Senior citizens likely to get higher rate on small savings
Wipro bets on future as net leaps 168%
Exports to drive growth: Premji
Part of BSNL assets to be converted into loan
Sharma held, gets bail
Daimler exits Bajaj Tempo
Bid to block private capital in oil
Sudden job cuts at Duncans spark panic
Move to doll up Bharat Pumps raises eyebrows
Foreign Exchange, Bullion, Stock Indices

 
 
SENIOR CITIZENS LIKELY TO GET HIGHER RATE ON SMALL SAVINGS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 20: 
In line with the Reserve Bank’s prescription in the slack season credit policy, the government is likely to grant senior citizens a higher interest rate under various small saving schemes.

Senior finance ministry officials say they are working on a proposal to allow a higher interest payout to senior citizens who have invested in small savings schemes like post office savings, national savings certificates and public provident fund. All others will continue to be paid interest at lower rates.

On Thursday, the RBI said banks could offer senior citizens higher interest on their deposits. Political considerations appear to have prompted the move to grant higher interest on the savings of senior citizens.

The rethink comes in the wake of the public outcry that followed the government’s decision to cut small savings rate by up to 1.5 percentage points which was announced in the budget.

The government, which had been paying as much as 11 per cent on most of these schemes such as public provident fund and National Savings Certificate earlier, had cut the rate to 9.5 per cent.

The government had linked these rates to those offered by banks on term deposits and said it could not afford to pay higher rates.

With the mounting fear that inflation could near 10 per cent, a 9.5 per cent payout on public provident funds meant that even long term savers in these schemes — usually small poor and middle class investors or retired people — would actually be left with real interest incomes of close to zero.

With the population greying and a large number of pensioners dependent on interest incomes from savings, the move meant the government was giving the opposition Congress and Left parties an issue that they could exploit in their election propaganda.

Realising this, even BJP MPs had in a recent mini-revolt made it clear to their leaders that they would like to see some kind of a rollback of the cut in interest rates.

“A total rollback is tough if not impossible. The economics of these schemes don’t allow that. So, we are working on a strategy that will provide a half-way house,” officials said.

Small savings schemes are huge money spinners. In the last fiscal alone, more than Rs 29,000 crore was collected through these schemes. In 1999-2000, small savings stood at Rs 21,000 crore.

As state governments can access up to 75 per cent of the money mopped up in their territories, they were equally vehement in voicing their objections to the rate cut despite the fact that lower payouts to investors also meant lower interest rates for borrowing states.

The point made by the states was that future flows into this kitty would be discouraged if there isn’t a favourable differential between the interest rate on small savings and interest on bank deposits.

West Bengal’s finance minister Ashim Dasgupta was among those who protested vehemently. Dasgupta flew in yesterday to try and persuade Sinha into seeing reason.

   

 
 
WIPRO BETS ON FUTURE AS NET LEAPS 168% 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 20: 
Wipro topped market forecasts to post a 150 per cent surge in third-quarter profit at Rs 217.5 crore and a 168 per cent spurt in 2000-01 earnings at Rs 667.9 crore, busting the myth that the country’s software powerhouses have run out of steam because of a sputtering US economy.

In a reversal of the trend of flashing growth warnings, the Bangalore-based company has predicted a heady 40 to 45 per cent rise in dollar-denominated revenues. Vice-chairman Vivek Paul told analysts later in the day that his firm does not see any pressure on its billing rates in the current financial year.

The market was betting on a fourth-quarter profit of Rs 200 crore, but that was surpassed by Rs 17 crore. The bright outlook — made sunnier because it comes against the backdrop of profit woes expected by industry majors like Infosys — sent the share soaring by Rs 153 or 12 per cent at Rs 1,435 on the Bombay Stock Exchange today.

Fourth-quarter sales and services stood at Rs 921.2 crore against Rs 739.1 crore in the same period last year. With other income at Rs 17.6 crore (Rs 3.7 crore), total income was pegged at Rs 938.8 crore, up 26.38 per cent from Rs 742.8 crore. Sales in 2000-01 stood at Rs 3053.9 crore compared with Rs 2273.6 crore while other income was Rs 38.3 crore (Rs 18.5 crore); revenues were placed at Rs 3092.2 crore (Rs 2292.1 crore).

Wipro Technologies, which oversees the firm’s global IT services business, accounted for 57 per cent of group revenues and 82 per cent of its profit (before interest and tax). R&D services contributed 50 per cent, up from 46 per cent in 1999-2000.

Revenues at Wipro Infotech, the firm which steers the IT business in India, were pegged at Rs 850 crore — 27 per cent of the group total. Consumer care and lighting business accounted for 11 per cent with Rs 330 crore. Sales of lighting products were up 17 per cent and toilet soaps 14 per cent.

