UTI mulls scheme to soak VRS cash
Uco, Vijaya VRS offers evoke strong response
Ranbaxy-Lilly board to meet on stake divestment
Oman offers better deal in LNG imports
Bengal beat in the game of baits
State Bank to buy Sidbi stake at Rs 30 a share
Markets bounce on record Nasdaq run
Foreign Exchange, Bullion, Stock Indices

 
 
UTI MULLS SCHEME TO SOAK VRS CASH 
 
 
FROM SATISH JOHN
 
Mumbai, Jan 4: 
Unit Trust of India (UTI) is working on a scheme to target the one-time packages employees get as part of the voluntary retirement schemes (VRS) being offered in the industry.

The sums that will be paid to employees could run into a few thousand crore. PSU banks alone have plans to strike off 29,000 employees from their rolls. The employees who retire early usually have no clues on investing their huge sums. UTI hopes to act as their investment manager at a time when there is uncertainty over the course of share prices and interest rates.

Dubbed as the ‘early retirement scheme’, the open-ended plan will stipulate a minimum investment of Rs 25,000. This will be the highest-ever amount set by the Trust.

Brij Gopal Daga, UTI executive director and the man behind the marketing of all schemes, told The Telegraph that his institution expects to reap the early-mover advantages.

Meanwhile, industry circles say a host of other mutual funds, including banks, have set their sights on the massive amounts of money that will flow to employees who accept the golden hand shake in a month or two. However, UTI, having secured an approval from the Securities and Exchange board of India (Sebi), will be the first to get off the blocks.

Not only nationalised banks, but other public sector units and private companies, have announced VRS offers as part of their efforts to shed flab and turn into lean-mean outfits.

However, there are a few funds who will use their existing debt schemes to tap the VRS payouts. “We will use existing debt schemes to tap this money,” says Krishnamurthy Vijayan, CEO of J M Capital Management. Incidentally, JM Mutual’s debt schemes were the best-performing funds last year.

According to sources in the mutual fund industry, UTI, with its monthly income plans, is best positioned to tap the VRS money. However, since assured-return schemes are not allowed at this point of time, the fund has to come up with a scheme to suit the investment needs of people who leave work early.

“We are still in the process of fine-tuning the scheme,” Daga, adding it will be launched some time next month. According to UTI sources, the scheme will be of two types. One will target the young retirees, people in the age group of 40-50, and the other, a regular income plan, for those who are above 50 years.

For the younger lot among retirees, UTI will offer a deferred income scheme. The official explained that the younger, who retire early only to find better jobs elsewhere, may not opt for the scheme.

UTI has created a regular income scheme where old retirees will get monthly interest payouts. The returns on all the schemes planned will be attractive, and in line with market rates of interest, Daga said.

In addition to managing the money for retired employees, the country’s largest mutual fund will earmark a portion of its corpus to fund companies which want to launch voluntary retirement schemes.

The Trust plans to enter into a tripartite agreement with employers and employees which will help it in two ways.

That way, it will earn interest on the amount advanced to companies and ensure that those who opt for early-retirement schemes will invest their money in its schemes.

   

 
 
UCO, VIJAYA VRS OFFERS EVOKE STRONG RESPONSE 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Jan 4: 
After receiving a good response for its voluntary retirement scheme, the city-based Uco Bank has directed its branches not to grant leave to employees till March 31, to maintain normal operations.

The bank, whose VRS opened on January 1 this year, has received about 3,800 applications till date. The bank has targeted to reduce 5,000 employees from its current staff strength of 31,400.

In a circular to the branches, U. S. Singh, general manager (personnel) has said, “Acceptance and consequent relief of officers/employees who have opted for voluntary retirement will have an immediate impact on the overall manpower position of the bank as a whole and it will be necessary to carry on normal operations without interruption till arrangements are made to fill the vacuum. Branches/offices should note that leave to employees till March 31, 2001 should be sanctioned under exceptional and unavoidable grounds to take care of the bank’s aforementioned exigencies.”

Employees are however, up in arms against the decision. Amal Chakroborty, all India secretary of Uco Bank Employees Association said, “The bank had declared its VR scheme almost a month ago. They should have planned how to run the business at that point of time. Our union has met the management and they said that they will try to amend the circular. But no official communication has been received till date.”

