RBI sets terms for 6.5% growth
Software exports to be maintained
FI word to end Haldia Petro debt woes
ITC foods make way into kitchens
IndusInd buys loan assets to extend client reach
Debtor Telco to sell properties
Sticky assets of institutions worry RBI
Water throws up flood of opportunities
Nagarjuna Fert merged with new co
Foreign Exchange, Bullion, Stock Indices

Mumbai, Aug. 28: 
Expressing concern about the decelerating economic activity, the Reserve Bank of India (RBI) today said several conditions had to be met if the 6-6.5 per cent GDP growth target is to be attained.

These, it said, include agricultural growth, an industrial recovery in the second half of this year and a more than 8 per cent growth in the services sector.

In its annual report for the year 2000-01, the central bank expressed concern over the present economic conditions which it felt could hinder sustained growth in the medium term.

The RBI also asked the government to create conditions for stimulating industrial recovery and sought more reforms in the non-financial sector.

The apex bank identified global slowdown as a major area of concern. Further, it said the “demand slowdown and sluggish supply response,” in the country has resulted in industrial production remaining well below the targeted growth of 8.2 per cent.

“On the whole, the monsoon so far has not turned out to be unfavourable. However, the industrial outlook continues to be uncertain and a cause for considerable concern. The realisation of the growth rate projected in April 2001 is dependent on a sharp reversal in current industrial trends during the post-monsoon period,” it averred.

The GDP growth target was set by the central bank in its lean season monetary and credit policy earlier this year.

On the agricultural front, the present year’s trends do not reveal an upbeat picture despite a good monsoon. Foodgrain output is now estimated to be around 209 million tonnes as against 212 million tonnes envisaged earlier.

But in the same breath, the RBI noted that the country is in a better shape than others, as its GDP is unlikely to be seriously affected. “India cannot but reckon the impact of these global developments, though for several reasons, including its relatively small share of trade, GDP growth is unlikely to be as seriously affected by these developments as for many other countries,” it said.

As regards industrial recovery, the central bank put the onus on the government, saying the industrial sector can be revived only by rebuilding confidence. It added that areas where action could be taken include labour market reforms, speeding up of the disinvestment process and increased investment in infrastructure.

On the policy front, the central bank called for acceleration of reform in the non-financial sectors, where it referred to the apprehension that the reforms process has so far bypassed the agricultural sector.

The RBI added that growth prospects for this year would also depend to a certain extent on global developments and bottoming out of the current slowdown in world output, trade and international capital flows. The RBI felt that the gross combined fiscal deficit of both the Centre and states would be at 8.1 per cent of the GDP during 2001-02, against 9.1 per cent during 2000-01.

It forecast the Centre’s deficit at 4.7 per cent of GDP and that of the states at 3.8 per cent of GDP. The bank here stressed that fiscal stability is crucial for achieving the targets being envisaged for the Tenth Five year Plan.

Public sector savings of 4.6 per cent of GDP and reduction of the combined fiscal deficit to 3.3 per cent of GDP during the Plan period are key fiscal indicators, consistent with Plan targets, it added.

“It is obvious that fiscal corrections at the central and state level are critical to reach the growth targets indicated in the approach paper to the Tenth Plan,” the bank said.

The RBI also expressed concern about the guarantees extended by the Centre and the state governments, estimated at 10.7 per cent of GDP as on March 31, 2000, which have not been treated as liabilities. This posed a fiscal risk, the bank observed.

These guarantees which form part of contingent liabilities are not treated as liabilities under existing accounting practices, given the high debt level, the annual report of the central bank added.

The RBI also indicated that it will continue to withdraw from the financial institutions, and will transfer its stake to the government. The central bank said that the exchange rate management will continue to focus on managing volatility.


Mumbai, Aug. 28: 
In what could warm the hearts of the Indian software industry, the Reserve Bank of India (RBI) has observed that exports from this sector is likely to be maintained in the current year.

Exports of software services has witnessed huge pressures following the global slowdown with many companies, particularly in the US, cutting down on their IT budgets.

However, the central bank said that while merchandise export growth may be moderate, software exports with more diversified destinations may still be maintained.

Acknowledging the huge potential of the new economy sector, RBI said a critical requirement for accelerated growth of this sector is the expeditious removal of procedural and institutional constraints on production, marketing and international trade.

Foreign capital

Stressing on foreign capital flows into the country, RBI said that they will have to grow four-fold if the current account deficit target set in the draft tenth five-year plan has to be achieved.

