Reliance at buyback trigger point
Auction route for PSU selloff
L&T shareholders to get 25% in cement outfit
Meet on power policy today
HM sees profit next fiscal
SBI to raise Rs 1400 cr to meet capital adequacy
Fast buck
Enron Oil pullout signal
Tisco net profit soars 140% in first half
Foreign Exchange, Bullion, Stock Indices

 
 
RELIANCE AT BUYBACK TRIGGER POINT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct 18: 
The Reliance scrip today dipped below the Rs 300-mark on the Bombay Stock Exchange (BSE) as expectations over whether the company would start buying back its shares in tune with an April announcement peaked across bourses.

The company — one of the youngest and nimblest in corporate India and a darling of millions of loyal shareholders in the country and abroad — had said six months back that it had set aside Rs 1,100 crore for share buyback, but made it clear that it would do so at a price not higher than Rs 303. However, the price had left much of the market cold.

So, when the scrip closed at Rs 298.30 today, the market was awash with speculation that the Ambani flagship would start the buyback, and in the process, help breathe new life into a stock market that is being overrun by sellers.

The company did not appear in a hurry though. A spokesperson said the buyback price of Rs 303 was only indicative in nature — not a compulsion to launch the process immediately. The shares can be purchased within a year.

Analysts say one of the reasons that could hold back the company from kicking off the buyback— the largest ever in corporate India — right away is the uncertainty over the depths that a falling market could plumb in the near future.

They are not sure if a buyback, even of a size promised by Reliance, will reverse the downtrend.

Their argument is that open offers by a host of companies — Bajaj Auto, Aditya Birla group’s for Indal and the recent Philips India open offer — have not prevented the near-daily slide in share prices.

However, there is another section within the market which feels that the Ambani operation will perk up the sentiment, and buoy share prices. “It would restore confidence, which is currently lacking in the marketplace,” a dealer said. They cite the case of IBM, which lifted the sagging American markets when it mounted a buyback several years ago.

The other reason why many in the broking community expect the buyback to catalyse a stock rally is the fact that the shares in this case will be purchased from the open market, not the book-building route or tender-price mechanism.

While announcing that his company would buy back its shares, Reliance managing director Anil Ambani had said one the major objectives was to tackle the volatility in the share, and to rein in speculators who use it as a ‘hedge stock’.

“Reliance Industries will reward shareholders by returning cash to them. We will endeavour to protect the interests of our long-term shareholders, and neutralise the impact of speculative forces by the judicious exercise of share buyback within the specified price. This will help contribute to the maximisation of shareholder value,” he is reported to have told newspersons during a presentation in April.

Reliance had argued the buyback would help attract long-term investors, apart from providing a floor price for the stock, which was being clobbered under a wave of speculative attacks.

“We want to achieve higher all-round valuation, so that the stock can be used as a currency for acquisitions. The other aim is to win a re-rating for the stock by sending a powerful signal that it is under-valued,” Ambani said.

There has been a strong perception in stock market circles that the real intention behind the Reliance group’s buyback announcement was to set a floor price of Rs 303, and to show that the company remains committed to long-term investors.    


 
 
AUCTION ROUTE FOR PSU SELLOFF 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 18: 
The government today said it is was in favour of open bidding for the privatisation of public sector units, instead of inviting price bids through sealed tenders.

Union minister for disinvestment Arun Shourie said, “We will go for open bidding or auctioning. We have got the approval from the Central Vigilance Commission for this process.” However, a formal clearance would be taken from the Cabinet.

“In fact the open bidding system would enable us to put the highest bid as the bench mark and others could be allowed to better this bid in a given time frame,” he added.

The minister said the government would continue its dialogue with the RSS, Swadeshi Jagran Manch and Congress to explain its viewpoint on privatisation in various PSUs.

Admitting that even members of the Sangh Parivar had differing views on the privatisation process, Shourie said government “Will continue to put before them its point of view.”

Sangh representatives, including K Sudershan and S Gurumurthy, had met Shourie to point out their objections to global tendering of IBP Ltd’s stock. The Sangh wants to keep retailing out of the purview of multinationals and IBP has a large chain of retail petroleum outlets.

Shourie replied that IBP sale had to be tendered globally to avoid creation of monopolies had thwarted their opposition.

However, the open bidding system would not necessarily be followed while selling stock in all PSUs, cautioned Shourie.

While it would be the preferred route in Air-India, this may not be used in cases like Indian Petrochemical Corporation Ltd (IPCL). Indian Oil Corporation chief M A Pathan had met him and expressed reservations about open bidding in IPCL case, he added.

Pathan had asked the government not to resort to open bidding as the present decision making process in PSUs would not allow it to take part in open bidding. This would put IOC at a disadvantageous position vis-à-vis Reliance which is the other shortlisted bidder.    


