Enron ready to slash tariff 10%
CSE to auction cards of defaulters
IDBI net dips to Rs 691 cr
Iridium write-off
Cairn gas find raises hopes
Repo rate cut to 6.5%
Sale of power plants helps SAIL trim loss
Mahindra profit dips
Foreign Exchange, Bullion, Stock Indices

Mumbai, May 28: 
Dabhol Power Company (DPC) is ready to slash its tariff by 10 per cent after the second phase of the 2,184 MW project in Maharashtra is functional in June first week, according to Industrial Development Bank of India (IDBI) chairman S. K. Chakrabarti.

“DPC has assured its Indian lenders that it was willing to reduce the tariff after firing the 1,444 MW second phase. The per unit price will also reduce by another 10 per cent when the plant switches to liquified natural gas as fuel,” Chakrabarti told reporters here.

He said there is hope that DPC tariff will come down to Rs 3.50 per unit after it shifts to LNG.

Meanwhile, IDBI has teamed up with other Indian lenders to try and settle the dispute between global energy major Enron Corp and the Maharashtra government.

“We have taken the lead in forming a committee which will comprise members of other leading domestic financial institutions,” Chakrabarti said today.

The committee, headed by R. S. Agarwal, an executive director of IDBI, and comprising members from ICICI Ltd, IFCI Ltd and the State Bank of India, will meet on May 30, ahead of the two-day meeting with international lenders, to be held in Singapore from June 5.

IDBI, with an exposure of Rs 2,158 crore, has a significant stake in DPC. While its exposure stands at Rs 1,528 crore by way of guarantees, the rupee term loan itself is to the tune of Rs 630 crore.

“We are persuading them not to precipitate the crisis,” Chakrabarti added. He was confident that the international lenders will see reason and would not enforce their guarantees. “We hope that good sense will prevail.” The May 30 meeting will take an overview of the entire situation.

Merchant bankers, following the course of the events. said the Dabhol imbroglio, if not resolved, may leave terrible scars on the balance sheets of Indian lenders. International lenders, on the other hand, are insulated by blanket guarantees from the central government.

DPC being an unlimited company, the entire liability will fall on Indian lenders and the central government, in addition to the loss of face in the international community, merchant bankers said.

Chakrabarti was, however, of the opinion that the international lenders will climb down from their stringent stand, as most of them are government-sponsored institutions like the US Exim Bank and other export credit agencies. “We are in this kind of business for the past 37 years and so we know,” a confident Chakrabarti said. He said the DPC chief had visited IDBI offices recently before the issue snowballed into a major crisis, and explained that Enron was basically posturing for now.

The bone of contention between the DPC and the state government is the cost of generating power and the central government’s stand on taking part of the burden on itself.

The Godbole committee was set up to sort out the differences between the two, amidst fear that the exit of the prestigious project may have repercussions elsewhere. IDBI is optimistic that this fear may force the parties to reach an understanding soon.


Calcutta, May 28: 
The Calcutta Stock Exchange (CSE) will auction the cards of defaulting members to recover its dues.

The bourse has already obtained orders from the Calcutta high court to attach properties of six defaulting firms owned by Dinesh Singhania, Ashok Poddar, Harish Biyani and Ratanlal Poddar.

Disclosing the move to sell the cards, CSE executive director Tapas Dutta said, “It may take some time as the recovery process has just started,” he added.

The bourse’s sub-committee on defaulters is likely to declare some more members as defaulters for their failure to meet pay-in commitments in the settlement numbers 148, 149 and 150 in March.

“The sub-committee has already summoned the defaulters and asked them to pay up. If they fail to cough up the dues, the exchange will start similar proceedings against them,” sources said.

Dutta said around 10 brokers have defaulted on payments last month. “They have not defaulted on a very big amount and we are persuading them to pay up. However, if they fail, we will have no other option but to take legal action against them,” Dutta said.

Meanwhile, CSE has sought more time from the Securities and Exchange Board of India (Sebi) to submit its report on the payment crisis that rocked the exchange in March.

“It is not an easy task to prepare a report, given the complex nature of transactions in the stock market. Moreover, the fault in the system has also to be understood before you can make a report,” a member of the CSE managing committee said.

Sebi, however, has already completed its preliminary report on the issue and is expected to take action soon.

“We have conducted detailed enquiries and found several loopholes both in the system as well as in the management. Action will be taken shortly,” a Sebi official said.


Mumbai, May 28: 
Industrial Development Bank of India (IDBI) today reported a 27 per cent decline in net profit to Rs 691 crore for the year ended March 31, 2001, from last year’s Rs 947 crore.

