Cash leash on day traders
Recast scheme for weak banks by month-end
HFCL buys Motorola’s Page Point at zero value
Export rider for big firms’ entry into SSI areas
Dr Reddy’s, Lever FDI proposals cleared
Thomas Cook eyes Travel Corporation
Modis add Spice to city cellular service
ITC dons the retail garb
3-day shutdown at Kidderpore

 
 
CASH LEASH ON DAY TRADERS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 13 
The Securities and Exchange Board of India (Sebi) today slapped margins on day traders — operators who try to square up their own positions within a day — to meet the threat posed by excessive stock market speculation.

It also raised the deposit margins on National Stock Exchange’s (NSE) stock-lending programme after rival bourses called for the measure on the grounds that it was similar to the carry-forward system. Sebi chief D R Mehta told reporters after a meeting of the risk management committee that the imposition of margins on retail trading was aimed at meeting the threat posed by the rising number of day traders.

The markets, though, saw the moves coming. The Bombay Stock Exchange (BSE) sensex hit 5058.90 points, but slid 83.48 points to close at 4880.80 after skittish operators dumped technology shares amid fears that the market regulator would discipline punters running up huge outstanding positions.

Reflecting the volatility, the 30-share sensitive index opened strong at 4994.92, propped up strong overnight gains on the Nasdaq before the rally took it past the magical 5000-mark to 5058.90. Mirroring the trend on the BSE, the NSE Nifty index closed at 1522.60, down a modest 10.75 points. A weak trend in stock markets across Japan, Hong Kong and Singapore is believed to have accentuated the downtrend.

It was the selling spree in infotech, communication and entertainment (ICE) shares by foreign institutional investors (FIIs) and domestic funds which precipitated the slide, and pulled down the sensex from its intra-day peak above 5000 points.

Later in the evening, Sebi said it had to raise margins on NSE’s automated lending and borrowing mechanism (ALBM) — which critics say is similar to BSE’s carry-forward facility — to address the mounting safety concerns. The capital market regulator imposed exposure limits and margins on the ALBM system only last week after a torrent of criticism from rival exchanges like BSE and CSE.

Mehta said the move should be seen as an attempt to reduce the risk of concentration in carry-forward positions. Currently, BSE imposes incremental carry forward margins both on exposure as a percentage of the outstanding capital of the company, and on absolute exposure value level.

Sebi officials said a combination of these two methods will be adopted to decide on the incremental margins for the ALBM system. For both the carry forward system and the stock-lending facilities, the margins will have to be paid entirely in cash or in the form of fixed deposit receipts or bank guarantees.

The new set of margins to be imposed on retail trade are over and above those currently being levied in the markets. “Any investor, except the institutional ones, will henceforth be required to shell out some kind of upfront margins,” senior executive director of Sebi, Pratip Kar, said.    


 
 
RECAST SCHEME FOR WEAK BANKS BY MONTH-END 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 13 
A restructuring package for weak banks that includes plans to recapitalise loss-laden ones and a legislation to set up financial reconstruction authorities (FRAs) for these banks is expected to be put together by the end of this month.

The plan would also incorporate a time-bound formula to liquidate non-performing assets, a voluntary retirement scheme, measures to strengthen the management of these banks and a modernisation programme for them, E.A.S. Sarma, secretary, economic affairs, told newspersons here today.

On the recapitalisation of identified weak banks, Sarma refused to spell out the exact source of the funds. It could be either out of budgetary resources or otherwise, he said. “We are yet to reach a conclusion on this issue.”

The legislation to set up FRAs was being worked out by the Reserve Bank of India and it would be ready soon, he added.

The government has already identified Indian Bank, Uco Bank and United Bank of India (UBI) as weak banks. While Uco Bank had a gross NPA as a percentage of gross assets of about 23 per cent as on March 31, 1999, UBI’s NPA level stood at 32 per cent and Indian Bank’s around 39 per cent.

The government’s decision to restructure these banks comes after a highly publicised and much criticised study by the Confederation of Indian Industry (CII) to close these banks. The recommendations had drawn flak from both the ruling BJP-led coalition and the opposition Left parties.

Sarma said a voluntary retirement scheme for other banks is also being readied as “staff costs were extremely high for most banks.” He, however, added that the scheme would not be funded out of budgetary resources and said bonds or other methods would be worked out for that purpose.

He indicated that the government was keen on restructuring the Unit Trust of India (UTI) and was awaiting the report of the Malegaon committee which had been set up by the UTI to work out the modalities for this.

Sarma also said a draft report on the fiscal responsibility Act has already been submitted to finance minister Yashwant Sinha. The draft report calls for for transparency in the budget making process and the government’s commitment for a 3-5 year medium-term fiscal plan to prune revenue and fiscal deficits.    


