Industry clampdown on investment
Sinha rules out growth target review
SBI millennium scheme to give US a miss
CII expects cut in interest rate
Bajaj Auto blamed for slide in ICICI
Icra sees high mortality rate for dotcoms
Basic-cellular cross-connection
Foreign Exchange, Bullion, Stock Indices

 
 
INDUSTRY CLAMPDOWN ON INVESTMENT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 9: 
The dog days are here again. With industrial growth skittering to 5.4 per cent in the first quarter of 2000-01 from 5.9 per cent in the year-ago period, corporates are becoming increasingly tight fisted. There is a downbeat mood within industry and not even one corporate is funnelling cash into a greenfield project, says a quick survey carried out by the Federation of Indian Chambers of Commerce and Industry (Ficci).

“The little that is being invested is confined to improving existing plant and machinery and that too thinly spread over to next two-three years,” says the Ficci survey which was released here today. The survey shows that the sharpest decline has been in the capital goods sector which decelerated to -0.3 per cent compared with a healthy growth rate of 11.6 per cent last year.

The slowdown is being mainly attributed to the lack of demand, increased competition from cheaper imports, inability to pass on increase in costs and an uncertain policy environment.

Ficci president G.P Goenka said, “The Indian economy is witnessing exponential growth of the unorganised and parallel manufacturing units because of the high incidence of sales tax and excise duty.” These units remain outside the pale because they do neither pay sales tax or excise duty, nor do they pay industrial tariff for power consumption.

Corporates feel that the low levels of investment was due to general feeling of instability and uncertainty in the economy arising from the increase in energy costs, high interest rates and costs of capital, lack of infrastructure and slow process of decision making.

More than 79 per cent of the respondents of the survey felt that government must increase investment to p-prime the economy. But government investment should be confined to the infrastructure sector. Goenka said that once the government shovels funds into the core areas such as cement, steel, the capital goods industry will receive a boost.

Goenka said Indian industry is feeling the pinch of cheaper imports and dumping. With the lowering of tariffs and removal of non-tariff barriers, Indian industry is not in a position to raise prices while its costs of production are rising.

Goenka said measures such as increasing investment in critical sectors like infrastructure would improve the recovery process. Ficci has suggested immediate rationalisation and lowering of rates of sales tax and introduction of VAT. On imports , Goenka said, “We need to take a re-look at non tariff barriers and tariff escalation options within the permissible WTO bounds.”

He said the banks and financial institutions should change their attitude towards lending and said there was a strong need to re-look at the costs of borrowings. Goenka said the banks were hesitant in lending to sectors which are on a decline and said they were more worried about their own NPAs.

Ficci has recommended the setting up a task force to suggest policy measures for sustaining growth of the agricultural sector so that periodical ups and downs do not impact the overall economy.

Meanwhile, the Ficci SEDF-Businessworld-Compaq award was given to Tata Engineering and Locomotive Company Ltd (Telco), while the runner-up award was presented to Chennai-based South India Corporation Ltd. Ultra Marine & Pigments Ltd was the second runner up.    


 
 
SINHA RULES OUT GROWTH TARGET REVIEW 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 9: 
Finance Minister Yashwant Sinha said today the government would not immediately revise the economic growth target following industrial slowdown while admitting that the recent hike in petro-products had impacted the economy and business sentiments.

“I am not revising it (economic growth target) as yet. Let me go into this question and then we will decide,” Sinha told newsmen on the sidelines of Ficci Socio-Economic Development, Businessworld and Compaq’s social responsiveness awards ceremony.

Sinha said, “There is an impact of the recent price hike of petro-products on the economy and economic sentiments.” The minister, however, said it (price hike) was totally unexpected but “looks like it is behind us and not in front of us.”

Sinha had projected a 7 to 8 per cent growth in gross domestic products (GDP) in the current fiscal. The gross domestic product growth slowed down to 5.8 per cent in April-June of 2000-01 compared with 6.9 per cent in the same period of the previous year.

He had earlier said the government would examine the recent industrial slowdown and take “corrective steps” if needed and emphasised that he would have in-depth discussions with the chambers of commerce and concerned ministries to find out the reasons for slowdown in the industrial growth.    


 
 
SBI MILLENNIUM SCHEME TO GIVE US A MISS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct 9: 
State Bank of India has decided to give the US a miss during its new round of funds shopping binge. According to SBI chairman G. G. Vaidya, the bank will not “implement” its much-talked-about India Millennium Deposit scheme in the US because of the time factor.

The five-year foreign currency denominated deposit is aiming to raise $ 2 billion (Rs 9,000 crore). The bank plans to invest 40 per cent of the amount in government securities while the remaining amount will be used to finance infrastructure projects.

Vaidya said the bank had been advised by its US counsel that regulatory clearances to implement the IMD programme in that country would require more time than the proposed time frame for this programme. “Accordingly, the IMD programme will not be implemented in the US,” he said.

