Limited mobility for basic operators
Mahindra-Sheth buys Dalmia stake in Gesco
Tech shares hammered, sensex sheds 64 points
Telco plans test drive with Peugeot as ally
Satyam Q3 net up 142% to Rs 87.51 cr
Customs duty may be pruned
Industry recipe for 9% growth
Foreign Exchange, Bullion, Stock Indices

 
 
LIMITED MOBILITY FOR BASIC OPERATORS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan 8: 
The Telecom Regulatory Authority of India (Trai) today allowed fixed telephone operators to offer limited mobility at the rate of Rs 1.20 for a three-minute call and, in a balancing effort, permitted cellular service providers to offer fixed phones on their GSM networks.

The telecom regulator also fulfilled the long-standing demand of mobile operators to fix the revenue share at 12 per cent of their annual revenues — putting them on par with basic operators (BSOs) in metros and category A circles.

With the announcements, the regulator has lobbed the ball into the government’s court, which will have the final word on the recommendations.

“The premise of the proposals is that mobility under wireless in local loop (WiLL) is not the same as it is in cellular services. Customers should not be denied the benefits of technology if policy changes can bring about a level playing field. Further, WiLL facilities are a by-product of basic services,” Trai said in a statement.

No separate entry or licence fee has been proposed for fixed-line operators. Basic licences will cover mobile services based on the code division multiple access (CDMA) WiLL technology.

The rental charge will be fixed in three months after taking into account the cost of last-mile WiLL connections. “All said and done, cellular phones are a premium service vis-a-vis WiLL-based limited mobility. Cellular subscribers have several additional features, such as seamless roaming,” Trai said. According to Trai, by the time basic operators start offering WiLL-based mobile facilities, reductions in per-line cost of GSM network will enable the third and fourth generation cellular firms to offer more services at significantly lower rates.

“The threat to existing cellular firms is, therefore, likely to come from the third and the fourth generation players, rather than WiLL operators or basic service companies,” the regulator said.

Trai has suggested that uniform standards under the national plan should be followed in the allotment and pricing of frequency spectrum for cellular companies and basic operators, including those which provide WiLL-based limited mobility.

“Given that tariffs for basic services will apply to wireline WiLL-based mobility within the short distance charging area, Trai does not recommend an additional entry fee for the spectrum. The existing mode levying spectrum charges should be applied to new operators,” the regulator said. Currently, WiLL frequency for basic service operators varies between 800/ 900 and 1700/ 1900 MHz bands in the NFAP-2000. Basic service licences also specify these bandwidths.

Rajeev Mehrotra, president of the Association of Basic Telecom Operators, welcomed the recommendations, saying they were long overdue and will help in achieving the targets set for increasing the tele-density in the country. “The proposals are pro-consumer and pro-technology.”

   

 
 
MAHINDRA-SHETH BUYS DALMIA STAKE IN GESCO 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 8: 
The four-month-old takeover battle for Gesco Corporation ended today when the Mahindra-Sheth combine reached an amicable settlement with the feisty Abhishek Dalmia under which the promoters agreed to buy out Dalmia’s 10.5 per cent stake in the real estate firm at Rs 54 per share on a spot delivery basis.

Later, the Sheth-Mahindra consortium said the shares were being bought by Mahindra Realty and Infrastructure Developers Limited.

As a consequence of the deal, the price payable to Gesco shareholders under the open offer to buy back shares automatically goes up to Rs 54 per share. The open offer closes on January 24.

On the Bombay Stock exchange, the Gesco scrip closed today at Rs 43.80, down by a rupee from Friday’s close of Rs 44.80. The deal was announced after market hours and the scrip is expected to climb when it opens for trading tomorrow.

The stake of the Sheth-Mahindra consortium is now close to 30 per cent (Mahindra Realty holds 17 per cent and the Sheths 13 per cent). After the successful completion of the open offer, the consortium is expected to have close to 65 per cent of the paid-up equity of Gesco Corporation.

