Govt bid to cushion US-64 loss
Sinha scotches quit rumour
Zee places 50 lakh shares with US firm
Alloy Steels may down shutters
SBI task force on stock option
ACC first quarter net at Rs 44 crore
Turnover tax bridges brokers’ divide
ITC faces Fera fine of Rs 613cr
Industry growth slips to 1.9% in May
Foreign Exchange, Bullion, Stock Indices

 
 
GOVT BID TO CUSHION US-64 LOSS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 12: 
The government wants Unit Trust of India (UTI) to redeem the units of its troubled US-64 scheme at a price above the face value of Rs 10.

The suggestion was made at a two-hour-long meeting that finance minister Yashwant Sinha and key ministry officials had with the top-brass of UTI here today. The UTI officials had, however, tried to argue that the units ought to be redeemed at a price nearer the net asset value, which is believed to be between Rs 8-8.50.

The government, which is concerned about the raucous protests over the UTI fiasco when Parliament reopens shortly, asked the country’s largest mutual fund to dip into its coffers and, if necessary, seek help from banks and financial institutions to finance a redemption package that will open an escape hatch for small investors.

Early this month, UTI stunned investors when it announced a six-month freeze on sale and repurchase of units of its flagship scheme.

The redemption package is expected to be cleared at a UTI board meeting in Mumbai tomorrow.

The finance minister is also slated to hold a meeting with financial institutions and public sector banks tomorrow where, among other things, the government will try to tie up the funding for the UTI bailout package either through a soft loan window or a bond issue. Life Insurance Corporation, State Bank and Punjab National Bank are expected to be major participants in this scheme.

Sources said both the Prime Minister’s Office and the finance minister want the redemption and bailout packages to be tied up by tomorrow when the UTI board meets.

They feel it would be necessary for political, if not practical, reasons to offer a price above the face value to investors. The US-64 scheme had been redeemed at above Rs 13 a unit before the scheme was frozen earlier this month following heavy redemptions by large companies even though the real intrinsic value of the units lower than the face value of Rs 10.

Anticipating such a decision, US-64 units zoomed on the bourses today to an intra-day high of Rs 11.65 before falling back at the close to Rs 10.15. On Wednesday, the units were traded at Rs 9.80.

Acting UTI chief K.G. Vassal, told reporters after the meeting, “It’s too premature to say anything ... we will shortly work out the package. “

Finance ministry officials said UTI was working out a cap on how many units a unit-holder could redeem.

Suggestions have been made that a cap of between 5,000 and 10,000 units be set. According to UTI’s own calculations, about half of their investors in US-64 hold less than 10,000 units.

Officials said UTI had also asked Sebi to create an alternative market route for larger scale trading in US-64 units. Currently, rules forbid the sale of more than 500 units through the market in the physical mode. Larger volumes have to be traded after being dematerialised.

UTI wants Sebi to relax this rule so that more unit holders can quit if they want to use the market option.

Besides soft loans and bonds, several other funding options were discussed. One of the suggestions was that UTI could actually sell off some of its equity or debt holdings to partly pay for the redemption package. But others have argued that any heavy and sudden sale of equity held under the US-64 scheme could lead to a sharp fall in the sensex, the main barometer of the Bombay Stock Exchange.

The sale of debt held by the fund would mean the debt-equity ratio, which is currently about 1:2, would tilt further in favour of equity even as the finance ministry has ordered the fund to bring it down to 1:1.

   

 
 
SINHA SCOTCHES QUIT RUMOUR 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 12: 
Union finance minister Yashwant Sinha today denied reports that he was planning to resign because of the UTI fiasco and said he would be part of the committee that would hold bilateral trade talks during the Indo-Pak summit. “I will not respond to the question of my resignation as these are all tutored questions. You have nothing else to do except to bring up the question about my resignation every two months and I will not reply to that,” he told reporters on the sidelines of a Nabard function here. He also refused to be drawn into a discussion on the possible solution to the crisis that has enveloped Unit Trust of India’s flagship scheme US-64.    

 
 
ZEE PLACES 50 LAKH SHARES WITH US FIRM 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 12: 
The promoters of Zee Telefilms (ZTL) today placed 50 lakh shares with a long-term investor for Rs 50 crore in a deal that helps them meet part of the Rs 220-crore liability that arose when they scooped up shares of media and entertainment companies like AB Corp and B4U.

There was no word on the price at which the shares changed hands on the Bombay Stock Exchange (BSE) this morning, but market grapevine pegged it at a little over Rs 100.

“The US-based institution which has purchased the 50 lakh shares is a long-term investor in Zee Telefilms. However, we are not at liberty to disclose the price or the identity of the investor,” a company spokesperson said.

