Tough rules to qualify for options trading
Tata Steel scouts for global marketing allies
Irani’s hit swan song
Fitch downgrade makes rupee, sensex jittery
Trade gap narrows as imports dip
HM, Telco put brakes on production
‘Block closure’ in Jamshedpur
Jaguar, Volvo may hit roads by December
NIIT to rely on core strength to boost brand
Foreign Exchange, Bullion, Stock Indices

 
 
TOUGH RULES TO QUALIFY FOR OPTIONS TRADING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 1: 
The J.R. Varma technical committee, appointed by the Securities and Exchange Board of India (Sebi), today finalised stringent norms to select listed companies for individual stock options, coinciding with the introduction of rolling settlement on July 2.

“The scrips will need to have a record of continuous trading for 90 per cent of the trading days and non-promoter shareholding in the company should be at least 30 per cent,” Varma told reporters after the meeting here.

According to market observers, only 30 to 35 highly liquid scrips will qualify for options trading by virtue of today’s decision of the Sebi panel.

Final selection of the scrips for options trading will be made by the exchanges with the approval of Sebi.

According to some brokers, even some of the stocks represented in the 30-share sensitive index of the Bombay Stock Exchange (BSE) and S&P CNX Nifty of the National Stock Exchange (NSE) may fail to make the grade. The market watchdog’s decision to play safe at the outset was, however, appreciated by the market observers.

Varma said market capitalisation of non-promoter holding should be at least Rs 750 crore for the past six months and “average daily trading must be Rs 5 crore.”

The value at risk (VAR) of the stock and the index would be factored in and the ratio of daily volatility of the stock vis-a-vis the daily volatility of index should not be more than four times, at any time during the previous six months. Volatility estimates would be computed as per J.R. Varma committee report on risk containment measures for index futures.

“The VAR calculates the volatility based on index and gives measure of risks on a continuous basis and exchanges would study volatility trends of past six months,” Varma said.

The first six months would be considered as an experimental phase and thereafter the situation would be reviewed, he added.

The exchanges would apply norms to select listed company and Sebi estimates that initially 25-30 scrips would pass the test to be eligible as part of individual option list, he said.

However, bourses may choose a small set of listed scrips for experimenting with stock options, he added.

Stocks figuring in top 200 companies based on market capitalisation and volumes had better chance for making to the options list, he said.

Initially, stock options would be settled on cash basis for first six months and thereafter, exchanges would move to physical settlement system, he said.

Large open positions for the scrip in derivative market may distort price trends in the cash market, hence “we have decided to limit open position to 20 times the average trading volume in the cash market in last calender month,” he added.

Meanwhile, the authorities of the two premier stock exchanges of the country—BSE and NSE—today informed Sebi that they are in a position to start trading in individual stock options by July.

   

 
 
TATA STEEL SCOUTS FOR GLOBAL MARKETING ALLIES 
 
 
FROM SATISH JOHN
 
Mumbai, June 1: 
Tata Steel is gearing up to bargain from a position of strength in the steel industry.

The Rs 7,759-crore steel major today outlined plans to strike alliances with global steel makers for marketing finished steel products and for sourcing their raw material requirements.

“We’ve held talks with a few leading companies,” said R. C. Nandrajog, vice-president (finance), Tata Steel.

“A number of alignments are possible,” he added, but declined to reveal names of the companies involved in the deliberations.

The trend towards alignments has picked up in the global steel industry mainly due to the long recession experienced by the industry. The steel mega corp NKK and Posco of South Korea have successfully worked out a neat arrangement between themselves, as have companies in Japan and the US.

Nandrajog clarified that Tata Steel is holding talks on its own and no other Indian company is currently involved in the deliberations.

Analysts say this is the first time that a domestic steel producer is even harbouring thoughts of an alliance in an industry which is passing through a prolonged bear phase with prices close to the bottom of what steel industry circles call the ‘death valley.’

Analysts claim these steps will help the company not only to increase realisations but also to cut costs and fulfil Tisco chief JJ Irani’s dream of bringing down the cost of steel to $ 150 from $ 220.

According to Nandrajog, the benefits arising out of such alliances are tremendous. “We can realise better prices while talking to global car majors like Ford, General Motors, the auto industry being one of the largest customers of steel, if we are together.”

For example, he said, in view of the logistics involved, many US steel producers may want to farm out their purchase orders received from Indian subsidiaries of US auto companies to Tata Steel.

He pointed out such alliances come in handy even for sourcing raw material requirements.

