500% VSNL dividend bonanza
Cash-out plan opposed
Four wise men to suggest US-64 revamp
Enron chief hopeful of compromise
Setback for BSNL
Infosys Q1 net spurts 50%
Fewer jobs on offer
Dr Reddy’s set to split stock
Systemic snags blamed for CSE crisis
Foreign Exchange, Bullion, Stock Indices

 
 
500% VSNL DIVIDEND BONANZA 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 10: 
Videsh Sanchar Nigam (VSNL) today gifted its shareholders an unprecedented 500 per cent dividend for 2000-01 in a payout that almost matches its net profit for the year.

The government, which holds the largest stake of 52.97 per cent in the selloff-bound company, is the biggest gainer in a bonanza that will swell its coffers by a staggering Rs 900 crore, which includes dividend taxes worth Rs 145 crore.

Many feel the telecom major, which will pick up a Rs 1,425-crore tab for its generosity, is limbering up for disinvestment and an end to its untrammelled dominance of the international telecom traffic from the country in April 2002. The free run is believed to have given it Rs 3,000 crore in monopoly profits. The payout includes normal dividend of Rs 10 per share and special one-time dividend of Rs 40, which coincides with the listing of its American Depository Receipts (ADR) on the New York Stock Exchange. It is the only state-owned INdian firm listed on the Big Board.

“VSNL is the only public sector undertaking in recent times to have recommended such a dividend. We have shown all-round impressive performance which is reflected in the growth of traffic growth as well as other value added services,” chairman and managing director S K Gupta said.

R S P Sinha, director finance, said the whopping dividend was a response to demands by shareholders for generous returns on their investments and would be paid from the huge cash surplus the company has amassed over the years. “Even after this huge cash outflow, we have enough in the kitty to meet the capital expenditure in future,” he added.

Total revenues in 2000-01 grew 10 per cent to Rs 7965.93 crore from Rs 7221.93 crore in the previous year. Net profit soared 112 per cent to Rs 1778.83 crore compared with Rs 840.28 crore. However, figures for 2000-01 are not strictly comparable with those of 1999-2000, when a Rs 512-crore investment in ICO-Global — an abortive global satellite venture — was written off.

The government last year decided to terminate VSNL’s monopoly on international long distance calls, two years before schedule and gave it a package to compensate losses arising from the loss of its stranglehold over the ISD market.

As part of the deal, VSNL will be allowed to offer national long distance services (STD) with the government by paying an entry fee and a licence fee for five years starting April 2001.

However, it will not have to furnish a Rs 400-crore performance bank guarantee, like others in the business.

It will also be granted Category A internet service provider (ISP) licence, which will allow it offer Net access all over the country.

Earlier, the global consultant engaged by the corporation, Salomon Smith Barney, had estimated the economic loss of VSNL at Rs 2,936.4 crore for ending the corporation’s ISD monopoly by April 2002 instead of April 2004. It also charted a specified role for VSNL in the changed scenario with specific concessions in different kind of services.

Another consultant, Credit Suisse First Boston, had estimated the compensation value at Rs 2,598.1 crore, with the value of preferential entry into national long distance market at Rs 415.1 crore.

   

 
 
CASH-OUT PLAN OPPOSED 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 10: 
The department of divestment and the Planning Commission had opposed the decision to announce a 500 per cent dividend to suck out Videsh Sanchar Nigam Ltd’s reserves just before its selloff. They felt this kind of reserve stripping would make the company considerably less attractive to any prospective buyer and had tried to stall it. However, the communications department proposal to cash out on the reserves was approved after the finance ministry supported it.

The government had done a similar deal just before selling off Balco, the ministry said. The government had allowed PSUs to pay low dividends over the years to help them finance their own restructuring and expansion plans. But now that they were going out of the government’s fold, the ministry argued that this money, which was in effect undistributed profits, should be reclaimed.

