Khaitans to merge tea businesses
VSNL draws up plans for Net telephony
Bank of India aims to cut 6,000 jobs
IBP allowedto pull out of Numaligarh
Court seal for SEB contract to Bhel
Spanners in infotech wheel
Foreign Exchange, Bullion, Stock Indices

Calcutta, Sept 26: 
The Khaitans of the Magor group are planning to bring their entire tea businesses, which are now spread over two companies, under one umbrella.

The Calcutta-based group is considering a proposal to demerge the tea division of Eveready Industries Ltd (EIL) into a separate outfit which will be merged with another group company, Bishnauth Tea.

Confirming the plan, highly placed sources in the group said EIL was assessing various alternatives before making a presentation to the financial institutions.

“The restructuring, when approved, will give birth to one of the largest tea companies in the country,” they said. The Magor’s group’s tea business is worth well over Rs 500 crore and is spread over 40 tea estates.

The restructuring will also save EIL from financial disaster. The company is saddled with borrowings of Rs 645 crore with an annual interest burden of Rs 83.48 crore.

EIL has decided to appoint a consultancy firm to prepare a “feasible formula” for the demerger of its tea business.

Sources said the promoters of EIL were frantically looking for a buyer or joint venture partner for the EIL’s battery business. Gillette of the US, the owner of the Duracell brand of batteries, is reportedly the front-runner in the race for the company.

“Splitting the company into two will not help much as none of the two companies will be able to service the loans. The company needs to have a strong financial partner which can take care of the battery business,” sources added.

In order to avoid a debt trap, EIL is also considering a proposal to sell its real estate in Delhi and Bhopal which will help it raise around Rs 60 crore.

EIL is in talks with a host of companies and hotel chains to sell off 1.5 acres of land on the Aurangzeb Road in Delhi and around 10 acres of land in Bhopal.

The Khaitans, who hold around 44 per cent in EIL and 50 per cent in Bishnauth Tea, are planning to move out of the battery and lighting business in which they entered into with great fanfare five years ago.

The group created a sensation by taking over the battery business of Union Carbide in November 1994 through group company McLeod Russel with an investment of Rs 290 crore.

In April 1995, the the company was rechristened as Eveready Industries with which McLeod Russel was merged in April 1996.

In 1995, McLeod had made a rights cum public issue to mop up Rs 302.6 crore in order to retire the high-cost debt raised from the financial institutions.

The issue, one of the largest from this region, failed to evoke the expected response from the investors, and put a heavy debt burden on the company.

As a result, the company made a loss of Rs 11 crore in the first quarter of the the current financial year.

Sources said the company will focus on the packet tea segment by repositioning its brands, Tez and Premium Gold.

“We came to the packet tea segment long after the other major tea companies. But we have embarked on a brand repositioning exercise in a big way and hope to corner sizable market share in the next couple of years,” a senior official of the group said.

The company has already made substantial investments in its packet tea factory at Chuapara for modernisation purposes.    

Mumbai, Sept 26: 
Telecommunications giant Videsh Sanchar Nigam Ltd (VSNL) is planning to introduce Voice over Internet Protocol (VoiP) technology. The provision of this facility — which will sharply reduce the cost of overseas phone calls and faxes — is subject to regulatory permission by the government.

In a press statement issued today after the company’s annual general meeting, VSNL said VoIP would enable provision of telephone calls and fax transmission over IP-based data networks with acceptable quality of service at a much lower cost to its subscribers.

Chairman and managing director S.K. Gupta told shareholders that VSNL was also planning to introduce e-commerce and that a total outlay of Rs 50 crore had been earmarked for the provision of these new services.

VSNL, which has a monopoly over overseas phone call traffic till 2002, said it has been continuing to work with its international carrier partners for the finalisation of the settlement rates which determine phone call rates. The telecom giant said global internet telephony was gathering acceptance worldwide and trans-continental rates for such services had fallen to as low as 5 cents per minute. The public sector company said it was alive to the competition and would be ready with appropriate technology when new opportunities arose.

Commenting on the future outlook, the VSNL chief said the growth in software exports from India and the IT industry had been leading to a buoyancy in the company’s value added services revenues which form a large slice of the total telecommunications revenue.