For instance, Broken Hill Proprietary, the Australian coal mining conglomerate, supplies almost 40 per cent of the coal requirements to steel industry. To break the strangle hold that BHP has in the industry, it is better for companies to join hands and negotiate from a point of strength.

However, while Tata Steel is in talks with other steel producers, he could not specify any time frame for the alliances to reach fruition.

Meanwhile, the company will shortly exercise its call option on the debentures, which will involve a payment of Rs 700 crore to its debenture holders. The entire funds will be generated through internal accruals.

   

 
 
IRANI’S HIT SWAN SONG 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 1: 
Tata Iron & Steel Co Ltd today announced a 31 per cent increase in net profit at Rs 553.44 crore even after absorbing a whopping extraordinary expenditure of Rs 285.84 crore. In 1999-2000 Tata Steel’s extraordinary expenditure was a mere Rs 22.51 crore.

The robust result comes just six weeks before the company’s managing director J.J. Irani calls it a day at the Jamshedpur-based steel company.

A richer product mix, marginally improved realisations, continuing control over costs and slightly higher volumes have contributed to Tata Steel’s highest ever profit before tax at Rs 602.44 crore.

The board has recommended a 50 per cent dividend (Rs 5 per share) for the year as against 40 per cent in the previous year.

The Tata Steel scrip, however, could not break free from the general bearish trend prevailing on the stock markets today. It shed 70 paise to Rs 140.70 from the previous close of Rs 141.60.

Turnover rose 13 per cent from previous year’s Rs 6,890.87 crore to Rs 7,759.44 crore last year. The previous fiscal’s turnover, however, had included Rs 206.04 crore from the erstwhile cement business which was divested in October 1999. Gross profit increased to Rs 888.28 crore from previous fiscal’s Rs 499.10 crore.

The fourth quarter of the reporting year was the best ever quarter in terms of net profit which touched Rs 209.01 crore compared with Rs 186.23 crore of the previous year.

While the cold rolling mill started operations in August 2000, the continuous galvanising line-(II), which is the last unit in the complex, will commence operations from tomorrow, said Irani.

On the outlook for this year, Irani said: “Steel realisations will hold and will not rise. The price of steel cycle will go up steadily. The one who makes steel at the lowest cost will succeed.”

Notwithstanding the bearish trend in the global steel sector, he was bullish, “Any industry with a production of 800 million tonnes globally cannot be looked upon as a sunset industry.”

In the post-Irani regime Tata Steel board will sport a new look. B Muthuraman will be the managing director designate, T Mukherjee deputy managing director (steel), F A Vandrevala, deputy managing director (new and allied businesses) and A N Singh, deputy managing director (corporate services).

Irani denied a report which quoted him saying that Tata Steel was considering an entry into the telecom sector.

Flat products, like HR and CR coils constitute 63 per cent of Tata Steel’s output. Wire rods constitute 24 per cent and billets 13 per cent.

The steel major is planning to fine tune the product output and have two-third of the output from flat products and one-third from long products.

   

 
 
FITCH DOWNGRADE MAKES RUPEE, SENSEX JITTERY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 1: 
Disappointed by Fitch’s downgrading of India, the rupee today plumbed an intra-day low of Rs 47.08 per dollar, close to its historic intra-day low of Rs 47.10 per dollar.

Thursday’s downgrade by the international credit rating agency also sent the Bombay Stock Exchange (BSE) sensex hurtling 74 points.

The rupee, however, staged an amazing recovery in late hours of trading, spurred by reports that the Hyderabad-based pharmaceuticals major, Dr Reddy’s Laboratories, has repatriated a part of its proceeds raised from the ADS issue. While Dr Reddy’s raised $ 124 million, it is reported to have brought in $ 59 million into the country so far. This led to a couple of foreign banks unwinding their mammoth dollar positions. With exporters also joining the dollar selling spree, the rupee finally closed at Rs 47.00/01 to a dollar.

Fitch had yesterday downgraded the outlook on India’s sovereign ratings to negative from stable, citing well-flagged concerns about fiscal policy, privatisation and the deterioration in the foreign investment climate.

This led to panic buying of dollars from corporates and banks. While the Indian currency opened lower at Rs 47.04/06 per dollar, nervousness led it to touch a level of 47.07/08 per dollar, which was closer to the historic intra-day low of 47.10 on April 17. The situation, however, marginally improved for the rupee on dollar sales from the State Bank of India (SBI). Though the weakened currency subsequently traded in a narrow range, it staged a dramatic recovery on reports of improved dollar supplies.

