Stocks worldwide scurry for cover
Crash leaves Unit Trust gasping
Opec word to keep supply, price steady
1:16 ITC, Bhadra share swap
GM skips India in Daewoo deal
New cars from Telco stable
Nalco remains on selloff agenda
Foreign Exchange, Bullion, Stock Indices

 
 
STOCKS WORLDWIDE SCURRY FOR COVER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept. 21: 

Sensex drifts back 8 years

Felled by fear and spooked by slowdown, stocks were sent sprawling on Friday as investors took money out of equities and hunted for secure havens in a selling stampede that pounded indices to new lows and left bourses across time zones gasping.

From Tokyo to Hong Kong to Mumbai, skittish markets looked for signs of how the imminent US retaliation will play out and its costs on the world economy.

Dalal Street turned into a sellers’ sanctuary — sending the Bombay Stock Exchange (BSE) sensex plunging to a new eight-year low when it closed 161.54 points down at 2600.12; it had ended at 2612.25 on November 2, 1993. The index had collapsed below 2600 in intra-day trading.

Scared of the scene unfolding in the sub-continent, war-wary foreign institutional investors (FIIs) dumped new-economy stocks and old-economy bellwethers. They do not want to risk their money in a country which could face the repercussions of possible US strikes.

“It is like a stone falling, the result of regulators, including the finance ministry, doing little to revive the capital market,” a crest-fallen broker in Jeejebhoy Towers moaned.

BSE’s market capitalisation — shareholder wealth — was sliced Rs 16,592 crore to Rs 4,27,870 crore; investors have lost a whopping Rs 84,980 crore from the day terrorists slammed into the World Trade Center and Pentagon.

As buyers looked a dead breed, key market movers like Infosys, Reliance, ITC, SBI, Satyam Computer, RPL, NIIT, Silverline and SSI plumbed new 52-week troughs.

Rupee steady

The market misery came on a day the rupee held its ground, closing at 48.01/03 against the dollar. It hit an intra-day low of 48.05/06 in the early hours, but rebounded as banks stepped in to sell greenbacks and use the money to make the best of the hardening call rates. However, there were growing fears that the pressure on rupee will mount once US retaliates to avenge the mayhem in Manhattan.

US plunge

Stocks pared steep losses in late morning trading on Friday as bellwether General Electric Co. offered an upbeat earnings outlook, but fears over a lengthy war on terrorism after last week’s deadly attacks kept the market pinned in negative territory.

Investors had started the session by dumping shares for the fifth straight day after attacks on some of the nation’s landmarks claimed thousands of lives.

The New York Stock Exchange has seen $ 1.2 trillion in shareholder wealth wiped out since it opened on September 17. That figure equals France’s gross domestic product.

UK wobble

UK shares ended a stormy session at a new 4-1/2-year closing low on Friday, but only after glimmers of a rally on Wall Street pulled a war-spooked market out of one of its steepest falls since the crash of 1987. The FTSE 100 index closed down 123.2 points or 2.7 percent at 4,433.7, its lowest close since April 1997.

Asia jitters

The benchmark Nikkei in Japan finished 230.17 points or 2.35 percent lower at 9,554.99. The index had earlier fallen as low as 9,382.95, a fresh 17-year intraday trough and 8.84 percent below the level before last week’s attacks in the US.

In Hong Kong, the Hang Seng index of 33 stocks ended down 4.12 percent, or 383.78 points, at 8,934.20, its lowest close since October 1998.

   

 
 
CRASH LEAVES UNIT TRUST GASPING 
 
 
FROM SATISH JOHN
 
Mumbai, Sept. 21: 
Will UTI need another bailout? For an organisation rocked by a depletion in its assets before it could recover from a share-placement scam, that’s the question haunting investors.

The jolt to an already weakened capital market from the September 11 terrorist attack on key US landmarks has gnawed away large chunks from the shares UTI holds as investments. There is a fear that US-64, its flagship scheme, is suffering a big hole, given that 60 per cent of its investible funds were parked in stocks before the September 11 crisis erupted.

Mutual fund industry watchers reckon that big bets in what are now comatose capital markets will have depressed US-64’s net asset value (NAV) — the worth of all assets under a scheme — to an alarming Rs 6-6.50; each US-64 unit has a face-value of Rs 10.

The recent panic has seen the fastest erosion of value in the history of Indian bourses; almost Rs 84,980 crore has been shaved off the market capitalisation of listed stocks on the Bombay Stock Exchange since America woke up to its worst carnage.

“UTI is in trouble,” is the refrain of marketmen. However, there are others like Dhirendra Kumar of Value Research, a premier research outfit, who try to offer a sense of just how deep the crisis in UTI may be.

“I can only speculate that the NAV of their flagship scheme should be in the region of Rs 6.50. “On all accounts, my assumption is a realistic one, given that no one can swim against the tide in the market.”

