FIs want JK, Thapars to sell assets
Tatas fail to make counter bid for BSES
Legal lacuna legitimises black money laundering
Technocrat may replace Vaish as DTS secretary
Binani plans flotation to raise Rs 60 cr
RBI, Centre at odds on SSI credit
Trading in derivatives begins
SEB as jobs protectorate
Lever coins new-age mantra for growth
Foreign Exchange, Bullion, Stock Indices

 
 
FIS WANT JK, THAPARS TO SELL ASSETS 
 
 
FROM NITHYA SUBRAMANIAN
 
New Delhi, June 9 
The financial institutions are planning to ask debt-ridden groups like JK, Thapar and Ranka-family promoted Modern to sell off some of their loss-laden units in order to revive the others.

IFCI officials said, “These groups have very large debts with the three financial institutions and we are jointly considering the option of asking them to sell off some of their businesses.”

“We will have to talk to the promoters and the other lenders before arriving at a final decision,” the officials added. “

Some promoters like the Thapars and the Singhanias have embarked on restructuring plans. So, we will have to analyse how far their plans have succeeded and how much debt they can service.”

P.V. Narasimham, chairman of Industrial Finance Corporation of India (IFCI), had recently suggested this option to reduce the high level of non-performing assets (NPAs) that the financial institutions had been saddled with.

“Talks with the promoters will begin soon and we hope that some units will be sold this year,” Narasimham had said.

These groups are basically involved in textiles, synthetic fibres and other businesses that have been hit by a downturn and show little signs of revival.

Bad loans to these groups by the three financial institutions — IFCI, Industrial Development Bank of India (IDBI) and Industrial Credit and Investment Corporation of India (ICICI) — have touched a whopping Rs 6000 crore.

The institutions also plan to identify other such groups and start negotiations with them soon.

The Modern group has been negotiating with financial institutions for the past two years to restructure its loans. Most of the Ranka-promoted companies which are involved in threads, synthetics, towels posted losses in 1998-99.

According to the last directors’ report, the group has been asking institutions to reschedule term loans, waive interest, and extend the redemption periods for preference shares.

Modern Syntex, the flagship company of the Ranka group, registered a turnover of Rs 611.4 crore in 1998-99 and registered a gross loss of Rs 52.4 crore.

In the case of JCT, the institutions are keen on concluding the sale of its synthetic fibre division at Hoshiarpur in Punjab.

The company had almost sold off the division to Indonesia-based Polysindo, but the deal did not take off.

“The company is now in talks with Reliance. If the sale goes through, a large portion of JCT’s Rs 1000 crore liabilities will be transferred,” said FI sources.

It has received approvals from 14 of the 43 creditors. In that event, the company will be left with only textiles and steel businesses. The FIs are also in favour of sale of JK Corp’s cement division or its conversion into a joint venture. The sellof will enable the company to pay off debts to FIs. The group has total debts of around Rs 1200 crore with banks and institutions. Even a partial sale of the cement division will yield close to Rs 500 crore, said sources.

This is the second attempt by JK to hive off its cement unit. Last year the company had roped in a foreign multinational, but talks fell through over the price.    


 
 
TATAS FAIL TO MAKE COUNTER BID FOR BSES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 9 
After all the hype about a corporate battle royale, it turned out to be damp squib as the Tatas failed to come up with the widely rumoured counter-bid for BSES, leaving the Ambani-owned Reliance Industries as the sole suitor for the Mumbai-based power utility.

Market circles said no competitive bids were received between the designated time of 10 am to 7 pm either at the office of the Securities and Exchange Board of India (Sebi) or the stock exchange. Thursday was the last day for filing a counter-bid to Reliance’s open offer to buy an additional 20 per cent of the shares at Rs 234 per share.

Sources said Reliance’s offer will now open next week and will remain valid for 30 days.

The house of Tatas continued to play coy throughout the day, refusing to confirm or deny the speculation surrounding an ambitious counter-bid for BSES.

