Interest cap on company deposits lowered to 14%
Tata Steel promoters rule out stake hike
UTI takes the lead in selling, sensex drops
Spectramind ties up with Cisco
Indian Hotels fourth quarter net up 20%
Little option for Wipro scrip but to take the hit
ITC weighs legal option on VST
Tata Chem plans to exit cement, stick to core area
HM puts revival on top gear
Foreign Exchange, Bullion, Stock Indices

 
 
INTEREST CAP ON COMPANY DEPOSITS LOWERED TO 14% 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, June 4: 
The government today reduced the maximum interest that companies are allowed to offer on their fixed deposits by one percentage point to 14 per cent.

The order, issued by the Department of Company Affairs in consultation with the Reserve Bank of India, followed a recent similar amendment by RBI of rules governing public deposits in the non-banking financial companies.

Officials said RBI decided on the 14 per cent ceiling taking into account two facts—most banks were offering 7-8 per cent interest on one year deposits and blue-chip companies who normally had triple A ratings in the debt market were paying just about 9.5-10 per cent interests on bonds. A notification handing out the 14 per cent rate flat was issued by the DCA today under the Companies Act, 1956.

“We calculated that the maximum interest companies should offer should be double the fixed deposit rate being offered by banks, anything more than that could turn into a sticky debt leaving investors in the lurch,” DCA officials said. Till date, the maximum permissible interest rate admissible on public deposits both in manufacturing and NBFC companies has been 15 per cent.

The Federation of Indian Chamber of Commerce and Industries however said, “While the decision is in line with RBI’s recent measures, we feel the government should leave it to individual to decide what rate they are able and willing to offer.”

DCA officials nevertheless protested that administered rate ceilings are necessary as many big corporates, including Delhi-based DCM Ltd have defaulted on fixed deposit payouts in the past. DCM and several other leading companies were embroiled in court cases that depositors had filed seeking return of capital and accumulated interest, in the last few years.

Bankers also tended to agree with the government’s action. Sameer Bhargava, SBI Mutual Fund’s vice president, said: “Regulation is necessary. Look at the earlier scenario when corporates were offering huge interest rates which used to attract greedy investors. But profit margins never permitted these high payouts to be viable. The net result was high rate of default in the corporate debt market.”

Bhargava added: “Profit margins for manufacturing companies are not expected to go up. On the contrary, expectations are of a profit squeeze due to increased competition. This means their capacity to pay out will be hindered in the near future too.”

Nor do bankers seem worried that higher interest rates offered by corporates would see depositors shift their deposits with banks. “Investors now tend to be wary of high interest rates,” said K. K. Sengupta, a leading merchant banker.

   

 
 
TATA STEEL PROMOTERS RULE OUT STAKE HIKE 
 
 
BY A STAFF REPORTER
 
Calcutta, June 4: 
J. J. Irani, the outgoing managing director of Tata Iron and Steel Co, ruled out any move by the promoters to raise their stake from the current 26 per cent in the company.

Talking to The Telegraph, Irani said, “The Tatas have already acquired 26 per cent stake in Tisco and there is no plan to raise the holding any further.”

The company does not foresee any hostile take-over bid although corporate India is recently rattled by such raids, he added.

“Even if such a bid takes place, we have strong faith in our shareholders that they will not favour any non-Tata person to take over the Tata company. Moreover, with 26 per cent holding, the promoters can always block any special resolution,” he said.

Irani, who was here to receive the CII-Exim Bank Award for Business Excellence-2001, said the company’s future growth prospects hinge on better cost control, improved and efficient supply chain, niche market servicing and strengthening brand equity.

“Our motto is what we call turning the Titanic. We have embarked on stringent restructuring measures, both corporate and business, so as to meet global challenges.”

The company, which has reduced manpower from 75,000 to 48,000 over a period of four years, will reduce it further by 3000 during the current fiscal.

“We have successfully convinced the trade unions that if Tisco has to grow in global competition, it needs to rationalise manpower as per the global standards. Otherwise we will simply sink,” he said.

