RBI wants update on loan defaulters
$ 550m credit to Reliance Petro for crude import
Unit Trust grooms Rajlakshmi successor
Infotech to get priority in Indo-Russian trade tie
Lubricant firmsgear up to raise prices
IBP, Balmer may swap wings

New Delhi, Oct 2: 
The Reserve Bank of India (RBI) has asked banks and financial institutions (FIs) to update their list of defaulting firms, and sought the names of current directors in companies which owe banks Rs 1 crore and above in unpaid loans.

The apex bank has asked for the new updated list of directors so that action can be taken against top brass of companies. The move comes after several cases of siphoning off of funds by company promoters and directors, which has led to an increase in non-performing assets (NPAs). “These steps will help bring about greater accountability among directors,” bankers said.

Banks have also been asked to verify the details about the current directors with the registrar of companies (RoC). At present, there are several instances where the names of directors who have retired or given up their positions — not the existing ones, as the case should be — appear on the defaulting companies’ lists circulated by the Reserve Bank.

However, that does not mean the previous directors of a defaulting company can dodge the law. In order to alert banks and FIs against directors who may have taken positions on the boards of other firms, banks have been told to furnish information about the directors who were associated with a company when the account was classified as a ‘defaulting’ one. This will not apply to nominee directors appointed by the government, banks and financial institutions.

The central bank also said professional directors, such as chartered accountants, should not be considered on par with promoter directors or directors who are promoters’ family members/relatives, or those who are involved in day-to-day management, unless they have an interest or stake in the company.

However, banks should clearly mark them out as ‘professional directors’ to differentiate them from others.

In the case of government undertakings, the names of directors should not be reported. Instead, a legend specifying the ‘Government of India/state Undertaking’ should be inserted.

These steps have been taken to check the increase in non-performing assets (NPAs) and to bring the corrupt directors to book. Banks and financial institutions have even been asked to include a contractual clause that would allow the RBI to make the names of defaulting borrowers public.

The apex bank has come out with a one-time settlement scheme for NPAs up to Rs 5 crore. For higher amounts, it has asked the chairmen and managing directors of boards to personally supervise them on a case by case basis.

All cases would be dealt with individually. The remedial measures could include rehabilitation, restructuring or a one time-settlement worked out by the boards of various banks.    

Mumbai, Oct 2: 
Reliance Petroleum Ltd (RPL) has concluded Asia’s largest syndicated letter of credit facility, availing $ 550 million (Rs 2,500 crore) from a clutch of banks.

Banking circles said that following a solid response from the subscribing banks, RPL had to exercise the greenshoe option amounting to $ 100 million, resulting in it availing the amount against the targeted amount of $ 450 million.

The issue, which was heavily over-subscribed, saw banks like ABN Amro, Citibank, HSBC, Standard Chartered, Bank of Baroda (BoB), Punjab National Bank and Syndicate Bank subscribing to the Letter of Credit.

RPL will use the LoC facility to import crude oil for its mammoth 27 million tonne refinery situated at Jamnagar in Gujarat. At current crude prices, RPL’s import bill is estimated in the region of $ 5 to 6 billion or a whopping Rs 25,000 to Rs 30,000 crore.

Banking sources added that RPL was able to secure a fine pricing for the facility at an all-in cost of below 35 basis points. They pointed out that this was remarkable considering the fact that RPL had started commercial production only six months ago and it is yet to announce fully operational results.

“The fine pricing also reflected strong fundamentals and outlook apart from the good quarter results clocked in the first quarter’’, a banking official told The Telegraph.

RPL, which is scheduled to announce its half-yearly results on October 30, posted a sales turnover of Rs 5,983 crore and a net profit of Rs 324 crore for the first quarter. Based on full year operations, the company is expected to meet the targeted turnover of over Rs 22,000 crore for the fiscal year and join its parent Reliance Industries Ltd (RIL) among the ranks of India’s top two private sector companies in terms of sales and profits.

While RPL has an agreement with public sector oil companies under which the latter will lift the controlled products, it has applied for marketing rights. The 27 million tonne project which is the world’s largest grassroots refinery, saw the Reliance group pumping an investment of over Rs 24,000 crore in the entire project. Annual output at the refinery is expected to be of the order of Rs 28,000 crore.

At present, the Reliance group holds around 64 per cent of the equity, international investors 7 per cent, domestic financial institutions around 9 per cent and retail public almost 20 per cent. Recent reports indicate that the value of RIL’s investment in RPL, has appreciated by over 181 per cent, translating into unrealised capital gains of over Rs. 11,300 crore (US$ 2.5 billion) for the shareholders of RIL. The company holds a 13 per cent stake in Petronet V K Ltd, owning the Vadinar Kandla pipeline.    

Mumbai, Oct 2: 
Unfazed by the recent string of court cases filed against the closure of the Rajlakshmi scheme, Unit Trust of India (UTI) has devised a new plan for the girl child, called the Millennium Grihalakshmi Unit Plan (MGUP).

The Securities and Exchange Board of India (Sebi), the capital market regulator, last week allowed the mutual fund major to launch the scheme, senior UTI executive director Brij Gopal Daga told The Telegraph. “We are in the process of fine-tuning it in consultation with several agencies. We hope to launch the scheme by the second week of November,” he added. The new scheme has three unique options thrown in to attract investments from parents and guardians of the girl child, the most striking of which is the ‘Gold Redemption Option’.

The option — which is proposed to be included in the scheme once all arrangements are in place — will give investors the choice to receive repurchase proceeds, subject to the stipulation of deferred sales charges. The mutual fund major is now looking into several problems — most of which are logistical in nature — that can arise due to the option. UTI has also thought up a ‘festival cash option’, under which an investor can opt for the redeem a portion of the amount that has appreciated over the period of a year. What makes it attractive is that one can get the cash in the festival seasons.

