SAIL seems headed for sick bay
Airline ticket prices may rise on tax twist
HDFC net rises to Rs 473 cr
Satyam plans $ 130m ADS issue
Sebi to hear BPL appeal today
Reddy’s GDS terminated
Nasscom move to create more software jobs
Foreign Exchange, Bullion, Stock Indices

New Delhi, May 8: 
The Steel Authority of India Ltd, the largest government-owned firm, appears ready to be wheeled into the sick bay. According to sources, SAIL’s combined estimated losses in the last 37 months stands at Rs 4,294 crore, which is more than 50 per cent of the public sector giant’s peak networth of Rs 8,489 crore as on March 31, 1998.

Steel ministry officials said after clocking a combined estimated loss of Rs 4,144 crore in the last three fiscal periods, the steel behemoth has run up a loss of more than Rs 150 crore in April.

“Although they need not report to the Board for Industrial and Financial Reconstruction as a sick firm till the end of this fiscal, it looks like they are headed for the sick bay,” officials said.

Under Clause 23 in the Sick Companies Act, if any company’s losses amount to more than 50 per cent of its peak net worth within the previous four financial years, it has to call a meeting of its shareholders and report to the BIFR.

SAIL, of course, is putting on a brave face. A spokesperson for the public sector giant said, “There is no question of SAIL being referred to the BIFR. We are taking steps to ensure that SAIL, in fact, returns to a position of profitability in the future.”

But SAIL is unlikely to reverse the first month’s losses in the coming months as it is saddled with with huge debts of over Rs 14,000 crore and the interest burden on this alone is expected to be more than Rs 1,600 crore for this fiscal.

Depreciation charges are expected to be more than Rs 1,100 crore and together these two major heads of expenditure are expected to wipe out any operating profit the company makes.

The blue-chip steel company started sinking into red from 1998-99 when it ran up a loss for the first time. It ran up a huge loss of Rs 1,574 crore, forcing the government to sit up and order a study by management consultancy firm McKinsey and Company.

Its losses next year increased to Rs 1,720 crore. In 2000-2001, the steel ministry in a performance budget estimates the loss to be at about Rs 850 crore.

Ministry officials said they had come to know through their interaction with SAIL top brass that the monthly loss during the just concluded month of April would be above Rs 150 crore.

“This means our worst fears are coming true. The McKinsey turnaround which the cabinet cleared isn’t working out,” they said.

The cabinet had given the Rs 16,000 crore steel giant a Rs 4,703 crore bailout package two years back based on the McKinsey plan. It had also given the go-ahead to SAIL to disinvest in the Durgapur based Alloy Steel Plant (ASP), Salem steel plant, Visveswariya Iron in Karnataka and IISCO.

It also plans to sell off its captive power plants at Bokaro, Durgapur and Rourkela, the second oxygen plant at Bhilai besides a fertiliser plant at Rourkela in a bid to earn money to retire its debt overhang.

It also aims to restructure itself into two separate business units producing flat and long products respectively.

SAIL has sold off some minor units and a power plant till date. However, none of its big ticket sales have been completed. But even if the McKinsey plan is implemented, , it is doubtful whether SAIL’s fortunes will improve in the immediate future.

The McKinsey plan itself envisages that SAIL will notch up a total loss of Rs 5,000 crore by 2002-2003.


New Delhi, May 8: 
Come June and airline tickets may get dearer, courtesy a 10.2 per cent tax at source on travel agents imposed by the finance ministry.

Travel agents are concerned over the income tax department’s interpretation that this tax be paid in full even if agents have sold the ticket at a heavily discounted price.

Normally, agents sell tickets at discounts of up to 40 per cent on published fares of international airlines and up to 5 per cent on fares of domestic ones, passing on their own trade discounts, as well as any season discounts offered by the airline, to the customers.

But the income tax department is insisting they pay full TDS on what they would earn if the tickets were sold at published fares. Naturally, no travel agent is willing to bear the loss. “If it comes to the worst, we will pass on this cost to passengers, though it will mean that they will lose money and we lose clients,” says Debasish Chatterjee of CTI Travels.

On a London-Delhi return ticket of about Rs 54,000, while the airline charges about Rs 37,000, the rest is left to the discretion of the agent, to mark as their commission or pass on discounts to their clients. “We usually sell these tickets at about Rs 39,000,” says Chatterjee.

Far more ‘annoying,’ say travel agents, even if they sell a special scheme ticket which allows a companion to travel free or at a huge discount, they are expected to pay tax on the notional earnings they would get by selling the second ticket.

The agitated agents are meeting the Central Board of Direct Taxes today to argue their case.

Said Sanjay Narula, a travel agent who is co-ordinating the trade’s stand on the issue: “What we want done is that trade discounts, which are part of the airline business, should be shown as proper discounts being given by the airline itself and not shown as our commission earnings, as is the current practice. In case of net fares (rack rates), no discount should be shown and no tax should be payable.”