The performance of Wipro’s foreign operations improved last quarter despite reduced reliance on the US markets. In all, 32 new clients, from areas as diverse as finance, retailing and healthcare, were added in this period.

   

 
 
EXPORTS TO DRIVE GROWTH: PREMJI 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
Bangalore, April 20: 
Wipro says it poised to best industry major Infosys in the race for growth despite the US slowdown.

The message from Azim H Premji, chairman of the Rs 3,000-crore company and the richest Indian on the planet, on Friday was that things may not be hunky dory, but his money machine will lead the pack when it comes to software exports.

“We will be ahead of the 40-45 per cent growth rate projected by Nasscom. We cannot be more specific than that,” Premji said after announcing his company annual numbers that were crowned by a 168 per cent surge in 2000-01 profit. “Predicting the future is not a science anyone has perfected so far. All the same, we anticipate that we will have rates higher than the average growth in software exports,” he added. Infosys had announced last week a whopping 70 per cent decline in its revenue projection for the current financial year because of problems in the US economy. It has estimated a revenue growth of 30 per cent for the current fiscal.

Premji did not want spell out investment plans, nor did he reveal his present controlling stake in the company after it was diluted because of the listing on the New York Stock Exchange.

The US slowdown has already slowed recruitment at Wipro, though there is no freeze or layoffs. On its overseas acquisition plans, Premji said no deal was being proposed for the moment. “We have evaluated a number of companies. The positive factor is that we have not entered into a deal. Given the situation in the US markets, which you are all aware of, we are better off for not doing any deals at the moment. As we go forward, our intentions are clear. We believe no deal is better than a bad deal,” the Wipro chief said.

   

 
 
PART OF BSNL ASSETS TO BE CONVERTED INTO LOAN 
 
 
FROM M RAJENDRAN
 
New Delhi, April 20: 
The finance ministry has decided to convert Rs 7,500 crore worth of assets owned by Bharat Sanchar Nigam Limited (BSNL) into a loan with a three-year moratorium.

The department of telecommunications (DoT) had asked the finance ministry to treat Rs 15,000 crore in assets as a government loan with a five-year moratorium. The ministry has not accepted that demand, but agreed to issue preference shares for the remaining Rs 7,500 crore with a dividend of 9 per cent. The request for a waiver of interest on repayment has also been turned down, and a 12 per cent rate imposed.

The Cabinet is likely to discuss the capital structure of Department of Telecom Services (now Bharat Sanchar Nigam Limited) with assets of Rs 66,000 crore, including outstandings in the debt deposit and remittance heads operated by DoT, at a meeting expected to take place next week.

Sources say the paid up- equity will be around Rs 5,000 crore, preference equity Rs 7,500 crore, government loan Rs 7,500 crore and loans to Mahanagar Telephone Nigam Limited Rs 3,000 crore. The proposed capital structure, approved by finance ministry, will result in a debt-equity ratio of 0.2:1.

A DoT proposal for a 15-year loan to BSNL with a moratorium on repayment for five years and repayments to be made in 10 equal instalments could also be taken up for discussion. If accepted, the annual financial liability on BSNL, including interest during the moratorium period, will be Rs 750 crore. The figure goes up to Rs 900 crore if the calculations are based on the government’s own lending rates. “The loan is important for BSNL to generate cash flows internally, to help meet capital expenditure requirements and to avoid the unduly high level of borrowings,” sources said.

DoT’s proposal for an exemption from government guidelines and re-dividend for five years — which will have an annual financial impact of Rs 500 crore on BSNL — will also be discussed. It could also seek an exemption from paying dividends on the Rs 7,500-crore preference equity for five years. The move is expected to have a financial impact of Rs 675 crore. Other issues that could be taken up at the meeting are a demand for the waiver of spectrum charges, re-imbursement of licence fee and spectrum charges on BSNL’s rural services.

   

 
 
SHARMA HELD, GETS BAIL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 20: 
Shankar Sharma, the promoter of First Global Stock Broking (Pvt) Ltd, was granted bail today for a sum of Rs 4,000 after being arrested on Thursday evening on charges of intimidating and insulting income tax officials.

Sharma has been in trouble after Sebi debarred First Global along with Credit Suisse First Boston and Nirmal Bang from undertaking broking business on charges that they had manipulated the market. Sharma was arrested yesterday by Tardeo police station on a complaint filed by deputy director of income tax (investigation) R. Laxman.

Sharma, 38, was produced before the additional chief metropolitan magistrate R.D. Ghate who granted him liberty on a plea made by his counsel Freny Ponda. Sharma was, however, directed by the court to appear at the Tardeo police station (in central Mumbai) for the next five days for a span of two hours. Sharma was booked under IPC sections 179 (refusing to answer public servants authorised to question), 228 (insult to public servant on duty) and 506 (2) (criminal intimidation). He was arrested yesterday evening from his office at Fort, Mumbai.

