Move to boost credit offtake
Pacts, buyouts key to RPL’s retail foray
BAT seeks support from VST board to raise stake
Buyback bug bites Bombay Dyeing,Britannia
Santro prices to go up by month-end
Yamaha buys out Escorts stake
Overseas flights keep the IA flag flying
Carrier Aircon net profit slumps again
United India to float personal insurance arm
Foreign Exchange, Bullion, Stock Indices

 
 
MOVE TO BOOST CREDIT OFFTAKE 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, June 12: 
The finance ministry today asked banks to work out sectoral interest rate structures designed to increase lending to the housing, pharma and small scale sectors.

The meeting held at the North Block tried to find ways to improve credit offtake in the face of a slowdown.

Ministry officials pointed out that banks were losing money by investing huge sums in 6.5 per cent Reserve Bank of India (RBI) repositories. Instead, they observed, it would be better to work out a separate prime lending rate for the three sectors and give them easier terms.

The meeting follows alarming reports by the RBI which points out that the banking industry’s credit portfolio has shrunk by Rs 9,980 crore in April and May, while its deposits have surged by 16, 205 crore.

Officials pointed out that investment in housing was reasonably safe as the houses were hypothecated against payments and small scale sector borrowers had a better repayment record as compared with large industry.

However, ministry officials conceded that there could be no across-the-board cut in lending rates.

The meet was chaired by finance secretary Ajit Kumar, and attended by revenue secretary, S. Narayanan and banking secretary, Devi Dayal, besides chairmen of FIIs and PSU banks. Today’s meet was a sequel to earlier meetings chaired by finance minister Yashwant Sinha for working out strategies to reverse the economic slowdown.

At these meetings, suggestions had been made for differential sectoral interest rate structures, officials said, adding the cement industry was one of the strong advocates of the idea.

Bankers, including S. S. Kohli, chairman of the Indian Banks Association (IBA), on their part, pointed out that one of the main reasons why private borrowing was not picking up was that the heavy government borrowing at Rs 41,000 crore in just two months had tended to crowd out other borrowers.

Meanwhile, in a separate meeting today with chiefs of IFCI and the Industrial Development Bank of India (IDBI), Kumar also discussed means to bail out the ailing IFCI.

Jalan stand

Concerned over the industrial slowdown, Reserve Bank governor Bimal Jalan today said it will continue with”rate easing bias” to ensure easy liquidity conditions to improve credit growth.

“We have softened interest rates ... the rate easing bias will continue,” Jalan told reporters after a high-powered committee meeting here.

“Credit offtake is poor. We are concerned over the downturn in industry. We would like industrial recovery to take place,” he said.

   

 
 
PACTS, BUYOUTS KEY TO RPL’S RETAIL FORAY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 12: 
Reliance Petroleum Ltd (RPL) plans to raise production from the present 27 million tonnes, as part of its growth strategy.

Besides, it will also adopt a multi-pronged approach of joint ventures and alliances, acquisition of marketing and distribution assets or development of its own infrastructure for venturing into retail marketing of key petroleum products.

Divulging this at the company’s 10th annual general meeting here at Jamnagar, Dhirubhai Ambani, chairman, RPL, said the company has the capacity to increase production beyond the rated capacity, through debottlenecking of operations at marginal capital costs. He, however, did not provide further details on the capacity increase consequent to the de-bottlenecking.

Maximising production through this manner forms one part of the growth strategy of RPL, apart from entering into retail marketing of petroleum products, investing in pipeline distribution infrastructure in the country and accessing global markets.

“RPL has the ability to increase production beyond the rated capacity, through debottlenecking of operations, at marginal capital costs. The increase in production from existing assets will contribute to increased profitability,” he stated.

It is expected that RPL’s competitive advantage of low per tonne capital costs will be further enhanced when the refining capacity is increased through debottlenecking. The logistics and related infrastructure to support increased volumes are already in place at Jamnagar.