 
 
L&T SHAREHOLDERS TO GET 25% IN CEMENT OUTFIT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct 18: 
Larsen & Toubro (L&T) today approved the demerger of its cement business into L&T Cement Ltd (LTCL). The new company, in which L&T shareholders will have a 25 per cent stake, will be listed on the bourses.

L&T, in a late evening press communiqué, said that the move to demerge its cement operations was aimed at unlocking maximum value for shareholders and to meet LTCL’s capital requirements for growth.

The statement added that L&T would invite a strategic financial partner, who would reach a level of equal shareholding with it through a combination of secondary market purchases and infusion of capital in LTCL over a period of time.

In another significant announcement, the company said it will consider a proposal to merge its subsidiary Narmada Cement Co Ltd with LTCL, subject to the approval of the board and shareholders of NCCL.

At today’s board meeting held to discuss the demerger, L&T’s investment bankers DSP Merrill Lynch and JP Morgan presented their broad recommendations on the demerger plan.

The process of demerger of its cement business had commenced with the board having earlier given its approval to the plan. It had also directed the management to come up with a detailed structure for the cement company.

Further, the US-based Boston Consulting group hired to advise L&T on maximising shareholder value, had been given a clear mandate to propose definitive measures for value creation through accelerated growth and enhanced profitability.

BCG was entrusted with the task of advising the company on a possible restructuring plan after an in-depth review of its business portfolio.

Regarding the restructuring moves within the company, managing director A M Naik had earlier stated that the company had appointed seven task forces to look at its various businesses.

Besides, they will ‘review the portfolio’ and outline growth in tune with his Vision 2005 plan (which envisages a turnover of Rs 25,000 crore). The task forces are slated to submit their report by the end of this month.

These task forces would also suggest measures to improve L&T’s market capitalisation. Some of the sectors in which the task forces have been constituted include cement, management information systems, power and infrastructure ventures, energy and construction, besides telecommunications and electronics.    


 
 
MEET ON POWER POLICY TODAY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 18: 
In a bid to hasten the financial closure of various independent power projects, Union power minister Suresh Prabhu will take up the issue of reformulating the power policy with finance minister Yashwant Sinha tomorrow.

The meeting is also expected to discuss the increase in power tariffs effected by liquid fuel-based power projects.

Among other issues, the meeting will examine pending policy matters which need to be taken up in the next session of Parliament.

Speaking at the Economic Editors’ Conference, Prabhu said, “India would need Rs 800,000 crore to add one lakh megawatt of power over the next 12 years. Of this, about Rs 80,000 crore will have to come through foreign direct investment and independent power producers.”

Prabhu also invited power companies to invest in power transmission. “The World Bank chief is expected to be in India by mid-November. We will impress upon him the need to extend concessional credit to power projects in India, which will enable several of them to achieve financial closure,” he added.    


 
 
HM SEES PROFIT NEXT FISCAL 
 
 
BY A STAFF REPORTER
 
Calcutta, Oct 18: 
Hindustan Motors, the C.K. Birla flagship, is hoping to substantially cut its losses and expects to post a 20 per cent growth in turnover in the current year.

The newly-appointed president B. K. Chaturvedi is hopeful that the company will start generating profit from the 2001-02 fiscal.

Addressing a press conference here today, Chaturvedi said, “Our main focus is to increase the annual sales to 30,000 units. The target for the current year is 2

3,000 cars, against 18,000 cars last year. At present, average sales are around 2,000 cars per month. Our target is to sell 2,500 cars per month.’’

Chaturvedi said the company will focus on the semi-urban and district towns for its cars, be it the flagship Ambassador brand, Trekker or its rural transport vehicle (RTV).    


 
 
SBI TO RAISE RS 1400 CR TO MEET CAPITAL ADEQUACY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 18: 
State Bank of India (SBI) will be raising about Rs 1400 crore through debenture issues by March next year to meet capital adequacy norms prescribed by the Reserve Bank of India (RBI). This was announced by the bank chairman G.G. Vaidya today.

Vaidya said, “SBI needs between Rs 7000-8000 crore as capital over the next four years. Right now our shares are trading low, so we prefer to raise capital through subordinate debt. It is cheaper to service it.”

Vaidya, who was here to unveil the India Millennium Deposit (IMD) scheme, said SBI had received assurances from its bond marketers that it would be able to raise $ 5 billion through its latest international offering.

On the bank’s future plans, Vaidya said it would soon finalise plans to computerise its network, amalgamate associate banks and select a multinational partner for its insurance venture.    


 
 
FAST BUCK 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 18: 
The SBI Millennium deposit scheme could well be an NRI’s millennium chance to mint money without actually locking it in with the bank.

An NRI in Europe who deposits $ 1 million today at an interest rate of 8.5 per cent, can borrow up to $ 1 million against this, soon afterwards. On this loan against his deposit he will have to pay the going market interest rate in that country, which would be something over the Libor rate and should work out to about 7.5-7.75 per cent.

