Crisis pushes Unit Trust closer to carve-up option
No reserve respite for FIs’ bank plan
Delivery-based deals still a trickle on CSE
DPS Tech to invest Rs 100 cr in research hub
Panel on transfer of SEB plants
Agencies square off in ad scrum

Mumbai, July 8: 
The beleaguered Unit Trust of India (UTI) now faces the prospect of being trifurcated into three separate entities.

Informed circles say that the mutual fund major set up by an Act of Parliament in 1964, may be split into a development financial institution and, two, asset management committees for equities and debt respectively.

Such a drastic restructuring was among the options examined by the corporate repositioning committee headed by Y. H. Malegam, a noted authority on taxation. UTI officials, however, declined to comment.

UTI’s investments in companies through subscriptions to debentures and bonds could be transferred to the proposed development financial institution, sources said. In addition, the several growth and income schemes under its belt, may be handed over to two separate asset management companies.

UTI’s Development Reserve Fund has proved to be woefully inadequate in the context of its Rs 57,000-crore corpus.

Whether the government will allow the creation of a new term lending institution, is now the million dollar question. Considering the fact that the government is mulling a merger of the loss-making IFCI into the Industrial Development Bank of India, a move being stoutly resisted by the latter, it is unlikely a new entrant on the scene will be welcome.

In 1998, UTI had considered entering the project finance sector by extending term loans. However, its plans came to naught then, as the UTI Act needed to be amended to facilitate its role as a term lending institution.

However, the fact that UTI is beset with controversies would be the best time for restructuring the organisation, market observers said. A restructuring will also enable the government to deflect public outrage caused by the six-month freeze on repurchases and sales of US-64.

Limited impact: Amfi

The US-64 crisis is not as disastrous as is being projected and is likely to affect only a small segment of investors, the Association of Mutual Funds in India (Amfi) chairman A P Kurian told PTI today.

“It is not that disastrous. This problem is product-specific and related only to US-64 which constitutes about 25 per cent of UTI’s total corpus,” Kurian, also a member of the Sebi Advisory Committee on Mutual Funds, said.

“This is a pain we have to go through for long-term interests of the 20 million investors,” he said.

He added the decision was likely to affect only a small segment of ‘US-64’ investors who might need money within this period for meeting contingencies. “I don’t think there is panic among the US-64 investors,” Kurian said.

“There are several exit routes for investors in dire need of liquidity,” he said pointing to the schemes offered by some banks like the State Bank of India to provide loans against US-64 units.

“Further, trading in US-64 units on the National Stock Exchange, both on the equity and debt markets, will be active during this period,” he added.


Mumbai, July 8: 
The Reserve Bank of India (RBI) has shot down a proposal seeking dilution of the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) norms for development financial institutions (DFIs) planning to convert into banks.

Instead, the central bank is believed to have conveyed to the institutions that they will have to fully comply with the regulatory requirements and will be placed on par with banks as far as compliance to the specific proposals of CRR and SLR requirements is concerned.

The RBI has told the institutions that its prudential and supervisory norms for banks would not be diluted as it believes in a consolidated approach to supervision and regulation.

“We have informed the FIs that they will have to fully comply with the reserve requirements,” a senior RBI official told The Telegraph.

This is in response to a recommendation made by the Industrial Development Bank of India (IDBI) and others, including Exim Bank, on scaling down the CRR and SLR requirements after its conversion into a bank.

Apart from IDBI, ICICI Ltd too is considering a universal-bank status. While both these leading institutions are now exploring ways to make the conversion into universal banks, industry circles point out that considering the crucial issue of preparedness, it would take a year or two for the FIs to achieve this feat.

IDBI has already roped in the services of Boston Consulting Group to chart out a roadmap. ICICI officials, on the other hand, said though they too were considering such a transition, the time-frame necessary to achieve this process would largely depend on the stance adopted by the central bank.

In this regard, the RBI has recently conveyed to the institutions that apart from maintenance of reserve requirements, they will have to comply with various other conditions upon conversion into a universal bank. While lending to the priority sector for a certain percentage of their net bank credit is one such condition, such FIs will also be subject to prudential norms as applicable to banks.

