Slowdown stifles growth hopes
Centre takes control of Mideast Steel
Bengal cellular slot in Trai court
Escorts plans to shuffle stake in IT, telecom arms
Stock listing rules up for review

 
 
SLOWDOWN STIFLES GROWTH HOPES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept. 9: 
It’s a nightmare of numbers on the economy. Yet another tell-tale evidence of the gloom has come from a Confederation of Indian Industry (CII) study that forecasts a best-case growth scenario of 5.25 per cent this year, less than the 5.6 per cent figure trotted out by the National Council of Applied Economic Research (NCAER).

CII has looked at the trends in data on gross domestic product (GDP), the index of industrial production (IIP), the state of capital market, banks, external sector and corporate performance for the first half of the year to determine just how much they can contributeoverall growth.

It concludes that agriculture, the primary sector which accounts for a little less than 25 per cent of the national income, will make up 1.25 per cent of the GDP growth. This is because it has grown at only 5 per cent against 9 per cent forecast earlier.

Industry is not in good shape either. Stuck in a trough for past six months, its fortunes are entwined with the Kharif harvest. Between winter and the year-end in March, the study says 3 per cent is the maximum it can rack up. That means a 0.75 per cent contribution to the growth pie.

Growth in services, over 8 per cent so far, is expected to slow down to 6.5 per cent, lending to the GDP growth about 3.25 per cent. Numbers in the three sectors, totted up, stand at 5.25 per cent — another shock to optimists who had trouble digesting the numbers dished out by think-tanks.

The cycle-influenced agriculture, says the chamber, cannot deliver high growth rates year after year. Moreover, with its share in GDP declining, industry and services have to be the driving forces. That appears a far cry though. After scaling a high of 15.7 per cent in September 1995, the industry has been caught in a downtrend spiral, with growth plunging to 1.9 per cent in April 2001.

All segments of manufacturing — basic, intermediate, capital and consumer goods — have taken it on their chins. From a heady 16.3 per cent in May 2000, the capital goods industry is down to 2.4 per cent in the same month this year. The consumer goods industry, one of the fastest growing since the 1990’s, is now struggling with 3 per cent.

In banks, deposits have grown faster than assets, saddling them with more cash than they can lend. As a result, call rates and treasury bill yields have softened with little sign that rates will firm up in the second or third quarter. Two of the three big financial institutions are in trouble. Allahabad, Dena and Punjab & Sind Bank have been added to the list of three weak banks. The study says re-capitalisation is required, but restructuring and downsizing should precede it. The scenario of foreign direct investment and foreign indirect investment is also grim: instead of the targeted $10 billion FDI in 2000-01, the country had only lured $ 2.16 billion. The cumulative FII at the end of July 2001 stood at $14.32 billion. FII investment can only shoot up if government relaxes the 49 per cent cap on foreign portfolio investment. The FDI scenario will only be able to get between $2.7-$3 billion.

Stock sting

From a peak of 5933 on 11 February 2000, the BSE sensex piped down to 4438 on 15 February 2001, thanks to Ketan Parekh’s dalliance with shares. Between the budget on February 28 and August 30, the index has shed 984 points — a 23 per cent plunge. The trend has mirrored the meltdown on Nasdaq and Wall Street, but that is no consolation. CII says the ban on badla and introduction of options such as Black-Scholes are fine, but investment fervour hit by scams must be rejuvenated by bringing in new alternatives.

   

 
 
CENTRE TAKES CONTROL OF MIDEAST STEEL 
 
 
BY JAYANTA ROY CHOWDHURY
 
Calcutta, Sept. 9: 
The reins of the controversial Mideast Steel project, floated by the flamboyant entrepreneur Rita Singh, have been virtually taken over by the government, which has put its own man in charge of the project.

With the promoters—Rita Singh and her husband JK Singh—unable to infuse the funds required to take the project to the commisioning stage, the government, backed by the financial institutions (FIs) has appointed B. R. Satpathi, as chief executive of Mideast Integrated Steel Ltd (MISL).