“We are pleased with the settlement as we have been able to acquire the shares at a price slightly lower than its current book value. Our efforts will now be to maximise shareholder value by building on the synergies of Gesco and Mahindra Realty,” said a spokesperson for the Mahindra outfit.

Dalmia, who had acquired the stake over a period of six to eight months through a series of market deals that put the average price at between Rs 22 and Rs 25, was equally exultant. The pugnacious fighter, who saw a window of opportunity in the stock as far back as February, was today all praise for the Mahindras.

“We were getting into a phase of uncertainty which is not good for anyone and settlement was the best option. A price war would have led to irrational and an uneconomic acquisition, which I always wanted to avoid. I am glad that with this settlement, the period of uncertainty is over,” Dalmia said.

Ghanshyam Sheth, managing director of Gesco Corporation, said, “I am delighted that the whole episode is behind us. This has been possible by the apt handling of the whole issue by Mahindra Realty and the good counsel of Kotak Mahindra”. “Both the parties want to thank S. Gurumurthy for taking the initiative to bring about this settlement which is in the interest of both the parties,” the statement said.

For Dalmias, it was a good start after exiting their family venture. The other gainers were the institutional investors and small shareholders of Gesco Corp.

In the battle for takeover, both parties had raised their offer prices a couple of times. While the Sheths got Mahindras and HDFC to counter Dalmia’s hostile bid, Dalmia’s Renaissance Estates said it had created a cash chest out of borrowed funds to part-finance the Rs 58 crore takeover bid for the Mumbai-based realty firm.

The Delhi-based A H Dalmia group had mounted a takeover bid for Gesco through the open offer route and announced a hike in its offer price recently to Rs 45 per share for 45 per cent of all outstanding shares.

   

 
 
TECH SHARES HAMMERED, SENSEX SHEDS 64 POINTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 8: 
The Bombay Stock Exchange (BSE) sensex closed 63.6 points lower at 4120.43 today in a session dominated by reports of the arrest of key diamond trader-cum-value investor, Bharat Shah, and growing anticipation over the quantum of the third-quarter profits to be announced by technology bellwether Infosys on Tuesday.

The 30-share index scaled a high of 4,204 in the early hours but slipped to 4,102 after a selloff in infotech, communications and entertainment (ICE) stocks. Himachal Futuristic, Global Telefilms, SSI, Silvertech, Infosys Tech were clobbered when news of Shah’s arrest trickled in. Shah is believed to have a large exposure in new-economy shares. Friday’s 160-point fall in the Nasdaq also weakened sentiment.

Operators were waiting for Infosys’ third-quarter results with bated breath. Profit forecasts range from Rs 165 to Rs 180 crore, a whopping 123 per cent higher than the Rs 73.79 crore notched in the same quarter of the previous year.

The results will be announced against the backdrop of earning warnings from most technology topguns amid cuts in spending by US firms. However, most analysts and portfolio managers do not expect Infosys to give them the fright, though there could be provisions/write-offs on dotcom receivables.

Infosys has pumped in Rs 45 crore in eight dotcom infrastructure firms. With internet shares hitting the skids, there are concerns that receivables from dotcoms will shrivel.

“Though Infosys has a limited exposure to Net companies, we may find provisions/write-offs to take care of dotcom receivables,” said Dhiraj Sachdev, senior analyst at HDFC Bank. The slowdown in infotech spending by US companies will not impact Infosys because its revenue stream is isolated in terms of the billing rates, said an analyst.

   

 
 
TELCO PLANS TEST DRIVE WITH PEUGEOT AS ALLY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 8: 
Tata Engineering (Telco) today said it would conduct a feasibility study to see if it can develop a mid-sized car with French auto major PSA Peugeot Citreon. The study will be wrapped up in the next six months.

PSA Peugeot Citroen, Europe’s second largest carmaker, will provide one of its existing platforms for the development of the new-generation car, besides making available its design skills.

With most global car makers linking up through mergers or technological tieups, there was intense speculation in the industry on Telco’s choice of a global partner to meet the threat from rivals who are entering into new alliances.

