BoB to merge loss-making branches
Bajoria seeks to sell stake in Bombay Dyeing
India to ask rich to lift agro subsidies
Institutions clear Jindal Vijaynagar Steel revamp
Jalan upbeat on growth prospect despite shocks
Dalmia mulls stake hike in Indian Rayon
Bengal lends a helping hand to car makers
Hurdles to Great Eastern transfer
Campaign for austerity drive
Foreign Exchange, Bullion, Stock Indices

 
 
BOB TO MERGE LOSS-MAKING BRANCHES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 20: 
Bank of Baroda (BoB) is planning an organisational restructuring programme within the bank that entails “rationalisation or merger” of around 300 loss-making branches and a possible elimination of zonal offices.

The bank is also contemplating a drastic restructuring of its subsidiaries that include its mutual fund, capital markets, housing finance and credit card businesses.

BoB is looking at partnerships in these subsidiaries and has not ruled out offloading a part of its stake to foreign partners.

BoB chairman and managing director P.S. Shenoy said around one-fifth of its branches (around 300, mostly in rural areas) which are either loss-making or have stagnant business will be merged.

While hinting that some branches may even be closed down, he said BoB would also embark on the redeployment of its personnel consequent to such an organisational recast. BoB currently has a network of over 2,600 branches.

Terming the entire process as an effort to make the bank a flatter organisation, Shenoy said BoB was likely to have a three-tier structure with zonal offices likely to be eliminated. Currently, the bank has a four tier-structure comprising branches, regional offices, zonal offices and corporate office.

“Of these, we are discussing whether to raze the regional offices or zonal offices. It is most likely that the axe will fall on the 13 zonal offices,” a senior official from the bank told The Telegraph.

BoB recently completed a VRS programme that saw over 3,000 officers and over 2,000 clerical staff going off the rolls. Shenoy said the outgo on the VRS was projected at about Rs 700 crore and the bank was planning to amortise the expenditure over a period of five years.

Prior to this, BoB was planning to write off this expense, but the idea was dropped as a writeoff would undermine its capital adequacy ratio.

The bank is now aiming to adopt GAAP (generally accepted accounting practices) as part of its plan to tap the overseas markets. Shenoy, however, pointed out that this exercise would be initiated only after the stock reached a decent level on the local bourse without actually spelling out what that was.

Shenoy was speaking to reporters on the occasion of BoB joining hands with Gartner, a leading IT consultancy firm, to evolve business and IT strategies. BoB is planning to invest Rs 250-300 crore in the next two to three years and the IT thrust would also include business process re-engineering within the bank.

Senior bank officials added that a sum of Rs 500 crore was likely to invested in wide area networking (WAN), around Rs 150 crore will be put in developing core banking solutions, and over Rs 50 crore in setting up a payment gateway and internet banking.

   

 
 
BAJORIA SEEKS TO SELL STAKE IN BOMBAY DYEING 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Feb. 20: 
Arun Bajoria, the city-based jute baron turned corporate raider, is finally chickening out. Bajoria, who has built up a 14 per cent stake in the Rs 946 crore Nusli Wadia-controlled Bombay Dyeing, is seeking to sell his holding.

After months of sabre-rattling and hectoring talk about unseating Jinnah’s grandson from what he termed a “badly managed” company, Bajoria told The Telegraph today that his sole intention was to sell his stock, but at his price.

The qualification is important: last year, Bajoria had said he would hold out for a price of Rs 250 per share, but with the stock hitting Rs 92.15 on Tuesday, the raider clearly indicated that he had no stomach for a bruising battle to take over the textile major.

“I had bought the Bombay Dyeing shares purely from an investment point of view. And in the investment world, there is no place for sentiment,” he said. “I will sell the shares at my price. There will be no distress sale.”

Bajoria refused to spell out his current price for the greenmail operation that has now gone sour.

He also made it clear that he was not going to make an open offer as he did not have the resources. Nor did he relish the prospect of hanging on to his Bombay Dyeing stake in a falling market.

“I hope the current problem will end soon and I will get the price I am looking for,” he said.

Bajoria said he had not received a good offer from any one else who was planning a stake out at Bombay Dyeing. But he said it would not be difficult to get someone interested in the textile company which has a huge asset base.

The raider said Wadia had not made any offer to buy his stake. “If he is interested, he can always get the deal brokered through some of his associates,” he said.

Meanwhile, Bajoria has moved Calcutta High Court against the Securities and Exchange Board of India (Sebi), which has launched an investigation to determine whether Bajoria had failed to inform the authorities and the company management of his stake build-up at the company. Bajoria has consistently maintained that he had flouted none of the regulations.

The jute baron has also moved to the Company Law Board against the “mismanagement” in Bombay Dyeing and is also seeking a berth on the company’s board.

