Upbeat FIs see Enron crisis blowing over
Bright Star offer too good for LIC, GIC to resist
Three suitors for Jessop
LIC strengthens bond with Corporation Bank
Panel gets tough on bank directors
Carrier board demands clarifications on accounts
Dunlop seeks Rs 25 cr loan
BSNL ultimatum to basic operators
Bank of India net profit jumps 46% to Rs 252 cr
Foreign Exchange, Bullion, Stock Indices

 
 
UPBEAT FIS SEE ENRON CRISIS BLOWING OVER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 6: 
Domestic financial institutions are confident that the uncertainty engulfing the Dabhol power project will blow over and foreign lenders would not do anything that would precipitate the crisis.

At the end of the two-day talk in Singapore, FIs are pretty sure that the foreign lenders would not invoke their guarantees.

According to sources, the FIs had made it clear to the foreign lenders that any such move (invoking guarantee) would lead to a stand-off and may spill over to other projects. “If they exercise the right, we will then reconsider whether it is prudent to extend guarantees for any future projects.”

The local lenders were also believed to have ruled out any further interest rate concessions to DPC, from the existing 16 per cent. “The 16 per cent interest is the rock bottom that we can hit,” IDBI officials insisted. IDBI’s prime lending rate is 12.5 per cent, while 3.5 per cent is the risk return on the loan.

Though the FI representatives are coming back, the foreign lenders have decided to extend the two-day meeting, which will now be held in the absence of the Indian lenders. The DPC officials will also attend the meeting.

“The response has been positive,” IDBI officials said. However, R.S. Agarwal, executive director, the man who led the Indian delegation, will return only by midnight tonight.

The Indian FIs, who have lent the bulk of the funds to the DPC project, are keen that the foreign lenders stick together, as the lending community is known to present a united front.

Thanks to the stance of the Maharashtra State Electricity Board (MSEB), the DPC imbroglio has spilled over to a wider forum, with the central government being dragged into the controversy by the Maharashtra government and its power distribution utility.

Negotiations on the issue are being held simultaneously at several forums, the IDBI official said. While talks between the sparring parties continue, the matter is also being dealt with at the bureaucratic, institutional and diplomatic levels.

The central government had also given an assurance that it might intervene to end the deadlock. Eventually, the Centre may have to step in and buy the excess power generated by the DPC plant and wheel it to the power-deficient states neighbouring Maharashtra.

The financial institutions have an exposure of Rs 2,463 crore, which is in danger of being invoked by the lenders.

The 2184 MW project, which costs $ 2.9 billion, was forced to cease production of power as the MSEB, its sole customer, decided to scrap the power purchase agreement.

   

 
 
BRIGHT STAR OFFER TOO GOOD FOR LIC, GIC TO RESIST 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 6: 
The Life insurance Corporation (LIC) and the General Insurance Corporation of India (GIC) have more or less decided to sell their holdings in VST Industries to the highest bidder.

“Their task has been made easier by the fact that Bright Star Investment’s revised offer price of Rs 151 per share is Rs 26 more than the re-revised offer of Russell Credit.

Senior LIC officials, however, said, “We are yet to formulate our strategy and confirmed that no decision has been taken on selling VST shares.”

According to sources, the insurance majors will make their decision known only on the when the offer closes, that is on June 13.

Sources said the most logical decision on part of LIC and GIC’ would be to accept the best offer, which is Bright star’s Rs 151 per share.

Any decision to defer the sale will result in the insurance companies losing an opportunity to liquidate shares at an attractive price. Ultimately, they are answerable to the policy holders. They have to take a decision with their interest in mind, said sources close to the institutions.

Bright Star stand

Bright Star Investments said today it was keen to meet British giant British American Tobacco (BAT) even as it had not taken any decision on buying out the 32 per cent stake BAT holds in VST Industries.

Asked if Bright Star was thinking in terms of acquiring the stake BAT holds in VST, Bright Star spokesperson John Band said, “We are keen to meet BAT and clarify that we are long-term players in VST. But there is no decision yet on buying out their stake in VST since right now, our focus is entirely on the success or otherwise of the open offer.”

Bright star has bid for an additional 30 per cent stake in VST Industries, and this will take its total shareholding in the Hyderabad-based company to 46 per cent, since it already has 16 per cent of VST’s equity.

ITC subsidiary Russell Credit has bid f or 20 per cent of the VST pie.

   

 
 
THREE SUITORS FOR JESSOP 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 6: 
The public sector Jessop & Company, recently put up for divestment, has found three suitors — Hinduja group company Ashok Leyland and two city-based firms Titagarh Steels and Srei International.

