McKinsey holds out hope of double-digit growth
Vandrevala to take charge at Tata Power
Merger angst leaves ITC bleeding
Ispat to write down 50% of equity in recast drive
TVS sees no threat to Suzuki tieup
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MCKINSEY HOLDS OUT HOPE OF DOUBLE-DIGIT GROWTH 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept. 6: 
The tiger economies of south-east Asia have gone into a slouch, but India can easily earn its stripes by turbo-charging its economy to post a 10 per cent annual growth, says McKinsey which presented a 500-page report to Prime Minister Atal Bihari Vajpayee today.

But the management consultancy said the economy—which has been huffing and puffing at a sedate 5.2 per cent—could leapfrog into a double-digit growth if the government was ready to bite the bullet and take harsh decisions.

In its report titled ‘India - The growth imperative’, McKinsey suggested a 13-point action plan to achieve the target. It said the government would have to dismantled barriers in three areas—product market (which distort the price and quantities of goods and services produced), land market (factors that distort the price of land), and government ownership.

The consultancy firm claimed that the three barriers constrain GDP growth by four percentage points.

Once these barriers are removed, it will unleash productivity growth in modern sectors such as construction, retail, food processing, telecom and power, the report said. The gap between current productivity and potential productivity is the largest in these modern sectors.

The report claims that dismantling these barriers will also allow India to mobilise more capital and utilise it more efficiently. The consultancy firm is optimistic that India will be able to raise its investment rate from the current 24.5 per cent of GDP to 30 per cent of GDP and achieve a 10 per cent annual growth rate.

“The reform programme could transform India within 10 years. India’s GDP could grow to about $1,100 billion and would be rated among the fastest growing economies in the world,” claimed William Lewis, director, McKinsey Global Institute (MGI).

He added, “More importantly, the income of average Indian would more than double and the living standards would improve dramatically. This is no pipe dream but an achievable goal—if India acts decisively and soon.”

Presenting the report, Shirish Sankhe, partner, McKinsey and Company, said, “What holds India back today is not the scarcity of resources, either human or capital, but barriers that prevent these resources from being utilised efficiently.”

McKinsey India’s managing director Ranjit Pandit said, “If India is to reach the 10 per cent growth target by 2005, then it should ensure rapid implementation of the 13 point programme over the next 2-3 years.”

Finance minsitry advisor Rakesh Mohan said, “The number of policy recommendation given by McKiensy is already in our horizon and these are being addressed to.

   

 
 
VANDREVALA TO TAKE CHARGE AT TATA POWER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept. 6: 
The Tata group today announced that Firdose A. Vandrevala, deputy managing director, Tata Steel, will take charge as deputy managing director of Tata Power from November 1.

The move has been interpreted in corporate circles as a clear signal that Vandrevala is slated to succeed A J Engineer as managing director of Tata Power, who will retire from the company on August 31 next year.

A M Sahni will be laying down office as executive director of Tata Power on October 31, 2002.

Vandrevala is currently the deputy managing director (new and allied businesss) of Tata Steel. A B.Tech from IIT Kharagpur, Vandrevala has obtained his post-graduate diploma in business management from XLRI, Jamshedpur.

Vandrevala joined Tata Steel in 1972 and has held various senior positions prior to being elevated to the position of deputy managing director, the Tata Group said in an official communique.

He has been initially appointed for a five-year term effective November 1, subject to shareholders’ approval, which the company hopes to obtain at its next Annual General Meeting.

Tata Tea borrowings

Tata Tea managing director H. R. Khusrokhan today said the company is trying to reduce the borrowings of Tata Tea (GB) — the special purpose vehicle floated to acquire Tetley — to the same level as its equity, and eventually integrate Tetley into the group.

Tata Tea plans to launch ready-to-drink tea leveraging brands from the Tetley portfolio in the next financial year, Khusrokhan said.

This will put Tata Tea in head-to-head competition with consumer goods giant Hindustan Lever.

