Bankruptcy code to toe US line
Morgan, UTI to come under JPC scanner
Wipro Net merges with parent
New Spice card aims at low-use segment
Jalan vows to end credit drought
Met office spurs market rally
Maruti Vistaar to extend reach
Foreign Exchange, Bullion, Stock Indices

 
 
BANKRUPTCY CODE TO TOE US LINE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 17: 
A Reserve Bank of India (RBI) advisory group has recommended a more comprehensive bankruptcy law for companies, called for a professional bankruptcy institution and said the Sick Industrial Companies Act (Sica) and the Board for Industrial and Financial Restructuring (BIFR) should be jettisoned.

The group says there should be a dedicated bench in high courts to deal with bankruptcy cases, and that there is no need for an official liquidator.

It has suggested a comprehensive corporate bankruptcy law with provisions on reorganisation on renegotiation, similar to Chapter XI of the US Bankruptcy code.

The new set of laws, which will cover all issues related to corporate bankruptcy, restructuring, renegotiations and fast-track liquidation, will obviate the need for Sica and BIFR.

Therefore, existing cases before BIFR should be transferred to a bankruptcy court, which could appoint what the group called a trustee — a professional bankruptcy institution comprising chartered accountants, lawyers and cost accountants.

The administration and properties of a company will be placed under the trustee once a case for bankruptcy is filed. Under the existing norms, promoters/managements remain in control of a company when it is hauled to BIFR, and therefore, find it hard to win creditors’ approval for their restructuring plan.

The group said the trigger point for bankruptcy proceedings should be the failure to repay or secure a loan of Rs 1 lakh — instead of the current minimum default limit of Rs 500. Cases can be filed either by the debtor or a creditor.

A reorganisation proposal can be set in motion if 50 per cent of the creditors, whose claims add up to 75 per cent of the total, vote for the decision. However, the claims of those who do not agree with the proposal would have to be secured.

The panel said once the proceedings start and there is no scheme of reconstruction possible, or the trustee comes to the conclusion that the plan put forward is unworkable, the court will ask the trustee to go in for wind-up and liquidation. After this, a company may be disposed of as a going concern or its assets sold piecemeal at the maximum possible value.

Institutions which lend to troubled companies will have a say in the appointment of a trustee, which can be vested with powers to supervise the restructuring process and closure.

Bankers have welcomed the group’s suggestions, but have said much will depend on whether they are accepted by the government, and the manner in which they are implemented.

   

 
 
MORGAN, UTI TO COME UNDER JPC SCANNER 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 17: 
The joint parliamentary committee (JPC) set up to probe the recent stock market scam will examine mutual funds like Unit Trust of India and Morgan Stanley to ascertain their involvement in the whole matter.

JPC chairman Prakash Mani Tripathi said mutual funds can be examined by the committee probing the stock market scam to determine their scam-related activities even though mutual funds are not specifically mentioned as part of the terms of reference.

“Though mutual funds, in general, are not part of the terms of reference of the JPC, buying or other functions of companies such as the Unit Trust of India or Morgan Stanley that impact stock exchange (during scam period) can be inquired into,” Tripathi said while speaking to reporters on the fourth-day of technical briefing.

“The JPC would not be going into the general functions of mutual funds but any activity that it felt is connected with stock exchanges before or during the scam period could be looked into. JPC would primarily look into those guilty and would suggest punishment.”

According to Tripathi, the JPC has decided to undertake this exercise since Securities and Exchange Board of India (Sebi) told the JPC that it did not have enough powers to regulate. The JPC would continue its technical briefing on May 29 and 30 before moving onto the second stage of discussion from the second week of June to decide on those who need to be called for examination.

Giving details on today’s technical briefing, Tripathi said Sebi led by its chairman D.R Mehta gave an insight into the role and functions of the regulations and provisions of the Companies Act.

This, he said, was followed by a briefing by the National Stock Exchange managing director designate Ravi Narayanan. It was told at the JPC that the NSE was set up to enable people from far-flung areas to access the stock exchange. The Bombay Stock Exchange officials also explained in detail the functions of the bourse, he said.

To a query on whether the JPC would not get outdated due to the measures taken for preventing price rigging and market manipulations, Tripathi said the earlier JPC set up in 1994 had taken stringent action against many officers and others.

   

 
 
WIPRO NET MERGES WITH PARENT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 17: 
Wipro Net, a subsidiary of the Azim Premji-owned Wipro Ltd, has merged with the parent company. The Wipro board today cleared the proposal and communicated to the stock exchanges that the merger will be operational retrospectively from April 1.

Wipro Net provides service to the corporate business to business (B2B) space.

The merger is subject to the approval of the Karnataka high court, shareholders and creditors of both the companies.

Commenting on the merger, Premji said, “The merger enables us to synergise customer offerings under one management. In addition, it will allow us to offer the specialised telecom skills available within Wipro Net and Wipro Ltd to our customers in the domestic and Asia-Pacific markets.”

