Time ripe to fortify fortresses
Infotech feels the pinch
LG to invest $ 100 m
Gilt rally cut short
Tax relief on perks
V.P. Singh set to head IFCI
IBP terms for future buyer
Foreign Exchange, Bullion, Stock Indices

Mumbai Sept. 25: 
The market meltdown has sent companies armed with the permission to buy back shares on a stock-buying binge at bargain-basement prices.

Those doing it are promoters of blue-chip conglomerates and owners of smaller firms who find themselves vulnerable to the designs of predators. So, the likes of Bombay Dyeing are in the company of Winsome Yarn to ratchet up stakes to more comfortable levels.

Finolex Industries, the P. P. Chhabria-promoted PVC maker, has bought 76.28 lakh shares from the market, while Jayshree Tea, a B. K. Birla group company, acquired 3.52 lakh. Multinational companies like Britannia Industries (co-promoted by the Nusli Wadia group) and Siemens were not far behind, scooping up around 6.22 lakh and 18.67 lakh respectively.

Bombay Dyeing, the Wadia group flagship, has bought 1.61 lakh shares in the recent stock market slide. G E Shipping, promoted by the Sheths, who struggled to fend off Abhishek Dalmia of Renaissance Estates from group firm Gesco, has bought 11.79 lakh shares as part of its second buyback plan kicked off recently. Little-known companies such as Selan Exploration picked up 12.01 lakh shares and Winsome Yarn 4.15 lakh.

There are several reasons for the share chase, the most important being the dramatic fall in the value of prices across the board. “The slowdown in the economy had depressed stocks, but the recent plunge has been triggered by the attacks in the US,” a dealer said.

Another motivation for promoters who feel insecure is to push up their stake to 40-50 per cent, instead of the 26 per cent seen earlier as enough of a shield.

Merchant bankers say companies armed with shareholder approvals for a buyback have gone on the overdrive in the current market slump. Most of those have seen their shares languish at rock-bottom prices — far below the upper limits set in buyback resolutions.

Many argue that minority shareholders are losing out because they are selling at prices much lower than those laid down in the buyback clauses. However, merchant bankers point out that the purchases are made not only from small investors, but institutions as well.

Creeping acquisitions have also gained currency. Using this route are promoters of Nestle (its Swiss parent), Tata Sons and the A.V. Birla group, though no numbers are available.

Bombay Dyeing had set the upper limit at Rs 60 per share in its buyback resolution. If it can grab the targeted amount, the Wadias will take their stake in the company from 40.85 per cent to an unassailable 54.47 per cent.

The share build-up assumes significance because Calcutta-based jute baron, Arun Bajoria, has held out takeover threats by mopping up small stakes from the market. Significantly, while the offer price for the buy-back has been pegged at Rs 60, the book-value of the scrip is close to Rs 160. The maximum the company can spend on buying back shares is a little over Rs 61 crore.

However, what has foxed the market is the silence in Reliance, a company which renewed its buyback plan for the second straight year, but has not done so. The Ambanis have not bought a single share from the market despite the fact that the stock price has been hovering below Rs 303 — the upper-limit set by the board.

Biscuit major Britannia Industries had also announced its plans of buying back up to one million shares at a price not exceeding Rs 750 each. The share price is now ruling at Rs 500.


New Delhi, Sept. 25: 
The dog days have begun for the infotech industry. After an incandescent performance till the middle of last year, IT companies in India have lurched from one crisis to another—buffeted first by the meltdown in technology stocks in the US, the slowdown in the US economy that the eight interest rate cuts this year by the Federal Reserve have failed to arrest, and now the bloody mayhem in Manhattan that has rocked the world economy.

The successive blows have sent jitters through the down-on-its-luck Chip Street: the latest to suffer has been Chennai-based Pentamedia Graphics which has fired about 60 employees and faced demonstrations when it decided to delay this month’s pay cheques by a week.

Earlier, the Microland Group had retrenched more than 60 per cent staff at indya.com and IT space dot com. Reports indicate that salaries are being delayed at other infotech companies too. Moreover, NIIT the leading IT education institute is facing the lowest-ever intake of students—a sure sign that youngsters are loathe to lay their bets on infotech jobs.

If you are looking for other indicators to show which way the wind is blowing, here’s another: information technology savvy chief ministers Chandrababu Naidu of Andhra Pradesh and S.M. Krishna of Karnataka have rejected invitations to participate at the India Internet World which begins here tomorrow.

