Lyons Range nails 10 defaulters
Sensex ends flat as FIs take a break
Govt readies BIFR successor
Tax sleuths claim success in raids
Rights issue, debentures to fund Telco expansion
Panel to chart Duncans recast
Talk in peace on Spice cellphone
Foreign Exchange, Bullion, Stock Indices

 
 
LYONS RANGE NAILS 10 DEFAULTERS 
 
 
BY A STAFF REPORTER
 
Calcutta, March 26: 
The Calcutta Stock Exchange (CSE) has declared 10 brokerages owned by Harish Biyani, Dinesh Singhania and Ashok Kumar Poddar as defaulters, ending a two-week payment crisis that pushed the bourse to the brink of a shutdown.

Those who have been arraigned are Harish Biyani, Biyani Securities (P), Ashok Kumar Poddar, Prema Poddar, Raj Kumar Poddar, Ratan Lal Poddar, Dinesh Kumar Singhania &Co, Doe Jones Investments & Consultants (P) Ltd, Arihant Exim Scrip (P) ltd and Tripoli Consultancy Services (P) Ltd.

Recommendations made by the defaulters’ sub-committee formed the basis of today’s decision, which was taken by the CSE committee at a meeting attended by a representative from the Securities and Exchange Board of India (Sebi).

CSE executive director Tapas Dutta said the exchange has initiated criminal proceedings against the defaulters under section 138 of the Negotiable Instrument Act, and appointed a legal firm which will examine the matter in detail. “CSE will move the court against errant brokerages and take steps to recover losses inflicted by them,” he added.

Later in the evening, the CSE put out a release, saying the committee had ‘unanimously decided to declare members as defaulters and suspended them from membership of the exchange in view of their failure to meet their pay-in obligations in successive settlements of the exchange’. Never in the history of the Lyons Range has such a large number of broking firms been indicted in a one-off declaration. The ten brokerages belonging to the three big punters have failed to pay more than Rs 200 crore in settlement numbers 148, 149 and 150. Their massive defaults triggered the worst-ever payment paralysis the bourse has seen so far.

In order to complete the pay-out process, the CSE had to invoke bank guarantees worth Rs 70 crore, place shares worth an equal sum with financial institutions and rustle up over Rs 38 crore by dipping into the trade guarantee fund (TGF).

The crisis not only undermined the financial strength of the 100-year-old exchange but left it staring at a possible shutdown. Dutta said the CSE authorities are doing everything possible to ensure that such a crisis does not erupt in future.

With the payout process having been completed after a great deal of fire fighting, the official word is that the problems are over. However, there are strong indications that the threats posed by factors outside the trading ring have not receded.

“The three brokers have huge outstanding dues with fellow brokers, who acted at their instance in piling up shares of Himachal Futuristic and DSQ Software. Both scrips have lost over 80 per cent of their values since the market collapsed over the payments crisis,” said a senior CSE member.

According to him, there are over 100 small and medium level brokers who have lost their lifetime earnings in the past couple of weeks. “How can they start afresh if they are not paid by the three brokers who are now in the dock?”

Dutta did not specify whether the cards of Biyani, Singhania and Poddar would be auctioned to recover the losses they have suffered and inflicted, but kept the issue open by saying ‘all necessary steps will taken in due course of time’.

Meanwhile, sources close to Singhania say he is unlikely to meet his payment obligations.“ Dineshji has been declared a defaulter. Even if he clears his dues now, he is not if he will be allowed to trade again,” they added. Called the CSE’s Big Bull, he has resigned from the exchange committee.

   

 
 
SENSEX ENDS FLAT AS FIS TAKE A BREAK 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 26: 
Foreign institutional investors today bought technology shares that kept the 30-share BSE sensitive index in a positive territory with a gain of 1.04 points. The bellwether index finished flat at 3636.62, as against last Friday’s close of 3635.28.

