Shape-up message to co-operatives
Higher lending by banks key to 8% GDP growth
Bajoria buying inBombay Dyeing on
Bilt to cut 10% jobs
Maruti drive to step up sales of add-ons
Kwality to cool it with softies

 
 
SHAPE-UP MESSAGE TO CO-OPERATIVES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug. 25: 
Sounding a warning note to ailing co-operative credit institutions to shape up or face closure, Prime Minister Atal Behari Vajpayee today said ‘tough decisions’ were necessary to find a solution to their problems.

Addressing a conference of Chief Ministers on Co-operative Credit Structure here, Vajpayee said those co-operatives which have no hope of revival may have to be wound up. “Such difficult but unavoidable decisions can help us in the long-term,” he said.

Asking chief ministers and political parties to help ”depoliticise and debureaucratise” co-operative institutions, Vajpayee said “we cannot brook any delay” in improving governance as co-operatives have become levers of political power.

Pointing out that in several parts of the country, co-operative institutions are being used as levers of political power, Vajpayee said elections to the boards of co-operative banks and other institutions have become an arena of rivalries between parties and individuals.

“The positive philosophy and ethos of Cupertino will have to be wed with modern practices of professional management, to enable co-operative institutions keep pace with the broader developments in the country,” he said.

Moreover, he directed the states to consider a comprehensive package for revitalisation of the co-operative structure, besides setting up of a Co-operative Rehabilitation and Development Fund and a Mutual Assistance Fund.

The Prime Minister also said the dual control on co-operatives has to be done away with. “Co-operatives are a state subject in our Constitution but are also subjected to supervision by the RBI and the National Bank for Agriculture and Rural Development (Nabard) which has given rise to some problems” he said. Vajpayee added the task force on co-operative institutions under the chairmanship of former Reserve Bank of India governor Jagdish Capoor has suggested a four-pronged strategy of strengthening the rural co-operative system that encompasses the financial, operational, organisational and systemic aspects.

Speaking on the occasion, finance minister Yashwant Sinha also advocated hard decisions for co-operatives, saying their problems are too large to be rectified even by additional finances.

He said the co-operatives are plagued by excess and unproductive staff, indifferent appraisal of loans and monitoring, lack of accountability, poor governance and an extremely weak credit discipline.

Sinha said co-operatives had not so far benefited enough from the on-going reforms since they were controlled by more than one agency and the process of reforms in the sector had been introduced in a gradual manner and had not been stringent as it was in the commercial banking sector.

“The onus of reforming the co-operative institutions is primarily on those who happen to be members of these institutions,” he said. The real need of the hour is that co-operatives should themselves send out strong signals of their desire to improve, Sinha said.

Difference over recap

Finance and agriculture ministers were at loggerheads today over the issue of budgetary support for recapitalisation of cooperative credit institutions on the lines of public sector banks and regional rural banks.

Union agriculture minister Ajit Singh said he failed to understand why finance ministry could not provide Rs 8,000 crore to cleanse the balance sheets of cooperative credit institutions, when it gave nearly three times more for the recapitalisation of PSU banks and RRBs.

Rejecting the suggestion made by the chief ministers on co-operative credit system,Sinha said such recapitalisation could not be borne by the Centre.

   

 
 
HIGHER LENDING BY BANKS KEY TO 8% GDP GROWTH 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug. 25: 
Banks need to step up lending to raise the investment rate above 30 per cent, Rakesh Mohan, adviser to the finance minister said today. This will be essential to achieve an 8 per cent GDP growth rate in the next 10 years, he added.

“One cannot grow unless investment is high and banks will have to lend more, increase savings mobilisation and channelise funds in higher productive investments for better returns,” Mohan said addressing the 54th annual general meeting of the Indian Banks’ Association (IBA) here.

The current investment rate at 23-24 per cent was not good enough and has to be enhanced to over 30 per cent, he said adding, “We also need to double per capita income to $ 1,000 by the year 2010.”

Asked about GDP growth for this fiscal, he said “I will stick to the Reserve Bank of India’s estimate of 6-6.5 per cent.”

Referring to the net non-performing assets (NPAs), he said banks and financial institutions have to tone up risk management and deploy the best talent available in the organisation. Asking the banking community to focus more risk management techniques, he said that banks should look at adopting new techniques as regards appraisals and efforts should be on sectoral specialisation and less bureaucratisation.