The three have sent in their bids after the department of disinvestment invited expressions of interest(EoIs) for Jessop a few weeks back. The three firms have already conducted a due diligence of the company.

J. P. Chowdhary, chairman of Titagarh Steel, admitted that his company had conducted a due diligence of Jessop. “Yes, we have carried out a due diligence of the company and I had personally gone to the factory at Dum Dum to take stock of the situation.”

However, Chowdhary was non-committal on whether his company will submit bids for Jessop. “We have not made up our minds yet and the issue is being debated by the board. We are interested in the company as we already have an interest in the wagon business. We are also evaluating what investment can go into the company.”

Jessop manufactures wagons, EMU coaches, roadrollers and cranes.

The company was referred to the Board for Industrial and Financial Reconstruction (BIFR) in 1995. After a series of hearings, BIFR ruled on March 29 that the company should submit a fully tied-up, comprehensive rehabilitation proposal, to the industry ministry before July 31, along with a copy of the valuation. The valuation is being done by A. F. Fergusson & Co.

BIFR also directed the company to inform prospective bidders about the dues of its workers. The State Bank of India, which is the operating agency for Jessop, will examine the proposals within four weeks.

The workers’ dues, which include provident fund liabilities, gratuity and arrears arising out of pay revision, are estimated to be around Rs 70 crore. The accumulated loss of the company is nearly Rs 350 crore. AT present, the company currently employs 1540 people.

Srei International, too, is interested in Jessop. When contacted, Hemant Kanoria, chairman of Srei said: “My investment banking division has done a due diligence of the company. I will be able to talk more about the matter after a week.

Efforts to contact Ashok Leyland, however, drew a blank. Managing director R. Seshasayee was not available for comment, with sources stating that he is arriving in the city today to discuss about Jessop. Efforts to reach chairman R. J. Shahaney also proved futile.

   

 
 
LIC STRENGTHENS BOND WITH CORPORATION BANK 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 6: 
Life Insurance Corporation (LIC), which has long nursed ambitions of a banking foray, today announced it will be raising its stake in the Mangalore-based Corporation Bank to 27 per cent from the present 12.32 per cent through a preferential offer of 2.4 crore shares.

The strategic alliance will see both partners leveraging each other’s branch infrastructure and other respective strengths. Thus, while the nationalised bank will distribute LIC’s life insurance policies through its network of 650 branches, akin to the ‘bancassurance’ common in developed nations, the insurance major will enable Corporation Bank set up offices on its premises, bringing banking services to its policy holders. LIC will also secure a berth on the board of the nationalised bank.

Though the price of the allotment is yet to be decided, LIC chairman G.N. Bajpai told newspersons here today that this would be done as per the formula drawn up by the Securities and Exchange Board of India (Sebi). Further, two independent valuers are also being appointed for the purpose.

According to market observers, based on the closing price of the Corporation Bank scrip on the Bombay Stock Exchange (BSE) today, the stake could be valued at around Rs 335 crore. The share today closed at Rs 139.55 after opening at Rs 138.95 and rising to the day’s high of Rs 140.85.

Following the preferential allotment, the paid-up capital of Corporation Bank will rise to Rs 144 crore from the present Rs 120 crore. The government’s stake in the bank, now put at over 68 per cent, will decline to around 57 per cent later.

Bajpai said LIC zeroed in on Corporation Bank as it was a well-managed, technology savvy bank, with an extensive presence across the country.

Corporation Bank chairman and managing director K. Cherian Verghese, said following the alliance, LIC premiums can be paid through the bank’s ATM network.

Meanwhile, Corporation Bank has reported a 12.70 per cent rise in net profit for the year ending March 31, 2001. Net profit rose to Rs 261.84 crore. For the fourth quarter, profit was however hit due to enhanced provisions. The net NPAs of the bank rose to Rs 171 crore over Rs 148.80 crore.

   

 
 
PANEL GETS TOUGH ON BANK DIRECTORS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 6: 
The Reserve Bank of India (RBI) constituted advisory group today suggested that the central apex bank consider introducing measures to make directors and boards of banks accountable.

It also suggested setting up a primary regulator with clearly assigned roles and responsibilities to co-ordinate between different regulators in the country.

The group said there was overlap in RBI’s role as a owner/owners’ representative and as a regulator/supervisor which should be corrected.

The panel said that advanced risk management capabilities must be in place in the banks by March 31, 2003.

Suggesting a more formal and rigorous assessment of boards’ performance, the panel said RBI should rate the boards’ performance with the provision that if the rating falls below a certain specified level, prompt corrective action should be triggered.

The group has also called for urgent changes in areas of corporate governance, internal control systems and management of risks.

