Other exchange boards face BSE-like cleanup
Watchman under watch
Lever flavour to ICI venture
Gillette India net up 36% to Rs 26.42 cr
Modis to pick up 35% more in MRL
Airline sale in slow lane
Dunlop city abode in hock
Foreign Exchange, Bullion, Stock Indices

Mumbai, March 28: 
The Securities and Exchange Board of India (Sebi) indicated after a crucial meeting today that the recently clamped bar on brokers from taking seats on the Bombay Stock Exchange (BSE) board could be widened to other bourses.

The pointers came on a day when three broker-directors were elected to the BSE board, but the market regulator made it clear that none of the new members would be allowed into the governing body.

“We have told BSE that no broker can sit on the board of the exchange till the Sebi order remains in force. We cannot block the board elections, but we can do this,” Sebi chairman D.R. Mehta said. Sunil M Shah, Apurva Shah and Ashok Kumar Damani were the three brokers who were voted in.

Broker-directors at the country’s premier exchange were recently restrained from acting as directors on its governing board after tapes revealed ousted president Anand Rathi asking for details of specific deals from its surveillance department.

Asked if the ban on short sales would be lifted, Mehta said the regulator would review the situation after the market stabilises. “One cannot put the safety of markets at a risk. Volumes are not a priority against safety,” he said.

Apart from Mehta, the emergency board meeting was attended by executive director J.R. Verma, finance ministry representative Rakesh Mohan, Reserve Bank deputy governor S.K. Talwar and eminent industrialist Kumar Mangalam Birla.

Later, the Sebi chief tried to dilute the import of his earlier statement, saying the order that restrains brokers from acting as directors on bourses was BSE-specific and that a similar stand would be taken if the situation on other bourses warranted it.

In another key announcement, the watchdog said 261 more scrips would be shifted to rolling settlement from July 2, taking the total number in this category to 424 shares.

Meanwhile, the ban imposed on former BSE chief Rathi’s brokerages came up for hearing today. Sebi will pass its order a day before the case comes up for hearing in the high court, Mehta said.

Another scam-tainted broker, Harshad Mehta, did not show up, prompting the Sebi board to declare it will pass an ex-parte order.

One of the interesting events at today’s meeting was when Kumar Mangalam Birla walked out minutes before Rathi’s lawyers trooped in for the hearing.

The former BSE chief was a senior Aditya Birla group official before his stint as the helmsman on Dalal Street.

The BSE board has 18 members, of which nine are elected by the members of the exchange; the thers are nominated. The seven broker directors suspended by Sebi included Anand Rathi, the president, and Deena Mehta, the vice-president of the board who was appointed to serve as the interim board president after Rathi resigned on March 8.

Rathi had quit amid a barrage of allegations that he sought confidential information about short positions held by several speculators, touching off a post-budget meltdown.


Calcutta, March 28: 
With Lyons Range still struggling back to its feet, the spotlight is now on the Calcutta Stock Exchange’s surveillance department, for its failure to stem the rot.

The role of the surveillance department is in for scrutiny, for assisting, “either overtly or covertly,” a few leading brokers who carried on trading, despite defaulting on their margin payments that resulted in an unprecedented payment crisis.

Sources said the surveillance department, which comes under executive director Tapas Dutta, came to know on March 5 that a cheque from Dinesh Singhania worth Rs 17 crore, towards margin payment, had been dishonoured. As per the norms, Singhania’s terminal should have immediately been switched off.

“But Singhania was allowed to trade for the next three days. And by the time his terminals were switched off, the disaster was complete,” a top CSE source said. Asked to comment on the issue, Dutta said he was not aware of the matter.

Market insiders said Singhania, a former president of the bourse, was able to influence the governing board along with persons “who matter,” and take the market for a ride.

“He (Singhania) continuously skipped the marked-to-market margin payment which is collected by the bourse on the reduced value of a particular scrip. Since the three contentious scrips, DSQ Software, Himachal Futuristics and Global Tele, lost heavily over the next three days, the exchange had all the more reason to collect the margin to prevent any kind of payment crisis,” they added.

Meanwhile, CSE members have become restive as the exchange has “defaulted” on releasing the margins, even though a week has elapsed after the stipulated time.

