1:1 debt-equity term for cell loans
Bharti plan on JT Mobile dues
Slowdown blamed for dip in export growth
Closure of banks’ rural branches made easier
Kesoram suspends work atTribeni unit
STAR cast in lead Indya role
Cloud over investor fund
E-biz buzz getting louder: Nasscom
Electrosteel mulls buyback
Foreign Exchange, Bullion, Stock Indices

Mumbai, Aug. 2: 
Financial institutions are likely to stipulate a debt-equity ratio of 1:1 for funding fourth cellular operators.

The figure, which does not differ widely from the one currently prescribed, has been worked out after considering various aspects of a business that is fast shaping up into a scramble for subscribers among too many firms.

Though institutions have not reached an informal agreement on the issue, sources said there were growing indications the ratio would be accepted as a benchmark while evaluating proposals for cellular loans.

“The ratio of 1:1 has been fixed after considering the strength of existing players in various circles, and the impact of wireless-in-local loop services which can be provided by fixed-line operators,” a senior official from one of the financial institutions told The Telgraph.

Most institutions have not received formal proposals for funding from cellular operators so far, sources said business — and the need for credit —will pick up as companies which have bagged licences early this week finalise investment plans for their circles.

FI officials say most players have strong financial muscle, but that would still require their overall business plans to be examined while considering loan requests. Though some operators have recently seen an expansion in their subscriber base, cut-throat competition means the revenues of the fourth operator will not be stabilise before the end of two to three years.

The valuations in various circles have come down due to various factors, but most officials agree that the major disadvantage for the fourth operator is to fight an incumbent who is well entrenched in a given region.

Recently, the Delhi-based Bharti emerged as the leading player, having bagged eight of the 17 circles auctioned in the final round of bidding for fourth cellular licences. Industry sources predict consolidation along the lines of the recent Batata-BPL alliance is on the cards despite the entry of the fourth operator.

IFCI bailout

IDBI officers has come out strongly against the government for having asked it to infuse funds in the beleaguered IFCI.

In an representation made to finance minister Yashwant Sinha, the All-India IDBI Officers Association said investing in IFCI’s bailout meant throwing “good money after bad”. IFCI, they urged the finance minister, should be converted into a special purpose vehicle in the form of an asset reconstruction corporation.

Association president Manoranjan Ghosh said IDBI could hardly afford to lend money for a bailout at a time when it itself is struggling..


New Delhi, Aug 2: 
The government is likely to accept the Bharti group’s proposal to clear the dues of JT Mobile, the cellular operator in Punjab which the Sunil Mittal-owned group took over two years ago.

The Mittals have proposed a mix of cash and bank guarantees to clear the Rs 515 crore dues of JT Mobile -- Rs 258 crore (the principal sum) in cash and the remaining Rs 257 crore dues arising out of interest through bank or corporate guarantees.

The JT Mobile dues have assumed significance for the Sunil Mittal-owned group after the government said new telecom licences would be issued only after all previous telecom-related dues were cleared. The Mittals recently won the right to eight new licences through the third round of bidding for the fourth cellular operator in 17 circles.

Under the bidding norms prescribed by the government for the fourth round of bidding for cellular, basic and other telecom services, the companies have to clear all outstanding dues against them.

“Bharti had offered to pay the principal amount in cash. But they want to furnish a corporate guarantee to cover the interest component. This was rejected on technical grounds. However, this will be reviewed by the Telecom Commission before a final decision is taken,” said a communications ministry official.

“Corporate guarantees are issued all over the world but in India it present certain problems. Officials in financial and legal departments are examining it. The issue has also been referred to the Attorney General for his opinion,” sources added.

Sources in communications ministry said, “Even if the matter is cleared by the communications ministry and the AG backs it, the matter will still have to be finally cleared by the Cabinet.”

Earlier, communications minister Ram Vilas Paswan said, “We want to be positive in our approach. The companies will have to meet all the requirements to get the fourth cellular licences.”

