Sebi picks 31 scrips for options
Tata Steel to slam brakes on capital expenditure
State Bank net dips 22%
SBI Caps to rope in foreign ally
Centre urges Dabhol partners to make up
Enron plea turned down
Global flotations of RPL,HDFC Bank approved
Institutions toe US line on investment
New strategy to hasten foreign funds inflow
Foreign Exchange, Bullion, Stock Indices

 
 
SEBI PICKS 31 SCRIPS FOR OPTIONS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 21: 
The Securities and Exchange Board of India (Sebi) has picked 31 shares for the introduction of individual stock options, but left most momentum stocks out.

Prominent among those who could not make it were Himachal Futuristic, Zee Telefilms, DSQ Software, Wipro and Global Telesytems. Market circles expect a surge in the prices of scrips which figure on the list and a slide in those which could not make the grade.

J R Varma, Sebi board member and the man behind the whole exercise who will leave the regulator soon, said those left out had failed to meet the volatility range and the condition that non-promoters should hold at least 30 per cent of the equity.

While premier bourses like BSE and NSE expect to kick off individual stock options from July 2, Varma did not specify a date. He said the eligibility norms would be reviewed after six months.

Infosys, Digital and Satyam Computer are the three stocks on the list which is packed mainly with sensex shares, except Videsh Sanchar, HDFC, Tata Tea and Tata Power. However, Nestle, Castrol, Colgate, Glaxo and NIIT are among those in the 30-scrip index which have not been included.

The Sebi technical group under J R Varma set up to prescribe risk-containment measures for new derivative products said stock options traded on the derivative exchange should have prior approval of the market regulator. Only American-style stock options settled in cash should be allowed for an initial period of six months.

The panel felt that option contracts should be at least worth Rs 2 lakh, carry a maximum maturity of 12 months and have a minimum of three strikes (in the money, near the money and out of the money).

The initial margin requirements will be based on worst- case loss of portfolio of an individual client, which will be calculated by valuing the portfolio under various sets of price changes.

A short option minimum margin equal to 7.5 per cent of the notional value based on the previous day’s closing value of the underlying stock of all short stock options shall be charged if the sum of the worst-scenario loss is lower than the short option minimum margin for the given underlying asset.

The net option value will be calculated as the current market value of the option multiplied by the number of options (positive for long options and negative for short options) in the portfolio.

Premiums for stock option positions will be paid in cash on T+1 day. The panel, however, said exchanges are free to set limits for stock option contracts.

   

 
 
TATA STEEL TO SLAM BRAKES ON CAPITAL EXPENDITURE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 21: 
Steel major Tata Iron & Steel Company (Tisco) has decided to restrict capital expenditure in the near future.

The company, which has completed four phases of modernisation at a cost of almost Rs 12,000 crore since 1980, said in its latest annual report that the future capex will cover only essential balancing facilities, replacements and renewals.

The modernisation plan, which started over 20 years back, has helped the company do away with obsolete plants/processes and emerge as one of the modern integrated steel plants in the world. However, Tisco does not intend to put a full stop to its expansion plans and will endeavour to identify opportunities for acquisitions in selected steel and allied business fields and diversification into promising areas, that will be in tune with its existing business.

Already, the fruits of its conservative spending are visible, as the company repaid long-term loans of Rs 509 crore during the year. After taking into account fresh withdrawals from loans arranged earlier, there has been a net reduction in outstanding long-term borrowings by Rs 106 crore.

Short-term borrowings also decreased by Rs 129 crore over the previous year. Further, there has been a reduction in the overall borrowings by Rs 235 crore.

Meanwhile, the company plans to exercise its call option in respect of the secured redeemable non-convertible bonds amounting to Rs 500 crore, in view of interest rates moving southwards.

However, despite its prudence, Tata Steel continued to splurge on Tata Cellular Ltd. During 2000-01, Tata Steel acquired 1.78 crore shares of Tata Cellular to raise its holding in the company to 4.09 crore shares. The investment is valued at Rs 40.99 crore.

The company also helped the Tata group raise its holding in Telco Ltd by acquiring 9 lakh shares during the year under review, taking its holding in Telco to 2.34 crore shares valued at Rs 74.81 crore.

   

 
 
STATE BANK NET DIPS 22% 
 
 
BY A STAFF REPORTER
 
Calcutta, June 21: 
The State Bank of India (SBI) has registered a 21.8 per cent dip in its net profit to Rs 1604.25 crore in the 2000-01 fiscal, as against Rs 2051.55 crore in the previous year.

