US-64 set to get a new look
States oppose Montek formula on power dues
CSE blames banks, tech failure for payment crisis
Aventis prescriptionto spur growth
Dial MTNL for cheaper cellular rates
LML skids, suffers net loss of Rs 41.3 cr
Cement makers hint at price hike
Indian Rayon takes a beating on bourses
Foreign Exchange, Bullion, Stock Indices

 
 
US-64 SET TO GET A NEW LOOK 
 
 
FROM SATISH JOHN
 
Mumbai, June 26: 
Unit Scheme-64 (US-64), Unit Trust of India’s (UTI) largest investment plan that has given investors years of steady returns, will shed some of the equity and real estate assets in its kitty as part of a makeover aimed at turning it into a pure income-oriented financial product.

The US-64 was conceived as a pure debt-oriented fund, but the proportion of equity in its portfolio increased over the years at the expense of fixed-return assets. Last year, it was believed to have had an equity exposure of around 64 per cent. The goal is to bring down that figure below 50 per cent in tune with the Deepak Parekh Committee recommendations.

The fund is also saddled with deadwood in the form of real estate worth Rs 800 crore, investments which have fetched little income for UTI’s flagship scheme. Sources say the entire chunk of real estate assets will be transferred to its reserves and the proceeds invested in debt for more stability.

There are indications that some equity will be shifted to other schemes. Sources say a part of equity in the US-64 pool will be shifted to equity-oriented plans to be launched soon.

An internal transfer of US-64’s equity holding will ensure that the mutual fund major remains in control of strategic stakes in bluechip companies like ITC and Reliance Industries. Further, it would be imprudent for UTI to sell out of good companies whose share prices are quoting at historic lows.

UTI hopes the churning will help redeem lost faith and squelch fears gripping investors, most of whom are retired people, over the viability and solvency of its mainstay product.

Officials have played down the US-64 restructuring by saying the effort is to only re-orient it along the lines of a report submitted by a committee under HDFC chairman Deepak Parekh.

There are growing indications that dividend on the scheme will be lower than the 13.75 per cent announced last year. However, it is unlikely that the fund will peg the payout at 9.5 per cent, the rate of return on public provident fund. UTI is learnt to have sold a substantial quantity of bluechip shares in recent months to meet its dividend commitments.

Meanwhile, the flagship scheme is unlikely to be linked its net asset value (NAV), rumoured to be around par now.

This was one of main recommendations made by the Parekh Committee, which had set a deadline of July 2002 for doing so.

There was a feeling at the time the proposal was made that the linkage would be established before the scheduled time as its kitty swelled in the infotech boom. However, much of those gains in the portfolio were lost to the tech rout.

Officials shrugged off recent reports that UTI had approached State Bank of India for a Rs 1500-crore line of credit, saying it always banked with the country’s largest bank.

   

 
 
STATES OPPOSE MONTEK FORMULA ON POWER DUES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 26: 
State governments today expressed reservations on the proposed one-time settlement of power dues to central utilities.

Several state governments, including West Bengal, Orissa and Madhya Pradesh, today strongly objected to the severe penalties proposed by the Montek Singh Ahluwalia Committee, which is examining the one-time settlement of power dues against the defaulting states.

Under the first report submitted by the Ahluwalia committee, 50 per cent of the surcharge/interest on delayed payments is to waived off.

The rest of the dues, amounting to the full principal amount, as well as the remaining 50 per cent of the interest/surcharge, aggregating Rs 33,600 crore, will be securitised through bonds to be issued through respective state governments.

However, the committee has suggested that national coal and power firms should stop power supplies to defaulting state electricity boards (SEBs) and the finance ministry should deduct outstanding dues from central transfer funds to those states.

The empowered group of chief ministers, which met finance minister Yashwant Sinha and Union power minister Suresh Prabhu today to consider recommendations of the Ahluwalia committee on the one-time settlement of dues, decided to meet again on July 6 to work out a mutually agreeable formula.

Today’s meeting was attended by Madhya Pradesh chief minister Digvijay Singh, Rajasthan chief minister Ashok Gehlot and Haryana chief minister Om Prakash Chautala, and the energy ministers of Andhra Pradesh, Gujarat, Karnataka, West Bengal and Orissa.

   

 
 
CSE BLAMES BANKS, TECH FAILURE FOR PAYMENT CRISIS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 26: 
Officials of the Calcutta Stock Exchange (CSE) today blamed banks and a technical glitch in the bourse’s on-line system for precipitating the massive payment default in March that saw stocks swoon to their lowest levels in the past four years.

CSE executive director Tapas Dutta, general manager Gautam Bhattacharya and secretary D. K. Ray made a technical briefing to the Joint Parliamentary Committee (JPC) investigating the multi-crore stock scam that led to the stock meltdown this year.

