Block deals catch bourses off-guard
HFCL pie may come in handy for UTI
Damodaran hints at strategic sale of holdings
Brokers’ bandh on Monday
Bharti knits optic-fibre network dream for state
Pointer to supplementary budget
Crisil rating rap for IDBI
HDFC net profit rises 19% in first quarter
Malaysian firm to get tech help from Globsyn
Foreign Exchange, Bullion, Stock Indices

 
 
BLOCK DEALS CATCH BOURSES OFF-GUARD 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 17: 
Stock markets went into a tailspin today, stirred by a flurry of block deals — transactions where a large volume of shares change hands — amid speculation that Unit Trust of India (UTI) was selling its equity assets to repay investors.

The scale and breadth of the trading jolted exchanges out of their stupor, and though no rumour could be confirmed, most tongues in the market wagged about UTI’s role.

There were some who pointed to Morgan Stanley, saying the key foreign institutional investor (FII) was at the centre of the bulk deals. “Perhaps, the FII was in the process of doing some inter group deals,” a dealer affiliated to a leading FII said. However, Nihar Oza, an analyst with a local broking house, said it was difficult to put a finger on the source of the deals.

“At the end of the day, it was nothing but wild speculation. One was only playing a guessing game.”

What was remarkable was the way illiquid scrips like Visual Soft, VSNL, Cummins and Bharat Forge came alive during the day. Marketmen say the mutual fund major and Life Insurance Corporation (LIC) were the main market movers, but the insurance monolith largely remained a buyer.

On its part, UTI denied its involvement in today’s trading, and its executive director, Brij Gopal Daga, scotched allusions that his institution was behind the welter of block deals.

The denials followed a deafening buzz that the Trust was dumping shares to raise funds for an anticipated redemption rush. However, the counter-argument was that the new exit plan announced for US-64 investors on Sunday does not require a sale of the kind that was witnessed today.

Some brokers attributed the block deals to a desire by some financial institutions to move out of comparatively illiquid stocks without disturbing the equilibrium of the market.

Most of the deals were witnessed on the Bombay Stock Exchange (BSE), though the trend was also seen on the National Stock Exchange (NSE).

Despite the preponderance of block deals, turnover on Dalal Street was relatively unchanged at Rs 1,000 crore, as was the sensex, which closed 2.90 points lower at 3431.93.

Reliance Petro clocked a volume of around 22 lakh shares on the BSE and 4.46 lakh on the NSE; 14.77 lakh Cummins shares changed hands on the BSE, and 23,000 on the NSE.

The Shipping Corporation of India share nose-dived 3.82 per cent after the country’s biggest shipping company announced a dividend which fell far short of market expectations.

   

 
 
HFCL PIE MAY COME IN HANDY FOR UTI 
 
 
BY ANIEK PAUL
 
Calcutta, July 17: 
The Unit Trust of India’s (UTI) decision to sell large equity holdings to strategic investors at negotiated rates has raised the possibility that it could offload its 12.42 per cent stake in Himachal Futuristic Communications (HFCL) in a one-off deal.

Analysts say it is an attractive proposition for the mutual fund major, which would stand to gain more than Rs 67.66 crore, the current market value of its stake in the company. “With UTI’s holding and another 20 per cent acquired through an open offer, one can wrest management control of the Rs 1,280-crore firm for Rs 200 crore,” an analyst said.

“We have not taken a final decision on the stocks to be offloaded, but holdings as large as HFCL would be sold through negotiated deals,” Trust executive director Brij Gopal Daga said. Birla Corporation, Hindalco, Reliance Industries, BSES, Exide, Larsen & Toubro and SmithKline Beecham Consumer Healthcare are some of the other companies in which the UTI has a stake of more than 10 per cent.

Though most mutual funds have moved out or substantially reduced their investments HFCL — a Ketan Parekh favourite — UTI continues to hold 97.91 lakh shares in the company. Other mutual funds hold only 0.46 per cent, while financial institutions and banks together control 1.74 per cent.

The Trust has the largest stake after the promoters, who boosted their holding by 3 per cent to 26.9 per cent in the last financial year through the creeping acquisition route.

HFCL posted a 127 per cent topline growth in 2000-01, and a 50 per cent rise in net profit at Rs 128 crore. At an earning per share (EPS) of Rs 14.59, the company’s stock is trading at 4.73 times the EPS.

The Securities and Exchange Board of India (Sebi) has said in its preliminary report to the Joint Parliamentary Committee (JPC) probing UTI’s stock investments that the country’s largest mutual fund accumulated 187,117 HFCL shares between July 1999 and March 2001. Even in March, it was a buyer in the stock, having picked up 1.46 lakh shares at an average price of Rs 439.20. It did not sell a single HFCL share during the month, though it sold 1.83 lakh shares in February and January at varying prices.

