Khaitans to sell Darjeeling gardens
Data house to help banks curb loan misuse
PowerGrid plans tieup with BPL for STD foray
IT firms devise poison pills to ward off raiders
Bharti venture with India Today on the rocks
India Inc caught napping
New channels to sell LIC products
Squabble over divestment fund
Delphi close to deals with Ford, Hyundai
Foreign Exchange, Bullion, Stock Indices

 
 
KHAITANS TO SELL DARJEELING GARDENS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Nov 3: 
B.M. Khaitan, one of the pioneers of the Indian tea industry, is leaving Darjeeling. He has put all the four Darjeeling gardens — Glenburn, Lingia, Nagri Farm and Soom —belonging to Eveready Industries India Ltd on the block.

Sources acquainted with the development said the plan is to sell a few other gardens in Dooars. It is learnt that EIIL is planning to sell some of its newer acquisitions in Dooars like Bhatpara, Mathura and Jaybirpara apart from the earlier ones.

“I am not aware of such developments,” Deepak Khaitan, executive vice-chairman and managing director of EIIL, told The Telegraph when asked to comment. Efforts to reach Aditya Khaitan, the youngest son of B.M. Khaitan who looks after the tea business, proved futile.

However, tea industry sources said they were aware of the move. The grapevine was abuzz with the rumour that Ashok Lohia of Chamong Tea Limited had emerged as the front-runner in the race to acquire the Darjeeling tea estates. Others in the fray include Sanjay Bansal of Ambootia Tea.

Eveready Industries has 26 gardens spread over Assam and West Bengal with a total tea production of 31,733 tonnes. In Dooars, the company owns Bhatpara, Mathura, Central Dooars, Chuapara, Jainti, Matelli, Jaibirpara and Chuniajhora.

Sources said the company has put the gardens on the block to raise funds that will help it retire a portion of its high cost borrowings totalling Rs 644.91 crore (secured and unsecured loans).

EIIL bore an interest burden of Rs 83.48 crore in 1999-2000 on these loans. The interest outgo is almost 10 per cent of its sales turnover of Rs 832.92 crore.

Industry sources said Lingia and Soom are premium gardens, while Nagri Farm and Glenburn are mid-quality ones. The four gardens together produce 6.5-7 lakh kgs of tea a year. Nagri Farm is a high-yielding garden.

Market sources said tea produced at Lingia and Soom gardens are being sold at around Rs 300 per kg.

A top-level official of EIIL said, “Darjeeling gardens are perennially loss making. They have never added to our cash box.”

Tea industry sources said the Darjeeling tea gardens have not been performing well for quite sometime.

“This year it has suffered more with the foreign buyers not picking up a substantial amount of first flush tea. There are two reasons for this: foreign buyers have a carryover stock and, secondly, the trademark certification introduced by the Tea Board this year for Darjeeling teas.

Corporate mavens say that after the Khaitans failed to seal a deal with Gillette on the sale of its profit-making battery operations, they will have to devise ways to ensure that EIIL doesn’t fall into a debt trap.

Gillette Company of the US had evinced interest in buying EIIL’s battery division but the deal was called off after the two sides failed to agree on the price.

Khaitans had acquired 1,65,84,750 shares of EIIL in September 1994 at a premium of Rs 175 per share through McLeod Russel. In 1995, McLeod Russel had made a rights-cum-public issue of Rs 302.85 crore. The issue failed to evoke the expected response from the investors and put a heavy debt burden on the company. In the following year, McLeod Russel, which handled the group’s tea operations, was merged into EIIL. At the annual general meeting in September, the company obtained shareholders’ approval to demerge the battery and tea operations.    


 
 
DATA HOUSE TO HELP BANKS CURB LOAN MISUSE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Nov 3: 
The government has come up with yet another plan to tackle the menace of non-performing assets. This time around it is planning to set up the country’s first information bureau to provide inputs on corporate clients to banks for better risk management.

The mandate for setting up the information bureau is likely to be given to Housing Development Finance Corporation (HDFC), State Bank of India (SBI) and Dun & Bradstreet.