Prior to this assignment, Satpathi headed the Steel Authority of India’s mines division.

The decision to appoint Satpathi was cleared by the steel ministry following a meeting earlier this year in New Delhi between the promoters, financial institutions led by the Industrial Development Bank of India and the steel secretary.

At the meeting, IDBI insisted that it wanted a professional manager at the helm of MISL before infusing more funds into the project. The meeting itself was held on the insistence of the Prime Minister’s Office, which urged the steel ministry and other key ministries, to take steps to revive the faltering economy.

Work on the Rs 610-crore MISL project had remained suspended for over a year, because the promoters could not garner funds to finish the project being set up at Duburi in Orissa’s Jajpur district. Sources say the project requires more than Rs 100 crore to take it to the commissioning stage.

Satpathi, a metallurgical graduate, was with SAIL’s Rourkela Steel Plant for more than three decades. He was head of works at RSP before assuming independent charge of SAIL’s mines division in 1999.

His place at the mines division will now be taken over by S. Panigrahi, who has been appointed executive director in charge of the division, also labelled the raw materials division. Panigrahi, who joined RSP in 1964, was SAIL’s executive director (safety) earlier this year.

Panigrahi will take charge of the reins at the raw materials division at a critical juncture when SAIL is making an all out effort to cut costs, improve quality of raw materials and maximise production and utilisation of resources.

SAIL, unlike the new steel makers on the block like Essar Steel and others, sources most of its inputs from its own mines. A slump in the commodities markets abroad means that these makers are able to source inputs at extremely low costs, posing problems for SAIL, which as it is, is battling a rush of cheap steel imports from abroad.

   

 
 
BENGAL CELLULAR SLOT IN TRAI COURT 
 
 
FROM M RAJENDRAN
 
New Delhi, Sept. 9: 
The government has shelved former communications minister Ram Vilas Paswan’s proposal to award three cellular circles — West Bengal, Orissa and Bihar — without any bidding as there were no suitors in the fourth round concluded last month. Instead, it has now decided to lob the issue into the court of the Telecom Regulatory Authority of India (Trai).

Trai has been requested by the communications ministry to suggest whether a change should be made in the tender conditions. It has also asked the regulatory body to recommend the new criteria, if any, for the new bidders and spell out the entry fee. The communications ministry has also asked Trai to consider whether these circles can be offered without any bidding.

After the fourth round failed to turn up a bidder for these three circles, Paswan had suggested that they should be offered without a bidding process and even without an entry fee. Earlier, the communications ministry had planned to invite fresh bids by early September for the three cellular circles.

A senior official in the ministry said, “We were gearing up for a another round of bidding when we were told that issue the should be referred to Trai for its recommendations. Now the process can be undertaken only after we receive the recommendations from Trai. That could be any where between six months to a year.”

Paswan had asked Bharat Sanchar Nigam Limited, which is the existing operator, along with one private cellular operator in all the four circles (Reliance is the other operator along with BSNL) to expand its services.

The government had cancelled the licence of Koshika Telecom, the other cellular operator in Bihar and Orissa, as it had failed to migrate to a revenue sharing arrangement under National Telecom Policy 1999 and also defaulted on its licence fee payments. This left Reliance and BSNL as the only two operators in the two circles. Industry observers feel the telecom companies did not bid for the four circles because they were already well covered by Reliance.

Moreover, BSNL is also slated to provide mobile services in these circles. The government-owned BSNL is likely to set up more cell sites to expand its reach.

   

 
 
ESCORTS PLANS TO SHUFFLE STAKE IN IT, TELECOM ARMS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept. 9: 
The Delhi-based Escorts Ltd has drawn up plans to reorganise its holdings in its subsidiaries, with emphasis on information technology and telecom, signifying the importance of the two sectors in the company’s business portfolio.

In the telecom sector, Escotel Telecommunications Ltd (Estel), an Escorts subsidiary, is being turned into a holding vehicle for both Escotel Mobile Communications and Escorts Telecommunications Ltd.

