Market buzz over hostile bid for ACC
Bounty for state power boards
Philips India parent hikes open offer size to 49%
Suzuki officials open talks n Maruti selloff
Top Indian Oil official to appear before CBI
Boost for basic operators
Grasim to raise cement capacity
Entry bar for credit card issuers
Foreign Exchange, Bullion, Stock Indices

 
 
MARKET BUZZ OVER HOSTILE BID FOR ACC 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Nov 30: 
Over a year after the Tatas exited in favour of Narottam Sekhsaria’s Gujarat Ambuja Cements Ltd, Associated Cement Companies (ACC) returned to the spotlight today as rumours swirled in the markets that a foreign cement major was stalking the company and preparing to make a hostile bid for the company.

The market was agog with the news that the cement multinational had started scooping up shares at the ACC counter with some dealers talking of a mega block deal involving over three million shares.

Earlier, dealers surmised that the sudden surge in the ACC stock was triggered by the spurt of cement prices nationwide. But soon the grapevine was buzzing that interested parties were taking positions in the counter. Market rumours suggest that Cemex of Mexico or French cement giant Lafarge were behind the surge in the ACC stock.

Company officials said they had no idea who was buying the stock. “We have yet to receive details regarding the latest shareholding figures from the depositories. Therefore, we cannot comment at this stage,” an ACC spokesperson said.

The market covens said the raiders would shortly come out with the announcement of a open offer at Rs 180 a share.

A merchant banker associated with several mega deals in the cement industry admitted that he had heard rumours but found it “a little hard to believe”.

“If it true, they are off the rockers. No one in their right minds and especially a multinational would try to make a hostile bid. When the promoters involved are the Tatas, who still have board representation in ACC, and the Sekhsarias, an established name in the local cement industry,” he said.

The ACC counter clocked major gains in the last hour of trading. Dealers are sure that a major buying spree was under way as three million shares changed hands only in the last half-hour of trading.

ACC opened at Rs 142.10 but slid to Rs 138.55. However, it closed down only 40 paise at Rs 142.65 with volumes of 10.34 million shares.

However, the share is way off its 52-week peak of Rs 284.25 which it touched on December 24, 1999. The year’s low was pegged at Rs 84.90.

Earlier, GACL pulled off a major coup in the domestic cement industry when it acquired half of the Tata group’s stake of 14.4 per cent holding in ACC. The deal was struck at a price of Rs 370 per share amounting to Rs 455.10 crore.

The Tatas sold the rest of their holding recently at the same price to GACL. The deal angered a section of the minority shareholders as the parties to the deal had left them out in the cold.    


 
 
BOUNTY FOR STATE POWER BOARDS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Nov 30: 
The Cabinet today cleared a plan for state electricity boards, offering a total of Rs 1000 crore in the next fiscal, besides some Rs 33,000 crore over an 11-year time span towards renovation and modernisation of power plants and power line networks. However, these goodies come with a catch — only those states which agree to bring in market-oriented power sector reforms will be eligible for them.

The plan, christened the ‘Accelerated Power Development Programme,’ will pay up to Rs 1,000 crore next fiscal and follow it up with a larger dose of Rs 3,000 crore to those states which agree to charge viable power tariffs, set up power regulatory authorities and put the finances of their SEBs in order.

Parliamentary affairs minister Pramod Mahajan who announced this at the end of a two-hour long Cabinet meet, told newspersons that the states will have to agree to power reforms to gain access to these funds.

While 50 per cent of the funds will be in the form of central grants, the rest will be in the form of loans. However, special category states such as Jammu and Kashmir and the north eastern states will receive 90 per cent as a grant and the rest as loan.

The Cabinet also set up a group of ministers which will include heavy industry minister Manohar Joshi and finance minister Yashwant Sinha, to review the ‘navratna’ and ‘mini-ratna’ status granted to various state-owned companies.

