ITC makes open offer to buy 20% stake in VST
Bank rate cut by 50 basis pts
VSNL cuts leased line tariffs
Sensex recovers after early slide
Tatas launch internet service
Auto majors hit the road with price cuts
Foreign Exchange, Bullion, Stock Indices

 
 
ITC MAKES OPEN OFFER TO BUY 20% STAKE IN VST 
 
 
SATISH JOHN, PALLAB BHATTACHARYA AND SUTANUKA GHOSAL
 
Mumbai/Calcutta, March 1: 
ITC, the Rs 8,069 crore Calcutta-based cigarette-to-hotels conglomerate, today emerged as a white knight to fight off an hostile bid by two Mumbai-based broker brothers who laid siege last month to Hyderabad-based VST Industries which is controlled by British American Tobacco (BAT).

ITC has pitched in with an open offer to acquire a 20 per cent stake in VST through its fully-owned investment subsidiary Russell Credit.

The ITC offer is priced at Rs 115 per share, and tops the Rs 112 per share offer by Radhakishan S. Damani and his brother Gopikishan S. Damani who stunned the market with their audacious open offer last month for the maker of Charminar and Charms cigarettes.

BAT has a 33.6 per cent stake in VST, which has a 13 per cent share of the domestic cigarette market.

Russell Credit has lodged the offer with the Securities and Exchange Board of India (Sebi). The leading stock exchanges in the country were also informed about the move.

The VST stock closed at Rs 121 on the Bombay Stock Exchange today, up Rs 3.50 from Wednesday’s close of Rs 117.50, undimmed by finance minister Yashwant Sinha’s budget proposal yesterday to slap a 15 per cent surcharge on cigarettes.

When asked to confirm the development, senior ITC officials said they were not “aware” of the open offer. “ITC does not hold any stake in VST and I don’t know anything about the move,” said a top ITC official.

BAT spokesman Scott Hills told The Telegraph over the line from London: “ITC has informed us about their move to acquire a 20 per cent stake in VST. As an independent organisation, ITC has decided to make its move through its investment subsidiary Russell Credit. We support the move 100 per cent. We are behind them.”

BAT is the principal shareholder in ITC with a 34.1 per cent stake in the country’s premier cigarette maker. ITC produces two of BAT’s best-known brands — 555 and Benson and Hedges — under a licence.

However, relations between the two cigarette companies have been fractious in the past and matters reached a head in the mid-nineties when local managers asserted their right to decide the course of ITC’s future.

An uneasy truce has since been reached but there have been several pinpricks, most notably when BAT wanted to set up a fully-owned subsidiary to make and market its brands. The move was stymied by ITC which refused to grant a no-objection certificate that was required under law.

On February 21, when the VST board met to consider the developments arising from the Damanis’ open offer, the directors said they were unclear about the motivations behind the bid and said they would prefer to wait and watch till they received a formal communication from Bright Star Investments, the Damani-owned firm behind the open offer.

At that time, John Band, the managing director of ASK Raymond James, the firm that is advising the Damanis, said the VST directors did not know how to deal with the situation and were merely stalling for time. Bright Star’s offer is slated to open on March 30.

ITC has now stepped in to bail out the £ 21.67 billion BAT, which must seek government approval before raising its stake in VST.

“We will wait till the actual counter offer is made and the real price is known,” said Band. There is a possibility that the price mentioned in the draft counter offer could be revised later in a tactical move.

In its offer, Bright Star revealed that the two brothers hold 14.97 per cent of the paid-up ordinary share capital of VST and were in the process of making an offer to VST shareholders to acquire 30.88 lakh shares amounting to a 20 per cent stake. Merchant banking circles that the Damanis would have to stump up Rs 34.58 crore to acquire the VST shares.

   

 
 
BANK RATE CUT BY 50 BASIS PTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 1: 
Prodded by finance minister Yashwant Sinha’s decision to slash interest rates on small savings by 150 basis points in the budget, the Reserve Bank (RBI) today slashed the bank rate — a key signalling device and the rate at which it lends to banks— by half a percentage point to 7 per cent.

