Fingers crossed for momentous Monday
Legal changes for transfer of RBI stake in State Bank
Economy drive skips bank, FI top brass
First bond issue to fund WBIIDC growth centres
India Inc in restructuring mood to fight slowdown
TCS research to get Rs 200cr booster
DVC leaves decision on shift to govt
Taj toys with tieups for growth

Mumbai, July 1: 
Retail investors, the first to have their socks knocked off in a crash, were on tenterhooks a day before the release of Unit Trust of India’s (UTI) annual report card and the landmark debut of rolling settlement on stock exchanges.

The two events will keep investors, analysts and operators rivetted over the next few days as the market tries to figure out just how well the 414 shares supposed to roll adapt themselves to the new trading regime, and unit holders digest the numbers reeled off by the Big Daddy of mutual funds. It was hard for many to decide which was more crucial.

UTI, in a major break with tradition, will hold its annual meeting in Delhi, instead of its headquarters in Mumbai. The move is seen by some as an indication that proximity to the seat of power — the finance ministry —is necessary to help it plug huge holes in US-64, its flagship scheme.

In another setback, premier stock exchanges like BSE and NSE have confirmed that individual stock options — billed as an effective replacement for the now-forbidden carry forward trading — will not be introduced on Monday.

“The coming days will be a learning experience for marketmen. We will find out how the investor psyche evolves to the new systems. Liquidity in the market will take a hit,” says Nikhil Vora, senior portfolio advisor of, a feeling echoed by much of the market. The consensus is that near-term volatility will increase as intra-day selling and buying will be conducted in clusters, and resource-strapped operators scramble out of holdings at every available opportunity because of the day-long deadline.

The 414 major stocks picked up for the start of rolling mode — under which all deals will have to be settled the same day — will set the tone in the weeks ahead. Ramesh Damani, prominent BSE broker, is one of the bravehearts who is willing to bet on how the markets will behave. “You should see a rally, but it will fizzle out because it does not have strong support. The market lacks the stamina of a marathon runner,” he says in remarks that reflect the underlying jitters.

The big question is: Will “day trading” catch the fancy of operators? The answers are not easy. For one, it will depend on whether intrepid traders find new ways to gauge the surge and slump of a stock in just five-and-half hours of trading. The system so far gave operators five days to square up a deal, plus a choice to carry forward his exposure to the next settlement on the payment of a margin fee.

Broking circles expect the going to be tough as low volumes and sharp volatility rock exchanges ill-prepared for the switch-over. Jignesh Shah, strategist at ASK RJ Investment Advisory Services, advises retail investors to stay away for the time being from the secondary markets as volumes dry up and traders grapple with a new set of rules.

“It is better to stay away for now,” Shah said. Rolling settlement will soak up liquidity in the market and options premium may take some time to stabilise due to uncertainty over interest rates and price swings, the key factors which influence premiums.

Most analysts see tight liquidity as stocks react sharply even to small transactions. In other words, small lots of buying or selling will dictate the movement of share prices, brokers say.

The volatility may be addressed by the recent Sebi decree on price bands. The market regulator announced that a 20 per cent fluctuation (either way) for circuit filters to be activated in shares which have been selected for rolling settlement. However, exceptions would be made for those in which option trading is allowed or scrips that are part of the sensex or nifty.


Mumbai, July 1: 
The government has decided to amend the State Bank of India (SBI) Act and the Reserve Bank of India (RBI) Act to have the central bank’s stake in the country’s largest commercial bank transferred to itself.

Senior finance ministry officials, while confirming that proposals pertaining to amendments of both the RBI and SBI Acts were likely to be placed in the monsoon session of Parliament, said the process is expected to be completed by the end of this fiscal or the beginning of the next financial year.

“We have held various discussions with the RBI on this issue. While the government, has, in-principle allowed such a transfer, it cannot proceed without amendments in both the RBI and SBI Act,” senior officials pointed out.

The amendments, however, are expected to delay the transfer of the entire stake held by the central bank in SBI.

RBI, the single largest shareholder in SBI, holds over a 59 per cent stake in the latter. The bank recently announced its intention of transferring this stake to the government in the lean season monetary and credit policy. The apex bank then said it also planned to offload stakes in other institutions like Nabard and National Housing Bank, to the government.

Besides, the RBI said it would also put its shares in Securities Trading Corporation of India (STCI), Discount and Finance House of India and Infrastructure Development Finance Corporation, on the block.

Sources said the amendment of the SBI Act is vital for the banking giant in view of its intention to raise additional capital to maintain its capital adequacy ratio. What now remains to be seen is what level the government desires to reduce its holding in SBI following the transfer of the RBI stake.

SBI chairman Janki Ballabh recently announced the bank may go in for an equity issue during the current fiscal. Though it has not yet decided whether to go in for a domestic or an international float, it is plans to adopt the US GAAP accounting norms. The exercise relating to adoption of this accounting practice is estimated to take a year.

