Naik dithers, ONGC suffers
Makeover mode
Slump bites into Telco rights issue
Bajoria back on the prowl
Supreme Court stay on cellular phone cases
ICICI to raise Rs 5000 crore
Sebi open to changes
Sebi nominee on DSE board has his way
Amul pizzas set to scaleSnow Cap
Foreign Exchange, Bullion, Stock Indices

New Delhi, Aug. 13: 
Petroleum and natural gas minister Ram Naik does not believe in announcing unpopular decisions stealthily. But he is tongue-tied now when he is faced with the prospect of raising the price of natural gas because its buyers are some of the biggest names in Indian business.

In the 22 months that he has been Cabinet minister, Ram Naik has increased the prices of petroleum products twice. His predecessors always squirmed at the thought of making public the decisions to jack up rates of essentials that have a cascading effect on the economy and anger voters. Not so Naik, whose bravado was on show in the electronic media on both the occasions he increased petroleum prices.

But for more than a year now, Naik has been sitting tight on a proposal to raise the price of natural gas. This delay is proving to be quite costly for Oil and Natural Gas Corporation (ONGC) which is the largest producer of natural gas in the country. Everyday Naik defers his decision, ONGC suffers a loss of Rs 20 crore.

The hike in natural gas prices was recommended by an expert committee about one-and-half-years back. This translates into a loss in revenue of Rs 10,300 crore!

Naik has his reasons. The major consumers of natural gas are industries owned by such heavy weights as the Ruias of Essar, the Birlas, the Mittals and the Ambanis of Reliance as well as fertiliser companies in both the private and public sectors. Many of the industries are located in Maharashtra, his home state.

Official sources say a Cabinet note recommending a steep hike in the prices of natural gas was sent to the minister early last year. The price revision was to take place with effect from April 2000. If the gas prices are raised, these industries will lose and ONGC will gain.

The Shankar Committee, appointed by the government, recommended that prices of natural gas be linked to those of a basket of fuels up to March 2000 and thereafter on a par with prices of fuel oil with a ceiling applicable to prices being paid for gas produced by Enron-Reliance combine from its mid and south Tapti gas fields at $ 3.11 per million Btu (British thermal unit). The decision was to be taken by a Cabinet committee. The initiative for this should have come from Naik who is the minister in charge.

ONGC is selling about 60 million cubic metres a day and the price it is getting is only Rs 2850 per 1000 cubic metre which works out to $ 1.6 per million Btu. ONGC cannot protest because Naik is the boss.


Calcutta, Aug 13: 
Oil and Natural Gas Corporation Ltd (ONGC) is ready to embark on an ambitious organisational restructuring programme from Tuesday. The new organisational structure entails a shift from special business unit model to a new dispensation under which will be two main divisions — asset base and basin base.

There will be 15 asset bases and nine basin bases, all headed by managers. The company is also in the process of revamping the board to create three portfolios — director (onshore), director (offshore) and director (services). The company has sought the government’s approval to shuffle a board which currently has seven directors. A couple of slots, such as director (operation) and director (technical), may be abolished in the new structure.

Confirming the move, ONGC chairman Subir Raha said the new model will delegate more powers, financial and operational, down the line to ease the functions of units. “The new structure will also help focus on our core competencies, ensure accountability and promote healthy intra-base competition,” Raha said.

While the asset bases are being created to operate the company’s oil producing fields, the basin bases will take charge of the exploration activities. Seen from another angle, asset bases will be the earning sources while basin bases will pave the way for future investments.

Both divisions will be backed by support base comprising the research and development wing (R&D), apart from the administrative and personnel departments.

Currently, ONGC operates through six regions. Two of them are headed by executive directors, while the rest are under regional directors. These posts may be rationalised under the new structure in a progressive manner.


Mumbai, Aug. 13: 
Hobbled by the recession in the automobile industry and the primary markets, Tata Engineering and Locomotive Company (Telco) has scaled down the size of its rights issue to Rs 978.65 crore against an estimate of Rs 1228-Rs 1382 crore.

In a proposal cleared today, the board of the automobile major said one fully convertible debenture (FCD) would be equal to four shares and one non-convertible debenture (NCD) for 10 shares.