The move comes less than a fortnight after a similar cut in the benchmark rate and coincides with Federal Reserve chairman Alan Greenspan’s remarks on Wednesday that a slowing US economy may force another rate cut at a meeting of its rate-setting panel on March 20.

The move triggered a flurry of cuts in banks’ prime lending rate (PLR) — the rate at which they lend to their most preferred clients. The lead was taken by Bank of Baroda (BoB) and Housing Development Finance Corporation (HDFC).

The housing finance major brought down rates on its loans above Rs 2 lakh (above five years) to 10.75 per cent from a flat rate of 13 per cent. Ten-year loans up to Rs 2 lakh will now be available at 11.50 per cent, those above Rs 2 lakh at 12.25 per cent; 15-year loans up to Rs 2 lakh will have to be serviced at the rate of 11.75 per cent; the rate will be 12.5 per cent on loans above Rs 2 lakh.

BoB cut its short-term PLR (up to 180 days) by 2 per cent to 10 per cent. For loans between 181 days and a year, the rate will come down by 1 percentage point to 11 per cent; for those over a year, the lending rate has been cut to 11.5 per cent from 12 per cent.

The bank said interest rates on its domestic term deposits will also be reduced in the wake of the cut in the small savings rate. Its asset-liability management committee will meet soon to discuss the revision.

The RBI had on February 16 cut the bank rate from 8 to 7.5 per cent and brought down the cash reserve ratio (CRR) to 8 per cent.

Only a few banks, including State Bank, lowered their lending rates but kept their deposit rates unchanged. The country’s largest bank is expected to take a decision next week, as are financial institutions like IDBI, ICICI and IFCI. Nabard has already decided to reduce the rate on its capital gains bonds to 8.75 per cent per annum from the 9.25 per cent.

The money markets had already factored in the reduction, but there was brisk trading in the government securities market. Prices of long-dated papers moved up by over 80 paise, but later gave up some of those gains to profit-taking.

They saw it coming

The bank rate seems to have come as no surprise. Most bankers, companies and stock market analysts had been expecting it.

Coming as it did a day after the much-lauded budget, companies saw today’s decision by the apex bank as part of the second economic reforms wave. They were unanimous that it will fuel investment, and speed up the rate of growth.

“Today’s decision by the RBI was a logical conclusion considering the significant announcements made by the finance minister yesterday. It goes to show that the authorities are committed to giving a kickstart to the economy,” averred N Balasubramanian, senior general manager, ICICI.

Officials say the cut will force banks to take a fresh look at their lending and deposit rates in the new low-interest rate scenario. “Soon, we will have more banks and institutions dropping their lending rates. This should lead to not only a growth in credit offtake but we may see companies making investments as well,” a leading banker commented.

However, there were many companies which felt that the cut could have been steeper. Aadesh Gupta, chief financial officer at Indian Rayon said considering the 150 basis point reduction in the interest rate on small savings, the central bank should have brought down the bank rate by one percentage point.

“Though the corporate sector will benefit from subsequent reductions in prime lending rates, we were a little disappointed as we had expected a 100 basis points reduction. All the same, a cut is always welcome,” he added.

However, stock market circles while welcoming the development, pointed out that the bourses have already discounted the rate cut. Despite such a feeling, bank and finance scrips are expected to show an upward movement tomorrow.

The chambers are also happy. Ficci and CII said the move will spur lending rate cuts by banks and lower the cost of borrowing that would give a fillip to industrial growth and investment.

“The budget had set the stage for a lower interest rate regime and RBI’s move would go long way in reducing the cost of capital in the economy and boost competitiveness,” CII president Arun Bharat Ram said.

“The interest rate structure will move southwards. This should encourage investments. The adjustments were needed to arrest the slowdown in the economy,” Ficci said. In Calcutta, Indian Chamber of Commerce president C K Dhanuka said the cut will boost investment and accelerate industrial recovery.

   

 
 
VSNL CUTS LEASED LINE TARIFFS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March. 1: 
Videsh Sanchar Nigam Ltd today slashed internet leased line rates by 40 per cent for non cable head stations. It also announced a steep reduction and rationalisation of co-location and web hosting tariffs.

