Wheels roll for Maruti divestment
Indian Oil vies for Enron stake in three oilfields
Mega MEN plan for broadband link
Curbs on rolling settlement
Insurance kids go house-hunting
Foreign Exchange, Bullion, Stock Indices

New Delhi, Nov 16: 
The Cabinet Committee on Disinvestment (CCD) is likely to clear the disinvestment of government’s equity in Maruti Udyog this week despite objections from the ministry of heavy industries and howls of protests that it could provoke from the Opposition and swadeshi hawks.

The Prime Minister’s Office (PMO) and finance ministry have apparently cleared the plan to sell the government’s 50 per cent stake in the firm to an ‘international bidder’.

Legal experts being consulted on the issue say it will be obligatory for the government to offer its shares — with a nominal face value of Rs 5 crore — to Suzuki, which has the first right of refusal under the terms of the shareholders’ agreement. However, it will be free to sell them to anyone later.

According to the Cabinet note on the selloff, a committee of senior bureaucrats, most likely to be headed by the Cabinet secretary, will hold negotiations to arrive at the sale price.

The shares are currently valued at about Rs 270, but the panel will try to the set the prices considerably higher.

The only discordant note in the chorus has come from the ministry of heavy industries, which has argued that the sale should be delayed until a new auto policy is in place. Other ministries do not buy the point, saying there is little reason and, possibly no relevance, in linking the disinvestment of government’s holding in Maruti to the auto policy.

The government argues that the fall in Maruti’s market share and profitability because of growing competition from auto companies which set up shop after the market was opened up in 1991 makes it imperative that it cut its stake.

The Cabinet note points out that Maruti’s marketshare has shrivelled to 54 per cent from 83 per cent amid slowing profits.

Several sections of the government feel new technology and more capital are required to keep the company afloat in a market bristling with rivals which have deep pockets and cutting-edge know-how. Since these are things the government cannot provide, it is better for it to sell its way out of Maruti. The decision is expected attract a barrage of criticism, not only from the Opposition but also from within the BJP. There are fears critics will call the disinvestment a ‘sellout’, designed to help the Japanese partner achieve its long-harboured objective of taking control of the Rs 8,000-crore company.

Suzuki has been trying to wrest the government stake in Maruti for a few years now. It had crossed swords with the government over managerial control four years back.

The bone of contention was the government’s demand that it transfer a key technology to make gear boxes to its Indian affiliate. In recent years, there have been media reports — which were denied by the government— about tentative sale negotiations with Suzuki or with General Motors. The US auto major has a tieup with the Japanese car manufacturer.    

New Delhi, Nov 16: 
Indian Oil Corporation (IOC) has decided to enter the race for Enron’s stake in oil and gas fields such as Panna, Mukta and Tapti.

The US energy giant last month announced its decision to pull out of these fields as part of its global strategy. The Indian Oil management is still debating whether to go with Oil and Natural Gas Corporation (ONGC) or Petronas of Malaysia in bidding for the stake as it has no experience in upstream activities, including oil production.

Sources say Indian Oil will first approach Oil and Natural Gas Corporation, which has already announced its intention to bid for Enron’s 30 per cent stake in these fields. ONGC is the biggest partner in the consortium in terms of its equity stake. It has 40 per cent with the remaining 60 per cent, shared equally between Reliance Industries and Enron Oil and Gas India. However, Enron is the operator even though it holds only 30 per cent.

If ONGC declines to go with Indian Oil, the Malaysian company, Petronas, will be invited to make a joint bid. Petronas normally does not decline an invitation from IOC, and together they have proposed many joint ventures. Sources in Oil and Natural Gas Corporation Oil say the management has taken a decision, in principle, to bid alone.

After all, these fields were discovered by ONGC and it does not require any financial or technical support from others. In the case of IOC and Reliance, these are not qualified to be the operator of oil and gas fields as they do not have sufficient experience in the area. They can overcome this by projecting an experienced upstream company as the operator.

Indian Oil is keen to diversify into upstream sector, following its belated realisation that it can compete in a deregulated market only by becoming an integrated company. The deregulated Indian market will have integrated oil companies such as Reliance group and multinationals.

With refining margins shrinking mainly on account of huge investment in pollution-control measures, downstream companies will find the going tough.

The stand-alone refineries without marketing network have decided to merge with companies such as IOC and Bharat Petroleum. The next step is backward integration.

Sources say the ministry of petroleum and natural gas should take the initiative to ensure a joint bid by ONGC and Indian Oil.

ONGC and Reliance have the pre-emption rights by virtue of being partners in the joint ventures operating these companies. This does not mean that they will get it any cheaper. They will have to match the highest bidder. There are conflicting claims about the recoverable reserves of these fields.    

