Trai, DoT square off for fresh battle
Drop in diesel sales presents growth paradox
$ 1.5mn seed capital for GKPL
Sensex loses 108 points on profit taking
Rediff targets $ 12 ADS price
Finance secy to meet bank chiefs on debt tribunals
SBI Bengal circle profit declines to Rs 99 crore
Govt to push strategic PSU sale

 
 
TRAI, DOT SQUARE OFF FOR FRESH BATTLE 
 
 
FROM M RAJENDRAN
 
New Delhi, June 1 
The Telecom Regulatory Authority of India (Trai) and the department of telecommunications, forever at loggerheads, appear to be squaring off for another skirmish on the issue of opening up national long distance (STD) services.

The fresh spat between the regulator and the country’s pre-eminent telecom operator started when Trai’s part-time member, Rakesh Mohan, shot off a note to DoT, raising objections to the restrictive entry norms and licensing conditions it proposed for private companies keen to offer STD services.

More important, Mohan has suggested that the new entrants should pay the same licence fee as the existing operators — DoT and MTNL.

However, DoT does not like this idea. It wants private players to bid for licences that would make them its competitor but does not wish to participate in the bidding process itself on the ground that it is already an existing player.

Mohan has argued in his note that India should have free-entry norms, as is the case in many European countries.

“The core of my disagreement is with the bidding procedure proposed to select the new licencees. The country has already suffered delays in telecom development due to the licence fee standoff. It would be highly undesirable to enter into another bidding war that results in over-bidding and then puts the development of entire sector in jeopardy,” Mohan says in his note.

He has argued in favour of unlimited entry for private operators in NLD services as opposed to DoT’s recommendations, which seek to limit the field to three operators. He says tough entry conditions will ensure that non-serious players stay out of this sector.

“DoT’s fear that too many entrants in this sector would lead to wasteful duplication of investment is unfounded. The pre-qualification conditions, the entry fee conditions and the proposed rollout programme are such that only a few national-level players are expected to enter,” Mohan says in his note.

While supporting unlimited entry of players in NLD, Mohan said all entrants should pay an entry fee of Rs 500 crore, of which Rs 200 crore will be non-refundable. The rest will be refunded after the launch of services.

To dispel the notion that free entry norms would lead to waste and inefficiency, Mohan points that even in countries where entry barriers are relatively low, it is rare to find more than a handful of national long-distance operators with a nationwide reach.

“I would like to propose that the revenue-sharing proportion should be specified and this should be the same for all licences, including those of the incumbent players,” he says.

“The revenue-sharing formula should have two components, one for the universal service obligation (USO) and the other to cover costs incurred on administrative (DoT), regulatory (Trai) and research and development. The indicative share for USO could be 5 per cent of the revenues, and for the others, about 1.5 per cent each.”

Supporting the opening up of internet telephony, Mohan has warned DoT that if conventional long-distance telephone services are made too expensive, consumers will find it difficult to resist the temptation of switching over to internet telephony given that it is already technologically feasible.    


 
 
DROP IN DIESEL SALES PRESENTS GROWTH PARADOX 
 
 
FROM R. SASANKAN
 
New Delhi, June 1 
Is the Indian economy slowing down? Certainly not, if the official figures about the performance of various sectors of the economy are to be believed. On the contrary, planners are even predicting a gross domestic product (GDP) growth of 7-8 per cent in the current fiscal.

The consumption of petroleum energy is a reliable yardstick to measure the health of the economy. It has been growing at the rate of over 7 per cent, and was expected increase at a faster rate this year. However, the consumption of high-speed diesel and furnace oil — two fuels directly linked to the pace of economic activity — has not grown. In April, it was down 4.3 per cent year on year. In February, it grew by 1.7 per cent and in March by 1.2 per cent. HSD accounts for nearly 45 per cent of the petroleum energy consumed in the country.