The Reserve Bank has also informed the FIs that a change in the composition of their board may also have to be undertaken to comply with the provisions of Section 10(A) of the Banking Regulations Act, which says at least 51 per cent of the total number of directors should have special knowledge and experience in banking.

Further, the institutions will have to divest holdings that exceed 30 per cent of the paid-up share capital of a company, or 30 per cent of its own paid-up share capital and reserves, in accordance with the provisions of the Act.

Moreover, an institution, after its conversion into a bank, would come within the branch licensing policy of the RBI, under which they will have to allot at east 25 per cent of the total number of their branches in semi-urban and rural areas. The FIs will also have to comply with the requirements of compulsory deposit insurance from the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a maximum of Rs 1 lakh per account, as applicable to banks.

However, FI circles observed while most of these regulations could be complied with, toning down the reserve requirements apart from certain modifications in the priority-sector lending category are the two major issues that need to be ironed out.


Calcutta, July 8: 
Delivery-based transactions on the Calcutta Stock Exchange (CSE) continue to be as low as 7-8 per cent, even after the introduction of rolling settlement. The rest are squared-off transactions where positions taken are liquidated by the end of the day.

Trading in the rolling mode on the bourse took off last Monday with a turnover of about Rs 50 crore, a third of the average daily volume in the previous week. It shot up to over Rs 100 crore on Wednesday as the National Stock Exchange (NSE) fell victim to some manipulative trades. However, it dropped to finally settle around the Rs 70-75 crore mark.

During its heydays, daily turnover on the CSE was pegged at Rs 2,000-2,500 crore. But following the payment crisis in March, volumes diminished by about 90 per cent. The bourse has traditionally been the Mecca of speculative trading till the excess of it brought the exchange to its knees.

Traditionally, 90 per cent of the business at the bourse was generated by a handful of momentum stocks and delivery-based transactions have always remained below 10 per cent.

With the introduction of the rolling mode of trading for nearly all the actively traded stocks, delivery-based dealings were expected to go up. The fact that it has not is threatening for the bourse, feel experts.

“Speculative trading, and that too without badla, cannot sustain itself over a very long period. Nearly half of the 1,000-odd members are out of business, and more may soon exit,” said a former CSE president.

Sagging volumes also mean lower income for the exchange, which charges Rs 500 per Rs 1 crore of turnover from the brokers as fees.

The exchange is reeling under a huge cost-income mismatch, and has project a substantial deficit in its budget for the 2001-02 fiscal.

Recently, CSE formed a subsidiary to seek membership of the derivatives segment of NSE or BSE.

But it seems derivatives trading will take some time to flourish in the country, and till it gains enough depth, there is little use of CSE taking membership of NSE or BSE, experts say.


Calcutta, July 8: 
DPS Technologies has outlined a Rs 100-crore project to set up a research and development (R&D) facility in the city.

According to Dilip K. Barman, chairman of DPS, the centre will focus on development in telecom and storage. The company plans to employ 125 people dedicated for the R&D centre by July 2002.

DPS has already submitted a proposal for allocation of six acres of land to the West Bengal Electronics Industry Development Corporation (WBEIDC).

The Rs 16-crore IT services and consulting company has also entered into an alliance with a US-based software firm to fund the planned investment. The US firm will buy a 51 per cent stake in DPS. Barman said officials from the US company will soon visit Calcutta to finalise the details of the agreement.

Last year, the Emami group acquired a 27 per cent share in DPS at a cost of Rs 15 crore. The stake has now gone up to 50 per cent.

DPS also plans to diversify into bio-infotech development and services. Barman says the company has already commenced work in this area and details for expansion and investment are being discussed with the US firm.

Besides, the company plans to undertake a Rs 300-crore project to develop customised software for the education, tourism and healthcare sectors, in association with the state government. Barman said the company is discussing the details of the project with the concerned ministries.

DPS is already a partner of IIT-Kharagpur, which in turn has an affiliation with the Massachusetts Institute of Technology (MIT), and is doing important work in healthcare services along with the premier institute. It is also associated with the Indian Statistical Institute, Calcutta.

