Wipro US debut at heavy discount
Rating rap for Guj Ambuja, ACC
Changes in takeover code to take note of Bajoria case
Govt sets ballrolling for SBI merger plan
FDI in insurance put on fast track
Sensex claws back on UTI support
Cloud over Petronet’s stand-alone status
Foreign Exchange, Bullion, Stock Indices

Mumbai, Oct 19: 
Wipro Limited today listed its American Depository Shares (ADS) on the New York Stock Exchange (NYSE) at an offer price of $ 41.38 in a steep 13 per cent discount to its closing price of Rs 2222.65 on the Bombay Stock Exchange (BSE) today.

However, a lower price means the company will raise $ 113.79 million, down from the $ 166.2 million estimated when it filed for the US listing with the Securities and Exchange Commission. Also, the price is 35 per cent lower than its projection of $ 63.86.

The ADS, which was traded under the symbol WIT, opened above the offer price, at $ 44.50, on Wall Street, scaled on high of $ 45.08 and a low of $ 41.03. It was trading at $ 44.87 till the last reports came in.

The company, which gave its owner Azim Premji a fortune unmatched by an Indian, gambled on the float at a time when most technology big guns are under fire across global bourses.

Premji said the lower listing price was done to not get the market right, but it was based on the share’s closing price on BSE on Wednesday, when it was hammered 9 to Rs 1916.10. Today however, it hit the upper-end circuit filter when it closed 13 per cent higher over its previous finish.

Premji said funds raised from the US listing will be used to win a currency for acquisitions, getting currency or options in the US, and to build a brand in the global market.

He said the company has not decided how it would use the money, and asserted the lower offer price would not hit the company’s business plan.

Last week, the company had cut its projected price for the ADS issue to $ 52.48 per share from an earlier $ 63.86. The recent meltdown in technology stocks in the overseas markets had given rise to estimates that the ADS would be price between $ 43 and $ 45.

Wipro is a leading provider of IT services globally and the country’s second largest software exporter.

It provides high-end IT solutions to leading companies worldwide and has other businesses in niche markets in India. It also renders comprehensive and integrated software solutions apart from meeting all IT service requirements of its clients.

It has three major business segments which includes global IT services, Indian IT services and consumer care & lighting. In global IT Services, Wipro provides research and development services for hardware and software design to technology and telecommunication companies and software application development services to corporate enterprises.    

New Delhi, Oct 19: 
Icra today downgraded ACC’s Rs 500-crore and Gujarat Ambuja’s (GACL) Rs 50-crore non-convertible debentures (NCD) due to mounting concerns over their feeble finances.

Gujarat Ambuja’s NCD programme has, however, been removed from the rating watch it was placed in earlier in a move that was prompted by stable operating profitability and healthy cash accruals, despite the fact that they were accompanied a high level of high borrowings. “

Gujarat Ambuja is likely to borrow more given that it may have to offer financial support to its group companies. In addition, it has to fund its own capacity-expansion programme,” Icra said.

The company, which grew at a fast clip through a slew of acquisitions last year and is now building up capacity for itself and Ambuja Cement India, plans two greenfield cement plants and captive power units in a consolidation that will lead to still higher levels of debt, the rating agency said.

On the other hand, ACC’s Rs 500-crore NCD programme has been downgraded from LAA to LAA(-). The same rating has been assigned to its planned Rs 200-crore NCD issue.

The downgrade, though high enough to be safe, is a pointer to the deterioration in its operating and financial performance. The troubles lie in falling prices in its key markets, despite a steady overall consumption in the cement industry during 1999-2000. ACC’s Rs 400-crore commercial paper programme, however, won the highest-safety A1+ grade.

According to Icra, the cement industry has witnessed strong consumption growth during 1999-2000, especially in north and east. However, prices in the eastern region declined substantially in the last financial year, impairing the profitability of most companies operating in this part of the country.

However, an analysis of all-India trends shows a price-hardening in the second quarter of the current financial year. In the first three months, ACC’s despatches were up more than 12 per cent even as the industry averaged only 5 per cent.

Meanwhile, ACC has taken several measures to prune fixed and variable costs, including completion and modernisation of plants. Combined with planned job cuts, these are likely to improve profitability over the medium to long terms, the rating agency said.

At the same time, long-term borrowings to meet working capital requirements will help ACC maintain a strong liquidity position, Icra said. Improvement in internal accruals and greater financial flexibility will take care of debt servicing.    

New Delhi, Oct 19: 
The Securities and Exchange Board of India (Sebi) today said the Bhagwati Committee reviewing the takeover code was looking at the tussle between Arun Bajoria and Bombay Dyeing even as it admitted that the statute itself required changes to make it more effective and fair.