With its offer now scheduled to open next week, a Reliance spokesperson refused to comment on any issues pertaining to its bid including the possibility of a revision of its offer price. “We cannot offer any comments as the legal rules do not permit us to do so on the eve of our open offer,” an official said. The market has been abuzz with talk that the Ambanis will raise their offer price, which has ratcheted up the BSES share price over the past few days.

On the BSE today, the BSES scrip was nearly locked at the upper circuit filter as it closed higher at Rs 322.20 after opening at Rs 302. Earlier in the day, the stock was frozen at Rs 328 as operators made a beeline for the stock in anticipation of a Tata counter-bid.

Even as the market was eagerly waiting for a Tata counter-bid, industry sources said although a takeover of BSES would have made immense sense for the Tatas, such a possibility was extremely limited as the Ambanis already own around 15 per cent in BSES.

Further, there is little possibility of the financial institutions offloading a substantial chunk of their 35 per cent holdings in BSES. In fact, one of the FI chiefs has already stated that institutions would prefer to retain 26 per cent in the power utility. With retail holdings in the company also low, it was believed that the Tatas would have to fork out over Rs 2,000 crore for a significant stake in BSES.

Reliance is now the single largest private sector shareholder in BSES, with an aggregate shareholding of 14.82 per cent of subscribed and fully paid-up equity share capital. BSES is one of the leading power companies of the country, and is engaged in the generation transmission and distribution of electricity. BSES is ranked among India’s top 20 companies in terms of net profits, and among the 30-35 top companies, based on other parameters.

It is also the largest power distribution company in India and holds an exclusive licence for the distribution of power in Mumbai which is valid till August 15, 2011.    


 
 
LEGAL LACUNA LEGITIMISES BLACK MONEY LAUNDERING 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, June 9 
If you have some black money stashed away abroad, this is the right time to launder it. From June 1 onwards, money laundering per se is no longer an offence and the situation will prevail till the government can get its act together and pass a suitable legislation.

Fera, the earlier law which dealt with foreign exchange violations as well as with money laundering offences, lapsed on June 1 and was replaced with the Foreign Exchange Management Act. But the Prevention of Money Laundering Bill, which is Fema’s twin , has yet to see the light of day. A select Rajya Sabha committee is still debating its provisions.

Top revenue officials admit that offenders can only be nabbed for the crime they committed in earning black money but not for laundering it during this period.

“Money laundering will become an offence only after the MLB is passed, not before,” officials admitted. Initially, when N.K.Singh was heading the revenue department as secretary, the government had planned to implement the two laws — Fema and MLB — simultaneously as soon as Fera was phased out.

But somewhere down the line, the tactics changed. And it decided either wittingly or unwittingly to rush through with the implementation of Fema without bothering about the legislation to prevent money laundering offences.

Although the Prevention of Money Laundering Bill has been criticised as being soft towards business interests, it will cover economic offences such as counterfeiting and forgery and money laundered out of proceeds of such crimes as terrorism, rebellion, culpable homicide, extortion, kidnapping, dacoity, forgery, counterfeiting, prostitution, offences under the Arms Act and the Narcotic Drugs and Psychotropic Substances Act and corruption by public servants only.    


 
 
TECHNOCRAT MAY REPLACE VAISH AS DTS SECRETARY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 9 
The ministry of communications today succumbed to the pressures of Indian Telecom Service (ITS) officers and proposed the name of N. R. Mokhariwale for the post of secretary of the department of telecom services (DTS).

If the proposal is accepted, he will replace Vinod Vaish, who is likely to be shifted as special secretary, department telecommunications (DoT).

Communications minister Ram Vilas Paswan today put the reshuffle proposal before Prime Minister Atal Behari Vajpayee. The decision on whether the changes have been cleared will be announced on Monday.

It now appears that the battle royale for the post of DTS secretary — which has so far been occupied by ITS officers but has always been eyed by the IAS lobby — has been won by the technocrats for the second time.

According to sources, Paswan is believed to have told the Prime minister that Mokhariwale, as the member (operations) of the Telecom Commission is dealing with all critical issues related to telecom and, therefore, has the right credentials for the job. The commission is the apex body in the communications ministry which takes key decisions.

