Sebi wants tabs on bank funds
Damning indictment of CSE brass
Reliance Petro global flotation to raise $ 760 m
Decision on VSNL dividend deferred
Warburg picks up 9.8% in Gujarat Ambuja
Connaught Place back in favour
Flexibility in fixing WiLL phone rentals
Landmark set to open more outlets
Max Healthcare focus on capital
Foreign Exchange, Bullion, Stock Indices

 
 
SEBI WANTS TABS ON BANK FUNDS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 18: 
The Securities and Exchange Board of India (Sebi) has proposed a centralised monitoring system to keep tabs on the flow of funds from banks to bourses in its preliminary investigation report on the recent stock scam.

The proposal comes in the wake of evidence that brokers used funds borrowed from banks to manipulate the market. DSQ Software, Global Tele, HFCL and Zee Telefilms were among the shares which were at the centre of the scam.

The report says there is a nexus between rogue brokers such as Ketan Parekh and a few promoters who are alleged to have provided Rs 800 crore to them between January and March. “However, the findings are based on a preliminary probe. Only detailed investigations will yield definite conclusions.”

The market regulator says in its over 300-page report that norms for bank lending to the capital market have been tightened by the Reserve Bank of India (RBI), but this has to be backed up by an effective centralised monitoring mechanism.

Sebi has requested the government to give it more hands and better facilities so that it can effectively perform the tasks of market surveillance, investigation and inspection of exchanges/intermediaries. “Recent experiences indicate that till self regulatory organisations can police effectively, Sebi will have to play a continuous and a proactive role,” it says.

The watchdog wants tighter norms on the functioning of overseas corporate bodies (OCBs) in the wake of reports that some of them were used as conduits to rig shares.

The regulator has suggested that bourses impound at least a third of the badla profits till positions are squared up to mitigate risks and prevent the misuse of carryforward instruments like automated lending and borrowing mechanism (ALBM) of National Stock Exchange, borrowing and lending of securities system (BLESS) of BSE and the modified carry forward system (MCFS) on other bourses.

The market regulator has suggested that steps be taken to ensure that surveillance of stock markets is unaffected by changes. The system, the report states, should be independent even after the exchanges are demutualised to keep out board members from proprietary trading on their own account.

“In fact, there is some debate that demutualisation does not totally remove the conflict of interest that arises between Sebi’s regulatory and surveillance roles,” the report says. It has also said that the functions of surveillance and monitoring should be free from interference of the management at a time when the dimensions of markets have been expanding.

The report also calls for urgently evolving a mechanism of sharing of information among the surveillance departments of exchanges to develop a complete profile of members. The system of bank guarantees to meet capital and margin requirements needs to be reviewed to reduce leverage in trading.

   

 
 
DAMNING INDICTMENT OF CSE BRASS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 18: 
The Sebi report has criticised Calcutta Stock Exchange (CSE) for failing to check the rampant violation of exposure limits and risk-management norms.

According to the regulator, the exchange could have prevented brokers from building up large and untenable positions in several scrips with a high market capitalisation if it had strongly enforced the exposure limits and forced brokers to adopt risk-management systems already in place.

The report says CSE did not charge proper margins and allowed members to overshoot exposure limits in their transactions.

The bourse did not look into allegations of unauthorised carry-forward deals. Even Sebi letters sent in August last year asking it to stop those who were allegedly manipulating a handful of shares did not bring about corrective steps. “This is a serious lapse on the part of the exchange,” the report adds.

The report says the exchange did not call for advance pay-ins or impose ad-hoc margins when some members built massive speculation positions in s few scrips.

“What is particularly disturbing is that margin collections and pay-ins are still being done by accepting cheques, instead directly drawing the amounts from brokers’ bank accounts.”

Citing an example, it says a cheque of Rs 7.09 crore given by a member, who subsequently defaulted, was presented by the exchange to the bank for clearance on March 5.

This, the report says, was returned by the bank five days later, but the member was allowed to carry on trading and continue increasing his exposure to shares at the expense of market integrity.

Citing another case, the Sebi report says though D K Singhania, another CSE member, had taken a delivery position on March 1 which was the last day for settlement 148, it was not included in the gross exposure limit calculated by the bourse.

As a result, he was able to further increase his buy position by Rs 17 crore on March 2, and ultimately defaulted by Rs 6 crore.

   

 
 
RELIANCE PETRO GLOBAL FLOTATION TO RAISE $ 760 M 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 18: 
Reliance Petroleum Ltd (RPL) today announced a global depository receipt (GDR) offering in tranches against existing domestic shares. The company is expected to mop us at least $ 760 million (Rs 3,600 crore) from the issue.

