NDA allies oppose selloff policy, Opp stages walkout
Tata Power acquires Tata Petrodyne for Rs 145 cr
Rs 10,607 cr incentive fund for states
Wipro buys 45% in ISP
Deadline may be relaxed for reducing bank promoters' stake
Technology typhoon knocks down sensex by 66 points
Sterlite Optical to raise $ 200m
Hindujas sell Astra-IDL holding to AstraZeneca
Batata buys RPG Cellcom for $ 113m
Foreign Exchange, Bullion, Stock Indices

New Delhi, Dec 20: 
In what turned out to be a major embarrassment for the NDA government, three key BJP allies — Telugu Desam, Trinamool Congress and Shiv Sena — made common cause with opposition parties in Parliament today in opposing the government’s disinvestment policy.

As ally after ally stood up to blast the government over its disinvestment policy during a debate on the issue, treasury benches turned incredulously silent, except for the normal whispered presentation of private memos by MPs to various ministers. In the end, the opposition stormed out of the House dissatisfied by the disinvestment minister Arun Shourie’s refusal to spell out a policy on the issue through a white paper. However, the treasury benches, already in a state of shock at their allies’ desertion on the issue, refused to react.

The Telugu Desam set the ball rolling by ticking off the government for not having a well thought-out policy on the issue and demanded a white paper on disinvestment.

Trinamool’s Sudip Bandopadhyay took up the gauntlet after that with an opening announcement that his party was opposed to the government’s disinvestment policy. Bandopadhyay, in implied criticism of the government’s current plans to sell Air-India, demanded that the flagship carrier be merged with Indian Airlines so that their combined strength could create a more viable airline.

Shiv Sena also joined the chorus stating that it felt the disinvestment policy was ill-conceived. Ministers from both Sena and Trinamool — Manohar Joshi and Mamata Banerjee — sat through their party colleagues performance with bowed heads. Both the ministers as well as Janata Dal (U)’s civil aviation minister Sharad Yadav have been fighting on just these points inside Cabinet meetings. The Lok Sabha debate seemed to be merely an extension of the fight within. In fact, Yadav had tried to put off A-I’s divestment initially by proposing what Bandopadhyay now placed before the house — merge the two airlines and revive them before thinking of selling their shares.

Buoyed with this unexpected support, Congress MPs seemed ebullient. Mani Shankar Aiyer, the party’s key speaker on the issue, had a field day with allies nodding in agreement with much that he said. Aiyer picked up a study prepared by a PSU chamber — Standing Committee on Public Sector Enterprises — and pointed out that the government was earning some 17-19 per cent profit on an equity investment of Rs 77,000 crore from state-owned companies and selling them off would actually add to the budgetary deficit instead of reducing it as was being made out by the BJP government. He pointed out the government had fixed no criteria for choosing PSUs for sale nor any for deciding which should be sold to strategic buyers, which on the open market, and which should be sold outright.

He tried to round off his speech by inviting other ministers present — Yadav and Joshi — to join in and speak their minds on the issue. This seemed to have hit the bull’s eye. Both disappeared from the house without further ado!


Mumbai, Dec 20: 
Tata Power Company, the country’s largest private power utility today announced its acquisition of oil and gas exploration company Tata Petrodyne Ltd, for Rs 145 crore.

This acquisition is in line with Tata Power’s corporate strategy to establish a national presence in three core sectors of the economy — power, energy and communications infrastructure, a statement from the company said.

Commenting on the acquisition, Adi J engineer, managing director, Tata Power said, “Tata Power has identified domestic energy sector as a high growth area. The acquisition of Tata Petrodyne represents a firm step to significantly stregthen our position as a leading player in this sector.”

Tata Petrodyne Ltd, the 100 per cent subsidiary of Tata Industries Ltd is engaged in the business of oil and gas exploration and production.

The company is consortium with global majors Cairn Energy, Enron, Hardy Oil & Gas and leading Indian Oil, ONGC and Hindustan Oil Exploration Company (HOEC) for its gas and oil exploration and development projects in three offshore blocks.

