MTNL rate cut buzz angers cell firms
Indian Rayon to buy out Bull in PSI Data for Rs 71 crore
Hopes of rate cut send gilt prices soaring
Siemens-led combine in Bangalore airport plan
Tech stocks clobbered in 63-point sensex slide
Tribunal rejects CSFB plea
Foreign Exchange, Bullion, Stock Indices

 
 
MTNL RATE CUT BUZZ ANGERS CELL FIRMS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 25: 
Communications minister Ram Vilas Paswan appears set to invite a flood of lawsuits from private cellular operators when he announces a planned 30 per cent reduction in tariffs of mobile-phone services offered by Mahanagar Telephone Nigam Limited (MTNL) on Tuesday.

Private operators who got the wind of the decision have asked their lawyers to file a case at Telecom Regulatory Authority of India (Trai) and the Telecom Dispute Settlement Appellate Tribunal as soon as the announcement is made.

Earlier, MTNL triggered a price war in the cellular industry by launching its services in Delhi and Mumbai at Rs 2.50 per call and a monthly rental of Rs 400.

The two private operators in these cities reacted positively and brought down their airtime rates.

However, this time round, they are limbering up to challenge MTNL in courts, instead of the market.

“Market forces should determine the rates, not the government. It will be a mockery of whole service. Whatever may be the cut, MTNL will have to show that there is no element of cross subsidy involved,” said a senior executive in Bharti Telecom, which offers cellular service under the AirTel brand-name.

MTNL, which offers its service under the Dolphin label, is likely to announce a significant reduction in tariffs.

“It is true that we will be announcing a major cut in cellular rates and rentals. This could be in range of 25-30 per cent over the existing tariffs. We have taken the decision on the basis of a market survey initiated by the communications minister. We hope to bring monthly rentals closer to those of landline phones at Rs 250,” sources in MTNL told The Telegraph.

“We will also offer different tariff packages to meet the growing demands of customers. The communications minister will unveil the new set of tariffs on Tuesday,” they added.

MTNL has not penetrated deep into the Delhi’s mobile market, where Bharti and Sterling are locked in battle for customers. “We are ready to meet operators anywhere — in the market or in courts. They will be shown that there is no cross subsidy in our venture. MTNL is responding to the market demands and will not be part of any cartel which determines the fate of customers,” a senior company official said.

Sources say the declining cost per line as a result of technological advances have made a cut in cellular service rates possible. MTNL had planned to slash tariffs earlier, but then decided to wait for its network optimisation. Sources say that now it covers most of Delhi and a large part of the National Capital Region (NCR) have been covered.

Recently, Bharti and Essar Cellphone had announced attractive tariff packages to steal a march over each other.

Bharti fixed the monthly rental at Rs 295 and priced both incoming and outgoing calls at Rs 2.30 a minute. Essar had announced different plans carrying minimum commitment airtime with lower rates for incoming and outgoing calls.

   

 
 
INDIAN RAYON TO BUY OUT BULL IN PSI DATA FOR RS 71 CRORE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 25: 
In one of the largest cash deals in Indian technology sector, Indian Rayon and Industries Ltd will acquire a 50.35 per cent stake in PSI Data Systems from Groupe Bull of France. The AV Birla group company will pay Rs 186.80 per share to pick up the equity in a deal which is valued at Rs 71 crore.

Indian Rayon will also make an open offer to the shareholders of PSI Data Systems to acquire a further 20 per cent stake at the same price. This will winch up Indian Rayon’s total shareholding in PSI to 70.35 per cent and the total consideration on this count would be Rs 99.2 crore. The open offer would translate into an offer for acquisition of 15.10 lakh equity shares aggregating Rs 28.2 crore.

“PSI fits with the growth plan of the group to expand the presence in information technology business and will enhance Indian Rayon’s shareholder value,” AV Birla group chairman Kumar Mangalam Birla said.

PSI Data Systems would be AV Birla group’s first major domestic acquisition in the technology sector. Though the deal surprised market observers, operators were disappointed over the open offer price and, as a result, the PSI Data scrip was pounded on the bourses today. Since noon, the scrip was locked at the lower circuit filter as brokers were expecting a offer price of Rs 220-230 per share. The scrip finished sharply lower at Rs 134.35 after opening at Rs 166.30 and rising to a day’s high of Rs 170. The counter witnessed 5213 trades, resulting in a turnover of Rs 7.14 crore.

