BSES investors spurn Reliance offer
Wagon order plot to derail Mamata plans
Seven in fray for Bengal captive power units
Atal roots for national consensus on reforms
Telecom scrips dive, sensex slips 109 points
DSQ venture with BankAmerica off
Maruti takes an image drive

 
 
BSES INVESTORS SPURN RELIANCE OFFER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 17 
Reliance’s open offer for BSES is believed to have evoked a lukewarm response from retail investors and generated little interest among financial institutions which have refused to part with their stake in spite of the June 30 increase in its offer price from Rs 234.60 to Rs 255.

According to market estimates a day after the open offer came to a close, the Ambanis have mopped up no more than 6 to 8 per cent of the equity after the open offer to shareholders in the Mumbai-based utility was announced on May 19.

Most observers and dealers in the market feel the price at which Reliance wanted to pick up the BSES shares was not attractive enough to lure investors, including the financial institutions, even though it was raised by 10 per cent later.

There is also a feeling among a large section of the market that the Reliance’s valuation of BSES stock, even after the offer price was revised upwards, did not reflect accurately the true worth of the company.

By sweetening its offer last month, Reliance had tried to send the impression that its new bait is targeted at BSES’ 1,80,000 retail investors who it said would get more time to make up their minds.

“Our objective is to provide adequate time to the shareholders of BSES, particularly retail investors, to consider the new price and respond to the open offer,” the company said in a release issued here today.

While 8 per cent is believed to be the maximum that the Ambanis could have garnered, the details are not available at this stage. Company officials refused comment on the issue, saying it was too early for them to have the figures in hand.

As the success of the open offer remained a subject of speculation in the absence of independent confirmation, there was a feeling in several quarters of the market that the Ambanis might raise their stake in BSES by the maximum of 5 per cent permitted under the creeping acquisition method.

A crucial factor which remains unclear is whether LIC, UTI and GIC stuck to their guns and refrained from selling their holdings to Reliance. These institutions, which together hold 35 per cent of the equity in BSES, had indicated earlier that they might offload around 9 per cent to the Ambanis.

On the Bombay Stock Exchange today, the BSES scrip closed marginally lower at Rs 254.40 after opening at Rs 255. It touched an intra-day high of Rs 251.50 and a low of Rs 251.10.

The Ambanis are the single-largest private sector shareholder in BSES with an aggregate shareholding equal to 14.82 per cent of its equity share capital of Rs 137.83 crore.

One of the leading power companies in the country, BSES generates, transmits and distributes electricity. As the largest distribution company in India, it holds the exclusive licence to service the country’s financial capital. It also supplies power to more than 75 per cent of Orissa.

Reliance, on the other hand, has interests only in generation, but is developing power projects which would have a capacity of over 6,000 MW once they go on stream.

BSES, with its existing and future projects of 2,000 MW, will increase Reliance’s capacity to a staggering 8,000 MW, making it the largest private sector player in the country’s power sector.    


 
 
WAGON ORDER PLOT TO DERAIL MAMATA PLANS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, July 17 
The BJP-led coalition government has finally laid a snare for its most troublesome ally — Mamata Banerjee. It will ask her to award 60 per cent of railways’ wagon orders with six public sector wagon builders, including four in West Bengal, at a Cabinet meeting tomorrow.

The catch is that the Railway minister will find it tough to agree to the proposition, given that her reply to the initial Cabinet note earlier says these units never fulfiled past orders and, therefore, could not be trusted with big assignments.

Manohar Joshi, the heavy industries minister who has been asked to lay the trap, has chosen the companies with care. They include Jessop, Braithwaite, Burn Standard and Bridge & Roof — all companies on whose behalf Mamata has fought the Centre in the past. Joshi, who wants the reservation for four years, is looking at Mamata to promise to pay these four companies and two more — Bharat Wagon and Engineering and Richardson & Crudass — 50 per cent of their wagon making costs in advance besides giving them the steel, wheel sets and bearings they need to make the wagons free of cost.

Naturally, she doesn’t like these demands. The Railways itself is strapped for funds and has been pleading for more money from the public exchequer. It can ill-afford to pay such huge advances, that too to builders who don’t finish their jobs.

In 1998-99 and 1999-2000, these public sector companies were asked to manufacture 10,000 and 7,450 wagons respectively. They managed to turn out only 7,600 and 5,760.

To sweeten the bait and make it tough for Mamata to refuse, Joshi has said in his Cabinet note these moves ‘will help make these state-owned firms healthier’ and allow them to gain better joint venture partners when they are sold off.

Obviously, the plan was thought out by BJP leaders who were upset that Mamata had outwitted their plans to close down sick public sector companies in West Bengal. She had raised a hue and cry when the Cabinet had, behind her back, ordered the closure of six PSU companies in West Bengal last month.

