Big Bull’s empire under siege
Sebi told to make Rathi case stronger
Ministry wants Sebi to persist with GTB probe
Bharti buys out BT stake in joint ventures
ONGC weighs direct marketing of produce
Tata Korf heads for closure
Bureaucracy throttles FDI flows: Kearney

Mumbai, April 5: 
Almost a week after Ketan Parekh’s arrest, the Securities and Exchange Board of India (Sebi) today cracked down on his broking and merchant banking firms by restraining them from taking up fresh business with immediate effect.

The curbs were clamped on Triumph Securities, Triumph International, N H Securities and Classic Share and Stock because of allegations that they manipulated prices of K-10 stocks — the shares to which the Big Bull had taken a shine.

The market watchdog said it found prima facie evidence against these companies and the restrictions on them have been clamped under Section 11 B of the Sebi Act to protect investors.The firms will present their case at a hearing on April 16.

In an attempt to pre-empt action from regulating agencies against Triumph International, two high-profile directors of the broking outfit, Ketan and his brother Kartik Parekh, resigned from its board a day before they were taken into custody. But this was not enough to stave off the Sebi blow.

Triumph International had said in a notice sent to the stock exchanges earlier this week that its board had “noted and accepted the resignation letters of Ketan Parekh and Kartik Parekh as directors of the company” at a meeting held on March 31.

The capital market watchdog had been looking into allegations of price manipulation by the Big Bull, now cooling his heels in CBI confinement over his role in the Rs 137-crore Bank of India pay-order scam.

Today’s clampdown by Sebi has reaffirmed the widely held view among legal experts that despite the resignations, Triumph will not find it easy to shrug off the stigma that it has been carrying because of Parekh’s association with the company.

When the Big Bull joined Triumph in September last year, it did not surprise those in the market as the company was always known as an affiliate of the Ketan Parekh group.

The Parekh brothers had decided to consider jointly sharing control of the company with the existing promoters and to issue 25 lakh shares on a preferential basis.

The control, the company had said then, would be split between Ketan and Kartik Parekh.

The preferential allotment of shares are believed to have been made at a premium of Rs 140 each.

Triumph had earlier bagged big clients as a merchant banker, a job which included lead managing several Bollywood firms going public, like Balaji Telefilms.

It also bagged a high profile client, ABC Limited, Amitabh Bachchan’s failed corporate venture where it finalised a restructuring package to revive the company’s fortunes.

It also helped click a deal for Balaji Telefims and Nine Network promoted by HFCL and the Packers by structuring a merger proposal for the two entities. This was on the eve of Balaji’s listing in the Bombay Stock Exchange.

Narbheram Harakchand Securities, or N H Securities as it is popularly called, is a third-generation broking outfit.

During recent years every move made by the 70-year old Bombay Stock exchange broking outfit is watched by the broking community and investors. The curiosity is mainly on account of its uncanny knack to spot multi-baggers.

Whereas Classic Share and Stock Ltd was a loss-making firm acquired during the big bull’s heydays from the cigarette maker ITC Ltd.


Mumbai, April 5: 
The Mumbai high court has asked the Securities and Exchange Board of India (Sebi) to take a ‘sensitive view’ on the ban imposed on the brokerages of former Bombay Stock Exchange president, Anand Rathi.

Reacting to the court’s observation, a senior Sebi official said the regulator will go by the advice of its lawyers. Senior counsel for Anand Rathi and his group of companies, A. M. Singhvi, argued before the court that Sebi had abused the powers it was granted under Section 11 B of the Sebi Act. He said Rathi’s group firms were suffering a daily loss of Rs 8 lakh apart from fixed costs as a result of the order which prevents them from conducting any business. These outfits have 223 terminals and nearly 15,000 clients.

Sighvi said the powers under Section 11 B of the Sebi Act are extra-ordinary and have to be used by the watchdog on generic issues or policy matters, not against specific or individual intermediaries. Sebi board member J. R. Verma was the only one who had disagreed with the move to rein in Rathi’s brokerages, something Sighvi used to buttress his contention that the March 12 order was invalid.