The three institutions are working on the modalities for setting up such an information system. Special secretary for banking, Devi Dayal said, “The modalities for the Information Bureau (by HDFC and SBI) have to be decided and talks are in progress.” He was speaking to reporters at the sidelines of a seminar on risk management.

The bureau is expected to provide personalised data on major corporate clients to the banks. This will enable the lending companies to tackle the risk factor better and curb the burgeoning non-performing assets which is touching close to Rs 58,000 crore.

The proposed information bureau would provide corporate data to the banks for analysing the risk involved while extending credit to them.

He said it was neither recovery nor collateral that were to be treated as a paramount factor for credit risk management but projects should be appraised well for reducing the sticky assets to a large extent.

While addressing the seminar, Devi Dayal earlier said, “In the light of high credit risk, there should be information bureau to collect personalised information on corporate clients.”

Minister of state for finance, Balasaheb Vikhe Patil said, “The pre-requisite for establishment an effective risk management system is the existence of a robust information infrastructure.” The present system requires a complete overhaul, he added.

According to the Reserve Bank of India’s estimate, the present risk weighted assets of public sector banks is Rs 3,34,757 crore. These risk weighted assets are expected to double over the next five years and additional capital required to support the projected risk weighted assets would be over Rs 20,000 crore, said Patil.

Regarding increasing non-performing assets, Patil said, “The best way for banks to protect themselves is to evolve a proactive credit management practice.” He said, out of the Rs 58,000 crore NPAs, 53 per cent belong to the non-priority sector while the remaining 47 per cent is from the priority sector.

Regarding amendments to the Bank Nationalisation Act, Dayal said, a bill to dilute government stake in public sector banks to 33 per cent would be introduced in the winter session of Parliament starting on November 20. However, “SBI would not form part of it,” he added.    


 
 
POWERGRID PLANS TIEUP WITH BPL FOR STD FORAY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Nov 3: 
PowerGrid Corporation of India Ltd (PGCIL) is likely to be the first company to bag the national long distance telephony licence and may join hands with BPL Telecom for the venture.

The company also plans to enter the entertainment media business through a separate subsidiary.

R. P. Singh, chairman and managing director PGCIL, said, “We plan to enter the entertainment business. However, things are yet a conception stage and the board’s approval will be necessary to execute the project.”

However, he declined to comment on the company’s telecom foray. “The company will announce its plans on November 25 in Mumbai,” said Singh.

Company sources said, “We are in final stages of completing the formalities for the NLD foray, which is our first major telecom venture. We have held discussions with VSNL, BPL, Reliance and many other telecom companies in this regard. The final plans will be announced in Mumbai.”

Sources said the proposed telecom network will be able to provide additional high capacity telecom connectivity to all four metros — Delhi, Chennai, Calcutta and Mumbai along with smaller cities. The project is expected to cost about Rs 1,202 crore with an assumed payback period of three to four years.    


 
 
IT FIRMS DEVISE POISON PILLS TO WARD OFF RAIDERS 
 
 
FROM SATISH JOHN
 
Mumbai, Nov 3: 
Corporates are scouting about for strategies to ward off raiders as a new breed of carpetbaggers swarm over the corporate landscape.

Promoters of raid-rattled companies are chewing on a new range of poison pills that will stop predators from licking their chops as they relish the prospect of a hunt. So, they are now mulling options like introducing iron-clad clauses in the articles of association or persuading their loyal customers to sign exclusive contracts that would prevent them from dealing with a new management board that could step in after mounting a hostile bid.

The top five customers will be asked to sign a bond that ensures that they will cease to deal with the company if a hostile bid succeeds. This automatically makes the company attractive to any hostile raider.

Cyril S. Shroff, partner Amarchand & Mangaldas & Suresh A. Shroff & Co, a leading firm of corporate solicitors and advocates told The Telegraph that companies have started incorporating clauses in the articles of association which will make the target company a very unattractive proposition for raiders.

Corporate observers say that in the coming days the raiders may also have to go through the articles of association and supply contracts before targeting a company. Gone are the days when the raider made a judgement just by pouring over the balance sheet.

