Indian Oil moves to buy out AV Birla group in MRPL
Govt looks to Supreme Court to untie cell knot
UTI chief sees no rush for US-64 redemptions
Carrier may raise open offer price
Double boost for Dr Reddy’s
Sinha faces murky monsoon session
Midway selloff curbs opposed
Tisco in consolidation mode
Slump knocks 93% off NIIT Q3 net profit
Foreign Exchange, Bullion, Stock Indices

 
 
INDIAN OIL MOVES TO BUY OUT AV BIRLA GROUP IN MRPL 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, July 19: 
Indian Oil Corporation (IOC) is considering a proposal to buy out the entire 37.5 per cent stake of the Aditya Vikram Birla group in Mangalore Refineries and Petrochemicals Ltd (MRPL). Senior IOC officials have already prepared a “preliminary report” on the Mangalore-based joint venture project between the Aditya Birla group and the public sector Hindustan Petroleum Corporation Ltd (HPCL).

The IOC move puts an end to speculation that HPCL, the co-promoter of the company, will buy out the Birla group’s stake in the company. Under the joint venture agreement, HPCL has the first right of buying out the Birla group’s stake.

A senior IOC official confirmed that “HPCL has approached us for acquiring the A. V. Birla group’s stake in MRPL. The matter is now with our board and a decision is expected soon.”

An HPCL spokesperson said IOC has shown keen interest in the project.

Arthur Andersen and SBI Caps have been appointed for conducting the due diligence in MRPL, which made losses of over Rs 200 crore last year, compared with a loss of Rs 300 crore in 1999-2000. “The company needs fresh investment immediately to retire some of its huge high-cost debt. Since the Birla group has decided to exit the venture, we need a strong partner to revive MRPL,” the HPCL official said.

The two consulting firms are expected to submit the due diligence report in the first week of August, on the basis of which formal negotiations will start with IOC, sources said.

Asked why the Birla group has sought to quit, the group spokesperson said: “The stand-alone refineries cannot survive unless they have their own marketing network. We felt it is not economically feasible only to produce, while marketing rights for the controlled and decontrolled products remain with HPCL.”

While she refused to comment on the price sought by the Birla group for its stake in MRPL, she said the group has invested Rs 600 crore in the project. The Birla group stake in MRPL is routed through Indian Rayon, Indo Gulf, Grasim and Hindalco.

MRPL, which was promoted with great fanfare in the early 1990s, has been sick ever since its inception due to a very high debt burden, which now stands at Rs 5350 crore against its equity of Rs 965 crore. Sources said the company needs fresh investment to the tune of at least Rs 1000 crore to partially reduce its debt burden in order to become viable.

The company has reportedly appointed Lazard India as financial advisor to carry out the restructuring exercise. Sources said Lazard has been given the mandate to restructure the company’s poor 1:6 debt-equity ratio. However, it could not be confirmed whether the consulting firm has already commenced the restructuring exercise.

   

 
 
GOVT LOOKS TO SUPREME COURT TO UNTIE CELL KNOT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 19: 
Legal wrangles have once again tangled the bidding process for the fourth cellular operator’s licences in 17 circles. The government today accepted the third and final financial bids for the cellular circles but did not open them pending a resolution of the litigations filed in the Mumbai and Chennai high courts.

On Wednesday, the Chennai high court issued a stay on the bidding process. The day before, the Mumbai high court had heard a suit filed by the employees of Videsh Sanchar Nigam Ltd arguing in favour of the state-owned telephony giant’s right to participate in the bidding for the fourth cellular licence.

The government had earlier barred state-run VSNL, Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd from bidding for the new cellular licences.

The government has now decided to wait for a decision from the Supreme Court on the two litigations. The Department of Telecom (DoT) is expected to move the Supreme Court tomorrow to decide on a joint hearing of the cases filed in the two high courts. It will also try to obtain a stay from the Supreme Court against the order passed by the Chennai high court restraining DoT from awarding the new cellular licences.

“The Mumbai high court today rejected the litigation filed by VSNL but we are yet to vacate the stay order issued by the Chennai high Court. We will approach Supreme Court tomorrow . But it is not yet clear when a decision will be taken on opening the final bids. We will have to wait for the legal issues to be sorted out before we can proceed,” said a senior DoT official.

Sources in communications ministry said, “The bids have been submitted by the telecom companies already in the fray. A clear picture is yet to emerge on the opening of bids. All this is very unfortunate because the whole process could now be delayed.”

Telecom industry sources said, “This was expected to happen. There are vested interests who are trying to delay the whole process. The subscribers will have to wait longer to get more cellular service options.”