The Mittals had acquired the Punjab cellular circle from Evergrowth Telecom Ltd (EGTL), a 100 per cent subsidiary of JT Mobiles. In December 1996, the licence of EGTL was cancelled due to non-payment of dues. The dues were automatically transferred to Bharti which had bought over JT Mobiles. While Bharti cleared all the outstanding for Andhra Pradesh and Karnataka cellular circles, it had objected to the payment of dues for Punjab circle.


New Delhi, Aug. 2: 
The government has blamed the global slowdown for the dismal export performance in the first quarter of the current fiscal (April-June). The growth in exports slumped to a piffling 1.76 per cent from 28 per cent in the corresponding period a year ago.

“The dip in exports is mainly due to the international slowdown. Any improvement in export performance will depend on the international market conditions...We can only hope for the best,” commerce and industry minister Murasoli Maran told reporters on the sidelines of a seminar organised by Confederation of Indian Industry (CII).

He, however, added that, “the silver lining was that the downturn in the US economy could compel the countries to outsource from India. That will boost our exports.”

Maran also said a medium-term export strategy would be announced soon. “The first draft of the strategy is ready and we are examining it,” he added.

He said, “Taking shelter behind anti-dumping and other trade restrictions will not help the industries. They should concentrate on making the quality and designs better in the most cost-effective way.”

“Mere cry of ‘cheap imports from China’ will not any more help. Just because China is not yet a member of the WTO, we cannot ban all Chinese exports because India has extended a most favoured nation treatment to China under a special agreement,” Maran said.


Calcutta, Aug. 2: 
The finance ministry has allowed banks to close down all but one rural branch in a certain area through consultations among their board of directors.

A finance ministry notification (F.NO.8/1/2001- Dev) makes it clear that banks which have a single rural branch in a given geographical zone (excluding that of regional rural banks) cannot close it, but they are free to shut down others after its directors discuss it.

Banks have been asked to submit their board-approved proposals for closing rural branches to the Reserve Bank of India (RBI). The ministry notice has also been sent to RBI’s department of banking division, the chairman of State Bank of India, chairman and managing directors of all nationalised banks and managing directors of associate banks of SBI. The finance ministry says it has received complaints that banks are closing down their rural branches and, in some cases, converting them into satellite offices in violation of Reserve Bank guidelines.

It has asked banks to furnish details of their branch-expansion plans for 2001-02, the number of branches closed down and converted into satellite offices last fiscal per thousand people, and the number of single rural branches that were shut down in 2000-01.

Many in the banking industry say the move will deal a body blow to the rural economy. “These branches were set up to with a social objective — to boost the agriculture-based economy and liberate the rural population from the shackles of the age-old Zamindari system. The economy even today, they argue, remains agrarian, which heightens the importance of these branches. It is true that some of these branches have turned loss-making, but they account for only Rs 10,000 crore worth of non-performing assets (NPAs). “The government should have first tried to turn them around and then thought about closing them,” said a senior banker. There are about 32,811 rural branches of the 65,340 that are now working.

There is no thumb rule to determine how many rural branches are set up in a certain area: a village may have two branches while there might be only one for three villages — the key is resourcefulness. Bank officials feel making rural branch closures easier will be a setback to the habit of banking among villagers. They point out that 40 per cent of their total loans went out to small-scale industry, artisans, small enterprise — part of the priority sector – compared with 14 per cent at the time nationalisation.


Calcutta, Aug. 2: 
Kesoram Industries, the B.K. Birla flagship declared suspension of work today at its rayon manufacturing unit at Tribeni in the Hooghly district on grounds of labour unrest. The suspension notice was put up on the gates of the factory at six in the morning.

The unit, which manufactures viscose yarn and chemicals and cellophane paper (food grade) employs nearly 3,700 people. S. K. Parik, senior president of the company said, “The BMS union had given a strike call from today. In fact, they had stopped working from yesterday, thereby halting operations. Production is a continuous process and cannot be stopped in such a fashion.”