On account of a local holiday, Gudi Padwa, most of the domestic institutions were closed and there was no major activity. The total volume of business was pegged at a new 16-month low at Rs 744.20 crore. The exchange had earlier recorded a low turnover of Rs 746.48 crore on November 7, 1999. FIIs made some value buying at the counters of Satyam Computers, Infosys, Digital, NIIT, Polaris.

However, the market seemed to be apprehensive about tomorrow. The tax sleuths raid at BSE brokers’ premises last week, coupled with Cisco chief John Chambers forecasting that the slowdown in the US IT spending to continue for another three quarters may dominate the proceedings, said sources.

Reflecting the low key activity, the BSE Sensex opened with a gap of five points at 3640.47. It touched the day’s low of 3600.39 and recovered marginally to a high of 3654.04.

For large part of the session it was locked in at an extremely narrow range before finishing at 3636.32. The transition of 34 B group scrips to the A group was made effective today.

   

 
 
GOVT READIES BIFR SUCCESSOR 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, March 26: 
The finance ministry is giving final touches to a Cabinet note on a three-tier corporate debt restructuring mechanism that, along with the alternative of winding up through debt recovery tribunals, will replace the existing system under the Board for Industrial and Financial Reconstruction (BIFR).

The mechanism which will initially be non-statutory will be turned into a statutory body later. The ministry’s note, a copy of which is in The Telegraph’s possession, points out that both the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority (IRDA) have been set up in the same manner.

Any defaulting company unwilling to accept restructuring under the new mechanism will have to report to a debt recovery tribunal (DRT) for winding up action. While a debt restructuring package is being prepared to save the company, an administrator may be appointed to run the company if creditors feel the promoters of the company may strip off assets before the package is implemented.

Debt restructuring packages worked out will be for a maximum period of 180 days, default after this can be handed over to the DRTs.

At the apex of the structure will be the CDR standing forum comprising heads of all banks and financial institutions. Chairmen of State Bank of India, Industrial Bank of India, ICICI and Indian Banks Association and executive director of the Reserve Bank of India will be permanent members and one of the permanent members will be the chairman of the forum by rotation.

The CDR forum will lay down the policy and issue guidelines and monitor corporate debt restructuring. The CDR empowered group as well as CDR cells will work out details of specific debt restructuring packages.

The new mechanism will be legally backed by two agreements—a debtor-creditor agreement under which creditors will agree not to take any action for 90-180 days during which empowered group or cell will work out a restructuring package; an inter-creditor agreement by which all creditors will agree to accept the restructuring plan provided 60 per cent of all secured creditors (by value) approve of it.

This will be done by holding meeting of debtor company and its creditor banks. A creditors committee will be formed with a lead creditor that will appoint a consultant who in turn will report on the viability of the business. If the business is found viable, a debt restructuring programme will be chalked out. Otherwise it could be winding up or curtains for the company.

The note also states “all restructured debt of any bank or financial institution shall be disclosed under separate heading of contingent liabilities in annual accounts”.

No incremental provisioning for restructured debt will be necessary and provisioning shall continue to be made on the basis of pre-restructured classification of the asset or debt.

The note, however, admits that as a “pre-requisite” to usher in the new mechanism, Sick Industrial Companies Act and BIFR laws have to be repealed.

   

 
 
TAX SLEUTHS CLAIM SUCCESS IN RAIDS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, March 26: 
The Central Board of Direct Taxes today confirmed that documents indicating undisclosed stock transactions have been seized after searches made on the offices and residences of six top Mumbai-based brokers—Nirmal Bang, Ketan Parekh, Anand Rathi, Radhakishan S. Damani, Rakesh Jhunjhunwala and Shankar Sharma. The total value of transactions documented, disclosed and undisclosed, stands at a mind boggling Rs 25,0000 crore, sources said.

The income-tax raids were carried out in the aftermath of irregularities detected on the Bombay Stock Exchange following bear hammering of key stocks just two days after the Union budget.