RPL promoter Reliance Industries Ltd (RIL), which holds 64 per cent of the company’s equity capital, will participate in the offering and bring down its shareholding in the refining giant to 51 per cent.

The move, a long-awaited one, is expected to unlock value in the company. Based on the current market price of the RPL scrip, the total unrealised capital gains on Reliance’s 64 per cent shareholding in RPL is alone put at over Rs 11,000 crore.

Considering RPL’s present market capitalisation figure of Rs 27,673 crore, the 13 per cent stake which Reliance Industries will offload, should be valued at Rs 3,597 crore, thus creating a cash flow of around the same amount for RIL. Providing for Rs 1,200 crore as cost of acquisition of these shares, the capital gain for RIL is put at Rs 2,400 crore.

What’s more, RPL has decided to allow its shareholders to participate in the issue and will offer them two pricing options. These include the indication of a minimum price at which the company would be willing to offer its equity share as part of the GDR program, and, another, to opt for the cut-off pricing, as determined by the lead managers.

The GDR offer will be made to strategic and financial investors and the scrip will be listed on the Luxembourg exchange. The proceeds of the issue will be invested to fund the group’s ambitious plans in areas of oil and gas and infocom among others.

Sources said the benefits to RPL from the proposed offering include broadening of its international investor base, an enhanced international profile and access to new markets in the future.

RPL said the size, timing and pricing for the GDR offering, in one or more tranches, as may be appropriate, will be determined by the lead managers to the offering.

With the RPL scrip today closing at Rs 53 after opening at Rs 53.25 and rising to an intra-day high of Rs 54.25, analysts largely feel that the pricing should be between Rs 60-70 per share.

   

 
 
DECISION ON VSNL DIVIDEND DEFERRED 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 18: 
An inter-ministerial group (IMG) today deferred a proposal to dole out a liberal dividend to shareholders of Videsh Sanchar Nigam Ltd (VSNL), while seeking clarifications from Sebi as to when the highest bidder will be required to make an open offer to other shareholders. Disinvestment secretary Pradip Baijal told reporters after the IMG meeting that the department has asked the Securities and Exchange Board of India (Sebi) to clarify if it was possible to compress the time frame of three months required to make the open offer after the strategic sale.

The IMG, however, finalised the confidentiality agreements and information memorandum for sale of the government’s 25 per cent stake in the long-distance telephone and internet service major. “These pacts and the information memorandum will soon be circulated among the bidders,” Baijal said, adding the group also discussed shareholders agreements but could not take a final view as VSNL sought some clarifications on the New York Stock Exchange (NYSE) listing norms.

Asked about Credit Suisse First Boston, one of the advisors in the disinvestment programme that has been barred by Sebi from taking any fresh business for its alleged involvement in the stock market scam, he said the government will soon take a policy decision on whether to allow it to act as an advisor.

The failure of the IMG to arrive at a decision today sparked off a negative reaction on the bourses, which saw the VSNL scrip being hammered. On the Bombay Stock Exchange (BSE), the VSNL scrip opened at Rs 352.45 crashed to a low of Rs 340 before finishing at Rs 344.85.

   

 
 
WARBURG PICKS UP 9.8% IN GUJARAT AMBUJA 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 18: 
Warburg Pincus has decided to pick up a 9.8 per cent equity stake in Gujarat Ambuja Cements Ltd (GACL). The global private equity fund is picking up the stake at a price of Rs 225 per share in a deal that is valued at Rs 360 crore ($ 77 million).

The per share acquisition cost is substantially higher than the current price of the Gujarat Ambuja scrip on the stock markets. On the Bombay Stock Exchange today, the scrip closed at Rs 192.75 after hitting a high of 205.45. The scrip opened at Rs 191.

The deal, which was approved by the Gujarat Ambuja board today, involves the issuance of 80 lakh equity shares to Affinity Investments Ltd, an affiliate of Warburg Pincus, at a price of Rs 225 per share and another 80 lakh warrants convertible into same number of equity shares at the same price.

According to company sources, the promoters holding in the diluted equity will come down to 27 per cent from the present 30 per cent.

The warrants are convertible into shares on or before September 30, 2002, GACL said in a statement issued later.

Commenting on how and where the proceeds would be used, Ambuja sources said the investment will be used to fund current capital expenditure and other opportunities for growth. They, however, refused to elaborate on what such opportunities meant.

With the Warburg money flowing in, the share capital of Gujarat Ambuja will go up to Rs 163.10 crore from the present Rs 147.10 crore and the net worth of the company will be over Rs 1800 crore.

The Warburg investment will thus constitute around 9.8 per cent of the expanded share capital of the country’s fourth largest cement company.

