Move to tighten mega merger rules
Sensex closes below 4000 on bear onslaught
TataTotal gas terminal at Trombay looks bleak
IFB Fin faces RBI action
Litmus test for FII stake in insurance holding co
States fight dole-reform link
Compaq drive for ITC Infotech
Bazee bets on slew of alliances
Foreign Exchange, Bullion, Stock Indices

 
 
MOVE TO TIGHTEN MEGA MERGER RULES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 22 
The Raghavan committee on competition law policy has recommended mandatory pre-notification of mergers if the value of assets of the merged entity exceeds Rs 500 crore and if the merged entity belongs to a business group with assets worth more than Rs 2000 crore.

The nine-member committee which submitted its report to the government today feels that pre-notification of mergers above the specified threshold should be sufficient in the present economic milieu

The committee has taken the view that predatory pricing may be treated as an abuse only if it is indulged in by a dominant undertaking. The committee feels that lower prices charged by the firm may sometimes constitute a gain in social welfare for the consumers.

The committee recommended the establishment of a new authority — a 10-member Competition Commission of India (CCI) — to hear competition cases and the repeal

of the Monopolies and Restrictive Trade Practices (MRTP) Act. It also recommended winding up of the MRTP Commission and transfer of all pending cases to consumer courts and the CCI.

The chairperson of the CCI can be from any field with knowledge in international trade, commerce and complicated issues relating to trade. The maximum age limit of the chairperson can be 70 years and that of the members 65 years. The terms of the chairperson and members of CCI may be five years at a time. They can be removed from the office by the government only with the concurrence of the Supreme Court.

The committee suggests that the headquarters of CCI may be located in a metropolitan city other than Delhi. Two members of CCI will constitute the mergers commission.

The provisions relating to unfair trade practices need not figure in the Indian Competition Act as they are covered by the Consumer Protection Act, 1986, it said.

The committee felt that the agreements between firms have the potential of restricting competition. Most laws make a distinction between horizontal and vertical agreements between firms. Horizontal agreements refer to agreements among competitors and vertical agreements to an actual or potential relationship of buying or selling to each other. The committee is of the view that both these types of agreements should be covered by the competition law.

The committee has suggested that state monopolies, government procurement and foreign companies should be brought within the ambit of the competition law. The law should cover all consumers who purchase goods or services regardless of the purpose for which the purchase is made.

The Industries (Development and regulation) Act 1951 may no longer be necessary except for considerations arising from environmental protection and protection of national heritage monuments. The committee has further suggested there should be no reservation for the small scale sector of products which are on open general licence (OGL) for imports. There should be a progressive reduction and ultimate elimination of reservation of products for the small-scale industrial and handloom sectors.

The committee said the CCI will have the power to formulate its own rules and regulations to govern the procedures and conduct of its business and also its administration. It will have powers to impose fines and sentences of imprisonment, to award compensation and to review its own orders.

The trial before the CCI should be summary in nature. It will have limited powers of contempt. It will also have powers to review the orders of other regulatory authorities on the touchstone of competition. There will be a provision for advance ruling. The investigative and prosecutorial wings will be separate but headed jointly by the director general (investigation & prosecution). All complaints will be made only to CCI. The director general (investigation and prosecution) will only take up such cases referred to him by CCI. He will not have suo motu powers of investigation.    


 
 
SENSEX CLOSES BELOW 4000 ON BEAR ONSLAUGHT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 22 
Bears crawled out of the woodworks to maul technology shares today in a fresh assault that sentthe Bombay Stock Exchange (BSE) sensitive index tumbling 148.47 points to a 11-month low of 3920.18 points — much below the crucial psychological threshold of 4,000 points.

Bearing the brunt of the attack were the shares of infotech, communications and entertainment (ICE) firms, most of which were clobbered to their lowest level this year.

The selloff turned the market sentiment weak and set the tone for more losses during the day. The bear attack spread like wild fire, and by the time trading closed for the day, most of the sensex heavyweights such as Infosys, Zee Telefilms, Satyam Computer, Level and L&T had their values eroded substantially.

Beginning the day 90 points lower at 3978.54, the 30-share index first hit a high of 4015.38 in early-session trading. However, it closed at the day’s low of 3920.18 compared with Friday’s finish of 4068.65 in a sharp loss of 3.65 per cent.

Mirroring the convulsions on the BSE, other stock exchanges also displayed a bearish sentiment.

The NSE Nifty closed at 1230.20, down 37.80 points, while the Calcutta Stock Exchange index closed at 112.26 in a modest decline of 1.85 points.

The last three consecutive days of bear hammering has wiped out a staggering 314.05 points in value from the index. The sensex had dipped below 4,000 to close at 3901.73 on June 6 last year.