The reduction in tariff will benefit the users in small towns.

As per the new scheme, VSNL will provide shared and dedicated internet local area network ports with a 100 megabits per second (Mbps) speed to customers with servers located in VSNL.

Earlier, it announced an about 70 per cent cut in internet leased line tariffs from January 1, at the cable head stations at Mumbai and Cochin. Under this scheme, the rate of a 2 Mbps internet leased line which used to cost Rs 41.8 lakh was brought down to Rs 12.5 lakh at Mumbai and Cochin.

The corresponding rates for 2 Mbps IPLC link which used to cost Rs 163.68 lakh on optical fibre cable to the US, was reduced to Rs 40 lakh at Mumbai and Cochin. The leased line linked tariffs at other stations, served by satellite or terrestrial, was fixed at higher levels.

   

 
 
SENSEX RECOVERS AFTER EARLY SLIDE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March. 1: 
The stock market’s barometer — the 30-share sensitive index failed to sustain yesterday’s rally as new economy stocks shed early gains on massive profit booking.

The sensex opened strong at 4288.23 and gyrated in a range of 4386.98 and 4215.27 before closing at 4271.65, as against yesterday’s close of 4247.04, netting a gain of 24.61 points. The BSE-100 index, however eased to 2138.89 from the previous close of 2139.72.

“There has been a lot of software selling and it is not bottoming out,” said Dhiraj Sachdev of HDFC Bank. “It is disturbing and now I feel that the rally was over-extended,” Ramesh Damani, a prominent BSE broker said. He said the bank rate cut is not likely to give a fillip to the market as it has already been discounted at the market place.

Morgan Stanley was a big seller in software stocks and dealers attributed the decline to the global meltdown in software scrips led by yesterday’s fall of 56 points at the Nasdaq.

Meanwhile, old economy stocks hogged the limelight, scoring sharp gains on the bourses today following hectic buying support from speculators as well as select purchases by domestic financial institutions. However, tech counters like Infosys, Satyam, NIIT and Zee that rallied yesterday, reacted sharply on heavy selling pressure from FIIs.

Dealers said the banking sector, which was expected to improve its efficiency after more autonomy was given to public sector banks, was largely behind the rally in cyclicals. Telecom bellweather HFCL, severely battered in the past few days, hit the recovery path on sustained demand, following the reduction of tax liability and the concessions in the budget proposals to companies setting up telecom projects.

Hero Honda and TVS Suzuki also attracted good buying support on reduction of excise duty on two-wheelers, while ITC continued to reel under pressure with a 15 per cent surcharge on excise duty on the cards.

Satyam Computer topped the list of highest traded shares with a turnover of Rs 605.58 crore followed by HFCL at Rs 528.97 crore.

   

 
 
TATAS LAUNCH INTERNET SERVICE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March. 1: 
The Tata group today launched its internet services under the brandname Tatanova.

Marking the group’s foray in the internet service providers’ business, chairman of the group, Ratan Tata said, “The group firm, Tata Internet Services Ltd will offer access, content and other value-added services.”

It plans to set up international gateways and data centres in Mumbai, Delhi and Hyderabad. At the launch, Tata said, “Tatanova represents a significant step in our endeavour to be a leader in internet related services.”

Tata Internet Services is a wholly-owned subsidiary of Tata Industries, the Tata group’s investing vehicle in the new economy. Tata Industries plans to invest Rs 500 crore in the project over a period of three years.

Tata Internet Services plans to set up 2000 public internet centres in the next two years. Later, it may become an application service provider.

It plans to offer 100 hours of internet access for Rs 750, said N Srinath, CEO of Tata Internet.

   

 
 
AUTO MAJORS HIT THE ROAD WITH PRICE CUTS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March. 1: 
There’s good news for those who have been drooling over that dashing beauty in the showroom, but couldn’t quite get close to driving it home.