Communications minister Ram Vilas Paswan had set a target of July 19 for the finalisation of bids. The new licences were slated to be issued by the end of August.

Under the tender conditions, the successful bidders were required to deposit 20 per cent of the bid amount which is the entry fee quoted by the company. They will have to pay the remaining 80 per cent by July 30.

   

 
 
UTI CHIEF SEES NO RUSH FOR US-64 REDEMPTIONS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 19: 
Unit Trust of India (UTI) chairman M. Damodaran has said he does not foresee a rush for redemptions when the country’s largest mutual fund resumes repurchases of units of its flagship fund, US-64, next month.

On July 2, UTI stunned investors by freezing repurchase and sales of US 64 units for a period of six months.

Briefing reporters after meeting finance minister Yashwant Sinha here today, Damodaran said UTI had no problem in tying up funds with public sector banks. He said there was no need to seek a sovereign guarantee or budgetary support from the government.

“I don’t need a lot of money and whatever I need, the 27 public sector banks are ready to give even at sub-PLR rates. No bank chairman I spoke to told me that he was not ready to give me a loan. The question of asking for a government guarantee does not arise at present. I will only ask for it if I feel there is a need for it,” Damodaran said.

Asked if he would need all of the Rs 3,000 crore UTI has believed to have tied up with the banks, Damodaran said the entire corpus would be required only if two-thirds of the small investors wanted to exit the scheme. “Only if two out of three investors decide to opt for redemptions will we get close to such a figure,” he said.

He saw very little likelihood of such a situation since investors were being assured a very good return with the increase in the redemption price by 10 paise per unit every month. The returns would match that of any other mutual fund, he said, adding that the interests of the 2 crore investors in US-64 would be protected at any cost.

Asked to comment on reports that the Trust was planning to split US-64 into equity and debt schemes, the UTI chief said there were various strategies that could be worked out, some even requiring legislative action.

US-64 repurchase

The Trust today clarified that investors who had bought US-64 units from July 1 will not be eligible for the repurchase scheme announced on July 15. Those who bought units from the secondary markets in July or had their requests resolved after May 31 would also not be able to exercise the option.

   

 
 
CARRIER MAY RAISE OPEN OFFER PRICE 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, July 19: 
Carrier Aircon’s overseas principals, who have come out with an open offer to buy out 51 per cent of the equity held by the public, may consider raising the open offer price of Rs 100 per share if the response is tepid.

At present, Carrier Aircon’s US parent holds a 49 per cent stake in the company. The open offer has been made by the US giant’s subsidiaries in Mauritius and Singapore.

Sources said a higher price could be on the cards if the open offer, which closes on July 31, fails to give Carrier’s overseas principals a stake holding of less than 85 per cent. If the response to the open offer is so weak as to lead to a stake consolidation of less than 75 per cent, Carrier’s parent may even reconsider plans to totally take over the Indian operations.

Carrier Aircon, the country’s largest airconditioner maker which has been battling a sharp fall in its market share as competition hots up from Japanese and Korean companies, has put all its decision making on hold until the uncertainty over the shareholding pattern clears with the close of the open offer.

“We will take a decision on our future course of action only after it becomes clear whether out foreign principals are able to corner 90-95 per cent of the equity,” said Anil K. Srivastava, managing director for Carrier Aircon in India. Carrier’s overseas principals want to completely overhaul the Indian operations.

The company has already put a freeze on all promotional activities. It also plans to downsize operations with the axe set to fall on accountants and marketing personnel.

   

 
 
DOUBLE BOOST FOR DR REDDY’S 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 19: 
Dr Reddy’s Laboratories (DRL) moved closer towards the launch of its anti-depressant fluoxetine capsules when a US court ruling allowed it to sell the drug for six months.

The boost came on a day when Novartis Pharma AG won rights to commercialise an anti-diabetic drug which had been licensed by the Hyderabad-based company to Novo Nordisk.

DRL had been embroiled in a patent spat with Eli Lily over fluoxetine, a generic version of blockbuster anti-depressant drug Prozac, which is scheduled to go off-patent.

The order was passed by the US Court of Appeals (Federal Circuit) in Washington after it rejected an Eli Lily appeal for fresh hearings into the dispute over Prozac. The drug can now be sold by DRL in 40 mg formulations for six months.

“A major hurdle in the launch of our 40 mg fluoxetine capsules under an exclusivity system is out of the way. We have moved a step closer towards full-scale marketing,” G V Prasad, chief executive officer of DRL, told The Telegraph.