Our Mumbai Correspondent adds: The Bangalore-based Vijaya Bank has received an overwhelming response for its VRS that seeks to shed a part of its workforce of around 14,000 employees.

Bank sources bank said the scheme which opened last month and is scheduled to close on January 31, has so far received around 1,746 applications from various parts of the country. Going by the positive trend seen so far in the bank, it now seems that the number of employees opting for the scheme is likely to touch 2,000 when the scheme closes, with some estimates even suggesting the actual number to be above this mark.

   

 
 
RANBAXY-LILLY BOARD TO MEET ON STAKE DIVESTMENT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan 4: 
Ranbaxy Laboratories Limited will offload a part of its stake in the 50:50 joint venture Eli Lilly Ranbaxy.

The Eli Lilly-Ranbaxy board is scheduled to meet tomorrow to approve the sale of Ranbaxy’s stake in the venture. A decision on acquiring Gufic Pharma, a local company, will also be taken at the meeting.

“Both companies feel there is a need to infuse more funds in the venture. However, Ranbaxy also requires more money to expand its own operations. Fresh investment in the venture will not be consistent with its larger plan,” sources in the company said.

Ranbaxy’s stake divestment, sources say, will unlock its value in the joint venture. Eli Lilly may also divest its stake to generate more funds since the future of this company is ‘bright’.

The next step after the board’s approval will be to win an approval from the government. An application will be filed with the Foreign Investment Promotion Board (FIPB), an Eli Lilly spokesperson said.

The joint venture, which was formed to sell Eli Lilly’s products in India, notched up a turnover of Rs 90 crore last year.

“It is a profit-making venture,” an Eli Lilly spokesperson said.

The amount Ranbaxy could fetch by selling its stake in the joint venture will be clear only after the board meeting.

Even if the joint venture is called off, some Eli Lilly products will continue to be manufactured by Ranbaxy under a fee-based arrangement, a source said.

The Eli Lilly spokesperson said his company is not looking for new partners after Ranbaxy sells its stake in the venture.

The Eli Lilly Ranbaxy Ltd joint venture was formed in 1992 to market some products from Eli Lilly’s stable in India.

Ranbaxy’s turnover in 1999 was pegged at Rs 1559.82 crore and its profit after tax was Rs 196.88 crore.

The company, whose accounting period coincides with the calendar year, has not released its numbers for 2000.

Refusing to comment on the intention of buying Gufic Pharmaceuticals, the Eli Lilly spokesperson said Ranbaxy had been looking for a buyout for some time.

Ranbaxy has been reviewing its partnership in the joint venture mainly because of its inability to commit capital infusion into the venture consistent with the long-term business expansion plans of the venture.

Eli Lilly is pressing for infusion of additional funds into the joint venture by the partners, in the region of Rs 65-70 crore, for its expansion plans.

   

 
 
OMAN OFFERS BETTER DEAL IN LNG IMPORTS 
 
 
R.SASANKAN
 
New Delhi, Jan 4: 
Oman’s liquefied natural gas (LNG) to India will be cheaper than what is offered by Qatar. Since Petronet LNG Ltd has already negotiated the deal with Ras Gas, Oman is trying to enter the Indian market through Shell, which is setting up a LNG terminal at Hazira in Gujarat.

Shell is an equity partner in Oman Gas’ LNG venture. Shell’s equity LNG, coupled with Oman’s interest in the India, will make its gas at least a few cents cheaper than Ras Gas’.

Oman does not have much of surplus gas after it committed 1.6 million tonnes to Enron.

On the basis of its nameplate capacity, it only has an exportable surplus of six lakh tonnes annually; it can produce 10 per cent over this level.

On the basis of this estimate, the total surplus works out to 1.4 million tonnes. Oman is setting up another train of 3.3 million tonnes, of which 2 million tonnes have been committed to Shell.

Shell cannot compete with Petronet LNG unless it gets cheaper gas. Shell is the operator of the LNG plants in Oman, in addition to being an equity partner.

It is in their mutual interest to price the LNG cheaper. Shell has equity LNG in many places. If it needs more gas, it can source it from Indonesia.

The LNG Enron has contracted from Oman Gas is slightly costlier than what Ras Gas will sell to Petronet LNG. Enron tries to neutralise the higher cost with lower sales tax.

Enron’s gas comes to Maharashtra, where it has to pay a central sales tax of only 4 per cent.

This has to be carried to Gujarat, where the rate of sales tax is higher at 22 per cent.

