Speaker breaks Maruti deadlock
Godfrey Phillips share afire on stake-hike buzz
Rs 6000cr needed to wipe out NPAs
Govt readies Bill to cap fiscal deficit
Hindustan Lever plans to reshuffle brand portfolio
IDBI hands out 3:5 bonus
HP targets small and medium enterprises
Public sector chiefs, MPs blast selloff policy
BPCL looks for third ally at Bina
Foreign Exchange, Bullion, Stock Indices

 
 
SPEAKER BREAKS MARUTI DEADLOCK 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Dec 19: 
The impasse over a three-month-old strike by Maruti workers is likely to be broken tomorrow with industry minister Manohar Joshi agreeing to get the government directors to propose that the Maruti management withdraw all suspension and dismissal cases against workers.

Joshi accepted this suggestion at an unprecedented meeting called by Lok Sabha Speaker G.M. Balayogi to try find a solution to the labour strike that began in September.

The meeting was attended by CPI leader Ajoy Chakraborty, Congress MP Satyabrat Chaturvedi and Trinamool leader Sudeep Bandopadhyay among others.

Normally, Lok Sabha Speakers do not intervene to settle corporate labour problems but, with the issue being raised repeatedly in Parliament, Balayogi decided to call the MPs who had been speaking on behalf of the workers for a meeting with Joshi who exercises control over the 50 per cent shareholding in the auto-maker on the government’s behalf.

The ‘pro-labour’ MPs on their part promised to persuade the labour unions to agree not to press for a higher incentive pay right now. Joshi told the Speaker he could not speak for Maruti as a whole but would certainly get the government-nominated directors to press their partner in the joint venture, Japanese automobile giant Suzuki, to accept these gestures.

“We think the row can be settled now,” Chakraborty said after the meeting. Maruti management and labour have been at loggerheads since the unions began their strike. The carmaker’s output has been badly hit with less than a third of the Maruti’s 4515 unionised workers reporting for duty for most of the period. As a punitive measure against striking workers, Maruti Udyog threw out some 44 workers and 21 trainees and suspended another 10 workers since the start of the agitation.

The carmaker, a 50:50 joint venture between Suzuki Motors of Japan and the Indian government, has taken an aggressive stance since the strike began. It said it would allow the workers to return to the shop floor only after they signed a “good conduct undertaking” that would bind them to a promise not take part in any agitations in the future. The government had earlier offered a peace formula which, however, did not satisfy the unions as it did not offer to lift suspensions and dismissal notices served on some of the workers nor legal complaints against some others.

It has become important for the government to settle the strike because it was being accused of being insensitive to workers’ interests even as it tried to sell its 50 per cent stake to Suzuki or a third auto-maker nominated by the Japanese company..

   

 
 
GODFREY PHILLIPS SHARE AFIRE ON STAKE-HIKE BUZZ 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 19: 
There is smoke billowing out of Godfrey Phillips. The KK Modi group flagship company has seen its share price hit upper-end circuit filters on successive days, lending credence to the rumour that its US partner Philip Morris may finally raise its stake in the company.

The market buzz has sent the Godfrey Phillips share soaring by 31 per cent, or Rs 133.47, in the recent days starting from December 8. It closed at Rs 552.45 on the Bombay Stock Exchange (BSE) today, up sharply from Rs 511.45 on Monday.

There is a feeling among marketmen that the US parent will offer an attractive offer price to increase its stake in the company. However, GPI officials were not available for comment. R A Shah, the chairman of the company, is abroad.

Philip Morris, which holds a 37 per cent stake in Godfrey Phillips, was keen to hike its stake in the company. The Modis hold 32 per cent in the company.

Earlier, the government had rejected an application from Philip Morris’ Swiss subsidiary, FTR Holdings, to set up a 100 per cent arm in the country. The reason advanced was that it did not secure a no-objection certificate from the Modis, their partner in the Indian subsidiary.

The planned wholly owned subsidiary would have established an international standard tobacco processing plant, using proprietary technology. It also had plans to establish a research and technical service centre to implement programmes that would help farmers improve leaf production.

