Sleuths sniff more dud deals in UTI
New mobile phone alarm
Subramanyam on the offensive
Johri used front firms to milk Lucknow coop bank
New norms for nidhi companies notified
Deveshwar lights up new ITC dreams
Roadmap to step up FDI
Alstom focus on India
Five-year ban on Khemkas
Foreign Exchange, Bullion, Stock Indices

 
 
SLEUTHS SNIFF MORE DUD DEALS IN UTI 
 
 
FROM SATISH JOHN
 
Mumbai, Aug 3: 
The Central Bureau of Investigation’s (CBI) probe into the Rs 32-crore Cyberspace Infosys private placement with Unit Trust of India (UTI) has thrown up enough indications that the mutual fund major’s investment debacle in the Lucknow-based firm was the tip of an iceberg — and more dud deals could spill out.

The agency believes there are plenty of other decisions that UTI took for “reasons other than commercial consideration or business expediency”. Moving its application for remanding suspended executive directors M M Kapur, S K Basu and former chief P S Subramanyam in further police custody, it said investigations conducted have given it reasons to believe that the Cyberspace placement was not a one-off affair. “Verification of information revealed by the accused during the custodial interrogation is likely to be influenced adversely if they are allowed to go on bail,” it said.

The market has been awash with stories of whether UTI, which manages Rs 57,000 crore in investment funds, could have gone wrong in only one deal. There is a feeling more skeletons could tumble out. Defence lawyers argued that for a fund handling so much money, a Rs 32-crore deal is a paltry sum. In doing so, they unwittingly reinforced the belief that there could be many blackholes in UTI’s investment kitty.

Remand extended

The three UTI topguns accused of misappropriating Rs 32.8 crore in public funds were remanded in judicial custody till August 7 by special court judge S R Mehra, who allowed them to have their own medicines, but declined to pass any order on home food.

The CBI wanted Subramanyam’s remand extended for a day so that it could confront him with documents that it believes hold the key to more breakthroughs in the case. The lawyer, however, said he was not in a position to reveal what those papers were. However, he forwarded the case diaries to the special court judge for his perusal.

He argued that it was opposed to the bail for the three accused because, as top officials of UTI, they might influence the course of the investigations if granted bail.

The custody of Arvind Johari, the promoter of Cyberspace Infosys, was also extended till August 7 in the same case. The CBI has alleged that Johari had induced UTI top officials through Rakesh Mehta to buy 3,45,000 shares of Cyberspace at an exhorbitant price of Rs 930 per share, resulting in loss of Rs 32.08 crore to the financial institution.

The former executive directors were produced in court this morning along with Mehta by the agency for further remand.

   

 
 
NEW MOBILE PHONE ALARM 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug 3: 
In addition to his official mobile phone, P.S. Subramanyam has admitted to have used a personal mobile phone, the particulars of which were not disclosed by him till late on August 2.

“On August 2, he did not disclose it on his own but as a sequel to the examination of some vital witnesses and after sustained interrogation,” the CBI application for further police custody remand revealed.

“The particulars of call details of this phone have been requisitioned from the cell phone company. The same are likely to be received today,” the investigative agency said.

“Considering that the accused had deliberately withheld this vital information from the CBI despite his interrogation in custody since July 21, it is essential that he is confronted in custody with the information available in the call details of the said mobile phone,” the investigative agency added.

CBI has also alleged that some vital documents have been collected on August 2 from UTI which provide important clues regarding the conspiracy.

“Subramanyam will have to be examined with reference to the said documents,” the agency pleaded before the court.

Shiv Sena MP Sanjay Nirupam had already accused that officials from the Prime Minister’s Office had been in touch with Subramanyam on various occasions prior to the run up to the private placement of the Cyberspace Infosys deal.

   

 
 
SUBRAMANYAM ON THE OFFENSIVE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug 3: 
Former UTI chairman P.S. Subramanyam has now turned the heat on the central government, especially the finance ministry. He had alleged that the government was intimated thrice on the serious situation afflicting the mutual fund.

Subramanyam has made this observation in his application seeking bail in the case relating to Cyberspace Infosys.

He said, the government was first apprised of the situation on May 18 and then again on June 30.

Finding that the government was not taking any action, the petitioner (Subramanyam) said that a proposal was sent to the finance secretary, through a letter dated June 30, in order to further apprise the finance minister of the said situation.

Subramanyam said in his bail plea that he had met finance minister Yashwant Sinha on July 2 who advised him to go ahead with the scheduled meeting of the board of trustees on the same day in Delhi.

Giving a general overview of then situation prevailing in the mutual fund, Subramanyam said in his bail application that the Trust was generally upbeat about the ‘growth-oreinted’ budget of 2001-2002.