The Central Bureau of Investigation (CBI) also confirmed that it had carried out raids on bankers and bullion dealers for the second day today in Mumbai and Ahmedabad in connection with a separate Rs 50 crore gold import racket case.

CBDT said its sleuths had recovered gold and jewellery, share certificates running into “several crores of rupees” as well as “evidence of share transactions running into thousands of crores of rupees.”

It had also recovered documents showing Rs 15 crore worth of irregular transactions in one case.

Other documents are being studied “to arrive at the exact quantum of undisclosed income.” Evidence also indicates fictitious purchase and sale of shares.

The CBI also claimed success in the raids it carried out today. Raids were carried out at nine places in Ahmedabad and five places in Mumbai and a case was registered by the central agency under section 120-8 (criminal conspiracy) and 13(2) of Prevention of Corruption Act against two bullion dealers and officials of two Ahmedabad-based co-operative banks, sources said here. The agency has recovered documents besides Rs 15 lakh in cash, 2.5 kg of gold and 186 kg of silver from owners of one of the bullion dealing firms.

According to an FIR filed in Ahmedabad’s CBI court, the owner of K.L. Chokshi group of firms Nareshkumar Keshavlal Chokshi along with Guru Exports (a firm of the same group) approached State Bank of India’s overseas branch in Ahmedabad for purchase of gold.

Both the firms approached the SBI branch for limits under the scheme and accordingly they were sanctioned Rs 10 crore each in August and October last year.

   

 
 
RIGHTS ISSUE, DEBENTURES TO FUND TELCO EXPANSION 
 
 
FROM SATISH JOHN
 
Mumbai, March 26: 
Tata Engineering and Locomotive Company (Telco) has drawn up a Rs 1,307-crore capital expenditure plan to be implemented over the next three years.

Ongoing capital expenditure, product development programmes and strategic investments will require Rs 780 crore, while prepayment and repayment of loans will soak up Rs 527 crore.

The company intends to finance the plan through a rights issue of Rs 410 crore and a non-convertible debentures issue of Rs 512 crore. A document filed with Sebi says warrants attached to the debentures should fetch another Rs 307 crore, while Rs 78 crore will come from internal accruals. The company has assumed a face value of Rs 80 for each convertible debenture and an exercise price of Rs 120.

Estimates of the mop-up are based on the lower limit of the price-range for debentures/warrants. The final price will be fixed just before the issue is launched, the company said. If the actual amount raised is more than the target, the company will draw down that much less from its internal accruals.

The funds will be used to develop products, invest in strategic alliances, expand the product range (light commercial and medium commercial vehicles) and launch new variants.

Telco says it will require Rs 160 crore to invest in strategic alliances. Money raised from the issue will help replace and modernise ageing equipment in the foundry, forging and paint shop departments. It will also fund the purchase of toolings and machines which manufacture new product and components.

Having already launched variants of the Sumo and a limited edition of the Safari in 2000-01, the auto major intends to launch new versions on the Indica platform by the end of 2002.

The company has said earlier it intends to develop cars for the mid-size/luxury segments, for which it is currently working on a feasibility study with PSA Peugeot Citroen of France.

The auto major has hived off some non-core businesses to rationalise its businesses in the last two years to pave the way for its expansion-cum-modernisation plan.

The company has cut 3,300 jobs in the current financial year which includes a separation package for officers.

   

 
 
PANEL TO CHART DUNCANS RECAST 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, March 26: 
Duncans Industries (DIL), the G.P. Goenka flagship, has embarked on a restructuring drive which may lead to the demerger of its tea and fertiliser businesses.

Group chairman G. P. Goenka told The Telegraph that a committee is looking at ways to recast the Duncan Goenka group. If it finds that demerging the two businesses will bring more benefits for the company, we may go ahead with it.”

Bhaskar Banerjee, senior managing director and P. K. Kaul, a director on the DIL board, are identifying the group’s performing and non-performing assets (NPAs).

