Rs 360 cr giant in India
Govt bid to clear air on Air-India bids
SBI plans separate infotech subsidiary
Stocks tumble on Microsoft rumble
ICI India to create kitty for buyouts
New panel on takeover code
Pentamedia to spend $ 100 m on acquisitions
Venture funds may get pension money
Nagarjuna in search of PSU ally
Foreign Exchange, Bullion, Stock Indices

Mumbai, Dec 15: 
Abbott’s acquisition of BASF’s drugs unit Knoll Pharmaceuticals will lead to the creation of a Rs 360 crore pharmaceutical major in India. It will have a wide range of products covering anti-infective, vitamins and cardiovascular products besides among diabetic, antacids, cough/cold and anti-inflammatory segments.

It will also include a presence in hospital products, medical and pediatric nutritionals. Knoll Pharma informed the stock exchanges today that BASF South East Asia Pvt. Ltd., Singapore has announced the sale of pharma business of BASF to Abbott Laboratories for $6.9 billion. It explained that the German multinational was focusing on the strengths of its portfolio in order to broaden its base for further profitable growth.

The stock markets responded positively to the news about the change in management control in Knoll Pharma, resulting in the scrip rising by more than 13 per cent from its intra-day low. In fact, Knoll Pharma was one of the few scrips that witnessed an upturn in an otherwise bearish market today. Opening at Rs 350, the scrip dipped to a day’s low of Rs 345, before strong buying took it to a day’s high of Rs 395. The scrip however, finished marginally lower than this high at Rs 390.30.

On the other hand, the Abbott Laboratories scrip finished lower at Rs 277.80, after opening at Rs 285. The scrip had touched an intra-day high of Rs 290, after which some selling resulted in the share closing at Rs 277.80.

It may be recalled that the Knoll Pharma scrip witnessed huge action yesterday following reports that the pharma giant Eli Lilly was set to acquire the company. However, this did not occur as the US company backed out.


New Delhi, Dec 15: 
The war that seems to have broken out among Air-India’s prospective suitors is giving the father of the bride some sleepless nights.

The government is perturbed by the fact that rival business houses, keen on walking down the aisle with the bride, are spreading misinformation to slight or improve each others’ chances.

Disinvestment minister Arun Shourie told The Telegraph on the sidelines of a luncheon party hosted by rural development minister Venkaiah Naidu here today, that he “felt rival companies were spreading misinformation” in a bid to hurt each others’ chances.

“We are sending out letters to shortlisted bidders for the Air-India disinvestment now.. There is going to be no fresh bidding nor is the list of shortlisted bidders anything like what is being bandied around,” Shourie said.

Soon after Shourie’s statement, the government selectively released some details of the list of those shortlisted which included virtually every company of consequence who had bid.

Except for three small players, which included the Indian Pilots Guild, almost all players including Tata-SIA, Videocon, the Hindujas, L. N. Mittal and the Delta-Air France combine have been shortlisted for Air-India. Eight bidders are in the fray for Air-India and five for Indian Airlines. Two bidders for Indian Airlines have also been rejected.

Initial details of their business plans and consortium details have to be submitted by those successful, by January-end, 2001. However, the final price-cum-technical bids can take another two-to-six months and the transaction itself was likely to be completed by the first half of 2001.

Obviously the government which had earlier announced it would not officially release the list was forced to retract, worried by media reports which suggested the Tata-Singapore combine had the upper hand in the disinvestment shortlisting and others in the race such as Hindujas, L. N. Mittals and Emirates Airlines are being quietly dropped.

Other reports suggested the government’s advisors to the divestment process want a second round of bidding to get a better price for the national flag carrier.

Further, a battle between civil aviation minister Sharad Yadav who is against Air-India being sold off, especially to any foreign airline and the Prime Minister’s Office, which is keen on the move, has also been alluded to in the reports.

Air-India itself is no pretty bride. It turned up a net loss of Rs 75 crore last fiscal, the fifth consecutive year it posted a loss. It has 26 ageing planes, most of which need to be replaced. And it has the world’s highest employee-to-aircraft ratio of over 680 workers for every plane it owns, whereas most airlines have less than 100 employees to a plane.

