Lyons Range snuffs out arbitrage
UTI Bank, Global Trust falter at the altar
Parekh brothers quit Triumph board
HFCL turns out to be a money-spinner for UTI
Govt not averse to JPC probe
Rash of rumours rattles Sebi
Classic deals Rs 5-crore blow to BoI
NHB ready to accept ANZ Grindlays offer
Foreign Exchange, Bullion, Stock Indices

Calcutta, April 3: 
Arbitrage business on the Calcutta Stock Exchange (CSE) appeared destined for death after the management committee decided this evening to advance the Thursday pay-in by a day.

Arbitrage — which means cashing in on the differential in share prices between two markets — is a big business avenue for over 60 per cent of CSE’s 500 active brokers who take advantage of the different pay-in days across bourses.

An investor can buy a share on the National Stock Exchange (NSE), where pay-ins are held on Tuesdays, to sell it on CSE two days later for a better price, something they can no longer do.

CSE executive director Tapas Dutta said advancing the pay-in is aimed at managing risks which arise in trading. “If it has an adverse impact on a particular business, we can’t help it.”

Brokers, deprived of business after the recent market mayhem, have slammed it, saying CSE has deprived investors of a facility that helps them get the best price. “The authorities are systematically killing the market by withdrawing the facility,” a former director of the exchange said.

The worst hit will be linewallahs, CSE brokers who depend entirely on arbitrage, at a time when volumes have nose-dived. Others who use this route will also take a beating.

“Brokers, already troubled, will become more miserable. Arbitraging between NSE and CSE was popular among them,” lamented another senior broker.

Brokers have accused the CSE governing board, which currently has no representation from their fraternity, of resorting to short-sighted measures in the name of safety. “These steps will plunge the market into deeper uncertainty and the investors will leave it for good,” said a broker.

Dutta argued the measures will make the market safer, but did not explain how a change in pay-in day will help manage risks better.

In another significant initiative to clean up the mess on the bourse, the CSE has decided to regularise the modified carry forward trading by introducing a new margin mechanism.

Margins have so far been imposed on the net position of a broker. Under the fresh directive which has been issued today, it will be imposed on the gross positions of brokers and clients.

Dutta said the move has been prompted by the Securities and Exchange Board of India in order to achieve a greater degree of transparency in carry-forward trading, which is known as badla.

Brokers did not see much in the decision, saying it meant little at a time when trading in the market is at a low ebb. “There is hardly any trading, so where is the possibility of a badla?” they say. Most have stayed away from taking fresh positions ever since the payments crisis crippled CSE.

The situation has worsened further after the troubles on the bourse last month made banks wary of issuing bank guarantees in favour of brokers. “The exchange is streamlining the margin-collection mechanism but we do not know how we should deposit the amount,” a senior broker said.


Mumbai, April 3: 
The welter of controversies over stock price manipulations have forced UTI Bank and its parent, Unit Trust of India, to reconsider its merger with Global Trust Bank (GTB).

“We wouldn’t mind if the merger slows down, but we will abide by Reserve Bank’s decision. We may even opt for organic growth,” sources close to UTI said. The country’s largest mutual fund, as the principle shareholder of UTI Bank, is expected to retain control of the merged entity but is now upset at the wave of adverse publicity surrounding the deal.

Sebi findings on the role of Ramesh Gelli in the alleged price rigging has rattled the UTI brass further, even though the Global Trust Bank chairman has denied his involvement in the ripoff. “If the charge against Gelli is conclusively established, then the whole issue will be revisited,” a source said.

The markets are already smelling a rat though — the Global Trust Bank share plumbed a new low of Rs 25.15 today from the previous day’s close of Rs 29.90 on the Bombay Stock Exchange; UTI Bank, on the other hand, rose to Rs 25.20 from Rs 23.95.

The swap ratio of 2.25:9 shares recommended by SBI Caps was endorsed by Deloitte Haskins and Sells. It was decided that UTI Bank, the bigger of the two, would merge with GTB and UTI would hold the majority stake in the new entity.

Senior UTI Bank officials had sold the merger to their shareholders as a deal that would give them better returns on their investments by boosting the earnings per share (EPS).