The deal is believed to have fetched the promoters — the Essel group of companies — over Rs 50 crore, which takes the total amount raised by them so far to Rs 110 crore. They had set for themselves a June 30 deadline to meet their commitment in full, but could rustle up only Rs 60 crore by then.

The promoters still have to cough up an equal sum, but it is not known what cards they have up their sleeves to raise it. “The big question that remains is how and when will the promoters repay the balance amount,” an analyst said.

The placement set the Zee counter alight: the share zoomed to an intra-day high of Rs 109.70 from its opening quote of Rs 99 before closing at Rs 108.40 on a Rs 95.77-crore turnover.

The liabilities piled up when the promoters committed Rs 220 crore to Big Bull Ketan Parekh and his associates for acquisition of shares in media outfits such B4U, the Bharat Shah-promoted unlisted television channel promoted and Amitabh Bachchan’s AB Corp.

The 50 lakh shares —with a face value of Re 1 — placed today will cost the promoters around 1 per cent of their holding in Zee, which will get the funds once the deal is squared up.

“We are committed to returning the full amount with interest as soon as possible. Placement of these shares is a testimony of the promoters’ will to fulfil their obligation despite the fall in the price of the Zee Telefilms’ share,” A C Saha, Essel Group president (corporate finance), told The Telegraph.

   

 
 
ALLOY STEELS MAY DOWN SHUTTERS 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, July 12: 
The Steel Authority of India is weighing the option of closing down its Durgapur-based Alloy Steels Plant which has around 3,000 employees. ASP is the second large plant in the state heading for closure after the Mining and Allied Machinery Corporation (MAMC).

Sources said the proposal is under consideration as the plant has become “totally unviable”.

Although SAIL has put ASP on the block and tenders were floated on June 28, the company has not received any query so far.

Industry observers say it is difficult to get a buyer for this plant in which steel is produced using the obsolete arc furnace method.

“Unlike IISCO, this special steel unit does not have any other asset apart from the junk plant and machinery. So, there are no takers,” a former SAIL director said.

SAIL has decided not to make any attempt to revive the plant as it is bound to prove futile. However, SAIL sources said the employees will not be affected if the plant is closed down.

“Manpower has already come down to 3,000 from around 7,500 a few years back. We expect the number to come down further as a result of normal and voluntary retirement,” the sources said.

Whatever manpower remains, can be redeployed at the Durgapur Steel Plant which has reduced its staff in the same manner from 32,000 to 19,000.

“After the wage board negotiations are over, we expect more people to opt for voluntary retirement in both the units. This will bring about a balance,” they said.

ASP, which has an installed capacity of 4 lakh tonnes of special steel, is currently operating at 25 per cent capacity. It is losing out steadily to cheap imports and competition from small and medium scale units with low overheads.

   

 
 
SBI TASK FORCE ON STOCK OPTION 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 12: 
State Bank of India (SBI) has constituted a task force to hammer out the nitty-gritty of an employee stock option (Esop) scheme it intends to launch in the first-ever plan of the kind by a public sector bank in the country.

The team, comprising members of the SBI Officers Federation and SBI Staff Association, is headed by S.A. Farooqi, chief of the SBI Staff Training College. With three months in hand to compile its report, it is now listing conditions that will make employees eligible for the share offer.

“One of the options being considered is to link Esops to performance. Preliminary discussions held so far indicate that employees will be given 50 shares each. However, this is not final. The issue has to be studied further,” sources added.

A member of the task force said they are looking at ICICI Bank’s stock option plan to see if their own scheme can be modelled along those lines. “SBI has 2.1 lakh employees, which makes it difficult to work out Esop,” sources added.

Before it introduces the plan, permission from the Reserve Bank of India (RBI), which holds 59.7 per cent in SBI, is a must. NRIs, foreign institutional investors (FIIs) and overseas corporate bodies have 16.7 per cent, financial institutions 11.1 per cent, mutual funds and other banks 1.6 per cent, domestic companies 1.3 per cent and public 9.5 per cent.

Bank of Baroda thought of launching Esops after its voluntary retirement scheme, but the plan has now been dropped.

Talking about the Millennium Deposits floated last year, sources said the five-year 8.5 per cent dollar-denominated plan mopped up a whopping up $ 5.27 billion even though the US market was left out. Around 40 per cent of the funds will be parked in government securities, 50 per cent with various banks which helped raise the money, while the remaining will be invested by SBI in infrastructure projects.