Nevertheless, the suitors are flocking to the ailing Maharaja due to the huge number of unutilised flying rights that the airline retains and the fact that its total fixed asset value is still an awesome $ 2.7 billion.


Hyderabad, Dec15: 
The State Bank of India (SBI) is considering the launch of a separate subsidiary for its information technology initiatives, which include extension of its internet banking scheme and computerisation of all its branches.

SBI chairman Janki Ballabh told newsmen today that a corpus of Rs 500-700 crore is set aside for infotech initiatives, which include improving its network and more ATMs before the end of this fiscal.

Internet banking, with the launch of is already operational in eleven branches, including an NRI branch in Kerala.

“The technology rollout has already begun with computerisation of 2500 branches all over the country. We propose to have internet banking in about 100 branches before the end of this fiscal,” he added. SBI already has a separate subsidiary for its cards and services with G E Capital.


Mumbai, Dec 15: 
Stocks plunged on the local bourses today as sellers scrambled to book their profits shaken by the news that Microsoft Corp, the world’s largest software maker, was cutting its sales and earnings estimates for this quarter as well as fiscal 2001.

The software giant said sales in its second quarter ending December 31 would be between $ 6.4 billion and $ 6.5 billion, less than the $ 6.8 billion average estimate of analysts surveyed by IBES International.

It was the first time in more than a decade that Microsoft had trimmed its earning forecast and followed several other computer-related companies scaling back their estimates earlier.

In Bombay, the 30-scrip Sensex crashed by 133.29 points as brokers punched buttons to book their gains in cement, automobile, telecom, pharmaceutical and FMCG counters.

The brokers realised that the impending bull party was over after Microsoft’s shock announcement sent both the Nasdaq composite index and the Dow Jones Industrials tumbling by over 94 and 119 points respectively last night. A feeble trend in South East Asian markets today also partly dampened the sentiment.

The sensex opened in the red with a gap of 29 points at 4214. It clung to its negative territory throughout the day touching an intra-day low of 4130 before settling at 4137.16 as against Thursday’s close of 4270.45.

The fall was exacerbated by the fact that 29 of the 30 sensex scrips took a beating today.

The foreign institutional investors were also major sellers today.

The buzz in the market was that the Janus Fund, which had only recently taken an exposure to the Infosys stock, had started selling heavily at the counter.

Software stocks remained under strong selling selling pressure with momentum stocks like HFCL and Global Telesystems wreaking havoc on the markets.

Among the major losers were Global Telesystems, HFCL, DSQ Biotech, Vikas WSP, Balaji Tele, McDowell, Mukta Arts, Padmalaya Telefilms, Shyam Tele and Apollo Tyres.


Calcutta, Dec 15: 
ICI India, which is restructuring its business, will spend a substantial amount on mergers and acquisitions.

ICI managing director Aditya Narayan said today the company was looking at acquisition possibilities in core areas, namely decorative paints, starch, speciality chemicals and fragrances.

Narayan said the company’s plans to sell its polyurethanes (PU) business and hive off its motor and industrial paints division into a joint venture with Berger Paints would generate an additional cash flow of Rs 100 crore.

While Rs 82.5 crore will be realised from PU business, the joint venture will fetch Rs 16.5 crore from the partner.

He said the board of ICI India would carefully study how to deploy the surplus cash and a strategy would be drawn up by March.

On the joint venture which will be managed by Berger, Narayan said ICI India would provide the common facilities to the new entity. However, he hinted at a possibility that ICI India might pull out of the venture a t a later date.

Narayan was in the city to attend the company’s extra-ordinary general meeting which was convened to seek the shareholders’ approval for the restructuring plan.

According to Narayan, if ICI gets good price for other non-core businesses, it will go ahead with its policy of sale. To sustain in the businesses like rubber chemicals, pharmaceuticals and nitrocellulose, the company is also looking for technology partners as it had done for the explosives business, he said.