Stressing on corporate governance and the accountability of bank boards, the panel was of the view that, “It should be same in all types of banks irrespective of their ownership.”

“The bank boards should modify their approach towards internal controls to have a firmer say in maintenance and improvement of internal control systems. Discussions between managements-boards on quality of internal controls should be institutionalised,” it stated.

RBI should develop a proactive policy for supervision of subsidiaries of foreign banks with branches in India and also for subsidiaries of Indian banks abroad and encourage such banks to submit consolidated supervision, it said.

   

 
 
CARRIER BOARD DEMANDS CLARIFICATIONS ON ACCOUNTS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 6: 
The board of directors of Carrier Aircon, the airconditioner giant, today failed to approve the audited accounts for the year ended March 31, 2001 because it wanted “further details and information on the accounts from the management which were felt were necessary and important for the purpose of approving the audited accounts.”

A fresh meeting of the board has been called on June 26 for the adoption of the accounts, which were prepared by Price Waterhouse, and to consider the recommendation of a dividend.

Carrier Aircon officials refused to say anything about the deliberations at today’s board meeting. It could not be ascertained whether the auditors had qualified the accounts.

Carrier, an undisputed market leader in air-conditioners till a year ago, has been losing its market share to new players like LG and Samsung of South Korea and National of Japan. It still leads the institutional market with a 36 per cent market share but has seen its share dwindle in the home AC market. During the year ended March 31, 2000, Carrier’s net profit tumbled from Rs 14.58 crore to Rs 9.16 crore. Its total sales turnover had also dipped to Rs 385.16 crore from Rs 404.39 crore.

   

 
 
DUNLOP SEEKS RS 25 CR LOAN 
 
 
BY A STAFF REPORTER
 
Calcutta, June 6: 
Dunlop India Limited today sought a soft loan of Rs 25 crore from the state government, against hypothecation of its Calcutta properties, to restart the holding operations at its Sahagunj factory.

Industry watchers described it as a move to put pressure on the state government. “The company wants to put pressure on the state government. The government will have to consider the case because the fate of the 4,500 workers of the Sahagunj factory is at stake.”

However, the company remained non-committal on the payment of arrear salaries of 7,500 workers at its Sahagunj and Ambattur factories.

Komal Chhabria, daughter of M.R. Chhabria and a director on the DIL board, today met state industry minister Nirupam Sen, seeking both the loan and cooperation from the government.

Later, talking to the reporters at Writers’ Building, Sen said: “They seem to be optimistic about carrying on the operations. I have asked them to submit their scheme so that I can examine it. The government will discuss the matter separately with the bankers. The government will help the company resume operations as far as possible.”

Chhabria, who called a press conference later in the day, said Sen has promised to revert back to the company within a fortnight.

The two buildings that will be hypothecated are Dunlop House on 57B Mirza Ghalib Street and the sales office at 63A Mirza Ghalib Street.

Dunlop has also been able to obtain an extension from the Board for Industrial and Financial Reconstruction (BIFR), for submitting a revised draft revival scheme (DRS).

Whereas earlier, they were supposed to submit the DRS by May 31, that has now been extended to September 30.

“We obtained the extension a few days ago,” said T. C. Goel, the newly appointed president of DIL.

Goel however, refused to comment when the employees’ arrears will be paid. “We want to resume the operations first,” he said.

   

 
 
BSNL ULTIMATUM TO BASIC OPERATORS 
 
 
FROM M RAJENDRAN
 
New Delhi, June 6: 
Bharat Sanchar Nigam Limited has threatened to cancel the interconnect agreement with Tata Teleservices Limited and other private basic telecom service providers if they fail to accept the revised interconnect provisions.

Under the interconnect agreement, BSNL carries forward the local, STD and ISD calls made by the subscribers of a private basic telecom company to any subscribers premises irrespective of the service provider.

A revenue sharing arrangement had been agreed by both parties based on the Telecommunication Interconnection Regulation, 1999, which allows private operators to retain 60 per cent of the revenue from a call while the remaining 40 per cent should be handed over to BSNL.

However, BSNL has now asked these companies to revise the interconnection charges. The government-owned telecom company has proposed a new system which has come into effect from June 1.

Under the new system, BSNL has proposed that the private operators should keep only 30 per cent of the STD revenue for the calls originating from their networks, while BSNL would retain the remaining 70 per cent.

In the case of international calls originating from private networks, BSNL wants to retain 80 per cent of the total revenue and give only 20 per cent for the private operators. In the case of local calls originating from the private networks, BSNL proposes to retain 50 per cent of the revenue.

Private basic telecom operators have opposed BSNL’s proposal saying that this would ruin them.

