Telco hunts for ally in China
Ford to launch Mondeo by year-end
Debt raising sans reserves for banks, FIs
Investors lose faith in UTI
Basic telephony plan of VSNL jammed
Bengal sets loan terms for Dunlop
Tata Tea net drops 20% to Rs 100.2 crore
Eveready sounds Toshiba, HK company
Foreign Exchange, Bullion, Stock Indices

Mumbai, June 19: 
Undaunted by a Rs 500.3 crore net loss in the 2000-01 fiscal, the second highest by any private sector company in India, leading automaker Tata Engineering and Locomotive Company (Telco) has now set its sights on China. It is scouting for a Chinese partner in its bid to tap growing demand in the world’s most populous country.

Telco is eyeing the two-tonne segment in China’s multi-utility passenger car market.

On home ground, the company leads in the MUV segment, topping the charts with the Sumo. It also has Safari in the premium end of the same segment.

“What we are looking for is a partner in China who will do the marketing and provide inputs like body-shells, while we will offer the other aggregates like engines,” a senior Telco official said here.

Auto analysts observe that China and India are the last bastions that global auto majors are trying to conquer.

The big three — General Motors, Ford Motor Company and Daimler-Chrysler, along with Japanese auto majors like Toyota are still struggling to penetrate China’s nascent auto markets, which at present has a size of 6.60 lakh units, roughly the same as India, which sold 5.90 lakh units last year.

“They have made their presence felt everywhere else,” he added.

In fact, most of the global auto majors have made a beeline for the Shanghai Auto Show going on now.

“China has a growing market,” N. S. Babu, Telco’s general manager for Cab Design, Auto Electricals and CAD Engineering Research Centre, said in an interview at the Shanghai Auto Show. “We are looking for Chinese partners but haven’t singled out a potential one yet.”

Babu is in Shanghai to promote the company’s Indica model fitted with a 1.4-litre engine and priced at about $ 12,080, the same price as the new Buick Sail sedan made by General Motors Corp’s Shanghai joint venture. Telco has not exported any cars to China so far.

Telco will have to compete with larger rivals such as Volkswagen AG, Toyota Motor Corp and General Motors for a share of the Chinese pie, which is set to surge by half-to-one million vehicles in five years, from about 660,000 units last year.

Babu said Telco has been attracted by China’s growing income levels, noting that the per capita income is higher in China than India.

The average annual per capital income is about $ 750 in China, compared with about $ 450 in India.

Expansions in China may also help offset Telco’s falling auto sales because of slowing growth back home, which led to a loss of $ 106.5 million in the year ended March 31.


New Delhi, June 19: 
Ford India is set to launch Mondeo—its offering in the top-end D segment —by the end of the year.

The car will be available in both petrol and diesel versions and is likely to be priced in the Rs 12-15 lakh range. The car will be competing with other models like Maruti’s Vitara, Honda’s Accord and Hyundai’s Sonata which are likely to be launched during the year.

The car has already been launched in Europe in November last year and its various models are priced at £ 16,000-20,000.

The car will be brought to India in a completely knocked down (CKD) form and assembled at Ford’s manufacturing facility at Chennai. The CBUs will be imported from Ford’s plant in Belgium.

Announcing the company’s plans to launch Mondeo later this year, Phil Spender, managing director of Ford India, said, “We have undertaken the market survey and are confident that there will be a niche market for the product. It is a 4,000-5,000 market and we will have a competitive market share.”

“The car will be customised to suit Indian conditions with higher ground clearance, better suspension and special induction shift (which will give the engine higher thrust while moving through waterlogged streets) specially designed for the monsoon season.”

The company will run a special training course for its dealers and enhance their infrastructure to service and sell the Mondeo.

“We have a tremendous investment in brand building we will continue to invest in it. This is important for the company,” said Randy Shockley, vice-president, marketing, sales and services.