UTI Global Bank (the merged entity) was projected to have a combined balance sheet of Rs 20,000 crore. Its top four shareholders would have been UTI with 19.8 per cent, GTB promoters (16 per cent), FIIs/NRIs/OCBs (12.8 per cent) and IFC with 7.8 per cent. The public holding would be 36.8 per cent.

Both banks had expected to close the merger by February 28 after clearances from shareholders and the Reserve Bank, and the integration process completed within 3-6 months. Excited officials had even indicated that a consolidated balance-sheet could be presented for the year ended March 31, 2001.

Officials said they were looking at a range of 2 to 2.50 while arriving at the swap ratio. “We realised that determining the swap ratio was not an easy exercise. Later, we opted for the arithmetical average and settled on a figure of 2.25,” UTI officials had explained while announcing the merger.

Senior SBI Caps officials had also said their figures were based on the weighted EPS, pricing norms laid down by the Securities and Exchange Board of India, book value and maintainable profits.

The board of the merged bank would have eight members from UTI and four from GTB. While Nayak would be the chairman and managing director, it was agreed that Sridhar Subasri would take over as the executive director.

The merger was also expected to result in one of the largest private sector bank with a deposit base of around Rs 16,000 crore and advances of Rs 7,900 crore.


Mumbai, April 3: 
The Parekh brothers, Ketan and Kartik, have resigned from the board of Triumph International Finance India Ltd. Triumph is a leasing and investment bank.

The move comes in the wake of the pay order scam which has led to the arrest of the Parekh brothers by the Central Bureau of Investigation (CBI).

According to brokers, the Triumph board, in order to save its own skin, has got rid of Ketan and Kartik to placate the investigating authorities.

In a notice sent to the stock exchanges today, Triumph said the board of directors of the company, at its meeting held on March 31, had “noted and accepted the resignation letters of Ketan Parekh and Kartik Parekh as directors of the company. Thus the aforesaid persons are not on the board of the company with effect from March 31,” the communication added.

However, market grapevine says that even after the resignations, Triumph will not find it easy to shrug off the perception regarding its affinity to the Parekh brothers.

When Parekh joined Triumph in September last year, brokers were not surprised as the company was always known as an affiliate of the Ketan Parekh group. In fact, the induction of the big bull into the company’s board was then welcomed by the market circles and the Triumph scrip recorded hefty gains. But after the Parekh magic vanished into the air, Triumph became a favourite whipping-boy of the bears. The scrip today closed at Rs 51.35, a new low, recording a fall of around 8 per cent over yesterday’s finish of Rs 55.80.

When the Parekh brothers were placed on the Triumph board, the management offered them joint control of the company and decided to issue 25 lakh shares on preferential basis. The company is believed to have made the preferential allotment at a premium of Rs 140 per share.

Triumph has some big clients and as a merchant banker it lead managed the public issues of several Bollywood firms, including Balaji Telefilms. It also bagged ABC Limited, Amitabh Bachchan’s failed corporate venture, for which it finalised a restructuring package.

It also helped to sew a deal between Balaji Telefilms and Nine Network of HFCL and the Packers by structuring a merger proposal for the two entities. This was on the eve of Balaji’s listing on the BSE.

For the year ended March 31, 2000, Triumph International made a net profit of Rs 19.3 crore as against Rs 2.5 crore in the previous year. During the fiscal, securities brokerage operations was the core business where business income accounted for 35.04 crore. Net sales of the company during this year stood at Rs 518.3 crore. Triumph during this year, also started trading in fixed income instruments as a strategy to penetrate into semi-wholesale debt market.

It also has a subsidiary called Triumph Forex Services that has commenced full-fledged operations.


Mumbai, April 3: 
The Unit Trust of India (UTI), the country’s leading mutual fund, claims to have made a killing at the Himachal Futuristic Communication (HFCL) counter.

While its average cost per share works out to a modest Rs 105, the mutual fund major has booked profits to the tune of Rs 943 crore in the HFCL counter by the end of December last year.

“From July to December last year, we had been constantly reviewing our position in the HFCL counter. In spite of the massive profit booking exercise, UTI continues to hold an 11 per cent stake in HFCL and our average cost works out to Rs 105,” sources said.