Last year, officers of the ITS cadre had elbowed out IAS officers who were aspiring for the post out of contention. Now, the same lobby is backing appointment of Mokariwale to thwart a second attempt by the IAS brigade to snap up the job.

“The post requires a technical person, somebody who is familiar with the new set of emerging technologies. A technical man will not only take quick decisions but also would be able to present it to the ministers, highlighting the benefits of getting it through quickly,” ITSA president A. K. Sinha said.

“We have suspended our agitation till Monday. Since the communications minister has recommended our demands to the Prime Minister. However, if an ITS official does not get the full powers of a secretary, we will renew our agitation,” he added.

Last year, when the Cabinet’s appointments committee announced the appointment of Vaish, then special secretary in the ministry of environment and forests as the secretary of DTS, he was not allowed take up his new assignment.

This time, when he has spent about a week in this job, he is likely to be made a deputy to DoT secretary, Anil Kumar.

The communications minister is known to be in favour of having officials of the ITS head the DTS, and had unsuccessfully lobbied for the extension of two telecom officers — P. S. Saran, secretary DTS, and N.K Sinha, member (technology) — in the past. Both these officers retired on May 31.

However, this time around, Paswan is likely to convince the government that technocrats would be better equipped to run the DTS.

The newly created DTS is part of the Telecom Commission but has been carved out from what was an omnibus department of telecommunications (DoT) earlier.

The DTS offers fixed-phone services and various value-added services like cellular phones, paging and intelligent network services.    


 
 
BINANI PLANS FLOTATION TO RAISE RS 60 CR 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, June 9 
Binani Industries Ltd, the country’s only zinc manufacturer in the private sector, is planning to raise Rs 60 crore through preference shares.

The company’s board of directors will meet on June 29 to consider the proposal. The board will also discuss changes that may be required to be brought in the memorandum and articles of association.

While comfirming the development, the company spokesperson refused to say why the funds were being raised. Company sources, however, said the funds were needed to part finance the expansion of the zinc manufacturing capacity at the Ernakulam plant from the existing 30,000 tonnes. The Ernakulam plant began operation with a capacity of 20,000 tonnes per annum which was later expanded.

Sources said the company planned to raise the capacity to 40,000 tonnes. The official said 60 lakh shares of Rs 100 each would be issued aggregating to Rs 60 crore.

Binani Industries, which has a turnover of over Rs 350 crore, had earlier embarked on a massive business restructuring exercise to improve its core competence.

“The company had earlier diversified into cement and glass fibre. But the two divisions have been hived off into wholly-owned subsidiaries so that proper attention could be paid to every company,” the official explained.

Binani Cement, which is the wholly owned subsidiary of the company, is planning to raise the production capacity from 1.65 million tonnes per annum to 2 million tonnes at its plant in Rajasthan.

The cement plant has operated at more than 100 per cent utilisation in the recent months.

The growth in production and despatches was at 4.4 per cent and 8.5 per cent respectively. While the company is enthusiatic about its cement business, it is “open” to a joint venture option for another subsidiary, Goa Glass Fibre Ltd.

Sources said the glass fibre company, which was hived off from the Binani Industries a couple of years ago, was exporting most of its production. “The production capacity in this factory stands at 6000 tonnes per annum.    


 
 
RBI, CENTRE AT ODDS ON SSI CREDIT 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, June 9 
The Reserve Bank of India (RBI) and central government are at loggerheads over directing banks to allocate 50 per cent of their priority sector loans to the small units.

The central government wants banks to focus more sharply on small manufacturing companies. It has, therefore, been asking the apex bank to direct scheduled commercial banks to allocate half of their priority sector loans to this sector.

The Reserve Bank, on its part, has been unwilling to do so. It has argued that in a liberalised environment, it would hardly be appropriate for it to instruct banks on how to lend and whom to lend, other than on matters related to prudential norms.

As things stand now, the matter will be taken up at a high-level meeting to be conducted by S. P. Gupta, member, Planning Commission.

