KK Birla sells Pilani Investment stake
Stocks swoon, sensex falls 128 points
Nicholas Piramal acquires 40% in RPIL
Tatas plan to increase stake in Special Steels
Indian Hotels plans buyouts in US
IPO offer floor set at Rs 100 cr
Foreign Exchange, Bullion, Stock Indices

 
 
KK BIRLA SELLS PILANI INVESTMENT STAKE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Dec. 22: 
K.K. Birla, the patriarch of the Birla clan, has sold almost his entire stake in Pilani Investment and Industries Corporation in favour of younger brother B.K. Birla.

Sources said the deal had been struck following prolonged negotiations among the family members including the Birla brothers who have cross holdings in Pilani Investment, which has a 36 per cent stake in Century Textiles.

The Rs 2,100 crore Century Textiles, which is touted as Asia’s largest composite cotton textile mill, recorded a net profit of Rs 34.52 crore during the year ended March 2000 compared with the previous year’s loss of Rs 93 crore.

In a telephonic interview with The Telegraph, K.K. Birla confirmed that he had ceased to be a stakeholder in Pilani. “I don’t think I have any stake left in the company; a small number of shares could however still be in my possession,” said Birla without disclosing any further details about the deal.

When asked about the developments, B.K. Birla said nothing could be said at this moment and it would take some more time to settle the matter. He preferred not to comment on this “very sensitive family matter”.

K.K. Birla is the first of several family members to dispose of his holding in Pilani Investment which has an asset base of over Rs 1,500 crore.

Sources said the deal could pave the way for similar deals with the other major shareholders — S.K. Birla, Priyamvada Devi Birla (wife of the late M.P. Birla) who are believed to be willing to dispose of their holding in the company.

S.K. Birla, who holds around 10 per cent in Pilani Investment, said he was comfortable with the current situation. “We always have to make some adjustments,” he said.

“Pilani’s share carries a high premium and no single Birla family member will be able to corner the entire stake,” he said.

Priyamvada Devi, who has a 25 per cent stake, could not be contacted for her comments.

Chandrakant Birla, son of G.P. Birla, holds around 25 per cent in the company. Sources however said C.K. Birla will retain his ownership in Pilani Investment.

“The Birla family is extremely disciplined and always settles any matter very quietly. It is likely that the issue will be resolved very shortly,” said a family friend of the Birlas.

C.K. Birla is understood to have been keen on launching a new division within Century and dissociating himself from the company’s existing businesses. He however was not available for comment.

Sources said the crossholding of the Birlas was one of the reasons why the Century management was unable to formalise its strategy on the sale of its cement division.

They added that B.K. Birla, who virtually controls Century, finds it very hard to take a stand on either the sale of cement division or its integration with the cement division of his flagship, Kesoram Industries.

Sometime ago, the UK -based cement major, Blue Circle, had evinced keen interest for a collective buyout of the Birla-owned cement units. The three strands of the Birla family — B.K. Birla , S.K Birla and G.P.-C K Birla combine — had pooled together six cement plants from their respective groups and had put them up for sale under a package deal.

Although there had been an agreement over the price at the initial stage, the deal ultimately fell through.

Century Textiles has hit a rough patch in the second quarter ended September 30 with gross sales falling to Rs 526.8 crore from the first qurter’s level of Rs 533.3 crore. After a robust first quarter in which the company ratcheted up a profit after tax of Rs 6.7 crore, the company’s tipped into the red once again in the second quarter, reporting a net loss of Rs 3.2 crore.

Century Textiles has an installed capacity for cement of 4.7 million tonnes per annum. In the year ended March 2000, it produced 99.7 million metres of cloth, 121 ThTPA of paper, and 9.6 million metres of denim.

The company has current assets worth Rs 888.4 crore and current liabilities of Rs 321.8 crore.

On Friday, the Century Textile scrip closed on the Bombay Stock Exchange at Rs 39.15, almost Rs 2 down from yesterday’s level of Rs 41.20.

   

 
 
STOCKS SWOON, SENSEX FALLS 128 POINTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 22: 
Christmas may be round the corner, but Santa Claus is not visiting Dalal Street. On the contrary, it was Black Friday which revisited the bourses today, as ICE stocks melted in tandem with old economy scrips, resulting in the 30-share BSE sensex plummeting 128 points to finish at 3905.90, a hefty drop of 3.18 per cent.

Bewildered market circles blamed the debacle on a combination of various factors, including an extended weekend ahead, as markets will remain closed on Monday due to Christmas. Today being the last day of settlement also saw a massive unwinding by both FIIs and domestic operators, particularly in the technology sector, which led the fall, where huge positions are said to have been built so far.

A section of the market also blamed the crash in the new economy segment to reports about a leading foreign brokerage house downgrading the Indian infotech sector. This led to a crash in several infotech stocks led by Infosys. It was downhill all the way after that in other TMT stocks and their old economy brethren.

