Maruti rights issue cleared; FIs, banks to lift shares
Speed up power reforms: Prabhu
Broker brothers make open offer for VST
Tata-AIG one up on rivals
Centurion Bank rights to raise Rs128 cr
Local steel prices buck global trend
Trai to release consultation paper on 3G spectrum soon
BK Birla to up stake in Kesoram
Foreign Exchange, Bullion, Stock Indices

New Delhi, Feb 13: 
The Cabinet Committee on Divestment (CCD) today decided to sell off the government’s stake in Maruti in a two-part deal that involves floating a rights issue which will be renounced by the government in favour of financial institutions, mutual funds and banks. The next stage will be the sale of government’s equity.

Disinvestment minister Arun Shourie told reporters after a two-hour long meeting that the rights issue will be made by September. “Suzuki, our partner in Maruti Udyog, will pick up its portion of the issue but the government will renounce its rights in favour of FIs, banks like SBI and mutual funds like UTI,” he added.

Shourie said the quantum of equity to be divested will be decided after consultations with Suzuki Motor Company. “The valuation of the rights issue will be made by a panel of three merchant bankers. The government will pick one banker, Suzuki will select the second while the third will chosen by mutual consent.

The FIs and banks will later have the right to sell off shares bought in the open market. This will help the government gauge the correct market price before selling off its own stake, Shourie said. “The open market sale will increase the value of the government’s shareholding,” he added.

The minister maintained that these were broad decisions, the finer details of which would have to be thrashed out with the Japanese car maker. “Suzuki may wish to cap an FI’s stake. We also have to assess whether the restrictive clause, which prevents the government from selling its shares to any party without Suzuki’s consent, will devolve on the banks and FIs that pick up these shares,” Shourie said.

When the disinvestment in Maruti was taken up last year, the government was hamstrung by the clause in the agreement which stipulated that the Japanese auto major’s prior written consent is needed before the government sells its stake.

“One of the main concerns voiced by Suzuki’s representative was that its rivals should not end up buying shares in Maruti Udyog. This could lead to a conflict of interests. Even we do not want that to happen,” the minister said.

He did not specify the manner in which the government would eventually sell off its own holding — about 50 per cent of the paid-up capital — in the Rs 8,000-crore car maker. “The government will decide what to do with its shares after the rights issue.”

However, by harping on the fact that the government was bound by the restrictions on selling shares to a third party under Clause 6(i) of the original shareholders’ agreement, Shourie’s implication was that open bidding as an option for selling the government’s shares was almost closed.

The only options now open to the government are selling off these shares either to Suzuki or to a company Suzuki is comfortable with. Obviously, the third option of holding on to the shares, being pushed by heavy industries minister Manohar Joshi, seems to have been given a burial.


New Delhi, Feb. 13: 
Union power minister Suresh Prabhu today cautioned that lack of power reforms could lead to deepening of economic slowdown. He has already indicated that the Centre will deduct the defaulting amount from a state government’s account if the electricity board of that state fails to pay its dues to a power generating or transmission company for which the Union government has stood guarantee.

Prabhu made a presentation to the Cabinet on power sector reforms here today.

According to sources, there was a proposal to ask all state governments to sign memorandum of understanding to enjoy all the incentives. “There will be a policy of incentives and disincentives for generation, distribution and transmission,” Prabhu said.

He said the outstandings of SEBs stood at Rs 14,464 crore in 1998-99 against Rs 3,100 crore in 1991-92.While the outstandings of central power sector utilities (CPSUs) like National Thermal Power Corporation and Power Grid Corporation stood at Rs 26,000 crore in 1999-00 against Rs 6,800 crore five years ago. The CPSUs were now facing a cash crunch which is growing concern for these sectors. He said, to solve this, the privatisation of distribution needs to be hastened.

The Cabinet was also informed that theft was the main cause for concern. Prabhu said the Centre was planning to give incentives to those states that agree to power reform package.


Mumbai, Feb. 13: 
Radhakishan S Damani and Gopikishan S Damani, two investors from Mumbai, have made an audacious open offer to acquire 20 per cent of VST Industries’ shares through Bright Star Investment, an investment outfit by the two brothers. BAT, the British tobacco major, holds over 35 per cent in the Hyderabad-based cigarette firm.

Sources close to Bright Star said the duo, with a 14.97 per cent stake in VST’s paid-up capital, will make an offer to ordinary shareholders to pick up 30.88 lakh shares, representing 20 per cent of the equity, at a price of Rs 112 each.

Merchant bankers say the acquisition will cost the Damanis Rs 34.58 crore.

The VST share flared up on the Bombay Stock Exchange (BSE), hitting its upper-end circuit filter at Rs 88.60, up from Rs 82.05 on Monday. Only 2,720 shares changed hands in 40 deals.