JPC chairman Shriprakash Mani Tripathi said Dutta told the committee that the banks did not inform the bourse that they would not be honouring the cheques submitted to them because the broker who had issued the cheques did not have money in his account. Instead, the banks delayed the payment of the cheques by four days which turned out to be “critical” for the stock exchange, Tripathi quoted Dutta as saying before the committee.

Tripathi, however, did not give the name of the broker, saying the committee did not quiz the CSE officials today as it was a technical briefing. The CSE officials will be called later to be examined as witnesses. Tripathi also said the CSE officials told the JPC that the payment crisis surfaced around March 9 when settlements for purchase of shares of Himachal Futuristic and DSQ Software were not made on the due date, which happened to be a Saturday (as the previous day was a holiday).

The settlement for these purchases were subsequently made on the next working day, which happened to be Monday, after Unit Trust of India stepped into bail out the bourse by purchasing the shares at a discounted rate, the CSE officials told the JPC. Another financial institution also purchased the DSQ Software shares at the discounted price and halted what had snowballed into a major crisis that threatened to engulf other exchanges.

CSE members also admitted there was a glitch in the software that prevented the system from dealing with the huge volatility in share prices.

   

 
 
AVENTIS PRESCRIPTIONTO SPUR GROWTH 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 26: 
Aventis Pharma Ltd (APL) will adopt a twin strategy of investing in existing brands, as well as introduce new ones from the parent’s repertoire, to create a strong presence in the country.

Some of the top brands in APL’s basket, previously known as Hoechst Marion, include Avil, Rabipur, Daonil, Combiflam and Soframycin. The company now plans to launch around 3 new products from its parent’s pipeline in the field of diabetes, rheumatoid arthritis and osteoporosis.

While Arava (rheumatoid arthritis) will be the first such new product to be launched in the domestic markets, it will be followed by Actonel in 2002 and Lantus, the anti-diabetes product, in 2003.

Briefing newspersons here today, Ramesh Subrahmanian, managing director APL, said the company’s Goa plant has been identified as a global sourcing base for Daonil, its major formulation, apart from other activities. Aventis holds around 50.1 per cent in Hoechst Marion, which will officially change its name to Aventis Pharma Ltd over the next two weeks, following the statutory approvals. The move is the result of the worldwide merger of Hoechst AG and Rhone-Poulenc SA that led to the formation of the Aventis Group in December 1999.

Pointing out that growth will be driven by launching innovative products, Subrahmanian said APL’s sales grew 5.4 per cent in the first five months of the year, adding a similar rate of growth is likely to be seen in the full year. Exports in the current fiscal are expected to be around 18 per cent of sales.

Commenting on the sale of its Mulund property near Mumbai, senior company officials divulged said the deal will be completed this year and will fetch APL slightly over Rs 30 crore.

   

 
 
DIAL MTNL FOR CHEAPER CELLULAR RATES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 26: 
Sparking a fresh rate war in the bitterly competitive cellular industry, Mahanagar Telephone Nigam Ltd today slashed its rental rates by 37.5 per cent to Rs 250 a month from Rs 400.

The state-owned telephony major also slashed its airtime charges by 48.15 per cent to Rs 2.00 per minute for outgoing calls from Rs 2.70.

MTNL is the first cellular operator that has brought the rental rates on a par with that for the fixed-line service.

MTNL, which offers cellular services in Mumbai and New Delhi under the Dolphin brandname, has also made roaming in these two cities free. This means a subscriber to Dolphin in Delhi will be able to use the same number in Mumbai.

The new rates will be applicable from midnight today. The company is in talks with a few private operators to provide international roaming.

Announcing the reduced tariff for MTNL’s cellular service, communications minister Ram Vilas Paswan said, “This is part of the efforts to make tariff more affordable to the customers and also to allow wider use of this facility.”

Industry observers pointed out that the cut was expected since the cellular subscriber base of MTNL—a late entrant into the field—had fallen to 9,884 in May from 10,080 in April.

“We are examining the implications of this rate cut for the industry. Simultaneously, we have also asked our legal counsel to look into all the aspects. Today’s announcement will not start any rate war since there is no major difference in airtime rates offered by private cellular operators in Delhi and Mumbai and the rates announced by MTNL,” said a senior executive in Cellular Operators’ Association of India.

“However, we will have to assess the impact of MTNL’s new rental charge. The basic operators will also be affected by the rate cut,” he added.

Airtel chief executive officer Sanjay Kapoor said, “The rates are already at an all-time low. There could be fine tuning of packages and value added services.”