President of Wipro Infotech Suresh Vaswani said the Indian IT services and products business unit of Wipro Ltd will be responsible for Wipro Net after the reorganisation.

The consolidation of Wipro’s IT products, services and solutions offerings with the communication services of Wipro Net will enable the company to offer an unique value proposition to the customers, he added.

The merger of Wipro Net will not result in a material change to Wipro Ltd’s financial statements under the Indian generally accepted accounting principles (GAAP) or the US GAAP, the notice to BSE said.

   

 
 
NEW SPICE CARD AIMS AT LOW-USE SEGMENT 
 
 
BY ALOKANANDA GHOSH
 
Calcutta, May 17: 
Spice Cell will introduce pre-paid cards worth Rs 300 on Monday, which will cater to the low-use segment of the cellular market.

The Spice move follows the recent guidelines of the Telecom Regulatory Authority of India (Trai) that asked cellular operators to offer pre-paid cards of lower denominations.

According to Spice, the coupon will be valid for 30 days and will have to be recharged within the 15-day grace period to enable the customer stay connected. Charges for incoming and outgoing calls will be Rs 4 and Rs 6 per minute respectively. First time activation charges for the new coupon remains Rs 630. Pre-paid Spice customers will be able to carry forward the unutilised airtime if their coupon is recharged within the grace period.

At present, the Modi Corp subsidiary which is one of the leading cellular service providers in the city, has cash cards with denominations of Rs 650, Rs 1,200 and Rs 3,000, valid for 30, 60 and 90 days respectively. Incoming and outgoing charges for these coupons are Rs 2.25 and Rs 4.50 per minute respectively.

Spice has also halved the replacements costs for SIM cards from Rs 500 to Rs 250.

Commenting on the lower denomination card, chief operating officer Arun Kapoor said, “The new card will serve as a major subscriber acquisition tool.”

Spice claims to have a subscriber base of 90,000, of which around 60,000 are pre-paid customers.

The company expects its total customer base to increase to around 2 lakh by March 2002. The pre-paid segment has witnessed a growth of around 60-70 per cent.

Says R. Mahesh, vice-president (marketing): “Like post-paid connections, we plan to have different tariff structures for different segments. This will give the customer a wide range to choose from.”

Kapoor said though the company is keen on segmenting the tariff structure for the pre-paid segment, it has no immediate plans to revise tariffs for post-paid subscribers.

   

 
 
JALAN VOWS TO END CREDIT DROUGHT 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, May 17: 
Reserve Bank of India (RBI) governor Bimal Jalan today promised more loans for industry, saying he will look into the reasons why successive cuts in the cash reserve ratio (CRR) have failed to boost credit.

He was responding to refrains from trade bodies in the city—Indian Chamber of Commerce, Merchants’ Chamber of Commerce, Confederation of India Industry, Bengal Chamber of Commerce and Bharat Chamber of Commerce—that there has been no significant increase in credit even though lower reserve requirements have given banks more cash to lend.

Merchant chamber president Sushil Dhandhania said the rash of scams in recent months has forced banks to pussy-foot on loans. Many genuine investors, both in the industry and trade, are not given credit because of fears that these will turn into non-performing assets and expose officials who cleared the loans to great risks, he said. The RBI chief said he will find out what is stopping banks from using their freedom to sanction credit and ensure that the industry is not deprived of much-needed funds.

Indian Chamber of Commerce president C. K. Dhanuka wanted to know if the central bank had any plans to slash the bank rate and devalue the rupee to help exporters compete with those in Indonesia and Turkey.

“On softening of interest rates, the RBI governor gave no clear cut answers, but there is an indication of another cut. However, Jalan said the Reserve Bank will not devalue the rupee,” Dhanuka told The Telegraph after the meeting, which was also attended by CII eastern region chief Harsh Neotia.

The chambers told Jalan that many industries are ready to clear their loan repayments under the one-time settlement scheme, but cannot not do so because the assets they would have sold to raise money are lying with banks as security.

The chambers want banks to release the collateral held in excess of what is specified under the settlement scheme so that borrowers can sell them to raise funds for repayments. Jalan assured chambers he would look into the matter.

Merchant Chamber members complained that finance for trade is not easily available although it is an integral part of industrial production. “We have suggested that the stringent norms for trade finance should be relaxed, but defaulters should be dealt severely. Specific guidelines should be issued in this regard and traders informed about it.”

   

 
 
MET OFFICE SPURS MARKET RALLY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 17: 
Dalal Street had an unlikely saviour today—the Met office. Old economy stocks rose on heavy buying by foreign institutional investors (FIIs) on reports of a good monsoon this year.

