ONGC jettisons Marathon bid
Move to keep tainted FIIs out of selloff
Zee faces rating rap
Infy looks at newer pastures for growth
Chinese toys come into play
In search of tieups
Allbank Fin may merge with parent

 
 
ONGC JETTISONS MARATHON BID 
 
 
FROM R. SASANKAN
 
New Delhi, April 13: 
The Oil and Natural Gas Corporation (ONGC) has scuttled the attempts of a powerful lobby in the government to hand over the country’s biggest oilfield, Bombay High, to US oil company Marathon.

Marathon, which has been lobbying for a foothold in Bombay High through a production-sharing contract over the last three years, convinced the Prime Minister’s Office (PMO) about its offer. Weeks before the defence bribery scandal broke, the PMO called a meeting of the current and previous secretaries of the ministry of petroleum and natural gas.

The initiative to call the meeting was taken by N. K. Singh, secretary in the PMO. It was attended by Brajesh Mishra, principal secretary to the Prime Minister and Cabinet secretary T. R. Prasad.

Though not invited, ONGC chairman Bikas Chandra Bora attended the meeting at the instance of P. Shankar, secretary in the ministry of petroleum and natural gas. Singh asked them why ONGC should invest in the re-development of Bombay High when Marathon was willing to do so.

The previous petroleum secretaries who attended the meeting were Probir Sengupta, now commerce secretary and S. Narayan, the current revenue secretary. Marathon began to lobby after Sengupta, who did not see much merit in its proposal, left Shastri Bhavan. He did not see much merit in its proposal. Sengupta has the reputation of not allowing lobbyists near his office.

Narayan also did not entertain these lobbyists, though one of them happens to be a retired Tamil Nadu cadre IAS officer. Narayan opposed the idea of Bombay High being given to Marathon. Shankar, relatively new to the ministry, fielded questions from the soft-spoken Bora. A senior official present at the meeting said the ONGC chief was unusually aggressive and rubbished the proposal.

He reeled off facts and figures in support of his argument. The Cabinet secretary was more than convinced by his arguments.

Multinationals have been lobbying to get into Bombay High for some time with offers of increasing crude production. The country’s premier oilfield has been facing production problems because of the reservoir’s unpredictable behaviour. Eight years ago, petroleum minister Satish Sharma forced ONGC to consider a production-sharing offer by Occidental of the US. It came through the Ruias of Essar.

When ONGC rejected this unsolicited offer, it was forced by the minister to go in for a limited tender. For two years, ONGC wrestled with companies such as Amoco, Occidental, Total, and Mobil. None could promise more than 72 million tonnes of additional oil. Since then, ONGC has produced 80 million tonnes and the present re-development plan launched by it with the help of consultant, Gaffney Cline and Associates, envisages an additional 78 million tonnes.

The corporation’s board later rejected these offers and the decision was endorsed by a committee of wise men appointed by the ministry of petroleum.

Marathon was not among the original bidders. While others purchased data packages paying $ 1 million each, Marathon did not even do that.

The US major entered the scene when Vazhapadi Ramamurthi was the petroleum minister. The retired Tamil Nadu cadre IAS officer hired by Marathon approached him. The minister took the then secretary, T. S. Vijayaraghavan, into confidence who talked to the ONGC management and counselled that the matter should not be pursued. Thereafter, Marathon appointed a Delhi-based company as its another agent. When the lobby failed at the ministry of petroleum, it turned to the PMO.

   

 
 
MOVE TO KEEP TAINTED FIIS OUT OF SELLOFF 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 13: 
The government should reconsider its decision to give foreign institutional investors (FIIs) who face charges of manipulating stock prices the mandate for public sector disinvestment, say finance ministry officials.

The jitters come at a time when several foreign funds are being probed for their alleged collusion with a bear cartel which manipulated share prices in recent months. “It’s a matter of concern. The government may have to take a fresh look at the issue,” senior finance ministry officials said.

However, disinvestment secretary Pradeep Baijal told The Telegraph that his ministry cannot take action against FIIs on the basis of accusations which have yet to be substantiated.

The BJP-led government has been resisting pressure from within its own ranks to probe the role of FIIs in the hammering of a few stocks, including those of PSUs slotted for selloff. BJP MPs like Kirit Parekh have charged FIIs of acting in concert with certain vested interests to clobber shares.

For instance, stock prices of aluminium companies had been depressed in the months which led up to the Balco selloff in spite of good fundamentals and good growth forecasts.

