Birla shield for family jewels
Tata Tele in alliance talks with Hughes
Maruti price hike spares high-end models
Apex court twist to Dabhol power struggle
Crompton Greaves set to turn around
Leave without pay for Dunlop brass
Strategy to make UBI strong
Bill to curb unfair trade practices
Dotcom hopes flicker on the screen
Foreign Exchange, Bullion, Stock Indices

Calcutta, Aug. 6: 
In a move aimed at fending off possible takeover threats, the promoters of the Aditya Vikram Birla group are planning to raise their stake in Hindalco, Indian Rayon, Indo Gulf Fertilisers & Chemicals and Grasim Industries to 40 per cent.

According to a group spokesperson, chairman Kumar Mangalam Birla feels that 40 per cent is the “comfortable” level in the current business scenario. “The holdings will be increased through creeping acquisitions and there is no plan for an open offer,” she said. Promoters can buy shares up to 5 per cent of a company’s equity in a given year under norms laid down by the Securities and Exchange Board of India (Sebi).

Based on the current market price of shares, the promoters will have to invest Rs 1,500-1700 crore to raise their stake. The Hindalco share closed at Rs 724.15 on the BSE on Monday, Grasim ended at Rs 311.25, Indo Gulf finished at Rs 34.15 and Indian Rayon settled at Rs 74.90. The spokesperson did not say whether funds have been set aside for the stake-hike plan.

Birla and his associates hold around 21.39 per cent in Hindalco, the group’s flagship; institutions (both domestic and foreign) control 41.82 per cent and others (including public) own 36.80 per cent.

The promoters of the country’s second largest conglomerate have routed their holdings in group firms through an intricate web of cross holdings. In Indian Rayon, for instance, Grasim, Hindalco and Indo Gulf hold 4.96 per cent 9.81 per cent and 2.98 per cent respectively.

“The promoters of the best-managed companies are more exposed to the threat to the hostile takeovers, especially in a situation where floating stocks of shares is large. So, raising stake is always a logical decision for any serious promoter,” a company official said. Sources, however, brush off suggestions of a takeover bid, saying financial institutions, both domestic and foreign, have reposed strong confidence in the promoters. “Even if a raid was mounted, there is nothing to worry about.” they added.

“The financial institutions and the public have always stood by the promoters and that is the reason why this group has done so well despite several problems along the way. Therefore, raising stake is a strategic decision in these circumstances,” sources close to the promoters said.

“We have a proven track-record in successfully managing different businesses, and we will continue to remain a conglomerate. The pre-condition for this is, of course, that each of our business should dominate the sector,” Birla said.

The group is now going thorough a restructuring over the past couple of years to sharpen its focus. Most important, it wants to concentrate on making the best of the knowledge-based industry — something other old-business houses in the country haven’t.

The A.V. Birla group has witnessed steady growth over the past few years even though most of its peers and other big industrial houses have been struggling to hold their ground amid a vice-like recession in most key sectors of the economy.


Mumbai, Aug.6:  
The Tatas today said they are in negotiations with Hughes Network Systems for a possible alliance between Hughes (India) Ltd and the Tata Industries-promoted Tata Teleservices. Sources close to the two sides said the negotiations are at an advanced stage and could yield an agreement within weeks. The Tatas had said recently they wanted to convert their letter of intent for the Maharashtra circle into a licence.

There is speculation over whether the Mittals of Ispat group, who own 24 per cent of Hughes, will sell out in favour of the Tatas. Financial institutions have badgered the Mittals to quit non-core sectors and to invest the money in their mainstay steel business. What has stopped them from leaving is the slump in the country’s stock markets.

The alliance will help both firms raise the mind-boggling volume of investments required for a fibre-optic back-bone and other facilities. The Maharashtra circle being a lucrative market, all long-term basic phone operators will need a foothold in the state. The Tatas can tap the massive broadband network now being set up by Hughes.

It would be logical for Tata Teleservices to surrender its letter of intent in Maharashtra if negotiations with Huges are successful. Tata Power, the group’s energy major and a key shareholder in Tata Teleservices, also has a broadband network in Mumbai.

The joint statement released by the two companies today said no further details can be made available at this point of time because discussions have not been wrapped up yet.