The foreign institutional investors, who have also been active in the scrip, hold 23.55 per cent in the company. Janus Overseas Fund has recently taken 6.21 per cent stake, while Deutsche Equities (Mauritius) holds 4.61 per cent.

   

 
 
DAMODARAN HINTS AT STRATEGIC SALE OF HOLDINGS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 17: 
The US-64 crisis may have blown over for now, but M Damodaran, the man entrusted with the task of setting things right at Unit Trust of India (UTI), is already charting his next move.

While on one hand, the UTI chairman indicated the mutual fund may initiate strategic sales in key holdings, he simultaneously hinted that an exit route may be on the way for investors with more than 3,000 units in the troubled US-64.

Speaking to newspersons here today, Damodaran said the fund would sparingly resort to strategic sales of its equity stakes in companies to realise the value of its holdings, adding in the same breath that there will be no fresh sales of units in the US-64 scheme as a “consolidation process” was on at the flagship scheme.

“UTI does not have any intentions to increase the corpus of the scheme and our focus now will be on managing what we already have. Therefore, there will be no sale of fresh units till the consolidation process is over,” he said.

Damodaran was speaking after a function organised by the Association of Mutual Funds of India (AMFI) to mark the release of the Mutual Fund Year Book-2000.

The new UTI chief said the review of the mutual fund’s working would also cover investment strategies adopted by the various funds. While addressing immediate concerns like investor confidence and feedback and the US-64 package for small investors, he said the fund will also work on long-term measures to tone up the working of the organisation.

Urging investors to keep their faith in UTI, Damodaran said, “Today might look bleak, but there is merit in staying with the schemes since benefits will follow from our restructuring efforts.”

Damodaran also hinted that relief was under way for other US-64 investors, particularly companies or those holding more than 3,000 units, saying, “UTI’s concerns are not confined to people holding only up to 3,000 units.”

Speaking on the occasion, D R Mehta, chairman, Securities and Exchange Board of India (Sebi), said the market regulator has asked 24 mutual funds, which have been “performing unsatisfactorily,” to review their work, which includes their investment strategies.

“The capital market regulator has asked mutual funds to review their performance and place the report before their board and trustees,” Mehta said. However, he added the regulator had no intention of interfering in their working.

Regarding the concern about the poor performance of the mutual fund industry, Mehta said only the equity funds had done badly and several debt funds have performed well.

While the net asset value (NAV) of equity funds were ruling low due to the market slump, debt funds have done well with returns in the range of 10-11 per cent with some even touching 13 per cent, he pointed out. Asset management companies have raised net funds worth Rs 6,990 crore in the first quarter of this fiscal while the gross collections in the quarter were around Rs 28,200 crore, Mehta added.

   

 
 
BROKERS’ BANDH ON MONDAY 
 
 
BY A STAFF REPORTER
 
Calcutta, July 17: 
Stock brokers across the country have decided to observe a day’s nation-wide strike on July 23 — the day Parliament reopens for the Monsoon Session.

The Ahmedabad and Uttar Pradesh bourses will, however, withdraw their strikes from Wednesday.

Representatives of the country’s 16 active bourses met today to form a national body of brokers, on the lines of Nasscom and the Confederation of Indian Industry (CII). Named the Securities Industry Association of India, this will work as a pressure group for brokers, besides providing assistance to regulate and upgrade themselves. The apex body of the country’s 5000-odd brokers will comprise representatives of all the bourses. While the Big-2, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), will have two representatives each, other bourses will have a single representative.

While Dina Mehta and Mohan Vijayan are likely to represent the BSE, T Premkumar may be one of the people chosen by the NSE. The Calcutta Stock Exchange’s (CSE) man on the panel will be Ajit Kumar Day.

Speaking to The Telegraph, Day, a former CSE president and convenor of the CSE Brokers’ Association, said: “We are protesting the government’s step-motherly attitude towards the brokers, who face a severe crisis at present. The objective of the strike is to call the attention of the government to our plight, hence, we decided to hold it on the day Parliament opens for the Monsoon Session.”

“With rising transaction costs due to the introduction of the rolling settlement and the market hitting new lows, brokers are reeling under a huge cost-income mismatch,” Day explained, adding a large number of brokers have already closed shop, while several others will soon be forced to follow suit if things do not improve soon.

Day said the brokers will soon present their case before the Securities and Exchange Board of India (Sebi) and the finance ministry. Some brokers met Sebi chairman D. R. Mehta last week.

   

 
 
BHARTI KNITS OPTIC-FIBRE NETWORK DREAM FOR STATE 
 
 
BY A STAFF REPORTER
 
Calcutta, July 17: 
Bharti Enterprises, the country’s leading telecom conglomerate, plans to connect the city with Vijaywada through an optic-fibre cable in order to provide basic telephone services.