MTNL will offer two new schemes for its services. Under Plan A, the subscriber can pay a rent of Rs. 250 per month and an airtime charge of 75 paise per 30-second pulse for incoming calls and Re 1 for an outgoing 30-second call.

Under Plan B, the rent will be Rs 375 per month and an airtime charge of 70 paise per 30 seconds for both incoming and outgoing calls. MTNL will also offer the standard tariff package announced by Telecom Regulatory Authority of India.

With the introduction of the new package, MTNL has slashed the monthly rental by 37.5 per cent under plan A and 6.25 per cent under plan B. The airtime rates have also been brought down by 48.15 per cent under plan B and 5.93 per cent under plan A.

   

 
 
LML SKIDS, SUFFERS NET LOSS OF RS 41.3 CR 
 
 
OUR BUREAUX
 
June 26: 
LML Limited has slipped into the red, suffering a net loss of Rs 41.29 crore for the financial year ending March 31, 2001 compared with a net profit of Rs 7 crore in the previous year.

During the last financial year, the company has notched up a turnover of Rs 628.18 crore, on a sales volume of 2,07,764 units. This is against a turnover of Rs 729.36 crore achieved on a sales volume of 2,83,071 units during the previous year.

According to the company, its performance has been affected due to the sharp decline in the market of metal bodied geared scooters, which witnessed a decrease in volume of 36 per cent.

Essar Steel prunes loss

Essar Steel Ltd has pruned its loss by 40.5 per cent to Rs 345.91 crore for the financial year ended March 31, 2001, compared with Rs 581.24 crore in previous fiscal.

Total income was higher by 3.8 per cent at Rs 2,565.05 crore as against Rs 2,470.15 crore in 1999-2000.

Essar Steel managing director J. Mehra said “While the operations of the company have improved, the stagnating demand and surplus capacity of over 30 per cent in the domestic market have led to severe drop in hot rolled coil prices by over 20 per cent during the year, thus negatively impacting the bottomline.”

Carrier net drops

Carrier Aircon Ltd has posted a 31.08 drop in its net profit at Rs 6.31 crore for the financial year ending March 31, 2001 compared with Rs 9.15 crore in the previous fiscal. The board, which met today, proposed a dividend of Rs 2.20 per share, the company informed the Bombay Stock Exchange in a notice.

Total income during this period was up at Rs 386.4 crore as against Rs 320.31 crore, it said.

   

 
 
CEMENT MAKERS HINT AT PRICE HIKE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 26: 
The domestic cement industry, which has often been accused of cartelisation, today hinted that prices are likely to go up.

According to the Cement Manufacturers’ Association (CMA), prices are likely to be higher by Rs 16-22 per bag (over ex-stockist price) in the four metropolitan cities as energy costs and royalty for limestone have risen.

The inflation adjusted fair ex-stockist price computed by Crisil Advisory Services (CAS) for Chennai, Calcutta, Delhi and Mumbai were in the range of Rs 170-200 per bag and retail prices are likely be higher due to the increase in transportation expenses and retailer margins, CMA president T.M.M. Nambiar told reporters here today.

During the past six months, cement prices in various markets were lower by 10-40 per cent compared to prices estimated by CAS, Nambiar said and added that low price trend was unsustainable, turning many units sick.

   

 
 
INDIAN RAYON TAKES A BEATING ON BOURSES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 26: 
The stock markets have given a thumbs down to Indian Rayon’s plan to foray into the infotech area and the related move to defer its buyback plan.

As a result, the scrip was heavily clobbered on the bourses even on a day when the BSE bellwether index sensex notched up a handsome gain of near 89 points.

Indian Rayon yesterday announced that since its acquisition of the 50 per cent Groupe Bull stake in PSI Data Systems will be funded through internal accruals, the buyback programme will be deferred.

Marketmen and analysts are not happy about its infotech venture as they perceive it as a non-competence area for the AV Birla group company. “The group could have routed the acquisition through Birla Technologies and not Indian Rayon whose core competence include viscose yarn, garments, carbon black and insulators,” an analyst said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.02	HK $1	Rs.   5.95*
UK £1	Rs. 66.41	SW Fr 1	Rs.  26.30*
Euro	Rs. 40.52	Sing $1	Rs.  25.55*
Yen 100	Rs. 38.02	Aus $1	Rs.  24.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4530	Gold Std (10 gm)Rs. 4440
Gold 22 carat	Rs. 4275	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7275	Silver (Kg)	Rs. 7370
Silver portion	Rs. 7375	Silver portion	   NA

Stock Indices

Sensex		3407.32		+88.65
BSE-100		1612.44		+44.23
S&P CNX Nifty	1096.60		+29.60
Calcutta	 114.36		+ 1.21
Skindia GDR       599.73	- 9.80
   
 

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