Even in the glaring instances of market manipulations, Singhvi said no order has been passed by Sebi suspending trading by intermediary concerns. This was done even though there was no danger to public interest as on March 12, 2001. He said Sebi had given them a hearing after it had taken a decision to bar the companies, when it should have been the other way round. He cited rulings of the Supreme Court and of the American Court to argue that curbs on business — a constitutional liberty — can only be placed in a grave situation and must be reasonable.


New Delhi, April 5: 
Finance ministry officials feel the Securities and Exchange Board of India (Sebi) should go ahead with its investigations into charges of rigging in prices of the Global Trust Bank (GTB) scrip, just prior to the merger announcement, despite GTB pulling out from the controversial merger with UTI Bank.

Senior finance ministry officials reasoned that price rigging being a criminal offence, if it is proved the rigging was in connivance with UTI officials, the case takes on a different colour altogether. Hence, investigations should be concluded, loose ends need to be tied up.

UTI Bank being a subsidiary of the government-run mutual fund major Unit Trust of India, the role played by its officers and directors too has come under a scanner.

GTB yesterday announced it was pulling out of the proposed merger, amidst allegations that price rigging just prior to the merger announcement had pushed up the GTB scrip to unrealistic levels.

Consequently, the swap ratio fixed initially by SBI Capital Markets, and later approved by Deolite Haskins and Sells, was set at 4 shares of GTB for 9 shares of UTI, which many felt favoured GTB.

The proposed merger, which was announced in January this year, would have created the largest private bank in the country.

Sebi had indicated to the Reserve Bank of India (RBI) which had started probing the merger that there were indications of unusual movements on the GTB counter just before the swap ratio was announced, lending credence to the allegations. RBI, which was the first to note the alleged price manipulations in GTB shares before the merger, had sought the market regulator’s assistance in probing the deal.

Ministry officials said as yet there was no question of bringing in any other investigative agency to look into the issue.

RBI on the trail

The RBI today denied reports in a section of the press alleging that the central bank had closed the chapter on trying to unearth any alleged wrongdoing by Global Trust Bank (GTB) or its promoters, in the capital market, says UNI.

In a statement, the RBI said it received a letter from GTB on April 4, stating its desire to withdraw the merger proposal. RBI wrote on April 4 itself to UTI, enclosing a copy of the letter received from GTB, adding the central bank was treating the approval of the merger as a closed issue.


New Delhi, April 5: 
Telecom major Bharti Enterprises today announced that it had acquired British Telecom’s (BT) stake in two of its joint venture companies, Bharti BT Internet Ltd and Bharti-BT Ltd.

The company, however, did not reveal the sum it paid for the acquisition. BT held a 49 per cent equity stake in the internet joint venture and 50 per cent in Bharti-BT Ltd, which was a joint venture for V-sat services.

“Under the agreement with British Telecom, we are not in a position to divulge the details,” company spokesperson Hemant Sachdeva said, adding the deals were completed in the last few weeks.

The acquisition is part of Bharti’s restructuring programme, under which four of its companies — Bharti BT Internet Ltd, Bharti BT V-sat, Bharti Broadband Services and their holding company Bharti Telespatiale Ltd — were merged into a single entitiy, christened Bharti Broadband Networks Ltd, the company said in a statement today.

Sunil Mittal, chairman and group managing director, Bharti Enterprises, said, “We believe that this merger will create a single entity which will emerge as one of the strongest integrated broadband players in the country.”

Badri Agarwal, president, basic services, has been appointed as president of Bharti Broadband Networks.

Bharti said the acquisitions and mergers were part of its strategic decision to build a common platform for developing integrated business solutions for its customers in different market segments, in the areas of internet and broadband services.