Speaking to newsmen here today, chairman and group managing director Sunil Mittal said work on the project will commence as soon as the company gets permission for the “right of way.”

Mittal, who was here to launch Bharti’s cellular services following its acquisition of a 100 per cent stake in cellular service provider Spice Cell, said he met the state minister for information technology Manab Mukherjee today to obtain clearance for the project. “We expect the state government will grant permission soon,” he said.

Mittal further said the group is working on means to link the entire eastern hub through the optic-fibre cable network, which will be connected to the national backbone. However, he did not reveal how much the company planned to invest in the project.

On the group’s strategy for cellular services in Calcutta, Mittal said Spice had been acquired at the “right price” and the “right time”, and will enable the group to be a strong player in all the four metros.

Earlier, we wanted to buy Command, but lost out to Hutchison. But this time, we have been able to corner the better company with a much wider network and customer base,” be said.

Spice Cell, he said, will be merged with Bharti Cellular, a wholly owned subsidiary of Bharti Televentures.

Mittal said the group will invest over Rs 50 crore to expand the Spice network, by raising the number of base stations from the existing 61 to 101 in the next couple of months. The company aims to double the number of subscribers to 1.6 lakh by July next year.

Replying to a query, Mittal said the entire funds for the acquisition will come from the company’s internal accruals.

The company has already placed an order for the required equipment with Nokia, which is expected to be delivered within the next 40 days, he added.

   

 
 
POINTER TO SUPPLEMENTARY BUDGET 
 
 
FROM R SASANKAN
 
New Delhi, July 17: 
The fiscal situation in the country calls for a supplementary budget. With tax revenues in the first two months of the current financial year registering a negative growth, senior officials in the finance ministry and Planning Commission have started discussing the feasibility of a supplementary budget.

“The situation calls for such a step. But the finance minister may not summon the courage even to suggest it because of assembly elections in UP, Punjab and Uttaranchal,” said a senior official. The erstwhile finance minister Y. B.Chavan presented a supplementary budget in the early 70s in a similar situation.

For the BJP-led government, the assembly elections are crucial. If it loses the battle for UP, it is as good as losing the battle for the Centre. A supplementary budget would mean fresh taxation, which might turn out to be politically suicidal.

Officials are doubting the effectiveness of such a move under the present finance minister Yashwant Sinha, who, after the securities and UTI scams, gives the impression of having lost his moral authority. He no longer inspires confidence.

The present situation is, to a large extent, Sinha’s creation. He deliberately minimised the revenue shortfall in the revised estimates for 2000-01. In the revised estimates, the gap was only Rs 2000 crore while the actual shortfall now stands at a whopping Rs 12,000 crore.

Even after the actual revenue shortfall was known, the finance ministry maintained that the fiscal deficit would remain at the targeted level, on account of savings in certain areas including defence. Now, the GDP growth in the current financial year is estimated at 5.2 per cent against the original target of 6.4 per cent. This should push up the fiscal deficit very close to 6 per cent of the GDP compared with the budgeted 5.1 per cent.

The budget estimate for tax revenue collections this year is Rs 2,26,649 crore 18 per cent higher than last year’s revised estimates. This, however, is 26 per cent more than the actual collections in 1999-2000. It is incredible that in a situation where industrial production is not picking up, the finance ministry will get anywhere close to its revenue targets. It should consider itself lucky if the trend of negative growth is reversed.

   

 
 
CRISIL RATING RAP FOR IDBI 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 17: 
The Credit Rating Information Services of India Ltd (Crisil) today downgraded Industrial Development Bank of India’s (IDBI) bond issues and certificate of deposit programme from AAA to AA+ indicating ‘strong’ rating.

The FAAA and P1+ rating assigned to the fixed deposit programme and term money bonds have been reaffirmed, Crisil said in a release here today.

The rating revision reflects the deterioration in asset quality and the non-fructification of the earlier indicated recapitalisation plan. Further the institution has witnessed a continuous decline in its profitability due to a combination of asset quality problems and contraction in spreads, it said.

IDBI has initiated steps to improve asset quality through considerable emphasis on restructuring and resolving problem loan to arrest further slippage in asset quality, it added.

The FI’s resource profile is characterised by its strong market position in the domestic wholesale debt market and demonstrated ability to raise resources in the international markets. IDBI has been able to prepay a significant portion of high cost debt in 2000-01, which was expected to lead to reduction in interest costs, Crisil said.

The rating agency said the institution has also begun the process of managing its balance sheet through asset-liability management so as to contain impact of interest rate movements on its net interest income.

Crisil said IDBI faces challenges in repositioning itself to compete effectively and sustain its market position in an increasingly competitive financial services sector. Challenges on the asset quality and profitability fronts are also expected to continue in immediate future, it said.

