Caribjet deal under scanner
251 more shares in rolling kit
IT firms in Tata fold leap on merger whispers
Ford India jacks up Ikon prices by 1.8%
Pentamedia to merge 3 arms
Bid to merge power schemes draws flak
Imports from Nepal roil local vanaspati makers
SAIL set to prune losses to Rs 700 cr
Small sector entry bar to go slowly
Foreign Exchange, Bullion, Stock Indices

New Delhi, May 25: 
Civil aviation minister Sharad Yadav wants the Central Bureau of Investigation to expedite the probe into the Caribjet wet leasing scam which plunged Air-India into the red after a whopping loss of Rs 321 crore. Suspended Air-India chief Michael Mascarenhas is the prime accused in this case.

“Not only did Air-India suffer a body blow due to this deal simply because Mascarenhas ‘forgot’ to put in a termination clause in the agreement signed with Caribjet but we also lost in the international court of arbitration and had to pay out another whopping Rs 125 crore,” Yadav told The Telegraph during the course of a free-wheeling interview.

The civil aviation minister had suspended the national carrier’s chief two days back on charges of favouring a general sales agent with illegal commissions; these charges are also being investigated by the CBI. The sacking had sparked off a war of words with Mascarenhas threatening to move court against the order and claiming it would hit the disinvestment of the national carrier.

To the minister’s relief, a threat by a union leader to launch a strike against his decision fizzled out today with the Air-India Employees Guild president V.S.Girdhar stating “no worker is going on strike or going to wear black badges in support of Mascarenhas.”

Yadav said he had already asked the CBI to probe the wet leasing deal which he described “as the real big thing”. The contract for wet leasing had been cancelled after it was found that Caribjet was flying sub-standard planes and flying sectors with vital systems unserviceable on a regular basis.

The investigative agency had however “for some strange reasons” ignored the mass of evidence in this case accumulated by a special audit team in the Caribjet case and given Mascarenhas a clearance when he was being promoted as managing director. If the current round of investigations into the Caribjet deal goes against Mascarenhas, he may have to face criminal charges.

Civil aviation ministry officials claimed that even after the Caribjet fiasco, Mascarenhas had given Middo, another aircraft renting company which is suspected to be a new front for Caribjet, contracts for flying Haj pilgrims. “The owners of both these companies are unknown to me,” the minister said. He said attempts by his officials to find who really owned these companies yielded no results.

Air-India ran up a whopping Rs 321 crore loss in a three-year phase by flying wet leased planes, rented on terms loaded in favour of leasing companies.

Wet lease losses have constituted over 45 per cent of total losses run up by the national carrier between fiscal years 1994-1995 to 1997-1998, the special audit discovered.

The probe report says the cost of the first wet lease deal signed up by A-I with Caribjet for two Airbus 310 jets in November 1994 was jacked up by Air-India’s then commercial director, Michael Mascarenhas (currently managing director of the airline), by $ 157 per block hour which worked out to a total additional payout of Rs 3.37 crore. This was done by the airline management without any reference to its board of directors on the grounds that the extra payment was needed for hiring licensed ground engineers to certify aircraft airworthiness in transit stations.

The total rental price tag eventually worked out to $ 1.72 million a plane a month which was far higher than the $ 1.62 quoted by a rival bidder, which was rejected.


Mumbai, May 25: 
The Securities and Exchange Board of India (Sebi) today released a list of 251 shares which will move into the rolling settlement mode from July 2 as part of its efforts to embrace the best international trade practices.

The additions take the number of shares in the rolling settlement to 414, which market circles say account for more than 90 per cent of the trading volumes on stock exchanges.

Some of the key scrips that have moved in are Bajaj Auto, Digital Equipment, DSQ Software, Glaxo India, Grasim Industries, Gujarat Ambuja Cements, ICICI, Hindustan Lever, HDFC, Hindalco, Larsen & Toubro, Reliance Industries, Telco, Tisco, Tata Tea, State Bank of India, VSNL, Wipro and Zee.

These shares were covered under deferral instruments like National Stock Exchange’s automated lending and borrowing mechanism (ALBM), and were part of BSE-200.

The market regulator had announced that it would expand the list of shares under rolling settlement whereby investors will have to square up speculative positions daily. If they fail to do so, they will be obliged to take delivery and settle deals within five days.

Though there are fears that the system will choke volumes, market participants appear to be ready to take it in their stride. “Initially, we saw volumes drying up, but by now, most of the people have got used to the system,” an investor said.

The market regulator banned all deferral products with effect from July 2, and said there will be a uniform settlement cycle for all scrips not coming under the rolling settlement thereafter.