The existing RBI norms require banks to set aside 40 per cent of their total credit to the small scale and service sectors, agriculture and cottage industries. This was a provision framed by the RBI in the heydays of the Congress rule, an era when socialist considerations held sway over much of economic policy making.

Normally, banks hardly ever manage to achieve this limit. In 1998-99, all banks taken together lent only 33.5 per cent of their combined credit to the priority sector, with SSI firms accounting for just 14 per cent.

The industry ministry — which is believed to be behind the move to get more credit for SSIs — says even the 14 per cent of the total bank credit that was extended to SSIs, transporters cornered the bulk of the amount.

With more small scale units across the country losing money, banks have become wary of giving them more loans in the fear that a large portion of these will turn into NPAs.

Their contention is that transporters, for instance, need not avail of priority sector credit as they are prized customers for banks. Instead, they suggest that the money be devoted to small manufacturing firms which have been suffering the consequences of an unannounced credit squeeze’ for the past few years.    


 
 
TRADING IN DERIVATIVES BEGINS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 9 
The Bombay Stock Exchange today started trading in derivatives based on Sensex-based futures.

In a low key launch of the new financial product, the first trade of five contracts of the June series was transacted at 9.55 a.m. between Kaji & Maulik Securities Pvt Ltd and Emkay Share & Stock Brokers Ltd at the rate of 4755. The initial margin was kept at 10 per cent.

The first exchange-based financial derivatives product in the India was inaugurated by Prof J R Varma, member of Sebi and chairman of the committee responsible for the formulation of risk containment measures for the derivatives market.

Among the leading dignitaries present on the occasion were L K Singhvi and O P Gehrotra, senior executive directors at Sebi.

Under sensex futures, the exchange has offered six categories where traders can bet on one month futures (June), two months futures (July), three month futures (August) and three spread futures.

In the spread categories, which is (June-July, July-August & June-August), there was hardly any trade witnessed today with dealers saying that volumes will pick-up eventually as the concept becomes popular.

However, for the one month future contract (June) a volume of 50 trades was witnessed and the traded turnover was pegged at Rs 2 crore. It touched a high of 4820 and a low of 4720, during the day.

Only eight contracts were traded in the two month futures contract window, while the three-month futures saw two trades of a value of Rs 5 lakh traded today.

Varma hoped that more derivative products would be developed for the Indian market and said “index futures is just the beginning.”

“Sensex futures are the first derivative contracts in India, but, certainly, they will not be the last contracts in the segment,” Varma said. “We will see a variety of instruments launched in this segment in the near future.” BSE president Anand Rathi termed it a “ historical occasion for the Indian capital markets”

As the premier stock exchange, it has launched derivatives futures based on sensex, which was globally considered to be the benchmark index for the Indian capital market, he added.

In March, the government had repealed a three-decade-old legislation that ptohibiuted forweard trading in securities thereby removing the last hurdle to the introduction of derivatives.    


 
 
SEB AS JOBS PROTECTORATE 
 
 
BY RENU M R KAKKAR
 
Calcutta, June 9 
Power reforms in West Bengal have the potential of turning its State Electricity Board into an employment protection agency (EPA) even as it hives off its generation plants and other related assets to other agencies which have refused to induct any of Board’s 37,000 workers.

The Board’s total salary burden of about Rs 37 crore a month — 15 per cent of its total costs and lower than the national average of 19 per cent — is however enough to mire the entity in deep losses.

The reforms require WBSEB to give up two functions: thermal generation and distribution of power in rural areas. A 7000-strong workforce is in charge of the rural power distribution. Ideally, the entire workforce ought to have shifted to the West Bengal Rural Energy Development Corporation Ltd set-up last year. The new corporation in its eagerness to remain trim wants only 1700 of them, which it says it will pick and choose.

Only about 500 of the 1700 employees who were given the option chose to leave WBSEB and join the new organisation on similar salaries. Even the 500 who agreed have not yet joined as the state finance department is holding up an order that will enable the new corporation to create these posts.