Bharti BT, a leading V-sat solutions supplier in the Indian market, was incorporated in 1995. It is a 50:50 joint venture between Bharti Telecom, the flagship company of Bharti Enterprises, and British Telecommunications Plc. Based in Bangalore, the company provides V-sat-based satellite communication services to Indian companies and MNCs who desire multi-locational connectivity. Bharti BT has a rapidly growing customer base, which includes the likes of Microsoft, Cadbury, Godrej, Wipro, Bharat Petroleum and SmithKline Beecham.

Bharti Enterprises provides cellular services under the AirTel brandname in Delhi and Himachal Pradesh. It also provides fixed line telephone services in Madhya Pradesh.

BT is one of the world’s leading communication companies, with a current turnover of over $ 24 billion and pre-tax profits exceeding $ 4.6 billion.

A diversified organisation with joint ventures and partnerships worldwide, BT has over 127,000 employees and operates in over 30 countries. It provides a comprehensive range of services designed to meet the needs of business organisations and individual customers.

BT provides communication services to more than 80 per cent of the Fortune 500 companies.


New Delhi, April 5: 
In an effort to market its products directly, the Oil and Natural Gas Corporation (ONGC) is planning to scrap its arrangements with the downstream public sector oil companies, like Indian Oil, Hindustan Petroleum and Bharat Petroleum.

The ONGC management will appoint an executive director to prepare the corporation undertake the marketing venture once the petroleum sector is totally deregulated.

Apart from crude and gas, ONGC produces naphtha, kerosene and LPG. The present policy does not permit it to market these products. Due to higher profit margin in marketing, the corporation feels tempted to try its luck.

ONGC produces 1 million tonne of LPG, 250,000 tonne of naphtha and 250,000 tonne of kerosene annually. Following the instructions of the Oil Co-ordination Committee (OCC), ONGC’s crude is sold to the PSUs.

The corporation’s gas is marketed by the Gas Authority of India Ltd. ONGC’s naphtha produced at Hazira is sold to IOC and HPCL. Kerosene produced at Hazira is sold through IOC, HPCL and BPCL.

Till recently, ONGC’s naphtha produced at Uran was exported through HPCL and BPCL. However, as these companies failed to lift the quantities, ONGC was forced to directly export naphtha.

The downstream oil PSUs have been wooing ONGC to enter into an arrangement for marketing these products during the post-deregulation period.

As ONGC is cash rich, it is in a position to invest in some of the ventures proposed by the PSUs.

For instance, immediately after the equity swap, IOC invited ONGC to invest in projects like Paradeep Refinery and power plant at Panipat. However, the ONGC management refused even to consider these proposals.

At one stage ONGC chairman B. C. Bora said the corporation will consider investing in the marketing arrangement proposed by the IOC in Mauritius. However, he ruled out investing in refineries.

The corporation does not have the necessary infrastructure for marketing. Hence, it may enter into a joint venture with one of the PSUs for a share in the marketing margin. It will be more or less similar to the deal between IOC and Reliance Petroleum Ltd.

Shortly, Bora will be leaving ONGC on superannuating and succeeded by Subir Raha, director (personnel) of IOC.

Raha’s appointment may be through either by the end of April or early May. He belongs to the marketing cadre of IOC. Though he may not like ONGC losing the benefits of marketing, he may like to bring the two giants closer.


Calcutta, April 5: 
Tata Iron and Steel Company has decided to wind up Tata Korf Engineering Services, a iron and steel technology consultancy and engineering services joint venture it floated with SMS Manesmann Demag Huttentechnik of Germany.

A senior Tisco official confirmed the development and said the company had to be closed down because of shrinking business. The German partner is believed to have pulled out of the joint venture after it failed to bag an expected high-value engineering contract from the steel major. Formed in 1985 when Russi Mody was the Tisco managing director, Tata Korf fast emerged as a major player in the iron and steel technology market with a 70 per cent share in the Indian mini blast furnace industry, which manufactures pig iron.

It bagged orders to set up two pig iron plants in Indonesia, which are now being executed. The company also played a key role in setting up eight basic steel and foundry units in Brazil.