The price of diesel is controlled by the government and is sold exclusively through the public sector marketing companies such as IOC, BPCL, HPCL and IBP. Its exports, however, have been decanalised because the country has a surplus. There is no reason whatsoever why the consumption of HSD should slow down the way it has.

There are two interpretations to this: either the economy is slowing down or the market is getting diesel from sources other than what is supplied by the Oil Coordination Committee.

Government agencies say they are not aware of any unauthorised imports which could be destabilising the market. If that is the case, then there is something wrong somewhere, said a senior executive of an oil company. Could it be the turn of a diesel scam?

There is already a diesel glut in the market. Companies like Reliance Petroleum and some of the PSUs are producing far below their capacities because the government is not in a position to lift their entire production. Exports are not an easy option given that the government has refused to compensate oil companies for losses suffered in foreign markets.    


 
 
$ 1.5MN SEED CAPITAL FOR GKPL 
 
 
BY A STAFF REPORTER
 
Calcutta, June 1 
Global Knowledge Portals Pvt. Ltd, (GKPL) has been valued at over Rs 60 crore by the French investment banker BNP. GKPL, promoted by Derek O’Brien, has received $ 1.5 million

“seed capital” from the Singapore-based trading firm Kaybee.    


 
 
SENSEX LOSES 108 POINTS ON PROFIT TAKING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 1 
The Bombay Stock Exchange (BSE) sensex today surrendered the gains piled up this week by losing 108.14 points to close at 4325.67 after a bout of profit-taking by institutions and local operators ahead of the weekend.

Both new and old-economy stocks tumbled, but marketmen said cyclicals bore the brunt of the selloff, many of them hitting their lower-end circuit filters during the session.

“Stocks had notched up good gains in recent days. Today however, operators and institutions, which had bought these shares when they were available at lower prices, preferred to offload them and book large profits,” a broker said.

The intensity of the profit-taking could be gauged from the fact that 28 of the 30 shares in the sensex suffered reverses. The selloff in infotech stocks, however, was attributed to Wednesday’s 58-point loss in the Nasdaq Composite Index.

Himachal Futuristic (HFCL) was the top traded scrip with a turnover of Rs 500.69 crore on a total volume of Rs 3038.38 crore. The share jumped Rs 95.75 to close at Rs 1132.00.

After opening at lower levels, software scrips recovered at midsession on some buying, albeit in small lots, from foreign funds but could not sustain on selling by operators.

Bombay Dyeing was in good demand due to better-than- expected working results for 1999/2000.

Other big draws of the day were Satyam Computer, Infosys Technologies, Global Tele-Systems and Zee Telefilms.

Satyam Computer slumped by Rs 109.70 at Rs 2432.10, Infosys by Rs 23.20 at Rs 6966.80, Global Telesystems by Rs 17.10 at Rs 1006, Zee by Rs 14.10 at Rs 502.85, Grasim by Rs 11.90 at Rs 262, Lever by Rs 76.85 at Rs 2488.15 and ITC by Rs 27 at Rs 697.

Other losers were Mahindra & Mahindra which declined by Rs 29.95 at Rs 220.05, NIIT by Rs 120.65 at Rs 1850.60, Novartis by Rs 69 at Rs 778.20, and Reliance by Rs 4.70 at Rs 339.

Mirroring the trend, the BSE-30 share index opened lower at 4406.52 and moved in a restricted range of 4412.20 and 4321.26 before closing at 4325.47 as against yesterday’s close of 4433.61, recording a loss of 108.14 points or 2.44 per cent.    


 
 
REDIFF TARGETS $ 12 ADS PRICE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 1 
Rediff.com India Ltd, the country’s leading portal, has set a price range of $10-12 for its issue of $75 million American depository shares (ADS).

If everything goes as planned Rediff.com will be India’s first dotcom company to be listed on the Nasdaq. Satyam Infoway (Sify) was listed on the US bourse as an internet service provider (ISP). The proposed Nasdaq market symbol would be (REDF).

