Mobile firms face tough loan tests
J&N to acquire paint firm, plans public issue
Tea ends chill in Indo-Pak trade ties
Tax portal to target corporate employees
CII wants corporate surcharge scrapped
100% duty on used car imports sought

 
 
MOBILE FIRMS FACE TOUGH LOAN TESTS 
 
 
FROM VIVEK NAIR
 
Mumbai, Jan 14: 
Loans will not come easy for cellular service providers. Cut-throat competition in the industry, especially the entry of the fourth operator, has forced financial institutions (FIs) to tread cautiously while clearing loans.

“Being a fourth operator is not an easy proposition at all. The degree of competition is very stiff. Therefore, we will examine proposals with a tooth-comb,” FI sources said.

A senior official said the major disadvantage for the fourth player is that it will have to battle rivals who are already well entrenched. “While the fourth operator may have the advantage of lower capital costs, it will take a while before it is well known. This will be a major disadvantage,” he said.

Given such a situation, institutions are likely to insist on the overall game-plans of operators before deciding whether they should finance a cellular phone project. “We will look at the promoters and their proposals very closely. It is going to be a tough market and, therefore, we will need to know the strategies of a company, whether it has the strengths needed to emerge as a long-term player,” the official said.

However, the institutions are unlikely to change the 1.2:1 debt-equity ratio — the level specified for the existing companies — for the fourth operator.

Increased competition is expected to bring down tariff rates, but the prospect of cheaper calls will bring more subscribers into the fold. Mahanagar Telephone Nigam’s (MTNL) mobile debut in Delhi and Mumbai, for instance, will shake up the industry. Existing operators in the two circles are already looking at the possibility of responding to MTNL’s aggressive tariffs by bringing down their own rates.

In such a scenario, sources say only cash-rich companies such as the Ambanis of the Reliance group, the Mittals of the Bharti group and the Birla-Tata combine will be strong enough to vie for the slot of the fourth cellular operator.

A consequence of stiff competition and falling tariffs is that the valuation of existing cellular companies will take a 30-40 per cent beating. According to the guidelines issued recently, the licence fee for the fourth operator will have two components — a one-time entry fee and a 17 per cent share for the government in annual gross revenues.

Successful bidders will have to pay the licence fee upfront, before signing the agreement for the 20-year licences, which can be extended by 10 years.

Also, the Telecom Regulatory Authority of India’s (Trai) decision to allow basic telecom operators limited mobility based on the wireless in local loop (WiLL) technology has sent ripples in the placid waters of the cellular industry.

The suggestion has caused much heartburn among cellular operators, who are now accusing the authorities for not providing level-playing field to basic and mobile firms.

   

 
 
J&N TO ACQUIRE PAINT FIRM, PLANS PUBLIC ISSUE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 14: 
Jenson & Nicholson, a Calcutta-based paint company, is in the process of acquiring controlling stake in a paint company based in south India.

It was revealed in the company’s offer document filed with the Securities and Exchange Board of India for a public issue having a size of 2.5 crore shares of a paid-up value of Rs 2. However, the company did not disclose the identity of the paint company.

In the document, Jenson & Nicholson has mentioned the recent incorporation of a subsidiary, “Nezone Paints Ltd”, to derive tax concessions from setting up a unit in the north-east. The new subsidiary will be setting up a plant to manufacture various types of paints with an installed capacity of 1,500 kilolitre per annum in the excise, sales and income tax free zone of Guwahati in Assam.

It will benefit from the new policy of fiscal incentives announced by the Union government, the company said. The brands “Jenson & Nicholson” and “InstaColour” has been valued at over Rs 185 crore and Rs 130 crore, respectively, by an accredited valuer, the company stated in the offer document. Jenson & Nicholson has other strong brands in its portfolio which includes Brolac, Special effects, Robbialac, Jensolin, and Armor Quartz.

The company hired Arthur Andersen to restructure and re-engineer its business units. Following the advise, the company has structured itself into three strategic business units which will function as independent profit centres. It presently controls 33 per cent of the tinting machines and 35 per cent of the dispensing machines market in the country.

The company has tie-ups with major foreign players like Tikkurila OY of Finland and Chugoku Marine paints of Japan to exploit new technologies and keep abreast of the trends in global market.

It has filed a suit for recovery of Rs 4.75 crore towards damages against Smifs Capital Market, Stewart & Co, YSN Securities and HSBC in connection with an aborted rights issue.

It has also filed a counter suit against Smifs Capital Market regarding the refund of Rs 18.90 lakh deposited with Calcutta Stock Exchange Association Ltd as security deposit.

   

 
 
TEA ENDS CHILL IN INDO-PAK TRADE TIES 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Jan. 14: 
The cup that cheers is brewing a refreshing change in relations between two squabbling neighbours. While both India and Pakistan have had their share of differences, they seem to be in agreement over one thing — Indian tea.

Pakistan has shown renewed interest in Indian tea and a delegation from Pakistan Tea Association (PTA) headed by Asgar Ali of Lever Brothers is coming to India in June to negotiate deals.

The Indian tea industry has also decided to initiate talks with Pakistani buyers. However, this time the traders are not involving the government and are going it on their own.

PTA is also working hard to convince the government to reduce the present import duty on tea from the existing 52 per cent to 25 per cent.