The operating profit of the bank, before taking into account expenses for the India Millennium Deposit scheme (IMD) and the voluntary retirement scheme charged off during the year, stood at Rs 5263.16 crore, compared with Rs 4202.50 crore in 1999-2000, an increase of 25.24 per cent.

Addressing a press conference here today, chairman Janaki Ballabh said, “IMD issue expenses amounting to Rs 443.19 crore were fully absorbed in the year. Besides, the VRS-related expenses charged off during the year amounted to Rs 853.19 crore.”

The bank incurred an expenditure of Rs 2,270 crore on the VRS, to shed 23,000 employees out of its 2.3-lakh strong workforce.

“Further, write back of the excess provision for depreciation of investment (net of tax), contributed only Rs 84.75 crore to this year’s net, as against Rs 322.40 crore in 1999-2000,” Ballabh said.

The results of the largest bank in the country however failed to enthuse the scrip on the Bombay Stock Exchange. It closed at Rs 227.50, a meagre Rs 1.75 increase over the previous day’s closing of Rs 225.75.

Net profit, prior to providing for the IMD issue, VRS and the write-back of depreciation on investment, stood at Rs 2160.48 crore, as against Rs 1729.15 crore the previous year. Ballabh said the profitability target for this year is a 20 per cent increase over this figure.

The foreign offices of the bank earned a net profit of Rs 270 crore.

The domestic deposits of the bank grew by Rs 19,300 crore during the year.

SBI’s total loan portfolio, at Rs 1,13,590 crore, increased 15.8 per cent in 2000-01, as against a 19.1 per cent growth in 1999-2000. Net domestic credit at Rs 1.01,974 crore at the end of the fiscal, posted a 16 per cent growth.

The bank has made a provisioning of Rs 1432.53 crore for non-performing assets. “In respect of sub-standard assets which have become doubtful as per the revised RBI norms, the central bank has asked to provide a minimum of 50 per cent of the additional provision as on March 31, 2001. However, we have provided the full amount required on such assets,” Ballabh said.

The net NPAs of the bank are at Rs 6,856 crore, as against Rs 6,283.99 crore in the previous year. The capital adequacy ratio of the bank is maintained at 12.79 per cent.

Net interest income was Rs 8247.79 crore, as against Rs 6928.35 crore in the previous year — a growth of 19.04 per cent.

Ballabh said he expected interest rates soften further in the coming months.

   

 
 
SBI CAPS TO ROPE IN FOREIGN ALLY 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 21: 
SBI Capital Markets, a subsidiary of the State Bank of India, is likely to rope in a foreign strategic partner soon.

Speaking to The Telegraph, SBI chairman Janaki Ballabh said, “We are in talks with a foreign merchant banker for a strategic alliance. The deal will be finalised within another two months time.”

Ballabh said while SBI Caps is doing well in the domestic market, but it does not have any presence in the foreign market. “We want SBI Caps to have a presence in foreign deals also.”

He, however, refused to name the merchant banker but added it is well-known globally.

SBI holds 86.16 per cent in the equity of SBI Caps, with Asian Development Bank holding the remaining 13.84 per cent.

Sources said the foreign partner is likely to pick up equity in SBI Caps. “The bank is scouting for partners both in the USA and the UK,” sources further added.

SBI Caps, which has seven regional offices, provides a full range of investment, advisory and financial services mostly in the power, telecom, oil and gas, metal and mining and surface transport sectors.

Commenting on the fate of the other subsidiaries and associate banks of SBI, Ballabh said an approach paper has been drawn up and they are in talks with the government regarding the matter. “Nothing has been finalised yet,” he said.

   

 
 
CENTRE URGES DABHOL PARTNERS TO MAKE UP 
 
 
BY A STAFF REPORTER
 
Calcutta, June 21: 
The Centre has urged the Maharashtra State Electricity Board (MSEB) and Dabhol Power Company to be flexible in negotiating a settlement to the dispute over the power purchase agreement.

Addressing a seminar on power sector reforms here today, Union power secretary A. K. Basu said the central government was not a party to the agreement between MSEB and the Enron-promoted DPC, but was forced to intervene to resolve the standoff because it had “assumed grave proportions.”s Conceding that the tariffs the two sides agreed on were extremely high, he urged them to soften their stance to resolve the tangle quickly.