The tenth five-year plan has projected an average annual 2.8 percent current account deficit during the plan period.


Calcutta, Aug. 28: 
Financial institutions, led by the Industrial Development Bank of India (IDBI), have assured Haldia Petrochemicals that they will soon find a way to restructure the company’s high-cost borrowings totalling Rs 4,000 crore.

The Chatterjee Group (TCG) chief Purnendu Chatterjee today met the FIs in Mumbai along with an HPL finance team to thrash out the petrochem major’s debt restructuring problems.

Only last week, the TCG chief had said in Calcutta that the crisis faced by the state’s showpiece project will blow over within 45 days.

Placing its case before the FIs, the HPL management today said though the petrochemical industry is now in the midst of a recession, things are likely to look up by 2003.

“In this interim phase, we need some relief if HPL is to stay afloat. If the FIs do not give the company a breather under the present market conditions, survival will be difficult,” a top-level HPL official said.

Today’s meeting with the FIs was crucial as the HPL board is scheduled to meet on August 31 to chart the future course of the company.

“A decision on the project’s future will become clearer in this board meeting,” a senior HPL official said.

“HPL’s high-cost borrowings are an area of great concern. When the company carried out its financial closure, interest rates were too high. What they need now is an interest waiver. We know the project is an excellent one and it needs an immediate breather. We are trying to reach a solution at the earliest,” IDBI sources said.

Bankers, too, have expressed confidence in the project, with senior State Bank of India officials saying, “We will follow IDBI’s decision on an interest waiver.”

Commenting on Indian Oil Corporation’s proposed participation as the fourth equity partner in the project, the HPL official said negotiations are still on with them. “We are trying to reach a solution at the earliest,” the officials said.

A fourth equity partner is crucial for HPL. The West Bengal Industrial Development Corporation and TCG had put in Rs 433 crore each and the Tatas contributed Rs 144 crore towards the project.

But the problem arose when the company failed to float an initial public offering for an additional Rs 969 crore and had to depend on FI loans for the same.

However, as HPL officials said: “We are not depending solely on IOC’s supply. In fact, there is no major difference between IOC’s prices and landed prices of imported naphtha.” The company imports feedstock after it commenced commercial production.

The company’s LLDPE (low linear density polyethylene) plant is yet to recover from a technical snag. HPL officials however said things will be back to normal within a couple of days time.


New Delhi, Aug 28: 
ITC, the Calcutta-based cigarettes-to-hotels conglomerate, today unveiled plans to enter the packaged gourmet foods business which will be marketed under an umbrella brand called the ‘Kitchens of India’.

“We are leveraging our expertise in the hotels business,” said R.S. Naware, chief executive of ITC’s foods business at a launch ceremony held in the capital.

The company will be kicking off with its ready-to-eat premium concoction called Dal Bukhara which will retail at Rs 190 for a 450 gm pack. The twin-pack will cost Rs 380.

Several supermarkets in Delhi have started stocking ITC’s food products. The plans are to sell them through 85 outlets soon.

ITC plans to launch its food products in Mumbai on September 2 and take it to Calcutta and the rest of the country in October.

The company refused to say how much it was investing in the foods business. However, officials said they expected business worth Rs 3-4 crore from the domestic market. The company expects to earn Rs 25-30 crore from exports.


Calcutta, Aug. 28: 
The Hindujas-promoted IndusInd Bank has acquired Rs 350 crore loan assets from four banks, three of them government-owned, and one, private. IndusInd is in talks with some private banks for the acquisition of branches being disposed.

IndusInd managing director Bhaskar Ghose said: “The PSU banks that got into the deals with us jettisoned some of their assets to solve the capital adequacy ratio (CAR) problem.” Of this, loan assets worth Rs 275 crore was acquired from one PSU bank.

“Through these deals, IndusInd was able to expand its client base,” Ghose said, adding that the bank was keen on expanding its client base through such innovative deals. IndusInd is fishing for opportunities to buyout branches of established banks. “Thanks to the ongoing consolidation in the banking industry, there are some banks that have merged and have overlapping branches. We are in talks to acquire some of them,” Ghose said.

Besides loan asset deals, IndusInd is planning to acquire other non-fund businesses to boost its retail business. “We have initiated talks with some depository participants (DPs) for outright buyout of their client base,” Ghose said.