The Tata group said the announcement was made in the interest of transparency and is consistent with the high corporate governance practices of the two companies. “It should not be construed to imply that any definitive agreement has or will be reached between the parties,” the statement clarified.

Tata Tele has LoIs for 15 circles. Among these circles, based on various considerations the company had earlier indicated that it has decided as part of its first phase to convert letters of intent into a licence in eight circles — Delhi, Punjab, Haryana, Maharashtra, Gujarat Karnataka, Tamil Nadu and, perhaps, Kerala.


New Delhi, Aug. 6: 
Maruti Udyog Ltd today announced a one to two per cent increase in car prices which will go up by Rs 2,600-6,500 in Delhi (ex-showroom).

The prices of high-end models—Baleno, Altura and Esteem VX—have not been raised. The company has also limited the increase in the prices of Zen VXI and Alto VX to Rs 200-500.

Company sources said: “This partial treatment of different cars depends on market feedback. As the volume sales of high priced cars are low, an increase in their prices will not give the desired revenue increase. That is why prices have been raised for models where the volume sales are high.”

Incidentally, the rumour in the automobile industry was that MUL would raise prices by three to 3.5 per cent, or about Rs 10,000 to Rs 20,000 by the year end.

Industry sources say there could be two more rounds of price hikes.

“The increase in the cost of inputs, along with a 32 per cent excise duty and 12 per cent sales tax on the total cost, calls for an increase in prices. But this will be done in a phased manner depending on how much the market can bear,” sources said.

MUL has been mulling the price hike for long as its ex-showroom prices only covers 55 per cent of the total cost of production. Moreover, the slump in demand has increased competition in the car segment. Most car companies have been wallowing in losses.

Maruti Udyog reportedly suffered a Rs 200 crore loss in 2000-01 against a profit of Rs 300 crore in the previous year.


New Delhi, Aug .6: 
In a new twist to the ongoing tussle between the US power major Enron Corporation and the Maharashtra government over the Dabhol power project, the Supreme Court today stayed the international arbitration proceedings initiated by Enron while asking Mumbai High Court to decide whether the Maharashtra Electricity Regulatory Commission (MERC) has the jurisdiction to adjudicate the dispute.

A division bench of Justices S.P. Bharucha and Y.K. Sabharwal allowed a petition by Dabhol Power Company (DPC) which challenged an order passed by the Mumbai High Court. In that order, the high court had held that the MERC, being an expert body, had the jurisdiction to hear the dispute.

The Supreme Court said “until such time the high court finally hears and decides on the writ petition filed by Dabhol Power Company, MERC will not pass further orders on the application filed by the Maharashtra State Electricity Board (MSEB). Likewise, the arbitration proceedings commenced by DPC would also not proceed till such time the high court gives its verdict.

However, the interim orders of MERC will continue to hold till the high court decides the issue of jurisdiction. The interim orders of June 29 restrained DPC from resorting to international arbitration and invoking the escrow account from the banks.

An escrow account is a mechanism devised by lenders wherein an identified stream of revenue is parked with a bank. Whenever there is a payment dispute, the litigant can seek to activate drawals from this account.

MSEB is Dabhol’s primary customer and owes Rs 226 crore to the power producer. Enron Corporation, which has a 65 per cent stake in DPC, contended that MSEB was not making punctual and full payment for the electricity drawn. MSEB, however, has made a counter-claim for a rebate of Rs 540 crore from DPC under the power purchase agreement (PPA) contending that there was a shortfall in delivery of power.

DPC disputed the claim and the matter was referred to a panel under the provisions of the agreement signed between the parties on December 8, 1993. The panel could not resolve the dispute and DPC gave the notice for international arbitration on April 12.

But MSEB approached the MERC set up under the Electricity Regulatory Commission Act and DPC challenged its jurisdiction.

But the commission restrained DPC from proceeding further and on appeal the high court upheld that the commission had jurisdiction.

DPC pleased with ruling

DPC today said it was “extremely pleased” with Supreme Court’s ruling which asked the Mumbai High Court to decide on MERC’s jurisdiction to adjudicate the US major’s payment dispute with MSEB.

“The favourable ruling gives further support to DPC’s faith in Indian legal system as it is widely known that the Dabhol project has previously been upheld in over 25 cases before courts in India, including the Supreme Court,” DPC said in a statement in Mumbai.