In a press statement released here today, the two companies said they had agreed to examine the feasibility of jointly developing a car on the PSA Peugeot Citroen platform. The vehicle would be manufacture in India. “If the feasibility is established, the car may also be exported. We are looking at developing a three-boxed sedan with PSA Peugeot Citroen,” said Rajiv Dube, general manager of the passenger vehicles business unit at Tata Engineering Limited.

He, however, clarified that the tieup was purely a technical one. Therefore, there is no question of Telco’s equity stake changing hands. “If everything goes on schedule, the three-boxed sedan will be rolling on the Indian roads by 2003,” Dube said.

The PSA Peugeot’s 206 platform is that of a hatchback version. The French car major is not known to have developed a three-boxed version on a 206 platform, although they have three-boxed versions in 306 platforms. Dube clarified that the Magna project will be a separate one, which will be a saloon based on the Tata Safari platform. But industry sources say the launch would be delayed.

Auto experts say it will be difficult for Telco to repeat the Indica miracle in terms of cost and time an industry changing rapidly. They have to join hands with another company, which has considerable expertise and experience in the field.

For PSA Peugeot Citroen, the alliance with Telco will give it another opportunity to make inroads into India. Its alliance with the Doshis of Premier Automobiles turned sour.

For Ratan Tata, the chairman of Tata Engineering, his dream car project will have another new baby if everything goes as planned. He has, on several occasions, declared that his company will not be a single-model car maker.

   

 
 
SATYAM Q3 NET UP 142% TO RS 87.51 CR 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 8: 
The Hyderabad-based Satyam Computer Services Ltd has posted a 142 per cent rise in net profits for the third quarter of the current financial year ending December 31, 2000. Net rose to Rs 87.51 crore over that of Rs 36.19 crore in the corresponding period of the last financial year.

Total revenues during the quarter stood at Rs 332.78 crore as compared to Rs 177.88 crore in the corresponding quarter of last year, representing an increase of 87.08 per cent.

Commenting on the results, B Ramalinga Raju, chairman, said “The key feature of the last quarter’s performance has been the higher value added projects that we have executed for our global clients. Apart from the increase in business, this has also translated into better price realisation.”

The revenues for the first nine months stood at Rs 857.43 crore, representing an increase of 81.58 per cent over revenues of Rs 472.21 crore during the same period last year. Net profit also rose by 121 per cent to Rs 204.82 crore for the nine months ended December 31, 2000.

   

 
 
CUSTOMS DUTY MAY BE PRUNED 
 
 
FROM R. SASANKAN
 
New Delhi, Jan 8: 
The basic customs duty may be reduced from 25 per cent to 20 per cent in the next general budget.

The finance ministry is considering such a move based on the recommendation of the advisory group on tax policy headed by fiscal expert Parthasarthy Shome.

The justification for the recommendation is that such a step would reduce the need for exemptions. However, this can be done only with the removal of multiple exemptions that continue to erode the base.

The advisory group suggested that a countervailing duty (CVD) of 16 per cent be levied uniformly so that the question of refunding the terminal excise duty which is associated with the CVD is eliminated. It is also in favour of removing exemptions from the four per cent special additional duty (SAD). If this is accepted by the finance minister, fertiliser, coal mining, power generation projects and setting up of crude petroleum units would be subjected to SAD.

These tax reform recommendations were made in an interim report to help the finance ministry in finalising its taxation proposals. Official sources maintain that quite a few of the advisory group’s recommendations will get reflected in the budget.

On central excise, the group has recommended a two-rate structure of 16 per cent together with a higher rate. An increasing number of items are to be converged to fall under the 16 per cent rate to minimise classification problems. This would be economically desirable and administratively simple. The rates would have to be adjusted for inclusion of services in the Cenvat.

The definition of manufacture is to be widened to include the chain of value addition by or on behalf of the manufacturer to be charged to duty. Both capital goods and raw materials used in the factory of the manufacturer should be allowed Cenvat credit.

