Centurion to issue fresh equity
Bestsellers from LIC to offer more
RPG to expand retail chain
RBI finalises corporate debt rejig scheme
Hindustan Steelworks shifts base to Bangalore
ABN Amro to sharpen retail focus
BSNL to tap rail, power network
Land swap boost for tea firms
Foreign Exchange, Bullion, Stock Indices

Mumbai, Aug. 23: 
Centurion Bank is planning a preferential offer that could raise the stake of Keppel Bank, its Singapore-based partner, and help the Devendra Ahuja-promoted institution push up its capital adequacy ratio to a more comfortable level.

The announcement came along with a statement from managing director V. S. Srinivasan that Centurion was not in talks with another private bank for a possible merger, as reported in a business daily recently.

Banking circles say Keppel Bank, which holds 17.5 per cent, is likely to pick up the preferential shares in an offer Centurion believes will help it garner Rs 120 crore. The money will be used to expand its capital base and fund growth plans, Srinivasan told reporters here today.

“The board is looking at a private placement or a preferential allotment. It is also considering whether a strategic partner can be roped in.”

It was reported earlier this week that the management of Centurion Bank had approached HDFC Bank, the country’s second-largest private sector bank, with an offer of an all-stock merger. HDFC Bank had merged Times Bank with itself last year.

Keppel Bank, taken over by Singapore’s OCBC Bank, holds the Centurion stake through its Mauritius-based investment company, and, therefore, will continue to invest in the way it does now, Srinivasan said. It has indicated its willingness to raise its stake to 20 per cent whenever fresh capital is issued, he added.

Centurion, which failed to raise funds through a rights issue this year, has a capital adequacy ratio (CAR) of 9.61 per cent on March 31, Srinivasan said. It is required to maintain at least 9 per cent under RBI norms.

Net non-performing assets (NPAs) stood at 2.96 per cent of its total advances, better than the industry average of 8 per cent. Like other private banks, Centurion plans to sharpen its focus on retail customers and increase its retail assets to 50 per cent from 35 per cent. It has bagged licences to open five more branches and intends to add 43 ATMs to its tally of 107.

The Centurion share jumped 1.68 per cent to Rs 9.10 on the Bombay Stock Exchange today on report of the capital issue.

The Rs 128.08-crore rights issue that came a cropper offered 10.67 crore equity shares of Rs 10 each at a premium of Rs 2 per share in the ratio of seven shares for every 10 held.

At the time the rights issue was announced, there was speculation that Keppel Bank wanted to raise its share holding to 20 per cent by subscribing to the share offering.

The bank had already obtained the permission from the Foreign Investment Promotion Board (FIPB) for raising Keppel’s shareholding to 20 per cent.

A couple of years ago, Keppel’s stake was reduced from 20 per dent to 17.71 per cent after 20th Century Finance Corporation was merged with Centurion Bank.

The bank was keen to enter the insurance sector through a tie-up with Canada Life, but the plan fell through after its prospective partner decided not to go ahead.


Mumbai, Aug. 23: 
Taking a cue from private players such as HDFC, ICICI and OM Kotak, insurance behemoth Life Insurance Corporation of India (LIC) is working on plans to offer more features on its “bread-and-butter” schemes. LIC plans to introduce riders on its endowment and money back policies, similar to those offered by the private insurers.

Speaking to The Telegraph, LIC managing director A. Ramamurthy, said: “We will soon introduce new features which will make our existing schemes more attractive, as policy holders will be able to pick and choose riders according to their individual needs”.

Industry officials say the changes being contemplated by LIC are not due to any overt sales pressure. This is because in April-July this year, growth in sales of endowment and money back policies have been put at 35.43 per cent at Rs 894 crore, up from Rs 660 crore in the corresponding period of the previous year.