The members were told by the CSE committee that the payment could not be made because of the funds crunch and efforts are being made to clear all margin-related dues before the end of the current financial year.

Members unequivocally alleged that the bourse used the funds to smoothly complete the pay-out last Friday. “ If the margin deposits have been used for the pay-out, it is a punishable offence,” said an aggrieved broker.

The executive director however said the exchange is currently scrutinising the margins, which is causing the delay. Over 70 terminals remained deactivated due to pay-in defaults, sources said.


Mumbai, March 28: 
Hindustan Lever Limited (HLL), ICI India and Quest International BV today announced their plans to form a joint venture that will take over the operations of Hindustan Lever’s fragrances and flavour division.

The turnover of this business last year was Rs 95 crore, including captive consumption.

Under the arrangement, ICI India and Quest International BV will together hold 51 per cent in the joint venture and the balance 49 per cent will be held by HLL. The value of the 51 per cent stake in the joint venture is estimated around Rs 155 crore, which includes a premium for management control.

Worldwide, HLL’s parent Unilever Plc has a similar arrangement with ICI Plc for their fragrances and flavours businesses.

The venture, in as much as it relates to the transfer of HLL’s flavours and fragrances and food ingredients business, is subject to the shareholders’ approval, which is expected to be obtained at the annual general meeting scheduled for June 1.

It will, however, exclude the aromatic chemicals business of Hindustan Lever and the erstwhile Industrial Perfumes Ltd, which will continue to be with the company.

The joint venture combines ICI India’s long standing knowledge of the country, HLL’s detailed understanding of Indian consumers’ preferences, coupled with Quest International’s consumer understanding, technological and creative expertise.

The proposed tieup is also expected to provide cultural and operational fit for the Quest division of HLL, which operated as the Indian arm of Quest International till 1997.

The HLL share price closed on the Bombay Stock Exchange (BSE) today at Rs 220, gaining almost Rs 10 from its previous close of Rs 210.05. ICI India also gained, rising from the previous day’s Rs 60.05 to close the day at Rs 64.80.


New Delhi, March 28: 
Gillette India Ltd today announced a 36 per cent growth in net profit at Rs 26.42 crore over a sales turnover of Rs 516.80 crore during the fiscal ended December 2000. Total income for the year ended December 2000 stood at Rs 536.54 crore, up from Rs 253.74 crore in the corresponding period last year.

Gillette India represents the combined business of Duracell (India) Ltd and Wilkinson Sword India Limited with Gillette’s flagship company, Indian Shaving Products Ltd. The company proposed a dividend of 15 per cent on the enhanced capital of Rs 32.59 crore, increased from Rs 12.87 crore before the merger. The pay out ratio stands at Rs 23 per cent of profit after tax, as against 22 per cent last fiscal.

“The new Gillette India is twice as large as the pre-amalgamation entity,” said Zubair Ahmed, managing director.


Mumbai, March 28: 
The Modis, promoters of the Delhi-based Modi Rubber Ltd (MRL), are coming out with an open offer to purchase 35 per cent of the company’s equity share capital at a price of Rs 80 per share.

In a notice sent to the stock exchanges here today, the promoters declared their intention to pick up 87.64 lakh shares. The announcement was issued on behalf of Vinay Kumar Modi, B.K. Modi, Modi Fashions and Securities Pvt Ltd and Modikem Ltd in concert with Witta International Inc and Sidh International Ltd.

According to the notice, the acquisition consortium along with persons deemed to be acting in concert, at present, holds over 58.58 lakh shares of MRL representing 23.40 per cent of the paid-up equity capital of the company.

The notice said that March 31 has been fixed as the date for the purpose of determining the persons to whom the letter of offer would be sent. The offer will open on May 16 and close on June 14.

The open offer price represents a premium of 32 per cent over the closing price of the Modi Rubber scrip on the Bombay Stock Exchange (BSE) today. The scrip closed on BSE at Rs 61.05 after opening at Rs 62.35 and touching an intra-day low of Rs 60.65.

The Modis have been contemplating such an offer for quite some time. Earlier, the financial institutions which has a significant equity stake in the company, asked the promoters to complete the purchase of shares by the end of March this year.