But to achieve this, not only will the IT authorities have to relent, but accounting procedures have to be changed and the Directorate General of Civil Aviation has to allow airlines to publish net fares instead of just full IATA-approved fares. Not an easy task by any means.

“We really don’t know how things will blow. But it will be one tough haul for us and for travellers if the government does not see reason,” admitted Narula.


Mumbai, May 8: 
Housing Development Finance Corporation (HDFC) has reported an 18 per cent increase in its 2000-01 net profit at Rs 473.65 crore against Rs 401.81 crore in 1999-2000. The board of directors, which met here today to review the accounts, declared a dividend of 125 per cent (Rs 12.50 per share) compared with an interim dividend of 90 per cent. It has cleared a proposal to raise the cap on investments by foreign institutional investors, overseas corporate bodies and non-resident Indians to 49 per cent from 40 per cent. Finance minister Yashwant Sinha had allowed more foreign equity in firms in the budget he presented in February.

The company will spend Rs 150.11 crore to pay dividends, Rs 15.31 crore to clear tax obligations, while Rs 308.23 crore will be transferred to reserves, HDFC said in a release. Total assets swelled 18 per cent to Rs 17,842 crore during the year compared with Rs 15,085 crore. Loan approvals were up 30 per cent at Rs 6,879.77 crore against Rs 5,305.15 crore, while disbursements at Rs 5,803.1 crore showed an increase of 29 per cent over Rs 4,492.74 crore in the previous year. Retail deposits of Rs 2171 crore were mobilised during the year, an increase of 44 per cent over Rs 1,891 crore last year. The profit gains came on the back of a rise in total income to Rs 2,382.35 crore from Rs 2,015.55 crore. Other income jumped to Rs 5.82 crore from Rs 2.21 crore. Income from operations includes interest on loans worth Rs 1,626.28 crore, fees and other charges amounting to Rs 102.82 crore, dividend income totalling Rs 121.74 crore, profit from sale of investments of Rs 85.25 crore, lease rental income of Rs 47.49 crore and other operating income of Rs 392.95 crore.

According to the company, approvals and disbursements of individual loans were up 53 per cent and 48 per cent respectively. Non-performing assets (NPAs) at Rs 98.71 crore amounted to 0.81 per cent of its Rs 112.81-crore loan portfolio. As a measure of prudence, the company has decided to provide Rs 33 crore more in provisions for contingencies.

Reacting to the results, which were in line with market expectations, investors sent the HDFC scrip tumbling to Rs 606.60 at the close on the Bombay Stock Exchange. Earlier in the day, the share had peaked at Rs 621 and hit a low of Rs 602.


Mumbai, May 8: 
Satyam Computer Services Ltd today announced it would shortly come out with an issue of 12.5 million American Depositary Shares representing 25 million equity shares, which at current prices would be valued at around $ 130 million.

As a first step, it filed a mandatory registration statement with the Securities and Exchange Commission of the US in this regard.

The underwriters will be allowed to purchase up to an additional 1.875 million ADSs representing 3.75 million equity shares to cover allotments within 30 days of the pricing of the offering.

Satyam Computer, one of the leading software shoguns in the country, said it anticipated that the price to the public per ADS will be determined with reference to the prevailing market prices of its equity shares, which are traded on the bourses in Mumbai, Hyderabad and the National Stock Exchange.

Pending completion of the offering, it is expected that the ADSs will be traded on the New York Stock Exchange under the symbol `SAY`.

The underwriters for the offering are Merrill Lynch & Co, Deutsche Banc. Alex Brown, Banc of America Securities LLC, Salomon Smith Barney and CLSA Emerging Markets.

Satyam Computers will be the second Indian company to see its prinicipal outfit and subsidiary listed on US bourses. The company, having recently unveiled 2000-01 results which bettered analysts’ expectation, increased the proportion of traditional-maintenance jobs in its product mix and cut the share of revenues contributed by e-commerce projects.

Earlier, in the day, the Satyam Computer stock vaulted 8 per cent, the maximum possible, to Rs 242.30 on the market buzz that its ADS would be listed on US bourses today.

In the morning, the Hyderabad-based software firm, whose subsidiary Satyam Infoway (Sify) is already traded on the Nasdaq, had refused to confirm the buzz in the market that it would be making an SEC filing for a ADS issue of between $ 100-120 million.

Dealers say buyers made a dash for the scrip moments after a comment from a leading fund manager that the company’s ADS issue would open today, but would be priced early next week.

The other rumour swirling in the market — that the Reserve Bank of India would permit an increase in the foreign equity limit in Satyam Computer to 49 per cent from 40 per cent — also proved to be true with the central bank making the announcement late in the evening. It said the shares could be purchased from the primary and secondary markets of stock exchanges after the company passed a resolution to this effect at its board and general body meetings.