Market operators say it is not the first time that rumours over Philip Morris’ stake hike moves have swirled. Godfrey Phillips is the second largest player in the Indian cigarette industry. Its leading brands are Four Square, Red & White, Cavenders, Jaisalmer and Originals are some of the leading brands with the company. The brands have a market share of around 12 per cent.

The Modis are represented on the board by K.K. Modi, Lalit Kumar Modi and Samir Kumar Modi. It was only in 1980, that the Modi group acquired an equity stake in Godfrey Phillips India. The foreign equity stake was diluted from 81.2 per cent to 49 per cent when the company made a public issue in 1975. This further came down to 40 per cent in 1979.

   

 
 
RS 6000CR NEEDED TO WIPE OUT NPAS 
 
 
FROM OUR CORRESPONDENT
 
From our correspondent 
Credit Rating Information Services of India Ltd (Crisil) estimates that the country’s scheduled commercial banks will require between Rs 5000-6000 crore in fresh funds to offset losses ‘embedded in impaired assets’.

“The capital shortfall estimated recognises the existing moderate capital position of Indian banks, the high and growing level of non-performing assets (NPAs) in most banks, and the inadequate loan-loss reserves maintained by banks to absorb these losses,” the rating agency said in a report, prepared in combination with Standard and Poor’s, the global rating major.

The weak capital position of the Indian banking system is largely a reflection of growing asset-quality problems stemming from weak underwriting and credit management systems, and the vulnerabilities of the Indian banking sector to the impact of globalisation on the country’s key industry sectors. The asset-quality position has suffered from regulations on lending to priority sectors. The capital shortfall calculated assumes a significantly higher system non-performing loan level to that reported under Indian regulatory standards.

According to the report, NPAs of Indian banks will be significantly higher at 20-25 per cent of their total advances if more conservative classification standards are adopted and restructured and ever-greened loans are included as impaired assets. “While 90-95 percent of all loans in India are secured with some form of collateral, it is estimated that a realistic loss given default rate on non-performing assets will be near 80 per cent,” the country’s leading credit rating agency said.

Crisil opined that many of India’s scheduled commercial banks are struggling to keep up with increasingly more onerous prudential standards stemming from ongoing financial sector reforms. The RBI’s loan classification and provisioning standards in some way underpin the government’s forbearance of the weak capitalisation of the Indian banking system.

   

 
 
GOVT READIES BILL TO CAP FISCAL DEFICIT 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Dec 19: 
The government today finalised a Bill that will make it obligatory for it to reduce the fiscal deficit by half a per cent of the gross domestic product (GDP) every year, starting April 2001.

This will help it reduce the deficit — the difference between the government’s earnings and spending — to 2 per cent of the GDP in 2006.

The Bill, which was circulated tonight among MPs before being taken up for discussion in Parliament, was framed after mounting concerns over the runaway increase in the government’s indebtedness, resulting from its unsustainably high fiscal deficit.

Even this year, the fiscal deficit is expected to about 5.5 per cent of the GDP or more than Rs 100,000 crore; in recent years it has even crossed 6 per cent.

The Bill aims to ‘eliminate fiscal deficit and remove fiscal impediments in the effective conduct of monetary policy and prudent debt management.’

The long-awaited Bill also enjoins on the government not to give guarantees to companies or other bodies for loans which total more than half per ent of the GDP in a year.

At the same time it asks the government not to resort to any borrowing from the Reserve Bank of India except as a temporary measure.

However, the RBI can if it so choose buy any bond or security floated by the central government.

The government will also have to lay before parliament every year a medium term fiscal policy, a current fiscal policy statement as well as a statement showing the macro-economic framework for the country.

This has to be followed up by quarterly reviews of incomes and expenditures where it has to explain any changes from the plan.

   

 
 
HINDUSTAN LEVER PLANS TO RESHUFFLE BRAND PORTFOLIO 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 19: 
Fast moving goods major Hindustan Lever Ltd (HLL) will embark on a major restructuring strategy by early next year which will see it shed some brands and also enter new business areas.