Further, Escorts plans to make Escosoft Technologies Ltd (Escosoft) its direct subsidiary, by acquiring the 65 per cent stake held in it by Escorts Automotive Ltd (EAL), also an Escorts subsidiary.

Presently, EAL holds over 70 lakh shares in Escosoft, which is worth Rs 7 crore.

The company will seek shareholders’ approval for the move at its annual general meeting scheduled for September 29.

Escorts said the rationale behind acquiring the stake in Escosoft is that the company is expected to generate cash profits from its third year of operations and in order of its strategic importance and potential, making it a direct subsidiary of the company would be a positive move. Escosoft is an IT solutions provider.

In the case of Estel, the company said it will be the holding vehicle for both ETL and Escotel Mobile Communications Ltd. Escorts now proposes to make this its 100 per cent subsidiary by acquiring equity shares at par from ETL. The investment will be funded from internal accruals.

Escotel Mobile, which posted a cumulative loss of Rs 632 crore, had earlier seen a financial restructuring of its offshore debts.

Escotel provides cellular services in Haryana, Kerala, UP West and recently bagged the four circles of Punjab, Rajasthan, UP (east) and Himachal Pradesh in the bidding for the fourth cellular operator. However, the tractor business has been passing through a rough patch. The company has a significant market share in the over 40hp segment.

Escorts has a presence in several areas, including tractors, asset management, stock broking, construction equipment and hospitals, apart from telecom and IT.

While it has identified agri machinery, telecom and healthcare services as its core businesses, Escorts has indicated it intends to carry on with its restructuring plans, and plans to eliminate those businesses where even value-addition will not translate into sustainable growth.

   

 
 
STOCK LISTING RULES UP FOR REVIEW 
 
 
FROM SATISH JOHN
 
Mumbai, Sept. 9: 
The Securities Appellate Tribunal (SAT) has asked the Securities and Exchange Board of India (Seibu) to take a fresh look at the listing rules currently enforced in the stock exchanges.

“Listing should not be viewed mainly as a means to augment the finances of the stock exchanges. Its objective is much wider, and generation of funds is only incidental,” SAT said in a 12-page order.

“However, it is for the authorities concerned to examine the matter and decide whether fresh listing requirements for the same type of securities by exchanges can be dispensed with, subject to compliance of certain guidelines, which Sebi should be in a position to provide taking shareholders’ interests into consideration,” the order added.

“One should not be insensitive to the time factor in a matter involving the listing of shares,” the Tribunal added.

SAT was hearing a case relating to the Bombay Stock Exchange’s (BSE) refusal to list 20.5 lakh shares of ASK Me Info Hubs Ltd (formerly Cellulose & Chemicals Ltd).

The company, at the time of its incorporation, was a manufacturer of chemicals.

Later on, it amended the Memorandum of Association to enable it to take up the business of purveyors/vendors of data, data bank managers and call centre operators.

The BSE listing committee, after considering the company’s profile, its business activities and capital structure, observed that the price of the scrip in the period specified by Sebi for pricing of the preferential issue, had been pushed down from Rs 71.25 to Rs 13.30 to enable the company to make the preferential offer at a lower price.

Further, it observed that those dealing in the scrip were related to each other and with the company.

However, the Tribunal rejected the bourse’s argument that since Sebi is investigating the matter, the appellant should approach the apex market regulator.

“We are here on an order already passed by the respondent and not on an issue pending before Sebi,” the Tribunal said in a caustic observation.

Sebi’s investigation is entirely independent and cannot be treated as an input to the decision already taken by the respondent, SAT’s order stated.

The company further refuted BSE’s conclusion that its share price was pushed down from Rs 71.25 to Rs 13.30 in order to make the preferential offer at a lower price to a select few and that the clients dealing in the scrip were related to each other.

The company alleged that the impugned order issued by the exchange is an exparte order, issued without giving it any opportunity of presenting its case and without calling for any explanation.

It furtehr argued that the order has been passed against all the established principles of natural justice.

It further pointed out that the change in its name was approved by the registrar of companies, which is the competent authority.

   
 

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