A low market capitalisation vis-à-vis a high book value may still be the benchmark for corporate raiders, but it will not be the only criterion as promoters find new ways to insulate themselves.

Commenting on the new trend among corporates, a leading merchant banker who preferred not to be quoted, said: “The trend is more noticeable in infotech companies as the entrepreneurs themselves have a small stake in the company.” It will thwart any ambitions harboured by venture capitalists and institutions to sell shares without their prior consent.

“Before the companies go public they incorporate “poison pills” in the articles of association and also in supply agreements.

“The poison pills ensure that the raider will pay a heavy premium to the market value of shares in case he tries to gain control of the company”, the merchant banker said.

Legal eagles aver that the poison pills incorporated by companies are still in a grey area. Shroff, who has framed such clauses for his clients, admits that this is still an uncharted territory and has yet stand up to scrutiny in the courts of law.

The other option is to ensure that a clause in the articles of association calls for a huge premium on shares acquired through the open offer route by the raiders. A clause can also be incorporated in the articles that specifies a heavy compensation for the promoters in case they are ousted from the board.

While none of the legal beavers were willing to reveal the names of the companies that have adopted such stratagems, but said almost all infotech companies of repute that went public in the recent past have incorporated such clauses in their articles.    


 
 
BHARTI VENTURE WITH INDIA TODAY ON THE ROCKS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Nov 3: 
Bharti BT Internet Ltd and the India Today group’s plan to jointly launch an exclusive news portal, ‘Mantra Today,’ may be grounded with the two disagreeing over equity stakes. The two companies have failed to come to an agreement over the equity holding in a joint venture company. According to sources, the India Today group was keen on a 26 per cent stake while Bharti was willing to offer only about 15 per cent. The portal was scheduled to be launched early this year and India Today had registered the domain name MantraToday.com. However, the squabbling between the two is likely to give the deal a quiet burial.

Bharti officials said, “Our company has several alliances with many big names who are in the business of content delivery, but we retain the majority stake in any venture and it had to be the same for this venture too. We tried explaining to India Today that giving them a higher stake will not be possible, but now the deal is almost closed.”

The portal was to offer news and also provide other services and features to niche markets like new agencies. Bharti BT offers internet services in four metros, Calcutta, Chennai, Delhi and Mumbai, besides Pune and Hyderabad, under the Mantra Online brand name.

Mantra Online is the first internet service provider to set up its own international gateway. The company which has already set up two gateways in Delhi and Pune has invested about Rs 25 crore in each gateway. It plans to set up six more gateways to be located in Calcutta, Chennai, Mumbai, Hyderabad, Bhopal and Bangalore. Last year it joined hands with online search company Looksmart to create an India-specific real estate market through a web directory/search engine called www.indiaproperties.com. Mantra Online also has an alliance with Trend Micro Incorporated to offer network-based antivirus solutions.

Besides, Mantra has a tieup with Unimobile.com Incorporated for its internet mobile product Unimobile, which offers Mantra Online users mobile access to their emails. It also has a tieup with Amadeus, a software company specialising in travel and hotel reservations for information on travel and accommodation. Further, it has niche portals, www.telefunda.com for teenagers, Mantra Maya for women and www.astromantra.com which offers information regarding horoscopes and numerology.    


 
 
INDIA INC CAUGHT NAPPING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Nov 3: 
As the March 31 deadline to appoint independent directors on the boards of top 141 companies draws near, corporate India is nowhere close to filling the vacant slots.

Nearly 450 posts will be created by the new listing norms specified by the Securities and Exchange Board of India (Sebi) that requires companies to have independent directors manning one-third of their boards, provided the chairman is an independent director.

The specifications are stiffer for boards where the chairman have executive functions. In such cases, Sebi has deemed that 50 per cent of the board members should possess independent credentials.

Omkar Goswami, chief economist of the Confederation of Indian Industry (CII) said at a seminar on ‘Independent Directors:Why, How and Who’, that almost 90 per cent of the 141 companies have not started the process of filling up the mandated slots to improve corporate governance.