The bank was affected by the recent stock market scam. It discounted post-dated cheques aggregating Rs 24.4 crore issued by Stock Holding Corporation (SHCIL) which were later stopped.

Further, Rs 14 crore is due to the bank from Madhavpura Mercantile Co-operative Bank on account of call lending. The bank had a net non-performing asset of 5.25 per cent as of March 31.

Hindujas to cut holding

The Hindujas will reduce their stake in IndusInd from 56.25 per cent to 40 per cent in keeping with Reserve Bank of India (RBI) statutes.

Ghose said, the bank had submitted a scheme with the RBI by which our promoters intended to reduce their holding by 16.25 per cent in a couple of weeks. He, however, refused to discuss the scheme till approved by the RBI.


Calcutta, Aug 28: 
Saddled with high-cost borrowings, Tata Engineering and Locomotive Company Ltd (Telco) is planning to sell its idle real estate assets to rake in money to retire a “significant portion” of the debt.

Sources close to the company, however, refused to identify the properties that are likely to be put on the block during the current financial year.

Telco has land and buildings worth Rs 543 crore while leasehold properties are valued at Rs 29 crore as of March 31 this year.

Sources said a considerable portion of these assets are idle and no income is expected to be generated from them.

“The biggest problem with Telco is the heavy interest burden. Quite logically, the company intends to retire the high-cost debt by selling non-performing assets,” they said.

The plan is being contemplated at a time when the automobile sector is undergoing worst ever recession for the past couple of years.

The company, which slipped into the red by making a loss of over Rs 500 crore last year, had to bear an interest burden (gross) to the tune of Rs 499 crore.

“It is a very desperate situation now for most of the automobile companies in the country. And the situation demands judicious steps to face the crisis,” they said.

The company has a secured loan to the tune of Rs 1813.33 crore, including a term loan of Rs 200 crore from State Bank of India and Rs 441 crore from banks on loans and cash credit accounts.

Sources said one-third of the total loan of the company bears interest of over 14-16 per cent.

The effort is on to pre-pay at least 50-60 per cent of this loan to bring down the interest burden, sources said.

Besides real estate, the company has also plans to divest its investments in some of the non-core areas to mobilise fund.

The company has already divested its stake in Marcedes Benz India Ltd for a consideration of Rs 85 crore while it is expected to sell its stake in Floatglass India for Rs 12 crore.

The company is also likely to pull out of Associated Cement Companies (ACC), in which it still has some stake. The information, however, could not be confirmed despite several attempts made by The Telegraph.

The company sold its investment in Tata Elxsi last year which yielded a cash flow of Rs 52 crore and a profit of Rs 41 crore.

It has also sold off its entire exposure in US-64, the flagship scheme of the Unit Trust of India, generating an income of around Rs 145 crore.

Telco chairman Ratan Tata said the company had embarked on an aggressive cost reduction programme generating a savings of Rs 295 crore last year.

“Efforts are also on to reduce costs in the areas of logistics, redesign of components which could yield a reduction in the number of parts by considering the possibility of having modular assemblies, commonisation of parts across vehicle platforms, better utilisation of available capacities as also through e-commerce initiatives,” Tata said.


Mumbai, Aug. 28: 
Expressing concern over the burgeoning non-performing assets (NPAs) of the developmental financial institutions (DFIs), the Reserve Bank of India (RBI) today called for tightening the regulatory framework of the DFIs and early implementation of the Narasimham committee recommendations.

“The ratio of net NPAs to net advances has increased sharply for some of the major DFIs, with an accompanying deterioration in their capital adequacy ratios and the ratio of total outstanding borrowings to net owned funds,” the RBI annual report said.

“It is in the context of these developments that early implementation of the recommendations of the Narasimham Committee and an unambiguous signal of strengthening the regulatory framework for the DFIs assume critical importance,” it said.

The central bank’s report observed that some progress had been made in the context of the recommendation of the Narasimham Committee (1991) recommendation that non-bank financial companies should be brought under the ambit of regulation and supervision of RBI.

RBI had taken number of steps towards regulating the undertaking of financial business by NBFCs and the acceptance and safety of public deposits, the report noted. Separate legislation has been proposed for enhanced protection to depositors of NBFCs.

The report further alluded to the recommendation of the Narasimham Committee II proposal to convert development financial institution into either commercial banks or NBFCs so as to improve their regulation.