It also decided to do away with price bands for shares in the rolling mode from July 2, and opted for index-based circuit breakers similar to the system followed in the US markets.

Sebi had also announced that stocks that do not come on the compulsorily rolling settlement from July 2 would be brought in by January 2. In the interim period, they would be traded in uniform settlement cycle (Mondays to Fridays). This was done to put an end to inter-exchange arbitrage, one of the reasons for excessive speculation on stock exchanges.

The Sebi move followed after the post-budget meltdown on bourses. The speculation recently resulted in some brokers at the Calcutta Stock Exchange failing to honour their commitments and the stock exchange was forced to use its reserve funds to make up for the shortfall.

Compulsory rolling settlement was first introduced in 163 scrips that were in dematerialised form. The regulator had then said that before further increasing the list of scrips for compulsory rolling settlement (including the A group scrips), it was necessary to introduce the facilities of daily and weekly modified carry forward system and ALBM.


Mumbai, May 25: 
Shares of two Tata group companies, Tata Elxsi and Tata Infotech Ltd today witnessed huge buying interest on renewed speculations about a merger with the unlisted IT giant, Tata Consultancy Services (TCS).

Market rumours pushed both the scrips to nearly touch the upper circuit limit of 16 per cent — Tata Elxsi surged nearly 15.97 per cent and Tata Infotech’s value soared by nearly 15 per cent over the previous close.

Though company officials later denied that they are not considering any such merger proposals, it is believed that Tata Sons is contemplating to bring in their infotech companies under one umbrella of TCS.

In fact, Tata group chairman Ratan Tata had confirmed such a move to The Telegraph last year, when he pointed out that an exercise was underway to restructure the group’s infotech ventures. He had, however, added that the exercise was a complicated one and it would take time to crystallise.

While TCS’ listing has been talked about for a long while, sources aver that the Tatas will not only have to take into consideration the fact that some of the companies in the group are privately held, there are also overlap in products and services among the infotech companies.

The group had only recently completed a major restructuring exercise in their power ventures.

Today, the Tata Elxsi scrip finished sharply higher at Rs 93.30 after opening at Rs 81.90 with 8,477 trades and a total turnover of Rs 11.79 crore.

Similarly, the Tata Infotech share also soared to Rs 179.30 with good volumes.

Tata Elxsi line of business include, distribution and marketing of computer systems, software and hardware design and development services for the overseas markets. Further, it provides solutions for CAD/CAM, entertainment, education among others.

Recently, a transaction between the two group companies saw Tata Sons, the holding company acquiring close to 40 lakh shares from Telco. Following this, the holding of Tata Sons in the company rose to over 19 per cent.


New Delhi, May 25: 
Car makers, withering in the heat of competition, sluggish demand and poor margins, have started raising prices in a desperate bid to steer their way out of trouble. The latest to do so is Ford India which raised the price of its mid-size Ikon model by a modest 1.8 per cent. The new prices come into effect from June 1.

Announcing the price revision, Randy Shockley, Ford India’s vice-president for marketing, sales and service, said, “With an increased focus on cost efficiencies and improved resource management, we have been able to minimise the price realignment and restrict the increase to 1.8 per cent.”

The Ford Ikon 1.3 CLXI (petrol engine) will now be priced at Rs 5,05,088 in Calcutta for its cheapest, manual steering version. The 1.3 EXI petrol version will be priced at Rs 5,57,297 and 1.6ZXI petrol at Rs 6,17,173 (without fog lamps). The 1.8ZXI diesel will now be priced at Rs 6,83,032 (without fog lamps).

“It is also significant to note that the Ford Ikon bought under finance schemes will not be affected as the revised prices will only lead to a nominal increase in the EMIs,” Shockley added.

The latest round of car price hikes was triggered by big brother Maruti Udyog which raised the prices of its small car offerings by around 15 per cent and it mid-size Esteem by around 1.5 per cent.

The Union budget’s bid to cut automobile prices with a heavy dose of excise rebate seems to be falling by the wayside, especially after car sales fell 7.4 per cent last year at 5.9 lakh units from 6.38 lakh units in 1999-2000. In view of developments such as the weakening rupee and increased raw material and freight costs, an overall price hike in the automobiles industry is inevitable.

Ford India claimed that its customers will continue to benefit from excise duty reductions; the Josh machines will still cost significantly less compared with pre-budget prices.

With over 38,000 Ford Ikons sold since launch in November 1999, the Ford Ikon continues to be the segment leader with a 25 per cent market share.

Ford India had improved its performance from 8023 units sold during financial year 1999-2000 as against 17,922 units sold during the same period in 2000-01. The company which has invested about Rs 1,700 crore at its plant in Chennai.