Summing up the situation, R Sreesankar, chief investment officer, DSP Merrill Lynch, said the fall was due to the building up of huge long positions in certain highly speculative scrips.

An indication of the bloodbath was reflected in the Infosys scrip which was one of the new economy stocks which led the crash. The stock breached the Rs 6,000-mark to touch a near 7-month low of Rs 5,774.95 before settling at Rs 5,796.40, down 7.78 per cent or Rs 480.70 from its previous close.

   

 
 
NICHOLAS PIRAMAL ACQUIRES 40% IN RPIL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 22: 
Nicholas Piramal India today announced that it has acquired a 40 per cent stake in Rhone Poulenc (India) Ltd at a total cost of Rs 157.5 crore, the largest-ever deal in the local pharmaceutical industry.

The cost of the acquisition will go up further to Rs 240 crore in case its open offer for an additional 20 per cent stake from Indian shareholders is fully subscribed.

The acquisition will make Nicholas Piramal the second largest player in the pharmaceutical industry behind Glaxo-Burroughs Wellcome and leave behind Cipla and Ranbaxy with the number three and four spots. By virtue of this acquisition, it will become the largest ‘Indian’ pharmaceutical company.

On Tuesday, Nicholas Piramal will seek Sebi’s approval to make an open offer to minority shareholders for an additional 20 per cent stake in RPIL at Rs 875 per share, the same price at which it acquired shares from Aventis Pharma.

Ajay Piramal, chairman of Nicholas Piramal, told reporters: “The acquisition will add strong brands with excellent profitability and growth potential to our portfolio. Our products complement each other well and RPIL’s sales strengths can be the ideal launching pad for our new products”.

The acquired company will change its name within six months. However, RPIL’s current brands in the Indian market are now licensed in perpetuity from Aventis Pharma to RPIL, both in the country and in some neighbouring countries. The company will have considerable flexibility in taking key decisions regarding the brands, including line extensions, composition and sourcing.

DSP Merrill Lynch advised Nicholas Piramal on the transaction. Shitin Desai, vice-chairman managing director of DSP Merrill Lynch, said a 100 per cent subsidiary has been created called NPIL Finvest Co Ltd which will borrow money to finance the acquisition.

The company brings itself a very strong portfolio in therapeutic areas such as the respiratory segment.

Wockhardt was one of several contenders vying to take over the Aventis arm. However, Ajay Piramal later said, his company had a history of several transactions with the foreign group.

On being asked whether the two companies would eventually merge, Piramalsaid, “We have not decided on the issue,” he added.

RPIL currently has a 438-strong sales and marketing team covering 120,000 doctors and 40,000 pharmacies across the country.

It has four brands among the ORG Top 300 and a well-established presence in cough & cold, anti-emetic, anti-epileptic, anti-diarrhoeal and anti-histamine segments.

RPIL is ranked 27th by ORG with a 1.12 per cent market share in India. It had a sales turnover of Rs 235.7 crore and a net profit of Rs 36.9 crore in the fiscal year 2000.

   

 
 
TATAS PLAN TO INCREASE STAKE IN SPECIAL STEELS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 22: 
The Tata group’s internal restructuring of companies took a new turn when Tata Iron & Steel Company Ltd (Tisco) announced plans to acquire another 55.24 per cent equity in Tata SSL Ltd through an open offer at a price of Rs 27 per share for a total consideration of over Rs 47.27 crore.

Though the exact current holding of Tisco in Tata SSL is not known, it is believed to be around 44.76 per cent. Thus the acquisition of over 55 per cent stake in the company would result in Tata Steel controlling Tata SSL’s entire equity. Tata SSL is set to be de-listed from the bourses if the open offer is successful.

The offer represents a premium of around 39 per cent as compared to Tata SSL’s closing price in the BSE today. The scrip was riding high on the news of the open offer and touched the 8 per cent upper limit.

It opened at Rs 18, dropped to an intra-day low of Rs 17.60, and quickly bounced back to finish at Rs 19.40. Over 46,102 shares have been traded at the counter. In a notice sent to the stock exchanges, Tisco said at today’s meeting its board of directors decided to make the open offer which would comprise 1,75,09,032 shares.

Tata SSL manufactures steel wires, ropes, and profiles. It has plants at Navsari in Gujarat and Tarapur in Maharashtra.

Tata Chem demerger

The board of Tata Chemicals today approved the divestment proposal of its cement business and authorised the management to pursue options of disposal of the cement plant at Mithapur to prospective buyers.

In its meeting, the board came concluded that cement would not be a core business for the company in the future. Options were also evaluated whether to offload the ownership of the plant to a joint venture firm or outrightly to a buyer. After the disposal of the plant, the company would firm up plans of focusing its portfolio in core chemical sector.