Mumbai, June 19: 
The government may exempt banks, financial institutions (FIs) and non-banking finance companies from creating a debenture redemption reserve (DRR) after they raise funds through a debt offering. The breather, which requires amendments to the Companies Act, will boost the bottomlines of companies which have to transfer a part of their profits to the kitty —aimed at giving investors a safety net in the case of a possible default.

Union law minister Arun Jaitley indicated at a recent meeting with representatives of banks, FIs and NBFCs that the government would introduce appropriate amendments to the law which will enable them to raise funds without creating a reserve. “The minister has given an in-principle nod. An amendment to this effect will be moved by the government after he receives a detailed representation from us,” a senior FI official said. However, there are signs that the exemption will not apply to manufacturing companies.

Banks and finance firms wince at the DRR, saying they are already burdened with prudential norms such as cash reserve and statutory liquidity ratios. “We have told the government that a debenture redemption reserve will make fund raising through debt instruments unattractive,” officials added.

A new Section, 117C, introduced in November last year through the Companies (Amendment) Act, 2000 made it mandatory for companies to create a reserve and transfer ‘adequate amounts’ from annual profits until their debentures are redeemed. Money from the DRR cannot be used elsewhere.

While the move was introduced as a tool to protect interests of debenture holders, critics say many problems were overlooked. One is that returns to shareholders decline because a part of distributable profits is poured into the reserve.

Further, there is confusion over the word adequate used in Section 117C. Experts say the government has not clarified what is ‘adequate’, leaving firms free to think that even a minuscule percentage of profit may be set side for the DRR.

“If reputed companies capable of repaying the entire debt allot only a tiny portion of their profits to the reserve, why have it at all,” an official from one of the institutions said.

ICICI allotted only Rs 10 crore for DRR even though it raised over Rs 2,900 crore via debt instruments in 2000-01. Observers say there are other instances where firms which could have redeemed their entire debt have set aside only a fraction of their profits.

Sources point out that parallel guidelines laid down by the Securities and Exchange Board of India on DRR has confounded the issue.


Mumbai, June 19: 
Mutual fund major Unit Trust of India (UTI) has witnessed a sharp fall in market share to 59.60 per cent in May this year, from 67 per cent in March last year. The fund, which will announce its annual results on July 2, has seen a rapid erosion of its investor base in the past few months following the bearish phase on the bourses. But UTI’s loss has been the private players’ gain, who have steadily nibbled away at the mutual fund major’s marketshare.

Out of a total MF corpus of Rs 96,795 crore, UTI is now managing a corpus of Rs 57,684.40 crore, which is 59.60 per cent of the market. Back in March 1999, UTI had almost 77.94 per cent of the investible MF corpus, accounting for Rs 53,145 crore, out of a total industry size of Rs 68,193 crore.

However, UTI is unfazed by the market trend and claims that the retail market (comprising the small investors) still retains its confidence.

“We have almost 80 per cent of retail market reposing their trust with us,” Brij Gopal Daga, executive director, UTI told The Telegraph.

For the two months April and May 2001, the mutual fund has seen a net outflow of Rs 2,223 crore, while private sector mutual funds made commendable progress, garnering new funds to the tune of Rs 4966.44 crore.

From the figures made available to the Securities and Exchange Board of India (Sebi), analysts conclude that the loss of investor confidence in UTI has entirely benefitted the private sector players, who raised their market share from 28.64 per cent to 33.13 per cent in April and May 2001 at its expense.

Daga said UTI’s lacklustre performance was due to a total absence of retail money in the markets. “No retail money is coming into the markets.”

Analysts tracking the mutual industry seem to agree. “The private players are getting the cream of corporate funds which are deployed in short-term schemes,” an analyst said.


New Delhi, June 19: 
Videsh Sanchar Nigam Limited will not be allowed to enter basic telephony, communications minister Ram Vilas Paswan said here today, contradicting his deputy Tapan Sikdar’s earlier statement that the articles of association of public sector telecom units would be changed to allow the state-owned unit to enter this field.

In May, minister of state for communications Tapan Sikdar had said, “An amendment to the terms and conditions would be made that which would allow the telecom PSUs to get basic licences.”