In terms of the tele-density of the country, the company is expecting significant enhancements in the telephone network, leading to higher international volumes, which will be further boosted by falling collection rates in India and other countries. “VSNL believes that the convergence of Telecommunications, IT and broadcasting, is now virtually complete and multimedia services will dominate the market in the coming years. VSNL is well positioned to take advantage of such situations. The domestic long distance sector has been opened up recently and VSNL has strong plans to enter this business segment,” Gupta said.

The company now plans to invest Rs. 4643.04 crore in various capital expenditure programmes as part of the original Ninth Five Year Plan. It has also signed an MoU for SAFE submarine cable project.

Further, VSNL has planned to instal and commission ATM superhighway gateways at various gateway nodes in the country.

At today’s meeting, the shareholders approved a 2:1 bonus issue. With this, the paid up capital will rise to Rs 285 crore. The company said its revenues had risen marginally to Rs 7230.5 crore from Rs 7175.6 crore in the previous year. However, its net profit had fallen to Rs 840.3 crore from Rs 1325 crore due to a write-off of its investment in ICO, the failed satellite phone project, to the extent of Rs 512.7 crore.    

Mumbai, Sept 26: 
Bank of India is planning to launch a voluntary retirement scheme (VRS) that it hopes will help slash 5,000 to 6,000 jobs in an organisation with 51,000 employees.

The details of the scheme were not available because the top brass, including chairman K V Krishnamurthy, would offer no comment in spite of repeated attempts to get their version. However, sources say the separation package is likely to cost the bank in the region of Rs 300 crore.

The scheme, modelled along the lines of a package proposed by the Indian Banks’ Association (IBA), is believed to have already been placed before senior board members for consideration. The issue will be discussed at a board meeting on October 20.

However, the bank management’s attempts to push through a VRS has been criticised by employees and officers’ unions. They have launched a signature campaign against any move to reduce the workforce. A senior union member told The Telegraph that all unions were united in their opposition to job cuts.

A large section of the officers are reported to be affiliated to the All India Bank Officers’ Confederation (AIBOC). Other unions include All India Bank Employees Association (AIBEA) and the NCBE. “On the question of the VRS, all unions have closed ranks in opposing the plan,” sources said.

IBA’s VRS and sabbatical scheme is open to all permanent employees who have put in 15 years of service, or are 40 years of age. They will be paid ex-gratia amounting to 60 days’ salary (pay-stagnation increment special allowance and dearness allowance) for each completed year of service, or a salary for the number of months of service left, whichever is less. The scheme is open till March 31.

According to IBA, an employee/officer who is not keen on VRS immediately can avail of a five-year sabbatical, which can be extended further by the same period. Once the sabbatical is over, the individual can resume service in the same post and pay-scale. The period of sabbatical will not be considered for increment or qualifying service of promotion or leave.    

Calcutta, Sept. 26: 
IBP has received the government’s approval to divest its entire stake in Numaligarh refinery in favour of Bharat Petroleum.

An IBP director said the issue is now before the petroleum ministry which, along with the finance ministry, will determine the price at which the 19 per cent stake will be sold off.

“We have sought a small premium of Rs 96 crore on our investment of Rs 172 crore in the Numaligarh refinery. We need to recover the cost of investment, that’s all,” he said.

The stake sale will help the company to carry out the financial engineering before the oil sector is fully decontrolled in April 2002.

The company is planning to make a private placement of 1.75 crore shares to the Oil Industry Development Board to garner Rs 200 crore once it gets the much-awaited government approval. The private placement of equity will increase the company’s capital base from the existing Rs 22 crore to Rs 40 crore.

The city-based oil marketing company is expecting funds from the Oil Coordination Committee which owes it over Rs 450 crore. “Had we received the money from OCC, our cost of funds would have been much lower and we could have registered higher profits this year,” said director (finance), A.K. Sinha.

IBP is planning to spin off its engineering and chemical business units into separate companies. The demerger of the chemical wing has been cleared by the board.

The company is also in talks with multinational chemical giant Oreka and also with the Hinduja-owned IDL Ltd for equity participation in the proposed chemical company. The division has around 700 staff members.    

Calcutta, Sept 26: 
The division bench of the Calcutta High Court has upheld the West Bengal State Electricity Board’s decision to issue the contract of setting up of sub-stations to the consortium led by Bharat Heavy Electricals Ltd (Bhel).