The bank is considering whether its 23,000 employees — 19,000 of whom are officers — who opted for voluntary retirement schemes (VRS) can be enlisted as insurance agents if they undergo the mandatory 100-hour training laid down by Insurance Regulatory Development Authority (IRDA).

SBI Life Insurance Company Limited, the bank’s insurance joint venture with Cardiff S.A, made its debut with “Sanjeevan”, a premium money- back product, last month.

Targeted at those who have retired prematurely, it is designed to provide a liberal risk cover and tax-free annuity payment. Sources say the market response has been good response and around 500 policies are believed to have been sold.

   

 
 
ACC FIRST QUARTER NET AT RS 44 CRORE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 12: 
The Associated Cement Companies Ltd (ACC) has reported a net profit of Rs 43.95 crore for the first quarter of the current fiscal as against a loss of Rs 9.50 crore in the corresponding period of the last financial year.

During the reporting quarter, net sales was at Rs 842.51 crore, up from Rs 746.16 crore in the corresponding previous quarter. ACC sold 28.69 lakh tonnes of cement in this period, up marginally from 28.08 lakh tonnes. The cement production for the quarter was higher at 2.90 million tonnes compared with 2.76 million tonnes last year.

For the first time, in this quarter the company paid Rs 27.70 crore towards deferred taxation. ACC’s income improved by 13 per cent to Rs 851.72 crore as against Rs 755.46 crore, last year.

Speaking to shareholders at the company’s annual general meeting today, chairman Tarun Das said, while cost reduction would be a focal point, other measures include, increasing throughput, removing operational imbalances, control of debtors and working capital, enhancement of sales realisation, enhancement of the brand image, presence in all important markets and further strengthening the distribution network.

He pointed out that though efforts are on to divest ACC’s stake in other non-core areas, the process would be slow and a complex one.

Hughes Tele prunes loss

Hughes Tele.com (India) Ltd (HTIL) net loss has declined by 22 per cent to Rs 30.3 crore for the first quarter ended June 30 compared with Rs 38.79 crore in the corresponding period previous year. HTIL’s total income was up by 106 per cent to Rs 62.93 crore compared with Rs 30.57 crore, a company release said. The company’s telecom service revenues increased by 82 per cent to Rs 54.52 crore as against Rs 30 crore in previous corresponding quarter.

President and chief executive officer Prakash Bajpai said the company is on target to reach 2 lakh subscriber lines by end of March.

Cadbury’s Q2 net up

Cadbury India Ltd (CIL) has posted a 23.10 per cent increase in net profit at Rs 8.79 crore for the second quarter ended June 17 compared with Rs 7.14 crore in the corresponding period last fiscal. Net sales was up by 10.65 per cent for the reporting quarter at Rs 118.49 crore as against Rs 107.08 crore in the previous corresponding quarter, CIL informed the Bombay Stock Exchange.

Mastek net dips 51%

Mastek Ltd’s net has dipped by 50.59 per cent to Rs 14.54 crore for the year ended June 30 compared with Rs 29.43 crore in the previous year. The company’s total income for the reporting year was at Rs 85.62 crore as against Rs 96.31 crore in the previous fiscal, the company informed the Bombay Stock Exchange.

In a statement, Mastek chairman and managing director Ashank Desai said: “The year was a challenging one with mixed fortunes. Yet longer sales cycle, which are still lengthening due to US slowdown, has been impacting our efforts.”

   

 
 
TURNOVER TAX BRIDGES BROKERS’ DIVIDE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 12: 
In a rare show of solidarity, brokers of the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) came together on a single platform to petition the Securities and Exchange Board of India (Sebi) to relax turnover tax fees. The brokers created history of sorts, as it was the first time that the two rival bourses buried the hatchet, closing ranks for a common cause.

The joint representation to the Sebi chairman, on a day the Joint Parliamentary Committee (JPC) came calling at the BSE and Sebi itself, was symbolic, but they promised more in the days to come. The brokers also asked the capital market regulator to look into problems relating to derivative membership and deferral products and pleaded for a restoration of the 5 day cycle for rolling settlements.

The rally, jointly organised by BSE brokers and their NSE brethren could only stage a symbolic march, as against their earlier plan of a rally from the BSE all the way to the Sebi office. Plans of a grand march had to be scaled down as the convenor of the rally, former BSE president Deena Mehta, reminded the brokers of a recent high court ruling forbidding morchas and roadblocks in the area. Consequently, it was a delegation representing the brokers which went ahead with the petition to Sebi.

The token march, with placards and banners, lasted a few metres.

Led by Mehta, the brokers took pains to underscore the fact that it was not a protest, but a petition to Sebi to read the writing on the wall.