Addressing the delegates, Infosys chief N R Narayan murthy, said, “A good set of independent directors come from the conviction of the management that independent directors are people who give good advice. Otherwise they become dependent independent directors.”

However, finding qualified personnel is a tough task as it is no longer attractive for companies to have army officers or bureaucrats serving on their boards, since the latter’s talents at leveraging business has been made redundant in the liberalised economy.

Corporate luminaries are also scarce as they serve far too many boards. However, a majority of the participants had no clue on the functions of an independent director.

According to Deepak M Satwalekar, managing director HDFC, the role of independent directors and an ideal corporate governance model would depend on the CEO. Also, as per Sebi guidelines, an institutional nominee is deemed as an independent director. However, many at the seminar disagreed with this classification.

P S Subramanyam, chairman of the Unit Trust of India (UTI), pointed out that developed European countries have agencies specialising in spotting talent for the posts of independent directors.    


 
 
NEW CHANNELS TO SELL LIC PRODUCTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Nov 3: 
Life Insurance Corporation of India is equipping itself in every possible way as the private players enter the insurance market. The fact that LIC has pulled up its socks in a fast changing environment cannot be missed.

Taking on a pro-active role, it is creating new channels to distribute the insurance policies apart from the existing 6.5 lakh agents.

Banks, corporates and direct marketing channels are slated to provide the incremental growth in the coming years as the insurance sector is opened to the private sector. The insurance major will consider using stock broking outfits to sell insurance policies once the Insurance Regulatory and Development Authority gives its nod.

Speaking to newspersons, G N Bajpai, LIC chairman, stated that the corporation is well-prepared to face competition and tackle the likely poaching of its human capital by the new players in the field.

When quizzed on the corporation’s strategy in the coming five years, Bajpai quipped “five years is too long a time”. LIC plans to connect through payment gateways. In future policy holders can make online premium payments.

The transformation from business process re-engineering to customer efficiency index is a sign of the times and Bajpai said it will be done by leveraging its vast human capital.

LIC is aiming at a 30 per cent. While its market share will logically drop from the current 100 per cent, the corporation expects to clock faster growth in future. LIC has been clocking a growth rate of 25 per cent for the last 20 years.

However, the growth chart seems to be ambitious when compared with the following figures. In individual assurances segment alone it has 1013.89 lakh policies for a sum assured of 5,36,451 crore, group insurance has 235 lakh members with a sum assured of 78,000 crore and group superannuation has members totalling 8.5 lakh with annuities per annum accounting for 975 crore.

LIC has prepared an assembly line to confront likely poaching of their staff. The assembly line will immediately throw up replacements whenever a slot becomes vacant, Bajpai said. “We are not reacting to the competition but we are simply being proactive,” he said. Currently, LIC has a 16,000 strong executive cadre.

Bajpai said Booz Allen Hamilton recommendations for leveraging human capital and adding value to the various layers in the hierarchy is being implemented. In addition, the corporation also plans to introduce new products to compete with the new offerings from its competitors.

“The new products that will come will derive the benefit of capital markets and the risk markets,” he added.

LIC also plans to strike some strategic alliances with banks.    


 
 
SQUABBLE OVER DIVESTMENT FUND 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Nov 3: 
The disinvestment and finance ministries are at loggerheads over a Cabinet note to set up a dedicated disinvestment fund. The disinvestment ministry has sent a proposal to the cabinet to set up a separate disinvestment fund which will use proceeds from the PSU stake sale to fund new social sector plan schemes, retire the burgeoning public debt, and revive sick PSUs with priority in that order.

To satisfy possible opposition from the finance ministry, the divestment ministry is willing to give the finance ministry the right to manage the fund. But finance ministry officials feel the disinvestment proceeds can be spent for the same purposes from the consolidated fund too.

“We really do not wish to see a separate fund as this might set a precedent and other ministries too may seek similar facilities,” a senior finance ministry official said.

