Recovery fades in pall of gloom
Govt flashes stake sale signal for IA
Sterlite set to take optic fibre network plunge
BPCL flotation likely in Feb
Eveready breaks off talks with Gillette
Foreign Exchange, Bullion, Stock Indices

 
 
RECOVERY FADES IN PALL OF GLOOM 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept 29: 
As the nation braced for an increase in the prices of petroleum products, its confidence was shaken by an array of gloomy figures that showed first-quarter economic growth sputtering to 5.8 per cent, slower than the 6.9 per cent it racked up in the same period last year.

Growth in farm output — the driving force behind the other sectors because of several linkages — was a modest 2.5 per cent between April and June compared with 4.9 per cent in the first three months of 1999-2000.

Production was lower in most Rabi season crops such as rice, pulses and oilseeds.

But if the green revolution appeared to be withering, things were not hunky dory on the industrial front either.

According to a study released by Confederation of Indian Industry’s (CII) Ascon, key industries such as cement, fertilisers and automobiles reported a decline in growth rates.

Official figures put out by Central Statistical Organisation (CSO) show the growth rate in the manufacturing sector at 5.5 per cent compared with a healthier 6.1 per cent a year ago.

The worst hit was the cement industry, where the growth rate plunged to 3.6 per cent from 21.3 per cent a year ago.

Of the 129 sectors surveyed by the Ascon monitor, only 15 sectors recorded excellent production growth rates of over 20 per cent. Most actually reported shrinking volumes.

The survey categorises growth rates above 20 per cent as excellent, those between 10 and 20 per cent as good, between 0 and 10 per cent as moderate, and negative growth rates.

Confectionery, colour televisions, electrical cables and wires, electrical machinery, power generation, oil and natural gas, telecom cables and transmission line towers were among those reeling under lower sales and flagging production.

What has stoked worries is a series negative growth rates in the all-important areas of infrastructure, investment and agriculture.

“There are concerns this may be an indication of a possible decline in consumption. Some sectors attributed negative and low growth rates in the first half of the year due to high production in March,” the Ascon report states.

Power-equipment makers also took it on their chins due to weaker demand. Most companies reported lower growth rates during the period.

The Ascon figures on production growth rates in the cement industry reflected the predicament just as closely: the figure plummeted to 3.5 per cent between April and September from a heady 20.4 in the first six months of last year.

Fertiliser firms also reeled under the impact of a slowdown in demand. The growth rate in production was 5.8 per cent, sharply lower from 6.4 per cent in April-September 1999.

Automobiles — a sector that mirrors the industry mood like none else — was not unscathed. Growth rates were slower at 4 per cent compared with 12 per cent last year.

The production of cars declined 6 per cent compared with 39 per cent in the first half of last year; the output of medium and heavy commercial vehicles fell from a high 63 per cent to a negative 19 per cent, scooters from a negative 4 per cent in April-September 1999 to a negative 24 per cent in the first half of the current financial year.

The future does not appear rosy either. Cement, fertilisers and automobiles are expected to log growth rates below 10 per cent. Others in the industry likely to turn in poor numbers include processed food, pulp and paper, alcoholic beverages, cigarettes, tobacco and a range of alkali chemicals.

However, better times are predicted for pharmaceuticals, industrial furnaces and malted foods, all of which are expected to log high growth rates.

The impetus will continue to come from information technology, with growth in hardware seen between 30-40 per cent and that in software forecast at 50 per cent.    


 
 
GOVT FLASHES STAKE SALE SIGNAL FOR IA 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Sept 29: 
A day after the government formally put loss-making Air-India on the block, it sought bidders for its profitable domestic carrier—Indian Airlines.

The government sought expressions of interest (EoIs) from Indian companies keen to pick up a 26 per cent stake in the public sector airline, making it very clear that these companies have to be effectively owned and controlled by Indian nationals.

Strategic buyers can have up to 40 per cent foreign ownership but these stake holders should not be from among foreign airlines. They can, however, have technical tieups with foreign airlines in order “to seek airline business expertise”.