 
 
HFCL BUYS MOTOROLA’S PAGE POINT AT ZERO VALUE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 13 
Himachal Futuristic Communications Ltd (HFCL) today acquired Motorola’s paging venture Page Point at zero value with a liability of Rs 4 crore and reserves of Rs 30 crore.

Deepak Malhotra, managing director of Page Point, said, “HFCL is a leading player in the paging business with presence in seven major cities in the country. This acquisition has not only doubled the subscriber base but also reiterates the company’s commitment to the paging industry.”

Motorola, along with its Indian partner, invested Rs 125 crore in Page Point. The company has a subscriber base of over 90,000 and registered a cash profit of Rs 7 crore. Motorola has been planning to get out of the operation business as part of its worldwide strategy. With this acquisition, HFCL has become the largest paging operator in India with close to 2 lakh subscribers.

“The company is bound to benefit since we have reached the critical mass in one stroke. This assures profit,” said Mahendra Nahata, group chairman of HFCL.

HFCL has expanded its footprint in paging operations in south and west. It offers paging services under the PageLink and Page Point brand names in several cities.    


 
 
EXPORT RIDER FOR BIG FIRMS’ ENTRY INTO SSI AREAS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July, 13 
In a move which is sure to raise the ire of the Swadeshi protagonists, a high level group on small scale enterprises has recommended virtual dereservation of the small scale sector.

It has recommended that large scale industry be allowed entry into all small scale sectors provided they agree to export up to 30 per cent of their output within three years. It also seeks to hike the stake level which large companies can acquire in SSI units. According to the recommendations, large enterprises can take stakes between 24 per cent to 49 per cent, just 2 per cent short of total control, in the SSI units. They can encourage foreign direct investment in the sector.

The recommendations will be discussed next week by a group of ministers headed by Union home minister L. K. Advani.

It is also likely to be discussed during the meeting of Union finance minister Yashwant Sinha with the RSS and the Swadeshi Jagran Manch leaders slated for next Monday.

The Swadeshi leaders have been accusing the BJP government of betraying their cause and sacrificing “national interests at the alter of globalisation and big business.”

The controversial recommendations are likely to draw flak from within the ruling coalition and the Congress and Left parties as well.

However, officials argue they are a necessity as per the World Trade Organisation (WTO) brokered treaties to which India is a signatory. The treaty will be applicable from April 2001.

Under this treaty the entire market, including the products now exclusively reserved for SSIs, will be thrown open to competition from foreign imports.

The SSI report prepared by a team headed by member, Planning Commission S. P. Gupta, who is otherwise considered to be close to the ‘Swadeshi’ brand of economists, calls for a 33 per cent reservation in government purchase of SSI products.

Gupta contends, this is in line with WTO regulations and is similar to what the US government follows. The group also wants the government to continue with a policy of 15 per cent price preference for SSI units.

The plan panel member, who enjoys the status of a minister of state in the BJP government, also sought total de-reservation of some selected export thrust items.    


 
 
DR REDDY’S, LEVER FDI PROPOSALS CLEARED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 13 
The government today cleared 45 foreign direct investment proposals aggregating about Rs 1,465 crore including Dr Reddy’s Laboratories, Bakreshwar Power and Hindustan Lever.

Dr Reddy’s Laboratories has received clearance for bringing in foreign investment of Rs 880 crores to set up a 100 per cent overseas-owned unit for pharmaceutical intermediaries.

The government has allowed Hindustan Lever to increase the foreign holding from 51 per cent to 51.57 per cent consequent to amalgamation of remaining Brooke Bond Lipton India Ltd with the fast moving consumer goods major. This amalgamation did not involve any fresh equity inflow.

Bakershwar Power Generation Company’s proposal to bring in a foreign investment of Rs 325.4 crore to take a 60 per cent stake in the company was also approved by the government today.

UK-based Powergen’s proposal to increase its stake in Gujarat Powergen Energy Corporation Ltd to 88 per cent from present 74.11 per cent by investing Rs 101.12 crore has been approved.

Other foreign direct investment proposals cleared include those of HDFC Securities, Pacific Convergence, Egis France and Obayashi Corporation.

HDFC Securities has been allowed to bring in overseas investment worth Rs 40 crore by offering 28.5 per cent to a foreign partner. The company will offer brokerage services through the internet and other channels.

Obayashi Corporation got the nod to raise stake in its consulting firm in India to 100 per cent from the current 80 per cent. The company undertakes engineering, consulting, designing and maintenance of all kinds of construction and heavy construction projects.    


 
 
THOMAS COOK EYES TRAVEL CORPORATION 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 13 
In line with the consolidation phase in the travel industry, Thomas Cook (India) Ltd, the Rs 75-crore financial and travel company, has initiated talks with Travel Corporation (India) Ltd (TCI) for a possible “tieup/acquisition” of the latter.