The deal surprised market observers as the group was largely expected to route this acquisition through Birla Technologies, its information technology division. This deal would thus mark a foray of Indian Rayon into the IT arena even as it is involved in businesses like viscose yarn, carbon black and ready made garments.

Birla said, “As its traditional businesses have limited growth opportunities in the immediate future, we have made a conscious decision to invest in knowledge-based high growth sectors.”

The acquisition of PSI Data by the Birlas follows Bull’s decision to exit from some of its businesses, as part of a global restructuring process.

Officials said that despite the exit of the French company, the association between the duo will continue with Bull according PSI a preferred vendor status.

While PSI Data Systems was floated in 1976, it was in 1988 that Groupe Bull of France acquired a 26 per cent equity in the company and later raised it to over 50 per cent in 1993. The company focuses on strategic technology solutions through a range of services, including software design and development, management consulting and systems integration.

Buyback deferred

Indian Rayon has decided to defer its share buyback plan following the precedence given to funding the acquisition of PSI Data Systems. The company has decided to fund the total consideration which would run close to Rs 100 crore through internal accruals. “The acquisition will be financed through internal accruals. In view of this development, the company intends to defer its share buy-back plans for some time,” A. Gupta, CFO, Indian Rayon said.

   

 
 
HOPES OF RATE CUT SEND GILT PRICES SOARING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 25: 
The rally in government security prices intensified today due to growing optimism that the Reserve Bank of India (RBI) would slash the bank rate further.

This, coupled with the speculation that the government would not announce fresh bond issues in the immediate term, led to a 10-20 paise increase in government security prices across the board, and a corresponding decline in yields.

For instance, the benchmark 11.50 per cent 2011 bond scaled an intra-day high of Rs 112.55 during the day against last week’s close of Rs 112.27; the yield on it fell to a low of 9.57 per cent. Dealers said the surge in the prices of government securities were reflected in corporate bonds as well.

The US Federal Reserve is slated to meet on Wednesday and there are high expectations that Alan Greenspan, its chairman, will announce another 50 basis point cut in its key interest rates. If that were to happen, the Reserve Bank will have to seriously look at bringing down its own bank rate, which currently stands at 7 per cent, at least by 50 basis points.

It has brought down the benchmark rate twice in this calendar year, by half a percentage point. With a comfortable liquidity position, and little signs of a pickup in the sluggish corporate credit offtake, there is a feeling that the RBI would embrace a cheap-money policy to kick-start the economy.

The expectations of a reduction in bank rate were accompanied by unconfirmed reports over the past few days that the Centre may not issue fresh bonds as it has received its advance tax collections — something that boosted security prices.

There were indications earlier that the government might announce a fresh bond issue to reduce its dependence on the ways-and-means facility with the central bank, a borrowing window from which it has already withdrawn over Rs 11,870 crore so far. However, these reports were proved to be untenable when the government announced a yield-based 10-year bond auction to raise Rs 4,000 crore, apart from re-issuing the 2018 security to mop up Rs 2,000 crore.

The Reserve Bank sucked out Rs 3,300 crore through a repo auction held today at a cut-off yield of 6.50 per cent, but that has not affected the volume of liquidity, which continues to remain comfortable as a result of sustained inflows from redemptions. While the central bank had last week sold 11-year bonds for a notified amount of Rs 4000 crore, analysts said redemptions have injected over Rs 6,000 crore.

   

 
 
SIEMENS-LED COMBINE IN BANGALORE AIRPORT PLAN 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
Bangalore, June 25: 
The Karnataka government has selected a Siemens-led consortium as its strategic partner in a joint venture which will build the Bangalore International Airport.

This was announced by state information minister B.K.Chandrashekhar after the state Cabinet approved the proposal made by a three-member technical evaluation committee.

Chief minister S. M. Krishna, who was supposed to make the announcement, asked his information minister to speak to reporters on his behalf about the decision. Chandrashekhar said the final clearance for the project would be granted after the Cabinet completes negotiations with the Siemens-Zurich Airport consortium. “We have given the companies two months to wrap up negotiations,” he said.

The Siemens-led consortium was preferred over the other shortlisted conglomerate, Hoectiff-Dusseldorf Airport. Siemens’ bid of Rs 1128 crore was the lowest against Rs 1487 crore quoted by Hoectiff-Dusseldorf Airport. It will hold 74 per cent of the equity stake in the venture with the state government.

