RBI showers blessings on exporters
Special financial package for six high-value items
Stock, bond markets breathe easier
Air-India, IA may seek cash support
Ruling on PTA to help Reliance
HPL advised to repay loans after 4-5 years
Saregama ready to sing the rural tune
Amara Raja all charged up
Foreign Exchange, Bullion, Stock Indices

Mumbai, Sept. 24: 

Shipment credit at 2.5% less than PLR

In a three-pronged plan aimed at boosting sagging exports and bringing down forward dollar premia, the Reserve Bank of India (RBI) today lowered interest rates on export credit and permitted exporters to raise foreign currency loans at competitive rates. Dangling another bait to attract dollars, it said exporters will be eligible for concessional finance if they agree to sell their forex proceeds in the forward market.

The decision is being seen by many in the financial services industry as the harbinger of a cut in interest rates. The expectation is this will be done through a reduction in the bank rate, which now stands at 7 per cent.

The raft of measures which will make rupee credit cheaper will be effective from September 26. The maximum rate which a bank can charge exporters will be 2.5 percentage points less than its prime lending rate (PLR) for pre-shipment credit up to 180 days and for post-shipment loans up to 90 days. Earlier, the cap on rates was set at 1.5 percentage points below the PLR. The reduced rates will apply on the entire gamut of export credit granted by banks till March 31 next year.

Exporters will also continue to enjoy the facility of forex loans in the currency of their choice at internationally competitive rates, a Reserve Bank spokesperson said. Interest on these loans will continue to be the London Inter-bank Offered Rate (Libor), plus a maximum of one percentage point. Therefore, dollar-denominated foreign currency credit can be raised at 3 per cent — the Libor rate — plus one percentage point.

In the case of rupee credit, the spokesman said exporters who avail of concessional loans should sell earnings in the forward market.

Assuming a PLR of 10.5 per cent, the interest rate ceiling on export credit will be 8 per cent. Adjusting for the forward premia, which are currently above 5 per cent, the effective interest rates for exporters on rupee loans could be brought down to as low as 3 per cent, the spokesperson added.

The rate relief is expected to boost exports, which shrunk to $ 13 billion in April-July from $ 13.86 billion a year ago due to the global economic slowdown.

However, with reports now suggesting that the slowdown will last longer than many expect it to, analysts are not sure if the RBI measures would be enough.

“Exports depend on a variety of other factors, such as demand from other countries and state of their economies. Interest rates do not play a large role,” said an analyst, implying that the move would benefit exporters, rather than giving exports the much-needed fillip.

Industry applauds

Industry welcomed the rate reductions, saying they expect exports to go up by 3 per cent.

FIEO president K K Jain said the decision should be implemented by the commercial banks in right earnest. Ficci said RBI’s pro-active policy initiative should push up export growth by 2-3 per cent to 11 per cent annually.

CII expected that RBI would follow up this move by cutting the Bank Rate.


Mumbai, Sept. 24: 
Soon after announcing concessions in export credit, the Reserve Bank of India, in a late evening press communiqué, unveiled a special financial package for six select export items, including pharmaceuticals and cement.

The other four export items eligible for the special package are, iron and steel, agro-chemicals, transport equipment and electrical machinery.

The one-year package, to be operative from October 1, will be applicable only to export contracts over Rs 100 crore annually.

As part of this package, the interest rates for pre and post shipment export credits have now been reduced to a maximum of prime lending rate (PLR) plus 0.5 per cent as against the present maximum rate of PLR plus four per cent.

RBI said this measure would result in substantial reduction in interest cost to exporters and was in addition to the across the board reduction by one per cent in ceiling rates on export credit announced earlier.

Indian exporters would also be permitted to import raw material on credit terms for period beyond 180 days at the rate of interest up to Libor plus one per cent under the special package, as against current stipulation of Libor plus 0.75 per cent (ceiling).

The central bank said the Exim Bank would be permitted to extend buyers’ credit of Rs 200 crore without RBI clearance. Similar permission would also be granted to the participating banks, the statement said.

Exim Bank, while approving export contracts, will have the freedom to decide minimum advance/down payment, security and availability of ECGC cover subject to post facto report to the bank.


Mumbai, Sept. 24: 
Savaged for much of the fortnight since the hijack attacks in the US, stocks today won a respite from the onslaught.

The Bombay Stock Exchange (BSE) sensex closed with a 52-point gain at 2,651.78 after having galloped 3.4 percent in the early hours of trading. The focus was on companies set to benefit from the lifting of US economic sanctions against India.

Mirroring the uptrend, rupee and bonds firmed up rose as traders cheered a good news after a long spell of misery. The rupee ended at 47.89/90 a dollar, rebounding from Friday’s record closing low of 48.01/03 and well above the all-time intra-day low of 48.43 a week ago. Exporters were believed to have brought in remittances while banks unwinded long dollar positions after RBI’s measures to ramp up exports. Forex dealers expect the rupee to harden further on Tuesday in response to the dip in global crude prices.