“This is not a hostile open offer. The brothers are not interested in taking over the VST management. They are keen on strengthening its hands,” went the market whispers.

The announcement by the Damanis, seen as long-term investors and Dalal Street brokers, came as a surprise.

Curiously, ASK Raymond, the FII broking firm which advised Abhishek Dalmia and Renaissance Estates in its bid to acquire Gesco Corporation, has been roped in Bright Star.

Sources say the offer, slated to open on March 30, is designed to raise the Damanis’ holding in VST, taking it to a level where it can secure the voting rights on the board.

“There is nothing more to it. There are no plans beyond increasing the stake to the desired level ,” the sources added.

However, there is a possibility that Bright Star might want to want boost shareholder value. It could do so by selling or encumbering the assets of VST in the normal course, or within two years from the date of the offer’s closure.

Bright Star, a little-known firm, has an authorised capital of Rs 6 crore and a paid-up capital of only Rs 3.93 crore. But its reserves and surplus account for a whopping Rs 51.17 crore.

There are allusions in the market that Bright Star has already created an escrow account to pay shareholders who respond to the open offer.

Bright Star is believed to have told Sebi in its offer document that the escrow account, favouring ASK-RJ, has been opened with HDFC Bank. It has Rs 40 lakh in deposits and Infosys shares worth Rs 12.76 crore.


Mumbai, Feb. 13: 
Tata AIG Insurance Co today said it has won an in-principle approval from the Insurance Regulatory and Development Authority (IRDA) to offer life and general covers.

The first private sector insurance firm to have received clearance in both segments, it is a joint venture in which the Tata group holds 74 per cent while a subsidiary of the American International Group (AIG) controls 26 per cent. The initial paid-up equity capital of the company is Rs 125 crore.

Farrokh Kavarana has been named the chairman while George Oommen will be the managing director. In January, the joint venture received the in-principle registration as a general insurer.

According to a release issued here today, products will be launched at the end of this month, after they are cleared by authorities. The company plans to start off with Mumbai, followed by other cities. Its products will include a wide array of life insurance covers for individuals and groups.

For individuals, the company says it will launch term products, endowment products as well as money-back schemes with different types of add-ons and options to give customers greater flexibility and choice. It is already developing a special product for the rural sector, officials said.

Its offices will be opened soon in Mumbai, February Delhi, Chennai, Bangalore, Hyderabad and Kolkata in the first year of operations. Products will be sold through agents spread across the country, and through alternate distribution channels such as direct and worksite marketing. The first group of agents will be trained by regulator soon, the release said.

Insurance norms

The Insurance Regulatory and Development Authority (IRDA) is considering a revision of the investment norms for insurance companies, chairman N Rangachary said here today. “We are holding discussions with the insurance companies and a decision is expected by the end of this month,” he said at a function organised by the National Stock Exchange and Insurance Institute of India (III). As per the current norms, insurance companies have to invest some amount of the premia collected in government securities and infrastructure bonds among others.


Mumbai, Feb. 13: 
Centurion Bank will raise Rs 128.08 crore by offering 10.67 crore shares on rights basis to its shareholders with premium of Rs 2 per share (face value Rs 10 each) to meet the capital adequacy requirements.

As a part of the rights issue which opens tomorrow, existing shareholders would be entitled for shares in the ratio of 7:10 (seven equity shares for every 10 shares held on January 27), according to the offer document.

“After the issue, bank’s capital adequacy ratio would go up from existing 9.71 per cent to 12.8 per cent,” managing director M.J. Subbaiah told newspersons here today.

The bank needs capital to support expansion plans, he said adding the bank would add 16 branches in two months taking their number to 60 by end of this fiscal.

Asked about the merger with or acquiring other banks, Subbaiah said, “We are just through the merger of Twentieth Century Finance Ltd with Centurion. For one year at least we will focus on organic growth and critical mass.”


Mumbai, Feb. 13: 
Steel prices in the country are expected to remain steady even as they firm up in markets overseas.

This has been attributed to the fact that domestic demand has not recorded a significant growth, and the industry remains so competitive that its output outstrips demand.

International prices have recently shown signs of resurgence, firming up by over $ 30 per tonne. Given that much of the increase is based on fundamentals, the uptrend will be sustained.

Global prices of hot-rolled coils (HRC) have now shot up to $ 220-230 per tonne from $ 190 per tonne a year ago while that of cold-rolled sheets are hovering above $ 330 per tonne.

The optimism over global prices has had a salutary effect on the shares of local firms such as Tata Steel, SAIL and Jindal Steel in recent times. According to market observers, the expectation that finance minister Yashwant Sinha will announce boosters for the infrastructure sector has led to a sense of confidence about the prospects of cement firms.

However, industry watchers say local prices are unlikely to firm up in line with the international trends. “Prices in the country have not moved in tandem with the international ones so far. This is largely due to the fact that there has been no substantial increase in demand from local buyers,” Steel Chambers of India president Sampat Maru says.

