Dalmias raise Gesco offer to Rs 45
State Bank picks Cardif SA as insurance partner
Govt begins exercise to recast MAT
Sensex up 51 pts in relief rally
Trai rebuffs mobile operators
Foreign Exchange, Bullion, Stock Indices

 
 
DALMIAS RAISE GESCO OFFER TO RS 45 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 27: 
Abhishek Dalmia’s Renaissance Estates today increased the offer price for shares of Gesco Corporation to Rs 45 from Rs 27, raising the stakes in its hostile takeover bid for the Mumbai-based realty firm controlled by the Sheths.

The new offer is a rupee more than the Rs 44 announced jointly by the Sheths and M&M in their counter-offer to the one made by Renaissance.

The only difference is that the Dalmias propose to pick up 45 per cent in Gesco Corp while the promoters and Mahindras want to snap up 33.5 per cent.

“We bought 22,000 shares of Gesco on December 26 at an average cost of Rs 43 each. The highest price paid was Rs 45. The acquisition was made through open market purchases. We did not enter into any negotiated deals,” said Dalmia.

In an interesting turn of events, the Gesco share closed at Rs 45 on the Bombay Stock Exchange (BSE) — just the price that the Dalmias are now offering — after opening at Rs 43.05. The counter saw 160 deals with 13,013 shares changing hands.

The Dalmias sweetened their bid, now worth Rs 70 crore, for 45 per cent of Gesco following the Sheth-Mahindra combine’s counter-offer made at Rs 36 per share on November 7.

With a share capital of Rs 29 crore and accumulated reserves of more than Rs 100 crore, Gesco Corp has made big real estate investments in Mumbai, Delhi, Pune and Bangalore.

Earlier this month, the Dalmias extended the closing date for their open offer from January 15 to January 24 after Sebi allowed the Mahindras a similar extension for their counter offer. The market regulator said the long postal strike — seen as the ostensible reason — made more time necessary.

The ball has now been lobbed into the Sheths’ court. The difference in the offer prices being only a rupee, it is now for shareholders to decide which of the two propositions is more attractive.

Today’s move is clearly not the end-game. Sources close to the Sheths say they will soon take a decision on raising the offer price. Dalmia, on the other hand, has been quoted as saying that his group ‘will look at Gesco up to a realistic level’.

The Dalmias claim to hold 10.4 per cent in Gesco, while the Sheths reportedly control 30 per cent. Financial institutions continue to hold 12 per cent while foreign institutional investors (FIIs) command 8 per cent.

The Housing Development Finance Corporation (HDFC) has extended a line of credit to the Sheths, but the housing finance major has not responded to a request from the Dalmias for a similar loan. There were reports that the Dalmias had approached ICICI to bankroll their takeover bid, but it could not be ascertained if the financial institution had done so.

It may be recalled that the Sheths late last month to counter the takeover threat, roped in Mahindra Realty and Infrastructure Developers, which acquired 6.34 per cent stake in Gesco from International Finance Corporation (IFC).

The A H Dalmia group mounted a Rs 35-crore bid to take over Gesco Corporation but later raised the ‘war chest’ to Rs 70 crore. The Gesco promoters, the Mumbai-based Sheths, have launched a counter-offer to the A H Dalmia open offer, and the two sides are waiting for shareholders’ response before the time is up.

According to sources, Gesco Corporation was originally a real estate division of Great Eastern Shipping Corporation, and was spun off into an independent company in April 1999.

   

 
 
STATE BANK PICKS CARDIF SA AS INSURANCE PARTNER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 27: 
The State Bank of India (SBI) has picked Cardif S.A. of France as its foreign partner in its proposed life insurance business.

Cardif, which is a BNP Paribas subsidiary specialising in life insurance, investments and retirement planning, will hold a 26 per cent stake in the venture.

Cardif pipped GE Capital and Fortis in the race to team up with SBI for its foray into insurance. G E Capital was seen as a front-runner as it already has a relationship through SBI’s credit card business.

SBI said it has recently incorporated SBI Life Insurance Company Ltd as a wholly-owned company with an authorised capital of Rs 250 crore.

It added that the combination of SBI, the largest bank in the country with an extensive branch network and client base, and Cardif, one of the most experienced international bank assurance players, will bring considerable thrust to insurance business in India.

The joint venture is planning to introduce a number of products to suit different segments of the population in the Indian market.