Market jitters also came from the weekend selloff on major American stock exchanges.On Friday, the Nasdaq Composite Index and the Dow Jones Industrial Average dropped by 148.31 and 150.43 points respectively, hitting market sentiment on bourses across the globe when they resumed trading today. In early Monday trading, the Nasdaq was off 113.98 points at 3276.42.

Significantly, the BSES scrip declined by Rs 10.15 at Rs 244.85 — it is still higher than Reliance’s the open offer price of Rs 234 per share. Reliance last week made an open offer to increase its stake by 20 per cent in the power company.

Of the 139 specified shares, 95 declined, 38 gained and six remained steady. Aptech, L&T and SSI Ltd closed at the lower end of the enlarged downward circuit filter of 12 per cent.    


 
 
TATATOTAL GAS TERMINAL AT TROMBAY LOOKS BLEAK 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, May 22 
The government is unlikely to favour the congested Trombay as location for a liquefied natural gas (LNG) terminal as proposed by TataTotal, a joint venture between Total of France and the House of Tatas.

Trombay is considered an environmentally hazardous location. The ministry of environment and forests is still sitting over the proposal and is unable to take a decision either way in the absence of several mandatory approvals from authorities such as Mumbai port Trust, Maharashtra Maritime Board, department of environment and Mumbai Metropolitan Regulatory Authority.

The proposed terminal, with an annual capacity of 3 million tonnes, gained some respectability with Gas Authority of India (GAIL) joining it. However, GAIL does not seem to have anticipated such problems which now look insurmountable. Trombay port area is part of the Mumbai Port Trust and is highly congested with Pirpao oil jetties and other industrial projects such as HPCL and BPCL refineries, RCF fertiliser plant ,Tata power plant, Bhaba Atomic Research Centre.

In view of the highly hazardous nature of plants in the area, the Mumbai Metropolitan Regulatory Authority issued a notification a couple of years ago not to set up new hazardous plants in Mumbai. The local environmental agency is worried about the domino effect of any serious accident in any of the facilities of the Trombay area. Mumbai port is one of the most congested ports in the world with large number of berths and all types of ships calling.

The traffic at Mumbai port is 50 million tonnes annually. Besides, this port also houses a large fleet of Indian naval ships which have to move at short notice on call of duty.    


 
 
IFB FIN FACES RBI ACTION 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, May 22 
The Reserve Bank of India (RBI) has initiated criminal proceedings against IFB Finance, a city-based non-banking financial company (NBFC), for not paying back its fixed depositors.

RBI sources said the NBFC had moved the Company Law Board seeking more time to repay its depositors. “The NBFC has failed to comply with the repayment schedule it had submitted to the CLB. Now the RBI has decided to initiate criminal proceedings against it,” a senior RBI official said. IFB Finance has been promoted by Bijon Nag of IFB Industries. Several efforts were made to reach Nag but he was not available for comment.

The RBI has adopted a two-fold strategy against errant NBFCs: first, it has decided to initiate criminal proceedings against those who fail to pay their depositors; second, it has started rejecting applications for certificates of registration of quite a considerable number of NBFCs.

The RBI had come out with specific norms for registration of NBFCs on January 9, 1997, where the central bank had categorically stated that to obtain a certificate of registration, NBFCs must have net-owned funds (NOF) of Rs 25 lakh. Those NBFCs that fell short of that stipulation were given three years to meet the criteria. The last date for attaining the stipulated NOF was January 9 this year. The RBI had also stated that the NBFCs should inform the bank before April 9 and also submit a balance sheet. Further, NBFCs which failed to attain the required NOF of Rs 25 lakh could apply for another extension.

About 36,000 NBFCs had applied for certificates of registration, out of which 13,000 alone were from the eastern region. Among these 13,000 NBFCs, 9,000 had an NOF below Rs 25 lakh. Only 300 NBFCs were able to attain an NOF of Rs 25 lakh by the January 9 deadline this year. Only 50 per cent of the 8,700 NBFCs had applied for an extension; the rest did not respond. “The same trend has emerged all over India,” senior officials of RBI said. The apex bank has issued a circular saying, “If the applicant company has not informed the bank within April 9 about its fulfilment of the required NOF and has also not applied for extension of time to fulfil such requirement then the bank is satisfied that the applicant company, having failed to comply with the statutory requirements does not qualify to have the certificate of registration applied for.”    


 
 
LITMUS TEST FOR FII STAKE IN INSURANCE HOLDING CO 
 
 
FROM NITHYA SUBRAMANIAN
 
New Delhi, May 22 
The government is planning a safety mechanism to prevent foreign insurance majors from picking up more than 26 per cent equity in their Indian ventures through a layered holding structure.