Earlier, ICI chairman A. S. Ganguly said the company was not forced to sell the PU business by its parent.


Mumbai, Dec 15: 
A sub-committee has been formed under the auspices of the P N Bhagwati committee which will frame the preliminary draft for the proposed amendments to the takeover code.

The Sebi committee on the takeover code proposes to finalise the draft in its next sitting on December 26-27.

The members of the committee headed by P N Bhagwati, include N A Soonawala, vice-chairman of Tata Sons, Nimesh Kampani, a leading merchant banker from J M Morgan Stanley, corporate legal eagle Shardul Shroff and Sebi’s executive director O P Gehrotra. The draft recommendations would be palced before the Bhagwati committee.

However, certain sections in the corporate world criticised the formation of a committee which it said is skewed in favour of the established czars of India Inc.

On Thursday, Bombay Dyeing chairman Nusli Wadia had submitted that all categories of shareholders including promoters should have an opportunity to exit in case of a take-over. In addition to this, he had also argued in favour of steep penalties for those acquiring shares in breach of the take-over code.

Others argued that the penalties should be proportionate to the seriousness of the violation. This would ensure that failure to make a public offer at the trigger point would be far more serious than failure to make a disclosure when the 5 per cent limit is reached.

The participants yesterday also debated about non-competing rights and whether these should form part of the public offer. In a friendly take-over, the outgoing promoter is given shares on the condition that he does not enter similar business activities. These shares, called non-competing shares, are offered at a price lower than that of the public offer. The concept is very popular abroad, aver corporate observers.

Sebi guidelines

Meanwhile, Sebi has issued guidelines for risk management in index options trading settled through cash transactions.

The minimum size contract for the index-based options would have to be Rs 2 lakh while introducing instrument in market with a maximum maturity for 12 months, Sebi said in a release here today. The capital markets regulator had adopted the portfolio approach while evolving guidelines for covering the risks involved in index based trading and reduce transactions costs in derivatives, it said.


Mumbai, Dec 15: 
Entertainment graphics major Pentamedia Graphics Ltd has earmarked $ 100 million for its acquisition programme that envisages taking over as many as 10 companies by March 31 next year.

This was disclosed by V Chandrasekharan, chairman and CEO, Pentamedia Graphics, after an extraordinary general meeting called to seek shareholders’ approval for the acquisition plan among others. The acquisition is to be met through an issue of American Depository Receipts (ADRs) or Global Depository Receipts (GDRs) up to $ 250 million with a greenshoe option of 15 per cent.

Chandrasekharan further said Pentamedia is in talks to acquire digital assets and related businesses in the global entertainment segment of 10 companies, of which four were in India and six are overseas. However, he refrained from naming the target companies.

He added the acquisitions which are part of its strategic growth plans also includes Film Roman where it has already agreed to purchase a majority stake for a total consideration of $ 15 million. The acquisition proceedings of this deal were almost complete, company officials pointed out. Pentamedia is likely to issue the ADRs only after April next year, sources said.

During the meeting, shareholders also approved the hiving off of its internet broadcast venture ( and a preferential allotment of six million shares for acquisitions of “content, programmes and/or brands from entertainment vendors for cash or stock.”

The preferential allotment will see Pentamedia issuing over 60 lakh shares of at least Rs 490 per share. The allotment would be made to body corporates, overseas body corporates, financial institutions/mutual funds/banks and NRI/OCBs.

Commenting on NumTV, Chandrasekaran said that it was still being valued by Ernst & Young, but the hive-off would be at a price not less than $ 15 million.


New Delhi, Dec 15: 
The government today indicated that it favoured permitting provident and pension funds to invest in the high-risk venture capital sector in a bid to give a fillip to the high-tech industry.

“We need to improve (quality of) high technology financing. A number of suggestions for improving operations of venture capital funds in India (including providing access to provident and pension funds) could be considered,” insurance secretary P.K. Banerjee, secretary insurance said.

Industry has long been lobbying that pension and provident funds should not be restricted to just infrastructure funding and should be allowed to participate in venture capital funding of high-tech companies.