Forex circles aver that the rupee will remain under pressure as concerns have begun mounting on the subdued FII activity. The stock markets, however, told a different story.

While the bourses initially seemed to have ignored the Fitch effect, even staging a minor rally, towards noon the impact of downgrade was felt, with massive selling being witnessed in both technology and old economy counters.

The BSE sensitive index opened at 3637.03 and rose to the intra-day high of 3651.32. Later, it met with strong resistance due to selling by foreign funds and fell sharply to 3555.74 before closing at 3557.64, as against yesterday’s close of 3631.91, a net fall of 74.27 points or 2.04 per cent.

FIIs, who had been sellers in tech counters like Infosys, Satyam Computer and others, were also seen selling old economy stocks like HLL, RIL and RPL among others.

   

 
 
TRADE GAP NARROWS AS IMPORTS DIP 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 1: 
A 9.88 per cent drop in imports coupled with over 5 per cent increase in exports has helped in bringing down the trade deficit in April by more than 55 per cent to $ 473.6 million compared with $ 1,090.82 million in the same period last year.

In rupee terms, the trade deficit dipped by over 50 per cent to Rs 2,215.78 crore compared with Rs 4,760.21 crore last year, as per provisional data released by the commerce and industry ministry.

India’s exports during April this year increased by 5.5 per cent to $ 3,492.18 million compared with $ 3,309.94 in the same month last year. In rupee terms, exports were Rs 16,337.66 crore, 13.11 per cent higher than Rs 14,444.16 crore during April 2000.

The major import item oil was valued at $ 1,196.83 million which is 7.6 per cent lower than imports valued at $ 1,295.29 million in the corresponding previous. Total imports in April is valued at $ 3,965.81 million which has declined by 9.88 per cent over imports of $ 4,400.76 million in April last year. In rupee terms, imports dipped by around 4 per cent to Rs 18,553.44 crore compared with Rs 19,204.37 crore in April 2000.

Non-oil imports were estimated at $ 2,768.98 million which is 11 per cent lower than import of $ 3,105.47 million in April 2000.

   

 
 
HM, TELCO PUT BRAKES ON PRODUCTION 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 1: 
The slowdown in the car sector is taking a heavy toll of C. K. Birla flagship Hindustan Motors, forcing the management to halt production as and when required at its Uttarpara plant in the state.

A voluntary retirement scheme for the 10,000 odd employees of the plant is also on the cards.

The company had to stop production for about 15 days in May and produced only around 600 vehicles, which is much lower than its average production of 2,000 cars per month.

The production recess is still continuing with the management issuing a notice on May 30 that no cars will be produced till June 3. This has spread panic among the workers of HM, who today staged a demonstration in front of the factory gate.

When contacted by The Telegraph, Prabal Chatterjee, senior vice-president of HM admitted the situation was very bad.

“We have had to close down production because sales are not picking up and we do not want our inventory to go up substantially. All the car manufacturers are passing through a slump and we are no exception.”

Chatterjee said, “A VRS is the only way to improve cash management. However, we are still examining the issue and have yet to decide on when to introduce the package.”

The company declared a VRS in February 1998 which was open till January 1999. The scheme received a lukewarm response, with only 1,100 people opting for it.

The management had earlier indicated it would like to shed another 2,500 people to make the plant viable. Chatterjee however, said that there is no such figure.

Last month the company was unable to pay salaries in time. Normally, the staff are paid on the third of each month and the workers on the seventh day of the month. Last month the staff were paid on the 23rd and the workers on the 25th.

Ajit Chakraborty of the Intuc-affiliated Hindustan Motors and Hyderabad Industries Employees Union said, “We feel the failure of the R&D department and the sales and marketing department has given rise to this crisis.”

   

 
 
‘BLOCK CLOSURE’ IN JAMSHEDPUR 
 
 
BY A STAFF REPORTER
 
Calcutta, June 1: 
Tata Engineering and Locomotive Company (Telco) today decided to suspend operations at its Jamshedpur unit for six days starting June 4, citing the recession in the commercial vehicle segment as the reason.

A company release issued in Jamshedpur said “poor market conditions and slump in demand of commercial vehicles,” has forced the company to go in for what it has termed as “block closure.”

The company witnessed a sharp drop in sales during the month of April, compared with sales in the same month last year.

Sources said the inventory has gone up substantially and the suspension of work was inevitable to clean up stocks.