Unlike Shell, Enron does not have equity LNG anywhere in the region. This is a major disadvantage, which prevents it from becoming a significant LNG player in India.

   

 
 
BENGAL BEAT IN THE GAME OF BAITS 
 
 
BY A STAFF REPORTER
 
Calcutta, Jan 4: 
The West Bengal government’s incentive package for industry looks attractive at first glance with its subsidies on capital investment and interest scoring over Andhra Pradesh, Karnatak and Gujarat.

The West Bengal government is offering a subsidy of 15 per cent of fixed capital investment up to a maximum of Rs 1.5 crore in Group B areas and 25% of fisced costs in group C areas. In comparison, Andhra Pradesh offers 20 per cent of fixed capital cost but with a lower ceiling of Rs 20 lakh. Karnataka isn’t much better with its ceiling capped at Rs 25 lakh.

Gujarat, however, has linked the subsidy to employment generation and offers two slab — Rs 1 crore for employment parks with 100 units or 2500 employment, and a higer ceiling of Rs 2 crore for parks with 200 units or 5000 employment. But Gujarat scores over Bengal by putting money where its mouth is: it is ready to pick up a 10 per cent of the equity in projects that involve an investment above Rs 500 crore (subject to a limit of Rs 2.5 crore).

Bengal, on the other hand, has merely promised to consider a special package for projects with an investment of over Rs 250 crore on a case by case basic with due regard to the size of investment, special nature of the industry, employment potentiality, downstream effect of the industry, ancillarisation effect, and export potentiality.

The Bengal package indicates that infotech will be one of its four thrust areas. But what it offers falls far short of what Karnataka and Andhra Pradesh are giving to lure greenbacks. Karnataka fully exempts stamp duty and restricts registration duty to Re 1 per thousand in repsect of loans and credit deeds as well as sale deeds with respect to plots, sheds and flats allotted by state agencies. Bengal goes just halfway with a 50 per cent exemption.

Andhra tops the lot with a 2.5 per cent rebate on power bills for three years for new units up to a maximum rebate of Rs 50 lakh for large and medium units and Rs 30 lakh for SSI units. Bengal’s offer seems modest in comparison with the waiver of duty on electricity for 5 years from the start of commercial production.

But the most compelling lure offered by Andhra is the deduction of pre-operative expenses in setting up a project and its unbeatable tax deduction of 30 per cent of the gross total income for 10 years for all new industrial undertakings.

   

 
 
STATE BANK TO BUY SIDBI STAKE AT RS 30 A SHARE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 4: 
The State Bank of India (SBI) and its associates, along with a clutch of other public sector banks and institutions, are set to pick up 51 per cent in Small Industries Development Bank of India (Sidbi) at a price of Rs 30 per share.

The SBI group will buy roughly 14 per cent of Sidbi (27 per cent of 51 per cent). LIC will hold 9 per cent and GIC will control 5 per cent. The remaining 23 per cent will be shared split between 10 banks, which include Punjab National Bank, Bank of India, Canara Bank and Bank of Baroda.

The proportion of shareholding by these banks and institutions will be fixed under a formula devised by SBI Caps, the merchant banker appointed to guide the process of transferring IDBI’s shareholding in Sidbi.

Earlier this year, IDBI could not reach an agreement with the banks and institutions on the pricing of its 51 per cent stake in Sidbi. Initially a price of Rs 50 per share was proposed but almost all public sector banks and institutions said it was too high.

The sale of IDBI’s 51 per cent stake in Sidbi is expected to fetch it over Rs 650 crore. As per an earlier understanding, after the board of each of the interested banks and institutions okay the purchase, each of the buyer would have to pay around 50 per cent of the purchase price by March 31, 2001 and the rest will be remitted by June 30, 2001.

Apart from parameters such as the investors’ exposure in the small scale sector, total deposit growth, Sidbi also looked at the aspect of profitability. All these factors was expected to make SBI and the subsidiaries the single largest shareholder in Sidbi after IDBI, which will hold 49 per cent.

Sidbi has a net asset base of Rs 16,561 crore with debt-equity ratio of 4.3 and book value of Rs 63.87 as on March 31, 2000 sources said, adding SIDBI’s strong fundamentals reflected in low gross and net non-performing assets (NPA) level of 3.82 per cent and 1.33 per cent respectively.

