Govt firm on paring stake in banks
GE unit invests $ 15 million in Patni Computer
Bishnauth Tea to prune debt via tea garden sale
Increase in World Bank funds linked to review
I-Sec arm gets access to US equity market
Mistry to be new MD of HDFC in reshuffle
FIs seek exemption from takeover code provisions
EU courts India for euro’s sake
Foreign Exchange, Bullion, Stock Indices

New Delhi, Nov 14: 
Despite the threat of a nationwide bank strike by restive unions, the government today announced it will go ahead with measures to reduce its equity holding in state-owned banks and take steps to slash non-performing assets (NPAs) by revamping the Sick Industrial Companies Act and replacing the Board for Industrial and Financial Reconstruction (BIFR) with a faster mechanism to shut down financially insolvent companies.

Disregarding a call by the bank unions for a one-day strike tomorrow, a defiant finance minister Yashwant Sinha told reporters here today that a long promised bill to pare government equity in public sector banks to just 33 per cent would be introduced in the coming winter session of parliament.

“They are going ahead with their strike and we are going ahead with our bill,” said Sinha.

He felt the bankers’ fears were unfounded as the government would still remain in control of these banks by making sure that no shareholder cornered a substantial portion of the equity.

Unconvinced union leaders however announced here that more than one million bank employees would strike work tomorrow to protest against the move for privatisation.

Unions fear that despite promises, legislation to bring down government equity would be eventually used to sell off banks to private business groups and this would undermine their job security and crimp other benefits.

Tarakeswar Chakraborti, general secretary of the All India Bank Employees Association, accused bank managements of “using intimidatory tactics to force employees to opt for a voluntary retirement scheme by threatening disciplinary action, resorting to transfers and reducing the retirement age from 60 to 58.”

Sinha decided to take a tough stand that would spark a showdown with the after a meeting today with the top executives of public sector banks to discuss ways to slash the burgeoning NPAs of these banks.

Banking secretary Devi Dayal told reporters that the ministry had agreed to push ahead with revamp of Sica and bringing in a new mechanism to wind up insolvent companies replacing the BIFR. These moves would come up before the cabinet later this week.

The twin steps are expected to help banks speed up their claims on companies which have gone bust.

The banking sector is currently saddled with a whopping Rs 53,600 crore in bad loans or non-performing assets in banking jargon. Normal moves to reduce this huge loan overhang have not succeeded so far.

Banks managed to get back just Rs 3,050 crore in NPAs in the first half of this financial year. Nearly 44 per cent of the loans have been made to the corporate sector which is why new laws to deal with sick corporates have become necessary.

At the same time the government also plans to activate Lok Adalats to recover bank loans worth less than Rs 10 lakh.

On publishing names of wilful defaulters, Dayal said the RBI would put up the names of the companies when cases come up in the debt recovery tribunals (DRTs).

Dayal dismissed claims that the present slowdown in industry has lowered the credit growth of banks saying “in the first six months, industrial production has gone up by 6.4 per cent but credit has grown by seven per cent.”    

Mumbai, Nov 14: 
GE Equity — a subsidiary of the US engineering giant General Electric — has made a strategic investment of $ 15 million in Patni Computer Systems (PCS) in an alliance that will make it eligible for a board berth.

Confidentiality clauses in the agreement prevented the company from revealing the precise stake picked up by the US major, but sources say it could be close to 10 per cent of its equity. Merchant bankers, taking a cue from today’s announcement, estimate PCS’ market value at $ 150 million.

PCS chief executive officer Narendra Patni told The Telegraph his company is a strategic supplier to GE, develops state-of-the-art software solutions, apart from maintaining and integrating a part of the US company’s legacy systems.

Patni Computer Systems, a leading software exporter, services GE through its two dedicated global development centres and over 1,000 professionals in Mumbai. It also offers consultancy services to several organisations in the world.

With more than 3,000 professionals working for it, PCS services its clientele through 18 international offices and several state-of-the art development centres in cities such as Mumbai.

Patni said his company is preparing itself for a floatation on domestic bourses, expected within six to nine months. Its earlier plan to seek a Nasdaq listing before being traded on local exchanges has been put on the backburner. “We have to consolidate and recast the equity before the listing,” he added.

GE Equity, a subsidiary of GE Capital, is the private equity arm of GE. GE Capital, which has assets of more than $ 345 billion, is a global, diversified financial services company which operates in 28 specialised businesses.

The Stanford-based GE Capital offers services in the area of equipment management, specialised financing activities like insurance, and a variety of consumer services such as car leasing, home mortgages and credit cards.    