He had clarified, “There is no proposal to make an amendment in the licence conditions that have already been announced. But a composite licence will automatically change the terms and conditions.”

Sikdar had said, “A single licence is inevitable and it has to be given. We are already working on convergence and, once we get the feedback on the draft communications which has been posted on the net, we will deliberate on it.”

The need to amend the memorandum of articles of association was necessitated since the government had stalled entry of telecom public sector units like Bharat Sanchar Nigam Limited and Videsh Sanchar Nigam Limited into the areas of basic and cellular telephony.

In the case of BSNL, which already fixed line services, the government had prevented it from obtaining licences in more lucrative circles like Delhi and Mumbai where the other state-owned unit—Mahanagar Telephone Nigam Ltd—operates.

A senior official in the department of telecommunications had pointed out that these PSUs cannot get licences since the equity of the holding company (the government in this case) is more than 50 per cent.

VSNL stands to lose its monopoly over international voice traffic in April next year—a year ahead of the earlier deadline of April 1, 2003. The state-owned unit has been keen to find ways to compensate for the loss of revenue. As a quid pro quo, the government has agreed to give it licences to offer national long distance (NLD) services and act as a category A internet service provider. However, VSNL was hoping to also get the approval for basic telephony which has now been nixed by Paswan.

NLD licence for Bharti

The communications ministry today issued the National Long Distance licence to the Bharti group. Paswan said, “The licence has been issued to Bharti. The licence was delayed since there were a few technical problems in the equity of the holding company which have been resolved.” Reliance has already received the NLD licence.


Calcutta, June 19: 
The West Bengal government has taken an in-principle decision to give loans up to Rs 10 crore to Dunlop India Limited (DIL) against the company’s properties.

The M. R. Chhabria-controlled firm was ready to hypothecate its city properties to raise a Rs 25-crore soft loan from the state government to resume holding operations at its Sahagunj unit.

“The government can lend a maximum of Rs 10 crore though the company has asked for Rs 25 crore,” said sources in the West Bengal Industrial Development Corporation (WBIDC). The state industrial reconstruction department had referred Dunlop to the corporation for financial assistance.

The government is ready to advance loans against the property at 62A Mirza Ghalib Street, though the company says it can mortgage the Dunlop House headquarters at 57B on the same road.

WBIDC sources said they were scrutinising the title deed of the 62A Mirza Ghalib Street building, which has now been lying vacant. “The property appears to be unencumbered. However, we have to examine it further. We will give the loan after we have wrapped up the legal examination.”

Nirupam Sen, the new commerce and industry minister, has said his government would consider Dunlop’s case because the fate of 4,500 workers at the Sahagunj factory is at stake. The unit has not been closed officially, but the management has not operated it or paid workers’ salaries since the past five months.

It is not clear how long the company can keep the unit going if the state government disburses the Rs 10-crore soft loan. Earlier, Chhabria had brought in Rs 26 crore, but the factory could not sustain operations beyond a few months.

Industry watchers feel the state government’s decision to give loans against mortgage of properties is designed to send the message that it is serious about the fate of workers at Sahagunj.

Meanwhile, Dunlop India has been given time until September 30 by the Board for Industrial and Financial Reconstruction (BIFR) to submit a revised draft revival scheme. It was supposed to do it by May 31.


June 19: 
Tata Tea Ltd has suffered a 19.59 per cent drop in net profit for the fiscal year ending March 31, 2001. Net profit declined to Rs 100.21 crore, from Rs 124.63 crore in the previous year.

The drop in bottomline was accompanied by a similar fall in topline with income from operations during the year declining to Rs 841.32 crore as against Rs 922.12 crore in the previous year. Tata Tea explained that income from operations was affected due to the general over supply of tea in the market, putting pressure on prices. With other income at Rs 49.84 crore (Rs 52.37 crore), the company’s total income was at Rs 891.16 crore (Rs 974.49 crore).