Commenting on the plans of the company to enter the business of retail marketing of controlled products following the de-regulation slated for next year, he said RPL is now evaluating a multi-pronged strategy that includes potential joint ventures and alliances, acquisitions of marketing and distribution assets.

“RPL’s objective is to be one of the lowest cost producers of petroleum products globally,” he disclosed.

Its present understanding with Indian Oil Corporation for marketing and participation in the process for disinvestment of IBP, reflects this strategy, he noted.

Ambani added the company’s growth strategy will focus on leveraging its competitive strengths.

   

 
 
BAT SEEKS SUPPORT FROM VST BOARD TO RAISE STAKE 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
Hyderabad, June 12: 
Global tobacco major British American Tobacco (BAT) today approached the VST Industries board for supporting its third application with the Foreign Investment Promotion Board (FIPB) to increase stake in the company.

VST Industries today confirmed that it has received a formal intimation from BAT about the latter’s intention to increase its stake further. While there was no indication of the extent by which BAT plans to increase its existing 32.16 per cent stake, VST has convened a meeting of its board of directors on June 14, a day after the current open offer closes, to discuss BAT’s proposal.

“We have received a fax, dated June 11, from British American Tobacco plc, UK, which is interested in increasing their shareholding in our company,” VST secretary, N Sai Sankar, said in a communiqué to the Hyderabad and Bombay Stock Exchanges.

The announcement, which comes a day before the present open offer closes, is likely to put parent BAT on a collision course with its Indian subsidiary ITC, which has resisted previous attempts by the former to increase its stake in VST.

However, it could not be ascertained whether BAT has obtained a no-objection certificate from ITC before announcing its decision, since under the current FIPB guidelines, ITC must provide an NOC before BAT can go ahead with its stake hike plans.

When contacted, spokespersons of both ITC Ltd and Russell Credit declined to comment on the issue. “No comment is our comment,” the ITC spokesperson said.

BAT spokesperson Michael Prideaux was also unavailable for his comment in London.

Sankar said in the notice to the bourses that BAT has asked VST to “support” it in the event of its applying to the FIPB for increasing its stake. “As a pre-requisite to enable them (BAT) to apply to the FIPB, they have sought for support from the VST board and to consider acting favourably on a resolution at the next meeting of the board.”

“The board will be meeting on June 14, to take a view on this matter in accordance with the relevant Securities and Exchange Board of India (Sebi) regulations,” he added.

BAT has seen both its previous attempts to increase stake in VST fail, due to the government’s policy of promoting the growth of the indigenous tobacco industry.

Earlier, VST had received application money from BAT against a rights issue of Rs 60 crore which the former planned to float. However, following the FIPB’s rejection of the same, the BAT’s contribution was converted into an external commercial borrowing (ECB) of £ 3.98 million. Yet another application for converting the ECB into cumulative redeemable preferential shares is still pending with the FIPB.

VST had badly burnt its fingers diversifying into financial services and as well the agri business. While it sold its financial services arm to ITC, it disposed of its agri business to Global Green, a Thapar group company in 1999-2000. The company had also sold off its real estate in Hyderabad, Ooty and other places worth almost Rs 100 crore, to ensure liquidity in the core business.

The BAT announcement comes even as the Andhra Pradesh high court issued a two-week stay on June 8 on the operation on the public offer of Bright Star Investments and the counter offer made by ITC.

PTI adds: Bright Star spokesperson John Band said from Mumbai: “I wish them (BAT) luck. ITC has been trying for the past six-seven years to ensure that BAT is unable to extend its influence over VST or any other company in India for that matter.”

   

 
 
BUYBACK BUG BITES BOMBAY DYEING,BRITANNIA 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 12: 
In a major consolidation exercise at Neville House —headquarters of the Nusli Wadia group — flagship companies Bombay Dyeing Manufacturing and Company Ltd and Britannia today announced their boards will meet on June 14 to discuss buy-back proposals.