Barr Labs, a US drug firm, was also locked in a patent battle with Eli Lily over another generic version of Prozac. The US court had allowed Barr to market its copycat version. In effect, DRL has tied the final outcome of its case to the result of Barr’s lawsuit. “This will ensure that Dr Reddy’s launches the product around the time Barr does it,” officials said.

Pharmaceutical analysts welcomed the development, saying today’s order will help DRL market the product earlier than expected. Its revenues from Prozac prototype in the six month exclusive period is expected to be $ 20 million.

Investors upbeat at the two-way gain send the DRL scrip soaring to an intra-day high of Rs 1717.80 after opening at Rs 1590 in a buying binge ascribed to foreign funds.

“Some of the foreign funds have even recommended a buy and expect the stock to surpass the Rs 2,000-mark,” a broker said.

WI Carr was one of the funds believed to have taken a shine to the share, though market circles some of the bullishness could also because of rumours about a bonus issue. The stock closed at Rs 1,666.30 in a 6 per cent gain over its previous finish.

   

 
 
SINHA FACES MURKY MONSOON SESSION 
 
 
BY A STAFF REPORTER
 
Calcutta, July 19: 
Finance minister Yashwant Sinha may have a stormy monsoon, thanks to the Unit Trust of India (UTI) mess. Come Monday, when Parliament reopens for its monsoon session, Sinha will have to face the music on the present state of the country’s capital markets, even though the finance ministry and UTI have devised an exit formula for the small investors of US-64.

Turning up the heat on the finance minister this time are the brokers who are not only observing a day’s token strike the same day as Parliament meets again, but are also trying to convince several members of Parliament, both from the ruling National Democratic Alliance (NDA) and the Opposition, to press for withdrawal of rolling settlement and the ban on carry-forward trading.

Brokers feel business on the bourses has substantially declined as a result of the steps taken by the Securities and Exchange Board of India (Sebi) following the stock market scam. The fall in business, in turn, has forced a large number of brokers to close shop, worst affected being brokers of the Calcutta Stock Exchange (CSE).

   

 
 
MIDWAY SELLOFF CURBS OPPOSED 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 19: 
In a move that might spark a fresh round of controversy, a caucus of public sector chiefs has expressed concern at the government announcing norms to bar certain kinds of buyers after a disinvestment process begins in an enterprise.

D. K. Verma, chairman of the Standing Committee on Public Sector Enterprises (SCOPE), told The Telegraph that “we are against the government changing rules which allow or debar certain companies from the disinvestment process midstream.”

SCOPE seems to feel that if rules have to be changed, then any disinvestment process which is being affected should be re-started. Implicitly, the statement represents a strong disapproval of the way government changed rules just before the submission of financial bids for Air-India and Indian Airlines. While only one bidder was left in the fray for Air-India as a result, no bidders were left for the other state-run airline. Verma made it clear that SCOPE has no objections to the concept of single bidders.

   

 
 
TISCO IN CONSOLIDATION MODE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 19: 
Steel major Tata Iron & Steel Company Ltd (Tata Steel) plans to bring all its engineering subsidiaries under one fold. It is simultaneously scouting for a new partner to replace Mannesman Demag in Tata Korf Engineering Services Limited.

Addressing shareholders at the company’s 94th annual general meeting, Tisco chairman Ratan Tata hinted at a consolidation of its engineering units, saying, “we are considering various possibilities”.

The four engineering companies are Tata Robins Fraser (TRF), Stewarts and Lloyds of India, Tata Construction & Projects and Tata Material Handling.

As far as Tata Korf is concerned, SMS Schloemann Siemag, the new owners of the engineering division of Mannesmann Demag, have indicated that they are keen to opt out of the venture. SMS has a 40 per cent stake in Tata Korf.

Earlier, addressing shareholders, Tata conveyed his gratitude to J J Irani, who stepped down today as managing director of the company.

“He (Irani) has institutionalised most of the systems. The new management that is taking over from him is home-grown and has the legacy of a robust company,” he said.

When shareholders queried why Irani was not given an extension, making an exception to the Tata policy on the retirement age, Tata replied, “much as I respect him, exceptions then become the rule”. A change of pace is always good for companies and Irani is not disappearing from the scene, he added.

The steel maker expects its second quarter performance to be better than the dismal first quarter. Speaking to newspersons after the AGM, B Muthuraman, who took charge today as managing director, in place of Irani, said he expected the steel major to produce around 9.30 lakh tonnes of steel, out of which cold rolled steel would comprise 2.10 lakh tonnes.

This would mean that the monthly production of Tisco’s cold roll mill would be around 70,000 tonnes lower than the March production figure of 1 lakh tonnes. Cold roll products contribute more to the bottom line than other products.