The FCDs, to be issued with a face value of Rs 65, will have to be converted into one ordinary share of Rs 10 each on March 31, 2002, at a premium of Rs 55. The debenture will carry an annual interest rate of 7 per cent.

The company had thought earlier it could command a premium of Rs 80-100 on the convertible debentures.

One detachable and tradeable equity warrant will be attached to every lot of five FCDs. The equity warrant can be used and converted into one ordinary share of Rs 10 each at a price of Rs 120 after 18 months from the date of allotment till September 30, 2004.

The rights issue of Rs 978.65 crore includes the Rs 300 crore that the company hopes to raise when shareholders opt for conversion at Rs 120 after 18 months.

Speaking to The Telegraph, Praveen Kadle, chief financial officer of Telco, said: “We will look at alternate avenues of finance as and when we require the funds. Already, the company has decided to divest assets which are not part of the main business.:

On why the firm had offered only 7 per cent, Kadle said the rate was bench-marked against the yields on banks’ short-term deposits.

The NCDs will carry an interest warrant of 11 per cent per annum on a face value of 100 annually.

The NCD would be redeemed in three instalments of Rs 30, Rs 35 and Rs 35 each at the end of the fourth, fifth and sixth years respectively from the date of allotment. There will a put and call option at the end of 24 months.

Every two NCDs would have one detachable and tradeable equity warrant.


Calcutta, Aug. 13: 
Jute baron Arun Bajoria is back in the market with a bang. He has acquired about 14 per cent of Calcutta-based Kanoria Chemicals, while his holding in Bombay Dyeing has once again crossed the five per cent threshold, thanks to a fresh acquisition of 86,475 shares.

Though the Kanorias are unruffled by Bajoria’s huge stake in their company, Bombay Dyeing-promoter Nusli Wadia appears to be upset. In its notice to the exchanges, Bombay Dyeing has alleged that there are discrepancies in the disclosures made by Mega Resources, the jute baron’s broking outfit.

Speaking to The Telegraph, S.S. Kanoria, chairman of Kanoria Chemicals, said: “We and our close associates hold about 60 per cent of the company’s Rs 16 crore equity. We know he is acquiring shares of our company from the market, but we are not bothered by his move. We have a transparent management, and any person holding a substantial stake in our company is not a threat to us. His buying is actually helping our market capitalisation grow.” Kanoria also said that Bajoria had informed the company in time, when his holding exceeded the five per cent threshold.

Meanwhile, in a notice to the stock exchanges, Bombay Dyeing has said that Mega Resources has reported that it held 2,110,090 shares on August 1. This represents about 5.14 per cent of Bombay Dyeing’s equity capital. Bajoria held 2,023,615 shares (or shade under five per cent) till he bought 86,475 shares on July 31, the notice said.

But putting Bajoria on the warpath with Nusli Wadia yet again, is Bombay Dyeing’s allegation that the disclosure made by Mega Resources this year about the exact holding of various entities was at variance with the ones made by it previously. Bombay Dyeing’s letter to the exchanges also said that it has asked Bajoria to clarify the exact holding of each of his group entities.

On June 14, Bombay Dyeing announced its intention to buyback 25 per cent of its equity, or about 1.02 crore shares, from the market at a maximum price of Rs 60 per share. Bajoria was upset with the price offered by the company, and refused to offload his holding. The market sees Bajoria’s fresh acquisition of Bombay Dyeing shares at this juncture and the company’s remarks in its notice as pointers to yet another round of legal wrangle. There is, however, no discernable takeover threat to the management as it already holds about 40 per cent of the company’s Rs 41 crore equity capital.

Bajoria had acquired close to 15 per cent of Bombay Dyeing last year, but reduced it to below five per cent. The acquisition, however, led to a lot of acrimony between Bajoria and Bombay Dyeing, with the latter moving the Company Law Board seeking a freeze on Bajoria’s voting rights.

Wadia had alleged that Bajoria did not inform the company in time, when his holding exceeded the five per cent mark.