UTI holds 85-90 lakh shares of HFCL, which adds up to 11 per cent of the company’s equity and holds 3.65 per cent in media major Zee Telefilms.

The profit made by UTI in the HFCL counter needs to be seen in the context of reports of Sebi investigating allegations of insider trading in the scrips of HFCL and Zee Telefilms. However, both Sebi and UTI denied the reports today.

UTI sources said the fund has been doing a a lot of selling and buying in the highly liquid counter. While HFCL was a multi-bagger for the mutual fund, the other ICE holdings in their portfolio, Zee, DSQ, Global Tel, are borderline cases. The losses or profits on these holdings are marginal, the source said.

At present, ICE stocks comprise nearly 19 per cent of UTI’s total equity portfolio, with old economy stocks accounting for the rest. “We are very comfortably placed with regard to our investments in HFCL shares,” the source said.

By virtue of the low acquisition cost, analysts expect UTI to have enough cushion and breathing space to last out the hammering the HFCL stock is facing on the bourses. UTI sources said the mutual fund is comfortably placed and its performance is on par with the rest in the industry, if not better. UTI has managed to book profit in new economy shares at the right time somewhere in December 2000.

UTI said its investments in the tech sector was based on the method followed by other mutual funds. Many experts had hailed the infotech industry as the new growth driver of the economy.


New Delhi, April 3: 
The BJP government today said it was not averse to a Joint Parliamentary Committee probe into the recent stock market crisis.

Speaking to newspersons after a Cabinet meeting, Parliamentary affairs minister Pramod Mahajan said “a consensus has to be created on the issue” before such a probe could be set up.

To thwart Parliamentary criticism on his handling of the crisis, finance minister Yashwant Sinha has indicated that he will take radical steps to revamp the board of the Securities and Exchange Board of India (Sebi).

There are also indications that action might be taken against a deputy governor of the Reserve Bank of India (RBI).

Sebi chief, D. R. Mehta, is reported to be on the government’s hit-list, though Sinha has gone on record in giving the market regulator a clean chit.

Finance ministry officials name Deepak Parekh, Housing Development Finance Company (HDFC) chairman, Y. V. Reddy, deputy governor of the RBI and C. B. Bhave, managing director of the National Securities Depository Ltd (NSDL) as possible contenders.


Mumbai, April 3: 
It was the hunter who ended up being the hunted today, bearing the brunt of the rumour-mills. The Securities and Exchange Board of India (Sebi) was today engulfed by rumours that chairman D. R. Mehta was putting in his papers.

With rumours flying thick and fast, the man in the hot seat was equally perplexed. When quizzed about reports suggesting his resignation, Mehta retorted, “You will have to ask them.”

“The finance ministry has so far not communicated anything to us,” he said, adding, “You will have to ask the very people who have told you about it.”

The market regulator’s office was clearly rattled by the queer turn of events, which placed it under the spotlight.

If the capital market watchdog was foxed, the scene was no different at the Unit Trust of India, where the buzz was a purported Sebi investigation on alleged insider trading at the HFCL counter. UTI was equally in the dark, with senior officials stating, “We have not received any communication either from Sebi or the finance ministry.”

This was corroborated by the Sebi chairman. “We are yet to receive any such letter from the finance ministry to investigate UTI’s role in the HFCL counter.”

At the Sebi office, after the rash of rumours had its run, things were slowly returning to normal. Mehta had a busy schedule for the day. While attending the hordes of newspersons calling on him, Mehta also managed to chair a panel hearing on a case pertaining to a BSE broker.

Certain financial dailies reported today that the government may replace the Sebi chief by the end of the week.

A leading financial daily today reported that the process of appointing Mehta’s successor is in the final stages and the government has already shortlisted a few names, citing Montek Singh Ahluwalia, Planning Commission member, C. B. Bhave, chairman NSDL, who has also served on the Sebi board as an executive director, as probables.

Meanwhile, the finance ministry is also waiting for Sebi’s report on the reasons which led to the crisis. Sebi is scheduled to submit the report by April 15.


