In recent times, the DCL Polyester scrip is quoting below par on the Bombay Stock Exchange (BSE). The Rs 10 share closed at Rs 4.65 on the BSE today.

Terming the deal as an “arrangement of using the polyester capacity of DCL,” RIL said its PFY capacity would increase to 3.60 lakh tonnes from 3.20 lakh tonnes.

With the addition of DCL’s facilities, Reliance will become the fourth largest producer of PFY in the world. Its share in the local market is also slated to rise from 33 per cent to over 38 per cent.

Under the arrangement RIL will also supply the basic raw materials, purified terephthalic acid (PTA) and monoethylene glycol (MEG), for the entire capacity of DCL. This will obviously benefit Reliance’s fibre intermediates business.

For DCL, it marks an exit from an area where margins are consistently under pressure due to the strong presence of rivals such as RIL and Indo-Rama.

The DCL unit located at Mauda near Nagpur has a PFY capacity of 40,000 tonnes. Its manufacturing facilities are based on the technology licensed by EMS Inventa of Germany.

With this acquisition, Reliance said, it had reaffirmed its plans to emerge as the world’s top three polyester producers by doubling its capacity over the next three years. Reliance, had in the past, acquired polyester capacities of ICI (30,000 tonnes), India Polyfibres Ltd (24,000 tonnes of PSF), J K Corp (43,000 tonnes) and Raymond Synthetics (66,000 tonnes).

DCL Polyester, which was incorporated in 1986, adopted high speed direct spinning process using either PTA or DMT and MEG as raw materials with upgradation facilities to produce chips.    


 
 
STOCK PILEUP TO FORCE 5-DAY SHUTDOWN AT BATANAGAR 
 
 
BY RENU M R KAKKAR
 
Calcutta, May 17 
Bata India Ltd has decided to suspend production at its Batanagar factory from June 5 to June 9, due to an inventory build-up.

The management today informed its 6000 workers that Bata India has not been able to achieve 100 per cent of its sales targets in the retail and wholesale segments. While 89 per cent of the target was achieved in the retail segment, only 80 per cent of the target was met in the wholesale segment.

The management also said that the company was forced to take such a decision to avoid shouldering higher costs due to stockpiling. The closure itself would anyway cost the company up to Rs 18 million, they estimated.

The thirty Bata Mazdoor Union (BMU) executive committee members who met the management today have been promised that the workers will get their basic pay and DA for the days of the forced closure.

However, workers whose salaries are linked to the incentives earned on a piece rate basis are upset with the company. The BMU, which had a meeting with the local management to discuss the issue expressed its deep resentment. The union officials later told The Telegraph, “Bata’s decision is not fair and has spread panic amongst the workers as the management has been claiming that it has increased sales tremendously since Keith Weston took over as managing director. We recently signed a long-term wage agreement with the company, with a strong per capita productivity. The workers will have to suffer up to a 60-70 per cent wage loss due to the shutdown.”

The May-June period is the peak season for retailing school shoes and sandak for the monsoon.

The company normally begins to stockpile leather and other fashion shoes near the Pujas or the festival season. Since Batanagar traditionally produces both leather and canvas shoes, hence the company has taken a decision to include the unit in a prudent practice to avoid an inventory build-up.

The closure makes logical sense also since it has been clubbed with an annual leave from May 27 to June 4 when Batanagar is traditionally closed for summer. vacations.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.97	HK $1	Rs 5.55*
UK £1	Rs 65.59	SW Fr 1	Rs 25.20*
Euro	Rs 39.35	Sing $1	Rs 25.05*
Yen 100	Rs 40.12	Aus $1	Rs 24.75*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4440	Gold Std (10 gm)	Rs 4370
Gold 22 carat	Rs 4190	Gold 22 carat	Rs 4040
Silver bar (Kg)	Rs 7900	Silver (Kg)	Rs 7920
Silver portion	Rs 8000	Silver portion	Rs 7925

Stock Indices

Sensex	4234.23	+4.10
BSE-100	2111.49	-2.11
S&P CNX Nifty	1311.65	+4.80
Calcutta	115.28	+0.10
Skindia GDR	NA	NA
   
 

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