CSE showcause to 3 brokers
Saw Pipes on Sebi watchlist
Reliance to divest 13% stake in RPL
Foreign banks asked to realign asset-liability ratio
Power funds linked to reforms
Bharat Petro to buy out govt stake in KRL
Foreign Exchange, Bullion, Stock Indices

 
 
CSE SHOWCAUSE TO 3 BROKERS 
 
 
BY A STAFF REPORTER
 
Calcutta, March 20: 
The Calcutta Stock Exchange authorities have issued showcause notices returnable in 48 hours against 10 firms belonging to Harish Chandra Biyani, Dinesh Kumar Singhania and Ashok Kumar Poddar, setting in motion the process to declare them as defaulters.

The pay-in shortfall of these firms has been estimated at Rs 45 crore which includes dishonoured cheques worth Rs 32 crore issued by the three brokers who are at the centre of the worst-ever payments crisis on the bourse.

Besides the 10 firms, some small broking outfits have also defaulted on payment, said CSE executive director Tapas Dutta. However, no showcause notices have been issued to them as yet.

The defaulter subcommittee of the bourse met early today to review the payments position of these errant firms.

Addressing a crowded press conference here this evening, CSE president Kamal Parekh said “After careful deliberation, the subcommittee was of the view that default proceedings should be initiated against these entities and showcause notices issued to them.”

Parekh said if the firms fail to reply within 48 hours, “the exchange will take stern action against them.”

While admitting that there was a possibility of a shortfall at the next pay-in, slated for Thursday, Parekh said the exchange had adequate resources to tackle this problem.

“The next pay-in and pay-out will be completed without any problem,” he said while refusing to go in to the specifics about the funds available with the cash-strapped exchange.

Dutta said the additional base minimum capital of the defaulting firms would be attached.

Refusing to comment on whether there had been any lapse on the part of the bourse’s surveillance system, Dutta said there was no question of allowing the brokers to build up positions beyond their exposure limits.

“The exposure limit is now totally machine driven and, as soon as a broker reaches his limit, the machine will switch off automatically,” he explained.

Dutta and Parekh, however, refused to be drawn into any discussion about the pay-in shortfall on Thursday, which market mavens say could be much higher than in the previous week.

“We have two more days to go and it will be unfair to make any comment on the pay-in crisis as that will have an adverse impact on the confidence in the market,” he said.

Parekh said the exchange could raise sufficient funds at any time by placing its buildings and other assets as collateral with the banks if the situation so demands.

“But at present, we don’t need to raise funds through this route and there is absolutely no question of mortgaging our properties,” he said.

Parekh however did not divulge anything about how the exchange could raise funds to meet any crisis in the next pay-in.

Market cognoscenti are estimating a pay-in shortfall of Rs 67 crore on Thursday.

Meanwhile, a close associate of Dinesh Singhania said the big bull is desperately trying to raise funds in Mumbai to cover his shortfall at CSE.

Parekh said the entire outstanding position of all the defaulting brokers would be squared off at the settlement number 150 and there would be no overhang because of the payment crisis on the next settlement.

   

 
 
SAW PIPES ON SEBI WATCHLIST 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 20: 
The number of scrips coming under the market regulator’s scanner for “abnormal share price movement” is increasing by the day.

The latest on the Sebi watchlist is Saw Pipes Ltd, the O.P. Jindal group company, which has yo-yoed on the bourses over the past few months.

The capital market’s watchdog has asked the premier stock exchanges to look into the “abnormality”, said Sebi sources.

It may be recalled that Saw Pipes scrip soared on the news that it had bagged a huge export order from an Egyptian company.

It was also learnt that the flareup at the counter was on the basis of rumours swirling around the market that the company had bagged a large number of domestic and foreign orders and that its order book position would exceed Rs 1000 crore in the current fiscal.

As a result, the share price touched a 52-week high of Rs 250 but later plunged to around Rs 100 levels.

In the case of Amara Raja Batteries and Cyberspace Infosys, it was the stock exchanges that took the initiative to investigate the price ramping operations.

However, in the case of Saw Pipes, Sebi had prodded the exchanges to investigate the sudden flare-up and the slump in the stock price.

Saw Pipes it was said was also expecting a large order from the IOC, expected to be finalised by the end of February.The company has a paid-up capital of Rs 40 crore.

Meanwhile, the National Stock Exchange (NSE) has decided to withhold pay-out in respect of transactions pertaining to Amara Raja Batteries and Cyberspace Ltd for certain previous settlements pending the completion of investigations for alleged price manipulation.

Sebi has also indicated that some more scrips may be investigated for alleged price manipulation based on investor complaints.

The regulator, apart from investigations, has sought trading data of some brokers, suspected in price rigging in these two scrips, from BSE and NSE, they added.

The two exchanges have already begun investigations and have been asked to report to Sebi the progress and actions taken on a “priority basis”.