Prices of government securities looked up too. The benchmark 10-year bond was quoting higher at Rs 113.85 compared with Rs 113.20 on Saturday. The rally was fuelled by the waiver of sanctions and expectations cheaper export credit was the build-up to a reduction in bank rate.

In the stock markets, the indices were up, but there were few willing to hazard a guess on whether the worst was over. Traded volumes were poor. Wipro, an illiquid share, notched up the highest turnover on BSE.

The sensex recouped some of the losses it sustained in the past nine sessions since the September 11 attacks in the US.


Calcutta, Sept. 24: 
Gripped by fears that a war will wreck finances, Indian Airlines and Air-India are planning a joint representation to the government for an interim bailout package.

A senior A-I official said the dramatic decline in the number of passengers after the September 11 carnage in the US will leave the bottomline and toplines of both carriers in a shambles.

“Although we are yet to take a formal decision, there is high probability that we will approach the government. This is the peak season for airlines, the time to make money. But the panic over US’ military build-up in West Asia has hurt airlines across the globe,” the official said.

The predicament Air-India and Indian Airlines face is worse because they have to bear overhead costs, unlike the global aviation majors who have already announced massive retrenchments as part of a cost-cutting drive. Although both the airlines are making efforts to sustain normal operations, there are fewer passengers flying everyday.

The concerns are greater, sources said, if the eruption of hostilities leads to a flare-up in the prices of crude — and aviation turbine fuel.

“Last year we had to bear an additional expenditure of Rs 297 crore on fuel. But for the increase in the cost of fuel, we would have made a net profit instead of suffering the net loss of Rs 28.5 crore,” a company official said.

That’s not all. There is the additional insurance burden. According to a rough estimate, Indian Airlines and Air-India will have to cough up over Rs 120 crore more by way of insurance premia, including war premium.

“New India Assurance is working on a new package. We will see if we should pass on the cost to passengers after we have the package with us,” says S. Punani, Air-India’s director (finance).

The blow to the industry has come at a time when the international carrier was trying to turn the corner with value-added services. The airline’s turnover in 2000-01 was Rs 5,180 crore, with a passenger load of 74 per cent. “The passenger load increased to 78 per cent in the last two quarters, helping us post better results. But, we do not know how the situation will turn out this year,” the A-I official said.


Mumbai, Sept. 24: 
The Union government has reinforced anti-dumping duties on imported purified terephthalic acid (PTA) and extended the ambit of the levy to cover imports from two countries—Spain and Japan—instead of one (Spain) stipulated earlier.

The move is likely to benefit the Ambani-owned Reliance Industries which is the biggest producer of PTA in the country.

The duties will range between $ 8 and $ 20 per tonne and will cover imports from companies like Interquisa of Spain and Mitsui Chemicals of Japan.

At present, international prices of PTA has softened to around $ 450 per tonne after hovering around the $ 470 per tonne some time ago. On the other hand, domestic prices have also softened to Rs 29,400 per tonne as against Rs 30,100.

The designated authority set up in commerce ministry last year proposed an anti-dumping duty of Rs 521 per tonne on PTA originating from Spain on grounds of injury to Reliance

However, the authority did not impose any duties on PTA imported from Japan, Malaysia and Taiwan against which Reliance had also filed a petition.

Sources said following this order, an appeal was again filed with the Customs, Excise and Gold (Control) Appellate Tribunal (Cegat), which later called for Japan to be included in the list. Consequently, the authority made the necessary modification in its order.

Though sources close to RIL felt the government decision would have a positive impact on its topline and bottomline, industry circles felt the impact would be limited as major exporting countries are still left out of the order.

“We must also remember that imports of PTA to the country have diminished over the years. Therefore, it will not have much impact on RIL’s balancesheet or on the industry,” an industry expert said.


Calcutta, Sept. 24: 
L.B. Jha, the Calcutta-based chartered accountant firm appointed an advisor to Haldia Petrochemicals (HPL), has suggested that the state government seek a moratorium of four to five years on repayment of the project’s high-cost borrowings.

Sources say several proposals on debt restructuring are on the table, some of which have come from promoters. “However, L. B. Jha says the state government should ask banks and FIs to work out a scheme under which the debt can be serviced after four to five years. It wants the loans rolled over,” the sources added.

HPL’s total debt is in the region of Rs 4,200 crore. Industrial Development Bank of India is the consortium leader. In addition to the funds lent earlier, the FI has provided a Rs 500-crore bridge loan to help meet the Rs 969-crore gap in the project’s equity.

L. B. Jha’s recommendation is based on the fact that the company’s sales have improved and the cash flow situation has turned better. “If the company is allowed to move in this manner for the next couple of years, Haldia Petro will not have to look behind. It will be in a position to repay all its interest,” the sources added.

