Market route for payout stockpile
FIs come up with solution for low-rated firms
ICICI to retail govt securities
IDBI weighs bailout for IFCI
Centre not to rush Competition Bill
Strike at Paharpur costs Alstom Rs 15 crore
Oberois set sights on Morocco
Foreign Exchange, Bullion, Stock Indices

 
 
MARKET ROUTE FOR PAYOUT STOCKPILE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug. 21: 
The Securities and Exchange Board of India (Sebi) has asked Unit Trust of India (UTI) and other mutual funds to float new schemes for managing their burgeoning corpus arising out of unclaimed dividends and interest warrants.

There are no precise figures on the exact amount of unclaimed dividends with the mutual fund industry, but sources say it could be as high as Rs 1,000 crore — UTI alone is believed to be holding a corpus of Rs 500-600 crore.

However, UTI chief M Damodaran did not believe that the figures were so high. He told the The Telegraph that the mutual fund major woulod be holding less than Rs 500 crore.

The market regulator mooted the proposal to ensure that the money from unclaimed dividends is used to educate investors. Speaking to The Telegraph, Sebi chairman D R Mehta said: “We have asked mutual funds to invest the funds in government securities and use the interest earned on them to raise the level of investor awareness.”

Sebi feels the funds should be used within three years. If there are no claimants after that, the mutual fund will be asked to use invest the entire kitty in investor education.

More details on the plan to utilise funds from unclaimed dividends are not known.

However, sources at the market regulator’s office said the corpus of unclaimed dividends is not expanding like it did a couple of years ago.

The Sebi move assumes significance because mutual funds wanted clear guidelines on ways to use this money at a time when the market slump has narrowed investment options.

Unlike companies, which have clear norms that oblige them to send unclaimed warrants and dividends to the registrar of companies, mutual funds in a similar situation do not know what to do with these idle funds.They have cited the example of UTI, where the growth in the corpus of unclaimed dividend has slackened compared to the previous years.

“Unclaimed dividends have become fewer compared with those in the earlier years,” Mehta confirmed.

This is in view of a more efficient postal system and facilities such as electronic clearance. Meanwhile, redemptions in the flagship scheme US-64 have tapered off significantly with the mutual fund reporting by the end of the first fortnight Rs 82.20 crore worth of repurchases from 63,000 unit holders.

Bolstered by the trend of unit holders preferring to retain units with them, the fund major is planning to launch a monthly income plan (MIP) with an open ended option and a revamped retirement benefit plan catering to VRS funds available with pensioners opting for early retirement schemes.

Further, sources at Life Insurance Corporation also claimed that the mutual fund may not need the funds set aside by it in view of the early trends of redemptions in US-64 provided by the mutual fund.

Quarterly disclosures

Sebi intends to make quarterly disclosures compulsory for mutual funds. The current half-yearly and yearly performance reports is considered inadequate and there is a need to protect investors by dishing out information more frequently. The initiatives undertaken by Sebi is in line with the Association of Mutual Funds of India, an industry association for mutual funds.

The market regulator’s effort is to make disclosure norms more attuned to the prevailing best practices in the developed markets. Sebi has also asked funds to disclose information relating to non-performing assets and illiquid stocks which the UTI had revealed in its latest performance report for the first time.

   

 
 
FIS COME UP WITH SOLUTION FOR LOW-RATED FIRMS 
 
 
BY A STAFF REPORTER
 
Calcutta, Aug. 21: 
Banks and financial institutions today said they can provide funds even to low-rated companies if proper insolvency and recovery norms are in place.

Kalpana Morparia, executive director of ICICI Ltd said the recent upheavals in the financial sector has forced banks and financial institutions to invest only in AA and AAA-rated companies. “No one is ready to invest in companies that do not have high ratings. The FIs can come out with structured financial solutions, provided insolvency norms are in place. We should create a market for non-AAA/AA+ papers through collateralised bond/loan obligations.”

They were here to address ‘Fintech 2001,’ a seminar on emerging trends in the Indian financial sector, organised by the Confederation of Indian Industry (CII).

Adopting a similar stand, S. K. Mitra, director of Birla Sun Life said, “A different type of junk bond market should develop in India to enable risk-prone companies to access the funds. If these companies fail to pay for two successive quarters, then banks and FIs should be allowed to take action as per the insolvency norms.”

Moreover, Mitra said, banks should be allowed to fund brokers for market operations, albeit with proper margining and risk control measures in place.

B. Samal, chairman and managing director of Allahabad Bank, said in the era of prudential norms, banks can come up with funds provided companies are more transparent and a corporate governance code is maintained.