Sources added the government was also toying with the idea of making significant changes in the regulatory and supervisory roles of the apex bank. The RBI had, in a proposal to the Centre, sought removal of all micro-issues relating to the day-to-day administration of banks from its purview and greater operational flexibility to concentrate on monetary policy functions.


Calcutta, July 1: 
The government has decided to increase the perquisites of chairmen and whole-time directors of banks and financial institutions, at the same time suspending the leave fare concession (LFC) for the 9 lakh bank and FI employees, for two years.

The government, which on one hand, wants to pare expenditure costs substantially, on the other, however, appears open to the idea of giving the top rung bank executives a feel of the luxury cars. Banks have now been permitted to purchase cars worth Rs 8 lakh, up from the previous ceiling of Rs 5 lakh. Moreover, when travelling by air, executive directors and officers of equivalent rank in public sector banks and FIs can now travel executive class, instead of the earlier economy class.

The facility will be available to the chairman and managing directors of the State Bank of India, Nabard, National Housing Bank, Industrial Investment Bank of India, Small Industries Development Bank of India, the managing director of Exim Bank, as well as to the chairmen and managing directors and executive directors of 19 nationalised banks. The wholetime directors of these banks and FIs will receive these facilities.

The government has also permitted the directors to stay in five-star hotels if no other accommodation is available in that particular place. Their ‘halting allowance’ has been hiked from about Rs 280 to Rs 400 per day, by the finance ministry. The move by the ministry to increase the facilities of the top-level management has created a furore among employees. “The government wants to cut down the expenses and so has suspended LFC for two years. But why are they increasing the perquisites of the top management,” they asked.

Bank and FI employees are entitled to LFC once in four years. Employees who have been transferred get it once in two years for going to their hometown. The average outgo on LTC per employee is Rs 10,000 and covers nearly 2 lakh people for two years.

“It will further demotivate employees. After the voluntary retirement scheme, the morale of the employees is down. Now if they are deprived of the LTC facility, it will dip further,” said S. R. Sengupta, general secretary of the All India Bank Employees Confederation.


Calcutta, July 1: 
The West Bengal Infrastructure Industry Development Corporation (WBIIDC) plans to come up with its maiden bond issue during the current financial year, to fund six new industry growth centres in the state.

Although the size and timing of the issue are yet to be decided, sources said the corporation will issue bonds worth Rs 50 crore in the first tranche.

The total investment for these growth centres, to be set up at Haldia, Uluberia, Falta, Jalpaiguri, Malda and Birbhum, has been pegged at Rs 210 crore. With this, the total number of such centres will go up to 18.

Confirming the move, a senior WBIIDC official said the corporation is in talks with the rating agencies, Crisil and CARE, for rating the bonds.

“This is the first time that we are planning to mop up funds through bonds,” the official said.

Moreover, he added, the bonds will be issued for five-to-seven year terms, “so we will have the time for interest servicing. By the time the redemption date comes, we will be ready to sell land in the growth centres.”

“We will open escrow accounts, where proceeds from the land sale will be deposited. This will ensure timely redemption,” he said.

Each growth centre will be set up on an average 250 acres of land, with an investment of Rs 35-40 crore.

WBIIDC has already acquired over 100 acres of land in Haldia and it is in the process of making similar acquisitions in the other areas.

The official further said the state government will give a grant as well as an interest-free loan to acquire and develop the land. However, the project will still need more funds, and hence the bonds, he said.

The corporation has set up a land bank which now has over 3300 acres of land.

“Acquiring land is not very expensive, but it is the development cost which is three times that of the land,” he observed.

The official said several multinational corporations have approached WBIIDC for land to set up their respective units.

“We cannot hold up the process due to lack of funds, as it will drive away prospective investors. So we have decided to go in for the bonds,” he argued.

“Industrial units will continue to get the land on a long-term lease basis. For the mega projects, we may consider selling land on a permanent basis,” he observed.


New Delhi, July 1: 
Corporate India is focusing on “strategic planning processes and advanced information systems” in order to cope with the slowdown of the economy, a survey by Confederation of Indian Industries (CII) reveals.

Respondents to a survey covering a spectrum of both public and private industry groups said competitiveness was the key word for any kind of growth in a sluggish market. The corporates feel GDP growth in the next five years will be 7-8 per cent, but foresee less than 6 per cent growth in this fiscal.

While the companies are carrying out all possible internal restructuring, they are unhappy about the cost of capital.

The interest rate is viewed as one of the biggest hindrances to growth. Even after initiatives like the cut in the bank rate and the reduction of interest rates for small-scale industries, the respondents felt that the effective domestic interest rate is higher than the neighbouring countries.

To spur growth, the soft interest rate regime initiated by the finance ministry and the Reserve Bank of India is not enough. Small units are facing liquidity problems because of the cumbersome procedure of obtaining institutional finance.