The advisor is also telling the state government how to restructure its equity in the project. “The government will not move out, though it might reduce its stake. We are finding out how it can be done. No final decision has been taken,” a source at L. B. Jha said.

The state government has not made up its mind on whether Indian Oil Corporation or The Chatterjee Group will become the majority stakeholder in the project.

These issues will be discussed at the company’s annual general meeting on September 28. In addition, the board will consider resolutions on accounts, re-appointment Tapan Mitra, M.V. Sladen (The Chatterjee Group nominee), D.P. Patra (state government nominee) as directors, and the appointment of auditors.

Company officials refused comment on Tapan Mitra’s resignation. “A decision will be taken by the board at the AGM. It is premature to comment on the matter.”

The company, having cornered more than 60 per cent of the polymer market in the eastern region, has kicked off a cash-management plan aimed at boosting the bottomline.


Calcutta, Sept. 24: 
Saregama India Limited is planning to reduce the present staff strength of 780 by another 10 per cent in this financial year as part of its cost cutting exercise.

The company has also taken a “conscious decision” to shift focus from the “well-penetrated” urban market to the “under-explored” rural market.

The music company, which has decided to co-produce international brands with Universal and Zomba, may also make a foray into television software business as recommended by McKinsey & Co.

Talking to newspersons after the company’s annual general meeting, Sanjiv Goenka, vice-chairman of the company, said: “Currently international music contributes only 3 per cent of our total turnover. We want to increase our presence. So we have entered into co-producing arrangement with Universal and Zomba. We are in talks with many others also. According to the agreement Saregama gets paid in direct proportion to what it imports.”

About the recommendations of McKinsey & Co, Goenka said the international consultancy firm will make a full presentation to the Saregama board on October 15. “They have made some radical suggestions. Entry into television software business is one of the suggestions. I will not be able to divulge further details until the board considers it,” he said.

Saregama has already prepared software for Tamil tele-serial Sigaram which is being telecast on Sun TV and enjoying a TRP rating of number three. “We would enter into Hindi software business in a big way,” Goenka said.

The FM software manufacturing business is expected to break-even this year.

Talking about the dotcom business of the company, Goenka said due to slowdown the company has decided to cut its expenses in this area by Rs 2 crore. “We are downsizing this business,” he said.

Earlier addressing the shareholders at the annual general meeting, Goenka said the company wants to tap the mass market.

“As a result, starting from the second half, Saregama expects to re-orient its pricing, supply chain and distribution model to generate an increasing component of its income from the rural geographies of the country.”


Tirupati, Sept. 24: 
As part of its expansion plan, Amara Raja Batteries Limited (ARBL) is planning to foray into the growing two-wheeler battery segment. The company, which is close to launching its UPS batteries, hopes to become the leading battery manufacturer in Asia by 2004 with a capacity of 20 lakh units.

Speaking to The Telegraph after the inauguration of its new plant here, ARBL chairman and managing director Ramachandra N. Galla said UPS batteries will basically be import-substitute products.

“We plan to introduce UPS batteries before the end of this fiscal which is growing at a rate of 25 per cent per annum,” Galla said and added that the company is also planning to enter the lucrative two-wheeler battery segment later for which a new production line will have to be set up.

The new greenfield automotive plant will produce 1 million batteries per annum.

The Rs 45-crore new automotive plant located at Karakambadi here was inaugurated by the Andhra Pradesh chief minister Chandrababu Naidu.

Initially the plant would produce 50,000 batteries, Galla said.

The company’s alliance partners, Johnson Controls of the US, had closely worked with its counterpart to put together the latest advances in the new plant, he said.

To cater to the changing customer needs, the plant has a battery excellence centre, he said and added this has been conceived as a completely self-sufficient facility with a full range of advanced testing equipment.

The new logo of the company was also unveiled on the occasion.

ARBL had already unveiled the Amazon range of batteries for four-wheelers and set up franchisee stores in 25 centres for retailing and servicing these products. At present, it has a 10 per cent share of the market in this segment.

The company, however, earns most of its revenue from the sale of industrial batteries in which it has a 40 per cent market share.



Foreign Exchange

US $1	Rs. 47.89	HK $1	Rs.  6.05*
UK £1	Rs. 69.82	SW Fr 1	Rs. 29.90*
Euro	Rs. 43.77	Sing $1	Rs. 27.00*
Yen 100	Rs. 40.84	Aus $1	Rs. 23.05*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4875	Gold Std(10 gm)	Rs. 4780
Gold 22 carat	Rs. 4605	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7625	Silver (Kg)	Rs. 765
Silver portion	Rs. 7725	Silver portion	NA

Stock Indices

Sensex		2651.78		+ 51.66
BSE-100		1253.02		+ 36.65
S&P CNX Nifty	 869.05		+ 14.85
Calcutta	  89.94		+  0.94
Skindia GDRNA	 396.44		- 15.83

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