“There are plans to link the various districts and towns in the state using a network backbone to distribute details regarding medicines and hospitals,” says Barman. DPS proposes to develop a software based on the curriculum for higher secondary education in schools and colleges.

Besides, it is working on developing Hindi and Bengali software, to enable foreign tourists communicate in these two languages.


Calcutta, July 8: 
The state government has set up a three-member monitoring committee to look into the transfer of the Santaldih and Bandel power stations from West Bengal State Electricity Board (WBSEB) to West Bengal Power Development Corporation (WBPDCL). The transfer of the two generating units was supposed to be effective from July 1. The panel will comprise the joint secretary of power, WBSEB member (operations), and WBPDCL’s executive director.

The state government has invited options from the 3,100 odd employees of Santaldih and Bandel, on whether they prefer to stay with the SEB or want to be transferred to WBPDCL. The last date of submission of options is August 31, 2001. The selection procedure will be completed by December 31, 2001, as per the vacancies with WBPDCL.

The employees of these two plants will be in lien service from July 1.

Senior SEB officials however, observed that the entire staff strength of Santaldih and Bandel cannot be transferred to WBPDCL, since the later works on a 1.6 man/megawatt ratio. Those who will not be absorbed, will be repatriated in phases to the board.

Speaking to The Telegraph, G.D. Gautama, WBSEB chairman said, “Those who will not be absorbed will be redeployed in the board. Moreover, those who do not opt will not lose their jobs and will also be absorbed. But, with Bakreswar and Gouripore coming up, WBPDCL has huge potential.”

However, in a circular (Govt 558-power/iv/June 28,2001) the government has categorically stated its decision will be final and binding on both the parties.

The government has decided to appoint S.R. Batliboi & Co to carry out an independent study of the assets and liabilities of these two plants.


New Delhi, July 8: 
The silly season is almost at an end — and things have started hotting up in the advertising industry. Firms have started snapping up several new accounts that have been up for the grabs, while others have nobbled accounts that were serviced by rivals.

Lowe Lintas has bagged the biggest new account on the street — Maruti’s Every, a sports utility vehicle that is due to be launched by the year-end. The estimated value of the big-ticket account is Rs 10 crore.

Percept of Delhi has snapped up three accounts — radio paging firm Mobilink, DialNet, the interactive voice response (IVR) and automated voice recording service that has been used by the hugely popular Kaun Banega Crorepati TV show, and Gopal Zarda’s Joie incense stocks — in as many weeks valued at over Rs 10 crore.

The Rs 4 crore Mobilink account has moved from Enterprise Nexus; the value of the Dialnet account is put at Rs 2-3 crore.

Percept bagged the Rs 4-5 crore account for Joie incense sticks last week edging out agencies like Contract and Triton which had also made a pitch. Navroz Dhondy, CEO of Percept, said Joie incense sticks was launched by the makers of Gopal Zarda, last year. This year the brand is going national and Percept is providing the total communication package.

McCann Erickson Delhi has bagged the National Panasonic’s consumer electronic business worth about Rs 10 crore recently. The account, which will cover colour TVs, audio systems and home theatre systems, has moved from Saatchi and Saatchi.

In another predatory strike, McCann has grabbed the Adidas shoe account from RK Swamy/BBDO and the Zee News television channel account from Re-diffusion.

“The annual potential of the Adidas, Panasonic, and Zee News accounts taken together is Rs 50 crore,” said Sanjay Naik, general manager of McCann Erickson. The advertising pertains to both the print and audio visual medium.

Enterprise Nexus Delhi has swiped the Rs 5 crore Xerox Modicorp account from Lowe Lintas.

Source say that troubled automaker Daewoo Motors is reviewing its advertising account which is currently handled by Enterprise Nexus. Reports suggest that Daewoo has asked agencies to make presentations. Equus, which had been dumped about two years ago in favour of Enterprise Nexus, is also expected to join the fray.

Akshara, the advertising agency specialising in PSU accounts, has been re-empanelled for two PSUs in the past two weeks. S.K. Swami, chief executive, said the empanelment tenure with BHEL and IREDA, which had come to an end, has been renewed in the last two weeks. Rajasthan Tourism has also extended its empanelment last week, said Swami.


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