   

 
 
TECH STOCKS CLOBBERED IN 63-POINT SENSEX SLIDE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 25: 
Jitters over the looming ban on carry-forward trading and concerns that first-quarter earnings will fall shy of expectations sent stocks into a tailspin today amid a scramble by investors to square up their positions.

The selloff pounded technology shares, some of which dropped by more than 8 per cent. A few were even languishing at their 16 per cent lower-end circuit filters in an indication that market operators were in a hurry to close all open positions. As a result, the Bombay Stock Exchange (BSE) sensex closed 63.09 points or 1.87 per cent down at 3318.67.

Estimates put outstanding positions on BSE’s carry-forward mode — banned from the week-end — at Rs 400 crore.

Among the frontline tech stocks hammered by the maximum possible 16 per cent were NIIT, HFCL (it touched a 2-year low), Global TeleSystems, PSI Data Systems, HCL Tech, Polaris Software and Mastek. Satyam Computers, Wipro and DSQ Software were among those which slipped by 8-15 per cent; some of them even tested their 52-week lows.

Brokers said another reason for the plunge was a report that the Unit Trust of India (UTI), the Big Daddy of the mutual fund industry, would seek Rs 1500 crore in loans from State Bank of India to meet mounting redemption pressures and to pay dividend on Unit Scheme-1964 (US-64), its flagship product.

In a reflection of the bearish undertone, the 30-share sensex opened lower at 3378.17 against Friday’s finish of 3381.76, moved down to a low of 3306.83 before closing at a two-month low at 3318.67, a net decline of 63.09 points or 1.87 per cent.

Brokers pointed out that the sentiment this week is likely to remain weak.

   

 
 
TRIBUNAL REJECTS CSFB PLEA 
 
 
OUR BUREAUX
 
June 25: 
The securities appellate tribunal (SAT) of Sebi today rejected the plea of stock broker Shankar Sharma and his firms, First Global Stockbroking and others, seeking interim stay of an order passed by the market watchdog, restraining them from undertaking fresh business as stock broker, merchant banker or portfolio manager pending enquiry.

The presiding officer of the tribunal, C. Achuthan, opined that it was not a fit case for his forum to interfere at this juncture. He also directed that the appeal filed by Sharma challenging Sebi’s order will be heard on July 19. The tribunal asked Sebi to file its reply by July 9.

Counsel for appellants, A. Chinoy, argued that the impugned order of Sebi was based on erroneous assumption that selling of shares by the appellants in a perfectly legitimate and normal manner would constitute market manipulation.

JPC to examine RBI

The joint parliamentary committee (JPC), investigating the multi-crore stock scam, will grill officials of Reserve Bank of India, Unit Trust of India and Madhavpura Mercantile Co-operative Bank in the second week of July for their role in the scam.

JPC chairman Shriprakash Mani Tripathi told reporters that while RBI and Madhavpura Bank would be examined on July 11, UTI will be asked to depose on July 12 and 13.

The JPC resumed its work today after a 10-day break, heard deposition from Business Standard editor T.N. Ninan, who felt that the scam involved an amount of Rs 5,000-6,000 crore and the market regulator, Sebi, could have understood the phenomenon much earlier, particularly the bull run on the stock markets.

Calcutta Stock Exchange officials, including its executive director Tapas Dutta, general manager Gautam Bhattacharya and secretary P.K. Roy, will depose before the JPC tomorrow.

The JPC, which will meet on July 27 and 28 as well, will resume its work on July 10.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.02	HK $1	Rs.  5.95*
UK £1	Rs. 66.57	SW Fr 1	Rs. 26.20*
Euro	Rs. 40.55	Sing $1	Rs. 25.50*
Yen 100	Rs. 37.91	Aus $1	Rs. 24.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4510	Gold Std (10 gm)Rs. 4425
Gold 22 carat	Rs. 4260	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7300	Silver (Kg)	Rs. 7365
Silver portion	Rs. 7400	Silver portion	   NA

Stock Indices

Sensex		3318.67		-63.09
BSE-100		1568.21		-51.99
S&P CNX Nifty	1067.00		-20.65
Calcutta	 113.15		- 1.96
Skindia GDR	 609.53		+ 0.33
   
 

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