Batata, BPL in $ 2 bn mobile merger
AES open to bailing out Dabhol project
Tussle over A-I selloff reaches flashpoint
Bank of Baroda net dips 40%
Bengal terms to repay central power dues
Indraprastha MD removed
Stricter valuation norms for institutions
Foreign Exchange, Bullion, Stock Indices

Mumbai, June 28: 
BPL Communications and Birla-AT&T-Tata (Batata) have made it official — they will walk down the aisle to create India’s mobile services Goliath worth $ 2 billion.

The announcement was made at a press conference held in Tisco’s board room at Bombay House by Ratan Tata of the Tata group, Kumar Mangalam Birla of the Aditya Birla group and Rajeev Chandrashekhar of BPL Communications.

“We recognise that one of the most important requirements of this business is scale and size,” Tata said. He, however, said the management structure of the company will remain unchanged, and that all firms will continue to retain their own identities under a common strategy to be forged by all partners.

“Local identities will be preserved within the framework of a common plan. It will remain so until we have developed a neutral common brand,” he added. There are indications that a unified brand and corporate identity will be fashioned gradually.

Kumar Mangalam Birla was upbeat on the merger, saying he was delighted to see his company’s venture transform into the country’s largest-ever cellular services company. “Our original investment has today evolved into the largest cellular force in the country. This merger accords the benefits of scale and will take consumer service to a new high.”

The merged entity will have around 18 lakh subscribers — about a quarter of a market that is growing at a scorching rate — and it will be owned 50.68 per cent by Batata and 49.32 by BPL. AT&T, Birla and Tatas will each have 16.9 per cent. It is expected to result in significant cost savings, though the partners fought shy of spelling out figures.

Asked whether the combine would infuse more funds into the venture, Tata and Birla said they are open to all options for raising capital. “We will also be looking at an initial public offering at an appropriate time,” Birla told reporters.

Birla-AT&T-Tata is a joint venture between US telecom giant AT&T and two of the country’s biggest conglomerates, the Tata and Birla groups. It runs mobile networks in Maharashtra, Gujarat, Madhya Pradesh and Andhra Pradesh.

Jordan Roderick, head of AT&T’s international wireless operations, said the merger combined strengths of four organisations and would undeniably provide consumers the best that wireless communications has to offer in India.

BPL services Mumbai, Maharashtra, Kerala and Tamil Nadu through BPL Cellular and BPL Mobile Communications (Mumbai). France Telecom holds a 26 per cent stake in BPL Mobile while MediaOne, a US telecom operator snapped up by AT&T last year, owns 49 per cent of BPL Cellular. “We are in talks with France Telecom, which has been supportive, and they are keen to continue its investment in India.”

Chandrasekhar told reporters that BPL’s franchise in Maharashtra has been kept out of the merger because it cannot hold two licences in a state under the regulatory norms.

He hinted that operations might have to be sold off in Maharashtra, where both Batata and BPL vie for subscribers.

Analysts reckon that the Indian unit of Hong Kong’s Hutchison Telecom, which is BPL’s arch rival in Mumbai, and the Delhi-based telecom major, Bharti Enterprises, could be interested because it would give them a slice of the lucrative Maharashtra market and help them enter the western region.


Mumbai, June 28: 
AES India has said it will “consider getting involved” in the controversy-ridden Dabhol power project and other projects in the country if the opportunity arose, but clarified it has not made any formal proposal so far.

US energy giant Enron Corp is in a bitter battle over its $ 2.9 billion Dabhol power project, with the Maharashtra State Electricity Board (MSEB), the project’s sole customer.

The wrangle has given rise to speculation that AES India, — the Indian subsidiary of US energy major AES Corp — could take over the reins of the project from Enron’s Indian subsidiary, Dabhol Power Corporation.

However, in a press statement, AES said it had neither made any formal proposal to stakeholders, nor received any, to take over the project. AES was among the first global firms to enter India when the power sector was liberalised in 1992 and has so far invested a total of $ 155 million in two separate projects.

In 1998, it purchased 49 per cent of Orissa Power Generation Corporation, when the state’s power assets were privatised. Again, in September 1999, it acquired the Central Electricity Supply Company of Orissa. AES initially entered the country intending to develop and operate a coal-fired power plant in Orissa. However, the project was delayed and is still under development.