Thus, while withdrawing part of his deposit, he will still be earning about one per cent interest.    


 
 
ENRON OIL PULLOUT SIGNAL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct 18: 
Global energy major Enron Oil & Gas is planning to exit from the Panna, Mukta and Tapti oil and gas fields, where it is a partner in a consortium comprising Reliance Industries Ltd and the Oil & Natural Gas Corporation (ONGC).

Enron in a statement issued today later said that the “sale of the oil and gas assets under consideration constitutes our annual rebalancing of assets.”

Industry sources added that Enron could making its way out of the project as part of the multinational’s global strategy to exit from oil exploration and production ventures.

While ONGC holds 40 per cent in the venture, both Enron and Reliance hold 30 per cent each. Though it is believed that the company may offload its stake to Reliance at a later stage, both Enron and Reliance officials declined to comment on the issue. According to estimates, the value of the 30 per cent stake of both Reliance and Enron in the venture is over Rs 3,000 crore each.

Earlier, the consortium of RIL, Enron and ONGC, had submitted a proposal to the government for increasing the production of gas from the Tapti fields from five to 20 cubic million metres of gas per day at a cost of about Rs 4,000 crore.

Reports about Enron’s possible exit from the joint venture come at a time when disputes are pending between the partners over the costs incurred in the project.

Both Reliance and Enron are the operating partners in the oil and gas fields.

Enron added that it remained strongly committed to its Indian operations and that it has over $ 3 billion by way of investments in the country in addition to its oil and gas assets.

The company said it is in the process of making additional investments in developing gas pipelines, trading operations and developing infrastructure for communications.

In India, Enron has also been looking aggressively at the new economy sector. Sources said that this follows its strategic shift from a traditional brick-and-mortar company to one seeking to carve a niche in the sunrise infotech sector.

In the US, the company has already set up an “Enron Intelligent Network,” a new world network built using the latest in optical technology, to satisfy real business needs.    


 
 
TISCO NET PROFIT SOARS 140% IN FIRST HALF 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct 18: 
Tata Iron and Steel Company (Tisco) today roared back with a 140 per cent surge in its first-half net profit at Rs 216.43 crore compared with Rs 90.18 crore in the same period of the previous year. The performance was helped by a 14.79 per cent rise in net sales at Rs 3598.61 crore as against Rs 3134.79 crore in the first six months of 1999-2000.

In the second quarter, the company’s net profit jumped 76 per cent to Rs 115.03 crore from Rs 65.39 crore in the same period of the previous year. The rise came on the back of a modest 9.53 per cent growth in sales during the period.

The steel major’s net sales from operations rose to Rs 1870.34 crore from Rs 1707.45 crore in the previous year, reflecting the tame trend in international steel prices, industry analysts said.

Buoyed by the impressive numbers, the Tisco scrip closed marginally higher at Rs 90.35 on the Bombay Stock Exchange (BSE) after opening at Rs 88.50 and hitting an intra-day high of Rs 91. Earlier, it had dipped to a low of Rs 87.75.

Second-quarter sales volumes were pegged at 837,742 tonnes, up from 8,37,200 tonnes in the same period of the previous year. The company’s production during the period increased by a moderate amount to 8,75,046 tonnes from 8,40,026 tonnes.

The export turnover of Tisco during the second quarter rose to $ 48.86 million over $ 44.4 million in the previous year.

Nirma profit up

Nirma posted a modest 18 per cent rise in its first-half net profit at Rs 136.55 crore from Rs 115.47 crore in the same period of the previous year.

Gross sales during the period stood at Rs 1211.53 crore, up 47 per cent over Rs 824.6 crore in the first half of the last financial year.

Second-quarter net profit increased 7.2 per cent at Rs 68.95 crore compared with Rs 64.32 crore in the same period of the previous financial year.

Nirma said higher interest and depreciation costs had restrained the growth in profits.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.33	HK $1	Rs. 5.85*
UK £1	Rs. 67.06	SW Fr 1	Rs. 25.85*
Euro	Rs. 39.61	Sing $1	Rs. 26.05*
Yen 100	Rs. 42.80	Aus $1	Rs. 23.75*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta	Bombay

Gold Std (10gm)	Rs. 4585	Gold Std (10 gm	4550
Gold 22 carat	Rs. 4330	Gold 22 carat	4210
Silver bar (Kg)	Rs.7975	Silver (Kg)	8085
Silver portion	Rs. 8075	Silver portion	8090

Stock Indices

Sensex	3593.63		-71.16
BSE-100	1802.37		-45.14
S&P CNX Nifty	1136.00		-22.05
Calcutta	101.81		-0.93
Skindia GDRNA	NA		-
   
 

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