The Big Daddy of mutual funds is not willing to part with numbers though: Executive director Brij Gopal Daga concedes that UTI’s investment portfolio has taken a beating, but will not say how much.

Also, he points out that problems from the stock plunge are not limited to his organisation alone. “The impact of the dismal state of affairs in the secondary market will be uniform across mutual funds.”

On a note of optimism, Daga believes the travails can end the moment stocks find their feet and claw back. “Everything hinges on the revival of the markets. The scene can change in three months time.”

The mutual fund major has an exposure of Rs 57,000 crore in the capital markets, including debt; US-64, which had a unit value of Rs 12,778 crore on June 30 this year, is expected to bear the brunt of the stock slide, say a majority of the industry observers.

Asked what steps were being taken to limit the effects of the market misery on the investment kitty, Daga said the “situation is being reviewed from time to time”.

Though outflows far exceed the inflows, UTI has not really faced a rush for US-64 redemptions: In August, for instance, officials put the outgo from the scheme at Rs 117 crore.

It does not see a dramatic increase in redemptions in a situation where the repurchase price of the units goes up by 10 paise every month. In August, the units were bought at Rs 10 each, subject to a maximum of 3,000 from every investor. Against that backdrop, Daga said the average daily outflow from the scheme is expected to be Rs 4 crore.

Even so, the turn of events as a result of the tragedy in the US has upset UTI’s rescue strategy. Shares like Reliance Industries, Reliance Petroleum and Infosys Technologies saw their values plunge as FIIs unloaded them in massive quantities. The two Reliance group companies alone comprise more than 20 per cent of US-64’s investment portfolio. Further, the volatility in the government securities market has not landed the scheme in more trouble.

   

 
 
OPEC WORD TO KEEP SUPPLY, PRICE STEADY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept. 21: 
Union petroleum minister Ram Naik today said the Organisation of Petroleum Exporting Countries (Opec) has assured him that it will not only maintain crude supplies to India but also try and keep prices stable at around $ 25 a barrel.

Naik’s comment came in response to the speculation that oil prices could surge in the wake of the tension in the sub-continent and the Gulf over military strike by a coalition of western states to avenge last week’s terrorist strikes in the US.

India said today that crude oil exporting countries were considering its demand of giving concessions to developing countries during high price regimes.

“The Opec is considering our request and may extend concessions in the form of extended credit facility during hard times,” Naik, who returned here today after attending the world petroleum congress in china, told a news conference.

“India is 70 per cent net importer of crude oil. Last year our oil import bill was to the tune of about $ 16 billion. High crude prices and uncertainties of supplies effect our economy to a large extent,” Naik said.

The minister claimed that India had two months’ oil reserves and plans were afoot to improve strategic storage of petroleum products.

Naik is slated to meet finance minister Yashwant Sinha tomorrow to hold preliminary discussions on the road map to dismantle of the administered price mechanism (APM) and the issue of disinvestment in IBP.

   

 
 
1:16 ITC, BHADRA SHARE SWAP 
 
 
BY A STAFF REPORTER
 
Calcutta, Sept. 21: 
The board of ITC Ltd today approved the merger of ITC Bhadrachalam Paperboards with itself and fixed a share swap ratio of 1:16, implying that the shareholders of Bhadrachalam will receive one share of the tobacco major for every 16 held in the subsidiary. The ratio was based on a report of valuation prepared by S.B. Billimoria and Company.

ITC held 41.26 per cent of Bhadrachalam, while Russell Credit, its investment subsidiary, held 20.34 per cent. Prior to the merger, ITC will buy out Russell Credit’s 1.78 crore shares of Bhadrachalam at Rs 71.36 apiece—the average cost at which the shares were acquired.

Following the transfer of shares from Russell Credit to ITC, the entire holding of the tobacco major in Bhadrachalam will be cancelled. As a result of the merger, ITC’s Rs 245.41 crore equity base will expand by about Rs 2 crore. The consequent decline in British American Tobacco’s holding in ITC will be marginal. London-based BAT holds a shade under 32 per cent in ITC.

Stock markets, however, were not impressed by the merger. The ITC stock was beaten down Rs 39.55 on the Bombay Stock Exchange today and the tobacco major’s scrip closed over 6 per cent lower at Rs 602.85. The Bhadrachalam scrip took a worse beating. It shed close to Rs 4 to close 9.6 per cent lower at Rs 37.15 on the BSE today.

According to an ITC release, “The merger would support ITC’s strategic intent of scaling up Bhadrachalam’s manufacturing capacity.” ITC chairman Y.C. Deveshwar had earlier said his company would be investing about Rs 1,500 crore in the operations of its paperboard subsidiary over the next five to seven years to expand capacity and improve technology.

The ITC release also said the company would consolidate the operations of Bhadrachalam with its own speciality paper and packaging divisions. This will not only yield greater operational synergy, but also enhance ITC’s earnings per share, the release added.