Calcutta, Nov 16: 
Modi Entertainment Network (MEN) will invest Rs 100 crore to set up a broadband network in Pune through its wholly-owned subsidiary, MEN Interactive Network.

A senior MEN official said the company will extend the services to 37 cities by the end of 2002. In the next phase, the services will be available in Delhi, Ahmedabad, Bangalore and Hyderabad.

“We have access to over 17 million households in 3000 cities through 40,000 cable operators. The network will be able to leverage this strength,” he said.

“Our target is to reach at least 30 million households with our internet services through the cable network. The services will be offered at very competitive prices,” the official added.

He said that internet-through-cable services will not be very expensive. While a desk-top cable modem will cost around Rs 10,000, the customer will have to pay a month’s subscription ranging from Rs 100 to Rs 500 depending on the services rendered. Besides offering broadband-based internet services, the company also plans to provide cable modems on lease.

Besides, the company has also entered into a number of joint ventures in the area. Recently, it signed a memorandum of understanding with the Chennai-based software company Pentasoft, for a 50:50 joint venture with a capital base of Rs 10 crore.

“While Pentasoft is a very strong player in animation and graphics, MEN’s strength lies in satellite communications. The joint venture will certainly have an edge over other competitors in the same field,” the official said.

MEN also acquired a 35 per cent stake in the Criclive portal and a 10 per cent stake in Design Expo Network, which owns portals like sawaal.com, fitness culture.com and planetgyan.com.

Further, MEN will also launch a children’s portal.    

Calcutta, Nov 16: 
The Securities and Exchange Board of India (Sebi) has announced a set of risk containment measures for rolling settlement and also for continuous net settlement.

According to the guidelines, the gross exposure will be aggregate of the net of the outstanding position of the previous four trading days, the outstanding position created on trading day and the net outstanding position of the future five settlements.

The trading limit of Rs 5 crore per scrip for a member will be applicable to the scrips in carry forward in rolling settlement (CFRS) and automated lending and borrowing in the rolling settlement (ALBRS) process.

The margin structure in the CFRS and ALBRS will also apply in continuous net settlement.    

Mumbai, Nov 16: 
After the new-economy firms, it is the turn of the new breed of private insurance companies to bid for the most coveted slices of real estate as they look for the best addresses in a city that is expected to house most of these upstarts.

The hot spots are Worli, Prabhadevi and Bandra/Kurla complex. Realty firms say it was the media firms and call/data centres which snapped up spaces in the central suburbs earlier, but now insurance outfits are jostling for offices.

The biggest deal, in the heart of the new commercial centre at the Bandra-Kurla complex, was sealed by HDFC-Standard Life Insurance combine. The first joint venture with a licence to sell life insurance products will buy 21,600 square feet from Infrastructure Leasing & Financial Services (IL&FS) in their swank new office at IL&FS house in the condominium.

The company will pay IL&FS Rs 21.68 crore, based on a price of Rs 10,040 per square feet. “Other insurers are also assessing their space requirements. Their focus is on acquiring space in the central Mumbai areas,” says Cushman & Wakefield, a foreign real estate consultant, which has an office in the city.

With the Insurance Regulatory and Development Authority (IRDA) working overtime to hand out licences on schedule, realty agencies expect that most of the firms will head for Mumbai to set up their headquarters once they are allowed to set up shop.

The race to pick up property in the country’s commercial capital has intensified despite the initiatives taken by Chandra Babu Naidu, the chief minister of Andhra Pradesh, to showcase his capital Hyderabad as an attractive destination not only software companies but for insurance firms as well.

Recently, a few insurance joint ventures unravelled abruptly before they could even start operations. Allianz-Alpic & Dabur-Allstate, for instance, were the latest to part ways.

The city has also seen an increase in investments in land, something that could increase the availability of good-quality, new residential and commercial space over the next few years.

Gesco Corporation, in the throes of a takeover battle with Abhishek Dalmia’s Renaissance Estates, recently purchased a bungalow spread over 600 square yards in Santacruz. Oberoi Construction bought 5,730 square metres in Andheri.

However, it is the purchase of ICICI Building at Churchgate by firms associated with Big Bull Ketan Parekh for Rs 73.10 crore that is touted as the deal of the year.

ICICI continues to retain the right to sell the land and the ground floor. The buyer will acquire the first to seventh floors — 49,875 square feet of space at an average rate of Rs 14,637 per square feet.

Among the suitors was the Securities and Exchange Board of India. However, the market regulator could not secure approvals from the Centre. Property dealers say the state government, which had given the space on a long lease to ICICI, has also expressed reservations over the deal.    


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