It was unlikely that exchanges would face a payment default in the concerned scrips, sources said.

The regulator in collaboration with the exchanges was conducting surveillance and any “unnatural price trends were being promptly followed-up”, they added.

Referring to the progress of the probe into the unnatural price movements after the budget, they said the preliminary findings were likely to be ready by mid-April.

   

 
 
RELIANCE TO DIVEST 13% STAKE IN RPL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 20: 
Reliance Industries Ltd (RIL), the group’s flagship, took another step towards unlocking the value of its investment in Reliance Petroleum Ltd (RPL) by indicating its intention to divest up to 13 per cent of its holding in the refinery.

RPL has the largest refinery in the country situated at Jamnagar in Gujarat with a capacity of 27 million tonnes per annum.

Conservative back-of-the-envelope calculations indicate that Reliance Industries — which has been talking of selling its stake in RPL over the past three months — could garner a cash pile of over Rs 3400 crore through the selloff.

Industry circles speculated that the “strategic investor” could be Kuwait Petroleum Corporation (KPC) as Reliance had a series of negotiations with a high-level delegation from the Gulf Oil major in January. However, the company spokesperson declined to comment on whether KPC was picking up the stake.

The Reliance group will retain management control of the company even after the selloff when its stake will come down to 51 per cent. The total cost of 13 per cent RPL equity is in the region of Rs 1300 crore, giving the flagship company a clear long-term gain of Rs 2,100 crore.

The nine-month (April -December 2000) financial results for the two companies reveal that RPL has overhauled its parent in terms of sales.

The company may partially divest its stake in the company at an appropriate time during the course of an international offering in one or more tranches to strategic investors, financial investors or any other investors in the form of depository receipts.

The announcement failed to buoy the two counters with the RPL share shedding a rupee to close at Rs 50.25 from Rs 51.25. The Reliance Industries scrip surrendered Rs 8.55 today at Rs 374 from its previous close of Rs 382.55.

   

 
 
FOREIGN BANKS ASKED TO REALIGN ASSET-LIABILITY RATIO 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 20: 
The Reserve Bank of India (RBI) has asked foreign banks to improve their asset-liability positions. The advice comes amid reports that funds from the money markets may have been diverted to the stock exchanges.

Senior RBI officials said the decision was taken at a meeting with these banks and RBI on Monday. The meeting, an annual feature, is held prior to the credit policy in April.

The apex bank’s concern, market circles said, springs from the fact that foreign banks are usually net borrowers in the inter-bank call money market (which is an overnight borrowing) and prefer to invest or park funds borrowed from this market in relatively long-term assets, leading to a mismatch.

The practice has stirred apprehensions that money raised through this route could be diverted to other channels, at great risk. “Since call money is an unsecured loan to another bank, the diversion could affect others,” bank officials said.

“The deposit base of foreign banks is small. They, therefore, find it better to borrow from the call money market, say at 9 per cent, and advance it as a loan or invest in a security,” sources said.

Meanwhile, the RBI today asked all scheduled primary (urban) cooperative banks to furnish details of transactions in the call money market and loans given against shares. The move comes in the wake of the payment crisis that crippled the Ahmedabad-based Madhavpura Mercantile Co-operative Bank.

In a circular sent to these banks, the apex bank has said it wants information on daily lending and borrowing in the overnight money market between March 1 and 17. These banks will also have to send a report on their borrowings — specifying the purpose — from other banks and the balance as on March 17.

According to a press release issued by the RBI, these banks have to furnish details of advances they made to brokers against shares, individuals (number of accounts and amount outstanding in both cases) and firms/companies where share brokers were partners/directors. In addition, information the daily repo transactions will have to be made available.

Clearing position — adverse or favourable — at the centre where the head office of the bank is located and at the centre where the treasury operations were carried out have also been asked for.

The RBI has reminded scheduled primary (urban) co-operative banks that they have to inform it about term deposits with other banks on March 17.

This must contain the name of the bank, the amount, the period of deposit and the rate of interest. The central bank has also sought details on the aggregate amount of deposits maturing in one month and liquidity position as on March 17.

The liquidity position includes cash in hand, the current account with RBI and other banks, term deposits with state coop banks and other banks, investments in government and other approved trustee securities, funds parked in the bonds of PSUs and other assets, the central bank circular said.

   

 
 
POWER FUNDS LINKED TO REFORMS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March 20: 
Union power minister Suresh Prabhu today dangled the funds carrot before state power boards, but held out the stick that they will have to reach break-even point within two years to get the money.

Addressing a two-day national conference on: ‘Power sector reforms at state levels: Past achievements and future milestones,’ organised by the Federation of Indian Chambers of Commerce and Industry (Ficci), Prabhu said the government would offer one-time settlement of outstandings of state electricity boards (SEBs) which undertake implementation of reforms with time-bound milestones. State goverments promising to turnaround their SEBs in two years and which restructure the power sector, would be helped by the Centre in clearing their past dues, he said.