New Delhi, Aug. 13 : 
In a decisive step which could help clean up the mobile phone mess, the Supreme Court today put on hold all cases related to cellular licences being contested in high courts across the country.

Notices asking for explanations within four weeks on why the petitions should not be transferred to the apex court, have been sent out by a division bench comprising Justices V.N. Khare and B.N.Agrawal.

The order came on a transfer petition lodged by the central government. It argued that interim orders issued by high courts were in conflict with each other and, therefore, it was only proper that the apex court of the country heard them and resolved the tangle in an open-and-shut manner.

The division bench issuing the notice stayed the proceedings currently under way in the high courts of Delhi and Madras. The order does not, in any way, affect the vacation of the stay granted by the Madras high court.

This means the fourth round of biddings would continue. The petitions in the high courts challenge the grant of licences without any fee or charge and allege that the government was squandering away its scarce resources.

Arguing the central government’s case, solicitor general Harish Salve contended that the high courts had passed various interim orders resulting in delay in the award of licences to the bidders and in the “matter of such importance” interference by high courts actually impinged the development progress in the telecom sector.

Salve said that considerable foreign investment was coming in and the delay in the disposal of the cases would affect such investments.


New Delhi, Aug. 13: 
ICICI Ltd plans to raise about Rs 5,000 crore through eight retail bond issues this fiscal, bring down its non-performing assets (NPAs) to below 5 per cent and ratchet up loan sanctions by 15-20 per cent. The ICICI top-brass, who made a presentation to finance secretary Ajit Kumar here today on the future strategy of ICICI, projected an upside of Rs 67,000 crore for sanctions and a downside of Rs 64,500 crore. They said NPAs would be brought down to 5 per cent from 5.2 per cent in the last fiscal.

Briefing reporters after the meeting, ICICI managing director and CEO K. V. Kamath said the institution is targeting a growth of 15 per cent on the lower side and 20 per cent on the higher side in its total sanctions as compared with the previous year.

Based on the disbursements and sanctions made last fiscal, a growth of 20 per cent works out to Rs 67,300 crore as against Rs 56,092 crore last fiscal, while disbursements are likely to be about Rs 38,300 crore as compared to Rs 31,965 crore in 2000-01.

Forecasting a revival in corporate demand in the third quarter of this fiscal subsequent to a good monsoon, Kamath said the first and second quarter are expected to be slow except from the retail sector which is already showing signs of strong demand.

”The growth in manufacturing sector is low. With a good monsoon, we expect demand in manufacturing sector to pick up from the third quarter,” Kamath said.

According to Kamath, ICICI’s mop-up target of about Rs 5,000 crore through bonds issue this fiscal will take place through eight issues of which two issues worth Rs 500 crore have already been made.

”Our third issue worth Rs 200 crore is slated to hit the market in two to three weeks from now,” ICICI executive director Kalpana Morparia said, adding that nearly Rs 500 crore will come up as bond redemptions this year.

According to her, ICICI is the only company which has managed to pierce the sovereign rating and so there is no problem in raising funds from the international markets.

This has been made possible as there has been no revision in its bond rating from Moody’s at “positive” despite the downgrade in India’s rating and that of all other corporates including heavyweights like Reliance which saw the outlook on their bond issues being downgraded to “stable”.


New Delhi, Aug. 13: 
The Securities and Exchange Board of India (Sebi) is prepared to make minor modifications in the present trading system by ironing out technical problems that brokers face but has ruled out any major change like the introduction of carryforward in rolling settlement and fixing a uniform five-day settlement period for all scrips.

Speaking to The Telegraph here, Sebi chairman D.R. Mehta said the government has already made its intention clear about sticking to the present system.

“Rolling settlement is here to stay and there is no need to accede to all sorts of requests made” he said when asked if Sebi was reconsidering its regulatory measures in the light of the representations made by brokers’ associations like the Security Industry Association and Association of NSE members of India.

In a move to popularise demutualisation of stock exchanges and dispel apprehensions raised by the broking community on the issue, Sebi will also conduct a detailed meet with heads of major stock exchanges on this issue in Mumbai tomorrow.