Speakers at the session on capital markets emphasised the need to develop a vibrant debt market like the National Stock Exchange’s wholesale debt market (WDM).

Citing the over Rs 100,000 crore turnover clocked by the WDM in July, as an example, National Securities Depository managing director C.B. Bhave said: “NSDL will seek the Reserve Bank of India’s nod to act as a clearing house for the retail debt market.”

   

 
 
ICICI TO RETAIL GOVT SECURITIES 
 
 
BY A STAFF REPORTER
 
Calcutta, Aug. 21: 
ICICI has decided to sell government securities to retail investors through its 100 retail centres coming up by next month.

Government securities will also be available online through its dedicated portal ICICI direct.com. Kalpana Morparia, executive director of ICICI said retail investors will be able to buy government securities within a month’s time.

The financial institution sells RBI relief bonds through ICICI centres and Morparia claimed it has been the highest seller of these bonds in the last fiscal. Though she did not quantify the amount of government securities that can be sold, but she said the FI expects a good response because it is the highest rated debt instrument in the market.

The ICICI centres will now sell mutual funds, RBI relief bonds, ICICI bonds as well as government securities.

Morparia said both ICRA and Crisil in their annual reviews have given an AAA rating to ICICI.

Regarding the non-performing assets of the FI, she said that ICICI has the lowest level of NPAs at 5 per cent and they would like to bring it below 5 per cent in the current financial year.

   

 
 
IDBI WEIGHS BAILOUT FOR IFCI 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug. 21: 
The Industrial Development Bank of India (IDBI) today said it would decide on the form and conditions of support to IFCI Ltd after obtaining the report of PricewaterhouseCoopers, pointing out in the same breath that it is not facing any liquidity problem.

“IDBI is not facing any liquidity problem for which it will have to seek succour or a bailout from the government or any other agency,” the financial institution said.

At the meeting with the finance secretary on August 8, the financial institution had placed a few strategic proposals, including transformation into a universal bank and further augmentation of capital adequacy to strengthen its balance sheet.

It clarified that the suggestion for conversion of outstanding borrowings into a 50-year loan was not due to liquidity constraints but for asset liability management, to finance long-term infrastructure projects.

This year, IDBI plans to prepay around Rs 3,000 crore, which it expects to do through the Flexibond series.

On the issue of institutional support to IFCI, the financial institution said the government and institutional shareholders have agreed to provide Rs 400 crore and Rs 600 crore respectively.

However, it said the form and conditions of such support to be provided by the institutional shareholders would be decided in the light of the report to be submitted by PwC which is making an independent assessment of the entire issue.

   

 
 
CENTRE NOT TO RUSH COMPETITION BILL 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug. 21: 
The government will not rush through the proposed Competition Bill as some of the issues still need to be debated and industrialists need more time to adjust to the idea of a truly competitive market.

“The Competition Bill is absolutely necessary, but it will take a few months before it is accepted universally,” Union minister for law, justice and company affairs Arun Jaitley said while addressing a session in the two-day seminar on ‘Concerns of developing nations in the WTO regime.’

Underscoring the need for a proper competition policy and an effective law to guard against anti-competitive practices in an open market scenario, he said every developed nation has competitive laws to protect the interests of consumers who are vulnerable to market aberrations in a free economy. He warned, “Anti-competitive practices like cartelisation, sharing of territories, bid rigging and limiting sources of supply will be sternly dealt with under the proposed law. While the law will keep an eye on the mergers, it will also encourage them to make the companies internationally competitive.”

Jaitley said the fear in the industry that the Competition Commission of India (CCI) would emerge as a super-regulator, leading to chaos and confusion, was completely unfounded. “The CCI could advise regulators in different areas on matters relating to competition, but parent regulators would be empowered to take decisions. Regulators will have to exercise self-restraint in determining jurisdiction,” he said.

On the issue of mergers and acquisitions, he said the proposed law was “one of the most liberal and almost benign”, pointing out that under the competition policy in UK, a much bigger economy, asset criteria in such cases were much lower.

“In India, only about 70 companies could possibly come under the ambit of an investigation by the CCI in case of a merger and acquisition,” he said.

“It is a universal practice to determine the threshold limit by using assets and turnover, hence, adopting a similar practice for India will not prove counter-productive,” he added.

   

 
 
STRIKE AT PAHARPUR COSTS ALSTOM RS 15 CRORE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug. 21: 
Alstom Ltd is set to lose Rs 15 crore as a result of three-month-long employees strike at its Paharpur factory in Calcutta.

Alstom has two power equipment manufacturing units in Calcutta. The unit at Paharphur manufactures low tension motors and power meters while the other unit produces high voltage power equipment.