The insurance activity is proposed to be fully integrated into the banking activity with appropriate sales support and marketing techniques, the country’s largest bank added. SBI sources added that it also plans to sell the insurance products linked to various loan offers.

Cardif is the wholly-owned subsidiary of BNP Paribas with its headquarters in Paris. Banque Nationale de Paris (BNP) and Banque Paribas had merged in May 2000 under the name BNP Paribas to emerge as the largest bank in France and the second largest in Europe. The combined entity has total assets of more than $ 700 billion and BNP has a presence in India dating back to 1860 with a network of eight branches.

Cardif and its sister company, Natio-Vie together rank as the third largest life insurer in France with a premium income of more than $ 9 billion and over $ 59 billion in fund under management.

SBI said the joint venture would shortly submit an application to the IRDA seeking a licence. J.P. Morgan, the leading US investment bank, acted as the financial advisor for SBI in the partner selection process.

   

 
 
GOVT BEGINS EXERCISE TO RECAST MAT 
 
 
FROM R. SASANKAN
 
New Delhi, Dec 27: 
The government will reconstitute the controversial Minimum Alternate Tax (MAT) in the next general budget.

According to official sources, an exercise to this effect is already on in the finance ministry in consultation with the tax policy group headed by Partho Shome.

The MAT reconstitution exercise is designed mainly to remove the inequity in the present MAT which puts both big and small units at par. This has nothing to do with the demand of the industry to scrap MAT which, in effect, will remain more or less in tact.

Indications are that MAT may be reconstituted as a tax of 0.75 per cent on adjusted net worth at the end of the year plus 10 per cent on dividend distributed. It is more less agreed that the 20 per cent dividend tax should be abolished.

The Finance Act 2000 inserted a new section 115JB in the Income Tax Act, 1961 with effect from April 1, 2001. It modified the existing scheme of taxation, that is, levy of MAT under section 115 JA of the zero tax companies. This provision requires companies to pay at least 7.5 per cent tax on its book profits.

This was denounced by the industry as a retrograde step on the ground that zero tax companies though not paying corporate tax are contributing to the exchequer in many other ways like excise duty, sales tax, and octroi.

The chambers of commerce and industry pointed out that provisions similar to MAT were brought into the statute book twice in earlier years but had to be withdrawn due

to undue hardship and retardation of economic growth.

The industry associations contended that though the economic scenario did not change much in recent years, MAT was not only reintroduced but its provisions were also made more stringent.

A glaring fallout of the new MAT provisions is the denial of full tax holiday benefit to corporatised small industries and units in the industrially backward areas.

The review of MAT was prompted by Sebi’s advice that it is unfair to treat all industrial units at par. The argument is that book profit can easily be manipulated since it is amenable to accounting changes. The base of MAT, they say, could combine a stock and a flow to appropriately reflect a plausible taxable capacity of the company.

   

 
 
SENSEX UP 51 PTS IN RELIEF RALLY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec 27: 
Mastek Computers, after having issued a profit warning on Tuesday, plunged 16 per cent even as the Bombay Stock Exchange (BSE) sensex vaulted 50.73 points to 3877.55 in a relief rally driven by brisk buying in pivotals.

Local operators dominated trading as foreign institutional investors (FIIs) remained on the sidelines because of the year-end vacations, but domestic institutions extended support. The market’s Big Bull came out of the woodwork, taking a shine to the shares of companies such as HFCL and Global Telesystems.

The FMCG giant and index heavyweight, Hindustan Lever, notched up a gain of Rs 6.60 to close at Rs 209, helping the sensex recover after days of losses.

Reflecting the firm trend, the 30-share index opened stronger at 3830.37, remained range-bound in the early hours of trading before rising sharply to an intra-day high of 3902.85. However, it closed below the 3900-mark at 3877.55 as against Tuesday’s finish of 3826.82, a gain of 50.73 points, or 1.33 per cent.

The BSE-100 index rose 30.37 points to 1963.77 compared with its previous close of 1933.40 while the BSE-500 index finished at 1263.99, up from Tuesday’s 1245.17.

Bhel, Grasim, L&T, MTNL, Reliance, NIIT, Satyam and Zee Telefilms set the pace for gains.

Dealers said many of these stocks attracted strong buying interest because of their intrinsic strength.

Infosys was trading weaker after its ADRs took a beating on the Nasdaq. It lost Rs 45.90 to finish the day at Rs 5505.10, but volumes in the scrip scaled a record at 13.2 lakh shares. Among the second-rung software firms, Cyberscape and Zicom were big losers.