Last year, even Bihar chief minister Rabri Yadav and consort Laloo Prasad Yadav were seen hobnobbing with the big guns of the IT world where the latter made his unforgettable comment: “Yeh IT-YT kya hai?” Like Shakespeare’s clowns, Yadav who has carefully crafted his image as a wisdom-spouting bhojpuri booby showed greater prescience with his caustic comment than the sages of Silicon Valley.

However, Microland and its chairman Pradeep Kar are optimistic that the gloom-and-doom forecasts will wither away.

Says Sameer Kochar of Skoch Consultancy, “Public seminar and symposia are tertiary mediums and the mood in the IT sector is certainly low. The slowdown in US economy and the recent developments in that country have indeed affected the IT sector. Most of the IT companies in India and worldwide have also slashed their market spending by half.”

It’s not just India; Australia, Singapore and Hong Kong are reporting equally distressing stories in the IT sector.


New Delhi, Sept. 25: 
At a time when recession-racked companies are battening down their investment hatches, LG Electronics India Ltd is ready to play the contrarian. The white goods and television maker is planning to invest $ 100 million in India to boost production of its existing range of goods and add new lines, including frost-free refrigerators.

LG Electronics, the Korean home appliance company, reckons its best to invest during a recession since it will be able to cash in as soon as the market improves. “We invested Rs 500 crore during 1997-2000. Over the next five years from 2001-05, we will shell out another Rs 500 crore. A sum of Rs 100 crore ($ 20 million) has already been invested to produce the range of frost-free refrigerators,” said Kwang-Ro Kim, managing director of LGEIL. It has also allocated Rs 25 crore ($ 5 million) to set up facilities to manufacture fully automatic washing machines that will start production in May next year.


Mumbai, Sept. 25: 
Profit booking today cut short a sharp rally in government securities, which had firmed up on expectations of a reduction in the bank rate. The benchmark 10-year bond, the 11.50 per cent 2011 security, peaked at Rs 114.50 — shooting past the price of Rs 113.50 set in Reserve Bank’s open market purchases.

The spurt was an indication that bond prices were inching closer to Rs 115.50, the level before the attacks in the US. There is an optimism that the cut in cost of export credit will be followed up by a reduction in the bank rate or CRR.

Dealers said profit booking was seen at high prices, erasing some gains notched up in the past few days. The 10-year gilt was traded at Rs 114.10 against Rs 114 on Monday.

Sanjeet Singh, senior debt markets analyst at ICICI Securities (I-Sec), said the market is edgy about the timing and the intensity of the US attacks on Afghanistan. “There are no other big negative factors as such. The sharp fall in world oil prices will have a positive impact on the trade balances of the country,” he said.

However, a large section of the money market does not see the RBI immediately going in for a cut in the bank rate, though many central banks in the world have lowered interest rates following the hijack attacks.

Analysts believe the cut will come after the financial markets achieve a semblance of stability. Others say the RBI may be prodded into it if the US Federal Reserve slashes rates at the October 2 meeting.

“If the Fed were to brings down rates by 50 basis points next week, the interest rate differential between the two countries will widen. That could force the RBI to follow suit,” said N. Balasubramanian, ICICI general manager. The Fed has cut rates eight times this year while the RBI has done so twice, each time by 100 basis points.

Rupee stays steady

The rupee extended its gains for the second consecutive day this week, ending the day at 47.88/89 per dollar compared with its previous finish of 47.89/90. Dollar demand from banks remained strong as markets worried about the US’ response to terrorist attacks. The rupee hit an intra-day high of 47.84/86.

Stock selloff

The Bombay Stock Exchange (BSE) sensex lost 34.43 points, or 1.30 per cent, when it closed at 2613.53 against Monday’s finish of 2651.78. It had opened firm at 2668.37 and scaled a high of 2727.32, but surrendered the early gains to a selloff by foreign funds, mainly in index heavy-weights.


New Delhi, Sept 25: 
Taxpayers who have been groaning at the government’s clampdown on perquisites can breathe a little easy.

For a start, the Central Board of Direct Taxes (CBDT) has offered an option to value perquisites during April-September on the basis of previous rules.

In a clarificatory notification issued today, the CBDT said the value of free or concessional residential accommodation provided by employer would be limited to 10 per cent of the salary for cities with a population exceeding four lakh as per as per the 1991 census and to 7.5 per cent of salary for other cities.

Under the earlier guidelines issued in June, employees getting rent-free accommodation were to have been taxed on deemed income which was to be calculated at 10 per cent of the salary which will include monthly bonuses and commissions.