   

 
 
MERGER ANGST LEAVES ITC BLEEDING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept. 6: 
Less than 24 hours after the plan to merge ITC Bhadrachalam with its parent spilled into the public domain, investors in the tobacco-to-hotels conglomerate made it clear that the deal is not music to their ears.

The backlash was sparked by a feeling among shareholders that ITC risked a bottomline beating in the short term if it went ahead with the plan.

The ITC scrip, whipped by concerns over the merger move, sank 10.50 per cent or Rs 79 to end at Rs 674.25 on the Bombay Stock Exchange (BSE) against its previous close of Rs 753. Institutions and operators were reported to have sold heavily.

The share opened at Rs 730, plumbed an intra-day trough of Rs 667.05 amid 21,324 transactions on a turnover of Rs 119.10 crore.

It was a different story for Bhadrachalam, whose share raced 14 per cent to settle at Rs 54.05 compared with Rs 47.50 on Wednesday.

“Today’s selling was triggered by fears that initially, the merger would have a negative impact on ITC’s books,” said Neesha Khushalani, FMCG analyst at Pranav Securities. According to her, the parent would be saddled with the long-term debt of Bhardrachalam — believed to be in the region of Rs 390 crore — as a result of the amalgamation.

ITC, with a balance-sheet of over Rs 3,500 crore, has continued to invest in its paper subsidiary in various ways over the past few years. Steeped in losses until some time back, Bhadrachalam turned around and logged a profit of Rs 4.5 crore in the last financial year.

There were some who said investor worries were more a matter of sentiment, rather than misgivings based on what could actually happen.

“The impact of the merger on ITC’s accounts because companies will have to present consolidated accounts as a result of which Bhadrachalam’s finances will tell on the financial health of its parent any way,” a broker said.

Analysts however, said the proposed merger of ITC Bhadrachalam would have a salutary effect on the parent, which is now increasingly looking for areas other than cigarettes to make money.

“ITC sources paperboards from Bhadrachalam. The merger will obviate the need to go in for a transfer pricing,” Khushalani said.

There is a widespread feeling that ITC will take time to break in the new businesses it is pursuing, and analysts say the company’s attempts to reposition itself as a fast moving consumer goods maker could also prompt a review of its rating.

   

 
 
ISPAT TO WRITE DOWN 50% OF EQUITY IN RECAST DRIVE 
 
 
BY ANIEK PAUL
 
Calcutta, Sept. 6: 
Ispat Industries, promoted by M. L. Mittal, has kicked off a sweeping financial restructuring plan under which it will reduce its Rs 692.59-crore existing equity base by 50 per cent, and secure Rs 312 crore in fresh funding from the promoters.

As part of the equity contraction, two shares will be converted into one of Rs 10, and a cumulative redeemable preference share of the same amount.

The preference shares will be redeemed in three equal instalments, starting from March 31, 2016.

The coupon rate on these instruments is a piffling 0.0001 per cent, raising the possibility of resistance from small shareholders, who hold a little less than 12 per cent in the equity capital of the steel major.

The steel major also intends to convert the Rs 510-crore loan taken to finance the hot rolled (HR) coil project into 31 crore equity shares of Rs 10 each (aggregating Rs 310 crore), in addition to 1 per cent cumulative and non-cumulative convertible preference shares worth Rs 200 crore. These will be converted into equity shares at par on March 31, 2003 at a redemption premium of 28 per cent on their face value.

The blueprint for restructuring has been drawn up on the basis of demands made by financial institutions (FIs) which have lent to Ispat. Some of them have already approved the plan, while others are expected to follow suit soon.

The debt and equity recast will increase the stake of financial institutions in the company to 47.67 per cent from 34.54 per cent at present.

The promoters will hold about 6 per cent less at 47.84 per cent while the public stake will be whittled down by a sharp 7.22 per cent to 4.49 per cent.

In addition to the restructuring exercise, the Mittals will invest Rs 312 crore in the form of equity and preference shares to finance the company’s Rs 7206-crore hot rolled coil project at Dolvi in Maharashtra.

