FIs pledge Rs 3,000 cr to UTI
Mutuals find the going tough
Sinha wants loan sharks in the net
Govt to stick to tax target
General Motors lines up three new models
SAIL staff quarters on the block
Rural boost for FMCG firms
Check-up panel for sick units in Bengal
Foreign Exchange, Bullion, Stock Indices

New Delhi, July 13: 
Finance minister Yashwant Sinha today tied up funds worth Rs 3,000 crore from a consortium of banks and financial institutions to finance Unit Trust of India’s bailout package for investors who have been trapped in its troubled US-64 scheme.

UTI will dredge up another Rs 1,500 crore from its own development reserve fund to finance the bailout package which is expected to be approved at a meeting of the board in Mumbai tomorrow.

Early this month, UTI stunned retail investors in the popular scheme when it announced a freeze on sales and repurchase of US-64 units for a period of six months. The sudden decision followed a disastrous run on the scheme by corporate investors who had yanked nearly Rs 4,000 crore out of it by way of redemptions.

Although Sinha did not chair the meeting of the core group of banks and FIs, including Life Insurance Corporation, General Insurance Corporation, Industrial Development Bank of India, State Bank of India, Punjab National Bank and Canara Bank, he sent a strong signal when he asked the group to meet at his North Block office. Top finance ministry officials including banking secretary Devi Dayal who attended the meet promptly reported the outcome of the meeting to him.

Although it is still not known how much each individual bank or FI will contribute, sources said the biggest chunk will come from SBI followed by LIC. The government has already instructed UTI to pay out a redemption value higher than the face value of Rs 10.

The details of the redemption package were discussed yesterday at a meeting between Sinha and the UTI top brass. Both the Prime Minister’s Office and the finance minister want the redemption at a price above face value. Anticipating such a decision, the US-64 unit zoomed yesterday to an intra-day high of Rs 11.65 before falling back at the close to Rs 10.15. Today, however, it experienced dull trading and closed at Rs 10.

Unit Trust, which is India’s largest mutual fund, now manages assets worth Rs 55,924 crore, which is about 57 per cent of all assets managed by the mutual funds industry.

It has for long been riding high on the success of its US-64 scheme which has been popular with small investors because of the tax shelter it offers. The freeze on the scheme sent the already roiled markets into a tailspin and sparked angry reactions among small investors across the country. This forced the finance minister to advise UTI chairman P.S. Subramanyam to step down. He was replaced by his deputy K.G. Vassal. Sinha has since claimed he had no prior inkling of the poor state of affairs in UTI and ordered an independent investigation into the way the Trust had been run.


New Delhi, July 13: 
The mutual funds industry is shrinking. Blame it on the stock meltdown, and top it with the large-scale redemptions faced by the Big Daddy, Unit Trust of India.

The total assets under the management of the mutual funds industry has shrunk by 9.07 per cent to Rs 97,953 crore as on June 30 this year from Rs 1,07,728 crore a year back, according to the first quarter (April-June 2001) data put out by the Association of Mutual Funds in India (AMFI).

UTI has seen its pool of resources dip by Rs 16,894 crore in just a year’s time to Rs 55,924 crore as on June 30 this year, from Rs 72,818 crore a year back.

This meant that the total share of UTI assets in the mutual fund industry has also gone down from 67.6 per cent to 57.1 per cent now even as private sector funds managed to bolster their assets from Rs 25,359 crore (23.54 per cent of total assets) to Rs 34,411 crore, or 35.13 per cent of total assets of the industry.

Investors voted with their feet when they scurried out of US-64— the flagship scheme of UTI. Result: UTI was the only mutual fund that saw higher redemptions of Rs 5,314 crore with sales of just Rs 2,684 crore leading to a net outflow of Rs 2,630 crore during the first quarter of 2001-02.