According to the bidding rules, the strategic partners should have a combined group net worth of over Rs 1,000 crore or $ 225 million.

The rules also bar rival domestic airlines—such as Sahara and Jet Airways—from participating in the bidding process for Indian Airlines. The logic given is that if either of the two take over Indian Airlines it would leave flyers to the mercy of a larger monopoly, defeating the very purpose of opening up the skies.

Incidentally, Air-India’s sale offer had also barred non-resident Indians (NRIs) from picking up stake as Indian companies. The combined impact of the two decisions is that Naresh Goyal controlled Jet Airways will not be able to participate in the IA sale and it can bid for Air-India only if it ties up with another Indian company.

Among the business houses that have indicated their willingness to buy into Indian Airlines are the Ambanis, Tatas and Hindujas. On the other hand, aviation giants Singapore Airlines, Air France, British Airways have shown interest for Air-India.

Apart from the 26 per cent stake on offer now to a strategic buyer, the government has plans to hawk another 25 per cent later to financial institutions, employees and public, reducing the net govenment holding to just 49 per cent.

Though beset with an ageing fleet, Indian Airlines is still the largest domestic airline and has one of the most extensive route networks any domestic Asian carrier has managed to build so far. The airline has a fleet of 55 aircraft, including 30 Airbus A-320s, operating nearly 270 flights a day to domestic and foreign destinations.    


 
 
STERLITE SET TO TAKE OPTIC FIBRE NETWORK PLUNGE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept 29: 
Sterlite Optical Technologies Ltd, formed by the demerger of the telecom business of Sterlite Industries (India) Ltd, is contemplating entering into separate joint ventures to set up optic fibre cable (OFC) networks in the country.

The move is in accordance with the company’s policy of moving up the value chain by emerging as a telecommunication infrastructure provider with optical fibres as the core area.

The company presently has a massive capacity of 141,000 cable kms of optic fibres. The new business areas identified include telecom turnkey solutions, network bandwidth and telecom software.

Senior company officials told The Telegraph that it is now trying to aggressively develop the export markets considering the upsurge in demand for optical fibre cables consequent to the emergence of broadband as a prime focus area as far as internet connectivity is concerned.

It has bagged orders around $ 75 million so far, to supply optical fibre cables to the US, UK and other Scandinavian countries. Officials estimate the order booking to even touch $ 150 million by the end of this fiscal. While Sterlite is presently bidding for the Railways’ plan to wire up the entire country with OFCs for broadband access, company circles did not rule out the possibilty of Sterlite even tying up with international companies for setting OFC networks in the country.

Industry reports say that both Alcatel and Lucent Technologies have evinced interest in teaming up with Sterlite in setting up such networks. However, this could not be confirmed from the company.

Apart from setting up such networks in the country, Sterlite also plans to create infrastructure for the department of telecommunications (DoT), Mahangar Telephone Nigam Ltd (MTNL) and other PSUs, besides putting in place turnkey telecom networks for basic service providers and large integrated voice and data networks.

The company is expecting a turnover of over Rs 3,000 crore by 2003.    


 
 
BPCL FLOTATION LIKELY IN FEB 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept 29: 
The planned public issue of Bharat Petroleum Corporation Ltd (BPCL), to fund the acquisitions of Kochi Refineries Ltd and IBP’s stake in Numaligarh Refineries, will bring down the Union government’s stake to 51 per cent from the present 66 per cent.

BPCL is planning to make a public issue of around Rs 500 crore to fund these acquisitions. Acccrding to senior company officials, the issue may be launched in February next year.

Speaking to reporters here on Thursday, BPCL chairman U. Sundararajan said the fate of the much delayed Rs 6,200 crore Bina refinery project of the public sector oil major with Oman Oil Company (OCC) in Madhya Pradesh would be decided on October 31.

“We have just completed a joint-review of the project’s profitabilty in the wake of increased costs and are waiting for a final answer,” he said.