Prices of hot rolled coils (HRC) are now around Rs 16,000 per tonne, a shade lower than what was last month. The same product manufactured by CIS countries sells at $ 200 per tonne in the global markets. In recent times, steel imports to the US have dwindled due to fears of trade action.

Sources say an uptick in demand can only be expected after the budget is presented at the end of this month. “The industry is looking forward to the budget. We feel that prices will firm up only if demand from the infrastructure sector picks up,” a official from a domestic steel major said. The finance minister is expected to bring down excise rates on the commodity to 8 per cent from the present 16 per cent.

Analysts say local companies may prefer to export more if the international prices continue to remain on the higher side. International steel companies such as US Steel, Bethlehem Steel, Nucor have already announced price hikes.


New Delhi, Feb. 13: 
The Telecom Regulatory Authority of India (Trai) will soon finalise and release a consultation paper on ‘Plan to select Spectrum for Third Generation (3G) Wireless Systems and Services’.

The consultation paper will initiate discussions on timing, number of operators, methodology for spectrum allocation and priorities for 3G spectrum.

While inaugurating a seminar on ‘Spectrum Management for third generation mobile: Technology and Regulatory Issues’ here today, Trai chairman M.S. Verma said, “the third generation mobile system is likely to be used in India much earlier than expected.”

“There is a need for a detailed study of spectrum issues, including the frequency bands identified at the World Radio Communication Conference 2000 that could be used for 3G systems,” he added.

The three-day seminar was organised by Trai in collaboration with the Canadian Industrial Development Agency(Cida).

Verma said the guiding principles have to be specified for allocating frequency spectrum for India’s future needs for mobile voice, high-speed data and internet-accessible wireless capability.

He said spectrum band and allocation for 3G systems need to be identified soon.

Third Generation Mobile Systems are driven by the vision of information at any time, at any place, in any form. The systems will provide access by means of one or more radio links to a wide range of telecommunication services supported by the fixed telecommunication networks and to other services that are specific to mobile users.


Calcutta, Feb. 13: 
Patriarch Basant Kumar Birla will invest around Rs 2.5 crore in the current fiscal to consolidate his hold on flagship Kesoram Industries.

Birla, who currently holds around 33 per cent in the Rs 733-crore highly-diversified Kesoram Industries, will raise his stake by three per cent during the current financial year.

Speaking to The Telegraph, Birla said the acquisition of fresh shares will be done through open market operations.

“According to the guidelines laid down by the Securities and Exchange Board of India (Sebi), we cannot buy more than five per cent of the company’s shares through the creeping acquisition route. We have already acquired two per cent and the rest will be done by the end of this fiscal,” Birla said.

Sources added since Kesoram Industries is a widely held company with the public holding around 50 per cent, the group patriarch has decided to raise his stake to over 40 per cent in the next three years to pre-empt any hostile take-over bid.

What may have spurred Birla to action, is a letter from Cemindia Investment of Deoghar to the Calcutta and Bombay bourses stating that the company has acquired a 6.5 per cent stake in Kesoram.

While the company’s investigations revealed it to be a false alarm, Birla apparently is not taking any chances.

“The claim is a fake, as no such company was available in the address printed on the letterhead,” a senior Kesoram official confirmed.

However, the financial institutions, which hold a little over a 21 per cent stake in the company, are said to be on very good terms with the existing promoters.

Meanwhile, Kesoram Industries, a dull scrip even a month ago with prices hovering around Rs 26.95, has witnessed a sudden spurt on the bourses over the last few days.

Today, the scrip shot up to Rs 59.50 before closing at Rs 57.55 on reports of a foreign investor picking up shares through a couple of brokers.

Birla dismissed “rumours” about a Dubai-based bank buying over 8 per cent in Kesoram Industries in the past few weeks from the market.

“The company has not yet received any notice from any bank or individual about the purchase of such a stake. Even if there has indeed been some interest buying, we don’t feel threatened,” says Birla, adding “ we are very comfortably placed.”

Sources pointed out that since all the company’s share are in demat form, it will take at least 10 days to determine whether there has been a large transfer of shares to a single entity.

Birla attributed the sudden spurt in trading of the scrip to the good performance of the company’s cement division.

“The rise in cement demand and substantial improvement in sales realisation has had a very positive impact on the bottomline,” Birla said.

The company, which has two cement plants each in Andhra Pradesh and Karnataka, may also increase its cement production capacity if the current trend continues.

The company reported a net profit of Rs 7.43 crore during the nine-month period of the current fiscal, against a net loss of Rs 4.17 crore last year. Profit during the third quarter alone was Rs 3.01 crore, against a net loss of Rs 4.86 crore in the previous corresponding quarter.



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