Enron’s investment in the Dabhol power plant is the country’s single largest direct foreign investment. However, the acrimonious row between DPC and the MSEB threatens the very survival of the high-profile project.

While Enron claims the state utility has reneged on its contractual obligations by defaulting on payments, the utility in turn alleges DPC has also violated several clauses in the contract.

Experts have voiced concerns that the dispute may deter potential investors. “However, the AES announcement may embolden the state government to pursue its strategy to its logical end,” an industry analyst said.


New Delhi, June 28: 
The tussle between civil aviation minister Sharad Yadav and disinvestment minister Arun Shourie over the proposed sale of Air-India could well turn into a battle royale over Shourie’s bid to rally the support of the airline’s trade unions to the selloff move.

Yadav’s office, obviously, does not like this one bit. It feels any talks with trade unions is its job and not the disinvestment department’s.

But after the Balco fiasco, where unions led protests against the selloff, the department of disinvestment does not want to take a chance. It wants to sweet talk the unions into supporting the selloff.

The Air-India union, which had earlier been considered a tame one, had come out in favour of disinvestment sometime ago. But it is now believed to be against the selloff.

When Yadav sacked Air-India’s former chief Michael Mascarenhas, the union virtually split. Trade union leaders who had supported disinvestment came out in support of Mascarenhas and claimed his departure would hit the sale, while the others rubbished the claim and said they were in any case set against the selloff.

The flagship carrier’s pilots are also not very enthused with the current selloff bid. A move by them to pitch in with their own offer to buy out the airline was struck down by the committee of secretaries, which had ruled that their bid to use money out of various statutory dues could not be entertained.

The department of disinvestment knows in all probability the selloff move will be mired in controversy, especially as one of the two bidders—the Hinduja group—is likely to be disqualified from the bidding on security grounds.

With just one bidder—the Tata-Singapore combine—moves by the department to go through with the sale would obviously be controversial. This is because rules framed for selling government-owned companies state that in such cases, there has to be a fresh round of bidding to widen the scope of the disinvestment and to give the government the best price possible.

Consequently, the department wants to clear as many hurdles as possible before going ahead with the actual sale.

Besides the unions, the department wants to smoothen out its relations with other decision-makers, for which the DoD is believed to be scouting around for a public affairs company.

The agency is likely to be asked to handle the controversial aspects of the sale and to explain to decision makers how transparent the decision making process has been.


June 28: 
Bank of Baroda (BoB) has registered a 40 per cent drop in net profit for the fiscal ending March 31, 2001. Net profit for the year declined to Rs 301.13 crore, from Rs 502.77 crore in the previous year.

The bank has attributed the drop in its bottomline to VRS expenses of around Rs 175 crore, apart from other factors such as stringent income recognition norms, excess depreciation and interest, that have not been recognised. However, its performance for the year was also marked by a rise in the bank’s non-performing assets (NPAs).

While gross NPAs rose to Rs 4,186 crore (Rs 3,897 crore), the net NPAs stood at Rs 1,851 crore (Rs 1,686 crore). As a percentage of net advances, it declined to Rs 6.77 per cent from 6.95 per cent in the previous year.

Commenting on the bank’s performance, chairman P. S. Shenoy said it has to be seen against the backdrop of the economy and the subdued growth in advances. For the current fiscal, he said the bank will place more emphasis on retail lending. In this regard, it is estimated that the percentage of retail lending to total outstandings will rise to over 7.5 per cent from 5 per cent in the previous year.

India Foils prunes loss

India Foils Limited has reported a lower net loss of Rs 21.09 crore during the 2000-01 fiscal, against Rs 40.40 crore in the previous year.

Net sales in the year came down to Rs 285.24 crore from Rs 308.23 crore while reduction in net loss was possible due to better cash management and a hefty decline of about Rs 12 crore in interest charges.


Calcutta, June 28: 
The West Bengal government has demanded a 3 per cent incentive for timely repayment of dues in future apart from a 100 per cent waiver of interest on the outstanding dues of the West Bengal State Electricity Board (WBSEB) to the central power utilities.

Speaking to The Telegraph, power minister Mrinal Banerjee said the state wants similar treatment for the amount that the SEB owes the Rural Electrification Corporation (REC), while its dues to Coal India Ltd (CIL) will be adjusted with the coal cess received by the state from the coal major.

