Exposure clause to check loan defaulters
Tisco lines up high-stakes telecom foray
Reliance net spurts 20% in first quarter
Ambanis claim to be BSES promoters
Naphtha power units to switch to gas
Rupee closes at new low of 44.90
Sales tax on tobacco, sugar awaits go-ahead
Linc sets Rs 80-crore sales target
Philips India aims to reach out to masses
Hindalco eyes Utkal Alumina

 
 
EXPOSURE CLAUSE TO CHECK LOAN DEFAULTERS 
 
 
FROM NITHYA SUBRAMANIAN
 
New Delhi, July 20 
The Reserve Bank of India (RBI) has asked nationalised banks to insert a clause in loan agreements that will give them powers to disclose the names of defaulters.

The move, which the central bank wants to be implemented with immediate effect, is part of its multi-pronged strategy to tackle the long-festering problem of bad loans.

According to an RBI circular, borrowers will have to agree to a condition which will vest the central bank with ‘an unqualified right to disclose or publish my/our name or the name of our company/firm/unit and its directors/partners/proprietors as a defaulter in the manner and medium it deems fit’. The Reserve Bank has sought to define a defaulter as somebody who fails to repay a loan/advance, or pay interest, or any of the agreed instalments of the loan, on the due date. The new clause, which will also apply while renewing or enhancing existing loans, comes at a time when total non-performing assets (NPAs) of public sector banks have touched an alarming Rs 51,000 crore.

Secrecy clauses in loan agreements prevent the Reserve Bank from making public the names of defaulters, a legal hindrance that has prompted the government into considering amendments in the Banking Act to allow such disclosures.

Bankers say one way of getting around the secrecy clause is to insert in the loan agreements a condition that the identity of borrowers could be made public in the event of default. “The move will strengthen the hands of RBI and enable it to take action against people who do not repay their loans,” a top official of Industrial Finance Corporation of India (IFCI) said.

Since 1994, the apex bank has been collecting and disseminating information on defaulters who owe banks Rs 1 crore and above. These are accounts which have been classified by banks as doubtful or loss-making. Later, even accounts with outstandings of Rs 25 lakh and above were included. Banks and financial institutions have since been using the information to scrutinise the credentials of borrowers.

Clearing the legal hurdles to expose individuals and companies who do not return banks’ money is one of the several strategies being worked out by the government to alleviate the NPA blight and to tighten the noose around defaulters.

Other measures include asking the Reserve Bank to draw up one-time settlement package for defaults up to Rs 10 crore. In the case of higher amounts, the chiefs of various banks have been asked to submit a list of defaulters who can be prosecuted.

At present, NPAs above Rs 1 crore account for an overwhelming 51.9 per cent of the gross NPAs, estimated at Rs 26,817 crore. The government is convinced that the recovery of these high-value loans is necessary to clean the bad-loan mess.    


 
 
TISCO LINES UP HIGH-STAKES TELECOM FORAY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 20 
The Tata Iron and Steel Company (Tisco) is exploring the possibility of entering ‘new businesses of substance’ as one of the ways to enhance shareholder value.

Company chairman Ratan Tata said these include software and telecom, the two high-growth sectors which will be scanned for their profitability and prospects by an ‘internal focus centre’.

Addressing shareholders at Tisco’s annual general meeting (AGM) here today, Tata said the steel major will have a big stake in the group’s telecom ventures. A beginning, he said, has already been made by investing Rs 47 crore in Tata Telecom.

Apart from the two sectors, Tisco plans to become a major e-business player to give its shareholders greater value.

The announcements about diversifying into new areas coincided with Tata’s admission that the perception of steel as a business had changed after the emergence of a new economy driven by the unprecedented infotech boom.

“Tisco is addressing the issue and it will keep abreast of new technologies, apart from entering new business,” he said.

Replying to a specific query, the Tisco chief said that the company is actively looking at strategic acquisitions which would enhance the value of its existing steel business.

Retirement on time

Tata today said that he would abide by the group’s policy and relinquish his executive position on December 31, 2002. However, he will continue as the non-executive chairman of Tata Sons for the five years starting January 2003.

A Tata Sons policy framed early this month fixed the retirement age of a director in the executive position at 65, and that of a non-executive director at 70. Tata, now 63, has two years to hang up his boots.    