The Bombay Dyeing scrip opened today at Rs 40.25 and closed lower at Rs 39.65. The counter witnessed trades of 9,2286 shares on the Bombay Stock Exchange (BSE).

However, the biscuit maker fared better on the bourses, as the scrip, after opening at Rs 619, touched an intra-day high of Rs 628.45, and later closed the day at Rs 625. However, trading in the counter was bare and only 1792 shares were traded on the BSE today.

“It was in the air for some time,” analysts tracking the Bombay Dyeing counter said. Market circles said that the firm, which hit the headlines recently following the acquisition of a stake by jute baron, Arun Bajoria, is now likely to opt for a buy-back programme to ward off any hostile acquisitions in future.

Though speculations on this count have been on the rise since November last year, the company had then clarified that no decision has been taken to hike the promoters’ stake, which is currently put at around 40 per cent.

Bajoria had cornered around a 13.5 per cent stake in the company. Reports subsequently said the jute baron had scaled down his stake by over 8 per cent.

   

 
 
SANTRO PRICES TO GO UP BY MONTH-END 
 
 
FROM SUTANUKA GHOSAL
 
Irrungattukottai (Chennai), June 12: 
Hyundai Motor India Limited (HMIL) will increase the price of its Santro cars by 2.2 to 3 per cent by the end of this month.

Addressing a press conference here today, B. V. R. Subbu, director sales and marketing, said, “Initially we will increase prices of the Santro, following which we will increase prices of Accent.” The ex-showroom price of the Santro in Delhi varies between Rs 3.25-Rs 3.88 lakh depending upon the models, while in Mumbai, it varies between Rs 3.35 to Rs 4.01 lakh. In Calcutta, prices range from Rs 3.24 to Rs 3.87 lakh and in Chennai they are between Rs 3.23-Rs 3.85 lakh.

Explaining the rationale behind increasing prices, Subbu said: “The cost of production has gone up and we are adding new features to our cars. So the price increase is inevitable.”

The Korean chaebol today launched a new Accent GVS, which redefines premium cars in its class, with a price tag of Rs 5.65 lakh (ex-showroom Delhi).

The company will launch its super premium sedan Sonata in the country next month, expected to be priced between Rs 13-15 lakh. The company will also import multi-utility vehicles like Starex for the diplomatic missions in India. “Imports, will however, be in very limited capacity,” he said. HMIL, which sold 86,000 cars in the 2000-01 fiscal, aims to sell 1.03 lakh cars in the current financial year.

Hyundai India is weighing an initial public offering as well. Commenting on the issue, managing director Y. S. Kim said, “We are examining the matter. Nothing has been firmed up as yet.” HMIL is a wholly owned subsidiary of the $ 15 billion Hyundai Motor Company of South Korea.

Further, Hyundai India today rolled out its 200,000th car from its Chennai plant, a 1500cc prime beige Accent.

   

 
 
YAMAHA BUYS OUT ESCORTS STAKE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 12: 
Yamaha Motor Corporation of Japan today completed the acquisition of Escorts’ 26 per cent stake in their five-year-old joint venture which will now become a 100 per cent subsidiary which is being renamed as Yamaha Motors Company Limited India.

The deal is worth Rs 120 crore. “We have paid Rs 70 crore to Escorts to buy back the 26 per cent equity shares and the remaining Rs 50 crore for existing preference shares,” Yamaha sources said.

However, Yamaha has decided to pay a royalty of $ 6.50 to Escorts for each Rajdoot motorbike sold in India. The two companies had entered into a 10-year royalty agreement in 1996, which allowed Yamaha to use the brand name Rajdoot till 2006. Officials in Yamaha said, “After the 10-year period, the brand name will be retained by Yamaha and the agreement will not be renewed.”

As a 100 per cent subsidiary, the company plans to give a thrust to its voluntary retirement scheme (VRS) to streamline the organisation and meet global standards.

S.K. Taneja , executive director of Yamaha Motors Ltd, said, “VRS is the need of the hour. It’s an annual feature and is truly voluntary. Since 1996 when our joint venture was formed, about 1,200 people have opted for VRS. Last year, about 220 personnel opted for the VRS.”