Banerjee, who was speaking at a seminar organised by the Indo-American Chamber of Commerce, also said the government is considering framing a standard guideline for valuation of VCFs to enable more funds to flow into the high-tech sector.

Banerjee said key growth areas, such as bio-tech and infotech, would be picked for venture capital funding and those, including small and medium-sized enterprises with research successes, should be encouraged. “Majority of knowledge based ventures in India are in the small and medium enterprises (SME) sector. There is critical shortage of venture capital kind of support,” he added.

Banerjee said the government has already formulated a credit guarantee fund scheme for small industries which will cover the collateral free loans extended to the SSI sector. The guarantee cover will mitigate 75 per cent of the risk to the lender.


New Delhi, Dec 15: 
With foreign oil companies fighting shy of the refinery sector, the Nagarjuna group is now wooing public sector oil companies to pick up a equity stake in its refinery at Cuddalore in Tamil Nadu. The refinery has a per annum capacity of five million tonnes.

This second hand refinery belonging to Mobil was imported from Germany at a time when the domestic refining capacity was far short of demand. The situation, however, drastically changed by the time the refinery reached Indian shores.

For the first time, the country is facing a glut in petroleum products and the situation is unlikely to change in the immediate future.

The cash-starved Nagarjuna group has been desperately looking for a co-promoter. Oil industry circles believed that Mobil would join the company as co-promoter. That was not to be. Caltex entered into serious negotiations, but decided against partnering it.

Major oil companies across the world are trying to wriggle out of their refining operations in view of the dwindling margins which in most cases have turned negative.

The unannounced capacity creation to the extent of 27 million tonnes per annum by Reliance Petroleum (RPL) threw the domestic market out of gear. RPL itself is finding it difficult to maximise its capacity utilisation.

The only public sector oil company which was short in refining capacity was Bharat Petroleum. It has, however, overcome this problem by taking over Cochin Refineries Ltd (CRL).

Indian Oil, which did not have a refinery in south India, has now got Chennai Petroleum Corporation.

The IOC management announced its decision to drop the refinery project it proposed at Nagapattanam in Tamil Nadu, the home district of former petroleum minister T.R. Baalu.

Most of the existing refineries are being expanded. IOC’s 9 million tonne refinery at Paradeep is expected to be commissioned in 2003-4. Essar’s 12 million tonne per annum refinery in Gujarat has to come up. RPL may also expand its capacity when its agreement with IOC expires in 2004. Even if the current recessionary conditions recede after some time, the domestic market will continue to be surplus in refining capacity.

Market conditions do not allow the PSUs to invest in a fresh refinery project. Then PSUs are vulnerable to political pressures. The management of BPCL does not easily give in. HPCL has an expanded refinery at Vizag.

At a time when its own refinery project at Bhatinda is languishing without a co-promoter, HPCL cannot be expected to invest in Pennar Refinery.

The Pennar refinery is headed by Shyam Sundar, former CMD of Madras Refineries. He was a high flying executive director of IOC, tipped to become the marketing director. As he did not want to leave Chennai, he opted for MRL from where he was eased out by former petroleum minister Vazhapadi Ramamurthy. Sundar is a heavy weight among oil executives.



Foreign Exchange

US $1	Rs. 46.76	HK $1	Rs. 5.90*
UK £1	Rs. 68.69	SW Fr 1	Rs. 27.35*
Euro	Rs. 41.97	Sing $1	Rs. 26.55*
Yen 100	Rs. 41.52	Aus $1	Rs. 25.20*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4570	Gold Std(10 gm)	Rs. 4530
Gold 22 carat	Rs. 4315	Gold 22 carat	Rs. 4190
Silver bar (Kg)	Rs. 7675	Silver (Kg)	Rs. 7775
Silver portion	Rs. 7775	Silver portion	Rs. 7780

Stock Indices

Sensex		4137.16		-133.29
BSE-100		2144.12		-86.11
S&P CNX Nifty	1312.60		-36.75
Calcutta	119.81		-1.68
Skindia GDR	711.41		-3.36

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