The scheme, to be launched on October 21, is targeted at the non-resident Indian (NRI) community. It will be denominated in US dollar, pound sterling and euro and will carry interest rates of 8.50 per cent, 7.85 per cent and 6.85 per cent, payable half-yearly, in the three currencies respectively.

The deposit scheme, will be in the nature of certificates of deposit, which is transferable by endorsement and delivery. It will be open for a period of 30 days, but can be closed on any date prior to this period at the discretion of the SBI and it will be only launched in those countries where approval has been given.

According to Vaidya, the cost of raising IMD will be cheaper than that of Resurgent India Bonds (RIBs). While the RIBs were procured at 7.75 per cent (2.25 per cent over the then six month Libor), the IMD at 8.50 per cent will be only 1.75 per cent over the six month Libor.

Vaidya said the bank would retain any excess funds above the core amount depending on market circumstances.

Though the ratio of how much foreign currencies would be converted into rupees has not yet been decided, the SBI chief said that besides funding infrastructure projects, the money would be utilised to fund foreign operations of the bank.

While 40 per cent of the proceeds will be parked in government securities, 50 per cent will be with various banks which will help SBI in mobilising deposits. For such banks, the SBI would on-lend funds at an interest rates of 10 per cent.    


 
 
CII EXPECTS CUT IN INTEREST RATE 
 
 
OUR BUREAUX
 
Oct 9: 
The Confederation of Indian Industry (CII) is expecting a cut in interest rates in the credit policy to be announced tomorrow, its president Arun Bharat Ram said today.

“We hope Reserve Bank of India will look at reducing the interest rate and thereby help increase investments and boost industrial growth,” Bharat Ram told newspersons on the sidelines of a meeting with finance minister Yashwant Sinha here.

“We also hope that steps would be taken to ensure that government borrowings do not cloud private borrowings,” he added.

Meanwhile, financial institutions and other stock market operators preferred to play a wait-and-watch game on the eve lean season credit policy and announcement of second quarter results of two infotech majors —Infosys and Satyam.

The first day of the new settlement saw the benchmark 30-share BSE sensex shedding 36 points in dull trading.

The proposed rolling settlement that had taken a heavy toll on the stocks in the previous week, continued to affect the market sentiment with operators gradually winding up their outstanding positions before the new system is introduced in the near future.

The sensex opened slightly up at 4106.15 and zigzagged in a restricted range of 4135.16 and 4055.42 before closing at 4056.07 as against Friday’s close of 4092.42, a loss of 36.35 points.

Telco hit the ten-year low of Rs 77 during the trading while other key scrips like Grasim, L&T and NIIT touched 52-week low due to sustained selling pressure.

The market leader Infosys edged up by 8.90 to Rs 7398.55. Satyam computer was up by Rs 3.80 at Rs 489.30.

However, HFCL dipped by 5.30 to 1253.95, HLL by 9.25 to 205, Grasim by 19.60 to 177.40, GACL by 7.45 to 152.10, Bajaj Auto by 8.95 to Rs 314.60, L&T by 4.90 to Rs 160.75, M&M by 5.70 to Rs 166.60, Niit by 22.35 to1375.60 and Novartis by 12.75 to 758.70.    


 
 
BAJAJ AUTO BLAMED FOR SLIDE IN ICICI 
 
 
FROM SATISH JOHN
 
Mumbai, Oct 9: 
ICICI Ltd, the financial institution which is seeking to metamorphose into a commercial bank through a reverse merger with its banking subsidiary ICICI Bank, has seen its stock plumb new lows ever since it made a presentation in this regard to the Reserve Bank.

While brokers and a section of the press have attributed this as a sign that the market is generally sending out a thumbs-down signal to the ICICI proposal triggered by a recent research report on the quality of its assets, it now appears that the villain of the piece could be the two-wheeler giant- Bajaj Auto Ltd (BAL).

“The stutter in ICICI share prices has been precipitated by the fact that Bajaj Auto has unloaded a major portion of its holding in the company,” said a broker tracking the FI stock.

While its peers IDBI and IFCI received poor discounting in the market, ICICI was weighed on a different scale mainly because of its stress on technology and its pro-active image in the market, the broker said. The rise in ICICI share price was also attributed to the steady accumulation of its shares by Bajaj Auto, primarily with investment objective.

Brokers said Bajaj Auto’s investment in ICICI has paid-off as it had bought the scrip at very low levels from 1998-99 onwards.

The selloff is being attributed to the two-wheeler major’s buyback of its own share at an attractive price of Rs 400 per share. It needs cash to honour its commitments. To fulfil the legal requirements for its buyback offer, Bajaj Auto had to deposit Rs 7.2 crore in cash. The company also deposited “acceptable securities” valued at Rs 123 crore, which is 17.08 per cent of the maximum offer size, with the manager to the offer — Khandwala Securities Ltd.