IDBI’s profit before tax declined by 28.52 per cent to Rs 734 crore, as against Rs 1,027 crore in the previous year. Briefing newspersons, IDBI chairman S. K. Chakrabarti, attributed the decline in profits to the slowdown in the industrial sector. The income from operations showed little change from last year’s Rs 7619.1 crore, to Rs 7671.3 crore this year.

Despite lower profits, the IDBI scrip was in demand in view of the generous dividend of 45 per cent (Rs 4.50 paise per share), on a higher post-bonus equity. After hitting an intra-day high of Rs 26.90, the share cooled off later to close at Rs 25.50. Significantly, the total assets of the bank declined by 0.7 per cent to Rs 7,178.34 crore, compared with last year’s Rs 7,228.54 crore. IDBI’s net worth as on that date recorded a rise of 1.1 per cent to Rs 91,26.6 crore.

Meanwhile, laying the groundwork to transform itself into a universal bank, IDBI has decided to approach the Reserve Bank of India and the finance ministry for some concessions in the stiff norms laid down by the central bank.

While on the one hand, it has appointed Boston Consulting Group to chart out the strategy for the transformation, on the other, it has approached the central bank for a rethink on the norms.

IDBI wants the Reserve Bank to consider its loans to the infrastructure sector and the food processing sector as priority-sector lending. Nationalised banks are required to apportion a significant percentage of their lendable resources to priority sectors like the rural sector.

Secondly, it wants the RBI to permit it to scale down its statutory liquidity ratio (SLR) and cash reserve ratio (CRR) requirements as a special case. These ratios are required to be based on incremental deposits collected by the bank.

In an era of low interest rates, the need to transform into a universal bank is being acutely felt by financial institutions like IDBI and ICICI, as banks have a better chance of attracting funds.

IDBI is also gearing up for a foray into the life insurance sector. Talks are on with leading global insurance players, Chakrabarti revealed.

Regarding pension funds, Chakrabarti told newspersons that its asset management subsidiary, in collaboration with world leader Principal of the US, was a better candidate for tapping the funds.


Mumbai, May 28: 
IDBI will entirely write off its exposure to Iridium LLC, the over $ 5 billion global satellite project that went bust. “It is a dormant company now,” chairman S.K. Chakrabarti said. He, however, declined to divulge the amount that will be written off. Officials at IDBI said, being the largest financial institution among the consortium of lenders, it may have to write off almost Rs 40 crore. According to their estimates, ICICI may have lost Rs 30 crore while IL&FS may have lost Rs 40 crore.

The Indian FIs had taken a combined exposure to the tune of $ 70 million through IITL. HDFC was relatively unscathed having prudently pegged its exposure to only Rs 5 crore. Videsh Sanchar Nigam Ltd was another Indian outfit that was hit hard when Iridium filed for bankruptcy..


New Delhi, May 28: 
Cairn Energy of the UK is understood to have discovered a large gas field in the deep waters of the Krishna-Godavari basin in a structure called D-5.

Sources close to the company said the structure can, on present reckoning, yield gas at the rate of 10 million cubic metres a day. According to oil industry circles, the entire area, covering four structures, has the potential to emerge as a huge gas field as big as South Bassein.

Oil and Natural Gas Corporation (ONGC) had discovered gas at a nearby structure last year. Reliance Industries has two adjoining structures, D-4 and D-6, where drilling is expected to begin a couple of months later. If Reliance also strikes gas in commercial quantities, south India can do without imported liquefied natural gas (LNG).

Cairn Energy has been successful in striking oil and gas in most of the wells it has been drilling even as ONGC’s success ratio has been going down steadily. Cairn is the leader of the consortium operating the oil field discovered in association with Shell in Rajasthan. It also found gas in a few wells in the Cambay basin. The amazing success of Cairn has provoked criticism that something is basically wrong with the state-owned ONGC whose impressive success ratio up to the 80s, has been in the reverse gear in the whole of the 90s.

Enthused by this discovery, ONGC will drill a few more wells at its adjoining licence area to delineate the structure. The fields discovered by Cairn and others in the Cambay basin are expected to add 10 million cubic metres of gas for supplies to Gujarat. The field, Lakshmi, is already supplying 1.5 million cubic metres to Gujarat Gas; Gowry, another field, is to supply another 1.5 million cubic metres a day to PowerGen.

There are two more proven fields all of which could yield 2 to 3 million cubic metres each a day. The demand in the western region is far more than the supply. There is certainly scope for an LNG terminal to meet the increased demand for supplies. Petronet LNG Ltd has gone ahead with the EPC contract. Shell which is licensed to develop Hazira port still remains committed to an LNG terminal there.


Mumbai, May 28: 
In what is perceived as another signal for a low interest rate regime, the Reserve Bank of India today brought down the repo rate by 25 basis points to 6.50 per cent. The repo rate is one of the instruments used by RBI to mop up liquidity from the system.