   


 
 
SLUMP KNOCKS 93% OFF NIIT Q3 NET PROFIT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 19: 
NIIT, the leading infotech education and software services company, today announced a 93.2 per cent plunge in net profit for the third quarter ended June 30 at Rs 5.29 crore compared with Rs 78 crore during the same period last year, evidence that the global infotech slowdown has had a knock-on effect on the software education business.

The company confirmed that the global economic slowdown has “had an early and a larger-than-normal impact.” In the second quarter, NIIT had recorded a net profit of Rs 48.3 crore. Global revenues in the third quarter stood at Rs 236.4 crore. Of this, software solutions contributed Rs 129.8 crore against Rs 116 crore in the same period last year. In all, 23 new international software services customers entered the rolls.

With an operating profit (with other income) of Rs 14 crore for the quarter, full-year operating profit is expected to fall 40 per cent. The company has an October-September accounting year. Total operating expenses at Rs 141.5 crore were lower than Rs 170 crore in the second quarter. An amount of Rs 8.75 crore was set aside as depreciation against Rs 8.8 crore last year.

Commenting on the impact of the economic slowdown, NIIT chairman Rajendra S Pawar said: “The software business, the bulk of which comes from the emerging areas and new technologies rather than the more stable legacy maintenance, has seen a slowdown which has proved to be worse than the revised estimates prepared in March this year. The education business has borne the brunt because of flagging consumer confidence caused by poor results from technology titans.”

Despite the problems, NIIT will continue to invest in anticipation of the economic revival, and will focus on brand building. “We have decided to spend an additional Rs 18 crore on brand building for the software and education businesses. This has depressed our profits for the quarter, but we have seen our share rise in a shrinking IT education market,” company chief executive officer Vijay K Thadani said.

“The strategy to boost market share in the education business will help us strengthen our dominance further. In the software services business, the additional investments will help us grow at a fast clip during the revival phase,” he added.

Revenues from the global learning solutions fell from Rs 185.7 crore during the third quarter of last year to Rs 106.6 crore in the same quarter this year.

Digital net zooms

Digital India has logged in a 201 per cent surge in its first-quarter net profit (pre-tax) at Rs 21.5 crore compared with Rs 7.16 crore in the same quarter of the previous financial year. Revenues soared 125 per cent at Rs 73.2 crore against Rs 3.26 crore in the same period of the previous financial year. Other income was pegged at Rs 2.91 crore, up from Rs 3.99 crore. Much of this has come from investments of surplus funds in the form of short-term deposits.

Siemens net slips 40%

Siemens India has recorded a 49 per cent decline in net profit for the third quarter ended June 30 at Rs 7.57 crore from Rs 14.84 crore in the corresponding period of the previous year. The decline was attributed to higher tax provision and the fact that it had not received an expected dividend income from a subsidiary. Income from net sales and services rose marginally to Rs 281.48 crore compared with Rs 231.63 crore. The lease and other income was placed at Rs 13.15 crore (Rs 14.33 crore).

Saregama in the red

Saregama India slipped into the red in the first quarter of the current fiscal with a net loss of Rs 65 lakh due to lack of major hits and depressed market conditions. Total revenues went down to Rs 29.68 crore against Rs 40.39 crore achieved in same period of 2000-01. The music major, which posted a Rs 2.52-crore net profit last year, entered troubled waters in the last quarter of 2000-01, when it recorded a net loss of Rs 1.82 crore. However, that was largely because of the Rs 3.26 crore spent on VRS.

SRF profit dips

SRF posted a 15.3 fall in net profit to Rs 15.23 crore for the quarter ended June 30 compared with Rs 17.98 crore during the same period in the previous fiscal. The company blamed aggressive exports of nylon tyre cord fabrics from south-east and Far East Asian countries for the decline.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.12	HK $1	Rs. 5.95*
UK Ł1	Rs. 66.79	SW Fr 1	Rs. 26.95*
Euro	Rs. 41.20	Sing $1	Rs. 25.45*
Yen 100	Rs. 38.17	Aus $1	Rs. 23.95*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4480	Gold Std(10 gm)	Rs. 4425
Gold 22 carat	Rs. 4230	Gold 22 carat	N.A.
Silver bar (Kg)	Rs. 7150	Silver (Kg)	Rs.7295
Silver portion	Rs. 7250	Silver portion	N.A.

Stock Indices

Sensex		3370.93		- 12.48
BSE-100		1590.00		-  8.87
S&P CNX Nifty	1085.90		-  6.05
Calcutta	 122.80		-  1.18
Skindia GDR	 596.45		-  0.27
   
 

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