Calcutta, Aug. 6: 
After two years of continuous losses, Crompton Greaves, the Rs 1378-crore infrastructure equipment manufacturer, is expecting to turn around during the current financial year.

Crompton Greaves managing director S.M. Trehan said the company has done reasonably well in the first quarter by reducing losses to Rs 5.68 crore from Rs 67 crore in the corresponding period last year.

“We hope the next three quarters will be even better for us and help us to turn around,” he said.

Trehan cited the company’s decision to restructure operations as the main driving force behind the good performance this year.

“We underwent massive restructuring over the past 15 months that resulted in quitting quite a few businesses in which we did not have core competence. Now our focus is very clear: grow with core areas and be either number one or two,” he said.

The company has reduced its manpower, primarily through a voluntary retirement scheme, by around 30 per cent this year from 10,605 in March to 7,764 in June. The VRS outgo has been around Rs 100 crore.

Crompton Greaves has now embarked on a project to e-enable the company which has four major businesses—power systems, industrial systems, consumer products and informatics & telecom. The power systems and consumer products contribute 33 and 34 per cent respectively to the total turnover while the industrial systems and telecom contributes 25 and 10 per cent respectively.

Trehan said the company is content to remain infrastructure equipment maker and does not have any plan to become a service provider. “Services is not our cup of tea and that’s why we have pulled out of several such areas,” he said.


Calcutta, Aug. 6: 
Dunlop India Limited (DIL) has asked its management cadre across the country to go on leave without pay till December – a move being seen as a precursor to a second round of work suspension at its factories.

Operations, halted at its Sahagunj factory on February 7, 1998 and at Ambattur the next day, were resumed on March 11 last year under a holding operation — the term used to describe a situation in which critical elements of the production process are kept running.

The management staff at the two factories and its offices were summoned on Sunday and told to go on leave without pay. The company said it was unable to continue with operations due to non-availability of funds.

The decision has been taken without informing the Board for Industrial and Financial Reconstruction (BIFR), which is considering the firm’s draft revival scheme. Most of the 7,500 workers at Sahagunj and Ambattur are baffled because they have no idea whom they will report to. “We do not know to whom we will report henceforth. The management should at least communicate to us about the developments in the company,” the employees said. “We were hoping that the draft revival scheme would be implemented soon. But the current move will jeopardise the entire plan. We had given all the co-operation the management needed,” a senior Citu leader said.

The union at Sahagunj has apprised state chief minister Buddhadeb Bhattacharjee about the company’s current state of affairs. Employees at the head office have informed state commerce and industry minister Nirupam Sen that the firm wants to shift base to Sahgunj, but the government has not made up its mind on what it can do about it.

Managing director T.C. Goel was not available for comment, while P.S. Sharma, senior vice-president, refused to speak on the issue.

The official spokesperson, India Infomedia’s Harsimron S. Sandhu, said: “The company has paid salaries till December 2000 despite the fact that there were only two-and-a-half months of production in the 17-month-long holding operations.


Calcutta, Aug. 6: 
The city-based United Bank of India (UBI) has worked out a new strategy to wipe out the stigma of a ‘weak bank’. The strategy envisages bringing down non-performing assets (NPAs) to five per cent, reducing wastage, increasing the productivity of its employees, launching retail products and taking the net profit figure to at least Rs 100 crore.

According to the newly-appointed chairman S. Madhukar, “All these targets will be fulfilled within the current financial year. We have entered into a memorandum of understanding (MoU) with the regional managers for meeting these targets.”

The bank’s current NPA is around 10 per cent of the net advances. “Our major initiatives to reduce the NPA will be through upgradation of accounts, fast compromises, recovery through lok adalats and, in few case, writing hem off,” Madhukar said.

“Upgradation of accounts should be the main focus. We should help the units to run properly and help them with financial assistance. We have to take risks in some cases. Investing only in government securities will not help the bank to grow and will boost narrow banking,” he said.

“I have told my regional managers to directly interact with me if they face any problem at any point of time. We have to achieve our goal and wipe out Rs 1300 crore accumulated losses,” the chairman said.

The bank has decided to come out with an innovative product whereby the deposits in the savings account will be treated as a fixed deposit if there is no activity in that account for a certain period of time. “The coming months will see launch of such unique products,” he said.

