GTB calls off merger plan with UTI Bank
New stocklending norms on cards
Govt denies extension, UBI chairman packs up
Go-ahead for 44 FDI proposals
Kingfisher set to hug foreign ally
Insurance secretary post scrapped
Ikon josh fires Ford’s Rs 10-lakh dream
Expansion, public issue high on LG agenda
Foreign Exchange, Bullion, Stock Indices

Mumbai, April 4: 
The stock scam claimed another victim today — the merger of UTI Bank and Global Trust Bank (GTB).

Before the curtains could come down on its alleged collusion with Big Bull Ketan Parekh in rigging the price of its share, a bitter GTB decided to call off its engagement with UTI Bank for a marriage that would have produced the country’s largest private sector bank with a balance-sheet of Rs 20,000 crore.

The two sides had been quibbling over a share swap ratio, and allegations that the GTB top-brass engineered a spurt in its share price to win a better deal drove them further apart.

Global Trust said it would be difficult to live together when it is being accused of a propping up its share. “Reports of a nexus between GTB chairman Ramesh Gelli Parekh and brokers in price rigging and similar allusions in the media have eroded the goodwill and understanding established between the two banks. The environment, therefore, is not conducive to a merger at this point of time,” GTB said.

Gelli told reporters in Hyderabad this evening that he wanted a union of strength but it was turning into a merger of ‘bad notions’. He denied any insider trading and said Global Trust had been the target of a wave of negative publicity.

The break-up did not come as a surprise. UTI chairman P S Subramanyam had voiced his reservation to the merger after Global Trust was accused of ramping up its share price. “It did not surprise me. I was under the impression that GTB would prescribe a fresh swap ratio, which would be rejected by UTI Bank, after which Global Trust would back out from the merger. However, the separation has taken place much earlier,” said a senior banking official.

With the dust now settling on the charges and counter-charges, the two banks are preparing to start life afresh. Sources say both would now count on organic growth as a means to build up their balance-sheets. However, banking analysts are credited with the view that the two banks, particularly UTI Bank, might try to explore the possibility of a fresh merger with another private bank after some time.

“It’s business as usual for the bank. Earlier, GTB used to post an annual growth rate of 40 per cent organically, but plans to boost it were put on hold due to the merger process. The bank will now step on the gas,” sources close to GTB said.

The bank had deferred a decision to set up 123 ATMs because it clashed with that of UTI Bank. This was in addition to branch expansion plans which were put off after the announcement that it would unite with UTI Bank. “All this will now start happening and the bank will start working towards attainment of the target. We will still set a target of achieving a growth rate of over 40 per cent,” officials said.

The decision to part ways was taken at a meeting of the GTB board of directors held here today. In a press statement issued here today, the bank said there have been misgivings about price rigging, and ‘living with the burden of this memory will be onerous’’.

The merger plan, which seemed jinxed right from the day it was unveiled, was first undermined by speculation about the fairness of the swap ratio of 2.25:1 ratio fixed by SBI Capital Markets, the merchant banker initially appointed.

The mistrust deepened when Deloitte, Haskins & Sells came up with the same figure after UTI Bank asked it to conduct a fresh valuation. Reports at that point of time talked about the growing differences between the two partners, and Global Trust’s unhappiness with Deloitte’s appointment.

GTB today said the Deloitte report had indicated that the share price considered for the arriving at the swap ratio had ignored the periods during which the scrips of two banks had peaked — but that would not have, in any possible way, altered the swap ratio. “Further, the price of GTB during the period of negotiations, actually moved down from Rs 91 on December 18 to Rs 80.25 on January 23, the day the merger was announced,” Global Trust said, repeating its denial that there was any foul play through price rigging.

Sebi somersault

The Securities and Exchange Board of India (Sebi), in a volte face, today said its preliminary report on the pre-merger price rigging in the GTB scrip does not mention individuals.

“We have said there was price manipulation, but we have not taken the names the people who were involved in it. We have not reached that stage,” a senior Sebi official said.

The clarification from senior Sebi officials comes amid reports that its preliminary report submitted to the Reserve Bank of India (RBI) talks about a nexus between Gelli and Ketan Parekh to orchestrate the price movements in the scrip.


New Delhi, April 4: 
The finance ministry wants to put in place a new set of prudential norms for stocklending to avoid repeats of the post-budget bear run. Finance minister Yashwant Sinha, during his meeting with the bankers on Saturday, will ask them to draft the new norms.

Though stocklending is not on the agenda of Saturday’s meeting, ministry officials said Sinha has indicated that he wants to prepare a draft of new norms before the Parliament session resumes.

The finance minister feels that inadequate lending norms have led to broker cartels amassing huge funds that financed their price rigging operations. Ministry officials also pointed out to the huge erosion in the value of the pledged stocks that the banks have been left holding after the stock market crashed. “Naturally we are concerned about this kind of beating that they are taking. After all most of the big banks are government owned. This will also figure as part of our discussions with them on non-performing assets,” officials said.