This was against a net inflow of Rs 1,512 crore during the same period last year. The private sector mutual funds fared much better, helping the industry to record a 55.19 per cent rise in net inflows at Rs 6,937 crore as against Rs 4,470 crore during the same period in the previous fiscal.

The credit for the major jump in collections during the first quarter of this fiscal, however, goes to bank-sponsored mutual funds whose net inflows went up by more than 15 times from Rs 63 crore to Rs 974 crore while institution-managed funds recorded net inflows of Rs 539 crore as against a net outflow of Rs 101 crore earlier.

The gainers in absolute terms, nevertheless, have been private sector funds which have seen their net collections shoot up by 168.8 per cent to Rs 8,054 crore from Rs 2,996 crore.

Among the private sector funds, those which are Indian-managed to record a net inflow of Rs 2,181 crore, up from Rs 244 crore earlier. Predominantly Indian-managed joint venture funds managed to net Rs 1,922 crore as against Rs 1,024 crore earlier.

Private sector funds which are predominantly foreign-managed recorded a net inflow of Rs 3,951 crore as against Rs 2,996 crore earlier.


New Delhi, July 13: 
Finance minister Yashwant Sinha today asked chief executives of financial institutions and banks to take a tougher line against large companies wilfully defaulting on loans, and if necessary, send them “to jail”.

Addressing a meeting of bank CEOs here today, Sinha pointed out a common man unable to repay Rs 10,000 was often jailed but “big fish” who owed more than thousands of crores of rupees were going scot free.

Briefing newsmen on the outcome of the fourth meeting, banking secretary Devi Dayal and Indian Banks Association chairman S S Kohli said the finance minister had asked the banks to expedite cases relating to non-performing assets(NPAs).

Although the gross gross NPA level has come down from 14 per cent to 13 per cent and net NPAs from 8 per cent to 7 per cent, Sinha asked each bank to devise its compromise formula with the clients. If this failed, more drastic measures should be adopted.

Dayal said the process of recovery and more stringent action would be expedited, with the setting up of seven more Debt Recovery Tribunals (DRT) and the introduction of new foreclosure laws.

He pointed out that due to recent Supreme Court judgments, properties of defaulters could now be attached without much problem. However, the civil procedure has to be followed.

Sinha also asked bank chiefs to speed up credit offtake which he described as sluggish. Bank chiefs however cautioned against any undue political pressure in forcing the pace of offtake as this could lead to larger NPA volumes. They also pointed out credit had already started picking up in certain sectors like consumer durables and retail segments.

However, they admitted credit offtake for infrastructure projects, which could have the biggest impact on the GDP growth rate, had been rather slow. Bankers promised to sew up funding for large projects at the earliest. Sinha also promised financial institutions chiefs, the Reserve bank of India (RBI) would soon come up with guidelines permitting banks and financial institutions (FIs) to share high-cost projects.

The FIs are keen to share the costs of movable and immovable assets of projects with banks. “The details of this are yet to be worked out. RBI has been asked to come up with the guidelines,” Dayal said. The FIs also discussed with the government ways of assisting companies to raise capital at cheaper costs by subscribing to their debt papers, the banking secretary said.

A crucial issue discussed at the meeting was that while non-food credit had gone up by only Rs 1224 crore in the first quarter, food credit had gone up by 22 per cent or Rs 8,800 crore. This was largely due to higher procurement. Bankers said outstanding credit amounted to more than Rs 7,500 crore or 1.5 per cent higher than it was in the first quarter.


New Delhi, July 13: 
Union finance minister Yashwant Sinha today said the government will not scale down its indirect tax collection figure of Rs 1,41,000 crore for this fiscal despite the industrial slowdown.

Speaking on the sidelines of a function held here today to distribute presidential awards to officers of the central excise and customs, Sinha said there will be no change in the collection targets.

“We will see,” was his terse reply when reporters asked him to comment on the latest statistics showing that industrial growth had slowed to 1.9 per cent in May and imports had plunged by 9.9 per cent in April.