ITC uses Bhadrachalam’s packaging for its cigarettes and for its greetings card business.

The high courts of Calcutta and Karnataka will soon be moved by the two companies to convene separate meetings for shareholders’ approval to the merger, the release said.

   

 
 
GM SKIPS INDIA IN DAEWOO DEAL 
 
 
FROM OUR BUREAUS
 
New Delhi/Seoul, Sept. 21: 
Daewoo India has been cut out of the deal under which General Motors of the US will acquire four plants of Daewoo Motor Company, the ailing Korean automaker, for $ 400 million in cash.

A memorandum of understanding was signed today in the Korean capital between GM and the Korean banks under which the four plants—two in South Korea and one each in Egypt and Vietnam—will be transferred to a new company in which GM will have a 67 per cent stake. The new company will also take over the assets of 22 sales subsidiaries worldwide. The Korean banks will hold the remaining 33 per cent.

The agreement, which took a year to negotiate, involves a cash injection, assumed debt and the issuance of preferred shares. Reports indicate that GM and the Korean banks will invest about $ 2.6 billion in the four Daewoo Motor plants.

General Motors and one of its partners will inject $ 400 million for 67 per cent of the new company, with creditors spending $ 197 million for the rest, the world’s largest automaker said in a statement.

In Delhi, Daewoo Motors India Ltd (DMIL) tried to downplay the obvious disappointment at being left out of the deal. “India was there on their list. In the first phase of understanding, they have placed certain conditions for the manufacturing plant here. This particular deal will have to be finalised by Daewoo Corp who holds 91.6 per cent in DMIL and not Daewoo Motors Creditors Committee,” DMIL officials said.

“Currently, negotiations are still on between Daewoo Corporation and GM and a positive decision is expected soon,” DMIL said in a late night press statement.

P. Balendran, GM India’s vice-president, corporate affairs, said, “In India for the present, Daewoo and General Motors (GM) will share a product launching platform. Any new product will be launched with the agreement of both the parties. GM will continue to supply parts, components and technical assistance from the new company to all the overseas plant it has not acquired, including India.”

   

 
 
NEW CARS FROM TELCO STABLE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept 21: 
Telco plans to come out with two new offerings in the ‘B’ segment—the most competitive arena in the automobile market. The two models, whose names have not yet been finalised, will be a sedan and an estate car, but smaller in size to fit in the mid-size car category.

“The Tatas will concentrate on the B-segment as 85 per cent of the customers are in that category,” Nitin Seth, regional manager for passenger car business said.

Telco today launched the Indica V2 petrol in the passenger car category.

   

 
 
NALCO REMAINS ON SELLOFF AGENDA 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Sept. 21: 
The core group of secretaries today cleared the sale of Balmer Lawrie, its parent IBP and Hotel Corporation while discussing plans to divest stake in aluminium major National Aluminium Co (Nalco) and Videsh Sanchar Nigam Ltd.

That Nalco figured in today’s meeting is a bit surprising given the fact that only last week mines minister Ram Vilas Paswan ruled out selloff in the aluminium major.

The government is toying with two options on Nalco — selling a 30 per cent stake in two tranches to foreign investors and financial institutions. The other option is to conduct a negotiated sale of the whole tranche on offer.

The sale of a 30 per cent stake will leave the government with a controlling stake of 57 per cent in Nalco. With fear of a war in the sub-continent looming, prices of strategic metals like aluminium are likely to go up and this has prompted the government to cash in on Nalco shares. At present, the Nalco scrip is trading around Rs 43 a share.

Agrani proposal

The Cabinet Committee on Economic Affairs (CCEA) today approved the proposal of Subhash Chandra-owned Agrani Satellite Services Ltd to induct 74 per cent foreign equity into the company. Agrani Satcomm (Mauritius) Ltd and other foreign partners will invest Rs 354.31 crore to pick up the 74 per cent stake. ASSL is procuring a satellite system from Alcatel Space Industries at a total cost of Rs 1,197 crore. The project will have a debt-equity ratio of 1.5:1.    

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.03	HK $1	Rs.  6.05*
UK £1	Rs. 69.99	SW Fr 1	Rs. 29.70*
Euro	Rs. 44.20	Sing $1	Rs. 27.25*
Yen 100	Rs. 41.24	Aus $1	Rs. 23.25*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4830	Gold Std(10 gm) Rs.4735
Gold 22 carat	Rs. 4560	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7600	Silver (Kg)	Rs.7690
Silver portion	Rs. 7700	Silver portion	NA

Stock Indices

Sensex		2600.12		-161.54
BSE-100		1216.37		- 61.48
S&P CNX Nifty	 854.20		- 44.60
Calcutta	  89.00		-  6.23
Skindia GDR	 412.27		- 24.04
   
 

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