India Cements was in the spotlight again, closing Rs 3.70 higher at Rs 53.20, on rumours that it was drawing up plans to take over Panyam Cements.

FIIs, which reportedly were sellers to the tune of Rs 670 crore during the last settlement period, were conspicuous by their absence in view of approaching year-end.

In the specified group, 116 shares, including 25 from the index, registered remarkable gains while 21 others closed with marginal losses.

L&T gained Rs 2.65 at Rs 183.55, MTNL was up Rs 4.65 at 168.55, NIIT by Rs Rs 32.60 at Rs 1557.65, Reliance by Rs 4.70 at 333.20, ACC by Rs 2.80 at Rs 150.05, HPCL by Rs 3.75 at 133.45 and Hindalco by Rs 8.15 at 739.15.

   

 
 
TRAI REBUFFS MOBILE OPERATORS 
 
 
FROM M RAJENDRAN
 
New Delhi, Dec 27: 
The Telecom Regulatory Authority of India (Trai) has rapped cellular operators for launching a tirade against the regulator.

Cellular operators had publicly accused Trai of having a “pre-determined mind on the introduction of limited mobility services by fixed telecom operators.”

Officials in Trai were agitated by private cellular operators’ accusation that the regulator has ignored all issues on the introduction of limited mobile services by fixed mobile operators at its open house sessions.

A senior Trai official said, “We have taken necessary steps within our powers. The Cellular Operators Association of India (COAI) will be informed about Trai’s views on the issue of limited mobility. It is our prerogative to reply or ignore such remarks. However the points they have made will be incorporated in the final recommendations.”

Sources said, “A letter has been sent to COAI to restrain them from making comments in public about the functioning of Trai.”

Trai is likely to give its recommendations by the month-end on the use of wireless in local loop (WiLL) using code division multiple access technology by basic fixed line operators to offer mobile telephony at the cost of a fixed phone call. The government will have the final word on the issue, irrespective of recommendations made by Trai as per the NTP 1999.

T.V. Ramachandran, director general of COAI said, “We have written to them the terms of reference issued by the department of telecommunication (DoT). However, the consultation process initiated by Trai clearly demonstrate a pre-determined mind as the introduction of limited mobility services by the FSPs is taken as a foregone conclusion.”

“We have not received any letter from Trai. But we have made our point and they can make their point of view,” he added.

COAI had also threatened arbitration if Bharat Sanchar Nigam Ltd or any other fixed telecom licencee is allowed to offer mobile service using WiLL system, without a cellular licence.

BSNL and fixed telephone operators have proposed to offer mobile services at Rs 1.20 paise for a three-minute call.

Ramachandran reiterated, “It seems, that the ‘limited’ objective of the consultation process is merely to seek operating guidelines rather than to have transparent debate on the subject. The issues of legality, licensing, contractual obligations, commercial conditions and competition involved in it due to introduction of wireless in local loop limited mobility services by fixed telecom service providers were not properly deliberated.”

COAI has also accused Trai of ignoring issues of legality, or even competition in the consultation process. Cellular operators argue that FSPs have been given a specific license only to provide fixed services which does not include offering mobile services.

ABTO president

Meanwhile, Rajiv Mehrotra, chairman and managing director of Shyam Telecom, has been elected president of the Association of Basic Telecom Operators (ABTO). Prakash C Bajpai, chief executive officer of Hughes Tele.com, has been elected vice president for the year 2001.

Both candidates were elected unanimously at the third annual general meeting of ABTO, an association release said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.46.72	HK $1	Rs. 5.90*
UK £1	Rs.69.53	SW Fr 1	Rs. 28.25*
Euro	Rs.43.53	Sing $1	Rs. 26.65*
Yen 100	Rs.40.94	Aus $1	Rs. 25.70*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs.4610		Gold Std(10 gm)	Rs.4565
Gold 22 carat	Rs.4355		Gold 22 carat	Rs.4220
Silver bar (Kg)	Rs.7700		Silver (Kg)	Rs.7790
Silver portion	Rs.7800		Silver portion	Rs.779s5

Stock Indices

Sensex		3877.55		+50.73
BSE-100		1963.77		+30.37
S&P CNX Nifty	1228.30		+16.30
Calcutta	118.22		+1.79
Skindia GDR	647.58		-3.60
   
 

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