In an interview to a foreign wire agency, HLL chairman Manvinder Singh Banga said: “We are at an advanced stage of evaluating the feasibility of several new businesses.”

Analysts claim that the strategy is in line with that of its parent, the Anglo-Dutch conglomerate Unilever Plc that makes soaps, detergents, personal care products and processed foods. Unilever aims to focus on 400 of its core brands.

The company has been struggling to raise its topline growth from the present single digit figures. Despite this, profits grew at a faster clip of over 16 per cent. Analysts however feel that unless some drastic re-engineering is done the poor topline growth will ultimately have a detrimental effect on the bottomline growth. HLL has been hit hard by external factors like a reduction in rural spending due to a bumper grain harvest that has seen poor offtake and low prices. HLL was counting on the rural markets to bring home an impressive topline growth.

The company has decided to invest Rs 100 crore annually on e-ventures and 80 per cent of that on business-to-business (B2B) models. The company is also looking at confectionery and mineral water businesses. HLL is in the process of developing its new millennium business, which was first initiated by Keki Dadiseth, former HLL chairman and now an executive director at Unilever Plc.

“We are extremely clear that we will move into new areas only where we can leverage our core competencies,” Banga told the news agency. The exercise to identify new business areas runs parallel to another exercise which focuses on pruning HLL’s 110-strong portfolio of brands. Banga also said that the company could dispose of some brands or migrate to larger brands.

The news buoyed the HLL share price which rose to an intra-day high of Rs 204.50 and pierced the Rs 200 mark. The HLL share finally closed the day at Rs 201.90. Marketmen also alluded that the company is proposing a buyback, which has activated the scrip offlate.

   

 
 
IDBI HANDS OUT 3:5 BONUS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 19: 
The Industrial Development Bank of India (IDBI) cheered its shareholders by declaring a 3:5 bonus issue.

The financial institution said it will seek shareholders’ approval at an extra-ordinary meeting, expected to be convened soon. Today’s board meeting was held in New Delhi.

After the issue of bonus shares, IDBI’s equity capital will be Rs 653 crore, marginally less than the subscribed capital of Rs 673 crore.

Analysts tracking the counter had predicted a similar bonus ratio. IDBI shares closed at Rs 42.75 on the Bombay Stock Exchange (BSE) after hitting an intra-day high of Rs 45.40. The counter witnessed 1,954 deals, with close to 5.18 lakh shares changing hands. The 52-week high and lows for the scrip were Rs 75 and Rs 30 respectively.

The move to declare an attractive bonus is considered as an attempt by the financial institution to reward its shareholders, including employees who subscribed to its shares at a high premium.

Employee-shareholders who subscribed to shares by taking loans had expressed their unhappiness on several occasions. Not only did they see their principal amount shrinking in value, they were forced to shell out more by way of interest for borrowing funds to subscribe to the issue.

IDBI had tapped the primary market in 1995 with a maiden public issue at a price of Rs 130 per share, aggregating Rs 2,184 crore.

Speculation was rife about a bonus issue for some time. Analysts were certain that the company would hand out a good bonus issue to placate its shareholders, and partially offset their losses.

The financial institution’s plan to restructure its Rs 673.09-crore equity hinges on reducing the government holding from 72.14 per cent to 51 per cent. This will be done either through an equity float in the domestic market or opting for an overseas listing in the near future.

IDBI plans to follow its arch rival, ICICI, which has already tasted success by listing its ADS on the New York Stock Exchange in a maiden $ 315-million issue. Like ICICI it also has plans to enter the infotech business, but unlike its rival, it has yet to has make a headway into the new sector.

The proposed floatation will bring down the government’s holding in IDBI to 58-60 per cent. Recently, the financial institution obtained the government’s approval to transfer part of its equity in Sidbi, its wholly owned subsidiary, to a clutch of public sector insurance companies. However, the price at which the divestment will take place has not been fixed.