He stated that funds must also be made available to medium sized companies. “There should be better identification of those companies who are likely to do well and assistance must be provided to them. The banks must also focus more attention to the service sectors as many activities do not find getting easy bank finance,” he observed.

The country has also seen a decline in agricultural investment, particularly from the public sector, Mohan said. However, agricultural growth this year is likely to be positive following the good monsoon in various parts of the country, he said.

Mohan added the uptrend comes against a decline in agricultural income during the past 10 years and a negative growth in the sector following an irregular monsoon pattern.

Speaking on the occasion, IBA chairman S. S. Kohli, said that banks are in the process of drafting ground rules for co-ordinating information sharing under multiple banking arrangements. A working group has in this regard submitted its recommendations, which will be implemented after obtaining the RBI’s approval.

Kohli divulged that the successful implementation of the first ever VRS in public sector banks saw nearly 1 lakh employees, constituting 11 per cent of the total work force opting for early retirement. Around 26 banks implemented this scheme and the exercise had a cost implication of over Rs 10,000 crore.

The one-time settlement scheme among banks saw over 6.5 lakh accounts involving nearly Rs 3500 crore being settled through the compromise route. Here, he added that there would be a renewed focus on recoveries through DRTs, with around 11 such tribunals opened in the last 2 years.

On the issue of wilful defaulters, he said an RBI working group is presently looking into the issue and will soon suggest effective measures.

   

 
 
BAJORIA BUYING INBOMBAY DYEING ON 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Aug. 25: 
The final whistle is yet to be blown in the Bombay Dyeing-Arun Bajoria battle. Even as the dust over Bajoria’s ‘raid’ on Bombay Dyeing is yet to settle, the Calcutta-based jute baron is on a buying spree, and continues to increase his stake in the Nusli Wadia-owned firm. In fact, Bajoria’s stake in Bombay Dyeing has already gone up over 6 per cent in the last one week.

Sources said Bajoria has continued buying in the scrip in order to sustain pressure on the company to offer to buy back its shares at Rs 60. Currently, the scrip is hovering around Rs 38.

Confirming the move, Bajoria said he would continue to buy Bombay Dyeing shares to raise his stake beyond 10-12 per cent. “I am buying the share every day and will be able to take my stake to a higher level very soon,” he said.

In an exclusive interview with The Telegraph, Bajoria said his buying spree would continue until the share price remained below Rs 40. “I am not going to allow Bombay Dyeing to buy back shares at a price less than Rs 60. I have not invested my money to waste it,” he said.

Bajoria also said he is ready to offload his entire stake in favour of the company if it offers at least Rs 60 for every share. “Frankly speaking, I am increasing my exposure in the company only because I don’t want the Wadias to wrap up shares at a nominal price,” he said.

Bajoria also pointed out that the intrinsic value of the share is much more than what it has been traded for now. “The company has tremendous potential to grow, but unfortunately the management has failed to steer it properly,” he said.

Bombay Dyeing has been in the news ever since Bajoria attempted a hostile take-over bid last year by grabbing around a 14 per cent stake in the textiles major. Bajoria’s move forced the company to seek shareholders’ approval to buy back a maximum of 1.02 crore equity shares, which account for 25 per cent of its paid-up capital, at a price not exceeding Rs 60 per share. The company has appointed JM Morgan Stanley as its merchant banker for the proposed share buy-back programme.

The promoters’ stake in the company will rise to over 50 per cent from the present 41 per cent after the buyback.

The company’s total paid-up capital is Rs 41 crore. Bajoria apprehends that the company will try to acquire shares at much below the proposed price since the current market price is very low.

“Whatever may be the situation, I am not going to make any distress sale and instead I will continue to raise my stake in the company,” he said.

   

 
 
BILT TO CUT 10% JOBS 
 
 
FROM RAJA GHOSHAL
 
New Delhi, Aug. 25: 
Ballarpur Industries Ltd (Bilt), the paper major, is planning to axe 10 per cent of its 13,000-strong workforce over the next two to three years.