Denying reports of OCC having lost interest in the six million tonne refinery due to several administrative hurdles and the consequtive delay, Sundararajan said, “Oman has not pulled out and we need Bina. It will enhance our presence in the north.”

He said four years had passed since the project was cleared and both the companies were taking a relook after which OCC would take a decision by October end.

The delay in setting up the refinery has increased its cost from Rs 5,300 crore to Rs 6,200 crore.

“As far as OCC’s stake is concerned, they may lower it from the current 26 per cent in the refinery+, a senior BPCL official said.

However, it has been given to understand that OCC was not keen on participation in Bina and was instead looking at the 10 million tonnes Jamnagar Refinery of Essar, likely to be commissioned next year.

Early this month, two oil majors Indian Oil Corporation (IOC) and Oil and Natural Gas Corporation (ONGC) had turned down BPCL’s proposal to pick up an equity in the project.    


 
 
EVEREADY BREAKS OFF TALKS WITH GILLETTE 
 
 
BY A STAFF REPORTER
 
Calcutta, Sept. 29: 
Eveready Industries Ltd (EIL), the Rs 840 crore tea-to-batteries conglomerate, has called off talks with the Gillette Company of the US after they failed to agree on the price for the sale of the battery division.

Eveready India chairman B.M. Khaitan said the brand had a tremendous intrinsic value for which it deserved a good price.

“Although the company has a high interest burden, there’s no way that we will go in for a distress sale of the battery division,” Khaitan said.

Gillette, which owns the Duracell brand of batteries, had initiated talks with EIL a few months back and sent a high level team to carry out a technical due diligence exercise at the Eveready plant.

Sources said Gillette’s offer was way short of the price that the Khaitans had in mind for the Eveready brand which is a market leader in the country. Media reports had earlier speculated that the ballpark figure that the Khaitans were looking at was around Rs 500 crore.

Sources said EIL heavy debt burden results in an interest outgo of over Rs 80 crore.

After EIL’s 65th annual general meeting, Khaitan told reporters that the company would continue to grow with battery which currently has over 43 per cent market share.

He added that an organisational restructuring was required to make the battery operations more profitable. He said the company would scout for for a strategic partner.

“ The company badly needs a strategic partner which can bring in investment so that the company’s debt can be restructured. This is essential for the proposed business restructuring proposal of the company,” sources added.

“We have decided to appoint a merchant banker to look into the feasibility of separating tea from the battery business because the two do not have any synergy,” Khaitan said.

The tea and battery businesses came under a single roof in 1996 when McLeod Russel was reverse merged with Eveready Industries. Khaitan has also indicated that the tea business of the Williamson Magor group is likely to be restructured.

“Everything, however, depends on the study of the merchant banker. Our effort is to focus on the core areas which is now the worldwide trend,” Khaitan said.

Addressing the shareholders, Khaitan said the board of directors is of the opinion that for higher level of growth and sustained development, batteries should seek participation of strategic partners or investors with international connections.

Regarding the tea business, he felt that the acquisition or merger routes could be thought of for one or more existing profit making tea companies , which will result in significant benefit for the tea business of EIL.

The company is now focusing on packet tea which is being marketed under three brands — Tez, Premium Gold and Jaago.

Khaitan said the branding exercise should improve the prospects for the tea business.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.04	HK $1	Rs. 5.85*
UK £1	Rs. 67.47	SW Fr 1	Rs. 26.25*
Euro	Rs. 40.54	Sing $1	Rs. 26.10*
Yen 100	Rs. 42.67	Aus $1	Rs. 24.70*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta	Bombay

Gold Std (10gm)	Rs. 4610	Gold Std (10 gm	4535
Gold 22 carat	Rs. 4355	Gold 22 carat	4195
Silver bar (Kg)	Rs.8050	Silver (Kg)	8125
Silver portion	Rs. 8150	Silver portion	8130

Stock Indices

Sensex	4090.38		23.00
BSE-100	2075.67		+8.09
S&P CNX Nifty	1271.65		+5.25
Calcutta	113.06		+1.17
Skindia GDRNA	NA		-
   
 

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