Truce buzz in telecom wrangle
Finance ministry plans fetters on UTI freedom
9% capital adequacy for co-op banks
Ketan remand extended
Pentamedia deal with Film Roman under review
Downbeat foreign funds sell heavily in Reliance
Srinath bowls a legal bouncer to Pepsi
Foreign Exchange, Bullion, Stock Indices

 
 
TRUCE BUZZ IN TELECOM WRANGLE 
 
 
FROM M. RAJENDRAN
 
New Delhi, April 9: 
The ministry of communications may be forced to go in for an out-of-court settlement with private cellular operators to allow limited mobility to basic service providers and resolve the issue of spectrum allocation.

However, communications minister Ram Vilas Paswan wants to force the issues without any discussion or settlement. Prime Minister Atal Bihari Vajpayee had recently chaired a meeting which decided that the issue of limited mobility would be referred to the group on telecom and IT convergence (GoT-IT) headed by finance minister Yashwant Sinha.

There are growing indications that Paswan will oppose a move that allows basic operators who offer limited mobility to charge an additional fee. Nor will he accept a change in the current system of allocating spectrum, which is based on a first come first serve basis, when the issue comes up for discussion before the group. He has minced no words in declaring that his ministry supports limited mobile service.

“It is, indeed, the failure of private telecom operators to achieve their rural telephony obligations which forced the ministry look at innovative uses of convergence technologies, such as wireless in local loop (WiLL) with limited mobility,” Paswan said last week.

He emphasised that the decision to permit limited mobility by fixed service providers was taken in a proper and transparent manner after the Telecom Regulatory Authority of India (Trai) had submitted its recommendations to this effect.

Sources in the group are optimistic that an amicable solution to the dispute would be found soon. Currently, the issues of limited mobile service and the allocation of spectrum are pending before the Telecom Dispute Settlement Appellate Tribunal (TDSAT). The spectrum or radio waves used in communication remains a scarce national resource. The impending convergence of information technology, communication and entertainment is likely to increase the demand for bandwidth.

“GoT-IT has pointed out that it would try to find a solution which is acceptable to cellular and basic fixed telecom operators. It is an indication that the issue would be sorted out without the intervention of the tribunal or the Supreme Court,” sources in the communications ministry said.

The group will examine whether the New Telecom Policy, 1999 allowed limited mobility to basic service providers, and, if it was consistent with the government’s stated objective of providing various operators a level playing field. It will also see if the decision helps in promoting the aim of offering assured services at the cheapest possible rates.

The group, expected to submit its recommendations on April 30, will consider changes in NTP, 1999 which facilitate the achievement of targets set for tele-density and rural telephony.

The Cellular Operators Association of India (COAI) claims allowing limited mobility to basic operators will sound the death knell for companies which offer mobile services, and could cost the government Rs 3,000 crore in lost revenues.

COAI director general T. V. Ramachandran has said in the past that limited mobility will spell doom for an industry that has attracted the highest FDI flows. More important, over 50 per cent of that amount has gone to cellular firms.

The association has expressed fears that fixed service providers who offer limited mobility in the short distance charging area (SDCA) will gradually service entire metros. Small towns and centres within a circle may be covered as well.

   

 
 
FINANCE MINISTRY PLANS FETTERS ON UTI FREEDOM 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 9: 
In what could be a double whammy to the controversy-prone Unit Trust of India (UTI), the government is planning to amend the UTI Act to bring the country’s premier mutual fund under closer market surveillance and take away the exclusive rights enjoyed by it so far.

The move comes at a time when the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) continue to probe the aborted merger of UTI Bank, a subsidiary of the UTI, with Global Trust Bank.

Under the current regime, UTI is not bound by Sebi’s disclosure norms for mutual funds, nor is it subject to surprise checks. However, it is loosely tied to the rules laid down by the market regulator for mutual funds. US-64, the Trust’s flagship scheme, does not even come under Sebi’s purview.

According to a note prepared by the finance ministry for the committee of secretaries, the UTI Act will have to be rewritten to make it like other mutual funds which are under complete Sebi regulation to promote competition in the industry.