Their report will be sent to a four-member committee comprising management maven Sumantra Ghosal, Goenka, Banerjee and Kaul.

Consultants may be appointed if the team says so. Earlier, Anderson Consulting had been asked to restructure the tea and fertiliser businesses.

Goenka is in talks with financial institutions such as IDBI, ICICI and IFCI to reschedule repayment of loans taken by group companies. “We do not want the credit given to our firms to turn into non-performing assets. FIs and banks have asked companies to get their repayment plans reworked before loans to them are classified as NPAs.”

The board has discussed spinning off the tea and fertiliser businesses several times but has failed to take a decision. It has been held back by investments, loans and advances which have not yielded the desired returns. Their values will have to be written down to reflect the true worth. This amount, estimated at Rs 250 crore, will be drawn down from the general reserves of Duncans Industries.

The Duncan Goenka group has 10 companies, apart from eight subsidiaries.

Corporate analysts say Goenka, who holds a majority stake in all of them, needs to dilute his holding. They say DIL should move out of companies which are not performing well. “The exercise of identifying our non-performing assets has started and we hope to come up with a blueprint for restructuring soon,” Goenka said.

Duncans Industries has 10 tea gardens in the Dooars and Terai regions. In Darjeeling, it has Marybong and Runglee, which is considered as one of the premium gardens in the hills. It has two estates in West Dinajpur — the Terai and Madarihat land project. The company’s ‘Chand’ brand of fertiliser is manufactured at its unit at Panki in Uttar Pradesh.

   

 
 
TALK IN PEACE ON SPICE CELLPHONE 
 
 
BY ALOKANANDA GHOSH
 
Calcutta, March 26: 
Spice Telecom, one of the city’s cellular service providers, has introduced enhanced full rate coding (EFR), a system which facilitates zero-disturbance, interruption-free conversation.

“The technology, acquired from Nokia for Rs 2.5 crore, is part of our plan to provide customers the latest. Our subscribers who have brought their cellphones in the past three years will be able to use it. Most handsets will be upgraded automatically at no extra charge for customers,” CEO Arun Kapoor said.

A Spice repeater has been installed at the Esplanade metro station at a cost of Rs 40 lakh to help subscribers remain connected underground. The service will be extended to eight stations by the second week of April. Another Rs 2.5 crore will be invested in the second phase of the plan in a technology which will help subscribers chat on train.

“EFR will be an added benefit because it will filter out noise disturbances which occur on the metro. The technology has already been installed at our facility in the SDF building at Salt Lake,” says S. Halder, senior vice-president (networking).

The company is holding talks with vendors and will soon finalise a roll-out plan. R Mahesh, president (marketing), says his company will focus on improving its network. “We have brought down the grade of service to 2.8 per cent as against international standards of 2 to 5 per cent.”

“The company is laying stress on mobile PDA applications. We have spent around $ 1 million in short messaging services, WAP gateway and internet gateway,” adds Mahesh.

Spice Telecom has already made plans for investments of over Rs 1,200 crore in the three circles in which it provides cellular service — Calcutta, Karnataka and Punjab.

While the Karnataka circle is in for a major branding exercise to take on AirTel, the Punjab circle is concentrating on enhancing roaming services and network expansion.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Closed	HK $1	Rs.  5.90*
UK £1	Closed	SW Fr 1	Rs. 26.80*
Euro	Closed	Sing $1	Rs. 25.70*
Yen 100	Closed	Aus $1	Rs. 22.60*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4340	Gold Std (10 gm)Closed
Gold 22 carat	Rs. 4100	Gold 22 carat	Closed
Silver bar (Kg)	Rs. 7350	Silver (Kg)	Closed
Silver portion	Rs. 7450	Silver portion	Closed

Stock Indices

Sensex		3636.32		+1.04
BSE-100		1718.69		+4.15
S&P CNX Nifty	1161.50		+0.20
Calcutta	 120.83		-0.63
Skindia GDR	 621.94		-1.90
   
 

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