Market analysts claim this was engineered by certain players who wanted to see Balco shares go cheap. Apparently, one of the methods to price an unlisted stock like that of Balco is to take the industry’s average share price as a benchmark.

Even in the case of VSNL — the latest company on the road to disinvestment — there have been allegations that its share price is being battered by a clique of market players.

Baijal said he had asked the Securities and Exchange Board of India (Sebi) to investigate the charges. “An MP made allegations about rigging in VSNL shares. We have referred them to Sebi,” he said. The telecom major’s stock was quoting below Rs 300 around the time the deadline for expression of interest expired, down from its 52-week high of Rs 660. Credit Suisse First Boston is managing the selloff, which has attracted companies like Videocon, Reliance and BPL.

   

 
 
ZEE FACES RATING RAP 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 13: 
Zee Telefilms, under siege for its covert acquisition of shares in AB Corp and television channel B4U, faces the prospect of a rating rap from Salomon Smith Barney.

The foreign fund, which advises investors on stock picks, had given the company a favourable assessment in March but is now unhappy at having been kept in the dark about its investments.

Zee advanced Rs 220 crore to Essel group companies, which picked up 15 per cent in B4U and 28.5 per cent in AB Corp. There are reports that the Zee management had not told the FII about it at a meeting held last month. “They may not have wanted to share this price-sensitive information,” a source said.

Salomon had given the entertainment major a buy recommendation in early March, a time when its share price was ruling around Rs 150. The scrip has been a plunge ever since, and it has been falling by the maximum permissible 16 per cent in the past three days. It closed at Rs 84.50 on the Bombay Stock Exchange today, capping a 40 per cent slide in the last three sessions to a two-year low.

Salomon Smith Barney’s Brian Brown refused comment. “It is a weekend and, anyway, I would not like to talk about it now.” Many analysts in the research departments of FIIs who advised clients to buy Zee will be left with red faces.

Both B4U and AB Corp were in the dark about Zee’s undercover deals in their companies, and see it as a hostile action. “We are yet to talk to the two companies. We will approach them in the near future with full details. We do not see a problem,” a Zee spokesman said. The company informed bourses and Sebi about its acquisitions earlier this week.

It has denied having lent Ketan Parekh any money, but said it had been picking up shares of Amitabh Bachchan Corporation and B4U, a TV channel promoted by Bharat Shah, besides four other firms. “We will bring these into the public domain at the proper time.”

The Zee spokesperson said the investment companies which picked up stakes in other media outfits were not part of Zee Telefilms, the flagship, but associate firms of Essel group.

The company has failed to explain why it required loans from Global Trust Bank when its stake purchases in other entertainment and media firms were being made by the Essel group.

Market circles say there is a possibility that these funds may have been passed on to the Big Bull as loans against the collateral of shares of AB Corp and other companies.

Zee refused to disclose the details of investments made by its associate companies, saying these had to be kept a secret due to their strategic nature and the cut-throat competition.

   

 
 
INFY LOOKS AT NEWER PASTURES FOR GROWTH 
 
 
FROM VIVEK NAIR
 
Mumbai, April 13: 
Infosys Technologies Ltd is considering a foray into the business process outsourcing (BPO) segment.

Simply put, BPO is the management of a company’s business processes by a third-party provider. This form of business is now said to be one of the promising segments in the global outsourcing market and thus will be a natural extension of the Bangalore-based IT company’s current functions of providing both on-site and offshore services.

Typically, such a form of outsourcing could involve customer relationship management with call centres, though a company like Infosys could also provide a whole range of services, such as maintenance of software, among others.

Infosys officials here added that while they believed the segment held a lot of promise, a decision on whether to proceed will be made in due course. “We have been considering what growth prospects it can hold. However, it is too early to say anything now, as nothing has been finalised,” an official said. He added Infosys was looking at offering a whole range of services and that call centres could be one among them. “However, they will not be purely call centres, but a variant of one,” the official added.

Industry experts say such a process has gained importance at a time when IT outsourcing services are becoming more ‘commoditised’.

A study conducted by PricewaterhouseCoopers revealed that companies which have outsourced a business process, become more efficient organisations, apart from improving shareholder value and maintaining a competitive edge over those who have not.

Sources say that outsourcing from a third party will enable a company to concentrate on its core functions, with the service provider taking care of the non-core ones. Infosys, which earlier this week, stunned the markets by announcing it was likely to post only a 30 per cent growth rate this fiscal, managed to record a slight increase in its operating margins due to a thrust on offshore projects.