The strategy being planned is to allow foreign institutional investors (FIIs) other than those with interest in insurance to own stakes in the Indian partner in an insurance joint venture.

There are several FIIs like Prudential, Aegon and Royal & Sunalliance that invest in equity of companies besides being involved in insurance business. Others like Morgan Stanley operate only as FIIs.

Hence, the government may allow those FIIs which invest in equities only to retain their holding in the Indian partner, while others that have dual interests may be asked to give up their holdings in the Indian parent.

Sources in the insurance division of the finance ministry said, “We cannot ignore the presence of FIIs in various banks and other finance companies. Therefore, it is important that a distinction is made between those which have interest in insurance venture and those who do not. The insurance regulator is in the process of laying down clear guidelines on this matter.” The issue of FII holding has been a grey area because the Insurance Regulatory and Development Act (IRDA) permits only 26 per cent foreign equity in the insurance sector. If FIIs, which are involved in insurance business, are permitted to retain their stake in the Indian parent, the foreign equity in the insurance company could go beyond the stipulated 26 per cent.

“This would give the companies a backdoor route to increase its stake in the insurance company,” officials said. The change is being contemplated because there are several companies like HDFC, ICICI and others which have substantial FII holding and are planning to enter the insurance sector, officials said.

“It would be difficult for them to completely do away with the FII stake. Therefore there is need to take care of FII holding in such companies,” finance ministry officials added.

In this year’s budget, finance minister Yashwant Sinha had also raised the FII limit in any company from 30 per cent to 40 per cent to encourage inflow of foreign funds.

However in case of Indian subsidiaries of multinationals, foreign equity would be treated differently. The foreign equity component would be proportionately reduced to the foreign equity already held in the subsidiary.    


 
 
STATES FIGHT DOLE-REFORM LINK 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, May 22 
The inherent conflict within the country’s federal structure once again came to the fore today with the states vociferously opposing the central government’s move to link funds disbursement to fiscal reforms.

The states were up in arms against the Centre’s diktat that the disbursement of some Rs 11,000 crore, recommended by the Eleventh Finance Commission, be linked to their (states) progress in implementing the fiscal reforms.

“Most states were quite angry with this brazen attempt to dictate terms to them,” West Bengal finance minister Asim Dasgupta said after coming out of a meeting called by the Centre to discuss this very issue. He claimed that some two thirds of the states opposed the move.

Haryana finance minister Sampat Singh, whose party is an ally of the BJP, said “The Centre’s revenue deficit had grown at a more rapid pace (compared to states).”

He openly demanded that Centre’s fiscal reforms should be monitored first. Many other states echoed this view and some suggested a fund should be created out of central taxes from which both the states and Centre could draw depending on their track record in reforming their fiscal situation.

It was all very well to say that subsidies had to be cut but “it was not an easy task for the states, given their socio-political and economic peculiarities,” Singh added.

The Centre wants the extra money which the commission wants it to release to states to tide their current financial problems, be governed by strict monitoring of their attempts to reduce their fiscal deficit. In simple terms the Centre’s message is: If states don’t reduce their fiscal deficit, they don’t get money. And it wants this to be the norm from next year onwards.

To do this the Centre wants the states not only to agree to this monitoring regime but also to be covered by its planned fiscal responsibility Act which will set statutory caps on borrowings and expenditure of both the Centre and states.

But states point out that imposing such conditions on them went against the spirit of the Constitution. “Grants-in-aid under article 275 of the Constitution cannot be governed by conditions,” Dasgupta said and added, “We are totally opposed to this kind of linkage with IMF-World Bank (type) conditionalities.”    


 
 
COMPAQ DRIVE FOR ITC INFOTECH 
 
 
BY A STAFF REPORTER
 
Calcutta, May 22 
ITC’s long-awaited foray into the infotech sector today took a decisive turn when its subsidiary, ITC Infotech, signed a memorandum of understanding with Compaq India to jointly market e-business solutions aimed at manufacturing companies.

For ITC, the USP of the tie-up is to market a number of patented Compaq products in commodity dealings, distribution, stock management programme and hand-held technology for e-business solutions.

ITC, one of the old-economy war-horses but a relatively a late entrant in the new Net-driven economy, will concentrate only on the high-end of the market, ITC Infotech director and chief executive of ITC’s information systems division, Sanjay Verma, said here today.

Together, ITC and Compaq will synergise their competencies in marketing, sales and project execution for end-to-end software solutions. To avoid a clash of interests with other Compaq partners, the two companies have identified specific sectors such as fast moving consumer goods (FMCG), hospitality, paper and packaging, retail and commodity trading — virtually covering all the areas in which ITC has presence and experience.