All mutual funds, except UTI, have to declare their net asset values (NAVs) on a daily basis, and disclose their investment portfolios every three months. Sebi cannot conduct surprise checks or audit its books. Its auditors have no powers to cross-check the net asset values announced on a weekly basis.

UTI enjoys its exclusive rights because of historical reasons. At the time of its formation, the Trust was the only mutual fund operating in the country. Other mutuals and Sebi, the capital market watchdog, sprouted long afterwards.

Under attack for its bad and, in some cases, even dubious investments, the state-owned mutual fund has found itself entangled in a different kind of controversy over alleged insider trading in the shares of its subsidiary, UTI Bank, and of GTB, its partner in a merger plan that never took off.

GTB announced last week it was pulling out of the proposed merger amid a barrage of allegations that it had been involved in price rigging just before the merger decision was announced to ramp up the price of its stock to unrealistic levels.

The swap ratio which was recommended by Deloitte Haskins and Sells was four shares of GTB for nine of UTI Bank’s — a deal which many had described as being loaded in favour of Global Trust. If the merger, which was unveiled in January this year, had taken place, it would have led to the creation of the largest private bank in the country.

The Reserve Bank of India and the capital market regulator are probing the price manipulation. Sebi has already told the Reserve Bank that there were indications of unusual movements at the GTB counter just before the swap ratio for the merger was announced. This has given some weight to the allegations, which have always been denied by the bank’s top brass.

   

 
 
9% CAPITAL ADEQUACY FOR CO-OP BANKS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, April 9: 
The Reserve Bank of India (RBI) has decided to introduce a capital adequacy ratio of 9 per cent for all co-operative banks to head off a crisis of the kind that felled Madhavpura — the Gujarat-based bank which was used by Ketan Parekh in an audacious stock market gamble that went sour.

Scheduled cooperative banks now maintain a capital adequacy ratio of 6 per cent.

The move is aimed at maintaining the liquidity of the over 2,000 scheduled co-operative banks in the country.

The central bank has also decided that there must be a presence of professionals on their boards.

“Co-operative banks will have to function like their commercial counterparts. We have decided that their boards should have chartered accountants, lawyers and professors,” a source in Mumbai said.

The instructions to this effect will soon be issued by the central bank, probably within a week. “It will check the powers enjoyed by a handful of people on the board,” sources said.

Moves are afoot to frame periodical guidelines for co-operative banks. Scheduled commercial banks have to comply with these norms as part of the central bank’s off-site monitoring system.

Capital adequacy is a measure of a bank’s capital expressed as a percentage of its risk weighted credit exposures. It is a tool which is extensively used by regulatory bodies the world over to protect depositors, apart from promoting the stability and efficiency of a financial system.

Two types of capital are measured: Tier I capital, which can absorb losses without a bank being required to stop operations, and Tier II capital, which can absorb losses in the event of a wind-up but afford a lesser degree of protection to depositors.

“The capital adequacy ratio is being increased to ensure that the co-operative banks can absorb losses in a financial crisis,” the source added.

   

 
 
KETAN REMAND EXTENDED 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 9: 
Ketan Parekh and his cohorts were remanded in custody till April 12 by the designated court allowing the Central Bureau of Investigation (CBI) further time to interrogate the accused.

While Ramesh Parikh, the chairman of Madhavpura Mercantile Co-operative Bank, and Ketan Parekh have been remanded to CBI custody for three more days, Kartik Parekh, who was arrested on suspicion of abetting fraud and J B Pandya, the bank official who approved the issue of the cheques on Parekh’s behalf that bounced, were remanded to judicial custody for the same period.

The four accused have been brought in together at around 2.45 pm when the designated court reassembled after a 45 minute recess. Looking tired and sporting a stubble, thanks to the 10 days in CBI custody, Ketan occasionally smiled during the course of the court proceedings, especially when the counsel for the chairman of Madhavpura Co-operative Bank pleaded the continuance of CBI custody for his client.

The Big Bull, unlike the last time when he appeared nonchalant, was more active this time. On one occasion, he even whispered instructions to his aides to be passed on to his counsel. Whereas his brother, Kartik appeared more glum and seemed unable to adjust to his current predicament.