Further, the apex bank pointed out that despite a perceptible decline in the NPAs of the Indian banking system, the levels are still high. Several initiatives have been undertaken for containing the stock of NPA overhang as well as its increment, the report said.

“The resolution of the NPA problem requires greater accountability, improved disclosures and an efficient credit information system.”

Simultaneously, it felt “there was a need to initiate legislative framework that will make the recovery process smoother and legal action more prompt and efficient.”

Decrying the insolvency laws in India and their operating mechanisms which are out of sync with the pace of reforms in the financial sector, the apex bank said this had emerged as the most critical impediment to debt recovery with mounting defaults perpetuated under legal provisions.

The RBI reiterated that it should be delinked from the ownership of financial institutions through transfer of ownership to the government. It has accepted the recommendation of transfer of ownership in respect of State Bank of India, the National Housing Bank, the National Bank for Agricultural and Rural Development and declared that it plans to initiate the transfer of ownership of other financial institutions.

In this regard, RBI said its holdings in the Discount and Finance House of India and the Securities Trading Corporation would be completely divested during 2001-2002.


New Delhi, Aug. 28: 
Water presents a tidal wave of business opportunity in India where the market for water-related business has been estimated at Rs 10,000 crore and growing at an annual rate of 20 per cent.

Marketing maven Shunu Sen says globally the water industry is a $ 400 billion industry.

Sen was here to launch the new marketing initiatives of Everything About Water (EAW) Pvt Ltd, the one-stop shop for the water community launched in July last year.

Some of the big segments in the water business are related to water treatment plants and the rapidly increasing business of mineral water, said Sen.

He added that though demand for water is increasing, the industry was highly fragmented, where the quality was deteriorating and quantity decreasing. Lack of standardisation is a prime problem of the industry, said EAW’s CEO Sunil Ghorawat.

“EAW is to the water business what Nasscom is to the Indian software industry,” said Shunu Sen, who is on the board of the company. EAW began with an investment of Rs 2 crore, with only internal funding and has broken even this year, said Sen.

With its new marketing initiatives, EAW is targeting a turnover of Rs 10 crore this year.

EAW’s new marketing initiative, the Marketing Level Agreements (MLAs) with the water companies, will utilise all the marketing tools of water, like its print magazine, website , e-mail services, seminars, conferences market research reports put together by EAW’s team of marketing professional and experts from the water industry, said Ghorawat.

According to Ghorawat, water is critical for most of the manufacturing industries -- chemicals, pharmaceuticals, breweries, distilleries, and electronics. The basic purpose of EAW is provide a platform for both the water industry as well as the end user for their water related needs.

EAW, whose present business focus mostly pertains to water treatment, has also been appointed as a water advisor for Positra Special Economic Zone in the Gujarat. Its domestic clientele includes compaies like Ion Exchange, Crompton Greaves, Thermax, and Kirloskar among others. Some of its global business partners include Flexcon and Vivendi.

The revenue model of EAW is based on both online and offline models including consulting services, advertising and promotion on its portal (www.everythingabout water .com) and magazine and working on project and systems.

Beginning from October EAW is starting an annual series of 24 seminars cum exhibition called Semex that will be held in all major metros and other cities culminating in a three-day international exhibition cum conference-Everything about Water 2002 which will bring the entire water community viz the OEMs, component manufactures, system integrators, intermediaries, service users and consultants together to increase business prospects.


Hyderabad, Aug. 28: 
The Rs 3000-crore Nagarjuna Fertiliser and Chemicals Ltd (NFCL) is being merged into a new entity —Nagarjuna Corporation Ltd.

The NFCL board, which met here today, decided on the merger to facilitate its diversification into a multi-product company, with a presence in both fertilisers and farm products. The swap ratio has been fixed at 1:1 in the company, which has an equity of Rs.416.61 crore.

Managing director K. S. Raju said the company was poised to enter a new era of agro-based products, which included oil palms, dehydrated foods and other farm-based products.

NFCL has already entered the power sector with a plant in Mangalore and an oil refinery project in Cuddalore, Tamil Nadu.

It has also formed a consortium with the Satyam and GVK groups, to set up a captive LNG regassification terminal at Kakinada port with a 2.5 mmt capacity.

NFCL had reported a turnover of Rs 1,231.24 crore for the period ending March 31, as against Rs 1,435.96 crore in the previous corresponding period, besides posting a profit of Rs 502.89 crore.

NFCL has already wound up Nagarjuna Finance.

, as well as other ventures such as the infotech one.



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