Peeved investors may haul Unit Trust to court
FIs to find partner to run Dabhol if Enron pulls out
Dull debut for shares on the roll
Rupee hits new low at 47.15
Fresh bids for 4 cell circles in September
Institutions not to bite the BK Modi bait
Tea industry to grow and export more
Foreign Exchange, Bullion, Stock Indices

 
 
PEEVED INVESTORS MAY HAUL UNIT TRUST TO COURT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 2: 
Unit Trust of India’s (UTI) decision to suspend sales and repurchases of US-64 is being seen as a ploy to buy time for the revamp of a scheme that has failed to generate the money it needs to retain the faith of investors.

Unit holders, many of whom are companies which have used it to park their surplus funds, will be upset at having been denied the opportunity to sell their way out of the units.

Many mutual fund observers are of the opinion that the Trust is clearing the way for a linkage of US-64 to its net asset value (NAV) from February 2002, as suggested by the Deepak Parekh Committee. This gives fund managers the time for a major churning and turn it into a debt-oriented scheme. However, a statement put out by it late in the evening said there would be no switch-over to NAV in the near future.

Analysts who have been tracking this scheme reckon that halting sales and re-purchases will give the country’s largest mutual fund a respite from redemption pressure so that it can concentrate on reviving the scheme.

Investors miffed at poor dividends may look at other avenues to deal with a scheme that is out of Sebi’s ambit. There are fears that the suspension of sale and repurchase will be challenged by investors in courts. “They may look at legal avenues to wrest back their right to sell their units, which was only exit route available to them,” an analyst said. The flood of lawsuits over the scrapping of Rajlakshmi Scheme is being trotted out as an example.

Announcing the annual results, UTI chairman P S Subramanyam said the scheme needs to be restructured so that it can churn out profits even in adverse market conditions. He said he was aware of the expectations over a switch to NAV-based pricing, but indicated that it had been deferred because of bearish conditions in the stock markets. The UTI chief said a committee would be set up to review the scheme and make suggestions for its restructuring.

The total mobilisation of US-64 in the last financial year was pegged at Rs 2661 crore during the year, accounting for 26 per cent of Trust’s sales. During April-May 2001, the scheme had significant repurchases of Rs 4151 crore which left the unit capital of the scheme at Rs 12,778 crore on June 30.

The plunge in share values in recent months has hit US-64 hard. The committee headed by HDFC chairman Deepak Parekh set up two years ago had suggested a Rs 3,300-crore rescue package 64 with the understanding that it would shift to NAV-based pricing by March 2002. It is not clear if this will happen.

However, analysts aver that UTI’s decision can be challenged in the courts as their decision to suspend repurchases has prevented its unit holders their only exit opportunity.

While it may be a short term negative for UTI, long term fund managers aver that it will be beneficial as UTI could concentrate on restructuring the scheme and not hassled by redemption pressure.

   

 
 
FIS TO FIND PARTNER TO RUN DABHOL IF ENRON PULLS OUT 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 2: 
The Indian financial institutions could take over the crisis-ridden Dabhol Power Company if its US-based promoter — Enron — pulls out, provided a third party can be found to run the power utility.

This could be a company which either buys equity from them or becomes an operations and maintenance contractor. The FIs who will be meeting tomorrow to debate the Dabhol plant’s fate, feel this course of action will have to be taken in a worst-case scenario where Enron pulls out. “In the worst circumstances, we can take over the power project,” IDBI chairman S. C Chakravarti said.

He said three US energy companies had evinced interest in taking over DPC, but refused to divulge further details. Sources said one of them was AES, which runs a power plant in Orissa.

Enron has threatened to walk out of the 740-mw phase-I, which is operational, and 1,444-mw phase-II to be commissioned shortly, project over payment disputes with the Maharashtra State Electricity Board.

The US-based power major’s move follows a tiff with the Maharashtra government over payments for power drawn from Dabhol. The state government feels the power is too costly and has protested several clauses in a power purchase pact it has with Dabhol Power and has refused to pay a part of its dues to the company.

Debt tribunals

The Union government is thinking of amending the Debt Recovery Act for faster resolution of 47,000 cases amounting to Rs 83,000 crore and the matter is expected to come up before the union cabinet soon.

Minister of state for finance Balasaheb Vikhe Patil told reporters after a meeting with the Indian Banks Association that the rules which come in the way of speedy disposal of cases with DRTs will be changed.