The securities deposited are ICICI shares, a senior official at Bajaj Auto told The Telegraph. Although it did not indicate the type of securities deposited with the manager to the offer, the company had mentioned in its offer document that Khandwala Securities had been empowered to realise the value of the escrow account “by sale or otherwise”.

Bajaj Auto has surplus funds of over Rs 2400 crore which are deployed in inter-corporate deposits and investment in various securities, including marketable and liquid financial instruments.

Officials at Bajaj Auto say the offer which closed on October 6, this month itself the company has received two crore shares for buyback in the dematerialised category against the targeted quantity of 1.8 crore shares. In addition, shares in the physical category are still being counted by the bankers to the offer, the official said.    


 
 
ICRA SEES HIGH MORTALITY RATE FOR DOTCOMS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 9: 
The Indian Internet Business Report (September 2000) prepared by Icra predicts that only five to 10 per cent of the existing dotcoms are likely to survive over the next five years and the web will change business practices in the domestic market though it can never replace the brick and mortar business. Icra’s message to the ad world is that the internet will command 10-fold increase in expenditure in the next five years

The study projects that the domestic internet subscriber base will increase from 0.85 million in fiscal 2000 to 8.3 million by 2005. In the same time span internet user base is likely to increase from 3.9 million to 21.5 million.

On-line ad expenditure is expected to increase from Rs 70 million in financial year 2000 to Rs 860 million by 2005. However, “growth of online advertising will be fuelled by growth of online commerce,” said Navroze Dhondy, CEO of Percept Advertising.

Some feel that the ad spend may be more than this prediction. Sreekant Khandekar of agencyfaqs.com , a vertical portal for the advertisement fraternity, felt that 860 million after five years is an underestimation.

Icra expects the aggregate value of domestic e-commerce business to increase from Rs 4.7 billion this year to Rs 252 billion after five years. B2B commerce is going to account for over 90 percent of the total turnover.

According to the study, the four broad success factors in the internet business are customer service, technological edge, cost competitiveness and marketing efficiency and network.

With the increase of online ad spend and e-commerce, a shake out of the content providers seem inevitable. ICRA predicts a decline in the margins of the pure internet service providers owing to severe competition. Alternative revenue stream may come to their rescue.

Penetration level of internet and usage patterns are likely to be transformed with the emergence of broadband and the ASP (Application Service Provider) in future.    


 
 
BASIC-CELLULAR CROSS-CONNECTION 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 9: 
Cellular and basic telecom operators in the country are fast getting entangled in operational skirmishes.

While the fixed line operators are planning to offer mobile services in a limited area, the cellular operators have vehemently opposed the move.

According to the Cellular Operators Association of India (COAI), the umbrella organisation for mobile players, “limited mobility” proposed to be provided by fixed line operators to its consumers “violates the level playing field” and the original licence condition did not allow any mobility to fixed line operators.

On the other hand, the Association of Basic Telecom Operators (ABTO), the apex body of the fixed line service providers, claimed that with the migration to the National Telecom Policy (NTP) 1999 and the government giving free hand on technology choice to offer any telecom service, it was within the rules to offer limited mobility at a lower tariff.

COAI had suggested a single licence with same conditions and same charges for interconnection and access connection.

ABTO secretary S.C. Khanna, said, “The NTP has removed all artificial barriers that had bogged down this industry over the past five years. The most important being technology neutrality.”

“It would be very harmful for consumers if affordable services and features like mobility are to be denied when the same infrastructure can easily provide such services,” he added.

Khanna claimed that mobility is essentially an extension of basic services through gainful exploitation of wireless in local loop (WiLL) technology.

He said, “It is impossible to meet rural demand through conventional landline routes. Hence wireless technology is the only viable solution to penetrate rural masses.”

“Mobile WiLL handheld sets being more cost effective than the landline or fixed remote stations will bring about affordability and create demand for basic telephone services.”

ABTO has urged the government not to “impose restrictions on deployment of new technologies.”

Like COAI, which had recently invited Mahanagar Telephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited (BSNL) to join the association, ABTO also extended an invitation to both companies to join them.

Both associations feels MTNL and BSNL would play a major role in inducting more subscribers during the next few years along with the existing operators.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.09	HK $1	Rs. 5.85*
UK £1	Rs. 66.75	SW Fr 1	Rs. 26.00*
Euro	Rs. 40.13	Sing $1	Rs. 26.00*
Yen 100	Rs. 42.30	Aus $1	Rs. 24.25*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta	Bombay

Gold Std (10gm)	Rs. 4545	Gold Std (10 gm	4520
Gold 22 carat	Rs. 4290	Gold 22 carat	4180
Silver bar (Kg)	Rs.7975	Silver (Kg)	8100
Silver portion	Rs. 8075	Silver portion	8105

Stock Indices

Sensex	4056.07		-36.35
BSE-100	2030.28		-20.01
S&P CNX Nifty	1267.30		-17.70
Calcutta	111.39		-2.28
Skindia GDRNA	615.74		-3.39
   
 

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