But “two days after the budget was presented, the stock market nosedived due to concerted bear hammering on the Bombay Stock Exchange,” he said in his bail application.

If the general expectation that the market would improve had come true, the UTI would have got four months—March to June—to intensify its market operations and book profits. But unfortunately that did not happen, Subramanyam said.

   

 
 
JOHRI USED FRONT FIRMS TO MILK LUCKNOW COOP BANK 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Aug 3: 
Cyberspace Infosys’s promoter Anand Johri siphoned off Rs 32.3 crore through his front companies from the failed Lucknow-based City Cooperative Bank Ltd where he was also in charge of all investment and credit decisions, according to a probe report received this week by the finance ministry.

Johri, who also acted as the bank’s finance director, violated all RBI norms and invested another Rs 6.5 crore of the bank’s funds in dud bonds floated by Cyberspace. This money was invested in these junk bonds between March 5 and 15 this year.

Anand Johri is currently arraigned before a court in Mumbai on charges of having colluded with UTI officials to siphon off money from the giant mutual fund. A Lucknow-based businessman, Johri, reportedly has Sangh Parivar links which were strong enough to get the Prime Minister to inaugurate one of his software companies.

Allegations have also been aired on the floor of Parliament that top officials of the Prime Minister’s Office have been involved in pressuring UTI to buy into his dud software company—Cyberspace Infosys.

The report, which is likely to be used by the CBI eventually against Johri, has been filed by Special Officers of RBI.

They also discovered that the bank under Johri’s directions also invested some Rs 30.82 crore in various scrips but has in its possession scrips or certificates worth just Rs 9.42 crore.

The report states that there are no documents to prove where the remaining Rs 21.4 crore were invested!

Johri also siphoned off Rs 5.88 crore through fictitious clean advances, some Rs 25 lakh through savings bank accounts and Rs 1.71 crore through illegal cheque purchases and Rs 42.83 lakh in overdrafts to a company floated by him called Kamal Infosys.

The bank also claimed that it had invested Rs 15.68 crore with three co-operative banks—Bombay Mercantile, UP Cooperative and Lucknow District—but fixed deposit receipts for some Rs 2.62 crore were found missing when the bank was probed.

Credit decisions, also taken by Johri without reference to any loan committees, were found to be highly suspicious. Loans were given against blank loan application forms, documents which did not have the borrower’s signatures or of any disbursing officer and which were backed by no collaterals. Almost all loans made by the bank against shares were found to have turned into non-performing ones.

The bank also discovered a novel way of circumventing the cash reserve ratio (CRR) prescription. It inflated its balances with notified banks with which it was to have held this reserve by booking fictitious debit entries and crediting false pay orders.

   

 
 
NEW NORMS FOR NIDHI COMPANIES NOTIFIED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug 3: 
The government today notified prudential and income recognition norms for the mutual benefit societies or nidhi companies, with immediate effect.

Under the norms notified today, income, including interest or any other charges of non-performing assets, shall be recognised as income only when it is actually realised.

Any such income, if it is recognised before the asset actually becomes a non-performing one and remaining unrealised shall be reversed in the current year’s profit-and-loss account.

Nidhi companies, which are a special category of non-banking financial companies, are outside the regulatory framework of the Reserve Bank of India (RBI).

The notifications also state that no company declared as a ‘nidhi’ can carry on the business of a chit fund, hire-purchase finance, leasing finance, insurance or acquire shares or debentures issued by any body corporate, except the shares of another nidhi, if specifically permitted to do so by the central government. The government has also ruled that a nidhi shall not issue any equity share of a nominal value less than Rs 10.

   

 
 
DEVESHWAR LIGHTS UP NEW ITC DREAMS 
 
 
BY A STAFF REPORTER
 
Calcutta, Aug. 3: 
In his second term as the chairman of ITC, Y.C. Deveshwar will seek to transform the tobacco major into a true “Indian company with greater commitment to the economy and society, rather than one which merely exploits opportunities available to it”.

Its food and branded garments range will be taken beyond the country’s shores, and businesses integrated with raw material-producing farmers through its click-and-mortar e-choupal platform.

“This will not only help increase our contribution to the economy and society, but also generate greater shareholder value in the process,” he told reporters after the company’s 90th annual general meeting (AGM).

E-choupals already reach out to 1.2 lakh farmers in 1,000 villages across Andhra Pradesh, Karnataka and Madhya Pradesh, linking them to the world markets and enabling ITC to source its agri-products in a cost-effective manner.