Calcutta, Nov 14: 
The board of Bishnauth Tea Co Ltd today cleared the sale of some of its unremunerative tea estates in Assam to retire a portion of its Rs 160 crore debt burden.

A four-member committee, comprising S.K. Mitra, wholetime director and other directors like Aditya Khaitan, G. Momen and P.K. Kaul, has been formed to identify the gardens which can be put on the block. Mitra said that the company would like to bring down the debt burden to Rs 90-95 crore.

Bishnauth Tea has 15 gardens in Assam with a total production of 18 million kg.

Williamson Magor Ltd holds a 65 per cent stake in Bishnauth Tea, with group companies holding another 10 per cent.

However, even as Bishnauth Tea passed a resolution to dispose off its unremunerative gardens and group company Eveready Industries Ltd having already announced its intention of disposing some of its tea estates in Darjeeling, Dooars and Assam, the board of George Williamson approved a proposal to acquire new gardens in Assam. A decision to this effect was taken at the company’s board meeting here, officials said.

While Williamson Tea Holdings of UK holds a 70 per cent stake in George Williamson, the Khaitans hold 8-9 per cent and the rest is held by the financial institutions and the public.

The company has 17 tea estates in Assam with a total production of 20 million kg.

Industry circles speculate that George Williamson plans to acquire all the tea estates of Eveready as well as Bishnauth Tea, as part of its strategy to consolidate its tea business.

Mitra did not rule out the possibility of George Williamson acquiring the unremunerative gardens of Bishnauth Tea. “If we get a good price we may sell off the gardens to them,” he added.    

New Delhi, Nov 14: 
World Bank president James D. Wolfensohn today expressed concern over India not being able to use up as much as $ 7.9 billion out of a sanction of $ 12 billion made in recent times.

The World Bank will review these projects to see where the problem lies before new projects are taken up, Wolfensohn told newspersons here today.

“I think both the Bank and the Indian government would have to initiate measures for enhancing the utilisation,” he said.

The World Bank chief also expressed concern over the high fiscal deficit, borrowings and deceleration in the GDP growth rate of the country. “From a level of 7 per cent you have come down to about 6.5 per cent,” he said.

Linking increase in lending to the review, Wolfensohn said the Bank would consider hiking lending from the current level of about $ 2 billion a year to $ 3 billion next year “if the implementation of the ongoing projects show improvement”.

The decision to review is expected to delay India’s effort to get around $ 4 billion in soft loans for the improvement of state-run power sector companies.

The loan was also to be used for funding the ambitious countrywide expressway project announced by Prime Minister Atal Behari Vajpayee last year. The government had claimed that the World Bank had assured support for the project.

Power minister Suresh today in fact met Wolfensohn to press for loans to the power sector.

The World Bank president, however, refuted suggestions that the Orissa power privatisation move, which was coming under increasing criticism, was unsuccessful and that this was a reflection on the Bank’s policies of forcing privatisation as a recipe for overcoming problems.

The Orissa government had privatised power transmission and distribution after breaking up its state electricity board into three companies on World bank advice.

“There is a indebtedness in the power sector in India where there are $ 4 billion in unpaid debts and when you have a bankruptcy you have to go ahead and sort it out,” the World Bank chief said.

Describing World Bank-funded projects in various states as successful, Wolfensohn said the Bank was very much involved in expanding Indian road networks.    

Mumbai, Nov 14: 
ICICI Securities and Finance Company Ltd (I-Sec)—the investment banking company of ICICI Ltd—today announced that its US subsidiary, ICICI Securities Inc, has been granted membership of the National Association of Securities Dealers Inc (NASD).

This will help ICICI to engage in permitted activities on the US securities markets. These activities include dealing in securities markets transactions in the United States and providing research and investment advice to US investors. I-Sec has its office in New York.

I-Sec CEO Devdatt Shah said, “ICICI Securities will provide investment banking services to its clients. We would be able to assist Indian companies raise equity capital in the US market and to service US investors for investments in Indian equities.

I-Sec has a net worth of Rs 250 crore and assets of Rs 215 crore as of March 31 this year.

It reported a consolidated profit after tax of Rs 72 crore and a return on an average net worth of 31 per cent. It is one of the most significant players in the primary and secondary equity and debt markets in the country.    

Mumbai, Nov 14: 
HDFC today unveiled a top-level management revamp as part of which Keki Mistry will take over from Deepak Satwalekar as the new managing director.

Mistry, along with the two existing executive directors, R V S Rao and Renu S Karnad, will assist Parekh in developing the housing finance major into a diversified, one-stop shop for a wide array of financial products.