According to Irani independent operational groups within the company will encourage healthy competition. The incentives and bonus may also be linked according to the performance of each group.

   

 
 
UTI TAKES THE LEAD IN SELLING, SENSEX DROPS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 4: 
Domestic financial institutions, led by the Unit Trust of India (UTI), today resorted to heavy selling and, in the process, dragged the 30-share Bombay Stock Exchange sensitive index below the psychological 3500-mark. The bellwether index lost 59.26 points to close at 3498.38.

According to market observers, UTI is likely to offload more stocks in the next few days in order to meet its US-64 dividend commitment which will be due shortly.

Market observers are also concerned about the mood of foreign institutional investors (FIIs) following the recent downgrade by Fitch and the subsequent observations made by Moody’s Investors Service and Standard & Poor’s on the country’s reform programme and budget deficit

The FIIs, as per recent figures, were net sellers to the tune of around $ 40 million. Some of the stocks in which selling pressure was seen were SSI, which declined by over 15 per cent, Satyam Computers, Infosys Technologies, HLL and Reliance Industries Ltd. The other stocks in which profit-booking was witnessed were Tisco, Gujarat Ambuja, Cipla and L&T among others.

Reflecting the rather negative undertone, the sensex opened at 3565.88. Though it touched a high of 3590.56, selling in various counters ripped off around 100 points.

Selling was also attributed to squaring up of positions on the penultimate day of current account on the National Stock Exchange (NSE). Volumes were extremely low at Rs 1,122.04 crore compared with last Friday’s turnover of Rs 405.74 crore.

   

 
 
SPECTRAMIND TIES UP WITH CISCO 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 4: 
Spectramind eServices, an IT-enabled services company, has signed up for Cisco’s internet protocol-based contact centre solution in the country. “We looked at solutions from various vendors and found that Cisco has the broadest range of hardware products and applications to set up a reliable information network,” Raman Roy, president and CEO of Spectramind said in a statement here.

Spectramind, which has invested about $ 10 million in the Delhi facility, has implemented IP-based converged infrastructure to provide a single IP-based voice, video and data infrastructure that is used by its contact agents. Cisco products are being used extensively to form the backbone of the IT infrastructure of Spectramind, the statement added.

According to Manoj Chugh, president (India and Saarc) of Cisco Systems: “Our key offering to Spectramind is a total solution integrating the voice and data requirements of the firm. Such a solution lowers operating costs and simplifies network administration.”

   

 
 
INDIAN HOTELS FOURTH QUARTER NET UP 20% 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 4: 
The Indian Hotels Co Ltd’s (IHC) net profit grew 19.86 per cent to Rs 47.86 crore for the fourth quarter of the last fiscal compared with Rs 39.93 crore in the previous corresponding quarter. Total income was Rs 222.59 crore during the reporting quarter as against Rs 195.03 crore in 2000.

IHC said that the improved performance was due to reduction in operating costs, particularly in food & beverage and staff costs consequent to the VRS implementation.

For the year ended March 31, while net profit increased by 3.14 per cent to Rs 116.79 crore from Rs 113.23 crore previous year, sales and operating income increased by 14 per cent from Rs 603 crore to Rs 687 crore.

In view of it’s centenary year, the board has recommended a 100 per cent dividend, IHC said in a notice to the Bombay Stock Exchange here today. It said the rise in profit was lower due to higher depreciation and interest costs aggregating to around Rs 23 crore.

Oriental Bank net dips

The Oriental Bank of Commerce (OBC) has posted a lower net profit of Rs 203 crore last year compared with Rs 278.62 crore in the previous year. The reduction is mainly due to payment of Rs 16 crore, leave encashment of Rs 31.75 crore and higher provisioning of Rs 108.93 crore.

The excess provisioning is in keeping with the bank’s policy of heading towards international accounting standards and preparing for the new BASEL accord which will become effective by 2004.