The Tata group had indicated earlier this year that Tata Industries, which will focus increasingly on the new economy sectors, would identify expertise areas that can be marketed independently to both Tata and non-Tata group companies.

The consideration of Rs 145 crore for the acquisiotion was based on a financial valuation by S B Billimoria and technical evaluation by a leading nternational petroleum consultant.

The transaction will be financed from the company’s internal resources.


New Delhi, Dec 20: 
The Union government will set up a Rs 10,607 crore incentive fund with which it hopes to get states to agree to a package of fiscal reforms over a five-year period.

In a supplementary report on the Eleventh Finance Commission tabled in Parliament today, the government said it would release money out of this fund to any state willing to take on a reforms package revolving around five core issues — growth in tax and non-tax revenues, reduction in wage bills, cuts in subsidies and retirement of state debt.

In what may well spark off another round of Centre-State confrontation, finance minister Yashwant Sinha who tabled the report also said a monitoring agency would be set up to draw up “state specific monitorable fiscal reforms programmes.”

The monitoring agency would include representatives from the planning commission, Union finance ministry and representatives of the concerned states.

The incentive grant would be partly culled out of an earlier grant of Rs 35,359 crore earmarked to help out 15 states facing a tight revenue deficit situation over a five- year period. The rest would come from matching Central grants. It would be spent in equal amounts over the next five years.

Better off states, led by Andhra Pradesh, had protested when this grant had been announced claiming they were being discriminated against for performing well. Today’s fund announcement is an obvious sop to try stifle criticism.

States can claim shares from the incentive fund on the basis of their population. Besides the incentive based fund, the Commission has recommended linking reforms with ways and means advances and permission for additional open market borrowing.

The 15-page supplementary report, however, has a dissenting note by one of its members, Dr Amaresh Bagchi, who felt the incentive fund would not serve its purpose.


Mumbai, Dec 20: 
Wipro Ltd today announced that it is acquiring a 45 per cent stake in the internet service provider (ISP) Wipro Net, from the Dutch telecommunications operator KPN Telecom, for Rs 108.8 crore ($23.25 million).

Wipro Net Ltd, a joint between the duo and it was formed to address the emerging internet services market, focusses on the business requirements of Indian companies and under the brand name, Net Kracker, it focusses on retail customers. Wipro in a communication sent to the stock exchanges today, said that subsequent to the acquisition of 45 per cent interest from KPN Telecom, it is planned that the retail ISP portion of Wipro Net will be spun off as a separate entity, under the name Net Kracker Ltd to facilitate funding its ongoing growing plans. Following the spin off, the restructured Wipro Net will focus its service offerings in addressing the corporate B2B space.


Mumbai, Dec 20: 
The Reserve Bank of India (RBI) is considering the possibility of extending the deadline set for promoters of private banks to reduce their stake to 40 per cent.

Current regulations by the central bank stipulate that promoters of private banks should reduce their holdings to 40 per cent by March 31, 2001.

However, five of the nine private sector banks have been unable to do this due to the poor capital market conditions.

Therefore, these banks had urged the apex bank to extend the deadline.

Speaking to reporters after inaugurating the new “large corporate branch of” Punjab National Bank, RBI deputy governor S P Talwar said, “We do not have a rigid stand on the issue and may extend their deadline of reducing the holding up to 40 per cent looking at the problems at the individual bank levels.”

An RBI official later told The Telegraph that the central bank was willing to look at the issue ‘positively’ if they received individual representation to this effect.

The five banks which have yet to reduce the promoters’ holding to 40 per cent include ICICI Bank, IDBI Bank, UTI Bank, Centurion Bank, and IndusInd Bank. Most of these banks, it may be recalled, were either planning to rope in a strategic partner or floating a public issue.

However, none of them have announced any decision in this regard.

The other banks which have complied with the RBI regulations include HDFC Bank, Global Trust Bank, Bank of Punjab and the Development Credit Bank.

The RBI while issuing licences to these banks had earlier extended the deadline for paring the promoters’ stake in 1997-98 and subsequently again extended it to March 31, 2001.