The other three unions – Citu, Aituc and Intuc however, are not party to the strike call.

He further added labour relations were severely strained owing to the non-co-operative attitude of the workers. Intermittent stoppage of work, strikes and refusal to comply with the agreed production norms as per terms of the existing tripartite settlements, besides other violation of work practices have resulted in a deplorable work culture.

“With no improvement in the situation, work suspension may be the only alternative,” he said.

The labour department has already been informed about the suspension of work and the company has also sent a notice to the Bombay Stock Exchange. “It is not fair to give a strike call when the bipartite agreement is still on,” Parik further added.

The labour unrest has cropped up at a time when the operating margins of the cellophane paper sector have dipped due to lower realisations and increased costs of the plant. Similarly, export realisation of the viscose yarn unit remained under pressure due to stiff competition from China and the CIS states.


New Delhi, Aug 2: 
The Rupert Murdoch-owned television-and-multiple-media group STAR has taken over indya.com, having bought out promoter Pradeep Kar’s Microland Group and picking up the shares of other investors in the one-year-old portal.

Company officials were tightlipped about the equity holding, and a company spokesperson said she could not disclose financial figures as part of an official policy.

There were conflicting versions of just how much of the portal was owned by the media moghul. Company sources say he owned 20-22 per cent, Kar 60 per cent while the rest was held by ICICI, Chase Capital Partners.

Others said STAR controlled 37 per cent, adding the shares had been purchased from Chase Capital, ICICI and individual investors at a price much lower than what it paid for the first lot. “Now, STAR has acquired a 100 per cent stake in indya.com,” company sources said.

For the $ 16 Microland, driven to the brink by an infotech shakeout that forced it to shed 50 employees last month, it was a way to get much-needed cash. For STAR, the deal fits neatly into its strategy of combining internet and broadcasting businesses.

Gary Walrath, executive vice-president of STAR Group, will be the chairman of indya.com while Sunil Lulla will continue as its CEO. There will be no change in its Indya’s management team.

“This alignment not only expands the convergence space but also offers a unique opportunity to both Indya and STAR to establish market leadership by way of strengthening revenue streams, increasing consumer franchise, consolidating content and enhancing brand presence,” Walrath told reporters.


New Delhi, Aug 2: 
The Rs 700-crore investor education and protection fund, which was supposed to have been set up by April 30, appears to have been stalled because the Comptroller and Auditor General of India is insisting on clear-cut rules regarding receipt, expenditure and utilisation of the funds.

According to a source in the ministry of law justice and company affairs, the CAG is also looking into rules that provide for the fund to be allocated without any regional bias, he said.

Earlier, the CAG had raised objections on issues relating to accounting procedures and accountability. CAG later gave his consent after being convinced that the fund would be managed as a government fund whose accountability would be through parliamentary control, the offices of the CAG and the Central Vigilance Commission.

However, final approval from the CAG has yet to come. It wants the rules clarified before the notification in the official gazette.

Sources said the fund will be notified within a week or two after the finalisation of the rules.

The fund is designed to protect the interests of the small shareholders who have been scalded by repeated stock market crashes. It will also help the small shareholders to make well-informed choices.

The fund will be managed by a committee comprising both government and non-government members and will be headed by the secretary in the department of company affairs (DCA).

Apart from government grants, money for the fund will be generated from corporate sector in the form of unclaimed dividends and debentures, share application money, matured deposits as specified under section 205C of the Companies Act.

Meanwhile, the three-year-old investor protection cell in the DCA said it has settled 501 complaints of investors during June, most of which were from individual investors. This cell is concerned with the settlement of grievances whereas the role of the fund will be primarily to make the consumers aware of their rights and to safeguard their interests.

While the Rs 700-crore fund will remain a part of the consolidated fund of India, a sum of Rs 7-8 crore will be spent annually out of this fund for consumer education and awareness, said the source.


Bangalore, Aug 2: 
The storm in the software sector is all set to blow over.