Last week however, she had her revenge when she scuttled plans, drawn up over a long time, to close down Hindustan Fertiliser’s plants at Durgapur, Haldia and Barauni. And then followed it up by getting disinvestment minister Arun Jaitley to push back plans to shut down West Bengal based companies like Hindustan Steel Construction Ltd, Hind Prefab and Hindustan Vegetable Oils Ltd to the financial next year.    


 
 
SEVEN IN FRAY FOR BENGAL CAPTIVE POWER UNITS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 17 
Seven companies have sent proposals to the West Bengal State Electricity Board (WBSEB) to setting up captive power plants in the state. They are Hindustan Heavy Chemicals, Indian Aluminium Company, Tata Metaliks, Kajaria Iron Castings, Rashmi Ispat, Kolman Chemicals and Chariot Company.

Hindustan Heavy Chemicals, Indal and Chariot Company want to set up plants in CESC’s area while Rashmi Ispat, Kolman Chemicals and Tata Metaliks are interested in territories under WBSEB. Kajaria Iron Castings is eyeing the areas around Durgapur projects.

A senior WBSEB official said the companies have been told to furnish clearances from the pollution control board and state environment department, besides the detailed project report.

New industries are allowed to set up captive power plants on the condition that it is not connected to the WBSEB grid, and that there is no third-party sale. Companies are eager to set up captive power plants to meet their own requirements. At the same time though, WBSEB has come out with a plan to offer time-bound connections to new industrial units. Despite this, WBSEB chairman G.D. Gautama told The Telegraph that many firms have not been provided connection on the basis of the schedule.

The WBSEB will undertake a joint inspection of units below 50 KVA within 10 days, above 50 KVA and up to 500 KVA within 15 days.    


 
 
ATAL ROOTS FOR NATIONAL CONSENSUS ON REFORMS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 17 
Sending a clear message that the economic reform process should be depoliticised, Prime Minister Atal Behari Vajpayee today asked his Economic Advisory Council to draft a common approach paper to carry forward the liberalisation programme on a consensus basis.

Addressing a meeting of the reconstituted council, Vajpayee said there was a need to sustain a genuine national consensus and to garner all-party support on economic reform. “I have said on several occasions that the economic agenda, which is in India’s long-term interest, can and must be depoliticised. Clearly, we need to identify the priorities and the commonalties,” said Vajpayee.

The paper will detail the ways and means to include private sector participation in social sectors like education and public services. It will also examine ways to reduce bureaucratic delays in the implementation of various programmes. The Prime Minster hoped that India would achieve a seven per cent GDP growth in the current fiscal.

The economic council will meet within the next two weeks to discuss broad guidelines for drafting the approach paper. Today’s meeting was attended by former Reserve Bank of India (RBI) governor I.G. Patel, secretary of the economic cell of the BJP Jagdish Shettigar and Rakesh Mohan of the National Council of Applied Economic Research (NCAER).

The Prime Minister also asked the council to draw up a strategy to remove the perception in the minds of people that the present reforms are only elitist driven. “We need to devise a more credible communications strategy and to clearly convey that the changes being brought about will benefit the average man, whether by way of improved rural connectivity at lower tariffs and assured supply of power or better roads and improved infrastructure.”

Vajpayee said if India was to achieve the rates of growth necessary to eliminate poverty, a concerted approach should be taken to sustain the momentum of economic changes. The problems concerning the social sector, particularly drinking water, primary health, education and rural connectivity, must receive the high priority they deserved, he added.

He said the ambitious road programmes are on track and 1,000 kms would be completed this year. The finalisation and awarding of contracts for another 3,000 kms would also be over by the end of this year.    


 
 
TELECOM SCRIPS DIVE, SENSEX SLIPS 109 POINTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 17 
Prime Minister Atal Behari Vajpayee’s promise to allow unlimited players in domestic long-distance telephony led to unrestricted selling in public sector telecom scrips on the Bombay Stock exchange (BSE) today.

Videsh Sanchar Nigam Ltd’s scrip fell by Rs 157.65 to Rs 1,008.55 from last week’s close at Rs 1,166.20. In fact, the scrip scraped to an intra-day low of Rs 990. Mahanagar Telecom Nigam Ltd’s stock also fell sharply to Rs 193.10 from Friday’s close at 204.55.

Amitabh Kumar, director operations at VSNL reacted cryptically, “we would not like to comment on the Prime Minister’s statement.”

The bearish trend was fuelled by heavy offloading by foreign institutional investors (FIIs) and bull operators in index-based software and select old-economy shares that pulled down the 30-share BSE sensitive index by 109.50 points to close at the day’s low of 4,747.32.

Software scrips drifted southward on heavy selling by FIIs. Unloading of outstanding positions by operators also affected the market.

Shares such as Infosys, Satyam, NIIT, Zee, ITC, HLL, MTNL and L&T were heavily clobbered, say brokers.