 
 
RELIANCE NET SPURTS 20% IN FIRST QUARTER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 20 
Reliance Industries Ltd (RIL) has posted a 20 per cent rise in net profit at Rs 612 crore for the first quarter ended June 30, on sales of Rs 6,615 crore, up 72 per cent over the same period the previous year.

“Reliance has set a new record by becoming the first private sector company to declare a quarterly net profit of over Rs 600 crore,” managing director Anil Ambani told reporters after its board meeting here today.

Optimistic about Reliance’s performance in this financial year, Ambani said, “We expect to establish new records for the full year by crossing our targeted production volumes of 10 million tonnes and enhancing our leading market share positions in all our major products.”

The sales revenue growth comprises positive impact of 45 per cent from the sales volume growth and 27 per cent from the increase in the product selling prices.

The company has increased the export revenues by over eight times to Rs 1,311 crore as against Rs 156 crore in the corresponding previous quarter, placing itself among the top 10 manufacturer exporters from India. This includes Rs 479 crore towards merchant export of petroleum products.

During the period under review, total production volume touched an all-time high of 2.63 million tonnes, an increase of 38 per cent compared to the corresponding previous quarter.

Stating the reasons for profit not keeping pace with the galloping sales, Ambani said that other income decreased by 48 per cent to Rs 78 crore. This is due to the lower interest income as a result of the reduction in foreign currency monetary assets, and conversion of optionally fully convertible debentures of Reliance Petroleum Ltd into equity.

Export revenues are more than adequate to cover the foreign exchange denominated interest liabilities on foreign currency debt. Ambani pegged RIL’s export target for the current fiscal at Rs 4,500 crore, adding that the company’s exports cover the entire forex risks by 10 times.

Regarding the other initiatives, Ambani revealed that RIL will be the lead investor in the infocom sector.

Global alliances are currently being negotiated with internationally acclaimed companies in the new economy sectors.    


 
 
AMBANIS CLAIM TO BE BSES PROMOTERS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 20 
The Reliance group has told Sebi that the acquisition of a 27 per cent stake in BSES through an open offer and market purchases makes it the promoter of the power utility.

“Reliance wrote to Sebi on Wednesday that it is the promoter of BSES, as defined under Section 2 (H) of the takeover code,” Ambani said. The company, he said, will soon open talks to put its nominees on the BSES board.

However, BSES managing director V Shahi said the board has not received any communication from the Ambanis so far. “Once it reaches the company, we will take up the matter with the board and hold discussions with financial institutions.”    


 
 
NAPHTHA POWER UNITS TO SWITCH TO GAS 
 
 
FROM M RAJENDRAN
 
New Delhi, July 20 
The ministry of power has asked independent power producers (IPPs) using naphtha as feedstock to furnish evidence that they have arranged gas supplies.

These independent power producers were allowed to use naphtha as an interim fuel at a time when gas was not readily available. The situation has changed now.

Naphtha prices have gone up and many gas pipeline projects are being set up. Therefore, says the ministry, it is better if the IPPs use the fuel they were supposed to.

However, the independent power producers may get more time to switch over because the ministry is waiting for the Planning Commission to announce the Fuel Energy Plan.

“Power companies will have to show gas linkages for their projects. Naphtha is only a bridge fuel. We will wait for their replies before cancelling their licences or giving them extensions,” power minister P Rangarajan Kumaramangalam told The Telegraph.

“We will encourage even the new liquid fuel-based power projects to use gas, provided they can show us that they have the linkages in place, within a given time frame,” he added.

The ministry had set a June 30 deadline for all independent power producers to get their projects off the ground. “We have sent letters to all companies whose projects have been cleared by the government. A few have written back and sought time to explain their position,” Kumaramangalam said.

The failure of most IPPs to start their projects on time prompted the power ministry to scale down the generation target for the Ninth Five Year Plan to 30,000 megawatts from 40 ,000 mws.

Seven hydel projects in J&K

The Jammu and Kashmir government today signed a memorandum of understanding with the Union government to implement seven hydroelectric projects in the state aggregating 2798 mw.

National Hydroelectric Power Corporation will implement the projects on build-own-operate-transfer (Boot) basis.    


 
 
RUPEE CLOSES AT NEW LOW OF 44.90 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 20 
Huge corporate appetite for US dollars today forced the rupee to close at a new low of Rs 44.89/90. Earlier in the day, the rupee touched an intra-day low of Rs 44.92. It was within the striking distance of the all-time intra-day low of Rs 44.95 on June 8.

