Token rise in US-64 payout at 13.75%
UTI weighs merger of seven equity schemes
Lever falters on split run, sensex jumps 96 points
Finance panel to be harsh on fiscal slippage
Bleak chances of bank pension rerun
IA to double Bangkok flights
Exports power software growth
Mesco group under CBI fire, MD held

 
 
TOKEN RISE IN US-64 PAYOUT AT 13.75% 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 3 
Unit Trust of India (UTI) today raised the dividend on its flagship scheme, US-64, by a niggardly 0.25 percentage point to 13.75 per cent but P S Subramanyam, the man who makes or unmakes many a fortune, said the returns handed by the country’s largest mutual fund rival those offered by similar financial instruments.

The July sale price of US-64 has been kept at Rs 13.50 per unit while the repurchase price will be Rs 13.20 — the levels at which they were pegged in July last year. Subramanyam said the payout — which many would consider niggardly — was driven by the objectives of a moderate dividend policy.

According to the chairman, what was creditable for UTI was the fact that the dividends would be paid entirely from its estimated net income of Rs 2597 crore for the year ended June 30. That income represents a return of more than 17.17 per cent on its outstanding unit capital.

The reserves of US-64 — which was bleeding not long ago before they were nursed back to health — have been provisionally estimated at over Rs 5,300 crore on June 30. Annual domestic and offshore sales during the year stood at Rs 16,445 crore. This was 96 per cent of the Rs 17,200-crore target. Domestic sales of units bettered the target by 1.3 per cent (excluding SUS-99). Measured against the aggregate figures of last year, sales increased by 6 per cent.

However, analysts are worried that good performance conceals the fact that UTI’s portfolios are steeped heavily in the shares of ICE sector — a result of the revamped investment policies.

“It is riding on the ICE wave. When the going gets tough, it will be hurt the most,” they warned. However, Subramanyam was confident about the bright prospects of these companies, and said UTI had stuck to the 25 per cent prudential limit for each sector.

The focus of US-64 on technology shares left very little for cyclicals, where the exposure shrunk to 10.08 per cent from 15.63 per cent last year. The UTI chief, however, said that this should not be read as an indication that the Trust had no interest in cyclical stocks.

A look at the investment mix shows that the lion’s share of the US-64 portfolio (32 per cent) is invested in ICE scrips; infotech shares alone account for 21.5 per cent, up from 5.5 per cent last year. Overall, UTI parked 68 per cent of its investible corpus in equity, down from 72 per cent last year; the rest was invested in debt.

Repurchases and redemptions fell 25 per cent at Rs 12,179 crore while net sales increased by 54 per cent to Rs 4266 crore in 1999-2000 from Rs 2776 crore.

The chairman said the Trust had regained the confidence of small investors.

“The mobilisation under US 64 was higher in the second half of the year with 60 per cent mopped up between between January and June.”    


 
 
UTI WEIGHS MERGER OF SEVEN EQUITY SCHEMES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 3 
The Unit Trust of India (UTI) is planning to merge seven open ended equity schemes into one umbrella scheme. This exercise is expected to bring in better direction and cost control.

The schemes proposed to be merged are, Masterplus-91, Mastergain-92, Mastergrowth-93, Grandmaster-93, PEF-95, UGS 2000 and UGS-5000.

Confirming the merger proposal, Brij Gopal Daga, executive director at UTI said, “The laborious exercise will take time as the unit-holders of the schemes will have to be informed and their approval sought, before embarking on it. We do not see this happening in the near future.”

As of today, UTI has 91 schemes with total assets under management pegged at around Rs 72,500 crore.

The mutual fund major is also waiting for the markets to further improve before going ahead with the proposal. The capital market has been informally apprised of the merger proposal.

During the year, UTI had rewarded unitholders of equity schemes by declaring dividend of 10 per cent in Grandmaster, 15 per cent in Mastergrowth. The rest have been average performers in the market.

In fact, sources in the industry have pointed out that the investment objectives of these funds are also identical to each other.

While, the investment objectives of Masterplus 1991 and Mastergain 1993 are to provide capital appreciation through equities and equity related instruments.

Except for Mastergrowth which differed slightly as it proposed investment up to 50 per cent of funds mobilised in the public sector undertaking stocks.

Launching its venture capital fund on a modest scale, the UTI collected Rs 24 crore from insurance majors, — the Life Insurance Corporation and the General Insurance Corporation.    


 
 
LEVER FALTERS ON SPLIT RUN, SENSEX JUMPS 96 POINTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 3 
The new Hindustan Lever (HLL) share with a face value of Re 1 opened for trading on the BSE today but ended on a weak note. The scrip plummeted to Rs 275.20 at the close compared with its previous adjusted finish of Rs 283.65 on Friday.

The fall disappointed marketmen, who had expected brisk buying in the scrip after it was split into smaller units. Expectations that the price of the scrip would increase had been building up for days, and operators thought the split would put the share within the reach of small investors. Hind Lever had announced the ten-for-one stock split by reducing the face value of its shares to Re 1 from Rs 10.