Some of Ketan’s acolytes anxiously observed the court proceedings as their broking houses lay frozen with the boss in CBI custody. Other stock market punters representing some of Dalal Street’s broking outfits also observed the proceedings and contacted their offices at the end.

After the arguments were over, the CBI escorted Ketan Parekh and Ramesh Parikh back to White House, the CBI headquarters.

The judge said the bail application for all the accused will be heard on April 12.

During the arguments, the CBI counsel revealed that they are going to examine three brokers to whom the Big Bull had paid Rs 32 crore. This was part of the Rs 137 crore which he withdrew from Bank of India. Another Rs 12 crore was paid to Global Trust bank.

The CBI counsel also stated that Ramesh Parikh owned two companies which he was actively managing concurrently while serving as the chairman of Madhavpura Co-operative bank. One was a food processing company and the other firm was a broking company affiliated to the Ahmedabad Stock Exchange.

Ramesh Parikh’s lawyer said his client had dealings with Ketan Parikh in his capacity as a broker.

   

 
 
PENTAMEDIA DEAL WITH FILM ROMAN UNDER REVIEW 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 9: 
Yet another acquisition by a new economy major may turn sour. The Chennai-based Pentamedia Graphics Ltd is reviewing its earlier decision to acquire a majority stake in Film Roman Inc, the US-based animation producer, due to differences over the entire transaction.

Pentamedia’s move follows Film Roman’s missive to the Securities and Exchange Commission (SEC) of the US stating that its deal to sell a majority stake to Pentamedia has run into problems. The board of Pentamedia will now be meeting on April 12 to review the deal.

Sources said the board will review the whole deal vis-a-vis the target company’s recent performance and the current developments in the industry.

Though senior company officials were not available for comment, it is learnt that Pentamedia had submitted a proposal to Film Roman to restructure the transaction.

Unconfirmed reports say that Pentamedia was not happy with the acquisition price and wanted to scale it down based on the current state of the industry and the stock markets.

In October last year, Pentamedia entered into an all-cash deal to acquire a 60 per cent stake in Film Roman at a cost of $ 15 million. Film Roman is widely known for preparing the animation used in ‘The Simpsons’ among others.

Last week, Film Roman, in a filing to the SEC, indicated that Pentamedia was unable to close the transaction on terms agreed by both the firms and approved by Film Roman shareholders. “Film Roman’s board has rejected Pentamedia’s alternative proposals to restructure the transaction,” it added.

Film Roman also said that it had extended the closing date to April 13 and discussions between the two companies were continuing.

Surprisingly the news of the deal going sour had a positive influence on the Pentamedia scrip. Opening on a better note at Rs 75 against the previous close of Rs 73.60, the stock surged to an intra-day high of Rs 78.10 and hit a low of Rs 72. It finally ended at Rs 74.45, a marginal rise of over 1 per cent.

   

 
 
DOWNBEAT FOREIGN FUNDS SELL HEAVILY IN RELIANCE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 9: 
Petrochemical major Reliance Industries Ltd (RIL) was steam-rolled by foreign institutional investors and operators on the bourses today following concerns that its ambitious telecom initiatives could be delayed and that higher naphtha prices may make a dent in its bottomline. As a result, not only did the scrip plummet by nearly 7 per cent, but it also dragged the sensex down.

Today the Relaince scrip opened at Rs 380, gradually rising to an intra-day high of Rs 383. However, nervous selling by certain FIIs followed by speculators, brought the scrip to an intra-day low of Rs 352.50. Later it recovered to close at Rs 357.50. Even then, the scrip showed a drop of 6.45 per cent over the previous close of Rs 382.15.

Reports that the government is planning to stall licensing of new fixed basic service providers and has referred the matter to a group on telecom to study the issue of allowing fixed-line operators to offer limited mobility spurred FII selling which moved the market in a southward direction.

Earlier, Reliance, through its group company, Reliance Telecom, submitted an application to the government to enter this area through 18 new circles.

“Reliance has been planning massive investments in the infocom area. It was felt that its efforts in the telecom segment could be seriously hit due to the move restricting limited mobility,” a broker said.

The rise in naphtha prices on account of the government increasing the custom duties of crucial feedstock to 10 per cent from 5 per cent added to the woe. Some expect Reliance’s bottomline to be affected as it imports nearly 70 per cent of its naphtha requirements.