“We will continue with it as the management has decided to meet the global standards,” he added.

Unveiling a new brand name and logo, Masahiko Shibuya, managing director of Yamaha Motor India, said, “The company’s Indian operations will now be completely aligned with Yamaha Motors worldwide operations after a decision to buy out the 26 per cent stake held by Escorts Group in the Indian joint venture.”

   

 
 
OVERSEAS FLIGHTS KEEP THE IA FLAG FLYING 
 
 
FROM JAYANTA ROY CHOWDHURY
 
Dubai, June 12: 
Indian Airlines is planning a major expansion in its international operations to tide over the present business difficulties.

V.P. Arora, deputy managing director of IA, told newspersons that the airline will start new flights to Hong Kong and Riyadh and add flights to its existing destinations in south-east Asia and the Gulf.

“We earn about 30 per cent of our revenues from just 17 destinations in the Gulf and south-east Asia as these operations are among our most profitable...we want to leverage the advantage here to subsidise some of the uneconomic business back home,” Arora said.

A maiden IA flight which touched down at Dubai from Hyderabad last Saturday signalled the start of this policy, he indicated. “Our business plans now are to improve upon the current network while expanding to new territories, directly connecting domestic hinterland cities like Hyderabad, Amritsar, Cochin and not just the metros,” the IA official added.

Indian Airlines suffered a loss of Rs 177 crore during the last financial year. High maintenance expenditure on an ageing fleet coupled with flights to loss-making routes in the north-east, besides increased fuel prices pushed IA into the red.

The airline plans to lease four more wide-bodied Airbus 320s and 6 turbo-props to add to its 59-strong fleet. The six turbo-props will be used in the loss-making north-east routes thereby releasing planes which, along with the newly rented Airbuses, will be used for IA’s international flights.

But the airline’s policy might not be a unique one and could actually fuel a new competitive race.

Emirates chairman and Dubai’s civil aviation minister Sheikh Ahmed Bin Saeed Al-Maktoum, who was also present at the party held to mark IA’s maiden flight, made it clear that Emirates too hoped to follow IA’s policy of flying direct to hinterland airports.

Sheikh Al-Maktoum said he hoped to gain permission to fly Emirates to Bangalore and Kerala soon after it launches eight flights between Dubai and Hyderabad.

He added that despite controversies he was happy that Emirate’s ground handling division D’nata had won contracts for operations in four Indian airports.

There had been reports in a section of the media that D’nata also operated in Pakistani airports and this could pose security problems for India.

Meanwhile, IA officials said due diligence for the sale of 40 per cent stake in the airline had been carried out by bidders, including Videocon. However, bidders have not yet placed their final technical and financial bids.

   

 
 
CARRIER AIRCON NET PROFIT SLUMPS AGAIN 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 12: 
Carrier Aircon, the troubled airconditioner giant, has seen its net profit slump for the second year running. Last week, the board refused to clear the accounts for 2000-01 and demanded an explanation from the management for its poor showing.

“We have registered an even lower profit this year,” admitted Anil K. Srivastava, managing director of the company but refused to divulge the figure. In 1998-99, the company had recorded a profit of Rs 22 crore which fell to Rs 9 crore in 1999-2000.

“The reasons for the slide in profits this year are totally external,” said Srivastava. The board has rescheduled its meeting to consider the accounts to June 26.

“The law requires us to submit the audited reports by June 30 and we will definitely stick to the deadline,” he added.

Carrier Aircon, a market leader for airconditioners both in home and institutional segments, first felt the heat of competition in 1999-2000 with the arrival of Korean multinationals LG and Samsung.

Carrier has struggled to regain its pre-eminent position because of the sharp fall in demand. Srivastava said, “In India, sales depend too much on weather both directly and indirectly. Rains in the month of June have given us lower volumes.”