   

 
 
MARKETS BOUNCE ON RECORD NASDAQ RUN 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 4: 
The techno-laden Nasdaq’s 325-point leap yesterday after the US Federal Reserve cut interest rates by 50 basis points, reverberated on the local stock bourses here.

Renewed buying in tech stocks pushed the Bombay Stock Exchange (BSE) sensex upwards by 55 points.

The early gains of the sensex were partly eroded later in the day due to profit-booking in old economy stocks.

“There was some unwinding,” said Dheeraj Sachdev, a dealer at HDFC Bank. “We are driven by the Nasdaq sentiment atleast for the short-term,” he added.

Significantly, the Nasdaq and the Dow Jones index were both down when the BSE opened for trading today. Market sources said the euphoria was so strong that players discounted reports that the Nasdaq futures index was quoting down by about 65 points at around midsession.

With new economy stocks back in favour, old economy stocks lost ground on profit-booking as operators shifted their loyalties once again towards tech stocks.

On Wednesday, the Federal Reserve ignited a historic rally on the US bourses which saw the tech-heavy Nasdaq gaining a record 324.83 points or 14.17 per cent to settle at 2,616.69.

The Dow Jones industrial average gained 299.60 points to settle at 10,945.65, which prompted Asian bourses to mirror the turnaround on the US bourses on Thursday.

The turnover on BSE rose from Rs 4143.86 on January 3, to Rs 5235.55 crore with 15.19 crore shares traded on the bourses.

Index heavyweight Infosys Technologies was up 8.27 per cent to Rs 6090 exceeding the 8 per cent upper limit.

The Infosys ADR, listed on the Nasdaq, gained a whopping $ 16.12 to $ 103.50.

Buying interest was seen in select old economy stocks like Hindustan Lever which was up 3.99 per cent to Rs 209.90 on value-buying. Telco was up 2.50 per cent to Rs 104.40 on renewed buying interest at lower levels.

Meanwhile, other old economy stocks especially those in the cyclical industries lost ground today.

Meanwhile, operators reportedly lightened commitments in line with squaring up on the last day of the current account on the Calcutta Stock Exchange.

Earlier, the BSE sensex opened with a wide upward gap at 4180.97 but later lost lustre due to selling in Indian stocks and dipped to the day’s low of 4109.55 before closing at 4115.37 as against yesterday’s close of 4060.02, netting a rise of 55.35 points or 1.36 per cent.

Though the sensex closed in positive territory, 102 out of 141 specified shares registered losses while 38 others including 10 index-based counters recorded smart gains. Himachal Futuristic continued to be the top traded share having clocked a highest turnover of Rs 773.35 crore followed by Satyam Computer (Rs 705. 75 crore), Infosys Tech (Rs 624.84 crore), Global Tele (Rs 369.66 crore) and Wipro (Rs 254.32 crore).

The telecom bellweather, HFCL, spurted by Rs 95.40 to Rs 1348.30. Satyam Computer rose by Rs 38.10 to Rs 356.05, Infosys by Rs 473 to Rs 6097.60, Wipro by Rs 243.35 to Rs 2653.45, HLL by Rs 8.60 to Rs 210.45.

Among the losers were cement major ACC which dropped by Rs 2.30 to Rs 163.20, Bhel by Rs 11.20 to Rs 154.95, Grasim by Rs 12.85 to Rs 289.40, GACL by Rs 7.20 to Rs 158.60, HPCL by Rs 3.50 to Rs 146.80, ITC by Rs 19.80 to Rs 925.20 and MTNL by Rs 3.40 to Rs 187.35.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.72	HK $1	Rs.  5.90*
UK Ł1	Rs. 70.19	SW Fr 1	Rs. 28.35*
Euro	Rs. 44.33	Sing $1	Rs. 26.35*
Yen 100	Rs. 40.87	Aus $1	Rs. 25.35*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4595	Gold Std (10 gm)4510
Gold 22 carat	Rs. 4340	Gold 22 carat	4170
Silver bar (Kg)	Rs. 7525	Silver (Kg)	7625
Silver portion	Rs. 7625	Silver portion	7630

Stock Indices

Sensex		4115.37		+55.35
BSE-100		2120.14		+52.54
S&P CNX Nifty	1307.65		+16.40
Calcutta	 125.08		+ 0.08
Skindia GDR	 676.28		+27.76
   
 

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