Sebi chairman D.R. Mehta, who met finance minister Yashwant Sinha today, said the regulator was inviting suggestions on the changes that could be made in the takeover code.

“I am not commenting on the Bajoria issue. However, we think that there is a need for changes in the rules. We have appointed a committee headed by Justice Bhagwati to offer suggestions,” he said.

Asked whether Sebi had told Sinha it wanted more powers from the government, Mehta said the suggestions made by the Dhanuka committee are already pending with the government. “It is examining the request for more powers.”

The capital market watchdog has been seeking additional powers to be more effective, saying it does not even have the kind of authority that is now vested in the department of company affairs (DCA). This prevents it from taking stringent action against companies or promoters.

Meanwhile, Sebi will start hearings in the Bajoria-Wadia case to decide whether Bajoria violated the takeover code. “Sebi will give its final word only after the hearing,” Mehta said.

The regulatory body had said earlier the Calcutta-based jute baron had informed Bombay Dyeing that he had acquired over 5 per cent in the company through his investment firm, Mega Resources.

Sebi had said this in a letter despatched to Bombay Dyeing last month, but the Wadia flagship denied having received it.

The Bajoria-Wadia battle has seen industry divided between the two businessmen. Ficci has extended implicit support to Bajoria by saying it is important is to determine whether his purchases were in conformity with the takeover code.

“In case the takeover code has been followed, the current set of laws cannot be set aside,” the chamber has said.

CII and Assocham, on the other hand, have asked Sebi to raise the creeping acquisition limit for promoters to bring them on par with raiders.    

New Delhi, Oct 19: 
The State Bank of India’s five-year old plan to amalgamate all its seven associate banks with it to create a banking powerhouse has finally received the finance ministry’s approval.

However, the government has asked the SBI to submit a fresh draft which takes into consideration the growing financial muscle of the associate banks.

Banking secretary Devi Dayal told The Telegraph, “We have asked the State Bank to prepare a fresh draft on the amalgamation issue and submit it to us.”

Finance ministry officials added that since many of these banks such as the State Bank of Hyderabad and State Bank of Patiala had grown into major banks in their own right, a fresh plan should be worked out to address the problems that might crop up from such a mega-merger.

“The State Bank’s plan to amalgamate all its subsidiaries is some five years old. McKinsey’s study conducted at that stage is now dated and the present realities have to be addressed,” officials said. Another plan, which sought to amalgamate all the seven associates — State Banks of Hyderabad, Patiala, Travancore, Indore, Saurashtra, Mysore and Bikaner — into one single bank rivalling the parent, has been vetoed by the SBI.

SBI’s argument, which finally seems to have been accepted by the finance ministry, is that with the banking and financial sectors likely to be thrown open to international mega players after the next round of World Trade Organisation negotiations, it is important for India to have at least one mega bank of its own which can rival the likes of Citibank or Duestche Bank.

At the end of March 2000, SBI had deposits of more than Rs 1,96,000 crore.

Following the amalgamation of its associate banks this would swell to over Rs 2,65,000 crore. Post-merger its total assets would stand at a whopping Rs 3,35,000 crore, compared with SBI’s current asset base of Rs 2,61,000 crore.

Obviously, this would propel the merged entity into the echelons of the top global banks.

Some of the banks like State Bank of Saurashtra have higher capital adequacy ratios (CAR) while others have better profit to turnover ratios than SBI itself.    

New Delhi, Oct 19: 
The government today decided to put foreign direct investment (FDI) in the insurance sector under the automatic route, retaining the sectoral cap of 26 per cent equity for joint ventures. The decision was taken after a meeting between commerce and industry minister Murasoli Maran and finance minister Yashwant Sinha today.

“This decision on the FDI front means that approval of the Foreign Investment Promotion Board (FIPB) will no longer be required for participation of foreign equity up to a cap of 26 per cent in the insurance sector, ” an official statement said.

It added that since the Insurance Regulatory and Development Authority (IRDA) is empowered to grant licences to joint ventures seeking to enter the insurance sector under the IRDA Act 1999, the pre-requisites for foreign partners would be met in any case.

“The decision is in line with the government’s policy of removing unnecessary pre-entry checks on FDI and is expected to facilitate easier inflow of FDI into a sector which has been engaging the attention of foreign insurance majors,” the statement said.

While five joint ventures have already applied for licences to the IRDA, a few more are expected to seek licences for entering the insurance sector.

The decision to move the insurance sector to the automatic route would mean joint venture proposals before the IRDA will be processed faster.    