Satwalekar now moves to HDFC Standard Life Insurance Company as its managing director and CEO with effect from November 14.

HDFC’s insurance arm is the only one till now to have received a certificate of registration from the Insurance Regulatory and Development Authority to sell life insurance policies.

HDFC Standard Life will be managed by a board of directors, which would have Parekh as the chairman and Satwalekar as managing director and CEO.    

Mumbai, Nov 14: 
Financial institutions today made a strong pitch for exempting them from the purview of the takeover code before the Justice P N Bhagwati committee on takeovers set up by the Securities and Exchange Board of India (Sebi).

Arguing that their objectives of investment in equities are different from that of private companies, the institutions argued that they should be exempted from provisions of the takeover code, such as those which require them to make an open offer after their holdings in a company touch the 15 per cent-mark. They urged the committee not to make the three reporting levels — 5 per cent, 10 per cent and 14 per cent — it laid down on Monday mandatory for them.

Today’s meeting was attended by representatives of the Unit Trust of India (UTI), Industrial Development Bank of India (IDBI), and the two insurance majors, Life Insurance Corporation (LIC) and General Insurance Corporation (GIC). “The committee will require at least five days to finalise its recommendations. It will consider the views put forward by the financial institutions after its three-day meeting beginning December 13,” Bhagwati told reporters after the meeting.

According to Sebi sources, today’s meeting was inconclusive, but Bhagwati said it was called only to record the views of financial institutions before the final set of guidelines are crafted.

While Sebi officials argue that the code has to evolve with time, promoters are worried that loopholes in the code will be used by ambitious raiders in future to first build up their stake, and then mount an audacious takeover attempt.

Other proposals, such as those which mandate a lock-in clause when creeping acquisitions exceed 5 per cent, were also bandied about to prevent promoters from trading in their shares. However, Sebi officials said the views on this have not been crystallised.

The Sebi panel is also divided on the minimum size of the open offer — whether it needs to be pegged at the existing level 20 per cent, raised to 51 per cent or even 100 per cent, as suggested by a few.    

Brussels, Nov 14: 
The European Union is making a concerted bid to revive the sagging fortunes of the euro with some assistance from Third World giants. It is holding out the bait of better trade terms to countries like India and China, if the two convert a larger part of their foreign exchange reserves into euros.

The move will partly help to shore up the euro, currently under attack from forex speculators banking on a strong dollar. China holds about $ 160 billion in reserves, nearly two-and-a-half times the forex reserves of the US, while even India holds nearly $ 34 billion in international reserves.

Economists with the European Commission and the European Central Bank (ECB) made it clear in discussions with a visiting team of Indian journalists that the EU was counting on Third World countries, outside the EU and Nafta trading blocs, to convert not only their deutsche marks, but also other hard currency reserves into euros.

Most nations like India hold their reserves in US dollars, Japanese yen, British pounds, Swiss francs, deutsche marks and the World Bank’s notional currency of SDRs, besides bullion reserves.

With the sliding fortunes of the euro and the dollar on an upswing, most central banks would be tempted to aim at bolstering dollar reserves when replacing their deutsche mark reserves, which are to be replaced along with the currency of 11 other EU nations from September next year.

This could help boost dollar value further while weakening the fledgling euro, something the ECB obviously fears. Hence, the EU which is also the largest trade partner for these nations, is eager to make it more lucrative to convert to the euro, dangling better trade terms and softer euro credit carrots, the economists admitted.

As the EU conducts most of its trade within its trading bloc with foreign trade outside the EU area accounting for just 15 per cent of its economy, ECB officials do not forsee any major economic hurdles for EU countries to agree to improving trade terms in favour of the developing countries.

Further, in a bid to specifically woo India, the EU will try to push its case for full membership of Asem (Asia-Europe meet), a trade grouping comprising the EU, Asean and East Asian countries, besides asking European firms doing business with India to link their projects to soft euro funding.

EU’s south Asia desk head Laurence Argimone Pistre admitted that the EU would be pressing India’s application for membership of Asem and will try to convince Asean members to drop their objections on the issue.

India and the EU will also set up a round table to bolster bilateral relations. The round table to be launched during the week-long visit of the EU external relations commissioner Chris Patten to India beginning January 25 next year, will aim at closer economic cooperation particularly in sectors like energy, environment, civil aviation, textiles and information technology.

The EU will also appoint a counsel in New Delhi to deal with visa problems faced mainly by infotech professionals being sent out to Europe by Indian software firms.    


Foreign Exchange

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