   

 
 
HP TARGETS SMALL AND MEDIUM ENTERPRISES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Dec 19: 
Hewlett-Packard today launched eSMART strategy in association with Intel, Nokia, Cisco, Microsoft and Oracle to tap small and medium enterprises (SME) market in India and Asia Pacific

“SMEs are keen to acquire computers and peripherals at an affordable cost and world class services. We will try to meet the demands the way Maruti did in the auto market,” said Ganesh Ayyar, president, Hewlett-Packard India Ltd.

HP expects the revenues from India particularly from the SME segment will grow over 50 per cent each year over the next three years. According to International Data Corporation (IDC) revenues from commercial desktop segment for the SME market will grow at a compound growth rate of over 40 per cent until 2004.

“SMEs want to e-enable their business, implementing IT solutions to help them grow. But they are constrained by resources and perceived high costs. Our goal is to deliver technology and business support that SMEs need from a single point of contact, thus enabling them to focus on and grow their core business,” said Chin Hon-Cheng, general manager Asia Pacific, SMB, Business customer sales organisation HP.

HP with its world wide alliance partners plans to offer affordable solutions ‘in-a-box’ specifically designed for the SME market, under the e-SMART alliance program for India. HP has also tied up with local partners and application developers to deliver eSmart solutions in India.

Financing of more than Rs 5 lakh will available from HP finance for SMEs to purchase IT solutions. It also plans to tie up with Indian FIs to provide financing options to SMEs for solutions less than Rs 5 lakh.

   

 
 
PUBLIC SECTOR CHIEFS, MPS BLAST SELLOFF POLICY 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Dec 19: 
The BJP-led government finds itself increasingly under siege over its public sector divestment policy — harried by the enemy within and the foes without.

Not only did the combined opposition try to tear the BJP government’s disinvestment policy today in Parliament, but CEOs of public sector companies also blasted the government for what they termed “an indiscriminate policy of privatisation based on disinformation.”

Uddesh Kohli, chairman of Power Finance Corporation and head of the Standing Committee of Public Sector Enterprises (SCOPE), an apex chamber for state-run companies, told reporters here today that many PSU chiefs felt the government should rework its disinvestment policy. He said the government should stop cherry-picking profitable units for the selloff programme and instead hunker down to decide which companies should be chosen and why.

“There is no need to sell off PSUs to industrial houses, many of whom have no great managerial track record to boast off,” said Kohli. “Instead the shares should be sold in small lots (ensuring there is no specific single owner) to allow these companies to turn into truly professional firms run by independent boards the way Larsen & Toubro or IBM are run.”

SCOPE’s secretary general M.A. Hakeem warned that strategic sale of companies like Hindustan Zinc and Bharat Aluminium would dismantle state monopolies only to create private sector monopolies with these vital metals being cornered by one or two business houses.

Echoing their views in the Lok Sabha just a couple of hours later, CPM MP Basudeb Acharya accused the government of trying to hand over management control of IPCL, a state-owned petrochem company, to the Reliance Group creating a monopoly in the sector. “Instead of self-reliance, the talk now is of Reliance,” he quipped.

Possibly to underline the significance of the seminar organised by SCOPE and the message the PSU body was trying to send across, SAIL chairman Arvind Pande joined in at the post-seminar lunch. Kohli blamed the delays in government decision-making for the predicament of many public sector companies like Air India and said this was eroding its value, which would force the government to sell companies at lower prices.

“Air India’s fleet should have been renewed and augmented long back. This would have created a profitable, strong airline which could have fetched a better price,” he said.

Hakeem said the proponents of the selloff policy had been orchestrating a disinformation campaign to project the PSUs as a drain on the exchequer. “Even the ministers have been making irresponsible statements about PSUs and legitimising this dirty-tricks campaign,” he added.

According to SCOPE, the facts don’t square with reality: the Centre had invested about Rs 64,000 crore in the equity of PSUs and advanced loans worth about Rs 22,000 crore; in return, the government had earned dividend worth Rs 15,000 crore, Rs 18,000 crore and Rs 25,000 crore from 1996-97 to 1998-99, an average rate of return on capital of 16 per cent. This is far higher than the rate of return afforded by the private sector.