The brokers’ main grouse was that the Bhatt Committee report on turnover fees was submitted way back in 1992, whereas “various changes have taken place in the capital markets since 1992.”

They pointed out flaws in the Bhatt committee report such as the assumption of a “gross income of 1 per cent on turnover”. The committee assumed the brokerage incomes to be a minimum of 1 per cent of turnover and accordingly set 0.01 per cent of the turnover as fees, which, it had felt would be reasonable.

“Post 1995, brokerage scales have come down from 1 per cent of the turnover to a range of 0.05 per cent to 0.10 per cent (charged only on one side for square-off transactions on weekly settlement basis),” speakers at the joint representation argued.

“Each and every institution also has started paying brokerage in the range of 0.15 per cent to 0.25 per cent, inclusive of service tax, that too on delivery-based transactions,” they said.

   

 
 
ITC FACES FERA FINE OF RS 613CR 
 
 
BY A STAFF REPORTER
 
Calcutta, July 12: 
ITC faces a maximum penalty of Rs 613 crore ($ 130 million) if the Enforcement Directorate (ED) can establish its case that the company violated foreign exchange regulations by offering to pay $ 26 million to ITC Global Holding’s creditors without prior Reserve Bank (RBI) permission.

The willingness to clear the dues is being treated as a confession that the tobacco major has overseas liability, and that it fell foul of Section 9 (1) (c) of the Foreign Exchange Regulation Act (Fera) by not informing the central bank about it, says the ED notice. The notice is based on a statement made by Sriram Khattar, former managing director of ITC Global, before the chief enforcement officer on April 13, 1999. The penalty is five times the amount involved.

According to the directorate, ITC’s offer of support tantamounts to “acknowledgement of the Singapore-based subsidiary’s liabilities”, which, without RBI approval, was a violation of Fera norms.

However, ITC has denied ever having accepted any liability on account of ITC Global in its reply sent on Wednesday. The directors’ report for the year ended March says the offer of support was intended to preserve “goodwill of the international banking communities”. It is understood that some of ITC’s bankers are also creditors of ITC Global.

The ED has held ITC chairman Y. C Deveshwar, erstwhile executive directors Saurabh Mishra, B Mitter, SSH Rehman and Anup Singh accountable for the breach. Others in the dock include non-executive directors, GR Armstrong (BAT nominee), Tapan Ganguly (IFCI nominee), PV Narsimham, AAF Rodriguez, Basudeb Sen, Ram S Tarneja, B Vijayaraghavan and KP Narasimhan

According to it, all the ITC directors participated at the board meeting held on February 10 1998, when thee decision to “admit the liability’’ on account of ITC Global was taken.

   

 
 
INDUSTRY GROWTH SLIPS TO 1.9% IN MAY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 12: 
The slump in the industrial production continued as the manufacturing sector grew by only 1.6 per cent during May this year, as against 6.2 per cent in May 2000. During April-May, the manufacturing sector grew 2.6 per cent as against 6.6 per cent in the same period last year. Industrial production registered a growth of 1.9 per cent in May compared with 6 per cent growth in the same month last year. The manufacturing sector has over a two-thirds weightage in the estimation.

According to the estimates of Index of Industrial Production (IIP) released by the Central Statistical Organisation (CSO), cumulative growth during April-May of 2001-02 was significantly lower at 2.6 per cent as against an impressive growth rate of 6.2 per cent in the corresponding period last year.

The electricity sector witnessed a low growth rate of 2.8 per cent in May this year as against 6.4 per cent in May last year, The cumulative growth in this sector for April-May was at 2.2 per cent as against 5.1 per cent last year.

The mining sector reflected improvement by growing at 4.1 per cent in May this year compared with 2.6 per cent growth last year. This sector’s cumulative growth was up at 3.8 per cent in April-May as against 3.3 per cent in April-May 2000.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.  47.16	HK $1	Rs. 5.95*
UK £1	Rs. 66.38	SW Fr 1	Rs. 26.30*
Euro	Rs. 40.30	Sing $1	Rs. 25.35*
Yen 100	Rs. 37.96	Aus $1	Rs. 23.55*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4455	Gold Std(10 gm)	Rs. 4375
Gold 22 carat	Rs. 4205	Gold 22 carat	N.A.
Silver bar (Kg)	Rs. 7175	Silver (Kg)	Rs.7280
Silver portion	Rs. 7275	Silver portion	N.A.

Stock Indices

Sensex		3452.75		+ 76.54
BSE-100		1614.80		+ 40.49
S&P CNX Nifty	1105.50		+ 21.85
Calcutta	 124.47		+  1.74
Skindia GDR	  N.A.		    -
   
 

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