Public sector units which posted a sterling financial performance were granted ‘navratna’ status, which entitles them to enjoy a great deal of autonomy in their decision-making process, as well as flexibility in setting their own pay scales. The review has been initiated due to the poor financial performance of some navratnas such as SAIL and IPCL.

Tonight’s meeting also decided in favour of augmenting the equity base of Nabard, giving the central government a 50 per cent stake in the apex rural bank, a decision announced earlier during the budget. Its capital will be raised to Rs 5,000 crore, from Rs 500 crore at present. To do so, the government will introduce the Nabard Amendment Act 2000, in the current session of Parliament. The Cabinet also decided to repeal the UP Sugar Validation Act 1961.    


 
 
PHILIPS INDIA PARENT HIKES OPEN OFFER SIZE TO 49% 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Nov 30: 
Royal Philips Electronics NV today enlarged the size of its open offer for Philips India from 23 per cent of its outstanding equity shares to 49 per cent in a move that could give the parent a 100 per cent stake if it is successful. It will mean a delisting for Philips India from local bourses. The Dutch electronics giant today informed Sebi that the open offer has been revised from 1,04,72,671 shares — 23 per cent of Philips India’s paid-up equity — to 2,23,11,341 shares. This represents the entire chunk of the outstanding equity shares.

While the price for the open offer will remain at Rs 105 per share, the total cost for acquiring a 49 per cent stake is pegged at Rs 240 crore. The parent holds 51 per cent in Philips India.

Royal Philips said the response to the open offer has been positive and the increase in size will give all shareholders, including FIs, an exit option.

Earlier, two open offers were announced to raise the parent’s stake to 74 per cent in Philips India and Punjab Anand Lamp Industries. The offers, managed by DSP Merrill Lynch, opened on November 13.

Company officials said Royal Philips Electronics NV has provided small shareholders an opportunity to sell their way out. Philips decided that it must acquire a 100 per cent stake in its arm to give it a sharper focus.

Industry observers interpreted the move by the Dutch electronics major as an attempt to shore up its fast-eroding market share, which has dipped from 5 per cent from 14 per cent.

When it made an open offer for 23 per cent of the equity, the parent wanted to enhance its holding in Philips India to 74 per cent.

Royal Philips Electronics holds 51 per cent in Punjab Anand Lamp Industries while 23 per cent is with Philips India. Punjab Anand Industries, which supplies lighting products to Philips India, will also be delisted if the open offer is successful.

On the Bombay Stock Exchange today, the Philips India scrip closed stronger at Rs 97 after opening at Rs 95.45. It hit an intra-day high of Rs 97.40 and an intra-day low of Rs 95.    


 
 
SUZUKI OFFICIALS OPEN TALKS N MARUTI SELLOFF 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Nov 30: 
A three-member Suzuki team today met industry ministry officials to discuss the government’s proposal to sell its 50 per cent stake in Maruti Udyog Ltd.

The representatives of the Japanese motor company are also likely to hold talks with the committee of secretaries. This committee, which is headed by the Cabinet secretary, has been authorised to negotiate with Suzuki on the selloff deal.

According to the joint venture agreement between the government and Suzuki, either partner has to seek written consent from the other before changing the shareholding pattern in Maruti.

Sources in Maruti confirmed that officials from Suzuki have arrived in New Delhi today after the Suzuki headquarters approved the Indian government’s equity sale proposal. “Suzuki has already communicated its acceptance to discuss the proposal. This is just an initial meeting. There will be a series of meetings before a final decision can be taken.”

Suzuki’s representative and director in Maruti, J Sugimori, and government nominee, managing director Jagdish Khattar, were, however, not available for comments.

The Cabinet committee on disinvestment (CCD) had decided to constitute a committee of secretaries to hold talks with Suzuki on the divestment issue. The government has five options in mind regarding the selloff which will be discussed with the Japanese car major.