First Global has been questioned on various occasions by the income tax department after the raid on various brokers on March 23.

PTI adds: Credit Suisse First Boston today said it supported the current enquiries by Sebi into the recent market activity and would co-operate with the latter’s directions in this regard. CSFB had received a notice yesterday from Sebi directing it to refrain from undertaking any fresh business as a stockbroker pending a Sebi hearing on April 30.

   

 
 
DAIMLER EXITS BAJAJ TEMPO 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 20: 
DaimlerChrysler AG and the Firodias are parting ways in Bajaj Tempo Ltd.

Daimler today announced that it is selling its 16.8 per cent stake in the Pune-based company in favour of an investment firm belonging to the Firodia group.

Explaining the rationale for terminating the over 43-year old financial relationship, that resulted in the manufacture of a four-cylinder diesel engine, it said this was being done as there is little synergy between the products and markets of the two companies.

“Daimler AG’s global strategy necessitates concentration on its own brand products and Bajaj Tempo too, in its endeavour to serve specific Indian transportation requirement, has developed its own range of three wheelers, agricultural tractors, multi-utility vehicles and light commercial vehicles,” a press statement said.

With the “product commonality and market synergies between the two companies” decreasing, Daimler decided to offload its stake in Bajaj Tempo to Jaya Hind Investments Pvt Ltd, an investment company belonging to the Firodias.

While Bajaj Tempo officials were not available for comment, the price at which the deal was struck was not known.

However, both the parties have decided to continue their association in other areas. Bajaj Tempo will continue to supply spare parts such as pressed parts and sub-assemblies and transmission components to DaimlerChrysler. The supply arrangement for Mercedes engines to be assembled by Bajaj Tempo for Mercedes Benz India will also continue.

Following Daimler’s decision to pull out, the Bajaj Tempo board is likely to see some changes. The car major has three nominees—Hanx Ulrich Mark, Helmut Petro, Rolf Werner Frierrich Bartke—on the board of Bajaj Tempo.

   

 
 
BID TO BLOCK PRIVATE CAPITAL IN OIL 
 
 
FROM R. SASANKAN
 
New Delhi, April 20: 
Public sector oil companies are trying to stave off competition from multinationals and private Indian players by erecting barriers to their entry into the deregulated domestic market.

According to official sources, the committee headed by Naresh Narad, additional secretary in the ministry of petroleum and natural gas, has submitted a report, diluting the original deregulation plan chalked out by Vijay L. Kelkar, then secretary in the ministry.

The committee has abandoned the common carrier concept for the existing pipeline network to transport crude, products and gas. In its view, the common carrier concept should be applicable only to the fresh pipeline asset and not for the existing ones.

This recommendation, if implemented, will ensure that there will not be any competition from multinationals and domestic oil companies at least for the next two to three years.

The purpose of the phased deregulation of the petroleum sector was to inject competition and attract foreign and Indian private capital into the oil industry. The government had also stipulated that anyone intending to enter retail marketing should invest a minimum of Rs 2000 crore either in refining or in infrastructure.

It is not known what prompted the ministry to abandon this common carrier concept. For instance, when Indian Oil singed a memorandum of understanding (MoU) with Enron to market its gas, it planned to do so through the HBJ pipeline, invoking the common carrier principle. It is a different matter altogether that Enron has dropped its plan.

The oil PSUs have created enormous capacity which may remain underutilised if the common carrier concept is given up. The companies that planned to set up liquefied natural gas terminals on the west coast were under the impression that they could use the HBJ pipeline. Gas Authority of India Ltd (GAIL) which owns the HBJ pipeline will definitely get a transportation fee. The proposed dilution of the policy will protect Petronet LNG Ltd which faces threat from companies such as Shell, Total and Reliance. In the absence of competition, the domestic consumers will end up paying a higher price for the gas. This in effect means regulating the market for the sake of oil PSUs.

According to the Cabinet decision, the oil and gas sector will be totally deregulated from April 1, 2002.

It may not be to the liking of the ministry to do so as it would lose control over the oil industry. Without the PSUs,the politicians and bureaucrats will not have anything to boss over. In fact, they derive their sustenance from these very PSUs.

However, it is extremely unlikely that the government would go back on its commitment to deregulate the sector. A deregulated market would inevitably lead to multinationals entering the retail marketing.The PSUs so far operated in a protected market which ensured them a fixed rate of return under the administered pricing mechanism. The multinationals are bound to have a superior marketing skill.