Earlier addressing the awards ceremony, Sinha said the department has to work hard to get closer to the target and even exceed it.

Over two-thirds of the government revenue comes from the customs and excise departments which are coping with problems of newer and sophisticated methods of tax evasion.

“Our endeavour is to enable the departments in fulfiling their task, particularly the Directorate of Revenue Intelligence whose role is very important. The proposed restructuring of cadres is a step in that direction,” he said.

Sinha said the ministry was in constant dialogue with the commerce ministry and the external affairs ministry to streamline operations and achieve higher customs collections while promoting export and import in the country.

The government is aiming to mop up a higher Rs 81,720 crore by way of excise duties during 2001-02, as against the revised estimate of Rs 70,681 crore last fiscal. The target for customs collections is Rs 54,822 crore as against Rs 49,781 crore in the last fiscal.


Calcutta, July 13: 
General Motors India intends introduce three new models, but its plan to import completely built units (CBU) of upper-end midsize car, Vectra, appears uncertain.

General Motors has submitted applications for introducing its models to the Pune-based Automotive Research Association India (ARAI) though senior officials gave no details on the features. Companies must have their plans to launch vehicles — whether made in India or abroad — vetted by the association.

However, the proposal by the fully owned subsidiary of the world’s largest vehicle manufacturer to launch a mid-sized car has run into pricing problems arising from import duties. It is holding fresh talks with its German counterpart in an effort to make it more affordable for customers in India.

P. Balendran, vice-president (corporate affairs), said his company expected to import completely built units of the model at a customs duty of around 35 per cent, but the 60 per cent levy imposed in the 2001-02 budget has pushed up the total tax outgo to 120 per cent — turning it into an unviable proposition.

GMI, he said, wanted to import the car at prices ranging from Rs 13 to Rs 14 lakhs from the German arm of the auto giant, but the high duty means it will now cost Rs 16-Rs 17 lakh.


Calcutta, July 13: 
Steel Authority of India (SAIL) has decided to sell its 9000 surplus quarters in the townships of Durgapur, Bhilai, Rourkela and Bokaro in a move that will boost its bottomline by Rs 300 crore and save it lakhs in maintenance expenses.

Money raised from the sale will not only increase current year profits in a one-off affair, but the houses will be sold to existing and retired SAIL employees who will get an opportunity to purchase their own dwellings at affordable prices.

Officials describe the plan as one that is designed to promote the “welfare of employees”, saying there are already 981 applications on the table. Unions have applauded the move.

The state-owned steel company, the country’s largest producer of the metal, is in talks with Housing Development and Finance Ltd to give its employees the option of borrowing on easy repayment terms.

“Our idea is that employees should be able to own a house with loans that can be repaid over a period of 10 to 12 years before retirement. This way, they will not have to cough up their lifetime savings for a house after they hang up their boots,” an official said.

While the existing and retired employees stand to benefit, the company will not have to spend on the upkeep of quarters at a time when it is struggling to remain in the black. The scheme is open to ex-servicemen, but not to outsiders.

The houses are priced between Rs 1.5 lakh and a high of Rs 15 lakh depending on the categories they are slotted in. In most SAIL townships, there are about eight types of quarters.

Asked whether the houses are being offered at a discount, the official said the “sale will be mutually beneficial.”

“The quarters which will be sold are not limited to the concrete structures. You have to take into consideration the huge piece of land attached to all of them,” he added. Sources in Durgapur speak of several employees who opted for such quarters constructing extra rooms in the spare land.

At the same time, SAIL is planning to sell other surplus assets like schools and hospitals, which it feels can be run either as joint ventures, or sold off. However, the company has not taken a final decision on the issue. “Our aim is to sell the houses first. Once that task is accomplished, we will be able to make up our mind on shedding services which have been rendered relatively insignificant over the years,” he added.