Ford has set a target of exporting Rs 20 crore worth of CKD kits during calendar 2000 and Rs 165 crore worth of equipment during calendar 2001.

The company is also planning to expand its dealer network from 55 to 65 over a period of one year.


Mumbai, May 25: 
Chennai-based entertainment graphics major Pentamedia Graphics Ltd, plans to merge three of its subsidiaries into a new company called Penta Entertainment Ltd.

Pentamedia, in a communication to the stock exchanges today, said the three firms include Media Dreams Ltd, Kris Srikkanth Sports & Entertainment, and Mayajaal. Incidentally, all these companies were acquired by Pentamedia last year. The company, however, did not provide financial details of the transaction. Pentamedia added that the combined entity would give it a strong footing in the entertainment industry.

The Pentamedia scrip closed higher at Rs 90.05 on the Bombay Stock Exchange, after opening at Rs 87.40 and rising to an intra-day high of Rs 91.15. The counter saw 1,1787 trades, resulting in a total turnover of Rs 28.51 crore.

Pentamedia Graphics had acquired these companies for a consideration of around Rs 176 crore in the previous year. The deal was done through a stock swap method that constituted around 9 per cent of the equity of Pentamedia and 35.19 lakh shares of the company were allotted at Rs 500 per share.

Among the three companies, Media Dreams is an entertainment business unit that caters to television, theatre and the internet. The company has content in various languages that include Tamil, Telugu, Hindi among others, which are distributed to satellite channels.

On the other hand, Kris Srikkanth Sport & Entertainment was acquired by Pentamedia after the former cricketer joined the company’s board. The third company, Mayajaal is a theme park near Chennai.

Pentamedia, it may be recalled, was recently in an acquisition drive that saw it grab companies like Improvision Corp, USA, a film production company, in an all stock deal of $ 19.80 million. The company had, late last year, announced it would invest close to $ 100 million for its acquisition programme that envisages taking over as many as 10 companies.

The company had targeted acquisitions of digital assets and related businesses in the global entertainment segment and the acquisitions were part of its strategy of growing inorganically.

Some of the firm’s plans in this direction have however, met with some reversals. Recently, the US based animation producer Film Roman backed off from a deal that would have seen Pentamedia acquiring an over 49.5 per cent stake in the former.

Pentamedia had entered into a deal in October last year to acquire 60 per cent of Film Roman at a cost of $ 15 million, in cash.


New Delhi, May 25: 
The government’s proposal to merge two schemes introduced to modernise and renovate power projects — the accelerated generation and supply scheme (AG&SP) and the accelerated power development scheme (APDP) — is being opposed by the power ministry.

Launched in 1997, the AG&SP was introduced to accelerate the completion of priority renovation and modernisation of all power projects which were languishing for want of funds.

The APDP was introduced last year to support power sector reforms through investment in thermal and hydel projects which need renovation and modernisation, with an investment of above Rs 100 crore. Currently AG&SP has a corpus of Rs 300 crore which is expected to be increased to Rs 500 crore during the Tenth and Eleventh Five Year Plans.

Power ministry sources said, “Our aim is to bring together similar objectives in both schemes and to highlight the rest in one composite programme. We will have to take this to the Planning Commission and discuss with it other ministries before it is sent to the Cabinet for final approval.”

“The process of identifying the common objective in both schemes has begun, but it is too premature to predict the final shape,” sources added.

AG&SP aims at increased investment in priority power projects and leveraging interest subsidy by about five times from the Union government in the form of a budget grant to the power ministry, which is then distributed to state electricity board/public sector units. APDP, on the other hand, is aimed at motivating states to take up power sector reforms by making investments as additional central Plan assistance to be passed on as grant/loan.

The APDP is also focused on upgradation of sub-transmission and distribution network including energy accounting and metering up to 11 kilo volt feeders. However, AG&SP’s objective is to increase supply from existing facilities. However, several officials are opposed to the merger of the two schemes, arguing both schemes have different objectives.

“Both schemes have absolutely different objectives. The AG&SP scheme is focused on bringing larger investments in the capital intensive priority power projects in all states. APDP has been designed for immediate and low-value investments in priority power projects in power sector reforming states,” said a senior power ministry official.

Officials also said the government’s target of a 92 per cent capacity addition in power generation during the Ninth Plan is based on the AG&SP scheme. On the other hand, the government expects to add only about 40-50 per cent through APDP.

Power Finance Corporation has requested the government to run both programmes parallel to each other.


Calcutta, May 25: 
The domestic vanaspati industry is feeling the heat as multinationals market vanaspati imported from Nepal in the country.