These include, selling the entire government stake to Suzuki, selling to a third party to whom Suzuki agrees, offering shares to the public, selling stake to financial institutions/mutual funds, and selling both Suzuki and government’s equity to a third party. In either of these cases the government will divest its shareholding in Maruti and the buyer or buyers will be decided with Suzuki’s approval.

Maruti’s market share and profitability has been under pressure in recent years. Its market share has come down from a high of 83 per cent to 54 per cent. According to official estimates, Maruti shares are valued at about Rs 270 a share. But the government is likely to negotiate a higher price for its 50 per cent stake which has a nominal face value of Rs 5 crore.

Earlier, government and Suzuki crossed swords over managerial control.

There have been skirmishes over the government’s stand that Suzuki transfer a key technology to make gear boxes here to the Indian affiliate.    


 
 
TOP INDIAN OIL OFFICIAL TO APPEAR BEFORE CBI 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Nov 30: 
The marketing director of Indian Oil Corporation (IOC), O. N. Marwah, will appear before the CBI on December 4 to depose in connection with the diesel scam. He was earlier asked to appear on November 25, but the interrogation was postponed because Marwah wanted to discuss the issue with the petroleum minister Ram Naik and ministry officials. Official sources say Marwah’s counterparts in Bharat Petro and Hindustan Petro may also be grilled.

The CBI investigation so far has not indicated any involvement of the top-brass at these PSUs in the diesel scam. At the same time, they cannot disown their responsibilities. There are varying estimates on the magnitude of the scam, the latest one putting it at Rs 1,000 crore. It involves officials of three PSUs, departments of industries and sales tax officials of the Gujarat government. They are alleged to have been supplying diesel at concessional rates of sales tax to fictitious companies in the state. The facility exists for certain registered industrial units.    


 
 
BOOST FOR BASIC OPERATORS 
 
 
FROM M RAJENDRAN
 
New Delhi, Nov 30: 
Basic telephone service operators got a shot in the arm with the expert committee set up by the Telecom Regulatory Authority of India (Trai) favouring the introduction of limited mobile telephony using the wireless in local loop technology.

The expert committee has also suggested allowing basic operators to provide the service with a minimum revenue share and not introduce ‘limited mobility’ as a new service. While cellular mobile operators are opposed to the fixed line telephone operators’ demand to provide mobile services in a limited area, Trai had to face allegations by consumers at various open house sessions recently held in the country that it was supporting cellular operators and was not concerned about consumers.

“We had a very informal meeting and suggested that the basic operators can be allowed to provide limited mobility, since the use of wireless in local loop is part of the licence issued to them,” said the ex-DoT official who was part of the expert committee called by Trai.

He added, “Trai is likely to forward the recommendations on limited mobility to the government by mid-December. However, the decision to allow limited mobility will rest with the government.”

While the Cellular Operators Association of India (COAI) had proposed that fixed line operators could offer limited mobility provided they pay all fees being paid by cellular operators, basic operators are opposed to paying any new fees for offering limited mobile services.    


 
 
GRASIM TO RAISE CEMENT CAPACITY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Nov 30: 
Grasim Industries Ltd, the A V Birla group flagship, is streamlining operations to raise its cement capacity by 3.5 million tonnes. This de-bottlenecking exercise, to be implemented in the next 18 months, will raise Grasim’s total capacity to over 14 million tonnes.

Cement, which is one of the core areas of operations, contributes to over 30 per cent of the company’s turnover. At present, the company’s installed capacity stands slightly below 11 million tonnes.

Sources said that Grasim has earmarked Rs 250 crore investment. Of this, over Rs 190 crore will be invested in the current year. Most of these investments will be made in its cement section. A grinding unit will be set up at a cost of Rs 83 crore at Bhatinda and Rs 32 crore will be spent for setting up four ready-mix concrete units in the country.