The company, according to reports, also needs an approval from the FIs on the final pricing of the open offer. The institutions comprising IDBI, IFCI, UTI, LIC and GIC are believed to hold over 40 per cent stake in the company. With the promoters holding over 23 per cent, the rest is being held by the public.


New Delhi, March 28: 
Civil aviation minister Sharad Yadav wants to strengthen Air-India and Indian Airlines before putting them up for disinvestment to avoid a distress sale of the two state-owned airlines.

“We have taken several measures to strengthen the two carriers to prevent any distress sale,” Yadav told newspersons on the sidelines of a conference of pilots and other technical experts on aviation safety here.

Yadav’s statement assumes significance, coming on the heels of the controversy over aluminium major Balco’s sale at a price which is being criticised as too low. Analysts see this as an attempt to delay the sale of the two airlines, till the controversy over the policy of public sector disinvestment blows over.

Besides, Yadav has always been against the divestment of these airlines, though he has accepted the disinvestment process for the two, initiated by the Union Cabinet.

Nevertheless, he has often privately let it be known that he prefers to revive the two airlines instead. However, as this involves pumping in funds as well as tax sops, both of which too are not forthcoming, he has his hands tied.

Among other things, Yadav wants to end sales tax on aviation turbine fuel. Even today he told newspersons he has already consulted various ministries on the issue and was optimistic of a quick solution. “A decision will be taken soon,” Yadav said.

He emphasised that a level-playing field should be provided to Air-India, which had to pay the tax, while foreign carriers did not. Air-India recorded an additional fuel outlay of Rs 178 crore for the hike in ATF prices, which reached a nine-year peak in 1999-2000.

The minister is also believed to be still keen on a plan floated a few years ago by a civil aviation ministry committee, recommending a combination of austerity measures with the amalgamation of the fleets of the two airlines, engineering strengths and marketing efforts, as well as spinning off independent profit centres to give greater air clout.

Though the disinvestment process has shelved the plan, the ministry seems to be going ahead with piecemeal steps from the same plan.


Calcutta, March 28: 
The Board for Industrial and Financial Reconstruction (BIFR) has allowed Dunlop India (DIL) to mortgage two prime properties in the heart of the city to raise funds for holding operations—the jargon used to describe a scaled-down run—at its Sahagunj and Ambattur units.

The real estate in question are Dunlop House at 57 B Mirza Ghalib Street and another building, 63 A, along the same road.

M.D. Shukla, president of the M.R. Chhabria-controlled company, said formalities will be completed in a couple of days.

The board has set forth a condition that loans taken against the two properties—not included in the draft revival scheme (DRS)—cannot be lent or invested at rates above 18 per cent.

BIFR has said an asset-sale committee comprising representatives from IDBI, state governments (West Bengal and Tamil Nadu), banks and the management will monitor the disposal of properties outlined in the draft revival scheme.

The properties that have been earmarked for sale are spread in Chennai, Bangalore, Goa, Pune and Mumbai. Of these, the ones in Pune and Mumbai have not been encumbered—no loans have been raised by mortgaging them.

Money from the sale will have to be stashed in an escrow account and used after permission from the BIFR.

Meanwhile, the consortium of banks led by United Bank of India has accused the ailing tyre maker’s management of repaying unsecured creditors while holding back its funds.

Shukla said payment to banks will be advanced. “I have submitted to the BIFR that Dunlop will start paying banks from the second year of the revival scheme. We will dip into our reserves of Rs 50 crore and try to settle the dues of our bankers.”

This change will, however, have to be incorporated in the draft revival scheme before it is submitted to the board.

BIFR has asked the company to send a revised revival blueprint to Industrial Development Bank of India—the operating agency—in a week. IDBI will examine the package and take about four weeks to clear it.

Shukla welcomed the board’s move to allow the mortgage, saying it was a pointer to a ‘positive future’ for Dunlop. “We are reasonably happy over the development,” he added.

Employees feel BIFR’s move will make it easy for the revival scheme to be approved. “Holding operations at the two units should continue but the board must clear the draft plan immediately, not least because the interest of 7,500 workers is at stake.”



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