According to Mehta, the various issues to be discussed in the meeting include how to proceed with the demutualisation of bourses, role of members, directors, brokers and functioning of the exchange in a demutualised environment.

Sebi will subsequently convey the views of the stock exchanges to the government, which may then address their genuine concerns, if the need arises.

Margin trading

During tomorrow’s meeting, Sebi is likely to approve the introduction of margin trading products by stock exchanges, a Sebi official said.

Introduction of margin trading will enable brokers to legitimately finance their clients’ transactions, and investors to take leveraged positions. Investors will not have to pay in full for their positions upfront. They can settle the difference with their brokers at the time of squaring off the position. But it will essentially encourage speculative transactions.

Sebi executive director D.N. Rawal indicated that there are about two models that can be followed for demutualisation of exchanges.

“We have to choose between the National Stock Exchange (NSE) and the New York Stock Exchange (NYSE) models.”


New Delhi, Aug. 13: 
The Delhi Stock Exchange (DSE) has decided to disband some of the internal management committees set up to monitor day-to-day affairs following objections raised by Sebi-nominated director D. N. Davar who had earlier put in his papers as a mark of protest.

Confirming the move, Securities and Exchange Board of India (Sebi) chairman D. R. Mehta, who met some of the DSE directors in the presence of the Sebi nominee, said Davar had been persuaded to withdraw his resignation after the directors assured that these committees would be disbanded.

The committees to be disbanded include the claims committee, the building and infrastructure committee, the legal committee and the staff committee. The DSE board will however strengthen its business development committee and structure its audit committee keeping in mind the principles of corporate governance, a separate statement issued by DSE said here.

According to reports, the crisis at DSE erupted last week when Davar, who is a former IFCI chairman, resigned from the DSE board following differences with broker-directors to record his protest over the petty in-fighting between exchange directors.

In his resignation, Davar accused the DSE directors of following a personal agenda in conducting the day-to-day operations of the exchange and stated that those who refused to toe the line were being harassed or forced to quit.


New Delhi, Aug. 13: 
The “utterly butterly” butter brand is now venturing into different pastures. Amul is all set to launch frozen foods under the ‘Snow Cap’ brand. From softy cones to frozen pizzas, frozen paranthas, matar paneer and refrigerated raitas, it’s taking the “taste of India” everywhere.

Hitting the market with softy cones and frozen pizzas in a month’s time, it will then go in for frozen paranthas, matar paneer and refrigerated raitas over a period of six months. Snow Cap softy cones priced at Rs 5 will be available in 5-6 flavours. Several other products will later be introduced under the brand, the company said.

According to R. S. Khanna, assistant general manager, north zone, Gujarat Co-operative Milk Marketing Federation, (GCMMF), “The six-inch Rs 20 veg pizzas that we are presently selling through our franchisees are not really Amul brands as such. We are offering the outlets pizzas made from Amul cheese which is clearly mentioned.” For its cold chain products, Amul will utilise the 7000 outlets across India which Amul uses to sell its existing ice cream range.

Amul will invest about Rs 90 crore in the Snow Cap brand in two years’ time. “With Snow-Cap, real branding will start for Amul in the pizza segment. We will use these outlets to market our frozen pizza brand, which will be priced between Rs 15-20, as also for selling our ice cream cones. We have tied up with Carrier and Blue Star for providing deep freezers to the franchisee at discounted prices. Investments have already been made for ice cream cone vending machines,” said Khanna.

For frozen pizzas, distribution will extend beyond Amul franchisees, he added. Beginning in early July, Amul has opened about 140 such outlets in Gujarat and Delhi, with a target of opening 3,000 in three months in 300 cities. Around 300-500 outlets have been planned for Calcutta, which will be set up by the end of the week, Khanna said. Operations in Mumbai have also started.

As a concession to franchisees during the initial six months, no brand fee will be charged even after they start marketing Snow Cap frozen pizzas, he said. This also benefits Amul, giving it a cost-effective distribution network, which would otherwise have cost it a fortune if it had to set one up on its own, he said.

Presently, on an average, an outlet is selling 70 baked pizzas a day, at a profit margin of Rs 8 per pizza, he said.



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