The CBDT has also modified the rules for valuing the perquisite value of for part personal use of employer-owned cars. While the deduction has been kept at the same level of Rs 1200-1600 (depending on the engine capacity), it has decided to treat all cars up to 1600 cc as small cars and a large car will now be the one that has an engine capacity above 1.6 litres. Earlier, the cutoff was 1800 cc.

But the biggest benefit will come from a clause that states that where the employer or employee claims that a higher amount has been spent for official use of the vehicle, the perquisite value can be so adjusted provided that necessary documents in this regard are maintained.

For housing and conveyance loans, the prescribed interest rate will now be 10 per cent per annum. For all other loans, the interest rate will be at 13 per cent. Under the earlier guidelines, it was 6 per cent for housing loans, 12 per cent for cars and scooters and 15 per cent for all other loans.

The exemption limit of Rs 500 per month per child for education has been enhanced to Rs 1,000 per child.

No perquisite will be charged for the use of laptops or computers as these are tools for increasing the efficiency of the employee. In case of computers and electronic items, to account for the higher utility and faster obsolescence the final rules provided that normal wear and tear shall be taken at the rate of 50 per cent and for cars at the rate of 20 per cent by the reducing balance method for the purpose of working out value of perks.

A new form—12BA—stating the nature and value of perquisites is to be furnished by the employer in case the employee draws a salary above Rs 1,50,000. In other cases, information will have to be provided in the amended form number 16.


Mumbai, Sept. 25: 
The post of chairman of the Delhi-based IFCI is likely to go to V.P. Singh, executive director of Industrial Development Bank of India (IDBI).

If he wins the race, Singh will have pipped contenders like IIBI chairman Basudeb Sen, Indian Bank chief Ranjana Kumar, Icra’s P K Chowdhury and IDBI executive directors, A K Doda and J N Godbole.

However, his is a crown of thorns: he heads an institution bedevilled by huge non-performing loans. P.V. Narsimham, the current incumbent, will be laying down office on September 28.

Sources say Singh is likely to emerge as the preferred candidate at the meeting of board of directors of IFCI, which was continuing till late today.

At present, Singh looks after the associate institutions in which IFCI has a stake. These include the Unit Trust of India, CARE, SHCIL, IFCI, IDBI Principal, apart from handling corporate finance and secondary market operations in the premier institution, sources said.

According to IDBI insiders, if Singh leaves for IFCI, the institution could see some top-level changes. It is believed that Kameshwara Rao, currently chief general manager in charge of planning, is likely to be promoted to the post of executive director.

While turning around the institution by tackling the huge NPAs is likely to be a top priority, the new chairman is stepping in when Corporate India has been passing through a wrenching slowdown. This has sparked fears that NPAs in the financial sector could increase.

IFCI was recently in the news when the government and institutional shareholders agreed to provide Rs 400 crore and Rs 600 crore respectively to pull back the institution from the brink.

Though all FIs have supported the rescue package, they have said that the form and conditions of such an assistance will be decided in the light of the report to be submitted by PriceWaterhouse.

A committee headed by the former State Bank of India chairman D Basu had recommended that the government provide a Rs 400 crore assistance to IFCI and then the institution rope in a strategic ally.


Calcutta, Sept. 25: 
IBP Ltd, the public sector petroleum marketing major put on the block, has approached the government to safeguard its non-core businesses. It has asked the government to ensure that the acquirer of the government’s 33 per cent stake in IBP is barred from closing the chemicals and engineering divisions—non-core areas—in the first year of operation.

IBP chairman S.N. Mathur said: “We have asked the government to set this as a condition to the bidders.” He said the government would clear Oil Coordination Committee’s dues to IBP before divestment.



Foreign Exchange

US $1	Rs. 47.88	HK $1	Rs.  6.05*
UK £1	Rs. 69.96	SW Fr 1	Rs. 29.55*
Euro	Rs. 43.93	Sing $1	Rs. 26.70*
Yen 100	Rs. 40.98	Aus $1	Rs. 23.30*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4820	Gold Std(10 gm)	Rs. 4730
Gold 22 carat	Rs. 4550	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7625	Silver (Kg)	Rs. 7655
Silver portion	Rs. 7725	Silver portion	NA

Stock Indices

Sensex		2617.35		- 34.43
BSE-100		1240.53		- 12.49
S&P CNX Nifty	 861.40		-  7.65
Calcutta	  87.53		-  2.41
Skindia GDR	 394.41		-  2.03

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