The disinvestment ministry obviously does not agree. Their point is that once money is deposited in the consolidated fund, their can be no specific earmarking. And plans to spend divestment proceeds on any specific scheme will obviously have to be given up. Instead they want the money to be used specifically for plan schemes like drinking water, primary education, healthcare etc which have been languishing for want of adequate funds.

At the root of the battle is really a disagreement over the politics of spending. The BJP government does not want to be accused of selling the family silver to pay for current expenses — a charge which it had made against the Congress government. It wants the political legitimacy of a fund with laudable objectives.

The practical fund managers in the finance ministry, worried by an ominously expanding fiscal deficit, want to use any money that the divestment may throw up to help bridge this fiscal gap.

Finance ministry officials agree that some of the money garnered could and should be used to retire public debt but are again unwilling to do so from a dedicated fund.

They admit that in the past few years, both internal and foreign debt have been going up for the government. Aggregate internal liabilities for the central government are budgeted to increase to Rs 9,25,036 crore in 1999-2000 or 48 per cent of the GDP from Rs 8,19,966 crore in 1998-99 or 46.5 per cent of the GDP.

While external liabilities at book value (at the exchange rates when loans were taken) increased from Rs 55,960 crore in 1998-99 to Rs 56,134 crore in 1999-2000. But when the foreign debt burden is revalued at current exchange rates, the total debt burden for 1998-99 itself goes up to a whopping Rs 1,77,934 crore. Taken together the total outstanding liabilities of the government exceeds half of the country’s GDP.    


 
 
DELPHI CLOSE TO DEALS WITH FORD, HYUNDAI 
 
 
BY A STAFF REPORTER
 
Calcutta, Nov 3: 
Delphi Automotive Systems Ltd is in talks with Ford and Hyundai in India to offer original equipment. “The talks have reached an advanced stage and we expect things to take shape shortly,’ said Rajiv Arora, general manager (sales and marketing) Indian sub-continent.

The US parent of Delphi, with $ 29.2 billion turnover, provides a range of automotive components to General Motors, Mercedes, Volkswagen. In India, Delphi’s major customers include Maruti Udyog Ltd, General Motors India, Daewoo Motors, Fiat, Hindustan Motors, Volvo and Telco.

The Indian subsidiary’s turnover in 1999 was Rs 250 crore. This year the company expects to register a 30 to 40 per cent growth in its turnover.

Delphi’s four manufacturing facilities—two at Gurgaon, one at Noida and the other at Jigani, near Bangalore—make six types of components, including suspension parts, drive shafts, compressors and catalytic converters.

“We are planning to outsource other range of automotive components from neighbouring countries and introduce them in India. We will also export automotive components manufactured at our Indian factories to countries like Sri Lanka and Bangladesh,” he said.

At present, components manufactured in India are exported to General Motors and Daimler Chrysler in Europe, Cadillac in the US, Daewoo in Poland and Suzuki in China.

Delphi has also opened an automobile replacement products division. “We are rapidly expanding our replacement market in India. However, it is not growing at a pace as was expected. We hope that the market will soon pick up,” he said.

Delphi’s original equipment approved design quality shock absorbers and struts are used by Maruti, Daewoo and GM in India in the replacement market. This product portfolio will be expanded soon.

Delphi has appointed Jullundur Motor Agency for retailing its products in the replacement market in eastern India.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.61	HK $1	Rs. 5.90*
UK £1	Rs. 67.60	SW Fr 1	Rs. 26.00*
Euro	Rs. 40.61	Sing $1	Rs. 26.65*
Yen 100	Rs. 43.12	Aus $1	Rs. 24.15*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4535	Gold Std(10 gm)	4490
Gold 22 carat	Rs. 4280	Gold 22 carat	4155
Silver bar (Kg)	Rs. 7950	Silver (Kg)	7955
Silver portion	Rs. 8050	Silver portion	7960

Stock Indices

Sensex		3955.70		+59.91
BSE-100		2009.27		+30.11
S&P CNX Nifty	1242.05		+17.20
Calcutta	108.91		+1.04
Skindia GDR	615.40		+18.21
   
 

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