The move comes exactly a month after the RBI cut repo rates by a similar 25 basis points margin, to 6.75 per cent. On April 27, it had announced a cut in repo rates, in what was then termed as a prelude to a cut in the Bank Rate. However, bankers and money market analysts are expecting a further cut in the Bank Rate, though not in the immediate term.

The Bank Rate is the rate at which RBI offers refinance to commercial banks and primary dealers in government securities and is used as a benchmark by commercial banks to set their interest rate on advances. It now stands at 7 per cent.

“With the floor for overnight rates moving down due to the cut in the repo rate, it sends a strong signal for a Bank Rate cut,” commented a senior banker, reflecting the upbeat mood in the community.

Though the RBI refrained from making any changes either in the Bank Rate or the cash reserve ratio (CRR) in its recent monetary and credit policy, expectations of an easy interest rate regime gathered pace after the central bank expressed its preference for lower rates. Speculations on such a cut were generated after the US Federal Reserve chairman, Alan Greenspan, announced a surprise cut last week, the fourth such reduction in this year.

“We are expecting a cut in the Bank Rate since last week. Despite today’s reduction in the repo rate, we still expect the central bank to come up with a 50 basis points cut by June,” said a senior debt analyst affiliated to a leading securities firm.

Some money market analysts, however, feel the repo rates have been reduced to assist changes in refinance facilities made by the RBI.

In the monetary and credit policy, RBI split the standing liquidity facilities into normal facility and “back stop” facility. The normal facility will be provided at the Bank Rate, while the back stop facility will be available at a variable rate linked with a repo rate/NSE-MIBOR. Earlier, while refinance was available at two levels of 7 per cent (the Bank Rate) and at another two percentage points above the Bank Rate, the RBI had indicated through the credit policy that it will provide liquidity support to market participants at market rates.

There are others however, who do not read too much into the reduction in repo rates. “The repo rate is a means of managing liquidity rather than signalling interest rates and is determined by market forces.


New Delhi, May 28: 
Steel Authority of India Ltd (SAIL) has managed to show a lower loss figure at Rs 728.66 crore for the year 2000-2001 by posting an income of Rs 286.89 crore from the transfer of its power plants in Durgapur and Rourkela to a joint venture with National Thermal Power Corporation (NTPC).

SAIL announced it had concluded the sale on March 7, weeks before finalising its accounts and hence was taking into account a transfer profit of Rs 286.89 crore.

The book transfer has enabled the troubled steelmaker to pare its loss from over Rs 1,000 crore. If it had not made this transfer and shown this “notional” profit, it would not only have shown a higher loss, but would also have to go before the Board for Industrial and Financial Restructuring to be notified as a sick company as there would have been an over 50 per cent erosion in its net worth.

Even with this lower loss figure of Rs 729 crore, the company is dangerously near the ‘sick’ mark. Its peak net worth as on March 31, 1998 was Rs 8,489 crore and already its total losses for the past three years has crossed Rs 4,022 crore. It has reportedly made a loss of Rs 150 crore in April this year. A loss of another Rs 80-odd-crore could really wheel steel behemoth into the sick bay.

However, SAIL chief Arvind Pande said, “Since we have budgeted a loss of Rs 150 crore in the current fiscal and plan to make profits from the next fiscal, SAIL is on the path to recovery.”

He insisted that SAIL is now nearer to a break-even position “through restructuring gains, (especially) after successful divestment of power plants at Rourkela and Durgapur”.

However, the company did manage to make a cash profit from operations of Rs 415 crore after a gap of two years.


Mumbai, May 28: 
The net profit of agricultural tractors-cum-utility vehicles major Mahindra & Mahindra Ltd has more than halved to Rs 120.56 crore in the last financial year compared with Rs 263.48 crore in the previous year. Net sales and income from operations were marginally down to Rs 3,538.41 crore compared with Rs 3,569.20 crore for the corresponding period of the previous year. The profit from operations is Rs 271.68 crore as against Rs 478.07 crore of the previous year.

However, despite the steep decline in profits Mahindra & Mahindra board of directors have decided to offer 55 per cent dividend. The outgo, inclusive of dividend tax is Rs 66.97 crore. In the reporting year, domestic sales of utility vehicles was 56,095 against 69,682 vehicles in the previous year. Mahindra and Mahindra continues to be the leader in domestic vehicle utility segment with 46.13 per cent market share.

In the tractor segment, the company increased its market share substantially to 33.6 per cent as against 27.1 per cent in the previous year. In all 79,237 tractors were sold during the year as against 70,571 in the previous year registering a growth of 12.28 per cent.

The company expects demand in the current year to remain sluggish. During April 4,456 vehicles were sold as against 5,028 in the corresponding period last year.



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