Bankers are also supposed to review the one-time settlement scheme for non-performing assets that they had launched. Also on the agenda are foreclosure law and debt restructuring mechanism that banks are expected to implement.

The finance ministry has already finalised a Cabinet note on a three-tier corporate debt restructuring (CDR) mechanism that, together with the alternative of winding up through debt recovery tribunals (DRTs), will replace the Board for Industrial and Financial Reconstruction (BIFR).

The mechanism will initially be non-statutory in nature but will become a statutory body later. Any defaulting company unwilling to accept the restructuring proposal under the new mechanism will have to report to a DRT for winding up action. In the interim period when the debt restructuring package is being prepared, an administrator may be appointed to run the company if creditors feel promoters of the company might strip it off assets before the package can be 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.


Calcutta, April 4: 
Biswajit Choudhuri will hand over charge as the chairman and managing director of United Bank of India (UBI) to an executive director of the bank after the government refused him a widely expected extension.

The 59-year-old Choudhuri’s term ended on April 3, and he has a year of service left. He is the first chief of a state-owned bank in the last 10 years who has not been asked to stay on. The man he will pass the baton to is G. R. Sundaravadivel, who joined United Bank as an ED in 1997 from Indian Bank. A finance ministry fax to this effect was received on Tuesday.

Choudhuri took the UBI top slot on April 4, 1996 for a five-year period after serving as its executive director. There is speculation that Madhukar Yadav from State Bank of Saurashtra — a wholly-owned associate of State Bank of India based at Bhavnagar in Gujarat — will be named his successor. Officially, there was no word to confirm it. “Nothing has been finalised yet,” a senior official of the bank said.

Unions feel Choudhuri could not win an extension because he did not enjoy enough political clout and was not backed by the industry lobby. “Though he was conservative in his functioning, he was a very honest banker,” employees said.

With a year to go before he turns 60, sources say he will be offered a government job soon, but it may not be in the baking sector.

Choudhuri took UBI from being a ‘weak’ bank to booking a net profit, which more than doubled to Rs 31.36 crore in 1999-2000 from Rs 14.70 crore in 1998-99. Operating profit increased to Rs 84.29 crore from Rs 46.39 crore in the same period.

Before his departure, Choudhuri successfully placed bonds worth Rs 120 crore with a green-shoe option of Rs 100 crore to increase the bank’s tier-II capital and maintain UBI’s capital adequacy ratio at 9.6 per cent. The debt issue has been oversubscribed, fetching the bank close to Rs 140 crore.

The bank, which expects a net profit of Rs 46 crore in the year ended March 31, had asked for Rs 300 crore in recapitalisation funds from the government to help it achieve its capital adequacy, in addition to the financial assistance it had sought for its Rs 180-crore technology upgradation plan. In December, it had announced its intention to close down 55 loss-making branches by 2003, of which 11 have already been wound up or merged with those which are doing well.

UBI’s operating profit in the April-November period increased to Rs 81 crore compared with Rs 21 crore in the corresponding period of the previous year. Deposits at the end of November were 7.9 per cent higher over the same period last year.


New Delhi, April 4: 
The government today cleared Rs 545 crore worth of investment in 44 foreign direct investment (FDI) proposals, including those of Eli Lilly Ranbaxy, Astra Pharmaceuticals and General Electric.

The major investment proposals, cleared by Murasoli Maran, commerce and industry minister, pertain to chemicals and pharmaceuticals, tourism, infrastructure and information technology related services, an official release said.

Following the Foreign Investment Promotion Board’s recommendations, Maran approved 100 per cent foreign equity in Eli Lilly Ranbaxy, up from the current 50 per cent, enabling an additional inflow of Rs 79.9 crore.

Indian Infrastructure Equipment Ltd’s Rs 122.2 crore proposal to provide infrastructure equipment services was cleared.

Swedish pharmaceutical company Astra Pharmaceutical’s Rs 16.75 crore proposal for increasing the foreign equity from 51.5 per cent to 56.49 per cent and British Abbott Equity Holdings’ Rs 106.27 crore proposal with a 20 per cent FDI investment were cleared.


Mumbai, April 4: 
United Breweries Ltd, the manufacturer of Kingfisher beer, has decided to offer a minority stake of 26 per cent to international brewers even as the company plans to launch two new brands in the next six months. “The board has taken an in-principle decision to invite a strategic partner in the brewing business (beer) and will appoint Kotak Mahindra Capital as advisors,” said Vijay Mallya, group chairman.

To facilitate financial participation by the foreign partner, UB has accelerated its corporate restructuring plans and IL&FS-Deloitte Haskins and Sells have been appointed as advisors.

This process, expected to be completed in the current fiscal, will see creation of a “beer-only” company with all other assets being separately held, he said.

UB will launch a light ice beer and Kingfisher Sport, a low calorie beer, in the next six months.

Mallya said UB has received “unsolicited expressions of interest” from “several large international brewers with deep pockets.”

UBs’ investments in the associate companies and its real estate assets will be separated from the new company before the stake is sold. He declined to put a value on the stake, but said the company has acquired significant brewing capacity lately and could be “significantly valued”.