Mumbai, Dec 20: 
The Bombay Stock Exchange (BSE) sensitive index today lost 66.53 points in a selloff that whipped infotech, communications and entertainment shares — referred to as ICE— as investors spooked by a series of warnings from global technology titans sold their way out.

Fund managers reviewed their investment strategy as Microsoft, Cisco and Intel flashed earnings caveats that sent global bourses into a tizzy. The Nasdaq composite index tumbled by a bone-numbing 113 points on Tuesday to settle at its lowest level since August 1999. The losses in the sixth straight session came after the Federal Reserve expressed worries — with clear indications of rate cuts in January — that the US may be risking a recession in its obsession to achieve a soft landing for an overheated economy.

The sentiment was hurt further by reports of slumps in south-east Asian markets earlier today; Hong Kong’s Hang Seng index was down 257.32 points, Tokyo’s Nikkei by 217.94 points and Singapore’s Straits Times Index by 31.54 points.

Brokers say the slide on foreign bourses and the poor fortunes of global majors are likely to tell on the bottomline of software companies at home. “Companies are likely to see an increase of only 25-30 per cent in their medium-term share prices,” said Dhiraj Sachdev of HDFC Bank. According to him, while the top bracket companies are likely to post an earnings growth of 80-100 per cent, their share prices will not keep pace with the growth in their topline. Infosys led the fall for tech stocks. FIIs, who have almost withdrawn, booked profits.

BoM base price

BSE today raised the base price of the Bank of Madura to Rs 315.80 for trading in the wake of the 2:1 exchange ratio for its merger with ICICI Bank. Normal circuit filter of 8 per cent will be applied on the new base price.

The ICICI Bank share had closed at Rs 157.90 on Tuesday while Bank of Madura finished at Rs 208.60. As a result of BSE’s decision, the Bank of Madura share rocketed to Rs 290.55, gaining over Rs 80, while ICICI Bank closed at Rs 157.20.


Mumbai, Dec 20: 
Sterlite Optical Technologies Ltd (SOTL) is planning to raise an amount of up to $ 200 million by way of American Depository Receipts (ADRs) or Global Depository Receipts (GDRs) and other financial instruments.

This decision was taken by the board of directors of the company here today. SOTL, in a communication sent to the stock exchanges, added that this is an enabling resolution and the exact size of the issue will be based on available oppurtunities to expand its operations in optical fibre, optical components (photonics) and other related business through strategic partnership/acquisitions and also the market conditions.

SOTL had last week announced plans to invest around $ 300 million in setting up a greenfield project for optical fibres. The proposed facility would have a capacity of 10 million fibre km to be set up in two equal phases of $ 150 million each.

The company, while announcing its decision to shift its marketing office to the US had then stated that its revenues from the export markets is likely to cross Rs 800 crore in the year 2001 due to strong demand emanating from the developed nations. The company’s expansion plans are part of its plans to capture a slice of the booming optical fibre market and be in the company of majors like Corning, Lucent and others.

Balco diligence

The second and final round of due diligence exercise in the public sector aluminium giant Balco is slated to begin tommorrow with the visit of a Sterlite Industries team to the PSU’s Bidhanbag unit in West Bengal, amidst strong protests from employees.

A team of officials from Sterlite Industries will start the final round of their due diligence with a two-day visit to the site.


Mumbai, Dec 20: 
The Hinduja group today sold its 25.75 per cent stake in Astra-IDL to AstraZeneca at a price of Rs 670 each. The Rs 85-crore deal will give AstraZeneca a majority stake of 51.50 per cent in the Bangalore-based company.

The Hindujas’ holding in the pharmaceutical company was held by IDL Industries. Both companies were in discussions on the acquisition of a controlling stake in Astra-IDL. Market circles AstraZeneca will now have to offer an exit opportunity to other shareholders by making an open offer of at least 20 per cent at the same price under the provisions of Sebi’s takeover code.