At present, the system is mainly used by soya and coffee producers, but it will soon be extended to cotton growers, and producers of rice and wheat at a later stage. The initiative, expected to cover five lakh farmers in a year, will help them get better price for their products, Deveshwar said. Addressing shareholders at the AGM, Deveshwar drew a sharp distinction between firms operating in India, and a “true Indian company”.

He said the difference lay in the depth of commitment to the economy. “As a true Indian company, we will go the extra mile to maximise value for the country’s society,” he said.

Deveshwar said ITC will develop a new business stream whereby its domain expertise in the distribution of consumer goods will be used to create a Web-based platform for FMCG majors that do not have one of their own.

The company, he said, is talking to various FMCG companies to explore possibilities in the new line of business.

In tune with its strategy of looking beyond tobacco, hotels and paper, ITC today recast its name by dropping the dots which separated the three letters. Explaining the move, Deveshwar said: “T from now on will stand for totality, not tobacco alone.”

The strategy of developing new businesses emerged from the two brainstorming sessions between the ITC top-brass and Krishna Palepu of Harvard Business School.

   

 
 
ROADMAP TO STEP UP FDI 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug 3: 
A report from the American Chamber of Commerce said India has the potential to attract investment worth $ 100 billion in five years but could get derailed if key barriers like sectoral policies, restrictions on foreign ownership and bureaucratic red tape were not removed.

The study, compiled in association with global consultant McKinsey, has suggested a road map for stepping up FDI, through privatisation of public enterprises in the next five years. The report further said if “appropriate measures” were implemented, the country’s economic growth would be pushed up 1-2 per cent to achieve an 8 per cent growth annually.

The report said the Prime Minister should set ministry-specific FDI targets and hold each ministry responsible for achieving its targets.

It also recommended setting up of two high-level committees, both within the government and outside it, to facilitate implementation of the report’s recommendations. Of this, the first should be an apex committee chaired by the PMO or the commerce ministry, for a regular review of sectors, specific policy implementation and to monitor FDI inflow on a quarterly basis.

The second would be an advisory committee or a taskforce comprising CEOs of Indian firms. This committee will work with the ministry of external affairs for marketing India as an investment destination and providing sector-specific feedback from investors to the ministries of finance and commerce.

The report said India should raise the FDI limit to at least 74 per cent in telecom, 49 per cent in insurance and 51 per cent in banks, including public sector ones.

   

 
 
ALSTOM FOCUS ON INDIA 
 
 
FROM M RAJENDRAN
 
New Delhi, Aug 3: 
Alstom Power India Ltd (APIL) plans to indigenise the manufacture of mini-hydro turbines for hydro power projects in India and abroad.

Besides, APIL will also partner Alstom Power of France, the lead centre for hydro power plants world-wide.

The efforts are part of Alstom’s strategy to set up three lead centres at a global level in India, Spain and Brazil. The prices could provide stiff competition to the state-owned Bharat Heavy Electrical Ltd (Bhel).

   

 
 
FIVE-YEAR BAN ON KHEMKAS 
 
 
BY A STAFF REPORTER
 
Calcutta, Aug. 3: 
The Securities and Exchange Board of India (Sebi) has barred the Chennai-based Khemkas of the NEPC group from entering the capital markets for the next 5 years. The penalty was slapped for non-fulfilment of commitments by the Khemkas in connection with their 1996 acquisition of Damania Airways, rechristened Skyline NEPC after takeover. The NEPC group promised to pay the shareholders who sold out Rs 35.25 per share, but defaulted in paying, and did not return the share certificates either, a Sebi press release said.

The NEPC group acquired 12.5 lakh shares from the erstwhile promoters of Damania Airways. Though this represented 3.89 per cent of the company’s equity, the Khemkas obtained management control through a strategic alliance with the Damanias. This allowed the Khemkas to nominate six out of the eight directors on the company’s board. Sebi directed the NEPC group to make an open offer for 20 per cent of the company’s equity. The group made the open offer at Rs 19.60 per share, but this was less than the price it had paid to acquire 12.5 lakh shares from the Damanias.

Sebi directed the group to revise the offer price to Rs 35.25 per share. The total consideration payable for the 64.66 lakh was Rs 22.80 crore. The offer ran through the February of 1996, and the Khemkas agreed to pay the consideration by March 28, but defaulted.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.12	HK $1	Rs.  5.95**
UK £1	Rs. 67.33	SW Fr 1	Rs. 27.15*
Euro	Rs. 41.51	Sing $1	Rs. 26.15*
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*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4440	Gold Std(10 gm)	Rs. 4385
Gold 22 carat	Rs. 4190	Gold 22 carat	N.A
Silver bar (Kg)	Rs. 7125	Silver (Kg)	Rs.7230
Silver portion	Rs. 7225	Silver portion	N.A

Stock Indices

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