“It is my legitimate claim to have a berth on the company’s board. That’s why I have submitted a 1,000-page document with the CLB which will hear the case on March 12,” he said.

Sources say Bajoria is trying to pressure the company’s promoters into making a reasonable offer for his holding which had cost him over Rs 60 crore.

“I need a good return on the investment. Let Wadia come, if he is interested, with a reasonable offer,” Bajoria said.

Meanwhile, the Bombay Dyeing stock remained stagnant at Rs 92.15 although there has been a sharp rise in the sales volume over the past two days. Asked whether he had sold any part of his stake, Bajoria was emphatic that he would not offload it in small parcels.

Bajoria is hopeful that the Bombay Dyeing stock will rise once the market appreciates that it has a very good intrinsic value.

   

 
 
INDIA TO ASK RICH TO LIFT AGRO SUBSIDIES 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 20: 
India and other developing countries will seek elimination of subsidies on agro products by the European Union and the United States, at the next ministerial round of the World Trade Organisation to be held from November 9-13 in Qatar.

Nripendra Mishra, special secretary in the Union commerce ministry, said the US and EU spend as much as $ 341 billion on subsidising their domestic agro products.

“These market distortions must be brought down to zero,’’ Mishra said while addressing a seminar on ‘Removal of quantitative restrictions: how to meet the challenge,’ organised by the Federation of Indian Chambers of Commerce and Industry (Ficci).

Mishra suggested that apex industry organisations such as Ficci should have permanent industry-specific cells to convey their concerns to the government from time-to-time and hinted that a number of measures to ensure non-tariff protection to the domestic sector were likely to be announced next month.

Mishra noted the domestic business had failed to make use of tariff commissions that existed with the finance ministry. He hoped that Ficci, as an apex organisation, would help the government in forming both transition and long-term policies for the WTO regime.

   

 
 
INSTITUTIONS CLEAR JINDAL VIJAYNAGAR STEEL REVAMP 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 20: 
Domestic financial institutions have approved a restructuring package in Jindal Vijaynagar Steel Ltd (JVSL) that provides for a substantial reduction in interest rate, a company spokesperson said.

Company officials said the interest rate reduction has been structured to ensure a lower interest outflow in the initial years of the project implementation, with a progressive increase in the latter years, thereby protecting the cash flow in the initial years.

As per the restructuring package, equity capital to the extent of Rs 560 crore will be converted into 0.0001 per cent redeemable preference shares, redeemable in 5 equal annual instalments, commencing 2016.

In addition, there will be a conversion of the existing rupee debt to the extent of Rs 560 crore into equity at par. This is expected to bring down the promoters’ holding to 38 per cent from the present level of 63 per cent and increase the financial institutions’ holding to 44 per cent from 7 per cent.

Further, the company has also proposed a reduction of interest rate on the remaining debt to 14 per cent from the existing 17.40 per cent. JVSL officials added the income lost by financial institutions due to the interest rate reduction will be compensated partly by the allotment of 14 per cent optionally fully-convertible debentures and recovery of the remaining in the year 2012.

The company said the proposed restructuring package will result in the reduction of the interest burden by 30 per cent and ensure the company is able to meet all obligations even in a depressed price scenario. Sources said any increase in the price of HR coils beyond the present levels will improve its profitability.

The company recently operationalised phase I (0.80 million tonnes) of its HRC manufacturing facility in Bellary district of Karnataka and is close to completing the implementation of phase II.

   

 
 
JALAN UPBEAT ON GROWTH PROSPECT DESPITE SHOCKS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 20: 
Reserve Bank of India (RBI) governor Bimal Jalan says a Swot — strengths, weaknesses, opportunities and threats — analysis has led him to the conclusion that the economy is resilient enough to absorb shocks, and grow at a fast clip.

Addressing a seminar on the State of the Indian Economy’ organised by the Indian Merchants Chamber here today, Jalan skipped discussing the recent bank rate cuts on the ground that all questions on the long-term prospects of the economy will be answered in the economic survey and budget.

“I am extremely optimistic about the economy. We will continue to maintain high levels of growth,” Jalan said. He pointed out that a 6 per cent growth had been achieved despite setbacks such as the Kargil skirmish, poor monsoon and droughts, the Asian economic crisis, rising crude prices and economic sanctions. “This is better than what our neighbours, and a few developed nations have accomplished,” he said.

He said the foreign exchange reserves are at an all-time high and exports have surged. This, coupled with a comfortable foodstocks and the ability to withstand oil price spikes, will help the country attain a growth rate of 6 per cent and above.

“There is a renewal of confidence to grow at high rates. Even the 6 per cent achieved so far is not low by any standards. Our economy has built up the capability and skills to withstand the impact of sudden developments. This could be seen in the way we dealt with the recent oil price hike, economic sanctions and the Asian financial crisis,” Jalan said.