In sharp contrast, MPs in parliament were however low on specifics and the kind of arguments and data that the PSU chamber had marshalled but took the rhetorical battle against disinvestment onto a different plane.

The Congress, represented by former minister Kamal Nath, demanded the disinvestment policy be cleared by parliament and warned that it would be forced to take the fight into the streets if this was not done.

Even as a clearly worried disinvestment minister Arun Shourie hastily took down notes, Congress MPs warned that the attack would continue in the Parliament.

But perhaps even more worrying for the BJP government is a position paper which was circulated in the committee of secretaries on disinvestment recently which reportedly warned that the government could hardly hope to earn more than Rs 1,500 crore of the Rs 10,000 crore target for earnings from PSU share sales.

   

 
 
BPCL LOOKS FOR THIRD ALLY AT BINA 
 
 
FROM VIVEK NAIR
 
Mumbai, Dec 19: 
Bharat Petroleum Corporation Ltd (BPCL) is likely to induct a third partner for its forthcoming 6 million tonne Bina refinery project. BPCL has already roped in Oman Oil Company as a partner for the project, with the latter slated to pick up a 26 per cent equity stake in the joint venture company Bharat Oman Refineries Ltd.

Top company officials told The Telegraph that though developments regarding the induction of a third partner are still in preliminary stages the option is very much open. Sources close to the company added that the third partner may well be a domestic company.

The cost of the project is now put at over Rs 6,200 crore and it will have a debt-equity ratio of 2:1. Of this amount, Rs 4,200 crore would be raised through debt and over Rs 2,000 crore will be met through equity. BPCL officials indicated that the company will shortly approach the financial institutions to partly finance the project.

BPCL officials stated while the Oman Oil Company had earlier sought a re-look into the project, the PSU is now waiting for a response from the company with respect to both its participation in the project and the equity stake which it would pick up.

“Oman Oil Company is likely to get back to us shortly and the company is likely to confirm its participation. We will then proceed with the details of the project,” they said.

The 6-million tonne refinery, which had suffered a cost overrun on account of various delays, is now put at over Rs 6,200 crore, up from the initial estimates of Rs 5,200 crore.

Oman Oil had earlier indicated its willingness to pick up around 26 per cent stake in the venture and has so far committed around Rs 100 crore to the project. BPCL is slated to pick up around 26 per cent stake in the venture.

Oman Oil Company had appointed the UK-based Chemsystems as consultant to conduct a detailed review of the project. However, in January this year, the company had indicated its plans to withdraw from the project following the delay in its implementation as it could not secure necessary environmental clearances.

BPCL is meanwhile awaiting the valuations of both Kochi Refineries Ltd and IBP’s stake in Numaligarh Refineries Ltd (NRL), slated to come by the end of this month, sources said.

The company is also planning to make a public issue of around Rs 500 crore to fund these acquisitions. The issue is likely to be kicked off in February next year and the combined value of both these investments is expected to be in the region of Rs 500 to Rs 600 crore.

Recently, Oil India Ltd (OIL) and the Oil Industry Development Board (OIDB) had picked up 10 per cent each in NRL for a total consideration of over Rs 180 crore. In addition to the Bina refinery, BPCL is also contemplating a 7 million tonne refinery at Allahabad in UP. The project, put at Rs 6,200 crore, is likely to be implemented from 2001.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 64.69	HK $1	Rs. 5.90*
UK £1	Rs. 68.48	SW Fr 1	Rs. 27.45*
Euro	Rs. 41.62	Sing $1	Rs. 26.60*
Yen 100	Rs. 41.61	Aus $1	Rs. 24.95*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4565	Gold Std(10 gm)	Rs.4525
Gold 22 carat	Rs. 4310	Gold 22 carat	Rs.4185
Silver bar (Kg)	Rs. 7625	Silver (Kg)	Rs.7725
Silver portion	Rs. 7725	Silver portion	Rs.7730

Stock Indices

Sensex		4152.94		-16.45
BSE-100		2132.96		-31.06
S&P CNX Nifty	1310.50		-7.10
Calcutta	121.48		+0.64
Skindia GDR	696.88		+8.63
   
 

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