WBSEB has been reduced to becoming a contractor for the new organisation. Its employees are doing the rural electrification corporation’s job on piece payment. They draw their salaries from the board whose balance sheet carries liabilities on account of rural distribution on its balance sheet.

The profile of the new corporation looks very smart on paper — about 10 senior members who includes consultants (retired SEB engineers), and an IAS officer as managing director.

The government’s initial estimates that 8,000-10,000 people will become surplus if the rural portfolio is hived off is way off base.

The Board will also be hiving off its two thermal plants at Bandel and Santaldih to the West Bengal Power Development Corporation Ltd (WBPDCL). Bandel has a workforce of about 1700 and Santaldih has 1600 and they will too be given the option to either stay with WBSEB or shift to WBPDCL.

An interesting indicator is what happened when the Kolaghat power station (after the first two units were commissioned) was hived off to WBPDCL. Employees did shift over but many came back even though the prospects for promotions were much better with the former. This will leave WBSEB to nurse the rest. Just about 5000 employees will retire over the next 3-5 years.    


 
 
LEVER COINS NEW-AGE MANTRA FOR GROWTH 
 
 
FROM SATISH JOHN
 
Mumbai, June 9 
Like all things in an age redefined by the internet revolution, consumers and their behaviour are changing like never before. For a company that likes to call itself the nation’s grocer, Hindustan Lever (HLL) is gazing at the crystal ball to see where buyers of a different generation will leave it.

As the country’s foremost fast moving consumer goods (FMCG) company, it has sketched the broad contours of a market in transition, a country where consumers will ask for global quality at local prices.

This has led it to nine growth drivers, many of which are rooted in the cataclysm of a society that places a premium on the quality as well as quantity. One of the most important trends Lever spots is a consumer who, unlike his predecessors who made self-denial a virtue, is ready to put his hands deeper into his pockets to buy something he feels will give him more pleasure and added convenience.

The company likes to call this syndrome ‘affordable indulgence’. The survey says this is a sign of the times, a result of changing values and higher incomes. However, the degree of shifts may vary across the affluent and the poorer sections.

Part of a wide survey conducted by the company, these trends have been gleaned from interactions with professionals across a wide spectrum. They included several eminent economists, social scientists, civil servants and experts in technology, infrastructure and business management.

The trends will form a part of a rigorous screening exercise aimed at selecting the nine growth businesses from a shortlist that stretches to nearly 200 items. The survey will help Lever devise plans to tap the burgeoning rural market, and launch initiatives that will help it make the best of the digital boom.

Another important point made by the survey is that all sections of the people will want ‘quality time’. Constraints on time will lead urban consumers to look for easy solutions, such as direct-to-home services.

According to the survey, the continuing migration of men will increase the drudgery of rural women, creating a demand for meaningful and engaging activities for them. Another key finding that will affect the way business is done is the growing awareness about health and vitality.

The survey predicts a surge in rural consumption as rising literacy and improved connectivity level aspirations across regions.

Globalisation is another factor. Consumers, says the survey, will demand global standards, but often at local prices. Last, but not the least, in significance is the prognosis that India will witness greater social disharmony.

The reason for this is that while aspirations become uniform, purchasing powers will not. Lever knows this is bad sociology, but more important, it is poor economics. Therefore, it plans to support government initiatives aimed at reducing socio-economic disparities.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 44.77	HK $1	Rs 5.65*
UK £1	Rs 67.48	SW Fr 1	Rs 26.95*
Euro	Rs 42.73	Sing $1	Rs 25.60*
Yen 100	Rs 41.99	Aus $1	Rs 25.95*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs 4570	Gold Std (10 gm)	Rs 4505
Gold 22 carat	Rs 4315	Gold 22 carat	Rs 4170
Silver bar (Kg)	Rs 7925	Silver (Kg)	Rs 7970
Silver portion	Rs 8025	Silver portion	Rs 7975

Stock Indices

Sensex	4729.63	+0.82
BSE-100	2330.14	-3.73
S&P CNX Nifty	1467.20	+3.55
Calcutta	127.17	+0.60
Skindia GDR	NA	NA
   
 

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