Mumbai, July 13: 
Hindustan Lever Ltd (HLL) and other fast moving consumer goods (FMCG) companies, long hit by the flat demand growth in the rural sector, are now coming back into the reckoning following the optimistic forecast of increase in rural incomes for this year.

Analysts and industry circles aver that the strong recovery in the agricultural economy following good monsoons in various parts of the country, will be directly reflected in the toplines of giants like HLL.

HLL, long viewed as a rural growth story, has, in the recent past, witnessed a marginal 1-2 per cent growth in its topline following a sluggish rural economy. However, things are now looking up. Sources said if initial estimates put forth by the Centre for Monitoring Indian Economy (CMIE) were to fructify, a “moderate re-rating” is likely in those FMCGs with a strong rural focus, which, at a later stage, could percolate to the entire sector.

“Companies like HLL, Colgate, Nirma and others could be the ones who could get re-rated in the months to come. This could spread to other FMCG companies like Cadbury’s and Nestle,” said Rajesh Kothari, FMCG analyst at Khandwala Securities.

Market circles said the optimism was reflected in the HLL stock today when it surged more than 4 per cent to finish at Rs 223.55, after opening at Rs 217. The counter witnessed 12,626 trades, resulting in a turnover of Rs 33.94 crore. “Considering reports about good monsoons and the agriculture sector showing positive growth, we feel this will be a catalyst for HLL and a further 10-15 per cent movement in its stock price cannot be ruled out,” averred another analyst with a foreign brokerage.

However, there are others who prefer to tread cautiously. Sources here added that even if a good agricultural growth is to be taken into account, its impact would not be immediate. “There is always a lag of 4-5 months. So the impact, if any, will be seen during the latter half of the year,” warned an analyst.

He added HLL is unlikely to report any significant improvements in topline for its second quarter ended June 30, and growth here is likely to hover between 2-2.25 per cent. The company’s net profit, is however, projected to rise by 18 per cent.

CMIE had forecast that growth in the agriculture sector this fiscal would jump to 7 per cent following a good monsoon. It said GDP would grow by 6.3 per cent this year, up from 5.2 per cent in the previous yea, riding on the performance of the agriculture sector.


Calcutta, July 13: 
The West Bengal government has set up a high-powered restructuring committee to suggest ways to turn around 51 perennially sick state undertakings.

Addressing members of the Indian Chamber of Commerce, Nirupam Sen, state industry, industrial reconstruction and public undertakings minister said, “The committee will suggest what to do with these units. If they advise closure, we may shut them down. On the other hand, if the panel feels private partnership may do the trick, then we are ready to examine the option. But employees’ interest will not be jeopardised in any event.”

The committee will submit its report soon.

Of the total 67 state undertakings, seven have already started making profits and nine of them are on the threshold of achieving a break-even.

The government has also decided to set up a high-powered committee at Silpabandhu, the single-window agency of the West Bengal Industrial Development Corporation to hasten industrial approval in the state. “This is being done as per the recommendations of the task force,” Sen said.

Regarding the issue of militant trade unionism in the state, raised by ICC members, including president C. K. Dhanuka, Sen said the Left Front believed in responsible trade unionism. “Relations between the management and trade unions should be transparent and neither the unions nor the management should resort to violence.”

Moreover, he said the police have been directed to intervene immediately if disturbances arise in any unit.

“Where the productive capacity of the workforce and the installed capacity of an industrial unit are happily married, we have to see to it that the right ambience prevails for optimal production,” Sen said.

He said the government is serious about reviving the jute industry, for which a committee has been set up, headed by state labour minister Md Amin.

On the demands of ICC members for appointing local people in the industry, Sen said, “I do not believe in the son-of-the-soil theory. But if the industry can absorb some unskilled labour, there is no harm in it. Industry should also be sensitive to the unemployment problem of the country. However, if any political party exerts pressure on industry for absorbing their own men, the government will take strict action against them.”



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