He said the current tempo of growth at 6 per cent has been maintained for over a decade even though the savings rate plateaued.

   

 
 
DALMIA MULLS STAKE HIKE IN INDIAN RAYON 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 20: 
Abhishek Dalmia, who has already acquired 1 per cent stake in Indian Rayon, does not rule out buying up more shares of the Aditya Birla group company,

The Renaissance Estates’ managing director said, “I got interested in Indian Rayon shares as I felt them to be undervalued.”

Confirming that he presently holds a 1 per cent stake of the company, Dalmia said these amounted to 6 lakh shares.

The Dalmia family scion said these shares were bought about nine months back and he had informed Aditya Birla group chairman Kumar Mangalam Birla of the acquisition at about the same time. He said though he did not buy all the shares at one go, they were acquired in a relatively short period of time.

So, is he planning another Gesco on Indian Rayon?

Last year, his well-publicised takeover bid for a 45 per cent stake in Great Eastern Shipping’s realty arm, though abandoned midway, let him pocket about Rs 9 crore by selling his stake to the promoters — the Sheth-Mahindra combine.

While Dalmia categorically ruled out any plans of making an open offer for Indian Rayon as of now, he said as head of an an investment company, he remained particularly interested in undervalued shares of all companies across the board and not necessarily realty companies.

“Only if the shares are undervalued will their valuations rise when there is buying into the scrip, which is why I go in for such shares,” explained Dalmia.

Dalmia added while he has several investments, at present he holds less than 1 per cent in all other firms except Indian Rayon.

He said he was currently focusing on his investments and not on the real estate business where he had earlier keen interest. Dalmia has also shelved plans for a software foray. Some time back, Dalmia had considered buying a software company in Chennai, but said “nothing came out of that.”

   

 
 
BENGAL LENDS A HELPING HAND TO CAR MAKERS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 20: 
The West Bengal government will lend a helping hand to the Indian automobile industry’s efforts to reduce pollution in the country, through an Emission Warranty Scheme.

The state government has already allotted land for a pilot project, becoming the first state to take an initiative under the new scheme aimed to control pollution.

This scheme will be available to all vehicles bought from July 1 this year in Delhi, Mumbai, Calcutta and Chennai.

Under the EMS, if a vehicle fails to meet the emission standards, the mechanic will not make the necessary adjustments, but will hand out a slip, which, when produced at an authorised sales service centre, will entail the customer for a replacement of that defective part, free of charge.

“West Bengal has already promised to allot the land and will participate in this pilot project. Under the pilot project, a new equipment to monitor emission levels in vehicles will be set up at authorised centres. This will be replicated all over the country based on the experience of this project,” said Venu Srinivasan, president Society of Indian Automobile Manufacturers (Siam).

According to, Pawan Goenka, chairman, emission technical committee, Siam, “The EMS will be similar to any other warranty on a product. It will be executed, based on the owners’ manual. Further in order to facilitate maintenance, the auto industry will also offer emission maintenance contract (EMC) as an option.”

This emission warranty will be in addition to and run parallel with the product warranty given by individual manufacturers.

The EMS will be applicable on all vehicles including passenger cars, multi-utility vehicles, commercial vehicles, two-wheelers and three-wheelers.

The emission warranty period for two-wheelers would be 30,000 kms or three years and for three-wheelers 30,000 kms or one year, whichever is earlier. The warranty period for passenger cars and multi-utility vehicles would be 80,000 km or three years whichever is earlier. Commercial vehicles will have a warranty period of one year or 80,000 kms, whichever is earlier.

Siam today again urged the government to improve fuel quality. “To meet strict emission standards, vehicle technology shall be more complex and the required fuel quality has to be made available,” said Goenka. Industry experts fear the scheme can be misused, to change the parts.

   

 
 
HURDLES TO GREAT EASTERN TRANSFER 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Feb. 20: 
An agreement to transfer control of Great Eastern Hotel to Accor Asia Pacific has been delayed over objections from the French firm to a revision in salaries made by the state government even as talks were under way. Accor was supposed to sign an understanding by December. The state Cabinet cleared a move to award the management contract on October 31.

The government revised salaries in line with the recommendations of Fourth Pay Commission, which gave the hotel’s 475 employees hefty increases in their compensation.

“The French firm said it will spend Rs 15 crore on a VRS package, which will cost more as a result of the salary revision. Accor wants to know why the government implemented the recommendations of Fourth Pay Commission after choosing it as the management contractor for the hotel,” a senior official of the state tourism department, who is a part of the team negotiating with the company, said.