“MSEB has made it clear that it cannot buy the amount of power it was committed to because industrial growth had fallen short of expectations. However, the board must give a concrete undertaking on how much it can buy, while DPC should make a fresh offer,” he said.

Underscoring the need for power sector reforms, Basu said the Electricity Bill 2000 to be tabled in monsoon session would gradually end cross subsidies to agriculture. “There should be a minimum tariff and no free lunches,” he said, adding a political consensus on the issue had been reached at a conference of chief ministers.

On the critical issue of SEB arrears to central public sector units like NTPC and funding agencies, Basu said a committee of chief ministers would discuss the issue with the central government at a meeting on June 26.

State governments want a 100 per cent waiver of interest on their dues, but the Centre has agreed to half that amount as part of its effort to speed up the process of securitisation of loans.

WBSEB chairman G.D. Gautama said the board owes Central PSUs and lenders Rs 2600 crore, of which the interest component accounts for Rs 800 crore. “Once the interest waiver issue is resolved, we will float bonds to securitise the loan.”

Truce hopes recede

DPC today told the Mumbai high court that prospects of an out-of-court settlement of its dispute with MSEB appeared bleak, and it would prefer a determination over jurisdiction of Maharashtra Electricity Regulatory Commission (MERC) and validity of the arbitration clause in power purchase agreement.

   

 
 
ENRON PLEA TURNED DOWN 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 21: 
The Company Law Board has turned down Enron India’s petition to shift its registered office from Delhi to Maharashtra under section 17 of the Companies Act in view of some technical discrepancies that were found in the papers filed.

CLB has directed Enron India to provide more details on the balance sheet, which was not signed by any secretary. Though the law says signatures by the director, board members and auditors will suffice in a case like this, the CLB did not accept the application.

Enron’s representatives have been asked to update their balance sheet with the signature of the new secretary.

   

 
 
GLOBAL FLOTATIONS OF RPL,HDFC BANK APPROVED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 21: 
The Cabinet Committee on Economic Affairs (CCEA) today cleared the global depository receipts (GDR) issue of Reliance Petroleum Ltd which is expected to raise between $ 750 million and $ 1 billion and the American Depositary Receipts (ADR) issue of HDFC Bank for $ 150 million.

Briefing reporters after the meeting that was chaired by Prime Minister Atal Bihari Vajpayee, parliamentary affairs minister Pramod Mahajan said the CCEA approved the proposal of RPL for divestment of up to 780 million equity shares held by Reliance Industries in tranches through the GDR issue. Reliance Industries Ltd, which currently has an equity stake of more than 64 per cent, will divest a 14.99 per cent stake in RPL through the international float.

“This divestment will take place through the GDR issue of foreign currency convertible bonds (FCCBs) and ordinary shares,” he said, adding that the amount expected from the issue was between Rs 3500-5000 crore at current market prices. Last week, at the Reliance Industries’ annual general meeting, chairman Dhirubhai Ambani had said the stake sale in RPL would generate proceeds of at least Rs 3500 crore and capital gains of Rs 2000 crore for the parent company. Reliance Industries is expected to shovel the cash into other subsidiaries, especially its information technology and biotechnology ventures.

The investment is designed to take advantage of the proposal in the Union budget to waive tax on capital gains if the proceeds are invested in an IPO.

The CCEA also approved the proposal of HDFC Bank to make an international equity offering of $ 150 million with the right to retain oversubscription of up to 15 per cent of the issue size, he said. According to the Cabinet proposal, the money will have to be repatriated within a month.

In the case of HDFC, the $ 150 million ADR raised by the bank will augment foreign equity in the bank from 13.4 per cent to about 27 per cent. In case of oversubscription, HDFC will have the right to retain up to 15 per cent of the issue. The equity will be raised at the rate of Rs 230 per share.

The FIPB had cleared the HDFC proposal last month. The increase in the foreign equity will be in conformity with the cap on FDI inflow into a particular stock.

   

 
 
INSTITUTIONS TOE US LINE ON INVESTMENT 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, June 21: 
Prompted by the finance ministry, state-owned financial institutions like Industrial Development Bank of India (IDBI), IFCI, Life Insurance Corporation (LIC) and ICICI are introducing new classification norms for their investments.

The move assumes significance as repeated stock market scams and bear runs have eroded the market capitalisation of their assets considerably.

Finance ministry officials said the FIs have been told to reclassify all investments into three categories—held to maturity, available for sale and held for trading.

“Some of them have already adopted this practice; others will have to follow suit,” officials clarified.