The share opened for trading at Rs 298 compared with Friday’s close of Rs 2836.35. It hit an intra-day low of Rs 272.25, before recovering marginally to finish at Rs 275.20. The losses suffered by Lever pruned some of the gains in the sensex, which surged 96.21 points to close at 4844.98.

Brokers said while both old-economy and new-economy stocks recorded gains, the driving force behind today’s rally was Friday’s upsurge in the Nasdaq Composite Index. Frontline infotech stocks were a big draw, helped in large part by the recent crop of good first-quarter results.

Foreign institutional investors (FIIs) were reported to have bought heavily in Infosys, NIIT, Satyam Computers, Wipro, NIIT and few others. In the old economy counters, BSES were in good demand. The interest was rekindled due to the fact that Reliance Industries raised the open offer for the Mumbai-based utility last week by Rs 16.20 to Rs 261.70.

FII withdrawal

Meanwhile, FIIs and mutual funds have pulled out Rs 1,323.49 crore from markets till June 29 by offloading their holdings. According to Sebi figures, mutual funds were net sellers to the tune of Rs 451.39 crore while FIIs sold Rs 872.1 crore more than they purchased.

Satyam Computers was the top traded scrip with a turnover of Rs 683.93 crore on a total volume of Rs 3848.50 crore. Other shares traded actively were HFCL (Rs 344.96 crore), Zee (Rs 327.57 crore), Reliance (Rs 307.30 crore) and Infosys (Rs 299.69 crore).    


 
 
FINANCE PANEL TO BE HARSH ON FISCAL SLIPPAGE 
 
 
FROM R. SASANKAN
 
New Delhi, July 3 
The Eleventh Finance Commission headed by A. M. Khusro will not reward states with sloppy fiscal scorecards while recommending the formula for allocation of grants to cover the shortfall between revenue receipts and expenditure — commonly referred to as the revenue gap.

The commission’s interim report had proposed that states be given Rs 11,000 crore as revenue-gap grants. The general budget for 2000-01 even set aside the money, but it could not be distributed in the absence of a formula for doing so. The government is now awaiting the commission’s final report, which was scheduled to be submitted on June 30.

According to official circles, President K.R.Narayanan has refused to give the commission more time to present its report, but has granted it a few more days on an informal basis to finish the job. The commission is now working overtime to complete the assignment in a week, or a little more.

However, Khusro and his team will get two more months to suggest ways in which the allocation of the grant can be linked to states’ fiscal reform programme — an additional area in which the commission was asked to look into. These set of proposals will not form a part of the main draft.

In the past, finance commissions assessed the revenue gap on the basis of actual revenue receipts and revenue expenditure. However, the Eleventh Finance Commission will do it on the basis of normative revenue receipts and normative revenue expenditure. The revenue gap calculated in this way will b such that it will not give incentives to states for inefficiency in mobilising revenues.

For instance, Uttar Pradesh’s actual revenue receipts are pegged at Rs 5000 crore while its revenue expenditure is Rs 10,000 crore. The revenue gap, therefore, is Rs 5000 crore. Under the normative approach adopted by the Finance Commission, normative revenue receipts are Rs 7000 crore while normative expenditure is Rs 8500 crore. This reduces the gap to only Rs 1500 crore, as against Rs 5000 crore based on actuals.

The commission recommended that the Rs 11,000 crore set aside for grants this year can be reduced gradually in future — something that was also recommended by the Tenth Finance Commission. It said states should be given Rs 4,500 crore in the first year, Rs 2541 crore in the second, Rs 777 crore in the third, Rs 259 crore in the fourth and nothing in the fifth year.

Official sources say the states in the south and west may not get the revenue-gap grants as most of them are fiscally sound. The beneficiaries will be those in the north and east such as UP, Bihar, Madhya Pradesh, Punjab, Rajasthan and Orissa.    


 
 
BLEAK CHANCES OF BANK PENSION RERUN 
 
 
FROM NITHYA SUBRAMANIAN
 
New Delhi, July 3 
The government is unlikely to agree to the demands of bank unions to revive the pension scheme for the employees who had not opted for the scheme earlier.

Public sector banks have indicated to the government that they do not have enough money to fund a pension scheme now. Employees could only opt for the contributory provident fund scheme till 1993 — the year in which a pension scheme was introduced in banks in for a brief period. About 50 per cent of the employees had signed up for it at that time.

However, unions have been demanding that the employees who could not avail of the pension scheme be given another chance. However, this plea, if granted, would benefit only those who had joined before 1993; those who came in after that year automatically availed of the pension scheme. The government had decided to reconsider the option early this year because it felt a voluntary retirement scheme (VRS) may not be a very attractive proposition for those who had opted for the provident fund scheme.

“Unions have been asking for the reintroduction of the pension option either to all employees of public sector banks or at least to those who opt for VRS. This would make the golden handshake scheme more attractive,” senior officials in the banking division of the finance ministry said.

The government had considered the suggestion earlier, but after consultations with various banks, the finance ministry appears to have accepted the argument put forward by banks that they do not have the money to fund what has clearly been accepted as an ‘expensive proposition’.