The report of the official committee has not yet been made public. It is likely that companies like Reliance and Essar would register their protest. They will not also be in a position to enter marketing without pipeline network.

   

 
 
SUDDEN JOB CUTS AT DUNCANS SPARK PANIC 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, April 20: 
Duncans Industries (DIL) has partially closed its export wing, reduced the number of systems employees and handed marching orders to the general manager of the purchase department in a wave of job cuts over the past fortnight.

The move has triggered panic among junior and middle-rung managers, who are petrified at the scale of the downsizing. “We cannot live with the existing workforce. We have to reduce it, but we cannot say how many we will strike off the rolls. We will trim whenever we find a surplus,” DIL chairman G.P. Goenka said.

Swarup Mukherjee, the general manger who oversees bulk tea purchases, has been asked to leave. Saumitra Chaudhuri, in charge of packet tea purchases, will replace him.

He said downsizing the export department was necessary because the margin-squeeze on products sold abroad has forced the company to shift the emphasis to other areas.

“Exports are already under pressure. Margins there are low. Therefore, I have taken a decision not to stress on it any more. That is the reason we have decided to bring down the number of heads in the department,” Goenka added.

The company exports tea to WANA — West Asia and North Africa — and CIS countries. Its shipments in 2000-01 were valued at Rs 12 crore, down from Rs 17 crore in 1999-2000. The last accounting year has been extended by six months to September 30.

Goenka said the focus on packet tea will be sharpened. “Our Double Diamond brand has been rated as a best-seller in the last quarter. Our distribution network, which kept us from reaching out to all parts of the country, will be strengthened,” he added.

The company has unveiled new mode of appraisal for managers, based on a ‘360 degree’ system under which they are to be evaluated by themselves, seniors and subordinates. Customers will also rate executives who deal with them separately.

The salaries of the non-unionised staff, including those in the senior management, have been linked to their performance. About 40 per cent of the total remuneration is tied to performance, which will be raised to 80 per cent in three years.

   

 
 
MOVE TO DOLL UP BHARAT PUMPS RAISES EYEBROWS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 20: 
Even before the dust could settle on the Balco selloff controversy and with allegations on VSNL—another prospective bride — price rigging flying thick and fast, the government, it seems, is wading into fresh trouble regarding the divestment of Bharat Pumps and Compressors Ltd (BPCL).

Strange as its ways are, the government is now trying to award a Rs 200-crore fiscal clean-up to the Allahabad-based company after closing the first round bids for its selloff.

A public sector unit put up for sale is normally painted before calling in prospective buyers but in the case of BPCL it was put up for sale warts and all.

Just as the first round of bids for the heavy engineering firm closed on April 12, a Cabinet note was circulated seeking a nearly Rs 200-crore bailout for the company. Some Rs 115 crore is being sought in various kinds of loan write-offs, another Rs 40 crore in equity write down besides a Rs 50-crore infusion for a golden handshake package for 1,000 workers.

This tantamounts to changing the terms of sale after reducing the number of prospective buyers by closing the bidding. When the company was put up for sale, prospective buyers were not told that such a package was in the offing. Those who bid did so without this key input.

The government has already put on offer through its holding company—Bharat Yantra Nigam Ltd—some 74 per cent stake in BPCL to bidders.

The company which makes various kinds of industrial pumps and compressors for refineries, fertiliser and chemical companies has been in trouble for quite some time partly because a slowdown in the economy has seen low orders and partly because more flexible multinational competitors are able to offer cheap finance along with their product.

As a result, it ran up a loss of Rs 17.34 crore last year on a low sale of just Rs 43.45 crore.

Officials vetting the Cabinet proposal say that window-dressing in a state-run firm before divestment is nothing new but this is the first time such an attempt is being made after the process has been.

Indian Iron and Steel Company, which the government is now trying to flog through SAIL, was given a write-off package that cost the government ten times BPCL’s package. However, that was awarded long before the steel maker was put on the block.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.82	HK $1	Rs. 5.95*
UK £1	Rs. 67.57	SW Fr 1	Rs. 27.05*
Euro	Rs. 42.21	Sing $1	Rs. 25.55*
Yen 100	Rs. 38.41	Aus $1	Rs. 23.75*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4375	Gold Std (10 gm)Rs. 4315
Gold 22 carat	Rs. 4130	Gold 22 carat	Rs. 3990
Silver bar (Kg)	Rs. 7475	Silver (Kg)	Rs. 7420
Silver portion	Rs. 7575	Silver portion	Rs. 7425

Stock Indices

Sensex		3583.04		+ 8.96
BSE-100		1704.43		+18.33
S&P CNX Nifty	1144.00		- 0.45
Calcutta	 120.96		+ 0.05
Skindia GDR	 618.84		+ 6.06
   
 

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