Finance ministry officials said the new classification norms are based on the US model. The earlier system had only two categories—held to maturity and available for trading—that made switching securities from one category to the other difficult.

Individual FIs have to decide in which category their investment will figure at the time of acquisition itself, ministry officials said. Then new guideline lays down that no more than a quarter of the total investment can be in the ‘held-to-maturity’ category which, as the name suggests, would mean securities acquired with the intention to hold them till they mature.

Ministry officials, however, clarified that certain investments made by FIs will be categorised as “held for maturity” but will not be counted for calculating the ceiling. These would include investments in subsidiaries, joint ventures, private placements, debentures or bonds issued as advances or as part of project finance or working capital deal as also stakes of more than 10 per cent in a single company.

FIs will have the freedom to decide how much of the remaining investment will be in the “held for trade” and “available for sale” classifications.

Those held for trade will be traded on day-to-day basis “taking advantage of short-term price” movements. Investments categorised as “available for sale” would be assets which could be sold either through negotiations or otherwise.

Investments classified under the “held for trading” category have to be sold within 90 days. If the FIs are not able to sell them within this period because of exceptional circumstances such as tight liquidity conditions or extreme market swings, then they should be shifted to “available for sale” category. This will have to be done after providing for their price depreciation and with approval from the FI’s board of directors or high level investment committee.

Ministry officials said to protect small investors whose money is at stake, it has also been decided that “transfer of scrips from one category to another, under all circumstances, should be done at acquisition cost or book value or else market value and any depreciation on such transfer has to be fully provided for in the FI’s books of account.”

FIs may shift investments to or from the “held to maturity” category only with approval of the board of directors once in a year. Such shifting should normally be done at the beginning of the financial year and shifts to or from this category should not be normally allowed during the rest of the fiscal.

Those investments which have been categorised as “available for sale” could be shifted to the more active trading category to take advantage of bull runs, but with permission from either the board of directors or the high-level investment committees.

   

 
 
NEW STRATEGY TO HASTEN FOREIGN FUNDS INFLOW 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 21: 
The government today announced a six-point strategy to speed up the implementation of projects approved by the Foreign Investment Promotion Board (FIPB).

The strategy, which lays emphasis on implementation and closer interaction with foreign investors and Indian embassies abroad as part of the efforts to sustain the momentum of foreign direct investment (FDI) flows into the country, was devised after a series of internal discussions and reviews initiated by commerce minister Murasoli Maran.

As part of the strategy, the Secretariat for Industrial Assistance (SIA) will function as the secretariat for foreign investment implementation authority (FIIA) which will contact all foreign investors who have obtained FIPB approvals to ascertain the progress of the implementation.

The contact will initially be at the operational level and will be upgraded to the board level, if required, to make investors aware that the government is fully committed to ensure that FDI inflows into the country are smooth and implementation of projects is quick. The SIA will take up problems of investors with the appropriate ministry or agency and, if required, bring it before the fast track committee or FIIA, it added.

The FIIA, in turn, will continue with vigour and frequency in its interaction with the ministries of the central and state governments. Indian embassies abroad will monitor the FDI cases emanating from their regions on behalf of the FIIA. The embassies have also been authorised to accept FDI applications.

The SIA will adopt a sector-wise approach in pursuing FDI cases for more effective coordination with the administrative ministries. In addition, the current mechanism of reviewing mega projects and holding meetings on a region-wise basis and meetings with investors of key countries like US, Germany and Japan will also continue with greater frequency.

During the last three years and the present quarter, from 1998-01, the total amount of FDI approved was $ 25.8 billion while the actual FDI inflows totalled $ 13.1 billion, an official report said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.47	HK $1	Rs.  5.95*
UK £1	Rs. 66.08	SW Fr 1	Rs. 26.00*
Euro	Rs. 40.25	Sing $1	Rs. 25.45*
Yen 100	Rs. 37.85	Aus $1	Rs. 24.10*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4515	Gold Std(10 gm)	Rs.4420
Gold 22 carat	Rs. 4265	Gold 22 carat	 N.A
Silver bar (Kg)	Rs. 7325	Silver (Kg)	Rs.7400
Silver portion	Rs. 7425	Silver portion	 N.A

Stock Indices

Sensex		3405.64		-  0.41
BSE-100		1645.20		-  2.87
S&P CNX Nifty	1095.20		-  2.40
Calcutta	 116.12		-  0.09
Skindia GDR	 614.79		+  4.24
   
 

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