Wednesday, the Indian Meteorological Department indicated a normal monsoon for this year, adding the South-West monsoon was likely to hit the Kerala coast by the first week of June. The news propelled the 30-share BSE sensex 77.70 points, to close at 3669.76 today.

Noteable among the old economy stocks were the Reliance siblings, Reliance Industries Ltd and Reliance Petroleum, that showed marked increases due to substantial FII interest. Brokers attributed the buying in RPL to the company’s plans to hike its FII limit to 49 per cent.

Apart from RIL and RPL, other stocks that saw good buying interest included ACC, Grasim, Telco, VSNL, Tisco, L&T, Bajaj Auto and Philips.

Brokers said while the ACC counter saw some buying on expectations of an open offer from Gujarat Ambuja coupled with rumours that a media group was accumulating that stock, Philips India was locked in at the upper circuit filter for a major part of the day due to rumours that its parent would come out with another open offer. This, however, was later denied by a company official.

The Bajaj Auto scrip also witnessed buying interest following rumours that the promoters were planning a fresh buy-back proposal. Besides, there was speculation that Kawasaki is set to buy a stake in its motorcycle division.

Several cement stocks were also in the limelight.

Market circles said that some of the key investors in today’s trading included Salomon SmithBarney, WI Carr, Alliance Mutual Fund, Morgan Stanley, Life Insurance Corporation of India and General Insurance Corp. However, Unit Trust of India was seen selling at regular intervals.

“There was a lot of buying by FIIs today, which shows the market is gaining strength and is in a bullish zone,” an analyst with a private equity firm said.

FIIs are believed to have turned net buyers and pumped in over Rs 215 crore in the first two sessions of the current settlement.

The BSE sensitive index opened at 3607.46 and later gradually moved upwards to close at 3669.76 as against yesterday’s close of 3592.06, showing a net rise of 77.70 points.

Sources attributed part of the strong showing to the massive rise in the Dow Jones industrial average yesterday.

   

 
 
MARUTI VISTAAR TO EXTEND REACH 
 
 
FROM M RAJENDRAN
 
New Delhi, May 17: 
Plan to buy a car? Simply walk into a Maruti showroom. From car finance to insurance to selling your old car—the dealer may just take care of everything.

Maruti Udyog will combine its existing strengths in the car business—a large dealership network and a sophisticated information technology setup—with a lean operating structure, to offer a variety of value-added services under one roof.

Under the new business initiatives—car insurance, auto finance, corporate lease and fleet management and sale of second-hand cars— christened Vistaar, the car major will deliver quality service and products through its 221 dealers across 135 cities.

It has already set up two new business divisions for the purpose.

Maruti plans to provide all services under one head, with the value-added services coming at a nominal cost. A customer who chooses a Maruti model can avail of finance, insurance and also gets to sell his old car—all at the showroom.

This will make it the first company in the country to provide these services and the first in the world to do so in an integrated form.

Although Ford, GM and DaimlerChrysler do it abroad, they are not available under one roof.

Maruti has also set up a negotiations committee to identify possible partners for its car insurance and auto finance businesses.

Managing director Jagdish Khattar said: “Maruti wants to be close to the customer; anticipate and fulfil his needs. The new business initiatives will expand the scope of this relationship. For the first time, car customers in India will be able to access these services through a one-stop shop.”

“We are currently exploring alliances and partnerships to implement the initiatives. While the new businesses will directly generate additional revenue and returns, Maruti sees greater benefits coming from the enhanced customer experience.” The new initiatives, to be implemented through the new business divisions NBD-I and NBD-II, will supplement Maruti’s core business of selling cars, and not be a stand-alone diversification, Khattar said.

However, as far as providing auto insurance is concerned, company officials clarified that “Maruti will be an insurance intermediary on behalf of insurance companies—it is not getting into the insurance business. On auto finance, it already has Maruti Countrywide and Maruti Citicorp.”

In addition, the company will also offer services like extended warranty, accident management or additional free services, through its dealers.

Company officials said the venture was based on the experience of global auto companies which generate substantial revenues and returns from related non-manufacturing businesses.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.94	HK $1	Rs.  5.95*
UK £1	Rs. 67.15	SW Fr 1	Rs. 26.75*
Euro	Rs. 41.44	Sing $1	Rs. 25.65*
Yen 100	Rs. 38.09	Aus $1	Rs. 24.30*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4510		Gold Std(10 gm)	Rs.4425
Gold 22 carat	Rs. 4260		Gold 22 carat	Rs.4095
Silver bar (Kg)	Rs. 7425		Silver (Kg)	Rs.7415
Silver portion	Rs. 7525		Silver portion	Rs.7420

Stock Indices

Sensex		3669.76		+ 77.70
BSE-100		1770.89		+ 36.03
S&P CNX Nifty	1174.95		+ 23.80
Calcutta	 123.81		+  2.66
Skindia GDR	 651.30		+  5.80
   
 

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