The Paharpur units has been shut since June 28 and repeated attempts by company management and the government to arrive at a solution have failed.

The company is worried since it is dependent on revenues from the sale of equipment to small captive power plants in order to survive in Indian market. This is because large power plants have been put on hold.

“The motors were meant for industrial projects including cement plants and the meters were meant for projects being executed by different state electricity boards,” said a company spokesperson.

He added, “Several export orders won by the company have also been hit and delivery schedules have gone haywire creating uncertainty. Unless the finished goods are allowed to move out of the factory, export orders cannot be delivered, critical component needed by national projects cannot be dispatched.”

On Monday, Krishna Pillai, country president of Alstom India, had said the company would focus on supply of equipment to captive power plants to sustain its operations in India. ”This focus is showing results and will continue. Nevertheless, the long term future of the company is closely dependent upon re-energising the stagnant power sector and the subsequent success of large power projects, “ said Pillai.

The striking employees are demanding that the jobs of 35 casual labour should be regularised. The company claims it has already absorbed 49 from its total pool of 84 casual workers.

Company officials claimed that the it was not possible (to absorb the casual workers) due to “prevailing market conditions. While the company continues to pay salaries to the 600 permanent employees, the rest of the workers are going without pay for the last three months. “

The issue is pending before the labour commissioner of West Bengal for conciliation. Sources in the company said, the West Bengal government on its part has shown a positive attitude towards resolving the problem, but the union has been intransigent in its stand.

   

 
 
OBEROIS SET SIGHTS ON MOROCCO 
 
 
BY A STAFF REPORTER
 
Calcutta, Aug. 21: 
EIH Ltd, the company that runs the Oberoi chain of hotels, will invest Rs 1,000 crore in new properties — including two projects in Morocco — and renovation of existing ones over the next three years. About a third of the outlay will be spent on the maintenance of existing properties while the balance will be used to develop new ones.

The company plans to set up two hotels in Morocco, one each at Marakesh and Casablanca, at a cost of $ 35 million.

Speaking after the company’s annual general meeting today, EIH vice-chairman and managing director, P.R.S. Oberoi said: “We will divest 25 per cent in the Marakesh property to a foreign player. Talks are under way with prospective partners.” EIH International, a wholly-owned subsidiary of the Oberoi flagship, has already entered into an agreement with ONA group, one of Morocco’s largest corporate houses.

The Oberois will hold 40 per cent, the ONA group 35 per cent, and the third partner – one that EIH is scouting for – 25 per cent in the planned hotel. It will be funded in a debt-equity ratio of 60:40.

The ONA group has acquired 20 hectares for the hotel, and an architect will be appointed in the next couple of months, Oberoi said. However, construction will not begin before 12-14 months.

“The other property at Casablanca will be built on a land which is owned by the ONA group,” Oberoi added.

Commenting on projects in India, the EIH managing director said: “We have decided to defer our projects in Jaisalmer and Khajuraho. There are no flights to Jaisalmer, while there is only flight going to Khajuraho daily. We are persuading Jet Airways to increase the number of flights to these cities, and we are hopeful that they will. Once that happens, we will revive our plans of building hotels at these spots.” He also said, the hotels at Udaipur and Sawai Madhopur in Rajasthan will open later this year.

Stake boost

EIH shareholders lent their support to the management in their plans to fortifying their holding in the company. Shareholders said they would not sell their stake to the three ITC investment firms that have reportedly acquired 10.4 per cent in EIH.

Oberoi said: “We are deeply moved by the kind of support that we witnessed among the shareholders today.”

The present management is not under threat from the investment companies – Megatop, Newdeal and Peninsular – as we hold 44.5 per cent voting right.”

The promoters having increased their stake in the last financial year by over 3 per cent, hold 39.15 per cent. “We will increase our stake in the company further through the creeping acquisition route,” Oberoi said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	NA	HK $1	Rs.  5.95*
UK £1	NA	SW Fr 1	Rs. 27.95*
Euro	NA	Sing $1	Rs. 26.55*
Yen 100	NA	Aus $1	Rs. 24.80*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4555	Gold Std(10 gm)	Rs. 4525
Gold 22 carat	Rs. 4300	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7030	Silver (Kg)	Rs.7140
Silver portion	Rs. 7130	Silver portion	NA

Stock Indices

Sensex		3297.43		+ 18.51
BSE-100		1553.20		+  8.71
S&P CNX Nifty	1068.70		+  4.95
Calcutta	 113.49		+  0.19
Skindia GDR	   NA		   -
   
 

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