The latest to join the bandwagon is Agrotech Foods Ltd, a subsidiary of global major Conagra. The Secunderabad-based Agrotech, which sells the Rath brand of vanaspati, has entered into an arrangement with Nepal Vegetable Ghee Industries to import vanaspati for marketing in India.

Taking advantage of duty-free imports under the Indo-Nepal treaty, Hindustan Lever Limited had earlier entered into a similar marketing arrangement with Nepalese vanaspati makers.

But this has dealt a heavy blow to the domestic manufacturers, many of whom were forced to close down their factories. Units in West Bengal are the worst affected, as HLL closed down its vanaspati unit at Shyamnagar, North 24-Parganas.

While Agrotech is marketing Nepalese products under the Rath brand in northern India at prices varying between Rs 41.20 for packs with a net content of 897 gram in UP, Rajasthan, Himachal Pradesh and Rs 40.50 for Delhi, Punjab, Haryana, Hindustan Lever is concentrating on Bihar and the north-east markets, selling its products for Rs 43 and Rs 50 respectively. Another phenomenon being witnessed in the recent spurt in vanaspati imports is that both Agrotech and Hindustan Lever have introduced 1 kg (net weight 897 grams consumer packs) in their recent marketing drive against the previous practice of importing 15-kg packs. This, the domestic industry fears, will have a larger market penetration, compared with the 15 kg packs.

The Eastern India Edible Oil Manufacturers Association has brought the marketing moves of the multinationals to the notice of the Union food and public distribution minister Shanta Kumar.

Although no legal action can be taken against the companies for marketing vanaspati imported from Nepal, the association has cited certain technical points against them for violating Vegetable Oil Products (Regulation) Order 1998.

These include the absence of registration numbers on packets while marketing imported items and not following norms on standard weights and measures regulations.

Apart from the competition posed by imported Nepalese products, where manufacturers enjoy duty drawback facilities for imported palm oil, the main input for vanaspati, the high 75 per cent import duty on imported crude palm oil has also affected operation of the domestic vanaspati units. The association has noted that the Indian vanaspati industry could still be competitive vis-a-vis imported vanaspati from Nepal if the government reduced the import duty to 55 per cent against 75 per cent in the last budget.


Calcutta, May 25: 
The public sector Steel Authority of India Ltd (SAIL) is set to report a loss of Rs 700 crore for the year ended March 2001, as against a loss of Rs 1,720 crore in the previous year.

The company’s board of directors will meet on Monday to finalise the financial results for the last fiscal.

Sources said the reduction in costs and better market realisations have helped the loss-making steel company come up with an encouraging performance.

The company has saved over Rs 525 crore during the year through a rigorous cost-cutting exercise while it achieved a 6 per cent rise in price realisations.

“Faced with a serious financial crisis, we took cost-cutting measures which yielded over Rs 3,000 crore in just four years. The exercise is still on and we hope to be able to be one of the most cost-effective steel producers in future,” they added.

Besides better price realisation and cost cutting measures, what has contributed most to reduce the losses is the proceeds from the sale of its power plants. The company has received Rs 391 crore from the sale of its power plants during the year.

A senior SAIL official said the company has set a target to break-even during the current financial year. “Last year, we sold 7.3 million tonnes of steel and our target for the current year is to add one more million to the sales. The signs of a growth in production are already seen in the first two months,” he said.

SAIL, however, has decided to go slow on further investment until its debt burden is brought down to a manageable level.

“The company may invest around Rs 200 crore this year for a new slab caster in Durgapur Steel Plant. Plans for some other small investments are also in the pipeline, but everything depends on the market situation,” he said.

The company will soon embark on a branding exercise, which, the official said, will give the products a distinct identity.

It will also build up a rural sales network by appointing dealers.

Since the export situation is very poor, it has decided to focus more on the domestic market, with special emphasis on the western part of the country, where the demand for steel is expected to pick up in the current year.


New Delhi, May 25: 
The government today indicated it would stagger dereservation of the small scale sector over seven-to-eight years, reviewing the process annually.

A high-powered group set up to work out ways of helping the small scale sector survive the onslaught from foreign imports has made this recommendation in its report, arguing this is the only way to save these companies from being shut down. However in the same breath, the report recommended that large industry be allowed to produce reserved items subject to a 30 per cent export obligation. Planning Commission member S.P. Gupta who headed the committee said, “We cannot let this vital sector die out as this is the biggest employer of organised labour in the country. Dereserving suddenly would mean death for this sector. We have to stagger things while we try to nurse this sector to better health.”

Gupta defended the decision to permit big business to manufacture items reserved for SSIs, provided they export it. “This will help build a cost-effective base, avoiding what many of them want to do—source products or components from abroad and sell here.”



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