   

 
 
CHINESE TOYS COME INTO PLAY 
 
 
FROM RAJA GHOSHAL
 
New Delhi, April 13: 
The dragon is giving Indian industry sleepless nights, even when at play. Chinese toys are fast taking control over India’s mass toy market, leveraging the price advantage they have over their domestic rivals.

Most of the quantitative restrictions (QRs) for the toy industry were lifted last year, and a few remaining items were opened up this year. “The negative impact on the industry began last year itself,” says Sunil Nanda, secretary, Toy Association of India (TAI), which has 750 members.

This year, restrictions have been lifted from toy guns, metal and plastic toys of animals or human form and video games used with a television receiver.

Raj Kumar, president, TAI, acknowledged that Chinese toys dominate almost 40 per cent of the mass market segment in the country.

“What is more worrying,” he says, “is that there are no big Chinese brands. Cheap and unsafe products, mostly rejects, are swamping the market through dubious routes.”

Nanda, who also heads a toy manufacturing unit in Okhla, said the Indian toy industry is not getting a level playing field with China. Apart from poor infrastructure, duty for importing raw materials for toys is usually equal to that of finished toys, paying peak duty.

“Some leading toy manufacturers from India have actually crossed borders and started doing business from China,” Kumar said, adding that it is their way of getting a level playing field, given the poor infrastructure here and the high cost of raw material.

He also expressed his reservations on toy guns, which have been put off QRs this year.

The removal of QRs on toy guns, he said, should have been accompanied by parameters such as those specifying the size of the gun. Moreover, a toy gun should be a toy and not too close to a real-life gun, which is often the case now.

Kumar regretted that though both industry and the government knew that competition was round the corner, neither were adequately prepared to face it.

Further, even the Rs 250-crore organised toy industry falls mostly in the small-scale sector. There are more than 1,000 units in the small sector, with the cottage sector having more than 200 units.

Industry sources say advertising and promotion budgets for most domestic players are low, hence consumers recall only the names of international brands, though many domestic players are also doing well.

   

 
 
IN SEARCH OF TIEUPS 
 
 
BY A STAFF REPORTER
 
Calcutta, April 13: 
Chinese manufacturers, fast emerging as a serious threat to Indian industry, are looking forward to team up with Indian firms for possible joint ventures in segments like cotton and textiles, plastics, medicine, beverages and others.

A seven-member business delegation from the Hebei province of China today said that various companies from the province were looking for possible joint ventures with Indian companies, as also the latter’s participation in projects on brick works, refractory material, pure water factory, medicine production and pharmaceuticals, among others.    


 
 
ALLBANK FIN MAY MERGE WITH PARENT 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, April 13: 
Allbank Finance Limited, a wholly-owned subsidiary of the city-based Allahabad Bank, is likely to be merged with its parent in the current financial year.

“We will review the position of the subsidiary after September and then take a final decision,” Allahabad Bank chairman and managing director B. Samal told The Telegraph.

There are three options on the table — sell off the subsidiary, merge it with the parent or find a joint venture partner. “We see merger as the best alternative,” the chairman said. If that happens, the balance-sheet of the subsidiary will have to be presented along with the bank’s own statement under rules laid down by the Reserve Bank of India (RBI). “The subsidiary has been earning a profit for us so far,” Samal said.

However, provisioning for its subsidiary weighed down the bank’s net profit in 1999-2000 at Rs 69.33 crore. The bank expects a lower bottomline as the provisioning liabilities mount.

The 10-year-old AllBank Finance is engaged in hire purchase, asset financing, inter-corporate deposits, leasing, debenture trustee, loan syndication and private placement. It privately placed bonds of Haldia Petrochemicals Limited. The company, with offices in Calcutta, Mumbai and Delhi, surrendered its merchant banking licence to the RBI in 1998. Talking about Allahabad Bank’s investment plans, Samal said the focus on the high-growth retail banking will be sharpened in the current financial year. “Our 100 retail boutiques are doing well. We want to add another 100 this year,” he added.

The boutiques offer consumer, housing, car and personal loans. Their disbursements till March 31 stood at Rs 238 crore, of which personal loans accounted for Rs 96 crore.

“Our retail business last year was worth Rs 500 crore. We have set a higher target for 2001-02. Finance minister Yashwant Sinha has announced innovative educational loans in his budget. We will start offering student loans once the government is ready with the scheme,” Samal said. The bank has set a target of reducing its Rs 1,690-crore non-performing assets (NPAs) by Rs 500 crore. Recoveries till December 31 amounted to Rs 110 crore.

   
 

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