On the basis of $ 10-12 ADS issue price, the pre-issue valuation of the company works out to $ 500-600 million. The Nasdaq listing is being managed by an underwriting group led by Goldman, Sachs & Co and Credit Suisse First Boston, and Robert Fleming Inc as the two co-managers to the issue. Rediff has an accumulated loss of $8.3 million. Its advertising and services revenues spurted by 86 per cent to $ 1.47 million, while its e-commerce segment grew by a whopping 536 per cent to $ 441,000.

Merchant banking circles say that players in the Indian dotcom arena will be closely watching the progress of Rediff as the proposed listing follows the meltdown of dotcom shares on the Nasdaq.

In an application filed with the Securities and Exchange Commission of the US yesterday, the company said it would offer 4.6 million American depository shares, each representing half the Indian share (one Indian share equals two ADS), company officials said today.

Although the company had received approvals to raise foreign equity of $ 75 million (about Rs 330 crore) through ADS, including green-shoe option and ADR-linked employees’ stock options (ESOP), the company has mentioned that it would raise only $ 60 million, they said. The company’s shareholders include Draper India International, Intel Corporation, GE Capital Services, Citicorp Finance, and Pacific Century Cyberworks India.

Rediff.com’s website consists of interest specific channels, community features, local language editions, search capabilities and online shopping.Rediff’s monthly page views have grown from approximately 13.2 million in April 1999 to approximately 70 million in March 2000.

While internet usage is at an early stage in India, the industry expects rapid growth to come in the future. The International Data Corporation (IDC) has projected that the number of internet users in India will increase from 1.0 million in 1999 to over 17.2 million by 2004, which represents a compounded annual growth rate of 79 per cent.

Rediff expects rapid growth in India to come from Government of India’s promotion of internet kiosks in smaller towns and villages and the proliferation of Internet cafes, which are sometimes referred to as cybercafes. “We believe that our market opportunity also includes the global Indian community living outside India”, it said in the prospectus.

In its prospectus, Rediff says that it is well positioned to capture the growth opportunities of the internet in India. “Our breadth and depth of service offerings is complemented by our ability to innovate and meet the demands of our users. Our objective is to strengthen our position as the leading internet portal focusing on India and the global Indian community”, the prospectus said.

The proceeds from the issue will be used to develop content for its portal, advertising and brand promotion and strategic acquisitions.    


 
 
FINANCE SECY TO MEET BANK CHIEFS ON DEBT TRIBUNALS 
 
 
FROM NITHYA SUBRAMANIAN
 
New Delhi, June 1 
Finance secretary Devi Dayal will meet chiefs of top public sector banks next week to discuss means to improve the functioning of debt recovery tribunals (DRTs).

Banking division sources said, “The government and large banks are concerned about the slow recovery process and about the huge non-performing assets (NPAs). They are keen to improve the efficiency of the DRTs so that the NPAs can be brought down.”

The secretary is expected to meet chiefs of large public sector banks like the State Bank of India, Bank of Baroda, Punjab National Bank and some others.

This meeting follows finance minister Yashwant Sinha’s statement in Budget 2000 that an efficient and effective mechanism for the recovery bank dues was essential to reduce NPAs. The secretary is expected to discuss additional powers that can be vested with the tribunals to give them more teeth, besides deliberating on ways to increase their number. They are also expected to discuss the ills presently plaguing the DRTs.

The finance minister, had in his Budget speech, said that besides the 5 DRTs and the four debt recovery appellate tribunals already in existence, the government would set up four more DRTs in Mumbai and one each in the three other metros of Delhi, Calcutta and Chennai. “The banking chiefs are going to suggest ways to set up these additional DRTs,” said sources.

The DRTs are perceived to be lacking a proper enforcement mechanism to enforce their orders, as they do not have the power to sell the assets of the debtor company and forward the proceeds to the winding up court for distribution, said sources.