Officials said public sector banks would have to first raise resources to offer a voluntary retirement scheme to prune excess staff and embark on new initiatives in human resource management. This is an expensive proposition for banks as the government is unlikely to provide funds, they added.

The government, meanwhile, is planning to institutionalise human resource management in banks. It has recently set up a committee comprising members of the Indian Banks’ Association (IBA), finance ministry officials and a few bank chiefs, to chalk out a strategy. The committee, which has already met twice so far, is expected to submit its report by July 15. Banks have also been asked to submit details of their requirements of manpower to the finance ministry. They will base their projections on technological changes, new services and other business parameters. These reports will give the ministry the basis on which to formulate a long-term recruitment plan.    


 
 
IA TO DOUBLE BANGKOK FLIGHTS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, July 3 
Indian Airlines is planning to snap up Air-India’s unutilised bilaterals with Thailand and double the number of IA’s flights to Bangkok from a current six to 12 per week.

“We were concerned for a long time about the asymmetry in the south-east Asian market. Thai Air, SIA were taking away the bulk of Indian traffic to this market simply because we were not utilising the bilateral we had,” top civil aviation ministry officials said.

With Air-India straightjacketed due to a dwindling fleet, Indian Airlines has been asked to pick up the Thai gauntlet. “This had to be done because the Thais have managed to wrestle more capacity to and from India in the last bilateral,” the officials said.

Ministry officials admitted this might be repeated for other destinations too, especially in the south east Asia. “These bilaterals are with the government and not with A-I. So we have the option of giving away some of these only to other carriers operating under the Indian flag,” they said.

Currently, Indian Airlines and Air-India put together account for just about 30 per cent of the market to Bangkok. With Thai Air planning to hike capacities into India, this was slated to go down to about 20 per cent.

Indian Airlines’ executives said they planned to increase the number of Calcutta-Bangkok flights from four a week to six a week, routing one of the extra two flights via Singapore and the other via Yangon from next week.    


 
 
EXPORTS POWER SOFTWARE GROWTH 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 3 
Spurred by a 57 per cent growth in exports, the Indian infotech, software and services industry grew by over 53 per cent, earning a revenue of Rs 24,350 crore during 1999-2000, as against Rs 15,890 crore in the previous year.

Indian software exports grew by 57 per cent in rupee terms during the fiscal 1999-2000, fetching an annual revenue of $ 4 billion (Rs 17,150 crore) during 1999-2000, as against $ 2.65 billion (Rs 10,940 crore) during 1998-99, a National Association of Software and Service Companies (Nasscom) survey said.

In fact, software exports accounted for 10.5 per cent of the country’s total exports during 1999-2000, up from just over 2.5 per cent five years back. The survey observed that Indian software exports are expected to touch the $ 6.3 billion mark during 2000-01 and are slated to grow by more than 50 per cent next year to Rs 39,500 crore ($ 8.75 billion).

Dewang Mehta, president Nasscom said, “With the increase in the velocity of business, mushrooming demand of Indian software experts and continued government support, Indian software exports during 2000-01 are expected to grow unabated and can gross $ 6.3 billion during the current year.”

The domestic software industry grew by 53 per cent, earning a revenue of $ 5.7 billion during 1999-2000, up from $ 3.9 billion earned during 1998-99.

“One of the main strategies for the software industry in 2000-01 would be to move up the value chain and sow the seeds of e-commerce, web-based technologies and interactive integration,” Mehta said.

He added, “The strategy would involve increased overseas acquisition by Indian firms. We expect the Indian software industry to do more than $ 5 billion of overseas acquisitions in the next 12 months.”

During 1999-2000, about 37 software companies exported more than $ 25 million worth of software and services while 180 companies exported software worth $ 2.5 million.

The survey ranked Tata Consultancy Services (TCS) as the number one exporter with Rs 1820.35 crore worth of exports in 1999-2000. Wipro Technologies with Rs 1044.12 crore in exports was a distant second.

Other prominent exporters were Infosys Technologies, Satyam Computer Services, HCL Technologies, NIIT and Silverline Technologies.    


 
 
MESCO GROUP UNDER CBI FIRE, MD HELD 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 3 
The Central Bureau of Investigation (CBI) has arrested Rita Singh, managing director of the Mesco group of companies, on charges of forgery and falsification of accounts.

Singh was produced before a designated court on Saturday which remanded her to police custody till July 5.

The FIR submitted by the agency also named Rita Singh’s husband J.K. Singh and financial controller of the company Deepak Singh, who were arrested by the CBI on May 23, director of the Mesco group Natasha Singh and former company secretary S.S. Batra.

The CBI, which has been probing the Mesco group’s activities since 1997, has alleged that there had been misappropriation of money to the tune of over Rs 130 crore through the creation of fake accounts, besides cheating of the public by issuing false share certificates.

Besides the small investors, the agency also alleged that the group had indulged in cheating insurance companies, financial institutions, banks and shareholders to the tune of crores of rupees.

The CBI has alleged that Singh’s company Mideast India Ltd, had cheated United India Insurance Company to the tune of Rs 12 crore by submitting a false ‘no objection certificate’ (NOC) purportedly issued by the IFCI and obtained payments on the basis of fake NOCs.    

 

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