The bank is also trying to bring down the average cost of funds from eight per cent to seven per cent in the current year.

Similarly the average spread which is currently at 2.6 per cent will also cross three per cent at the end of the current financial year.

Talking about the arrear payment to the employees arising out of wage revision, Madhukar said the matter will be resolved soon. “If not the full amount we would at least like to disburse a portion of it in the current financial year,” the chairman added.


New Delhi, Aug. 6: 
The BJP government today brought in a Competition Bill which seeks to prohibit trade practices that could hamper fair competition and set up a Competition Commission of India to monitor this. The Bill, introduced by law minister Arun Jaitley in the Lok Sabha, seeks to replace the MRTPC Act which, the minister claimed, has “become obsolete ... in the light of international economic developments.”

The Bill seeks to prohibit any pacts between enterprises or individuals on production, supply, distribution, storage, acquisition or control of goods and services which could adversely hit competition in India. It also bans any business agreements which directly or indirectly results in bid rigging or collusive bidding.

Unlike the MRTPC Act it does not consider creation of a monopoly to be a crime, but the abuse of market dominance is taken as an offence. It defines abuse to mean “if an enterprise directly or indirectly imposes unfair or discriminatory pricing (including predatory pricing) , purchase or sale conditions” or limits production of goods or services or markets ... technical or scientific development of goods or services which prejudices consumer interest. Or “indulges in practices which deny market access” or “uses dominant position in one market to enter or protect another relevant market.”

Industry chambers have been fighting these clauses tooth and nail and have been seeking their dilution. While they have succeeded somewhat, their attempt to totally dilute these clauses seems to have been stemmed by the government as it feels there is a need to check abuse of market dominance by individual companies as well as by cartels .

At a meeting with industry secretary P.G. Mankad and commerce secretary Prabir Sengupta, the Federation of Indian Chambers of Commerce and Industry had stressed the need to remove these clauses.


New Delhi, Aug. 6: 
The first shoots of another infotech resurgence have just started to appear and the dust over last year’s dotcom bust will settle sooner than many expect, says Robert (Bob) Hayward, senior vice president (operations) at Gartner Asia Pacific, an IT technology research firm.

Hayward reckons India is well positioned to cash in on the resurgence in the IT sector which has already begun and will reach its acme by the year-end.

“India is focused on things that matter,” said Hayward, an Aussie who feels that the government and companies Down Under are far too obsessed with sports. What if India could bag only a bronze medal at the last Olympics, they should be proud that they have the largest human resource in one of the emerging sectors—information technology.

“We have come from Australia, a country which is obsessed with sports and where there is massive investments in sports. But the investments in the IT sector or the response to this sector is no where near tp what it is in India. We may have won more gold medals, but we do not have the huge IT talent and I think that is the right investment.”

The research firm is bullish about the growth prospects for India in the IT sector and claimed that the US economic slowdown will not impact Indian infotech companies.

Gartner feels e-services like call centres, back office, financial transactions, processing, research and development, engineering are the real growth areas for India. Hayward said, “The e-services markets has the potential to reach $ 150 billion by 2008 and we see India taking a large chunk of this.” Gartner has projected that phone line revenues of $ 6.7 billion at the end of 2000 will increase to $ 18.9 billion by 2005.

To prove his point, Hayward presented a finding of Gartner about India’s telecom and IT sector. Last year, market penetration of telecom and internet was about 3 per cent or 32.25 million consumers. This is slated to go up to 7.7 per cent or 82.9 million consumers by 2005.

Data services last year generated a revenue of $ 577 million out of which 20 per cent came from internet service providers. According to Gartner, data service will generate $ 3.5 billion worth of revenues by 2004 out of which 40 per cent will be generated by ISPs.

ISP subscribers are expected to grow to 21 million in 2005 from 2.65 million last year.

Revenue from mobile users is targeted at $ 5.1 billion by 2005 to touch 31 million users as against 3.1 million users last year accounting for revenue of $ 577 million.

By 2006, net-liberated global 2000 organisations will reduce their operating costs by between 25 per cent and 50 per cent and increase their earnings by between 30 per cent and 80 per cent depending on the industry they operate, Gartner claimed.

This will result in a staff reduction of 75 per cent and cost reduction by 40 per cent between 2000 and 2006.



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