Result season

The market is bracing for the earnings season which commences tomorrow with infotech major Satyam Computers declaring its annual results. Satyam will be followed by the giant, Infosys Technologies on Wednesday.

Market operators, as well as, the investors are eagerly waiting for the fourth quarter results as concerns are brewing over the effect of the US slowdown on the revenues of Indian software companies. There is a feeling that the companies are in for a serious strain due to the slowdown.

Already, NIIT Ltd, Visualsoft have flashed revenue warnings. Though Satyam, Infosys and Wipro are expected to post growths in net profit ranging between 100-130 per cent for the fourth quarter ending March 31, their outlook for the next two quarters is awaited.

   

 
 
SRINATH BOWLS A LEGAL BOUNCER TO PEPSI 
 
 
FROM RAJA GHOSHAL
 
New Delhi, April 9: 
Javagal Srinath can be lethal off the field too.

The lanky Indian medium pacer has bowled a legal bouncer to Pepsi Foods Ltd, objecting to the use of his photograph in the cola major’s scratch card promotion scheme. Srinath has an exclusive arrangement with Pepsi’s arch rival Coca-Cola for advertising campaigns.

The legal notice, sent through the Mumbai-based law firm Consulta Juris, states that PFH Entertainment Ltd, agent for looking after the business interests of Javagal Srinath, had agreed to arrange for photographs and video shoots of the cricketer exclusively for Coca-Cola.

The notice says that the agency along with Srinath and Coca-Cola were surprised to learn that Pepsi has been distributing photocards showing the Indian medium pacer along with other cricketers from the Indian team.

It alleged that on the said cards Pepsi has also advertised its soft drinks.

In its letter dated March 23, PFH Entertainment said Pepsi’s act of using Srinath’s photograph amounts to derogatory treatment and issuing the same to public infringes the right of its client Coca-Cola and the cricketer.

Reacting to the development, a Pepsi spokesperson said the company had obtained a permission from the Board of Control for Cricket in India (BCCI) to publish photograph of any member of the Indian cricket team in its scratch card promotion scheme. For the purpose of promotion not only Indian cricketers but Australian players were also used in the cards (called scratch cards/toss cards).

Quoting from its reply to the said notice, Pepsi’s spokesperson said, “The running of such a promotion of photocards was pursuant to our agreement with the BCCI.”

The Pepsi spokesperson, however, pointed out that the scratch card promotion scheme has ended with the conclusion of the India-Australia cricket series.

“We had sent a reply to the legal notice immediately after getting it and stated our contention of having sought permission from BCCI,” the Pepsi spokesperson said. We received no further reply, he said.

The spokesperson also maintained that no cricketer in the card is endorsing the product, though he agreed that these were ‘Pepsi cards’

Pepsi, on its part, has alleged that Coke has deliberately raised this issue since a court battle is already going on regarding the controversial ‘Dil mange more’ line of Pepsi by Coke.

On the rationale of BCCI permission given by Pepsi, Coke’s spokesperson said, “How can the contract between two parties be violated by claiming permission from a third body?”

Pepsi however maintained that it has used the scratch cards to provide interesting statistics on the players of the Indian cricket team. Interestingly, another cricketer who features in the scratch card, Anil Kumble, has also got an exclusive advertising contract with Coca-Cola.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.56	HK $1	Rs.  5.90*
UK £1	Rs. 67.16	SW Fr 1	Rs. 27.10*
Euro	Rs. 41.94	Sing $1	Rs. 25.30*
Yen 100	Rs. 37.16	Aus $1	Rs. 22.80*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4315	Gold Std (10 gm)Rs. 4240
Gold 22 carat	Rs. 4075	Gold 22 carat	Rs. 3920
Silver bar (Kg)	Rs. 7375	Silver (Kg)	Rs. 7320
Silver portion	Rs. 7475	Silver portion	Rs. 7325

Stock Indices

Sensex		3544.08		-31.92
BSE-100		1646.64		-11.96
S&P CNX Nifty	1128.35		-11.25
Calcutta	 119.03		- 1.85
Skindia GDR	 598.78		- 6.20
   
 

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