With Gujarat Ambuja, Warburg’s investment in the country now stands around $ 600 million. Its other investments include Bharti Televentures, HDFC, Moser Baer, Nicholas Piramal, Venture Infotek and Rediff.com

The deal did not surprise analysts and marketmen as most of them had expected the preferential share issue to be made to Warburg Pincus.

The Telegraph reported on Wednesday that the price is likely to be at least Rs 220 per share.

Though Gujarat Ambuja officials were tightlipped, the possibility of the company hiking its stake in Associated Cement Companies (ACC) cannot be ruled out.

According to market observers, Gujarat Ambuja may come out with an open offer for ACC in June.

Gujarat Ambuja had purchased around 14.4 per cent stake from the Tatas in ACC at a price of Rs 370 per share. Sources said the Sekhsarias and Neotias can now acquire more stake at a much lesser price through the open offer.

   

 
 
CONNAUGHT PLACE BACK IN FAVOUR 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, May 18: 
Connaught Place, the heart of Lutyen’s Delhi, is trying to stage a comeback as the most lucrative business location on the corporate rental map.

With falling rentals and some 2 lakh square feet of space lying vacant, demand has picked up in the capital’s central business district (CBD).

New York Life, HDFC Standard Life Insurance and Grasim Industries, all in Ambadeep Building and UTI Bank in Statesman House are among the new enterprises heading towards Connaught Place.

Sanjay Verma, director, Cushman & Wakefield, said: “Demand for space in the area fell a few years back due to problems like parking, congestion and lack of central air-conditioning facilities. With Statesman House and NEI buildings coming up now, entrepreneurs will have access to good office space.”

“The growth seems to be around the CBD area. It will depend on how fast the existing space is lapped up,” Verma added.

Moreover, “Gurgaon and Noida offer better value for money with lower rent and modern facilities. While some business houses are coming to Connaught Place, Nehru Place and South Delhi, these areas still cannot offer continuous quality space.”

Rentals in Connaught Place fell drastically in the last two-to-three years, from Rs 120 per sq ft per month to Rs 90 per sq ft. The new deals are for 10,000 sq ft or less.

Anurag Munshi, senior manager, Jones Lang LaSalle, said: “Vacancies in the CBD area have gone up by 15-18 per cent with companies like Nestle, Du Pont, British Airways, Gillette, SmithKline Beecham and others moving out of the area. Though the business scene is not very bright, Birla House and Narayan Manzil are coming up soon.”

“Alternative CBDs have attracted some stand-alone A-grade structures and are scheduled to grow further. Barjaya Towers in New Friends Colony and Capital Court in Munirka has really set the standard in the areas,” he added.

While smaller and service-based operations prefer South Delhi to Connaught Place, the big firms with back-end operations and call centres opt for the suburbs.

Ruby Rai, CB Richard Ellis, said, “It is the South Delhi areas that will attract more attention in the future.

The new offices are coming to Connaught Place only for small spaces and a good business address.”

Rai also felt that while Connaught Place may be seeing some activity, it will be Gurgaon which will ultimately hold fort, with new projects like DLF, Unitech, MGF, Sahara lined up.

   

 
 
FLEXIBILITY IN FIXING WILL PHONE RENTALS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 18: 
Providing some leeway to operators offering wireless in local loop mobile services, the Telecom Regulatory Authority of India (Trai) today set the monthly rental floor at Rs 450 while fixing the ceiling at Rs 550.

“Ideally, we would have preferred to fix a single monthly figure—the spot rental—but we chose to specify a range because of wide variations in costs,” Trai officials said.

In its recommendations announced today, the regulator has renamed limited mobility based on wireless in local loop (WiLL) as WLL-M. Its rentals have been fixed after taking into account the cost estimates submitted by basic service providers and the likely investment scenarios over a year.

Operators providing wireless in local loop mobile services have been asked to refund subscribers rentals collected in excess of Rs 550.

The range of rentals fixed for WiLL-based services seeks to balance the two main objectives of consumer benefit and encouraging producers to go in for expansion of services, particularly in the initial stages of its introduction.

The floor for the rental has been determined by considering the best possible scenario for the rollout of mobility services — investment in the most profitable A category circles which have a large subscriber base — in the urban, semi-urban, and rural short-distance changing areas (SDCA).

The ceiling is based on a weighted average of the floor and rentals which would have been set for the worst investment scenario — investment in category C circles. The costs have been based on three lowest-subscriber situations.

According to the regulator, subscribers can get handsets for WLL(M) connections from the service provider or buy one on their own.

Subscribers who procure it from operators will have to pay a security deposit of Rs 10,000, which will have to be refunded in full once the service is terminated.

Service providers have been allowed to charge a maximum monthly rental of Rs 80 for handsets. This will cover all expenses/charges, including depreciation and other administrative costs incurred while procuring and supply them to users.