The move will help Thomas Cook (which is strong in the forex business) strengthen its foothold in all the three segments of the travel business—outbound, inbound and corporate travel—company officials told The Telegraph. The good brand identity of TCI and its strengths in inbound tourism market would not only expand Thomas Cook’s business but also give it a wider reach in terms of infrastructure, officials said.

While the buyout proposal has been put forward to the Thomas Cook board, approvals from regulators and shareholders would be sought after a due diligence. As per an understanding reached between both the companies, TCI brand would continue to have its identity. A decision on whether it should be retained would be taken only after the acquisition process is completed.

The management of TCI operations would continue to be in the hands of the Katgara group. Thomas Cook claims the combined turnover of the existing travel and tourism business, excluding foreign exchange, will make the entity the largest tour operator in India.    


 
 
MODIS ADD SPICE TO CITY CELLULAR SERVICE 
 
 
BY A STAFF REPORTER
 
Calcutta, July 13 
ModiCorp and associates have renamed cellular service provider Modi Telstra as Spice Telecom after buying out the Australian telecom giant Telstra’s 49 per cent stake in the joint venture.

Making this announcement here today, Dilip Modi, chairman of Spice Cell Ltd, said the company will invest Rs 40 crore to further develop the network. From this corpus, Rs 5 crore will be invested to build the Spice brand in Calcutta. The brand is being launched in the city today.

According to Modi, Spice is the market leader in both Karnataka and Punjab with a subscriber base of 2,00,000. With the inclusion of Calcutta, this figure has gone up to 2,65,000. “Spice is poised for huge growth with an expected customer base of over 3,00,000 nationally by the year-end and over 7,00,000 in the next three years,” Modi added.

Previously 51 per cent of Modi Telstra was held by Modicorp, Distacom of Hong Kong and financial investor AIG Asian Infrastructure Fund and the remaining 49 per cent by Telstra. Now Spice Cell has taken over this 49 per cent.

Spice Cell, which is a subsidiary of ModiCorp, is partnered by Distacom and AIG Asian Infrastructure. With the acquisition of Telstra’s 49 per cent by Spice Cell, the shareholding pattern in erstwhile Modi Telstra will undergo a change.

Modi said the stakes of the shareholders were still being worked out. The paid-up equity of the company is Rs 133 crore.

Spice Communications which operates in the Karnataka and Punjab circles will be merged with Spice Cell so as to consolidate the mobile phone operations, Modi added. A chief executive for Spice Cell will be appointed within next two month’s time.    


 
 
ITC DONS THE RETAIL GARB 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 13 
ITC Limited today broke into the apparels business with the launch of its ‘Wills Sport’ brand of leisure wear.

The company plans to start by opening 25 stores in cities and towns which have a population of over a million, but wants to increase the number to 100 within three years. While some of these would be directly owned by ITC, others would be launched with associates in a franchise arrangement.

Of the Rs 250 crore earmarked for the expansion of the garments business, ITC’s direct investment will be close to Rs 100-150 crore.

“Our short-term strategy is retailing branded relaxed wear, the medium-term strategy is to create a lifestyle brand and the long-term plan is to spawn a retail chain,” said ITC chairman Y. C. Deveshwar, adding the moves were part of his company’s ambitious plan to start big-time retailing.

Once the leisure wear business, which is under a separate division, takes off, the Wills Sport range would be expanded to include lifestyle products such as perfumes, personal carre products and even accessories, Deveshwar said. The company also wants to retail its ready-to-wear brand overseas. ITC decided to enter the apparel segment because it felt it can groom a brand by leveraging its core strengths. “Ours is a good marketing company with refined market research processes, and knows how to create brands,” Deveshwar said. He listed rigorous quality management, a good supply chain and strong distributor relationships as the key factors which will help it create a chain of Wills stores.

ITC’s aim is to grab 10 per cent of the ready-to-wear market in the next five years, and there are expectations the turnover in the three to five years will increase to Rs 250-500 crore. ITC plans to take the brand oveseas once it is firmly entrenched in the domestic mart. Deveshwar would not say when the division would break even and start making profits.

The Indian apparel market is estimated to be worth Rs 20,000 crore, of which with branded relaxed wear accounts for Rs 1,200 crore.    


 
 
3-DAY SHUTDOWN AT KIDDERPORE 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 13 
ITC has stopped cigarette production at its Kidderpore factory for three days, starting today, due to what the company said was a monsoon-induced seasonal fall in demand.

“We have stopped production at the unit for three days. But this is not because of a pile-up in stocks on shop floors. The demand is usually weaker during the monsoons. We will use the time to carry out maintenance job and to revamp the factory,” an official spokesperson of the company told The Telegraph.

The spokesman said ITC has no plans to halt production at its factories in Saharanpur, Bangalore and Munger. The Kidderpore factory produces the entire range of cigarettes in the ITC stable and its high-productivity is often used as a benchmark for other units.    

 

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