Mumbai, April 3: 
Bank of India (BoI), which has taken a Rs 130-crore battering from the pay-order scam, has another damage of Rs 5 crore on its hands, from a bullion transaction with Classic Cooperative Bank. BoI now plans to initiate legal action against the cooperative bank for recovering the dues.

A clearer picture of the beating taken by the bank emerged today, when all banks submitted data on losses suffered by them in pay-order, bullion and call money transactions to the Reserve Bank of India (RBI) following a directive from the apex bank. The RBI had asked all banks to submit the data by today.

“We have taken a hit of Rs 5 crore in a bullion transaction and together with the Rs 130 crore loss to the bank on account of the pay order, our total loss is now at around Rs 135 crore,” said a senior BoI official.

Apart from BoI, two other nationalised banks, State Bank of India (SBI) and Punjab National Bank (PNB) have burnt their fingers on account of bullion transactions with Classic Cooperative Bank. While State Bank has put its loss on this count at Rs 39.57 crore, PNB suffered a loss of Rs 7 crore when a pay-order was not honoured by Classic Cooperative Bank.

Though reports indicate that Ketan Parekh’s pay orders drawn on Madhavpura Bank and discounted by various banks including BoI, Standard Chartered Bank and Global Trust Bank bounced, officials from Standard Chartered Bank said that it has not taken any hit on this count.

While speculations are rife that Standard Chartered Bank is one of those affected after payment orders or bankers’ drafts on behalf of bullion dealers bounced, a senior official from the bank said that it has not suffered any losses on this count. “We have an exposure of around Rs 9 crore on a bullion deal. However, this is not in any way related to the current developments and we don’t face any problem on that count,” the official clarified.

Global Trust Bank officials however, could not be contacted. In fact, there was no response to a questionnaire from The Telegraph to Ramesh Gelli, chairman, GTB.


New Delhi, April 3: 
National Housing Bank (NHB) has decided to work out an out-of-court settlement with ANZ Grindlays to settle the multi-crore dispute relating to the 1992 securities scam.

The board of NHB today cleared the move and the bank will soon initiate talks with ANZ.

NHB chairman P.P. Vohra said, “The board has formed a directors’ committee which will negotiate with ANZ for a reasonable settlement.”

Paul Edwards, ANZ Grindlays group’s spokesperson, said from Melbourne: “It is a positive it is a matter of discussion between the two parties.”

Australian banking major Grindlays had offered the settlement deal which NHB now seems willing to negotiate.

Sources said Grindlays had offered to pay half of the Rs 1,529.6 crore it had kept in banks in India for this settlement as compensation but NHB has instead demanded 60 per cent of ANZ’s funds here or roughly a little over Rs 900 crore, which is also roughly the amount they have earmarked as bad debt in their books of account as a fallout of this case.

Grindlays is likely to accept the NHB demand, top banking sources said as it still means it can take back some Rs 600 crore home. The case is scheduled to come up for final hearing in Supreme Court next week.

ANZ had alleged that NHB had, on verbal orders, routed Rs 506.5 crore through it to scam tainted stock broker Harshad Mehta that was never paid back by the ‘Big Bull’ and hence could not be paid back to NHB. The Australian bank also pointed out that NHB followed similar routes through other banks, including the State Bank of India and three other public sector banks besides several foreign banks to channel funds to Mehta who used them to play the securities market.

These charges were refuted by NHB. According to the housing bank, it had routed the money to ANZ directly so that the Australian bank could use it in the stock market directly and demanded the money be returned to it. NHB itself was debarred from playing the securities market.

ANZ had sold off its local operations to Standard Chartered as a fallout of the huge amount which was being claimed from it. It deposited the money from the selloff deal in banks in the country as a contingency measure to pay up if asked by the courts.

But in 1997 an arbitration panel ruling came in ANZ’s favour forcing NHB to make a provision of Rs 912 crore in its books. This included the principle amount of Rs 506.53 crore plus an interest rate of 18 per cent per annum.

Grindlays made the offer of an out-of-court settlement to NHB about a month back but had got no response since then. But with the date of the Supreme Court hearing drawing closer, the housing bank decided to take it up seriously.

ANZ officials said they had offered about Rs 765 crore taking into account lower rates of interest now being charged in India on term deposits.



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