The firms hope to use internal resources for funds rather than procure capital through venture capital or public stock offering.


New Delhi, July 1: 
Tata Consultancy Services, the software arm of the Tata Group of companies, plans to spend Rs 200 crore to strengthen its research and development activities.

The company will also focus on its customer management and business processing services, both in India and abroad. Tata Consultancy Services is a global software solutions and consulting services organisation offering high-end IT services.

Phiroz Vandrevala, executive vice-president of TCS, said, “TCS has always stressed on investment in research and development. About 6-8 per cent of our annual budget is spent on R&D activities. As a company, we have never waited for the world-wide developments to dictate our R&D activities, we have been proactive, which has been a major reason for our success.”

TCS is Asia’s largest global software and services company and sixth fastest growing consulting firm in the world. With over 16,000 software consultants operating in 50 countries, TCS has been recognised for its R&D leadership.

Further, TCS and Housing Development Finance Corporation (HDFC) have set up a joint venture company — Intelenet Global Services — to provide reliable and quality customer management and business processing services. TCS and HDFC each hold 45 per cent in the company and the remaining 10 per cent is reserved for employee stock options.

Intelenet is expected to have access to the domain expertise of the promoters in infotech, banking, insurance, finance, telecom and retail. While TCS will support the venture by offering its global reach and infotech experience in various industry sectors to integrate technology and manage change seamlessly, HDFC will offer its expertise in financial services, realty, and enabling infrastructure development.

Intelenet’s first customer management and business processing services centre has already been established at the hi-tech Millennium Business Park in Navi Mumbai.


Calcutta, July 1: 
Damodar Valley Corporation (DVC) has placed the issue of shifting its corporate headquarters from Calcutta to Jharkhand, in the Centre’s court.

The corporation held a meeting on June 29 to discuss the matter and has referred it to the ministry of power, along with the views expressed by the Jharkhand government. The Jharkhand Assembly had recently passed a resolution in this regard.

Senior DVC officials said the management has already taken possible steps to develop Maithon as the company’s functional headquarters and shifted the important departments in stages, with the approval of the West Bengal government.

At present, although the corporate headquarters in Calcutta houses the heads of departments mainly for management functions, the field offices, with their concerned heads of departments, have been shifted to various locations in the state of Jharkhand.


Mumbai, July 1: 
Indian Hotels Company Limited (IHC), which owns the Taj group of hotels, plans to expand operations in key gateway cities like London, New York, Frankfurt and Amsterdam, by forging a series of strategic tieups.

The company envisages branching out to focus more on new service-related businesses such as healthcare and hospitality and will do so in partnership with companies with the necessary expertise. Confirming this, a senior official told The Telegraph, “We think international expansion has potential. We will carefully position our overseas properties in keeping with our long-term vision for the Taj brand.”

IHC’s expansion plans are in keeping with its vision to make the Taj brand a strategic international benchmark in the hospitality industry in India and in key regions of the world. Though it lost the race for acquiring the Carlyle hotel in New York, the group has set its sights on other premium properties in the city. Further, in pursuit of its vision, the Taj group has entered into a joint venture with the Chaudhary group for Taj Asia. The Chaudhary group, one of the largest family run business groups in Nepal, has interests in 40 local companies ranging from steel manufacturing to food products, breweries, banking and trading activities.

Taj Asia is focusing on renovating existing properties. Its property in Maldives has been completely razed down and a new hotel will come up shortly. Taj Asia will own the Taj properties in Maldives — Taj Lagoon Resort and Taj Coral Reef resort — and Sri Lanka — Taj Samudra.

Both partners intend to use Taj Asia as a base from which to expand further in south-east Asia. IHC already has Taj Annapurna in Nepal and officials do not rule out the possibility of the Kathmandu-based hotel being included in 50:50 joint venture with the Chaudhary group. By virtue of the Taj Asia joint venture, the capital expenditure plan will be shared with the strategic partner. Taj Asia will be the base from which the group explores new business opportunities for growth in south-east Asia, company officials said.

Officials added that major renovations in Mumbai and Delhi have resulted in a renewed spurt in occupancy. St James Court has posted a turnaround this year, after an image make-over. Plus, the Taj Dubai, which will be unveiled in a couple of weeks, is being touted as one of the most beautiful hotels in that country.

Despite earlier occupancy pressures due to renovations, the company reported an overall 14 per cent increase in operating income and a 20 per cent rise in gross profit for the 2000-01 fiscal.

Meanwhile, IHC has converted the agreement in Lake Palace from an operating arrangement to a licensing agreement. A greater profit generation potential is expected through this move. Another major initiative launched by the hotel major this year was the offer of a voluntary retirement scheme. The total outflow on this scheme is around Rs 58 crore against the pre-tax saving on payroll costs to the tune of Rs 18 crore.


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