Internet and e-commerce businesses account for 23 per cent of the company’s turnover; traditional maintenance accounts for much the same while ERP contributes around 8 per cent. The company said 59 per cent of sales come from offshore business.


Mumbai, May 8: 
The appellate authority in the Securities and Exchange Board of India (Sebi) will start hearing appeals from BPL, Sterlite and Videocon on Wednesday against an order which keeps them out of the capital market for manipulating share prices in collusion with Harshad Mehta three years back.

The appeal of BPL, which was barred from raising money from the capital market for four years, will be taken up first. The regulator had found the company guilty of funnelling Rs 57 crore into companies which were owned by Mehta. The Dhoots-owned Videocon International was handed a three-year ban while Anil Agarwal’s Sterlite Industries was denied access to stock exchanges for two years. The order was passed after three years of probe under Section 11 and 11b of the Sebi Act.

C Achuthan, a senior union law ministry official who now heads the appellate authority, will hear BPL’s case in a session which is expected to last the whole day. There are indications that the company will field a battery of top lawyers. The watchdog stripped Mehta of his right to trade on bourses under Section 11 of the Sebi Act — which prohibits fraudulent and unfair trade practices for dealing in securities — and ordered his prosecution under Section 24 of the same law. It is not clear if he has appealed against the order.

While passing the order, Sebi has also sought to prosecute five BPL directors and officials, three officials of Videocon International and an equal number of directors of Sterlite Industries.

Sebi investigations had revealed that a set of brokers and sub-brokers, acting on behalf of a common set of clients working for Mehta, cornered large chunk of shares to manipulate their prices.

Ten brokers of Bombay Stock Exchange and seven from the National Stock Exchange were also suspended for periods ranging from one to three years while several others were given softer punishments.

Following the probe, the erstwhile BSE president, J C Parekh, the vice-president and the executive director had to quit. Investigations against Mehta and the three companies were completed in October 1999 and showcause notices issued to them two months later.

Since Sebi was required to hear these cases in a quasi- judicial manner, the companies said they wanted to inspect documents, cross examine witnesses — which prolonged the proceedings.

Sebi to get more teeth

The department of company affairs (DCA), which, along with the finance ministry, is looking at a new law to strengthen Sebi, is against granting seize and search powers to the market regulator.

While it feels Sebi should be given greater powers, it is against granting search and seizure powers, arguing that raids by Sebi could lead to huge fluctuations on the bourses. The move to give Sebi more teeth is a fall-out of the recent stock market crises.

The finance ministry, too, is of a similar view, preferring to arm the market watchdog, but just stopping short of giving it extraordinary search and seizure powers.


Hyderabad, May 8: 
Dr. Reddy’s Laboratories Ltd (DRL) has decided to terminate its global depository share (GDS) facility. In 1994, the company privately placed 4,301,076 GDSs representing 4,301,076 equity shares (par value Rs 10). The GDSs are listed on the Luxembourg Stock Exchange. The shares underlying the GDSs will now be deposited in Dr. Reddy’s American Depositary Share (ADS) facility.    

New Delhi, May 8: 
In an attempt to generate additional jobs for software professionals in the dwindling IT market, the National Association of Software and Service Companies (Nasscom) today launched a call centre forum.

On-line activities like call centres and back-office operations call for direct interaction with customers for 24-hour services all year round.

An informal meeting to decide the administrative and structural issues related to the forum’s functioning is scheduled to be held next week in Delhi.

India is increasingly becoming the preferred hub for attracting call centres and back-office operations. The call centre business is one of the fastest growing sectors within the IT software and services industry.

In 2000–01, the call centre and back-office services industry contributed Rs 2100 crore in terms of revenue and employed more than 34, 000 people.

The Nasscom–McKinsey Report has estimated that opportunities in global IT-enabled services are likely to grow to $ 142 billion by 2008, of which India is expected to have a $ 17 billion share, employing more than one million.

Nasscom chairman Phiroz Vandrevala, said: “Nasscom has launched the Call Centre and Back-office Operation Forum, in view of the vast potential for call centres and back-office activities. The association has requested Arun Seth of British Telecom to be the convenor of the Forum.”

A company can become a member of this forum only if it has a functional call centre or back-office hub in service, whereas existing Nasscom members will get this facility as an additional benefit.

Regarding the activities of the forum, convenor Arun Seth said: “The forum aims to make India the most preferred hub for call centres and back-office operations by putting in place the best global practices. This will definitely make India a sustainable destination for the services over the next decade, thereby creating a million jobs.”

The forum plans to standardise the call centre industry by creating assessors and certifiers and also assist in setting up of call centre parks and training institutions.

Besides, the forum will lobby for increased availability of bandwidth and state-of-the-art infrastructure. The first meeting of the forum is scheduled to be held during the India IT Enabled Services Conference 2001, with the theme ‘Generating One Million jobs by 2008: Issues and challenges,’ at Chennai from May 30-31.



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