   

 
 
DULL DEBUT FOR SHARES ON THE ROLL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 2: 
It was a tame debut for something that was billed as the best thing to have happened to the country’s stock markets. When bourses ushered in compulsory rolling settlement today, operators retreated into their shells, preferring to test the waters rather than plunge headlong.

Yet another first in the Indian capital market went almost unnoticed when the National Stock Exchange introduced individual stock options in 31 scrips. This segment could register trade worth a piffling Rs 17.90 crore.

In a nightmare of numbers, turnover at the Bombay Stock Exchange (BSE) plunged to a record low of Rs 505.43 crore, even though the sensex edged up 30 points to close at 3480.06. Market capitalisation was down Rs 1,000 crore at Rs 5,52,000 crore as an early-session rally melted into a mid-afternoon selloff. Balaji Telefilms, not an obscure scrip but hardly a chart-buster at the same time, was the day’s biggest draw.

Fears that the new, all-safe trading regime would cost millions in lost turnover and increased price fluctuation grew as operators, denied the option to carry forward deals, scrambled to square up positions. The result was a selloff in shares which lend themselves to a high degree of speculation.

“Extremely boring. Speculative stocks like Himachal Futuristic were bought in the morning and sold in the afternoon. Volumes will remain pretty modest in the coming days. It will take months for trading to pick up,” was how John Band, CEO of Ask-Raymond James, summed up the day.

A rally that started just after trading opened for the day was cut short when operators dumped key shares like Lever, Reliance, State Bank, Hindalco, Bajaj Auto, BSES, NIIT and Infosys, dragging down the sensex to a low of 3418.28. Even the weekend Nasdaq rally was not enough to shore up confidence.

“The new system has sucked the portion of speculation which is necessary to stimulate trading,” Band added.

Jitters for ACC

In a major computer glitch, ACC was quoted for a measly Re 1 because of a punching error by a dealer affiliated to a leading BSE brokerage. Around 12.15 pm the share, with a face value of Rs 10, was quoted at Re 1. This triggered a buying binge and there were buy orders for 10 lakh shares within minutes. The “punching error” went unnoticed for a while because of the new index filters put in place by exchanges from today. Later, BSE issued a directive that all deals below Rs 109.10 would be automatically cancelled.

   

 
 
RUPEE HITS NEW LOW AT 47.15 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 2: 
The rupee closed at a historic low of Rs 47.14-15 due to a sudden burst of heavy dollar short-covering by banks and companies.

A whopping 10 paise fall from last Friday’s finish of Rs 47.04 was caused by fresh dollar positions undertaken by banks and bolstered by a steady corporate demand, said N Subramanian, an analyst at E Mecklai.

Thin volumes and lack of adequate dollar supplies, also dragged the rupee down. The fall was mainly due to State Bank of India’s constant purchases of the dollar. SBI’s dollar buying was attributed to a major defence purchase.

   

 
 
FRESH BIDS FOR 4 CELL CIRCLES IN SEPTEMBER 
 
 
FROM M RAJENDRAN
 
New Delhi, July 2: 
The communications ministry plans to call for fresh bids by early September for four cellular circles—West Bengal, Bihar, Orissa and Andaman and Nicobar Islands— for which there were no takers to fill in the slot of the fourth operator. The bidding for the fourth operator closed last Friday.

A senior official in the ministry said: “The re-bid would certainly be done to find a fourth operator. However before we do that, if any company is willing to enter as a fourth operator, we will examine the proposal.”

Meanwhile, communications minister Ram Vilas Paswan has already asked Bharat Sanchar Nigam Limited which is the existing operator along with one private cellular operator in all the four circles (except Andaman and Nicobar Islands, Reliance is the other operator along with BSNL) to expand its services.

Industry observers feel that the telecom companies did not bid for the four circles because they were already well covered by Reliance. Moreover, BSNL is also slated to provide services in these circles.

“We will expand our operations in the areas which have been left out. BSNL has already completed field trials in West Bengal and Bihar for the GSM-based cellular services and we will soon launch it,” said a senior BSNL official.

   

 
 
INSTITUTIONS NOT TO BITE THE BK MODI BAIT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 2: 
Financial institutions, led by the Industrial Development Bank of India, have decided not to subscribe to the open offer of Modi Rubber Limited. A decision in this regard was taken at a meeting of the top brass of FIs today.

Meanwhile, Vinay Kumar Modi has come out in support of his brother Bhupendra Kumar and backed the open offer to buy the Modi Rubber stock at Rs 90 per share even as the bickering financial institutions have, in the words of B.K. Modi, “tried to create a wedge between the two”.