Interbank foreign exchange market (Forex) dealers pointed out that apart from the huge demand for dollars from foreign funds and other companies, the recent political row arising out of the resignation of three Union Cabinet ministers and the foreign institutional investors selling in the equities markets, were also responsible for the fall of the rupee.

However, it was genuine corporate demand that sent the Indian unit into a tail-spin against the US dollar. Further, the Reserve Bank of India (RBI) was also conspicuous by its absence. Dealers said that the central bank tightened rupee supplies in the market as it did not want banks from holding long dollar positions in the market today.

All these resulted in the rupee declining by a whopping 12 paise from yesterday’s Rs 44.7750/7800. While the rupee has already declined by more than 3 per cent since the beginning of this year, analysts note that it is in for more bearish times as political worries confront several investors.

Short covering by banks put the Indian currency under pressure against the greenback. Consequent to the huge dollar demand, the rupee which opened on a weak note at Rs 44.7850/7950, saw continuous and orderly decline during the day. After breaching the Rs 44.80 to a dollar barrier, the rupee later pierced through the crucial psychological barrier of Rs 44.90 and touched the intra-day low of Rs 44.92 as banks, companies and importers rushed to cover dollar positions, dealers said. It finally ended at Rs 44.89/90.

With the central bank being absent and exporters holding on to their dollar supplies, most of the analysts expect the Indian currency to trade in a range of Rs 44.90-95 in tomorrow’s trading.    


 
 
SALES TAX ON TOBACCO, SUGAR AWAITS GO-AHEAD 
 
 
FROM R. SASANKAN
 
New Delhi, July 20 
States will be permitted to impose sales tax on sugar, tobacco and textiles if the Union Cabinet endorses the recommendations of the Eleventh Finance Commission.

So far, they were being compensated by the Centre with additional excise in lieu of the sales tax on these items. Of their 29 per cent share in the total pooled taxes recommended by the Tenth Finance Commission and implemented with retrospective effect by the Centre, 3 per cent would be given on account of additional excise in lieu of sales tax.

In other words, tax devolution was only 26 per cent while the remaining 3 per cent was compensation for not charging sales tax on items such as sugar, tobacco and textiles.

The Centre collected additional excise on these items. The Eleventh Finance Commission found out that additional excise in lieu of sales tax is a little over 1 per cent of the total taxes. It has, therefore, recommended that the states be permitted to impose sales tax on these items.

This will benefit the states marginally. The recommended scheme tantamounts to raising states’ share in taxes from 29 per cent of the total to 30-31 per cent.

Official sources say the commission has recommended a little over Rs 30,000 crore as revenue gap grant for weak states for the five-year period. For the current year, they will get Rs 11,000 crore but the amount will taper off in the coming years.

The Tenth Finance Commission also made a similar formula, but did not make any allocation for the fifth year. The Eleventh Finance Commission provides for revenue gap grant even in the fifth year, though the beneficiaries will be limited to special category states.

It is already clear that financially strong states such as Gujarat, Maharashtra and those in the south will not get a share in the revenue gap grant.

Cabinet meet on report

The Union Cabinet is expected to take up the 11th Finance Commission recommendations at its meeting here tomorrow. The commission headed had submitted the final report to President K R Narayanan on July 7 to pave the way for finalisation of states’ annual plans for the year 2000-01.    


 
 
LINC SETS RS 80-CRORE SALES TARGET 
 
 
BY A STAFF REPORTER
 
Calcutta, July 20 
City-based Linc Pen and Plastics Ltd has drawn up an ambitious plan to push up sales to Rs 80 crore in the current year against Rs 28 crore last year. To increase production, the company has finalised plans to invest Rs 10 crore in plant and machinery in both its factories near Calcutta and Goa.

To finance the expansion, the promoters will chip in Rs 5 crore through additional equity contribution.

The company’s board has proposed preferential allotment of 20 lakh equity shares at Rs 25 each to the promoters at a premium of Rs 15 per share aggregating Rs 5 crore. Deepak Jalan, managing director of Linc, told reporters today that the negotiations are on with banks for a better interest rate for funding the balance Rs 5 crore.    