OBC’s business rose by 13.7 per cent to Rs 35,935.80 crore as against Rs 31,604.69 crore in the previous year. Deposits grew by 11.7 per cent to Rs 24,680.43 crore.

Total income was at Rs 3,026.44 crore against Rs 2,679.43 crore in the previous year.

   

 
 
LITTLE OPTION FOR WIPRO SCRIP BUT TO TAKE THE HIT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 4: 
The stiff eligibility criteria for options trading, stipulated by the Securities and Exchange Board of India (Sebi) took the vigour out of Wipro’s counter today as its share price fell 6.44 per cent to close at Rs 1,558.90 from Rs 1,666.30.

According to dealers tracking the stock, Wipro is out of the reckoning for options trading as the Sebi norms require availability of 30 per cent floating stock.

Last week when the J.R. Varma technical committee, appointed by Sebi, finalised the norms to select companies for individual stock options, it stated that, “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

In case of Wipro, the promoters, that is Azim Premji and his associates, hold around 80 per cent equity. So there is no question of 30 per cent floating stock.

The Wipro scrip today opened at Rs 1,687 before touching an intra-day low of Rs 1,551.10 and finally closed at Rs 1,558.90. The counter attracted 16,995 trades for 4.04 lakh shares.

According to brokers, only 30 to 35 scrips will qualify for options trading as per the norms set by Sebi.

Even some of the stocks represented on the Bombay Stock Exchange sensitive index and the S&P CNX Nifty of the National Stock Exchange may fail to make the grade, brokers said.

According to the rules framed, 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 volatility of stock should not be more than four times the index volatility.

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

   

 
 
ITC WEIGHS LEGAL OPTION ON VST 
 
 
OUR BUREAUX
 
June 4: 
With the VST drama entering the decisive phase after the deadline for price revision expired yesterday, Russell Credit, the investment vehicle for ITC, is for the moment lying low.

According to sources who are tracking the high-stakes battle, ITC is desperate to stall the bid of Bright Star and is seeking legal options to ward off the “crisis.” The company is also hoping that good sense will prevail upon its investors.

“We are confident that the VST shareholders will take appropriate decision in this matter after careful consideration of what is good for the company,” Russell Credit said in a faxed reply to a questionnaire of The Telegraph. The company, however, kept its cards close to the chest. “In consonance with the Sebi regulations, we are not in a position to disclose our acquisition details to media,” the company replied.

Sources, however, said that ITC ha already urged the financial institutions, which hold around 15 per cent in VST, not to sell their stakes to Bright Star which has no experience in tobacco industry.

Asked whether Russell will sell its stake in VST to book profit, the company said it “does not plan to sell its holding in VST.”

Meanwhile, ASK Raymonds, the company which is managing Bright Star offer, today protested Russell Credit’s “disreputable” campaign against Bright Star.

CEO of ASK Raymond John Band said: “Russell Credit’s press campaign against Damanis has been untruthful and disreputable. And it may well have misled shareholders.”

   

 
 
TATA CHEM PLANS TO EXIT CEMENT, STICK TO CORE AREA 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 4: 
Tata Chemicals Ltd (TCL) will focus on its core business areas—urea, soda ash and salt—and exit the non-core area of cement.

The company wants to be one of the top three players in its core areas of operations in terms of size, market share and profitability.

Divulging the company’s refreshed strategy to newspersons here today, managing director, Prasad R Menon said that while the company has already exited one non-core area of detergent, it is exploring the option of divesting the stake in cement business.

As part of TCL’s renewed focus, it is now embarking on a comprehensive restructuring programme covering operations, product offerings, marketing and logistics to enhance value for stakeholders.

TCL aims to be the lowest cost soda ash producer over the next 36 months by reducing consumption of raw materials, lower transportation costs, astute working capital management among others.

In addition to this, it is also restructuring the marketing team by strengthening its field force and segmenting it as per the customer base.

TCL is chalking out plans to increase its market share, improve overall efficiency and enhance profitability in salt.