Industry sources said cement companies like ACC could be possible contenders for buying the plant since its products are marketed by ACC under the Tata Chemicals-ACC brand name.

   

 
 
INDIAN HOTELS PLANS BUYOUTS IN US 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 22: 
Indian Hotels Company Ltd, a Tata group company, will acquire new properties in the United States and South-East Asia through its Taj hotels chain.

In addition to this, in the next five years it will expand and renovate its existing properties in India for which it has set aside Rs 250 crore. On home ground, the Taj group plans to acquire new properties through Oriental Hotels, Piem Hotels and GVK Hotels, in addition to enlisting its flagship company Indian Hotels.

Briefing the press on the occasion of the unveiling of the new lobby at the Taj Mahal Hotel, R K Krishna Kumar, managing director Indian Hotels said, “The hospitality market in India is changing dramatically and we are now going through a phase of corporate re-organisation. We’ve always been a global player.”

The gameplan for the Taj hotel chain is to grow at a rapid pace. The business review committee set up by the Tatas to monitor each group company has set Indian Hotels an ambitious growth target both for topline and bottom line growth.

It has lined up a whopping $ 140 million dollar package for acquiring the Manhattan-based Carlyle Hotel, while it plans to set up Taj Asia under executive director Camelia Panjabi and also look at opportunities available in South-east Asia. “We don’t want to cast our nets too wide,” he said, adding, “for the present we are looking at the US.”

It is looking at acquisitions in New York, Los Angeles and Chicago and will later focus its attention on Europe.

   

 
 
IPO OFFER FLOOR SET AT RS 100 CR 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Dec 22: 
The Securities and Exchange Board of India (Sebi) today decided that companies will have to offer 10 per cent of equity or a minimum Rs 100 crore worth of capital, whichever is higher, in initial public offerings (IPO). This puts all firms, regardless of whether they are old-economy entities or new-economy upstarts, on an equal footing.

Brick-and-mortar companies had to offer at least 25 per cent of their post-issue capital to the public under the existing set of rules. For infotech, communication and entertainment — referred to as the ICE firms — firms, the floor was pegged at 10 per cent with a Rs 50-crore minimum offer.

There were recommendations that non-IT companies be allowed to offload 10 per cent of their equity, subject to a minimum of Rs 250 crore. However, the Sebi board decided to scale this down to Rs 100 crore because it felt a high issue size will allow only a handful of firms to tap the market.

However, the capital market regulator clarified that companies which do not want to raise Rs 100 crore can continue to offloading a minimum 25 per cent of their equity.

The new norm applicable to companies across infotech, telecom, media and entertainment sectors has raised the minimum issue size by Rs 50 crore, but the existing limit of minimum public offer of 20 lakh shares for all firms has been retained.

The Sebi board also decided that the issue shall be made only through book building method, with 60 per cent allocated to qualified institutional buyers (QIB). Companies that do not fulfil these conditions will be required to make a minimum public offering of 25 per cent under the existing policy.

The market regulator also removed the restriction on minimum public issue size of Rs 25 crore in the case of an IPO through book building and allowed companies to access the book building route. However, if the track record criterion is satisfied, allocation to QIBs can be less than 60 per cent .

In another significant decision, the rule that required venture capital funds to exit from companies in which they invest within a year of its listing to avail of tax exemptions, has been scrapped. An amendment to Sebi Mutual Funds Regulations, 1996 was approved. Under this, the period for deciding whether a security is traded or not traded has been reduced from 60 days to 30.

The capital market watchdog decided that the aggregate value of illiquid securities should not exceed 15 per cent of the total assets. Any illiquid security held above 15 per cent shall be assigned zero value. “The definition and provisioning norms for non-performing assets have been made more stringent,” Sebi chief D R Mehta said after the meeting.

All listed companies will have to maintain the non-promoter holding at the entry level of 10 per cent on a continuos basis to remain listed. Amendments to the regulations on depositories and participants were also cleared to facilitate lateral induction of sponsors after the formation of a depository.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.46.76	HK $1	Rs. 5.90*
UK £1	Rs.69.69	SW Fr 1	Rs.27.70*
Euro	Rs.43.16	Sing $1	Rs.26.65*
Yen 100	Rs.41.58	Aus $1	Rs.25.60*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs.4575		Gold Std(10 gm)	Rs.4550
Gold 22 carat	Rs.4320		Gold 22 carat	Rs.4210
Silver bar (Kg)	Rs.7625		Silver (Kg)	Rs.7745
Silver portion	Rs.7725		Silver portion	Rs.7750

Stock Indices

Sensex		390590		-128.33
BSE-100		1981.98		-83.75
S&P CNX Nifty	1242.00		-35.40
Calcutta	118.77		-1.65
Skindia GDR	662.82		-8.83
   
 

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