Fortunately, bullish trend prevailed at the HFCL and Shyam Telecom counters. These registered sharp gains. HFCL’s scrip rose by Rs 22.70 to Rs 1,379.10 and Shyam Telecom hardened by Rs 13.30 to close at Rs 2,76.85.

The pharma counters continued to be in the limelight as foreign investors as well as local funds mopped up stocks showing widespread gains.

The BSE-30 share sensitive index opened better at 4,874.41 and immediately logged the day’s high of 4,883.30. It finally closed at the day’s low of 4,747.32 as against Friday’s close of 4,856.82, a loss of 2.25 per cent.

The BSE-100 index also dropped by 39.49 points to 2,393.27 compared with the previous close of 2,432.79.    


 
 
DSQ VENTURE WITH BANKAMERICA OFF 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 17 
The Chennai-based DSQ Software Ltd has called off the proposed $ 20-million joint venture with BankAmerica International Investment Corporation to develop software solutions for the international banking and financial services sector. The agreement for the new venture was announced in March this year.

According to top DSQ officials, since BankAm already had an equity presence in the company, it made little business sense to have another equity tieup with the same partner.

At present, Bank of America, through BankAmerica Equity Partners, holds around 16.50 per cent in DSQ Software. Through this stakeholding, DSQ Software has been obtaining business from the bank.

The new venture was supposed to be the global hub of BankAm’s software solution requirements. According to the joint venture agreement, BankAm was supposed to hold a 52 per cent stake and DSQ the remaining equity holding in the venture. BankAm was to provide bulk of the business and DSQ all technical support. The software solutions provider was to set up the infrastructure, including a huge software development facility separately, which could house over 1,000 software developers.

Apart from BankAm, Credit Suisse First Boston holds 16.50 per cent equity DSQ. Dalmia, the promoter of the company, has a 22 per cent shareholding. DSQ top management was reshuffled early this year with Dinesh Dalmia stepping down and Pawan Kumar (formerly with IBM) filling in the vacancy. However, Dalmia still continues as the vice-chairman of the company.    


 
 
MARUTI TAKES AN IMAGE DRIVE 
 
 
FROM NITHYA SUBRAMANIAN AND M. RAJENDRAN
 
New Delhi, July 17 
A drastically shrinking market share is forcing car major Maruti Udyog Limited (MUL) to take a hard look at its image and a rethink on its current image-makers.

And with pitches from biggies like Mudra, O&M and several others for the over Rs 200-crore advertising account, Maruti has plenty to choose from. Besides, it has had day-long presentations from its three existing agencies — Lintas, Rediffusion DY&R and the newly appointed Saatchi & Saatchi.

Meanwhile, the company has decided to give the corporate advertising business to Capital Advertising, an account earlier handled by Rediffusion. Further, Saatchi & Saatchi has been entrusted with the responsibility of enhancing the image of the Wagon-R, which Maruti hopes will regain lost ground from rivals like the Santro.

Competition among the incumbent agencies itself is very hot. While Lintas which currently handles Baleno, Esteem and Zen and Rediffusion which does work on the Maruti-800, Gypsy and Omni are trying to save their accounts, Saatchi & Saatchi is on the prowl to increase its portfolio.

According to ad industry sources, several agencies are vying for the lucrative accounts.

“Contract, RSCG, McCann-Erickson, Chaitra Leo Burnett are some of the others who have pitched for the accounts,” said industry sources. Agencies, however, refused to confirm or deny whether they were in the fray for the Maruti ad accounts.

Mediamen said the automobile sector is set to witness a shake-up as several of the agencies which are in the fray are already handling competing accounts.

“For example, Mudra handles Mitsubishi Lancer. If the agency manages to bag any of the Maruti accounts, it would have to give up Lancer,” said admen.

Early this year, Saatchi & Saatchi gave up the Hyundai account. However, it has now bagged the more lucrative Wagon-R account.

Maruti sources confirmed the review and said the company was keen on a fresh approach and creating new advertising strategies, as its current strategies have not been able to keep competitors like Hyundai or Daewoo, at bay.

Maruti suffered a 37 per cent fall in sales in June. It sold only 14,715 units during June 2000 as against 23,469 units in June 1999. The company, however, claimed that it had operated its plants for only 15 days during June this year as against 21 days in June last year. Maruti shuts down its plant for it bi-annual maintenance in June.

The company sold 3,972 units of Zen as against 4,622 units of Zen in June last year. Sales of Wagon-R during June this year stood at 1,180 units. In the mid-size segment, the company sold 756 units of Esteem as against 1,323 units in June last year. While the Baleno clocked sales of 239 units in June this year, the bread-and-butter Maruti-800 recorded a sharp drop, selling only 5,298 units last month as against 12,164 units in June 1999. Sales of Omni stood at 3,270 units in June this year, as against 5,322 units sold in June last year.    

 

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