In their order, Chief Justice Ashok Mathur and justice Barin Ghosh observed, “The issuance of the contract in favour of the Bhel consortium is not actuated with irrelevant consideration and it was rational and in larger public interest and it cannot be said to be illegal so as to be quashed.”

The WBSEB had invited tenders for establishment of sub-stations in the state for strengthening and augmentation of its transmission system. The programme was undertaken on the basis of a loan from Japan Bank for International Cooperation (JBIC), the erstwhile Overseas Economic Co-operation Fund (OECF). JBIC had agreed to give a loan of Rs 340 crore for setting up 22 new sub-stations (400kv/220kv/132kv) and upgrading another nine sub-stations. It had also provided a loan of Rs 96 crore for setting up transmission lines.

While initially there were several bidders, only two, the consortium of Bhel (including ABB and Crompton Greaves) and Siemens, made it to the shortlist. While the board was initially reluctant to accept the Siemens tender, ultimately, it recommended Siemens in first place and Bhel in second place. However, as JBIC found the Siemens bid did not conform to its specifications and upheld the bid submitted by Bhel, the board awarded the tender to the Bhel consortium.

This prompted Siemens to take the issue to court, following which, on June 20, a single bench ordered another round of bidding. The WBSEB then challenged the order before a division bench, which gave today’s decision.

WBSEB chairman G. D. Gautama said that the delay in commissioning the sub-stations was causing hardship to the consumers in several areas. “Now that the legal wrangles are over we will be able to complete the work within 12-24 months time,” he said.

He added that the laying and upgrading of transmission lines was going ahead in a smooth manner.    

New Delhi, Sept 26: 
In spite of tall claims by the government, the growth of the domestic infotech industry still faces hurdles in the form of domestic technology, poor infrastructure, policy swings and a meddlesome bureaucracy, says a report prepared by top investment banker Goldman Sachs.

The report, Technology: IT services India, says Indian software companies can grab 5.1 per cent, or $ 30 billion of the estimated $ 585-billion global software market in 2004.

However, to capture that 5 per cent share, the report says India’s infotech service companies must overcome key challenges on the domestic and international fronts. In a 107-page survey and analysis, the Goldman Sachs Asian Technology Research Team says India’s share of the burgeoning infotech market, though still small, has tremendous growth potential.

Local companies which are reinventing themselves for the technology cycle and diversifying into both customer and revenue streams, are ready to capitalise on the evolution.

The report warns Indian software companies that too much of dependence on US market could pose a major risk. “India’s service providers must scale the value-chain to improve project scope, tap more diversified global markets and improve branding strategies to continue to attract the best people and maintain a respected position on a global scale. A slowdown in global IT spending, particularly in the United States, is an area of concern,” the report states.

Releasing the copy of the report, Rajeev Gupta, securities analyst with Goldman Sachs, said: “Indian software companies should focus on European markets and other areas, not just concentrate on US. Currently about 72 per cent of the total revenues of software companies comes from America.”

The US contributes the bulk of revenues of Indian infotech firms. According to the National Association of Software Services Companies (Nasscom), exports to the US made up about 60 per cent of the total in the last financial year.

“For many of the larger IT services companies such as Infosys Technologies or HCL Technologies, that exposure is over 78 per cent and 71 per cent respectively,” the report states.

“Given India’s large talent pool and its increasing credibility in providing high-quality solutions, we see tremendous upside opportunities. We have rated NIIT Limited as a ‘market performer’ and recently initiated covered Infosys Technologies and HCL Technologies, which are possibly among the highest-quality firms in the industry,” Anil Tewari, securities analyst with Goldman Sachs, said.

According to the report, Indian infotech companies have historically been able re-invent themselves quickly in terms of retooling their knowledge resources to optimise positioning when faced with a shift in a technology paradigm.

“To investors, India offers an attractive mix of diversity and growth, with focus on broadline IT services and increasing e-business transformation. Most of the large Indian companies have the diversity of broadline companies, but they have the growth and technological flexibility (migration and mobilisation strengths) of smaller and more nimble e-business integrators. We like this quality because it minimises the effects of seasonal fluctuations while maximising sustainability and visibility,” the report states.    


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