Moneyback and endowment assurance products from HDFC Standard Life, ICICI Prudential and Max New York Life come with riders like level term cover, accidental disability benefit, critical illness rider and major surgical assistance. However, similar schemes in LIC’s portfolio, such as Jeevan Mitra, Jeevan Surabhi, Jeevan Shree, Asha Deep, Bima Kiran come without any frills attached.

Private insurers offer complete flexibility in their policies, offering riders which can be attached in any way to suit the needs of the policy holder. LIC products, on the other hand, come prepackaged and lack much flexibility. Consequently, private insurers have caught the attention of prospective policy holders.

The innovative rider on critical illness gives the policy rider extra benefits equal to the sum assured, if any major illness is diagnosed.

Accidental and disability benefit and level term cover provides insurance cover at nominal cost. Further, all riders come mutually exclusive of each other and are paid under that eventuality.

The insurance industry is witnessing tremendous growth following the entry of private insurers, who have helped spread awareness of insurance products. “Thanks to the private insurers, our growth has been phenomenal,” says Ramamurthy. And the public sector life insurance major, by virtue of its large presence across the country and brand equity, has been the single largest beneficiary, clocking impressive growth year on year.

The private insurers, on the other hand, are slowly making inroads into the metros, and spreading their wings to other towns.

LIC recently reworked returns on a popular scheme ‘Bima Nivesh,’ that saw sales rise to Rs 3156 crore for the four months ending July. Interestingly, the scheme has crossed the targets set for the entire year by July itself.

Changes in the totally revamped ‘Bima Nivesh 2001,’ a single premium plan, include bringing down the entry-level age to 18 years, from the earlier 35 years. Further, returns will now be based on the market rates.

Besides, the revamped Bima Nivesh scheme is said to have benefitted from the recent crisis in mutual fund major Unit Trust of India’s flagship US-64 scheme, as well as falling interest rates.


New Delhi, Aug. 23: 
The Rs 500 crore RPG retail network, which covers white and brown goods, music, grocery items, and health and pharmaceutical products, is planning a major expansion by opening 200 stores over the next two years. The network has 86 retail outlets at present.

Foodworld Supermarkets Ltd, the grocery outlet which is the biggest retail platform of the group, plans to open 100 stores by 2003, said K. Radhakrishnan, Foodworld’s vice president-merchandising, marketing & logistics. At present, Foodworld has 63 stores in the four southern states and Maharashtra.


Mumbai, Aug. 23: 
The Reserve Bank of India today finalised a scheme for restructuring of corporate debts, of viable entities affected by internal or external factors, outside the purview of the Board for Industrial and Financial Reconstruction (BIFR), the Debt Recovery Tribunal (DRT) and other legal proceedings.

The much-awaited corporate debt restructuring (CDR) scheme, which will be a non-statutory mechanism or a voluntary system based on debtor-creditor agreement and inter-creditor agreement, has been seen as an important way of solving the vexed issue of rising NPAs among banks and financial institutions.

The CDR will be applicable only to multiple banking accounts, syndicates, consortium accounts with an outstanding exposure of Rs 20 crore and above with the banks and financial institutions to ensure a timely and transparent mechanism, the RBI said in a notification here today.

The framework will aim at preserving viable contracts affected by certain internal and external factors and minimise losses to creditors and other stakeholders through an orderly and co-ordinated restructuring programme.

The corporate debt restructuring mechanism is modelled on the one prevalent in countries like the UK, Thailand, South Korea and Malaysia, the RBI said in a circular to commercial banks and added that it would consist of a three-tier structure — standing group, empowered group and CDR cell.

The empowered group would be mandated to look into each case of debt restructuring, examine the viability and rehabilitation potential of the company and approve the package within a specified time frame of 90 days or at best 180 days of reference to the group.

Banks should ensure that preferably an executive director, with necessary authorisations from their respective boards to make commitments, should be represented on this group, RBI said.