A day after excise duties on passenger cars were lowered from 40 per cent to 32 per cent in the Union Budget, most car makers, including Ford, Daewoo, General Motors, Honda Siel, Maruti, Fiat and Tata Engineering today slashed prices of their car models.

Ford India cut the prices of Ford IKON by Rs 29,000 to Rs 40,000.

Ford India managing director Phil Spender said the benefits announced by the finance minister would be passed on to customers immediately.

“The automobile industry will benefit from a reduction in excise duty and the removal of surcharges. The effective level of duties for the used car market will also ensure that used car imports do not overtake the growth of the local manufacturing sector. Appropriate non-tariff measures in the exim policy will ensure that the used car threat does not emerge in the country,” he said.

Daewoo Motors India Ltd (DMIL) also reacted by reducing prices of all Matiz variants ranging from Rs 16,500 to Rs 23,000.

DMIL, which last month announced the ‘Suraksha’ and ‘Samadhan’ schemes, will issue refunds to its customers who bought their cars between February 5-28.

“We are happy to provide total price protection to our customers,” said Y. C. Kim, managing director and chief executive officer of DMIL.

He added, “The Union Budget 2001-02 presented by the finance minister is a pro-growth, pro-industry and pro-consumer budget for the automobile industry.”

General Motors also announced a reduction in the prices of its cars ranging from Rs 30,000 to Rs 48,000 across all models with immediate effect.

Honda Siel Cars India Ltd (HSCIL) slashed prices of all variants of its mid-size ‘City’ car by Rs 27,000 to Rs 39,000 with immediate effect.

Meanwhile Indian car major Maruti Udyog Limited also announced price cuts ranging from Rs 11,000 to Rs 42,000 for its car models. According to a company spokesperson, “The entire excise cut will be passed on to the customers. The prices will become effective from today and all dealers have been told to start implementing the new rates.”

Tata Engineering has cut about Rs 18,000 in the prices of its Indica models with immediate effect, while Fiat India will reduce the prices in the range of Rs 18,000 to Rs 45,000 for Uno, Siena and Siena Weekend, spokespersons of both companies said.

Tata Engineering in a statement said the lowering of excise duty would be passed on to customers with immediate effect.

In case of Fiat India, the cut would come into effect by this weekend, the spokesperson said adding, the actual pricing of cars was being worked out.

The Indica V2 DLE will now be priced at Rs 3,27,938 (ex-Delhi) and Rs 3,29,071 (ex-Mumbai), an effective reduction in the region of Rs 19,000. The Indica 2000, MPFI petrol, would now be priced at Rs 3,15,285 (Lei, ex-Delhi) and Rs 3,16,182 (Lei ex-Mumbai), an cut of approximately Rs 18,000, the spokesperson said.

C K Birla Group company Hindustan Motors said today it has reduced its vehicle prices by up to Rs 50,000. Company sources said ex-showroom prices of the premium mid-size car ‘Lancer,’ manufactured in collaboration with Mitsubishi Motors of Japan, have been reduced by Rs 40,000 to Rs 50,000. The Ambassador would now become cheaper by Rs 20,000 to Rs 25,000, while price of the Contessa has been cut by Rs 30,000.

Two wheeler manufacturers like Hero Honda and LML also indicated a price cut ranging from Rs 3,000 to Rs 5,000 on their various models.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.  46.55	HK $1	Rs. 5.90*
UK £1	Rs.  67.42	SW Fr 1	Rs. 27.50*
Euro	Rs.  43.14	Sing $1	Rs. 26.35*
Yen 100	Rs.  39.73	Aus $1	Rs. 24.15*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4405	Gold Std(10 gm) Rs.4325
Gold 22 carat	Rs. 4106	Gold 22 carat	Rs.4000
Silver bar (Kg)	Rs. 7475	Silver (Kg)	Rs.7500
Silver portion	Rs. 7575	Silver portion	Rs.7505

Stock Indices

Sensex		4271.65		+24.61
BSE-100		2138.89		-0.83
S&P CNX Nifty	1358.09		+6.65
Calcutta	137.05		+4.10
Skindia GDR	702.56		-4.06
   
 

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