Going by market projections, the global infotech slowdown is not likely to affect e-business in India. In fact, Indian infotech companies grew by about 70 per cent in April-June this year, compared with the same period last fiscal, according to initial estimates of the National Association of Software and Service Companies (Nasscom).

“This is a cause for euphoria,” Nasscom chairman Phiroz Vandrevala said, addressing the E-biz India 2001, Nasscom’s third annual e-business conference, which began here today. The seminar was kicked off on Thursday by Union information technology secretary R.R.Shah.

A joint study on e-commerce opportunities for India Inc conducted by Boston Consulting Group (BCG) and Nasscom, during January-May this year, concludes e-commerce is very much the flavour of the season.

The study is optimistic about a turnaround and estimates e-commerce transactions in the country to touch Rs 1,95,000 crore by 2005. Of this, the business-to-consumer (B2C) segment will be around Rs 3000 crore. The domestic transactions at present are pegged between Rs 15,000-20,000 crore. The study also says there will be a significant growth in e-business transactions in automotive, telecom and consumer goods sectors.

Regarding government e-commerce transactions, James Abraham, vice-president of BCG said, “They have a long way to go.”

The study recommends quick action from the government to remove regulatory and legislative barriers and improve the communications infrastructure.

It projects a $ 9 billion business opportunity for Indian IT companies from the global e-solution services market by 2005. The industry should adopt a new approach to tap the tremendous e-commerce opportunity. “The future belongs not to those who merely move first. But to those who move smartly first,” remarked Arun Maira, chairman of NSG.

Enthused by the upbeat market projections, IT secretary Shah said, “It will greatly help demystify the current negativity that the clouds the issue of e-commerce.”

Vandrevala asserted the Indian IT industry will buck the slowdown and meet the software export target of Rs 45,000 crore by the year-end. By 2008, India has set a $ 50 billion target. “It is achievable. Let us not have a negative mindset,” he said.

According to Vandrevala, Nasscom will have a new chief next week. “We are in the final stage of selecting a new head for Nasscom. An announcement in this regard will be made on 6 August.”

Meanwhile, he said, India is planning a bridge between European small and medium enterprises (SMEs) and Indian SMEs for outsourcing software requirements. This follows a meeting between the Nasscom chairman and the European Union Information Systems chief at Brussels recently.


Calcutta, Aug. 2: 
Electrosteel Castings Ltd (ECL), the Rs 557-crore cast and ductile iron pipe manufacturing company, is considering a proposal to buy back 25 per cent of its equity either through tender offer or through market operations.

Market sources said the city-based company, which has grown by around 80 per cent in the past four years, is likely to invest around Rs 150 crore to buy back shares.

ECL will seek the shareholders’ approval in this regard through a special resolution in the forthcoming annual general meeting.

Sources said the company has huge surplus reserves which could be deployed to buy back shares.

Moreover, the share price is currently very low compared with the company’s growth rate.

“If the share price and the surplus cash in hand are taken into account, it certainly makes sense to go for a buyback,” they added.

The ECL scrip was quoted at Rs 82.50 on Tuesday on the National Stock Exchange.

A senior company official said a resolution is being proposed that will enable the company to amend the articles of association to incorporate a new article 9A under the marginal note ‘buy-back of shares or other specified securities.’

It could, however, not be ascertained when and at what price the buyback will be made.

Sources said the promoters’ holding, which currently stands at over 62 per cent, will be well over 76 per cent if they don’t lodge their shares during the offer.

ECL, which saw its profit decline by 30 per cent in 2000-2001 due to recession, expects to bounce back to the growth path with rise in orders from the quake-hit Bhuj.

According to one estimate, around 60,000 ductile pipes will be needed in the quake-hit areas to restore water management system.

ECL has a production capacity of 1.5 lakh tonnes of ductile and cast iron pipes. Another 50,000 tonnes can also be added, if required, without making any significant investment.

The company, which has two plants-one in Khardah near Calcutta and the other in Kerala- has plans to phase out the production of CI pipes over a period of time and replace it by DI pipes.



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