At its board meeting held today, the directors recommended a dividend at Rs 9 per share aggregating Rs 55.76 crore.

George Williamson

George Williamson (Assam) Limited has registered a 46.77 per cent fall in its net profit for the year ending March 31, 2001, to Rs 15.58 crore, compared with Rs 29.27 crore in the previous year.

The company, now no longer a part of the B.M. Khaitan group, has declared a dividend of Rs 10 per equity share for 2000-01. It had declared a similar dividend last year. Sales dipped marginally to Rs 198.04 crore from Rs 199.70 crore in 1999-2000.

JK net plunges

The net profit of JK Industries Ltd plunged almost 50 per cent to Rs 16.59 crore for the year ended March 31, 2001, as against the previous year’s level of Rs 32.75 crore.

Net sales also dipped marginally at Rs 1332.55 crore from Rs 1338.27 crore in the previous year.

Earnings per share dipped to Rs 4.77 crore from Rs 9.38 last year.

The company said the slowdown in the economy had affected demand, resulting in lower tyre prices. This, along with the increased input costs had impacted profits, it stated.

AllBank profit dips

The city-based Allahabad Bank, which registered a dip in its net profit to Rs 39.91 crore in 2000-01, has decided to curb expenditure by 25 per cent in the current financial year.

Chairman B. Samal chairman said, “We had posted a net profit of Rs 69.33 crore in 1999-2000. The fall in net profit in 2000-01 can be attributed to the provisioning for the voluntary retirement scheme (VRS), pension and gratuity liabilities, as well as to the increase in provisioning on advances and investments.”

Operating profit went up from Rs 252.51 crore in 1999-2000 to Rs 266 crore during 2000-01.


Calcutta, June 19: 
Eveready Industries India Ltd (EIIL) is in talks with Japanese multinational Toshiba and Hong Kong-based Gold Peak to re-introduce alkaline batteries under its brand name. Sources said the company has held “some preliminary discussions” with both the companies in order to re-enter the field of alkaline batteries.

“It will, however, take some time to take a decision as we are examining the trends in the Indian battery market,” they added.

Last year, Eveready exited the alkaline battery segment after selling its entire stake in Eveready Energizer Miniatures Ltd to its joint venture partner Energizer India Ltd.

Replying to the queries by The Telegraph, the company spokesperson said, “Yes, Eveready is planning to reintroduce alkaline batteries in the near future.”

While the spokesperson did not confirm whether the talks were being held with the Japanese or Hong Kong firms, she said, “Eveready is planning to source the best possible product and is in constant touch with various companies across the globe.”

The company has also maintained that being the “one-stop dry battery marketeer in India, we have various batteries in our stable from zinc chloride, re-chargeable cylindrical as well as for cellular and cordless phones. Adding alkaline batteries will complete the range.”

Sources said the company does not have any plans, at least in the short term, to set up a separate manufacturing unit for the alkaline batteries.

“Outsourcing the product from the best manufacturer makes more business sense than setting up a unit with huge capital investment,” they added.

The company is currently outsourcing rechargeable batteries from Gold Peak.

Referring to the enormous brand equity backed by huge marketing network, the company will certainly be able to carve a niche for itself in the alkaline battery market, they said.

Eveready, which has a battery market share of over 45 per cent, is expecting more than 10 per cent growth during the current year after a period of stagnation over the past two years. The company has sold 726 million batteries in 2000-2001 against a sale of 720.5 million in the previous fiscal.

EIIL, which is also a market leader in the torch segment with a 70 per cent market share, is in the process of introducing high-end torches fitted with crypton bulbs.

In order to rationalise the company’s human resources, it has introduced a new designation policy and abolished some posts like supervisors and assistants.

Outlining the new strategy, EIIL vice-president (human re-source) Dipankar Banerjee said the new HR initiative has linked the compensation packages to the performance.

“Our current focus lies on the management development keeping in view the current industry needs,” he said. The company has already undertaken 12 performance management workshops for its over 850 executives over the last few months in order to get them attuned to the new HR policy.



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