Multiplicity of levies should be done away with. There are levies such as additional excise duty in lieu of sales tax on sugar, fabrics and tobacco, additional duty on motor spirit (petrol and diesel), additional duty on textiles and textile articles (fibres, yarn and fabric) under a subsidy scheme for controlled cloth.

Separate accounts are to be maintained for each of these levies, increasing administrative and compliance costs. It is difficult to work out effective tax rates since Cenvat is not given for all of them. This is the justification for the group to recommend a single levy under Excise Act.

   

 
 
INDUSTRY RECIPE FOR 9% GROWTH 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan 8: 
The Indian industry today urged finance minister Yashwant Sinha to speed up infrastructure development and suggested that 50 per cent of the $ 5.5 billion India Millennium Deposit inflow be spent on this sector.

At the pre-budget meeting with Sinha, industry captains proposed a slew of measures to achieve a 9-10 per cent growth rate in the medium term. The steps included ban on import of second hand capital goods, abolition of minimum alternative tax (MAT), scrapping of 10 per cent surcharge on corporate tax and termination of 20 per cent dividend tax.

Representatives of the three apex industry chambers of the country—Confederation of Indian Industry (CII), Federation of Indian Chamber of Commerce and Industry (Ficci) and Associated Chambers of Commerce and Industry (Assocham)—met the finance minister. Among those who attended the three-hour long meting were, Arun Bharat Ram (CII), Shekhar Bajaj (Assocham), R.S. Lodha (Ficci), Ratan Tata, Rahul Bajaj, Nusli Wadia and Sanjeev Goenka.

The finance minister told the industrialists that “forex reserves have achieved a record level at more than $ 40 billion because of the success of the IMD issue. Our exports are doing very well with a growth rate exceeding 20 per cent. Direct taxes are also doing very well and the overall fiscal situation is under control.”

The industrialists urged the government to accelerate the disinvestment programme and use the proceeds to retire debt and build social and physical infrastructure.

Opposing any hike in the existing service tax rate, the chambers said tax base should be widened by bringing in more areas like banking, legal advises, health and medical services into the net.

Sinha said, “The overall economic growth has slowed because of some internal and external factors like high oil prices, lack of investment demand and drought in several states.”

The industrialist also sought further simplification of rules and procedures for taxes and duties. The rationalisation of the customs duty structure by introducing three-tier rates on final products, intermediate goods and raw materials was also suggested by them.

They also demanded the abolition of zero duties on imports and a minimum duty of 5 per cent on imports except for life saving drugs.

Earlier, the finance minister met a delegation of consumer organisations. Speaking to them Sinha said, the government would formulate policy packages to achieve a higher annual growth of nine per cent from about 6.5 per cent growth expected during 2000-2001.

This projected 6.5 per cent growth would still be 0.5 per cent short of the target set by the government.

Sinha said, “It is our responsibility to frame policy packages to achieve the nine per cent growth.”

“The 6.8 per cent growth in 1998-99 and 6.4 per cent in 1999-2000 achieved by the government was creditable,” he added.

Sinha said the growth in the last two financial years was achieved under tremendous problem in the fiscal front, including the Eleventh Finance Commission’s recommendations on devolution of central pool of taxes and the implementation of the Fifth Pay Commission report.

The consumer organisations demanded the reduction of petrol price to Rs 20 a litre, review of maximum retail price (MRP) system for essential items and removal of surcharge on personal income tax.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.68	HK $1	Rs. 5.90*
UK £1	Rs.70.14	SW Fr 1	Rs. 28.80*
Euro	Rs. 44.41	Sing $1	Rs. 26.65*
Yen 100	Rs. 40.09	Aus $1	Rs. 26.30*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4570	Gold Std(10 gm)	4510
Gold 22 carat	Rs. 4315	Gold 22 carat	4170
Silver bar (Kg)	Rs. 7575	Silver (Kg)	7645
Silver portion	Rs. 7675	Silver portion	7650

Stock Indices

Sensex		4120.43		-63.30
BSE-100		2118.45		-46.05
S&P CNX Nifty	1309.25		-18.00
Calcutta	124.71		-0.37
Skindia GDR	677.27		-4.70
   
 

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