According to a letter from BSNL to Tata Teleservices Ltd, “We have made our best efforts to give the reasons behind our proposed change in the revenue sharing arrangement. In the absence of any alternate proposal from your side, it is not feasible for us to extend the date of effect of the proposal from June 1.”

The letter has also given TTL time till June 22 to come out with an alternate proposal “failing which we may have no alternative but to consider temporary suspension of the interconnect agreement,” states the letter to TTL.

Officials in BSNL said, “In a call of one-minute duration from Hyderabad to Calcutta, TTL gets Rs 15.12 for carrying the call from the subscriber’s premises to BSNL’s automatic exchange in Hyderabad covering a distance of 3-4 kilometres.

On the contrary, BSNL gets only Rs 10.08 for carrying their (TTL’s) calls over a distance of about 1516 kms from Hyderabad to Calcutta and further carriage of 8-10 kms for termination to the called subscribers’ premises.”

He added, “This is unjust and discriminatory. It causes under enrichment of the originating operator at the cost of the latter. The discrimination is more in case of ISD calls.”

BSNL has been following the recommendations of TRAI’s interconnection system with all the six private basic operators, since May 1999, based on the Telecommunication Interconnection Regulation, 1999.

   

 
 
BANK OF INDIA NET PROFIT JUMPS 46% TO RS 252 CR 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 6: 
Bank of India (BoI) has posted a 45.75 per cent rise in net profit to Rs 252 crore in the last financial year compared with Rs 173 crore in the previous fiscal.

BoI registered profit despite provisioning for Rs 130 crore payorder losses involving Ketan Parekh. The VRS accounted for extra-ordinary expenses of Rs 330 crore.

Operating profit stood at Rs 772 crore. The bank recovered non-performing assets worth Rs 1,038 crore during the year. Net NPAs have been reduced to 6.7 per cent from 8.6 per cent.

The bank is now planning to return around Rs 150 crore to the Union government, which would reduce the government’s stake from 76 per cent to 51 per cent.

ICI net up marginally

ICI Ltd has reported a 8 per cent increase in net profit at Rs 69 crore for the year ended March 31. However, the total income fell 6.48 per cent to Rs 841 crore from Rs 902 crore in the previous year, as it included ICI’s explosive business which was divested in September 1999. Operating profits also fell from Rs 86 crore to Rs 67 crore.

The board has recommended a dividend of Rs 5.50 per share, subject to shareholders approval.

Asian Paints fares well

Asian Paints has posted a 9.29 per cent increase in net profit to Rs 106.39 crore in the last fiscal compared with Rs 97.34 crore in the previous year. Net sales were up 12.23 per cent at 1,196.54 crore as against Rs 1,066.17 crore in the previous fiscal.

Bharat Petro net up

Bharat Petroleum Corporation Ltd (BPCL) today announced a 17 per cent increase in net profit to Rs 820.1 crore during 2000-01 compared with Rs 703.9 crore in the previous year, and declared a 75 per cent dividend including an immediate interim dividend of 40 per cent.

The board has recommended an interim dividend of Rs 4 per share, said Ashok Sinha, director (finance).

Tata Infotech net zooms

Tata Infotech Ltd (TIL) has posted 117.54 per cent increase in net profit at Rs 26.54 crore for the year ended March 31 compared with Rs 12.20 crore last fiscal.

The board has recommended 60 per cent dividend subject to shareholders’ approval, TIL said in a release. TIL’s total income was up by 21.12 per cent at Rs 523.62 crore last fiscal as against Rs 432.31 crore in the previous year, it said. Growth in income and profits were driven primarily by overseas business, it added.

Vijaya Bank record net

Vijaya Bank has earned an all time high net profit of Rs 70.73 crore in the last fiscal, said S. Gopalakrishnan, chairman and managing director.

He said the bank earned Rs 70.73 core net profit compared with Rs 53.84 crore in the previous year.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.46.98	HK $1	Rs.  5.95*
UK £1	Rs.65.93	SW Fr 1	Rs. 26.05*
Euro	Rs.40.11	Sing $1	Rs. 25.60*
Yen 100	Rs.38.92	Aus $1	Rs. 23.90*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4450	Gold Std(10 gm)	Rs.4355
Gold 22 carat	Rs. 4200	Gold 22 carat	Rs.4030
Silver bar (Kg)	Rs. 7350	Silver (Kg)	Rs.7400
Silver portion	Rs. 7450	Silver portion	Rs.7405

Stock Indices

Sensex		3457.31		-  2.73
BSE-100		1685.20		+  7.37
S&P CNX Nifty	 116.11		+  0.10
Calcutta	 121.42		-  0.47
Skindia GDR	    NA		    —
   
 

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