Under the option, units can be purchased by an applicant for the purpose of gifting them to an adult female on special occasions such as birthdays, marriage or on festivals like Deepavali, Raksha Bandhan, Christmas, Ramzan-Id, Onam, Pongal, Makar Sankranti, Ugadi and Baisakhi. The option can also be exercised by the member at the time of summer holidays for a school-going girl child or when the school re-opens.

The third option is more of the vanilla variety called the ‘Growth option’. Investors can repurchase holdings, partially or fully, depending on when the girl wants to have the money. However, this will be subject to terms of the deferred sales charges.

The minimum amount that must be invested in the scheme is Rs 5,000. The pre-denominated gifts will be available in amounts ranging from Rs 1,100, Rs 2,100 and Rs 5,100.    

New Delhi, Oct 2: 
New Economy sectors, such as of infotech, pharma and biotechnology, have been identified as potential areas for bilateral cooperation between India and Russia.

According to industry sources, India’s vast pool of trained technical manpower could be leveraged against Russia’s hardware design strengths. Besides both countries have a vast wealth of biotech resources which could be commercialised. In the pharma sector, many Indian companies have already made inroads into the Russian markets by acquiring companies there.

Russian president Vladamir Putin will chart out the course of Indo-Russian economic cooperation when he addresses over 350 leading Indian industrialists at a joint business meeting in Mumbai this week.

Finance Minister Yashwant Sinha will chair the business meeting, which is being jointly organised by CII and Ficci. The meeting would focus on strengthening economic ties, particularly in areas of financial services, information technology, biotechnology and pharmaceuticals.    

Mumbai, Oct 2: 
Public sector oil companies are contemplating to hike the prices of lubricants following a rapid surge in the costs of base oil. Prices of the raw material have climbed up to Rs 20,000 per tonne and are still northward bound. On an average, the prices are rising by Rs 600 per tonne every month. Confirming that an upward revision is round the corner, sources from one of the oil giants told The Telegraph that “considering the spiralling rise in base oil, there is a good case for lubricant prices to go up. We are planning a hike shortly.”

Though the exact quantum of the hike is not known, it is believed to be raised by at least Rs 4,000 per tonne. The upsurge in base oil which follows the escalation of crude oil prices, has resulted in domestic refineries purchasing base oil at Rs 20,000 per tonne from Rs 11,000 per tonne in June 1999.

However, the possibility of a price hike comes as a surprise because the sector is now crowded with as many as 37 players trying to woo the retail customer. The presence of too many players has resulted in a situation of supply often exceeding demand and the market growing at a “sluggish” rate of around 4 per cent per annum.

The Indian Oil Corporation (IOC) with its Servo brand is the market leader with a share of around 43 per cent.

While analysts still doubt a price hike, sources in the industry confirm that considering the significant weightage of base oil in the overall production costs, a price hike is imminent.

Due to the tough competition companies focus on brand positioning through improved customer service and enhanced direct distribution. Recently, Castrol India relaunched its premier brand, Castrol CRB Plus. It has decided to concentrate on better marketing initiatives and the use of convenient packaging.

Companies are also entering into strategic alliances with car, truck and two wheeler manufacturers to develop products as per the vehicles’ requirement and to market these in partnership with the auto majors.    

Calcutta, Oct 2: 
IBP Ltd, the Rs 6,800 crore stand-alone oil marketing company, is planning to acquire the lubricant division of its subsidiary, Balmer Lawrie & Co.

The proposal, if approved, will make the Calcutta-based public sector company the third largest lubricant seller in the domestic market after Indian Oil and Castrol India. At the same time, there are plans to transfer IBP’s engineering businesses to Balmer Lawrie.

A senior IBP official said the move is contemplated to strengthen the core competencies of both the companies.

“It is difficult for Balmer Lawrie to grow its lubricant division without IBP’s support in a market where more than 20 brands are competing. At the same time, the engineering business does not belong to our core areas. Engineering can achieve its best growth in Balmer Lawrie,” he said.

The proposal, if approved by the IBP board, will be sent to the government for final clearance, he added.

IBP wants the business restructuring plan to be approved by the government before any decision is taken regarding disinvestment in the company.

Balmer Lawrie’s lubricant brand — Balmerol, which was relaunched in April 1999, recorded a 8 per cent growth. The company has four plants at Silvassa, Calcutta, Mumbai and Chennai.

The company has made substantial investment over the last couple of years to modernise all its lube plants.

On the other hand, IBP’s flagship lube brand — IBP Red has registered a 11 per cent growth last year by selling 33,679 metric tonnes of lubes.

IBP has also introduced two other brands, IBP Dot 3 and IBP Cool. The company has 150 exclusive lube shops.

Petroleum and lubes business contribute 90 per cent of the business to the company. Presently, IBP has two other divisions, chemical and engineering. It is planning to hive off engineering and chemical business units into separate companies before they could be either sold off or put into joint ventures.

A decision has been taken regarding the chemical division. Sources said this division had incurred a loss of Rs 26 crore in 1999-2000 on a turnover of Rs 120 crore. IBP will bear the restructuring cost, which is around Rs 50 crore, for the chemical division.

The oil major is believed to be in talks with multinational chemical giant Oreka through ICI and Hinduja-owned IDL Ltd for equity participation in the proposed chemical company.

Regarding the engineering unit, a decision may be taken in the next board meeting. This division recorded 8 per cent growth at Rs 16.06 crore in 1999-2000, which is microscopic considering the overall turnover of the oil major.

The engineering and project division of Balmer Lawrie registered a turnover of Rs 44 crore during the same period.    


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