Over the years, Tata Korf developed a large number of overseas collaborators and business partners. They include Germany’s SMS Demag for mini blast furnace and energy-optimising furnace Korfac, SMS Demag-KTS division in Brazil for mini sinter plant and pulverised coal injection, UK’s Dyson Hotwork for burners and heating systems, and Belgium’s Hasco Thermic for hot dip batch type galvanising furnace.

As the orders for mini blast furnaces dried up, Tata Korf diversified into energy-optimising furnace and started taking up projects in the areas of energy and environment. The firm executed 20 orders in India, Indonesia, Brazil and Italy.

The slowdown in the steel industry choked fresh orders and forced many technical experts in the company out of their jobs. As it heads for closure, Tisco officials are tight-lipped about the future of Tata Korf’s technical and non-technical employees.

Sesa Goa, Mid-West Iron and Steel, Kirloskar Ferrous, Electrosteel Castings, Kalyani Ferrous, Tata Metaliks and Kajaria Iron Castings are among the companies whose pig iron units were set up by Tata Korf.

Its important energy and environment projects include those of Jindal Vijaynagar Steels, Siscol, Salem, Esab India, and several Tisco projects, including dust suppression system at its Jamadoba colliery and installation of galvanising furnace for the cold-rolling mill on behalf of Marubeni.

Sources say Tisco will formally announce the winding up of Tata Korf in a few weeks and come up with ways to complete pending services and honour other contractual obligations to its clients.

The company’s other important collaborations were those with UK’s Hasco Thermic for hot-dip batch type galvanising furnace, the US-based Bricmont for reheating and heat treatment furnaces, Germany’s Parsytec Computer for on-line surface inspection system, Switzerland’s Meaerz Ofenbau for lime calcination plant and Canada’s Trulogic Systems for spectrometer. At home, it has a collaboration with National Metallurgical Laboratory for cokeless cupola.


New Delhi, April 5: 
The bureaucracy and the slow pace of reforms are the prime deterrents to foreign direct investment (FDI) in the country, said AT Kearney’s report, ‘Foreign Direct Investment Confidence Audit: India’.

The report is based on the management consultancy’s in-depth private interviews from a sample of 1,000 global companies, covering the major sectors of investment and accounting for more than 10 per cent of the country’s actual stock of FDI.

Regarding the bottlenecks towards FDI, 39 per cent of the respondents cited the bureaucracy, 28 per cent cited slow pace of reforms, 8 per cent cited the government’s involvement in the economy as a prime deterrent and 6 per cent attributed it to corruption.

Other perceived liabilities include poor infrastructure (17 per cent), cultural barriers (11 per cent) and poverty and income disparity (8 per cent).

On the flip side, 33 per cent of the global 1,000 executives cited domestic market factors which include both the market size and market potential as the principal driver for investing in India.

Secondly, skilled labour force from India is another factor driving investment decisions. Wages and rule of law are also favourable to investors.

However, while a favourable regulatory environment motivates investors globally, the Indian regulatory environment is seen by the respondents as a disincentive to the FDI inflow.

“Investors are generally sanguine about the country, but reluctant to invest as it is perceived that the country has done less than other emerging markets to reduce the fundamental obstacles to investment,” said Paul A. Laudicina, vice president and managing director of A. T. Kearney.

Chinese challenge

India may face its biggest challenge from China in bagging FDI. Results from an audit conducted by A T Kearney on FDI confidence index shows that China will retain a commanding lead over India as a preferred FDI destination at least for the next three years.

The FDI Confidence Audit: India, has shown that 90 per cent of the Global 1,000 firms interviewed, take China as a benchmark for the Indian conditions and compare the two to analyse potential investment.

In 1999, China attracted nearly 20 times more FDI than India. The other countries compared to India were Indonesia, Brazil and Philippines. Of these countries, Brazilians has received 15 times more FDI per person than India.

Despite India’s expanding market and skilled labour force, the executives of the global 1,000 companies are more inclined to invest in China.

They recognise that India is committed towards economic reform but regret the slow implementation process.

India has a lead over China due to a large English speaking population. But China offers greater option in terms of market potential.


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