The company hopes to save Rs 12 crore—about 10 per cent of its Rs 120 crore annual wage bill—because of the roster cuts, said group finance director B. Hariharan. The cut in the workforce will be implemented through a voluntary retirement scheme (VRS). Hariharan said technological upgradation at the company would render a number of workers redundant.

The buyout of Sinar Mas India’s operations in early May under a deal valued at Rs 520 crore would also lead to a saving of Rs 100 crore which it otherwise would have had to incur if it had expanded its existing facilities to create a comparable capacity to manufacture coated paper.

Hariharan said a three-member committee set up to examine plans for the consolidation of Sinar Mas and Bilt would submit its report by the first week of September. A final decision will be taken at a meeting of the board of directors on October 15. If cleared, the process is expected to be completed by February, he added.

Earlier, Gautam Thapar, Bilt’s vice-chairman and managing director, had said Bilt would acquire the Sinar Mas shares from BILT Paper Holding Company (the LMT group company which had bought Sinar Mas) “at the original valuation”.

The committee was formed to decide the quantum of shares that Bilt would buy and the route to be used to raise funds to finance the deal.

“The capital can be raised through a rights issue, preferential allotment or private placement, or any combination of these. A rights element will definitely be there as we will BILT shareholders the opportunity to acquire these shares,” Hariharan said.

If Bilt acquires the entire shareholding, it will have to pay Rs 293 crore which is equivalent to the equity component of the Sinar Mas deal, he added.

   

 
 
MARUTI DRIVE TO STEP UP SALES OF ADD-ONS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug 25: 
Maruti Udyog Limited (MUL) is widening its range of car accessories by adding compatible mechanical and electrical gadgets for all models.

“MUL sold accessories worth Rs 15 crore in 2000-01. It expects this figure to touch at least Rs 30 crore this fiscal. We will be adding new accessories to the existing range of 140 items,” a company spokesman said.

The company is selling a range of over 140 accessory products including car stereos, mats, leather seat covers, body covers and rear view mirrors under the brand Maruti Genuine Accessories (MGA).

Based on the feedback from Maruti car owners, the fresh products to be launched are stereos for Omni, the A segment vehicle, CD changers, speaker sets and clear-lens fog lamps.

“The electrical gadgets are mostly in demand because they need to be compatible with the car’s electrical system. The warranty will cover any accessories brought through MGA and the customer won’t have to search the grey market for their requirement,” the official said.

   

 
 
KWALITY TO COOL IT WITH SOFTIES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug. 25: 
Kwality Walls plans to introduce its softy ice-creams in Calcutta within a month. The Hindustan Lever-owned ice-cream major has already started test marketing its “soft-and-creamy” offering and intends to set up 50 to 75 kiosks in the city. One vending unit costs Rs 3.5 lakh.

J.H. Mehta, executive director of the company’s ice cream division at Bangalore, said it is tying up with popular eating joints as vendor partners. The retailer is a stand-alone entrepreneur who will earn a margin of 90 paise per cone, his investment being the returnable deposit of Rs 1 lakh for the machine. Mehta was here to launch Kwality Walls softy ice-cream in the Delhi market. The softies will be priced at Rs 5 and will be available in 12 flavours. HLL is also considering higher pricing points for more flavours in future.

Kwality is setting up 23 vending units in the city and aims to set up between 50 and 100 units in the city in two years. The company has planned 1,000 kiosks by 2003 in major cities.

Mehta said HLL will invest about Rs 40-50 crore in the softy business. While it will outsource both the cone and the mix locally, “these will be dedicated facilities, under our guidance and supervision,” Mehta said.

Ravi Panchanandan, business manager of the ice cream division (out-of-home segment), said the organised softy market in India is about Rs 50 crore, and is growing at 30 per cent a year. HLL is targeting a market share of 70 per cent by the end of 2003.

But competition is going to be tough in the burgeoning softy market where Amul’s SnowCap softy brand is in the same league at Rs 5 and is in the process of rolling out nationally. Both Kwality Walls and Amul have launched their softy ice-creams in Chennai and Mumbai. The Ahmedabad-based Dairy Den, which recently entered the Delhi market with its Rs 5 softy, is also likely to go national. Added to these players is competition in the form of McDonald’s outlets (Rs 7 per cone) as also local softy vendors.

However, Kwality is optimistic its brand name and on-site promotion would be enough to push the brand.

   
 

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