However, IDBI’s ratings continue to derive strength from its strong market position in the wholesale lending segment and comfortable liquidity position, Crisil said. The FI’s ratings also benefit from a high likelihood of support from the government given its majority ownership and IDBI’s important position in the financial system, the credit rating agency added.

   

 
 
HDFC NET PROFIT RISES 19% IN FIRST QUARTER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 17: 
The Housing Development Finance Corporation Ltd (HDFC) has posted a 19.25 per cent rise in net profit for the first quarter of the current financial year ending June 30. Net profit rose to Rs 114.06 crore compared with Rs 95.64 crore in the corresponding period of the previous year. Approvals during the three-month period aggregated Rs 1593.12 crore as against Rs 1205.97 crore during the same period in the previous year, an increase of 32 per cent. Disbursements during this period amounted to Rs 1225.43 crore compared with Rs 937.62 crore, an increase of 31 per cent.

During the first quarter, the income from operations stood at Rs 633.07 crore (Rs 552.32 crore). The company added that approvals and disbursements in respect of individual loans were higher by 39 per cent and 41 per cent respectively compared with the previous year.

While analysts pointed out that the first quarter results of the company were more or less on the expected line, the HDFC scrip closed lower than its intra-day high. Opening at Rs 660, the scrip shot up to Rs 664.80 but closed at Rs 660.10. The counter witnessed 653 trades, resulting in a turnover of Rs 95.41 lakh.

During the quarter, while gross profit stood at Rs 142.16 crore (Rs 121.83 crore), depreciation was placed at Rs 9 crore (Rs 10.75 crore), resulting in a profit before tax of Rs 133.16 crore (Rs 111.08 crore). With provision for taxation accounting for Rs 19.10 crore (Rs 15.44 crore), net profit stood at Rs 114.06 crore.

According to HDFC, it has changed its policy of accounting for brokerage, to bring it in conformity with international accounting standards. As per the new policy, the total brokerage payable, other than incentive brokerage, is amortised over the period of the deposit. This has resulted in a reduction of Rs 5.92 crore from the amount of brokerage in the first quarter of last year. After adjusting Rs 1.37 crore towards tax, the net profit for first quarter of the previous year is consequently higher by Rs 4.55 crore.

   

 
 
MALAYSIAN FIRM TO GET TECH HELP FROM GLOBSYN 
 
 
BY ALOKANANDA GHOSH
 
Calcutta, July 17: 
Globsyn Technologies Ltd (GTL) will provide assistance to Malaysian firm Agenei Pekesjaan KWX for setting up a software finishing school in Malaysia.

Globsyn has entered into an agreement with Agenei Pekesjaan KWX (Knowledge Worker Exchange) for the latter’s ‘Sutra Project,’ which aims to train around 10,000 software engineers in Malaysia and the Asean region. The project, expected to be operational from July next year, will be aided by the Malaysian government and will set up a software training institute on the lines of TechnoCampus — GTL’s education division’s flagship product.

The Malaysian company, which is into human resource training and development, besides recruiting technology professionals, will be the majority stake holder in the joint venture.

“GTL will be the main content and delivery provider, but we will take up a minor stake in the project. The financial details are being worked out,” said Bikram Dasgupta, chairman and managing director.

Another Malaysian company, Junex Consulting, will do the market research and front-end operations for the project. GTL, which is into software development, web technologies services, plans to expand its operations into the European market through acquisitions.

“We are already holding talks with three companies and are in the process of finalising a financial model for the market,” Dasgupta said.

The education division of GTL plans to increase the number of KnowledgePub centres in the country from 24 at present, to 50 by the end of the year. KnowledgePub is based on a three-mode learning concept — instructor-led training, computer-based training and web-based training (WBT). The company plans to open three centres in the city by the end of this month and seven by the end of the year. It will also set up a model centre in the city at a cost of Rs 30 lakh. By March 2002, the company expects to have around 200 centres all over the country, with a model centre in each state capital.

The institute is also introducing a new curriculum — Young Software Developer (YSD) — a 500-hour duration course, with a Rs 45,000 course fee.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.11	HK $1	Rs.  5.95*
UK £1	Rs. 65.89	SW Fr 1	Rs. 26.20*
Euro	Rs. 40.16	Sing $1	Rs. 25.35*
Yen 100	Rs. 37.61	Aus $1	Rs. 23.60*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4445	Gold Std (10 gm)Rs. 4370
Gold 22 carat	Rs. 4195	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7125	Silver (Kg)	Rs. 7240
Silver portion	Rs. 7225	Silver portion	   NA

Stock Indices

Sensex		3431.93		-2.90
BSE-100		1603.85		-3.41
S&P CNX Nifty	1103.10		-2.45
Calcutta	 125.43		-0.29
Skindia GDR	 596.48		-4.44
   
 

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