However, the V.K. Modi faction has refused to comment on B.K. Modi’s assertion on Saturday that he was still in control of the company as the managing director.

Earlier, the FIs were reported to have staged a coup at the June 28 board meeting where they removed B.K. Modi from the post as MD and also forced his men out of key posts in the company.

The open offer is to pick up 35 per cent of the equity, thereby raising the promoters’ stake to 61 per cent. According to company sources, V.K. Modi will buy half of those shares. The promoters hold about 26 per cent of equity in the company. Despite the Vinay Kumar Modi faction’s support, doubts still linger over the success of the open offer which closes on July 3. With their 44 per cent stake, the financial institutions are now out. New York-based NRI, Purnendu Chatterjee, who has about 15 per cent stake, was also said to be in talks with the Fis.

HSBC Securities, the merchant banker for the Modis, admitted at the time of the price revision that the response to the open offer was poor. Without the FIs’ and Chatterjee’s participation, there is little hope of the Modis raising 35 per cent of the equity.

At the June 28 meeting, the board of directors, under the chairmanship of T. Pandurang Rao, who is a nominee of the FIs, conferred all managerial powers on Vinay Kumar Modi and dismissed three senior executives of the company who were known to be close to B.K. Modi.

Meanwhile, the labour union of Modi Rubber, in an executive committee meeting, has condemned the attempts being made by the FIs to destabilise the manufacturing operations of MRL. Expressing their confidence in the leadership of Bhupendra Kumar Modi, the union has urged the FIs to concentrate their energies in fructifying the public offer.

   

 
 
TEA INDUSTRY TO GROW AND EXPORT MORE 
 
 
BY A STAFF REPORTER
 
Calcutta, July 2: 
The tea industry has set for itself a production target of 855 million kgs in the current financial year, up 32 million kgs over last year’s 823 million kgs, while it aims to export 215 million kgs compared with 201 million kgs.

At the same time, it expects imports of 20 million kgs. The estimate is based, in part, on the 5.37 million kgs which was imported between January and May against 4.10 million kgs in the corresponding period of the previous year.

Indian Tea Association (ITA), the apex body of producers, wants orthodox tea to be produced in a fixed ratio to the total as part of the efforts to ease the glut of CTC variety and help the industry gain a competitive edge at home and abroad.

The variety of orthodox tea which is similar to Sri Lankan “High Growns” tea should make up the bulk of production in the Nilgiris. According to the association’s status paper released today, the production of orthodox tea should go up to 96 million kgs from 87 million kgs recorded last year.

There is also a plan to get gardens in Dooars and Terai to grow orthodox tea as good as the Vietnamese variety, the imports of which are giving the local variety tough competition.

The export target at 215 million kgs is 14 million kgs more than last year. Of this, north Indian tea will account for 100 million kgs compared with 92 million kgs in the previous year, while 115 million kgs will be contributed by south Indian tea compared with 109 million kgs in the previous year.

Russia, Pakistan, Iran, Iraq, UAE, Saudi Arabia and Egypt have been identified as the key export markets. Pakistan Tea Association, which will send a team to India this month, has signed an agreement with ITA to import 10 million kgs.

The swelling tide of imports is a big concern. The industry is waiting for a commerce ministry order to the Directorate General of Foreign Trade to set up an inspection mechanism at ports to ensure that imports meet quality norms.

Commenting on the current poor market conditions, ITA said the withdrawal of quantitative restrictions has prompted buyers to defer buying in anticipation of cheap imports. This has depressed demand in high-consumption and quality-conscious markets like Gujarat, Maharashtra and Punjab.

The other area of concern is the practice among leaf factories to buy poor quality tea and sell them at a mark-up. Prices of first-flush output this year are lower than they were a year ago because of weak demand in the local market and sagging exports.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.15	HK $1	Rs.  5.95*
UK £1	Rs. 66.57	SW Fr 1	Rs. 25.85*
Euro	Rs. 39.89	Sing $1	Rs. 25.50*
Yen 100	Rs. 37.90	Aus $1	Rs. 23.70*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4480	Gold Std(10 gm)	Rs.4410
Gold 22 carat	Rs. 4230	Gold 22 carat	N.A
Silver bar (Kg)	Rs. 7250	Silver (Kg)	Rs.7350
Silver portion	Rs. 7350	Silver portion	N.A

Stock Indices

Sensex		3426.03		- 30.75
BSE-100		1615.06		- 14.96
S&P CNX Nifty	1100.75		-  7.15
Calcutta	 118.43		+  2.05
Skindia GDR	 610.92		+  3.15
   
 

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