“We expected that this year the Indian population will cross the threshold between necessity and affordability. Likewise, we had estimated a growth of around 35-40 per cent. But the growth registered is only 10 per cent.”

Carrier Aircon has had to cut its budgeted adspend for this year from Rs 21 crore to less than Rs 16 crore, which was the amount spent last year.

The company is planning to streamline operations. Srivastava said, “I project sales to be even lower in the next few months because the enquiries have fallen. Sales are generally dependent on the people’s interest.”

To compete with other market players like Voltas, Videocon and others who has been continuously cutting prices, Carrier is looking at ways to trim costs. Srivastava said, “Using new technology and simpler models we have lowered the assembling cost. We are even examining the possibility of shutting down some offices and godowns now that our own retail channel has been established. Staff cuts are also on cards but their will be separate schemes for management and non-management staff.”

Even with a dismal performance in last couple of years, Srivastava is expecting a lot from the Indian market. He said, “People need a maximum of two colour televisions in their house. The TV industry has a 75 per cent penetration. The air-conditioners requirement is much higher while the penetration is only 10 per cent.”

“The government is also ready to boost up the sales by cutting down the duties and taxes. But due to power situation the decision is still on hold. In another three years, we are about to see a boom in the AC market,” he added.

   

 
 
UNITED INDIA TO FLOAT PERSONAL INSURANCE ARM 
 
 
BY A STAFF REPORTER
 
Calcutta, June 12: 
United India Insurance Company (UIIC) will set up a subsidiary to launch personal line insurance schemes.

Stating this here today, UIIC chairman and managing director V. Jagannathan said the board of directors has already approved the proposal for setting up a separate subsidiary, to strengthen the focus on personal line schemes.

“A consultant will soon be appointed to prepare a feasibility report, and will be asked to complete the study within two months,” he said.

UIIC is also open to the idea of a joint venture and the company will start dialogues with potential foreign companies as soon as the subsidiary is set up, Jagannathan said.

Referring to the business potential in personal line insurance, Jagannathan said the company expects a quantum growth in the next couple of years.

“Most people are still not aware of the advantages of medical insurance and other personal insurance products, thanks to the lack of marketing. We have decided to gear up the marketing cell to strengthen the campaign,” he said.

The company expects to earn over Rs 400 crore from personal line offerings, including medical insurance.

United India is set to report a lower net profit of Rs 100 crore for the year ended March 2001, against a profit of Rs 150 crore in the previous year.

“We had incurred an underwriting loss of Rs 365 crore in the last fiscal year which has pulled down profit,” said Jagannathan.

The company, however, has earned Rs 465 crore as investment income.

“Although interest rates were sharply reduced during the year, our good mix of investment portfolios helped us earn a good income,” he said.

UIIC’s total premium income for the last fiscal stood at Rs 2,449 crore.

“This year our target is to minimise losses and double the net profit,” Jagannathan said.

To consolidate its position in the insurance sector, the company has decided to bring all its 1100 offices under a computerised network. Over 300 offices have already been computerised. The company will invest Rs 75 crore for computerisation against last year’s investment of Rs 150 crore and has appointed CMC, the public sector information technology major, for the project.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.47.02	HK $1	Rs.  5.95*
UK £1	Rs.64.68	SW Fr 1	Rs. 25.70*
Euro	Rs 39.90	Sing $1	Rs. 25.60*
Yen 100	Rs.38.62	Aus $1	Rs. 24.20*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs.4450		Gold Std(10 gm)	Rs.4380
Gold 22 carat	Rs.4200		Gold 22 carat	Rs.4050
Silver bar (Kg)	Rs.7325		Silver (Kg)	Rs.7395
Silver portion	Rs.7425		Silver portion	Rs.7400

Stock Indices

Sensex		3498.39		- 10.93
BSE-100		1710.95		-  1.11
S&P CNX Nifty	1127.15		-  3.95
Calcutta	 117.53		-  0.32
Skindia GDR	   NA		     -
   
 

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