UB’s strategic initiative to acquire beer brands and brewing capacities in recent months stands vindicated by the deregulation initiated through various policy announcements by the state governments of Uttar Pradesh, Karnataka, Madhya Pradesh and Himachal Pradesh.

At the stock exchanges today the UB scrip opened at Rs 90 and finally closed the day at Rs 95.


New Delhi, April 4: 
Keeping in line with the promise in the Union budget 2001-2002 to downsize the government, finance minister Yashwant Sinha has dispensed with one post of secretary in his ministry looking after insurance and banking. Special secretary P. K. Banerjee, who was heading the insurance and external finance division in the economic affairs department, has now been made secretary in-charge of the inter-state council.

An official statement said today that additional secretary Adarsh Kishore in-charge of International Monetary Fund, World Bank and Asian Development Bank, will now discharge the duties of insurance and external finance in addition to his present responsibilities.

Kishore, an IAS officer of the 1969 batch, belongs to the Rajasthan cadre and has earlier served as principal finance secretary in the state.


Mumbai, April 4: 
From the Escort to the Ikon and all their variants, it has been a comfortable ride on Indian roads for Ford India. Now, fresh from its success with the Ikon, the carmaker is likely to introduce a premium car in the domestic market, by the end of this year. The launch of such a car, with a price tag of over Rs 10 lakh, sources said, is in line with the company’s aggressive plans for the domestic market.

However, they did not divulge details about the new car, such as the platform on which it would be built, or its name.

The only available information was on Ford India’s plans to launch new models before the end of this year. “There will be new models, but we cannot divulge the details now,” they added.

Ford presently has several variants of its highly successful Ikon, which has a good 28 per cent share in the domestic mid-size segment. The Ikon is based on the Fiesta platform. Other players in this category include General Motors, Maruti Udyog and Hyundai.

Speculations about the new addition to Ford India’s existing Ikon range have raged over the past few months, with reports that the new model could be imported as a completely built unit after April this year, when the quantitative restrictions would have been removed. There are reports that Ford India is also looking at entering the sports utility vehicle segment, apart from bringing out a small car.

Though Ford officials have in the recent past confirmed that they have undertaken studies about the prospects of bringing out a small car, they added that this could only be done after the company attains significant volumes in the country.

Figures released by Phil Spender, president and managing director, Ford India, show the company sold 28,766 Ikons in the year ended March 31, 2001. Sales in the month of March 2001 stood at 4,849 units, which included exports of 2,198 units, representing a 127 per cent growth over sales in March 2000.

The company has now placed a target of 40,000 cars for the next fiscal, and according to Ford India officials, half of this amount will be exported. A significant chunk of the company’s exports, in the form of completely knocked down units, go to Mexico and South Africa.

Spender expected the domestic car market to grow to over 6.21 lakh units, which is a rise of around 8 per cent from 5.76 lakh units in the previous year.

Meanwhile, when asked whether the company was interested in acquiring a stake in Indian auto major Maruti Udyog Ltd, Spender replied in the negative.


New Delhi, April 4: 
LG Electronics India Pvt Ltd (LGEIL) plans to invest some $ 289 million or about Rs 1,040 crore in the country, over a period of five years.

LGEIL managing director Kwang-Ro-Kim said: “We are opening up a compressor plant for refrigerators in Noida and plan to expand in south or west India later this year. India contributes only 5 per cent of our global output. We want to get back the money that we are putting in for the operations here, by expanding the scale of operations and the distribution muscle.”

The plant will go in for full production of compressors, instead of merely assembling components. Though it does not have any plans now to supply to other companies due to the low capacity installation, it may do so in the future. The company will be investing $ 10 million (Rs 50 crore) to expand indigenous productivity this year.

“In spite of the stock market crash,” Kim said, “we intend to come out with an initial public offering (IPO) to divest 25 per cent of our equity, in the current financial year.” The company, he said, was keen on a higher market share in India, especially in the high-end Flatron and IFT-LCD segments and will introduce more products in September.

The 30 products launched today in all categories keep environmental and health considerations in mind, company officials said.

Ajay Kapila, vice-president of sales and marketing, said: “The company hopes to attract customers with greater value addition. Even as the price erosion of white goods has increased to 15-20 per cent, LGEIL has been able to amass a turnover of Rs 2,000 crore and is looking to add another Rs 500 crore with its new range of CTVs, refrigerators, washing machines, air-conditioners, microwaves, vacuum cleaners, MP3 players and PC monitors.”

Kapila went on to add that the company does not see any competition in the lower end of the market following the removal of quota restrictions, despite the Chinese and Korean goods swamping the market, as people will go in for brand and quality in durable goods. “Layers of taxes will bring the imported goods at the same price level, if not a higher one, than the domestic goods.” He accepted that CTVs have recorded the lowest growth among all the categories of electronic products. “While the average sales growth of the company has been 20 per cent, sales of colour television sets have seen only a marginal increase. LG is one of the handful of brands that did not register a loss in the last quarter and our market share, in fact, increased by 2.5 per cent to 12.5 per cent now.”



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