   

 
 
FOUR WISE MEN TO SUGGEST US-64 REVAMP 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 10: 
Unable to find a quick solution to the crisis caused by the July 2 freezing of sales and repurchases in its flagship US-64 scheme, the board of mutual fund major Unit Trust of India (UTI) today said it has formed a four-member group to advise it on restructuring the scheme. The panel, constituted at the board meeting on Monday, includes eminent personalities like former National Stock Exchange (NSE) managing director R. H. Patil, tax expert Y. H. Malegam and Tata Sons non-executive vice-chairman N. A. Soonawala, UTI said in a statement. The board has also requested R. P. Chitale, one of the UTI trustees, to join the consultative group as a special invitee. The three wise men, apart from the special invitee, will provide an outsider’s perspective to the current crisis.

Speaking to The Telegraph, K.G. Vassal, acting chairman of UTI, said an external panel was appointed to “improve the quality of the decision.” “The management had placed various alternatives before the board, but the latter wants an external perspective,” he added.

The panel, Vassal said, deliberated all of Tuesday on ways to put the scheme back on its feet and is expected to report in a couple of days.

The group will render an external perspective on restructuring the Unit-64 scheme, he said, adding, “the panel has already commenced deliberations and is expected to submit its recommendations to the board in a couple of days.” The committee, thus, has an uphill task — trying to find a solution to the problem that has put the entire finance ministry on the defensive and hit the capital markets hard.

The board meeting, convened on July 9, could not arrive at any conclusion on formulating an exit route for small investors of US-64.

However, the exit route for small investors is expected to be etched out by the time the board meets in a couple of days. In fact, no sooner than the panel fine-tunes the alternatives, the board is expected to meet to give its approval, a UTI official said. UTI officials said the decision to enlist external experts on the panel was taken on Saturday. “Their assent to form part of the panel was taken the same day,” UTI sources said

Finance minister Yashwant Sinha said on Monday that a special package would be worked out by this weekend to provide liquidity to small investors of US-64, hit by the July 2 freeze on sales and repurchases.

   

 
 
ENRON CHIEF HOPEFUL OF COMPROMISE 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 10: 
Enron Corporation chief Kenneth Lay today said he was optimistic about striking a compromise deal with the Union government to end a payment dispute with the Maharashtra State Electricity Board.

The statement seemed to imply that the moves by financial institutions to buy out Enron’s stake in the $ 2.9 billion Dabhol power project have been pushed to the backburner for the time being.

“I am optimistic that a solution keeping in mind the interest of the country and investors would be found soon,” Lay told reporters after an hour long meeting with finance minister Yashwant Sinha.

However, both sides admitted that no solution had yet been reached, but indicated the process had started. Lay said, “We did not come to any conclusion and we did not expect to come to any conclusion. More work is required by us and the government to review the project .”

Finance ministry officials said their original plan to evacuate power from Maharashtra and sell it to power-deficit states in north India would be sold to Enron but at the same time the US-power major would be asked to rework tariff rates, a demand made by both Maharashtra as well by other potential buyers.

The Centre wants state-owned Power Trading Corporation to help sell Dabhol’s unsold electricity to power-deficit states like Gujarat, Haryana and Delhi, transferring the power through Power Grid Corporation’s national grid.

PTC will also explore the possibility of selling Dabhol’s power to newly set up large industrial units in southern and western India that do not have captive power plants. Officials said they estimated some 600 mw of power will have to be sold outside Maharashtra.

Today’s talks came about after Enron threatened to walk out of the Dabhol power project.

   

 
 
SETBACK FOR BSNL 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 10: 
Bharat Sanchar Nigam Limited’s attempt to increase its revenues received a setback as the Telecom Dispute Settlement Appellate Tribunal stayed its move to slap a new interconnect charge on private telecom operators. Under the interconnect agreement, BSNL carries forward local, STD and ISD calls made by the subscribers of a private basic telecom company to any subscriber’s premises irrespective of the service provider. Similarly, the private operators carry forward the calls made by its subscriber to the BSNL network.

A revenue sharing arrangement had been agreed by both parties based on the Telecommunication Interconnection Regulation, 1999 and Licence and Interconnect Agreement of 1994.