A 12-member trade delegation comprising chairman of the Indian Tea Association R. S. Jhawar and representatives from Tata Tea, Williamson Magor, Warren Tea, Assam Co, Assam Frontier, Octavious Tea, Randerian, Limtex and Madhu Jayanti will be visiting Karachi and Lahore between January 28 and February 2.

Last year, despite political tension across the borders, the Indian tea industry was able to export about 3.5 to 4 million kg of tea compared with half-a-million kg the year before.

The last official tea delegation that went from India under the leadership of S. S. Ahuja, the then chairman of the Tea Board of India, was in July 1997. In the same year members of PTA had also come to India to negotiate deals. Gautam Bhalla, chairman of the export sub-committee of the Consultative Committee of Planters’ Association (CCPA) said, “Indian tea has a huge market in Pakistan. But due to tensions across the borders, Indian tea cannot take full advantage of this. We will negotiate with the buyers to facilitate the flow of Indian tea to Pakistan.”

The total consumption of tea in Pakistan is to the tune of 130 million kg, with almost 70 per cent of the demand being met by Kenyan tea. Other countries which export tea to Pakistan are Sri Lanka, Indonesia and Bangladesh. Indian tea does not have a very significant presence in the market. Among the Indian teas, the Pakistan market has a preference for orthodox Assam teas. Packet teas dominate the Pakistan market with 65 per cent of the teas being value-added, while the rest is sold as loose tea. The per capita consumption of tea in Pakistan is 1 kg.

Smuggling across the borders has gone down over the years with reduction in import and customs duty. In 1997 the total import and customs duty was 111 per cent which has been subsequently reduced to 65 per cent and then to 52 per cent.

Meanwhile, Indian tea exports till December 2000 have touched a figure of 200 million kg and the industry expects that by the end of March the figure will shoot up to 210 million kg. Wana (West Asian North African) countries like Iraq, Iran and Saudi Arabia have lifted quite a substantial amount of Indian tea.

   

 
 
TAX PORTAL TO TARGET CORPORATE EMPLOYEES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 14: 
The web-based accounting and taxation service for personal finance and investment, munshikaka.com, has decided to target corporate employees, whereby its services would be implemented on a company’s intranet module.

The portal is part of Advantage E-Accounting Services Pvt Ltd, which provides “mission critical products” in the area of finance and accounting to individuals and companies on the internet platform. The firm is promoted by Shailesh Haribakti, a chartered accountant and K.N. Vaidyanathan, former business head of Morgan Stanley Dean Writter Investment Management. Recently, ICICI Venture Fund obtained a stake in the company.

Speaking to The Telegraph, Vaidyanathan said the portal, which follows both the on-line and off-line model to provide various services to its users, has so far been successful in targeting corporate employees and munshikaka.com has been implemented on ICICI Bank’s intranet.

   

 
 
CII WANTS CORPORATE SURCHARGE SCRAPPED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 14: 
The Confederation of Indian Industry (CII) has urged the government to abolish the 10 per cent surcharge on corporate tax to provide the necessary impetus to industry.

In its recommendations to the government for the Union Budget 2001-02, the industry chamber claimed introduction of surcharges have resulted in an increase in the effective rates.

CII has pointed out that at present, companies pay a surcharge of 11 per cent on corporate income tax — the additional one per cent being introduced to finance national calamity relief. “While CII welcomes the one per cent surcharge to help in mitigating losses arising out of national disasters and calamities, it strongly advocates the elimination of the 10 per cent surcharge,” the chamber said in a statement released today.

Commenting on the personal income tax structure, CII has urged the government to eliminate the 10 per cent surcharge at the 20 and 30 per cent slabs and also to raise standard deduction from Rs 20,000 to Rs 35,000.

In the case of medical treatment, CII has suggested raising the limit to Rs 25,000 from Rs 15,000. Further, CII has also recommended adding it annually to the cost of living index of industrial workers.

Recognising the fact that the salaried earners are a class of taxpayers who duly comply with the tax laws and taking into account the increased cost of living, CII has also recommended simplification and rationalisation of provisions relating to taxation of benefits and perquisites.

   

 
 
100% DUTY ON USED CAR IMPORTS SOUGHT 
 
 
BY A STAFF REPORTER
 
Calcutta, Jan. 14: 
The Federation of Automobile Dealers Association (Fada) has sought levy of the highest slab of customs duty permissible under the World Trade Organisation (WTO) on used car imports.

Apart from demanding a 100 per cent duty on imports, it has also demanded imposition of a number of other features such as ban on import of left-hand drive vehicles, compliance with Indian emission and safety norms, as a measure of protection to the domestic automobile industry.

According to Vinay Nevatia, past president of FADA, India should take adequate precautions to ensure it does not go the New Zealand way, where the domestic automobile industry was wiped out after unrestricted imports were permitted.

With an investment of Rs 50,000 crore in the automobile and component sector and the high employment generation potential, India cannot afford to allow unrestricted imports of used vehicles.

For the domestic sector, the federation, after a committee meeting held here on Friday, proposed a reduction in excise duty and sales tax on cars to boost sales. At present, a customer has to pay as much as 60 per cent of the price of the car as taxes.

   
 

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