Mumbai, Oct 19: 
Aggressive buying by domestic institutions led by the Unit Trust of India (UTI), helped revive sentiments on the bourses after a sharp slide in the last few sessions. The benchmark BSE index gained 109 points today to close at 3703.

Reports of a sharp fall in the US markets and a couple of disappointing quarterly results after market hours on Wednesday weighed heavily on the bourses in the opening hours of trading.

However, the arrival of domestic heavyweights on the scene buoyed spirits, with operators joining the fray, realising that it would be suicidal to leave open short positions.

The sudden positive turnaround was mainly attributed to a revival in technology, media and telecom (TMT) segments which came under heavy battering for the last several days.

Local institutions and mutual funds reportedly bought heavily shares of TMT sector stocks which were available at attractive levels, besides giving support to some index-based old-economy counters.

Dealers pointed out that by mid-session today, the change in sentiments was complete as institutional buy orders halted the fall in the market. At the final count, the BSE sensitive index, breaking the four days string of losses, closed up by 109.20 points or 3.04 per cent at 3702.83, as against yesterday’s close of 3593.63.

Broking circles say that new economy stocks led today’s rally. The main gainers were Infosys, Satyam, NIIT and Zee Telefilms.    

New Delhi, Oct 19: 
Reduced practically to an importing agency with promoters grabbing the marketing rights and control of the terminal, Petronet may find its stand-alone status unviable.

Official circles reckon that like the stand-alone refineries that were merged with marketing companies such as Indian Oil Corporation (IOC) and BPCL, Petronet LNG will have to be merged with one of the promoters at a later stage. Since Gas Authority of India (GAIL) has been identified as the country’s flagship gas company, Petronet LNG may have to go with it.

Petronet LNG was promoted by four public sector companies — IOC, ONGC, GAIL and BPCL — with a total equity stake of 50 per cent while the rest was supposed to be farmed out to private sector players. It has proposed to set up two LNG terminals, one each at Dahej with an annual capacity of 7.5 million tonnes, and another of 2.5 million tonnes at Cochin.

NTPC, which was to be the fifth promoter, is still dithering. It is having second thoughts on the idea of setting up LNG-based power plants. The World Bank has also cautioned Maharashtra, Karnataka and Gujarat against rushing into LNG-fuelled baseload power projects.

Petronet LNG’s marketing rights have already been given to IOC, GAIL and BPCL. In the oil and gas business, the real margins lie in marketing. ONGC, the fourth promoter, has staked its claim to operate the terminal whose main function is to regassify the liquid natural gas. ONGC will take its commission for the job. Thus the main company will be left the job of only looking after imports and the shipping schedules.

Originally, Petronet LNG created an impression that by virtue of the HBJ pipeline, its gas would be cheaper than those supplied by any rival on the west coast. The government had already issued licences for LNG terminals to companies such as Enron, Shell, British Gas, Reliance and Tata-Total on the west coast. It now appears that imported gas from Petronet LNG may turn out to be significantly costlier than expected earlier as the promoters try to maximise their returns on marketing and terminal operation. GAIL will also charge transportation cost for using its HBJ pipeline.

In contrast, Enron, which has already entered the final phase of construction of its LNG terminal at Dabhol, may be in a position to compete with Petronet LNG whose gas reaching Dahej in Gujarat will attract a sales tax of 22 per cent. Enron’s gas transported from Maharashtra to Gujarat will attract a total sales tax (state plus central) of only 14 per cent.

The benefit of a lower sales tax will enable Enron to compete successfully with Petronet LNG. If IOC is permitted to market Enron’s gas through the HBJ pipeline (taking advantage of the common carrier system), Enron will be able to consolidate its position further.

According to official sources, Petronet LNG cannot remain a stand-alone entity. The present arrangement is not being disturbed to get bank guarantees from promoters for the Rs 1,400-crore bridge loan obtained from international banks.

They agreed to provide the guarantee on a request that was made by S. Narayanan, the petroleum and natural gas secretary, who is now the chairman of Petronet LNG Ltd.

The promoters have also agreed to a take-or-pay marketing agreement without tying up the market. They seem to be confident of selling gas on the assumption that their gas will be 20 per cent cheaper than naphtha. The units that use naphtha will prefer to buy gas. If, by any chance, the arrangement does not work, the money sunk in EPC contracts will have ruinous effects on the finances of these companies.    


Foreign Exchange

US $1	Rs. 46.33	HK $1	Rs. 5.85*
UK £1	Rs. 67.06	SW Fr 1	Rs. 25.60*
Euro	Rs. 39.11	Sing $1	Rs. 26.05*
Yen 100	Rs. 42.98	Aus $1	Rs. 23.75*
*SBI TC buying rates; others are forex market closing rates


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