“The meeting of the committee of chief ministers on June 26 remained inconclusive as the Centre’s proposals were not acceptable. We will meet again on July 6 to sort out the differences,” Banerjee said.

The WBSEB owes Rs 2,638 crore to the central power utilities, including the REC. However, the CPSUs claim it owes them another Rs 670 crore.

While the SEB claims it owes Rs 1213.57 crore to the National Thermal Power Corporation, the largest it owes any of the CPSUs, the NTPC, however, claims the board owes it another Rs 203 crore.

Similarly, while the board claims to owe Rs 418.62 crore to the Damodar Valley Corporation, the latter adds another Rs 416 crore to the figure.

The interest component of the SEB’s total outstanding dues, on which the state has sought a waiver, works out to around Rs 800 crore.

“Once the differences are sorted out, the WBSEB will issue bonds to securitise its loan,” Banerjee said.

The major dispute, however, remains on the state’s demand for an interest waiver on the amount it owes the REC. The interest component of the Rs 447 crore the board owes the REC being over Rs 400 crore, the latter is unlikely to agree to a waiver of interest and, in fact, has already moved the debt recovery tribunal.

Besides, the REC has said it will stop funding the defaulting states, including West Bengal.

Moreover, the Centre’s proposal to adjust the state’s dues with the stipulated central fund has also drawn the state’s ire.


New Delhi, June 28: 
Rajeev Sharma, the managing director of Indraprastha Gas Limited which supplies compressed natural gas to the capital. Sharma, who was on deputation from Gas Authority of India Limited, has been asked to revert back to his parent company.

IGL is a joint venture of GAIL and Bharat Petroleum Corporation Ltd. Sharma’s place is likely to be taken by A. K. Dey, currently executive director in GAIL.

Sources in IGL said the Union ministry of petroleum was miffed with Sharma and brought pressure on the GAIL board to remove Sharma. Sharma’s deputation to IGL was to end in September this year.


New Delhi, June 28: 
Alarmed by the steep decline in the value of investments made by state-run financial institutions (FIs), the government is trying to get them to adhere to a new, more stringent set of valuation norms which seek to bring about a greater degree of prudence in funds deployment.

The rules will force the likes of Industrial Development Bank of India (IDBI) and IFCI to revalue investments in “held for trading category” every month or even fortnightly, to record whether there has been net appreciation or depreciation in income accounts. New book values of these scrips, in which FIs trade at least once every 90 days, will have to be computed and reported.

“This will help the government understand the financial position of FIs better and to take preventive action, instead of offering bailout packages after they land in trouble,” said a senior official of the finance ministry, which has been trying to piece together a revival kit for IFCI. There are fears the malaise at the Delhi-based entity can afflict other FIs.

The institutions will be required to classify investments into six categories, based on the type of assets, and into three new slots linked to the period over which these are to be retained — held to maturity, held for sale and held for trading.

Financial assets with institutions have been divided into six groups: 1) government securities, 2) other approved securities, 3) shares, 4) debentures and bonds, 5) subsidiaries & joint venture holdings and 6) commercial papers/mutual fund units.

Shares in the “available for sale category” will be marked to market at the year end or at the end of six months, an exercise which will depend on the frequency of trading.

Net depreciation, if any, will have to be gauged and fully provided for, while net appreciation can be ignored. The book value of these shares will not change after revaluation.

Net depreciation on investments must be calculated for all the six types of investments separately, and should not be reduced on account of net appreciation in any one category.

Provisions made due to depreciation in the value of scrips in the “available for sale” category in a given year should be debited to the profit and loss account and an equivalent amount, net of tax benefits, transferred from the Investment Fluctuation Reserve (IFR) to the profit and loss account.

If amount set aside for depreciation in the “available for sale” category is more than what is required, the excess should be credited to the profit and loss account and an equivalent amount, net of taxes, appropriated to the IFR account.

However, investments in the “held to maturity category” need not be marked to market and should be carried at acquisition cost unless it is more than the face value. If that happens, the premium should be amortised until maturity.

Financial institutions will have to recognise any reduction in value — other than temporary — of their investments in subsidiaries and joint ventures, and make adequate provisions.



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