The central bank said one of the important elements of the debtor-creditor agreement would be a “stand-still” clause that would be binding for 90 days, or 180 days, on both sides. Under this clause, both the debtor and creditor(s) shall agree to a legally binding “stand-still” whereby both parties commit themselves not to take recourse to any other legal action during this period. This will enable the CDR system undertake the necessary debt restructuring exercise without any outside intervention, judicial or otherwise.

The inter-creditors agreement would be a legally binding one amongst the secured creditors, with necessary enforcement and penal clauses, wherein the creditors would commit themselves to abide by the various elements of the CDR system, the notification said.

Further, the creditors shall agree that if 75 per cent of the secured creditors by value, agree to a debt restructuring package, the same would be binding on the remaining secured creditors.

The CDR system will be applicable only to standard and sub-standard accounts. There would be no requirement of the account/company being sick, non performing assets (NPAs) or being in default for a specified period before reference to the CDR group, the circular said.

However, potentially viable cases of NPAs would get priority and this approach would provide the necessary flexibility and facilitate timely intervention for debt restructuring.

In no case will the requests of any company indulging in wilful default be considered for restructuring under the CDR, it added.


Calcutta, Aug. 23: 
Hindustan Steelworks Construction Ltd (HSCL), the sick public sector unit, is quietly shifting its headquarters from Calcutta to Bangalore, even as a large number of its employees remain unpaid for over a year.

Sources said the move is being taken to avoid any direct pressure from the unions, which have been regularly organising demonstrations in the company’s headquarters for the last three years, protesting the non-payment of salaries.

“Of the total 346 employees in the Calcutta office, the company has forced 321 employees into voluntary retirement. The office is now manned by a skeletal staff who have no work for all practical purposes,” they added. However, HSCL chairman S. Monoharan, who is also a joint secretary in the steel ministry, was not available for comment despite several attempts made by The Telegraph to contact him. No HSCL official wanted to speak on the matter.

A severe cash crunch and bleak order position has forced HSCL to suspend payment of wages to about 800 employees in the Durgapur project for a long time. Payment of wages also became irregular in the Bokaro and Bhilai projects, which together employ over 8,000 employees.

Unions have staged several dharnas and hunger strikes against the management.

“Although HSCL is equipped with skilled workers and sound infrastructure, it lags far behind its competitors because of the management’s attitude. The management, including the chairman, hardly takes any initiative to bag orders. This has turned the once profitable institution into a sick one now,” an INTUC leader said.

The company sank into losses of over Rs 850 crore about a couple of years back, totally eroding its net-worth. Its interest outstanding to the government went up to Rs 624 crore as of March 1997, much of which was caused by the Libyan government not paying it for a major construction job.

undertaken in the 1980s, sources said. “The debt-equity ratio stood at 45:1 during the same period, sending wrong signals to its customers,” they added.

Although several steel plants came up after the liberalisation process was started in 1992, the company’s order book position remained bleak.

The unions further alleged that while most corporate houses were strengthening their core competencies in the post-liberalisation scenario, the HSCL management decided to diversify.

“In its turnaround strategy, the company management focussed on agriculture, drip irrigation, sericulture, tissue culture and real estate projects despite the fact that it has very little expertise in these sectors. This turned the situation from bad to worse,” the unions alleged.

Shifting the company’s headquarters out of Calcutta, will not only affect a large number of employees, but also various contractors who remain unpaid, sources added.


Mumbai, Aug. 23: 
ABN Amro Bank, N.V is planning a forceful push in the consumer finance segment by entering a host of new areas like housing finance and retail broking as part of its target to raise the contribution of this segment to 50 per cent of its profit base in the country.

Speaking to The Telegraph, Ramesh Sobti, executive vice-president and country representative India, said the thrust on investment and consumer banking will take place with a simultaneous expansion in its branch network.

While the bank presently has a network of 10 branches in the country, it will be expanded to 12 by the end of this year and later to 30 branches covering 12 cities.

Presently, the bank’s portfolio in the country is in favour of wholesale banking at 70 per cent and retail banking at 30 per cent.