Sources said tourism secretary Pranab Roy will hold fresh round of negotiations with Rajiv Sharma, director (development) of Accor Asia, in Delhi next month.

Accor’s proposal envisages the retrenchment of all employees through a VRS package. However, it has said a screening committee will select employees, below 45 years of age, who can be taken aboard by the new management. “Those found suitable will be absorbed. The screening panel will comprise representatives of the unions, the tourism and finance ministries, besides Accor Asia Pacific,” sources said.

Great Eastern Hotel has 525 workers, of which 50 are contract workers and rest are permanent. Of the 475 permanent employees, only 170 are below 45 years of age and, therefore, eligible to appear before the screening panel.

The delay in reaching an agreement has left the workers anxious over their fate. They have written to their representatives in International Labour Organisation (ILO) to find out the exact position from the Accor Asia management.

Ron Oswald, general secretary of the International Union for Food, Agricultural, Hotel, Restaurant and Allied Workers’ Association — an arm of ILO — has told Great Eastern workers that it is in touch with the Accor brass in Paris.

“We have requested Accor’s general management to issue a clarification on its intention to take control of Great Eastern. Employees have a right to be informed about the future if there is a change in ownership. The management says its talks contacts with the state government are in a preliminary phase. Negotiations are under way but Accor feels that an agreement is a long way off. Therefore, the management cannot make any commitment to the workforce.”

   

 
 
CAMPAIGN FOR AUSTERITY DRIVE 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Feb. 20: 
Saddled with a combined fiscal deficit (Centre and states taken together) of 10 per cent and a whopping government sector debt (combined) of 61 per cent, a hassled finance ministry is now trying to convince other key economic ministries of tough steps needed to wriggle out of the situation.

In a series of high-level pre-budget consultations held here this week, the finance ministry used the logic of “unsustainable deficit and debt position” to get other ministers to agree to key belt-tightening measures. These steps include: sustained privatisation in posts and telegraph services, increase in postal and parcel rates, greater privatisation of railway services, cuts in sugar and fertiliser subsidies, faster pace of disinvestment linked to a specific fund, reduction in the interest rate on small savings, introduction of bankruptcy laws and debt recovery tribunals which would replace the BIFR and downsizing of bureaucracy.

The debt and deficit position has indeed risen alarmingly. Current figures indicate government sector’s combined fiscal deficit has risen by well over one per cent of GDP in just one year.

A government sector debt of over 50 per cent of GDP is also considered alarming and the fact that it has crossed the 60 per cent-mark could lead to a further fall in India’s credit ratings, despite the fact that central borrowings have been within pre-ordained limits.

“We are very bluntly stressing home the message. Either we agree to hike user charges, cut down subsidies and let private sector offer services where we are making losses or else we slowly sink into bankruptcy,” officials said.

Though the Centre has kept its fiscal deficit just over its targeted 5.2 per cent this fiscal, mainly by not spending on many of the plan schemes which had been cleared earlier, it has managed to overshoot budget targets for food and fertiliser subsidies by some Rs 5,000 crore, officials said.

Despite better direct tax collection, low volumes of imports and a slowdown in industrial growth has still meant a tax deficit of nearly Rs 6,000 crore.

States have been worse. Tax give-aways and populist subsidies by Andhra and Punjab and poor fiscal management by Bihar have ruined their financial health, increasing their debt stock as well as their deficit.

To make matters worse for the Union government, finance ministry officials point out, the average interest cost of government debt which today stands at about 8 per cent is on the rise.

“Our efforts to move the government towards market borrowings is leading to higher interest costs. This might turn unsustainable in the long run. Already the Union government’s interest burden is Rs 88,000 crore or 48 per cent of the revenue receipts,” they said.

This is one of the reasons, they say, why interest costs of small savings have to go down.

Though Reserve Bank of India is the final arbiter of interest rates, the global trend of lower of interest rates may lead to further bank rate cuts in India

But in the long run, higher users charges, cuts in subsidies and salary expenditure were the only way out, officials said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.61	HK $1	Rs. 5.90*
UK £1	Rs. 67.16	SW Fr 1	Rs. 27.55*
Euro	Rs. 42.48	Sing $1	Rs. 26.40*
Yen 100	Rs. 40.27	Aus $1	Rs. 24.35*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4395	Gold Std(10 gm)	Rs.4320
Gold 22 carat	Rs. 4150	Gold 22 carat	Rs.3995
Silver bar (Kg)	Rs. 7475	Silver (Kg)	Rs.7540
Silver portion	Rs. 7575	Silver portion	Rs.7545

Stock Indices

Sensex		4359.22		+8.57
BSE-100		2229.88		-3.50
S&P CNX Nifty	1383.85		-0.95
Calcutta	134.61		+0.30
Skindia GDR	755.19		-2.51
   
 

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