The full bench of TDSAT of chairman S.C. Sen and two members, R.U.S. Prasad and Sen Gupta, heard the argument. The bench restrained BSNL from disconnecting the interconnection till the case is fully heard.

   

 
 
INFOSYS Q1 NET SPURTS 50% 
 
 
OUR BUREAUX
 
July 10: 
Infosys Technologies Limited has opened the 2001-02 financial year with a 50 per cent rise in its first quarter net profit at Rs 190.03 crore. In the same quarter last year, the Bangalore-based company had posted a net profit of Rs 126.79 crore.

Though Infosys beat analysts’ expectations on its performance, the infotech major expressed concern over the pressure on margins and declining billing rates.

Total income of the Nasdaq-listed company for the first quarter stood at Rs 626.01 crore compared with Rs 370.64 crore in the same quarter last year.

For the second quarter of the current financial year, Infosys expects total income to be around Rs 625-640 crore while for the full fiscal ending March 31 next year it would be roughly Rs 2,500-2,560 crore.

Analysts were expecting a first quarter net profit of around Rs 160-190 crore on sales of over Rs 580 crore.

Though the topline growth was healthy, billing rates declined by 2.9 per cent.

Infosys, however, said despite the fall in prices, volumes improved by 11 per cent. Software revenues in dollar terms grew by 8.1 per cent for the quarter.

“We have experienced pricing pressures from both our existing and new customers, especially in new, large-scale offshore initiatives,” S. Gopalakrishnan, deputy managing director said.

The underlying concern about the future growth of the company was best reflected in the share price movement of the Infosys scrip today when it closed lower at Rs 3494.85 on the Bombay Stock Exchange. The scrip closed at Rs 3519.65 yesterday.

While profit margins of the company are expected to be under pressure in the subsequent quarters, analysts said the stock price could mirror this concern. This apart, Unit Trust of India’s large holding in the stock is also a worrying point as it is felt that the beleaguered Trust may soon liquidate the holding.

Commenting on the company’s performance, a cautious N.R. Narayana Murthy, chairman and CEO said, “the economic environment continues to be challenging.”

“While we have exceeded our expectation for the first quarter, we have not seen any material change in the external environment to revise our annual revenue growth forecast of 30 per cent for fiscal 2002,” he added.

Nandan Nilekani, managing director and COO, said the company continues to witness a “softness in the telecom vertical sector.”

   

 
 
FEWER JOBS ON OFFER 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
Bangalore, July 10: 
Infosys is going slow on its recruitment drive. During the first quarter of the current financial year, the company has hired only 116 compared with 921 in the previous quarter. “We have phased out the joining schedules of campus recruits to align them with out business requirements. However, our plans for adding 1500 to 2000 employees remain unchanged,” K. Dinesh, director, human resources development, said.

The total employee strength of the company increased to 9,947 as on June 30 from 9,831 as on March 31. Last year, the staff strength at the end of the first quarter was 6,445. The number of software professionals as on June 30 this year increased to 8,724 from 8,656 on March 31.

   

 
 
DR REDDY’S SET TO SPLIT STOCK 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 10: 
The board of the Hyderabad-based Dr Reddy’s Laboratories Ltd (DRL) will meet on July 31 to consider the possibility of a stock split.

With this, Dr Reddy’s will become the second domestic pharmaceutical company after the Delhi-based Morepen Laboratories, to go in for a stock split. Market circles welcomed the development, pointing out it would improve the liquidity of the stock, particularly among retail investors. The stock is believed to have been accumulated by several foreign and local funds in the recent past following its overseas listing, better results and the licensing agreement with Novartis Pharma AG.

In a communication issued to the stock exchanges today, DRL said the proposed meeting of its board of directors on July 31, will also consider the un-audited financial results for the quarter ended June 30, and the issue of shares under the employees stock options scheme, apart from taking a decision on the “sub-division of existing equity shares.”