It is also felt that there is a need for more presiding officers in each tribunal, so that cases can be speedily expedited. Hence more officers need to be inducted, especially those with experience in finance and banking.Further, DRTs today look into small loan defaults as well as big ones. However, to make them more effective, the government may consider allowing DRTs to take up cases with a minimum recovery amount of a few crores.    


 
 
SBI BENGAL CIRCLE PROFIT DECLINES TO RS 99 CRORE 
 
 
BY OUR SPECIAL CORRESPONDENT
 
Calcutta, June 1 
State Bank of India’s (SBI) Bengal circle has recorded a 36.1 per cent decline in profit to Rs 99 crore in 1999-2000 from Rs 155 crore in the previous financial year. The fall has been blamed on a new transfer pricing policy followed in 13 circles under the SBI’s National Banking group.

Addressing a press conference here today, chief general manager S.K.Gupta said the bank is looking to increase the profit to Rs 170 crore this year. The growth will be driven by personal loans, including those made to the housing sector. At present, a whopping Rs 100 crore is earmarked for this segment.

The circle is intensifying the automation drive this year, adding 113 branches to its list of computerised branches. It also intends to increase the number of ATMs from 12 at present.

The projections of higher profit this year are based on the anticipated benefits of computerisation and an increase in its non-interest income, Gupta said.

“Profits dropped last year merely because of the transfer pricing. However, this year, advances are expected to grow by Rs 885 crore (Rs 602 crore last year) and deposits by Rs 2,900 crore (Rs 1962 crore),” he said.

However, the Bengal circle has not received fresh proposals to fund downstream projects in Haldia. Earlier, it invested Rs 600 crore in HPL and Mitsubishi Chemicals projects.

“We are interested in projects which will manufacture high-density bulk carriers, not plastic mugs and buckets. For that, a project like Haldia was not required. We have asked the government to give us proposals but there has been no progress,” Gupta said.

A thrust area for the bank will be retail banking, which at presents accounts for 97 per cent of its business. This will be expanded further by introducing services such as flexible banking hours, Sunday banking facilities and a larger number of personal banking branches.    


 
 
GOVT TO PUSH STRATEGIC PSU SALE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi,June 1 
The government is likely to go ahead with the strategic sale of public sector undertakings (PSUs) and plans to speed up the selloff mechanism to achieve the disinvestment target.

While it intends to continue with the current process of strategic sale, except in a few cases, the selection of partners will be based on their credibility and ability to add value to the company.

Disinvestment minister Arun Jaitley, said efforts would be made to reduce the time-frame of 12 months for the divestment of Air-India.

Further, he said that the decision to limit the foreign partner’s stake in the airline was taken to ensure that the prospective partner does not veto any special resolution regarding the company.

Last month, the Cabinet Committee on Disinvestment had approved divestment of up to 60 per cent of the government’s equity in Air-India, including the sale of 26 per cent to a foreign partner.

The government has already drawn up plans to divest its holding in 18 companies this fiscal. This includes selling its entire stake in Maruti Udyog, a 51 per cent in Balco and Vizag Steel Plant, 27 per cent in Videsh Sanchar Nigam Ltd (VSNL) and 100 per cent stake in Jessop & Co.

As of now, it has already taken a decision regarding disinvestment in two companies — Air-India and Hindustan Teleprinters Ltd.

In the case of A-I, the government has decided to offload up to 40 per cent to a strategic partner, and another 20 per cent to banks, financial institutions and its employees. Of the 40 per cent, a 26 per cent stake could be offloaded to a foreign company. In the case of Hindustan Teleprinters, the government will disinvest up to 74 per cent of its equity in the company.

The government wants to rake in some Rs 9,500-13,500 crore through the sales.

Besides Maruti, which will fetch the government about Rs 3000 crore, the real big ticket sale is likely to be that of an about 27 per cent stake in VSNL, from which it hopes to garner about Rs 1,500-3,500 crore.

Other gold mines in its kitty include HPCL from which the government expects to reap about Rs 1,200 crore and RINL from which it expects about Rs 1,000-1,200 crore.    

 

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