In wholesale banking, the services offered include corporate banking, treasury and fixed income, corporate finance, structured finance, equity brokerage and custody and depository services.


New Delhi, Aug. 23: 
Bharat Sanchar Nigam Ltd (BSNL) is likely to lash together a network employing infrastructure from the railways and the power sector to provide low-cost communication services in rural areas.

While all private basic telephony operators have reneged on their commitments to create a rural link spanning 10 per cent of their networks, the government is becoming increasingly passionate about rural communications.

A working group on the telecom sector set up to prepare the Tenth Five Year Plan (2002-2007) has suggested that BSNL utilise the infrastructure of various public sector units to provide the necessary impetus to rural communications.

It has also suggested that telecom equipment used in rural areas should be exempt from excise duty, customs duty and sales tax. Moreover, the service tax on rural telecom services should be waived.

Further, the working group has recommended that state government should be fully involved in implementation and maintenance of rural telecommunication.

“The role of the state government is vital for implementation and maintenance of rural telecom.

A nodal officer of telecommunication should be nominated by each state government for better co-ordination,” says a note presented by the panel.

It has also suggested that “A consolidated rural development should be formulated in co-ordination with other government agencies involved with the basic infrastructure development like electricity, roads, water in rural areas.

Revenues earned from the telecom sector should be ploughed back to generate funds for rural communications.” The working group on the telecom sector was set up in April this year, with four sub-groups formed in June to address various issues. The sub-groups submitted their recommendations to the working group on Wednesday.

It has laid special emphasis on encouraging the use of indigenous manufactured equipment. It said that service providers should be given the benefit of deducting one-third of the cost of purchasing indigenous equipment from their gross adjusted revenues, while calculating the revenue sharing charge.

The group also recommended the formation of a telecom financing corporation to ensure cheaper financial assistance for telecom manufacturers/operators. This will help the local companies to make large-scale investments in telecom manufacturing units.

The working group also suggested a 10-year tax holiday to existing manufacturing units as well as new manufacturing units being set up in line with a similar benefit already granted to licensed telecom operators.

It has also emphasised the need for bilateral agreements within the SAARC countries and other regions having export potential for telecom equipment.


Calcutta, Aug. 23: 
In a boost to the tea industry, the state government has allowed planters the freedom to swap land in the tribal areas of North Bengal, so far out of bounds for them.

The government has said those interested in setting up new tea estates in the state’s non-tea growing areas will not have to go through the land reforms department’s cumbersome procedures to acquire land. Instead, they can directly settle the matter with the land owner and send the copy of the agreement to the department.

According to the guidelines, if a planter finds land belonging to a tribal rayyat suitable for tea cultivation, he can buy land in a nearby area and ask the tribal rayyat to shift to that area, provided the latter is willing to do so.

However, there should be a proper agreement on the matter and the local land reforms office will have to be informed of the swap.

Further, the planter has to hand over the land deed to the tribal rayyat.

This will then be treated as mere shifting of landholding from one place to another.

The non-traditional tea producing areas are located in the West Dinajpur and Coochbehar districts.

With the land acquisition process now being simplified, major investments are expected to flow into the tea sector.

In another development, the state government has said new tea estates which have already come up in these areas before June 30 this year will be regularised and will be issued a no-objection certificate from the government.

Earlier, the government had fixed December 31 1998, as the cut-off date for regularisation of these tea gardens. The tea industry is pleased with these developments and senior tea industry officials said the state government is giving the industry its due importance.

“These new measures indicate that the government is serious about the traditional tea industry. These policy changes make it clear that the government wants to put a transparent system in place so that planters do not face any problems while expanding their plantations,” they said.

West Bengal is the second largest tea growing state in the country, next to Assam. It accounts for 24 per cent of the total area under tea cultivation and contributes 21 per cent to the total tea production.

The state has 343 gardens, which cover a total area of 10,3950 hectares. At present, West Bengal produces around 181 million kgs of tea.



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