Talking to The Telegraph on phone from Mumbai, a Telco spokesman said the factory will also carry on some maintenance job during the period of closure.

About 10,000 workers across six divisions will not attend work for these six days, leaving only a few maintenance staff to do so.

While there will be no deduction of salaries, the leave will be adjusted from the privilege and casual leaves of the workers, the release said.

The block closure, Telco maintains, will enable the company retain its competitiveness and protect shareholders’ interests.

Telco will also review its cost reduction and quality enhancement initiatives during this period.

   

 
 
JAGUAR, VOLVO MAY HIT ROADS BY DECEMBER 
 
 
BY A STAFF REPORTER
 
Calcutta, June 1: 
Ford India may launch high-end cars like Jaguar and Volvo by the end of this year, according to Phil Spender, president and managing director of the company.

Talking to newspersons here today Spender said: “Car manufacturing in India will be supplemented by importing our high-end cars. We may launch these cars in the current financial year as we feel they have a potential here.” The company, which achieved a turnover of $ 330 million in the last fiscal, is targeting to sell 20,000 units of Ford Ikon in India this year. It is also aiming at exporting 25,000 units.

Last year Ford India sold 17,500 cars in the domestic market and shipped 5,300 cars to Mexico, South Africa and Bangladesh.

Speaking about the export target, Spender said, “Out of the 25,000 cars, about 19,000 are expected to be exported to Mexico. We have found that the Mexican economy is doing better than what was expected. So we have kept higher target for this market.”

The company is also exploring export opportunities in other Asian countries. Despite the industry sales plummeting to 14.8 per cent in April 2001 over the same month last year, Ford has no plans to offer discounts to boost sales.

“We do not encourage price war,” Spender said categorically. The price of Ford Ikon varies between Rs 5 lakh and Rs 7.2 lakh.

   

 
 
NIIT TO RELY ON CORE STRENGTH TO BOOST BRAND 
 
 
FROM M RAJENDRAN
 
New Delhi, June 1: 
NIIT is hunkering down to focus on its core competence—IT education—to strengthen its brand image at a time when the slowdown in the software sector has started crimping industry bottomlines.

“Earlier anything went and survival was not that big an issue,” says NIIT chief executive officer P. Rajendran.

“Now we have to educate the student community about the wisdom on being selective: they have to be careful and they have to look at the options that are available.”

“Therefore, we have to invest much more in brand building, by educating our customers about what we are. We will bring more value into our products, introduce many more new technologies. Through all these methods, NIIT will march ahead,” he added.

During the next six to nine months, NIIT plans to educate prospective students about the need to invest their time and money in an institution that will at least continue to exist a year down the road.

“In life, you have to be very careful about making certain choices, and the choice of a career is one of the most important. I continue to believe that IT will offer much more promising career options than most other fields, in spite of the slowdown, which in any event is irrelevant for young people who are starting their higher education now because they would be passing out of the GNIIT course in a year, or two years or three years, by which time we will be back in a situation where there is a shortage of talent,” said Rajendran.

NIIT is confident that its basic model on which its IT education modules have been built would see the company through the rough times ahead. It is also bullish about the opportunities for various IT-enabled services.

“In spite of the high growth rates in the IT training business in India during the last 10 years, we have seen the market rejecting many companies that do not give good value. Now with a slowdown you can expect many more companies to be negatively impacted in the next six months,” said Rajendran.

“Customers will now differentiate between institutes like NIIT and others with weaker business models. This is the phenomenon seen in all downtrends,” he added.

NIIT believes Y2K provided India a big opportunity to prove itself, which also brought tremendous demand. As a result, many conservative American companies that may otherwise not have worked with any foreign company, got into India.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.02	HK $1	Rs.  5.95*
UK £1	Rs. 66.72	SW Fr 1	Rs. 25.85*
Euro	Rs. 39.85	Sing $1	Rs. 25.70*
Yen 100	Rs. 39.58	Aus $1	Rs. 23.40*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4435		Gold Std(10 gm)	Rs.4350
Gold 22 carat	Rs. 4185		Gold 22 carat	Rs.4025
Silver bar (Kg)	Rs. 7450		Silver (Kg)	Rs.7500
Silver portion	Rs. 7550		Silver portion	Rs.7505

Stock Indices

Sensex		3557.64		- 74.27
BSE-100		1734.90		- 28.45
S&P CNX Nifty	1148.05		- 19.85
Calcutta	 120.37		-  2.42
Skindia GDR	 664.19		+  2.04
   
 

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