In May this year, DRL entered into a licensing agreement with Novartis Pharma AG for a novel anti-diabetes agent. Under the agreement, Dr Reddy’s will grant Novartis worldwide exclusive rights for the development and commercialisation of their insulin sensitiser. While the scrip was then trading at Rs 1350, it has been recently witnessed a good amount of buying with various fund managers expressing optimism on its future growth plans.

On the Bombay Stock Exchange (BSE) today, the DRL scrip finished at Rs 1564.20 after opening at Rs 1550 and rising to a day’s high of Rs 1608.50. The counter witnessed 1851 trades, with a turnover of Rs 3.42 crore.

As far as the company’s research portfolio is concerned, of the seven pharmaceutical products which are in development, three are in clinical trials and two have completed pre-clinical testing. Among these, while two diabetes molecules have already been licensed to Novo Nordisk, there are three other anti-cancer molecules which are in Phase-I and late pre-clinical phase.

Similarly, in the international generic business, which occupies the top end of its entire value chain, DRL is now awaiting the US FDA approval for around nine products.

   

 
 
SYSTEMIC SNAGS BLAMED FOR CSE CRISIS 
 
 
BY A STAFF REPORTER
 
Calcutta, July 10: 
The chairman of the Joint Parliamentary Committee (JPC) probing the stock scam, Prakash Mani Tripathy, today said the crisis on the Calcutta Stock Exchange (CSE) was caused by lapses on the part of several individuals and institutions.

Though it is difficult to determine whether they were acting in collusion, he said the buck finally had to stop with executives of the exchange. In broad terms though, the panel felt it was a string of systemic deficiencies and market manipulation by brokers that pushed the bourse to the brink.

Former broker-directors of the exchange who resigned following the crisis, and five other members, deposed before the committee today. Notable absentees from among the former board members were Dinesh Kumar Singhania and K.K. Daga.

Representatives of IndusInd Bank, CSE’s clearing bank which has been dragged into the controversy for alleged delays in informing the bourse about bounced cheques, appeared before the panel, as did officials of CMC Ltd, the public sector infotech company which has been held responsible for a bugs that plagued the exchange’s margin software.

CSE executive director Tapas Datta had, in an earlier deposition before the JPC, alleged that IndusInd Bank delayed in informing the bourse that cheques issued by Dinesh Singhania and Ashok Poddar for margin payments had bounced.

Hence, the exchange could not deactivate their terminals.

However, the bank argued that the erstwhile president, Kamal Parekh, and vice-president K K Daga were intimated about the bounced cheques. It told the committee that an official had informed board members about the dishonoured cheques a day before the default took place. Parekh denied the claim, saying he could not remember meeting officials of the bank. All the same, the panel has asked IndusInd Bank to respond to the allegations in writing.

Parekh maintained that that board members did not meddle in the affairs of CSE’s surveillance and margin departments, and were therefore, not responsible for the crisis. “These departments reported to the executive director, who should be held responsible for the irregularities,” he added.

He accused exchange executives of not being alert to the threats arising out of the massive build-up of positions by defaulters, a charge which was levelled by other brokers too. Tripathy said key CSE officials, including department heads, may be summoned for further inquiries into the matter.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.14	HK $1	Rs.  5.95*
UK £1	Rs. 66.46	SW Fr 1	Rs. 25.95*
Euro	Rs. 40.29	Sing $1	Rs. 25.40*
Yen 100	Rs. 37.60	Aus $1	Rs. 23.70*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4445	Gold Std(10 gm)	Rs.4365
Gold 22 carat	Rs. 4195	Gold 22 carat	N.A.
Silver bar (Kg)	Rs. 7150	Silver (Kg)	Rs.7285
Silver portion	Rs. 7250	Silver portion	N.A.

Stock Indices

Sensex		3328.27		+ 37.46
BSE-100		1563.56		+ 15.80
S&P CNX Nifty	1072.05		+ 12.55
Calcutta	 121.73		+  1.45
Skindia GDR	  N.A		   -
   
 

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