The company will make a preferential issue of equity shares for Rs 245 crore to the promoters and their associates, while the balance Rs 67 crore will be brought in through preference shares.

   

 
 
TVS SEES NO THREAT TO SUZUKI TIEUP 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept. 6: 
The joint venture between TVS and Suzuki Motor Corp of Japan is not under any threat from the latter’s tieup with Kawasaki, TVS Suzuki chairman and managing director Venu Srinivasan said today.

Denying recent media reports, Srinivasan said there was no chance of Suzuki going in for a venture with Bajaj Auto. “We have been discussing the launch of Suzuki’s non-geared variomatic high-end scooters. Though the proposal has not been finalised, Suzuki has given no indications of going in for another partner to market its scooters in the country. We have no fears of Suzuki pulling out from the existing joint venture.”

He said Suzuki Motor Corp’s alliance with Kawasaki is unlikely to affect the company’s partnership with TVS in the country. “The Kawasaki deal has nothing to do with any Indian two wheelers company. Bajaj may have a separate deal with Kawasaki but that will not affect Suzuki’s deal with us.” The company has a technical and financial partnership with Suzuki till 2007 for motorcycles.

“The two companies will franchise parts and components for high-end motorcycles that they are now developing, which will roll out in three years’ time. Hence the question of scooter deals does not arise, let alone bringing them to India through another channel,” the TVS chief clarified. Srinivasan explained that Suzuki’s deal with Kawasaki was a global one, which will enable the two companies become more competitive on the global front.

“Neither Suzuki nor Kawasaki have Honda’s volumes in global two-wheeler market. They are less likely to penetrate below the 110cc segment in the current scenario. The object of the deal between Suzuki and Kawasaki is to gain a toehold in this segment and will not hamper our existing deal with Suzuki,” he said.

   

 
 
JUST DIAL TO ACCESS E-MAILBOX 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept. 6: 
Staying connected—that’s the name of the game. Executives of companies who go deep into the backwoods and need to keep in touch with base or their far-flung clientele have an exciting option on hand.

It’s called TelEmail and it allows an individual to receive and reply to e-mail messages from any telephone instrument, fixed or mobile, using speech recognition software.

You don’t need a computer or a laptop, or need to hunt down a cybercafe in Jhumri Tilaiya. TelEmail is a unique speech activated productivity enhancement solution directed at executives on the move.

Here’s how it works: the TelEmail user is prompted for a Personal Identification Number and a Passcode. After the credentials are verified, the system retrieves the mails from the inbox on the corporate mail server. Since access is direct to the corporate mail server, security is guaranteed.

TelEmail is easy to use and recognises, acts and responds to voice commands. It facilitates easy access to e-mails in the inbox of the corporate mail server and has them read out to the recipient over a phone, without using a PC.

The navigation is done by spoken commands such as Proceed, Next Mail, Previous Mail or Delete.

On selecting the option Proceed, the mail is opened and a Text-to-Speech system converts the text mail message to speech and reads it out using a human synthesised voice.

Attachments in HTML or Text can also be read out in a similar manner. You can also reply to the mail using the voice command Reply. Advanced versions of the system will allow a user to access web data through the same infrastructure. TelEmail is scaleable for small, medium and large enterprises.

Launched by Speech and Software Technologies (India) Pvt Ltd (SST), a Tata group company, “TelEmail increases the flexibility of communicating through the web by enabling the human voice to act as an e-mail browser. It is a simple idea that magnifies e-mail connectivity manifold, placing it within convenient reach wherever and whenever required through a telephone,” says SST president Prakash Shukla.

The company plans to target service-intensive industries such as banks, insurance companies, airlines and hotels where the need for mobility is very high and where response times are a critical element of the service offering.

The TelEmail solution has been thoroughly pilot tested and is soon to be deployed at AIG Insurance where it will be utilised by the company’s insurance agents to access sales leads from AIG headquarters.

   

 
 
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