The telecom regulator says the estimates furnished by most operators are tentative in nature, and their plans on WLL-M have not assumed a final shape.

The recommendation made by the group of ministers on telecom and IT that limited mobility services should be introduced in a manner that covers urban, semi-urban and rural SDCAs equally, has created a sense of uncertainty.

The regulator’s proposals, therefore, have defined the terms at which limited mobility services will be available to subscribers: a minimum monthly rental of Rs 450, Rs 1.20 for a three-minute outgoing call and free incoming calls.

   

 
 
LANDMARK SET TO OPEN MORE OUTLETS 
 
 
FROM RAJA GHOSHAL
 
New Delhi, May 18: 
Landmark group, the Rs 100-crore departmental store based in Dubai, will open 10 more outlets as part of a plan to expand its operations in the country.

The group intends to increase the number of departmental stores under the Lifestyle brand from two to 12 over the next three years.

Lifestyle International is looking at properties in Calcutta to set up a shop over 40,000 square feet. “We have already conducted a survey in eastern India and its results have encouraged us to go in for a project in Calcutta. We will start work once we have found a good site,” H. Ramanathan, managing director of Lifestyle International, said. Deals to purchase space at Gurgaon, near Delhi, and Mulund in Mumbai, have been firmed up, and the outlets there will be set up by the second quarter of the next financial year.

Lifestyle International has invested Rs 60 crore in its Indian operations and has notched up a turnover of Rs 53 crore in the last financial year. It’s outlet at Hyderabad is the second biggest, while a third will come up at Bangalore in July.

Landmark, which entered India in 1999 with a Lifestyle store in Chennai, has 200 outlets in the Gulf nations and West Asia.

According to Ramanathan, mega retail outlets in India sell merchandise worth Rs 100 crore, which is likely to go up to Rs 300 crore in five years. Lifestyle is eyeing 10 per cent of this pie.

Ramanathan puts the cost of setting up a departmental store over 40,000-50,000 square feet at Rs 30 crore. It would be half this amount if the property can be acquired on lease.

Lifestyle, a chain of outlets which stocks most leading brands in the market, also peddles wares with its own labels. Ramanthan says the profit margins on goods sold under its own labels are higher, though these are largely confined to women’s wear rather than men’s clothing. Products imported from Landmark group’s outlets abroad are also sold.

Apparels make up 50 per cent of the products sold from Lifestyle retail outlets. The rest of it comes from footwear, cosmetics, home furnishings, and a range of products for kids.

   

 
 
MAX HEALTHCARE FOCUS ON CAPITAL 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 18: 
Max Healthcare will set up two secondary and four primary health clinics in the capital by next January at a cost of more than Rs 35 crore. The company, a division of Max India, is already running two primary and secondary clinics in Delhi for the last four months.

Max India, which also has a life insurance venture, hopes to use its integrated health system to its advantage in the health insurance sector, which is fast making inroads into the country.

“We want to become the most preferred healthcare providers from the insurer’s point of view, said D. R. Nirmal Joshi, chief operating officer and medical director, Max Healthcare.

Max Healthcare will open a total of 30 DR Max clinics (primary clinics), four Max Medcentres (secondary clinics) and one super speciality tertiary hospital in Delhi in five years time, at a cost of Rs 400 crore.

“We are following a base-up model, starting from the primary centres, whereas the trend in healthcare chains is to start with the tertiary care centres,” said Joshi. While the primary and secondary clinics are both for out-patients, the tertiary hospital will be residential in nature.

The primary clinics provide examination rooms and X-Ray facilities and forward the cases to the secondary care centres, which offer a whole range of pathological tests, more than 15 specialist consultations, pharmacy, endoscopy, day care and surgeries.

The cost for putting together one DR Max centre is Rs 35 lakh, while a Max Medcentre needs an investment of about Rs 17 crore, said Joshi. Two DR Max implants are also on the anvil by early next year, he said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.94	HK $1	Rs.   5.95*
UK £1	Rs. 67.03	SW Fr 1	Rs.  26.65*
Euro	Rs. 41.25	Sing $1	Rs.  25.65*
Yen 100	Rs. 38.04	Aus $1	Rs.  24.40*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs.4515		Gold Std(10 gm)	Rs.4430
Gold 22 carat	Rs.4265		Gold 22 carat	Rs.4100
Silver bar (Kg)	Rs.7450		Silver (Kg)	Rs.7440
Silver portion	Rs.7550		Silver portion	Rs.7445

Stock Indices

Sensex		3655.03		- 14.73
BSE-100		1766.47		-  4.42
S&P CNX Nifty	1172.80		-  2.15
Calcutta	 123.07		-  0.74
Skindia GDR	  NA		     -
   
 

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