Last year, an understanding was reached between IDL and Astra AB of Sweden under which Astra would disinvest its holdings of 25.75 per cent in Astra-IDL to IDL — as part of the shareholders’ agreement — giving IDL a 51.5 per cent stake. Both parties initialled documents to this effect, subject to the approval of their respective boards.

Subsequently, Astra AB merged with Zeneca of UK to form AstraZeneca, which revised its earlier decision of Astra AB on disinvestment in Astra IDL. As part of its global plans, AstraZeneca was not willing to transfer any new technology to Astra IDL unless it had a majority holding.

Commenting on the development, IDL said while this would have restricted the future growth of Astra IDL, the board of IDL decided to accept AstraZeneca’s offer to buy IDL holdings (25.75 per cent) in Astra IDL. IDL said it has decided to develop and expand its core business, industrial explosives and detonators apart from diversifying into other areas related to their chemical business.

On the Bombay Stock Exchange today, the Astra-IDL scrip shot up by 4 per cent to close at Rs 413.10 compared with its previous close of Rs 397.90.


Calcutta, Dec 20: 
The Birla-Tata-AT&T combine (Batata) has acquired RPG Cellcom, the cell phone provider in Madhya Pradesh, for a sum of $ 113 million (a little over Rs 500 crore).

The deal, which is one of the largest in the cellular industry, signals the end of a fierce battle between Batata and Hutchison Max, the country’s largest cellular service provider, for the RPG outfit.

Confirming the development, a senior RPG official said the final deal was struck last week with Vodafone Airtouch selling its entire 49 per cent stake in RPG Cellcom.

A couple of weeks ago, the RPG group had entered into a sale agreement with the Birla-Tata-AT&T for its 51 per cent stake in the company. But the deal could not be clinched at that stage as the acquirers wanted to take over the entire company. It was only after Vodafone decided to sell its 49 per cent stake that the deal was finally sewn up. Rabo Bank, appointed by RPG Cellcom, had organised the transfer of ownership. The official said the enterprise value was estimated at $ 113 million which included a debt portion of $ 23 million.

The company is likely to get a new name once the process of transfer is complete. Earlier, the three companies — Hutchison, Birla-Tata-AT&T and BPL Telecom had pitched in to pick up the 51 per cent stake of RPG in the company.

Explaining the motive behind the sale, the official said, “We have decided to sell out our stake in the RPG Cellcom because we don’t have any geographical advantage in Madhya Pradesh.” However, RPG Cellcom will continue to be a strong player in Chennai, he added.

Vodafone, which is RPG’s partner in Chennai circle with 22 per cent share, is reorganising its entire operations in India, he said.

For the Chennai cellular service, the RPG group is weighing options to divest part of its holding in the RPG Cellular Services. The Rabo Bank has been given the mandate by the company to find out a buyer for the 17 per cent stake in the Chennai outfit. Sources said the RPG group, which has 68.5 per cent stake in RPG Cellular Services, was planning to dilute its holding over and above 51 per cent.

“After the process of valuation is done, the company will appoint a merchant banker to scout for a suitable partner,” they added.

The RPG spokesman said the group might offload part of its stake in the company but it would definitely continue to have the management control. Sources said several companies have evinced interest in RPG Cellular Services because of its “tremendous” performance.

“The company is already making a profit of Rs 1.5 crore per month before depreciation, which is very encouraging,” they said. It has invested Rs 40 crore and expanded its capacity to handle 75,000 subscribers from 25,000. “But this is not enough given our growth rate. We are connecting 4,000 subscribers every month,” they added.

The company is also planning an investment of another Rs 25 crore to expand the capacity further to 1.1 lakh subscribers. “We are hopeful that by the end of this financial year, the company will complete its second phase of expansion,” they said. The company also has plans to offer web-enabled services soon. “We are trying to offer the most modern services to our customers with the help of internet,” he said. The RPG official, however, has clearly stated the company does not plan to tap the capital market at the moment.

“We don’t need funds from outside to finance our expansion activities. We will make investment from our internal generation,” he said.



Foreign Exchange

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