The expenditure towards plant upgradation and streamlining the operations is put at over Rs 120 crore during the next 18 months. Sources added that in the cement sector, the company would pursue a policy of both organic growth and acquisitions to enlarge its presence in the industry.

Grasim had diversified into the cement business during the eighties and set up its first plant at Jawad in central India, which went on stream in 1985. Subsequent to this, two more plants came up at Raipur and Sambhupura. Grasim acquired Dharani Cements and Shree Digvijay Cement and consolidated the group’s cement operations by merging the cement business of Indian Rayon with itself.

This move resulted in bringing into Grasim’s fold the country’s largest single-location cement plant and one of the world’s largest white cement plants. Now the company has occupied the third slot in the domestic industry.

However, among its acquisitions, Shree Digvijay Cements, is now reeling in red with accumulated losses of the company standing at Rs 120 crore. The company, which has been referred to the BIFR, is now awaiting a revival plan.    


 
 
ENTRY BAR FOR CREDIT CARD ISSUERS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Nov. 30: 
After a two-year regime that allowed unrestricted entry, the Reserve Bank of India (RBI) has decided to restrict the number of players in the credit card business by laying down a Rs 100-crore net worth criteria for new ventures.

A senior RBI official said the move has been prompted by the rising incidence of defaults by credit card holders, and is designed to keep out banks which are not strong enough to cope with the problems posed by truant customers.

“We have been observing with concern the defaults in the business. The RBI has reviewed it, and decided that only banks with a net worth of at least Rs 100 crore undertake this activity. All bank managements have been informed about it,” the official said. Defaults in the credit card business have pushed up the overall non-performing assets (NPAs).

Banks which intend to issue credit/debit cards either independently, or in tieup with others, will have to meet the minimum net worth criterion before they seek board clearance. Net worth is computed by subtracting total liabilities from assets.

On June 5 1998, the central bank had allowed banks to offer credit cards without its prior approval — 17 years after the first one was issued in India by Visa. No conditions that would have served as an entry barrier were laid down.

But the situation changed when a few banks began handing out cards indiscriminately, often to people who did not have the ability to pay for their purchases. “Banks, largely the foreign ones, do anything to sell their cards. This hampers those who want to enter the business,” senior bankers said.

Banks charge a commission, ranging from 3 to 5 per cent, from shops and commercial outlets where purchases are made with credit cards, making it a lucrative business avenue that can be missed only at the expense of higher profits.

State Bank of India, Canara Bank, Bank of Baroda, Allahabad Bank, Andhra Bank, Vijaya Bank, Punjab National Bank and Bank of India are among the nationalised banks that sell credit cards. Citibank, Stanchart Grindlays, American Express and Hong Kong & Shanghai Banking Corporation are the others that jostle for a share of the cake.

The RBI official said the banks have been violating the guidelines issued by the central bank for smart cards/debit cards.

“We have allowed them to introduce smart/debit cards without the prior approval. But we have noticed that some of them tie up with a non-bank entity for marketing their cards, which is against the rules. We have told them that they can undertake credit card business through a separate department or through a subsidiary set up for the purpose.”

The official said a bank can enter the domestic card business by forging tieups with those who are already in it. Banks which want to float a separate subsidiary to undertake credit card business will still require RBI’s prior approval.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.46.85	HK $1	Rs. 5.95*
UK £1	Rs. 66.59	SW Fr 1	Rs. 26.30*
Euro	Rs. 40.65	Sing $1	Rs. 26.30*
Yen 100	Rs. 42.31	Aus $1	Rs. 24.10*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4545	Gold Std(10 gm)	NA
Gold 22 carat	Rs. 4290	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7725	Silver (Kg)	NA
Silver portion	Rs. 7825	Silver portion	NA

Stock Indices

Sensex		3997.99		+1.81
BSE-100		2061.18		-16.12
S&P CNX Nifty	1268.15		+3.40
Calcutta	113.58		+1.01
Skindia GDR	617.73		+4.89
   
 

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