The agreement, signed between Verma and Compaq India director of enterprise solutions and services, Kapil Jain, covers a wide range of business solutions in e-business, including those in related to supply chain and logistics management, enterprise applications, B2B, B2C and exchanges.

Replying to a question about the kind of customers who could pick up the products, Verma explained that the focus of the new alliance will be to tap those who prefer to replace their three to four-year-old processes with, faster higher-end technologies.

Jain said the alliance with ITC Infotech will help Compaq to ‘address the complete needs of customers, suppliers and dealers in all major manufacturing industries which are looking to deploy e-enabled solutions in industry and application domain areas’.

ITC Infotech, the London-based subsidiary of ITC, has also decided to upgrade its Calcutta Development Centre by doubling the number of its employees to 60 within a month and matching physical infrastructure of software tools, Verma said.

The synergy between ITC Infotech, a 100 per cent arm of the tobacco major, and ITC’s Information Systems Division offers competitive advantages in the global infotech business. ITC Infotech has offices in Milton Keynes (UK), and New Jersey (USA). It sells customised software development, tailored application packages, support and maintenance services, and infotech consultancy services.

ITC Infotech is also the business partner of Computer Associates, Damgaard, Lotus and Oracle. It provides software services to its international clients in Europe, America and the Far East.

The Bangalore-based Compaq India, established in 1994, sells products and services directly, and through a network of 350 marketing and service partners spread across the country.    


 
 
BAZEE BETS ON SLEW OF ALLIANCES 
 
 
FROM VIVEK NAIR
 
Mumbai, May 22 
The Mumbai-based internet auction business company, baazee.com India Pvt Ltd, is in discussions with a host of on-line and brick-n-mortar firms to expand the range of consumer products that can be bought and sold off the Web.

Baazee.com, the company’s portal that facilitates on-line auctions of products available at the website, covers 15 categories of products ranging from arts and antiques to travel.

Chief operating officer of bazee.com Jaspreet Bindra told The Telegraph that one of the business houses the company was talking to was retail chain Shoppers’ Stop. The company is also in negotiations with various vertical portals (vortals) catering to a diverse group of industries, such as automobiles and the construction, to launch an auction process.

Sources say while the arrangement with Shoppers’ Stop has not taken a final shape, they are clear that the partnership would not be limited to normal promotions, but will cover the auction of the retail chain’s products on the web.

Many vortals that now cater to either the automobile or the property industry only have listings — they have no auction processes. “Our tieup will enable them to conduct auctions,” sources said.

As part of a plan which seeks to give the business of the company a regional orientation, sources said the company is talking to several auction majors in Calcutta to give consumers a better deal.

baazee.com, says Bindra, is following a hub-and-spoke approach with centres like Mumbai, Bangalore, Delhi and Calcutta being promoted as the hubs. The company is expanding its presence in Calcutta and says it remains central to its overall scheme of operations. “Calcutta, where auctions are a common feature, is big attraction for us. Keeping that in mind, we are talking to certain auction houses,” Bindra said. He however, did not reveal the outcome of the discussions, saying they were in a preliminary stage.

baazee.com has a page-view of 1.5 million per month, it has grown from 4,000 products since its inception to over 35,000 products recently. Sources said the company has not charged its customers even though the portal has been a big success.

Bindra says that is because a ‘critical mass’ in terms of both products and users is yet to be built. Once it is achieved, the revenue model will consist of charging a listing fee for every product displayed on the site and an transaction fee which would be charged only for high-end products. The third revenue stream now being considered is that of advertising.

Baazee.com, started by Harvard Business School graduates Avnish Bajaj and Suvir Sugan, recently tied up $ 19 million in its third round of funding. This included investments to the tune of $ 11 million from global media magnate Rupert Murdoch. Prior to this funding, it had attracted a capital commitment of over Rs 17 crore from investors including Viventures , Chrysalis Capital, ICICI Venture, a Latin American firm, eVision Holdings and the L N Mittal Group.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.97	HK $1	Rs 5.55*
UK £1	Rs 65.38	SW Fr 1	Rs 25.00*
Euro	Rs 39.59	Sing $1	Rs 25.10*
Yen 100	Rs 41.05	Aus $1	Rs 24.65*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4415	Gold Std (10 gm)	Rs 4350
Gold 22 carat	Rs 4170	Gold 22 carat	Rs 4025
Silver bar (Kg)	Rs 7800	Silver (Kg)	Rs 7840
Silver portion	Rs 7900	Silver portion	Rs 7845

Stock Indices

Sensex	3920.18	-148.47
BSE-100	1928.23	-87.83
S&P CNX Nifty	1233.00	-35.00
Calcutta	112.26	-1.85
Skindia GDR	867.53	-43.81
   
 

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