“If an SEB is willing to turn around and take up power sector reforms in right earnest and reaches the break even point in two years time, then the government can facilitate funding of their past liabilities,” said Prabhu.

Prabhu said once the SEBs reach break-even, they will start generating surpluses in the third year. “We are willing to consider the funding of past liabilities of SEBs if they start generating surpluses on current account.”

He urged the state governments to have regulatory power commissions, whereby all tariff orders issued by such commissions must be accepted and acted upon. This will form an important element of the memorandum of understanding that the power ministry will enter with the state governments.

Cautioning that the sector was moving towards a ‘fiscal crisis,’ he said the gap between the cost of supply and realisation expected to reach Re 1 per unit. Emphasising the need for toning up the transmission and distribution sector, where leakages were costing the country Rs 20,000 crore annually, Prabhu said the Centre had taken a decision to create adequate facilities to evacuate 4,000 mw of power from the eastern region in two years.

He also called for greater investment in the distribution sector. “A committee comprising top professionals is already working on a strategy for bringing reforms at the distribution end and is expected to submit its report in the next three months. An efficient hardware and software component will be fitted at the transformer-feeder point which will enable us to know the losses being made by a particular feeder.”

Besides, the government plans to approach the power regulator for levying a consumption cess of five paisa per kilowatt hour, for garnering more funds to develop hydro-electric generation capacity. “We are considering levying the cess on power consumed.”

The government may approach the regulator for levying a cess, or, alternately, it may do so on its own. Prabhu said about Rs 3,000 crore would be mopped up from the five paisa per kilowatt hour cess, which will be invested in setting up hydro-electric generation capacities.

Earlier this month, finance minister Yashwant Sinha had offered SEBs a one-time settlement to clear outstanding dues of more than Rs 26,000 crore towards central public sector units (CPSUs), provided the state governments accept a time-bound reforms programme.

The state power ministers’ conference held early this month had passed a resolution for continued supply of power from central generating stations to be linked to demonstration of capacity to make payments for current purchases and securitisation of past dues.

   

 
 
BHARAT PETRO TO BUY OUT GOVT STAKE IN KRL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 20: 
Bharat Petroleum Corporation (BPCL) is acquiring the government’s 55.04 per cent stake in Kochi Refineries (KRL) at a price of Rs 86.85 each in a 659.10-crore deal.

The stake acquisition in which 75.89 million shares will change hands was approved at a BPCL board meeting today. Sources in the capital markets say the deal is unlikely to provoke the kind of controversy that surrounded the sale of Balco to Sterlite for Rs 555 crore because KRL’s valuation appears to be a fair one.

The price represents a 71 per cent premium to the closing price of KRL on the BSE, where the share closed at Rs 50.65 after opening at Rs 46.40 and rising to an intra-day high of Rs 52.

BPCL pointed out that its acquisition of the government’s holding in Kochin Refinery, which has a 7.5-million tonne refinery, will ensure that it has a constant supply of products.

It would also give it more strength in negotiations with other oil companies on product exchange arrangements. In addition, it will protect the corporation against the loss of sales volume in the key southern market, BPCL officials said. it intends to market 20 million tonnes in the current year and expects a turnover of more than Rs 44,000 crore. Officials say KRL will gain because it will have easy access to the marketing infrastructure BPCL has built over the years.

BPCL is also poised to buy IBP’s 19 per cent of its 32 per cent stake in Numaligarh Refineries (NRL). Though the valuation at which the shares should be picked up can be debated, sources close to BPCL were of the view that it should be close to the book value of around Rs10 per share.

Apart from these two refineries, BPCL is involved in the process of setting up a 6 million tonne refinery in Bina. The refinery, which was earlier supposed to come in a joint venture with Oman Oil Company, received a setback when the latter expressed its inability to pick up 26 per cent.

BPCL circles said that Oman has now indicated that it would remain only an investor in the refinery as it has already invested close to Rs 80 crore in the project. The project, cost of which is put at over Rs 6,000 crore, is likely to either come at a debt equity ratio of 2:1 or 1.5:1.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.70	HK $1	Rs. 5.90*
UK £1	Rs. 66.77	SW Fr 1	Rs. 27.05*
Euro	Rs. 42.22	Sing $1	Rs. 26.00*
Yen 100	Rs. 38.04	Aus $1	Rs. 22.95*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4360	Gold Std (10 gm)Rs. 4280
Gold 22 carat	Rs. 4115	Gold 22 carat	Rs. 3900
Silver bar (Kg)	Rs. 7300	Silver (Kg)	Rs. 7325
Silver portion	Rs. 7400	Silver portion	Rs. 7330

Stock Indices

Sensex		3672.40		-50.09
BSE-100		1758.46		-25.88
S&P CNX Nifty	1170.95		-15.75
Calcutta	 121.44		- 1.22
Skindia GDR	 627.55		- 2.31
   
 

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