It is evaluating the possibility of exporting vacuum salt to the international markets, particularly in West Asia and Sri Lanka.

Officials said that the company may post a slightly higher profit in the current fiscal, the topline may be dented by Rs 90 crore as production at its Mithapur complex has not yet fully recovered from a fire in early March. “It will take another three to four months to restore full production,” said Menon.

The company has the capacity to produce 875,000 tonnes of soda ash and 450,000 tonnes of salt per year.

   

 
 
HM PUTS REVIVAL ON TOP GEAR 
 
 
BY A STAFF REPORTER
 
Calcutta, June 4: 
Hindustan Motors, the flagship of the C. K. Birla group, is firing on all cylinders to make its beleaguered Uttarpara plant competitive.

To begin with, the auto major is launching its second round of voluntary retirement scheme (VRS) to get rid of 600 employees (applicable to all except directors).

The VRS is part of a four-pronged strategy that the company has chalked out so that the plant can break even by selling 20,000 vehicles annually. Apart from manpower reduction, Hindustan Motors will be introducing a single shift, lower material cost and procure raw materials from outside for its Uttarpara plant.

The VRS, which will be on a first come first served basis, will be launched on June 10 and remain open for a month. The single-shift system will also start from June 10. In general, the Uttarpara plant runs on three shifts.

At present, the company employs 10,000 people. The VRS will be offered to those people who have completed 10 years of service or are within the age group of 50-57 years.

The company has, however, remained tightlipped about the financial package that will be offered to the employees who opt for the VRS.

Talking to The Telegraph, B. K. Chaturvedi, executive director of the company said: “It will be somewhat like the last VRS offered in February 1998. However, VRS is not only the solution to make HM viable. We are taking other measures too.”

Prabal Chatterjee, senior vice-president of the company, said the company will offer VRS in a phased manner. “We will review the situation and introduce it as and when required.”

HM had offered VRS in February 1998 which remained open for one year. The company then offered Rs 1 lakh lumpsum besides the payment of statutory dues of provident fund and gratuity. Since the package was not lucrative, the scheme received lukewarm response with only 1,100 employees opting for it.

The unions are, however, dead against any sort of separation package.

Ajit Chakrabarty of Intuc-affiliated Hindustan Motors & Hyderabad Industries Employees Union said: “If the company offers us a lucrative scheme like the banks then only we can consider it. We will strongly oppose the scheme and see that it does not become a compulsory retirement scheme.”

Chaturvedi said the company has already approached the banks and financial institutions for funding the VRS.

Though the company has set a sales target of 20,000 cars to break even, Chaturvedi failed to specify when the company will be able to achieve this. “Selling 20,000 vehicles alone will not help the company to break even. We have to substantially reduce the overhead cost,” he said.

According to Prabal Chatterjee, the company will also have to achieve a spare parts sales of Rs 75 crore.

In the last financial year, Hindustan Motors had sold 19,992 vehicles. In the first two months of the current financial year the company has sold 1,800 cars.

The Intuc union which had called a meeting to review the situation has asked the management to provide the manning pattern for the single shift.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.02	HK $1	Rs.  5.95*
UK £1	Rs. 66.69	SW Fr 1	Rs. 25.95*
Euro	Rs. 40.08	Sing $1	Rs. 25.60*
Yen 100	Rs. 39.27	Aus $1	Rs. 23.55*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4455	Gold Std (10 gm)Rs.4360
Gold 22 carat	Rs. 4205	Gold 22 carat	Rs.4035
Silver bar (Kg)	Rs. 7450	Silver (Kg)	Rs.7490
Silver portion	Rs. 7550	Silver portion	Rs.7495

Stock Indices

Sensex		3498.38		- 59.26
BSE-100		1698.14		- 36.76
S&P CNX Nifty	1127.20		- 20.85
Calcutta	 118.40		-  1.97
Skindia GDR	 660.81		-  3.38
   
 

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