 
 
PHILIPS INDIA AIMS TO REACH OUT TO MASSES 
 
 
BY A STAFF REPORTER
 
Calcutta, July 20 
Shifting away from its earlier philosophy of “high-end and premium” products, Philips India Ltd (PIL) has decided to turning to the mass market with its low-priced 14-inch colour televisions.

Addressing a press conference here today Rajeev Karwal, senior vice-president (consumer electronics) said, “We will be launching two 14-inch colour television models in October priced at Rs 8,990 and Rs 10,990. The latter will have features like zoom control and smart surf. We have been able to convince Philips Eindhoven of Singapore that in the Indian market we need to emphasise mass selling of 14-inch, 20-inch and 21-inch colour televisions.”

The company, which ranks seventh in colour televisions sales, aims to achieve 10-12 per cent market share by 2003. However, in this fiscal the consumer electronics division of Philips will not be able to surpass last year’s turnover of Rs 700 crore.

Philips is also negotiating with major hotel chains in the country like ITC Welcomgroup, Tatas and the Oberoi group to sell its set top boxes. The set top boxes will be attached to the television sets in the hotel rooms. It has already sold 25,000 set top boxes to Zee Telefilms.

In the first six months of this year, Philips suffered a net loss of Rs 15.35 crore. “We have been able to sell 1.75-1.80 lakh television sets in the first half. We are hopeful that in the second half the sales will be 25 per cent more than the first half,” Karwal said.

As part of its new marketing strategy, Philips is seeking opinion from dealers and consumers on what kind of products they want. “We are taking 25 dealers to our Singapore facility to display the prototypes designed based on public opinion,” Karwal said.

Recently, the company launched 13 new monitors. “Our monitor sales is rising gradually,” he said.

Launching the home cinema solutions today, Karwal said, “The domestic market is aware of the latest technology. We have decided to bring the latest technologies to the discerning Indian consumer.”

Priced at Rs 1.40 lakh, the home cinema solutions comprise 29 inches colour televisions combined with five home cinema speakers, active subwoofer system, digital audio/video surround receiver and DVD video players.

Philips has introduced its unique proprietary Woox technology in the home speakers.    


 
 
HINDALCO EYES UTKAL ALUMINA 
 
 
BY A STAFF REPORTER
 
Calcutta, July 20 
Hindalco, the Aditya Birla group flagship, is eyeing a majority stake in the Rs 4,500-crore Utkal Alumina.

The aluminium major has initiated discussions with Alcan and Hydro, which hold 35 and 45 per cent stakes respectively in the alumina project, on this matter.

Indian Aluminium Company (Indal) holds a 20 per cent stake in Utkal Alumina. Hindalco, by acquiring Indal, has already entered into the much talked about alumina project in Orissa.

While confirming the move, Hindalco president Askaran Agarwala declined to divulge the percentage of stake the company is trying to take in Utkal Alumina.

“Hindalco may become the fourth partner in the alumina project with Alcan, Hydro and Indal. We are talking to both Alcan and Hydro, who are very co-operative in this regard,” Agarwala said.

A senior Indal official said on condition of anonymity that Hindalco might takeover the entire stake of Alcan in the project.

“Taking over the Alcan stake, Hindalco will have an effective control of 55 per cent in the project,” he said.

Agarwala said the project has a “very strong and positive prospect”. “Although we are self-sufficient in alumina, we are very much interested in the project,” he added.

Agarwala, who chaired the 62nd annual general meeting of Indal here today, said Hindalco had received overwhelming response to the open offer of acquiring Indal’s 20 per cent shares.

“According to the Sebi guideline, we are accepting up to 200 shares intact. Beyond 200, we are buying shares on a pro-rata basis,” Agarwala said.

The financial institutions (FIs), which earlier had around 13 per cent in Indal, currently holds 7.89 per cent. They have sold around 6 per cent stake on pro-rata basis to Hindalco. In response to the open offer, the FIs have sought to offload their entire stake in the company in favour of Hindalco.

Agarwala said Indal would look into the legal, economic and viability aspects of all the projects, taken up by the previous Indal management.

Indal chairman Kumar Mangalam Birla, who was absent at today’s meeting, said in a message, “... Indal and Hindalco complement each other and enjoy leadership positions in their respective areas of operation. Indal’s strength in alumina and downstream aluminium products ideally dovetails Hindalco’s unmatchable position in metal.”    

 

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