Bad loan-burdened IDBI keen to get out of other institutions
TVS, Suzuki teeter on the brink of divorce
Solace in Bajaj Auto arms?
HCL Tech buys 51% in Deutsche Software
Taxmen face Sinha wrath
Bare-all buzz in corporate corridors
ICICI to draw up power blueprint
Sahara gears up for feederservice debut
Changes in perk tax norms hailed
Foreign Exchange, Bullion, Stock Indices

 
 
BAD LOAN-BURDENED IDBI KEEN TO GET OUT OF OTHER INSTITUTIONS 
 
 
FROM VIVEK NAIR
 
Mumbai, Sept. 26: 
Groaning under a massive pile of bad loans, Industrial Development Bank of India (IDBI) wants to sell the stakes it holds in other financial institutions. The proposal will be put forward at a meeting between the new IDBI chief, P. P. Vohra, and the finance minister in the capital on October 4.

IFCI, Unit Trust of India (UTI) and Small Industries Development Bank of India (Sidbi) are some of the institutions partly owned the Mumbai-based financial major.

Though there are indications that Yashwant Sinha will not be amenable to the idea of IDBI’s exit, Vohra is likely to persuade the finance minister that this be done gradually. “It may not happen immediately, but the process could be spread over a period of time,” sources said.

The stake divestitures, however, are only one of the several significant recommendations which the new chairman and managing director will make in his date with the finance minister, sources close to IDBI told The Telegraph.

Vohra, for instance, could press for the transfer of stakes held by IDBI in state financial corporations to either the Reserve Bank of India (RBI) or any other body, which could include Sidbi. The combined holding in these entities, sources say, is worth Rs 250 crore.

These recommendations are seen as part of the aggressive efforts aimed at improving IDBI’s finances and limiting its focus to its core business of project finance.

The institution is bedevilled by mounting non-performing assets (NPAs), which have smudged its balance-sheet and depressed net profit to around Rs 182 crore.

Moves to divest stake come at a time when IDBI has signed up to the joint rescue effort for IFCI. It holds around 36 per cent in the New Delhi-based financial institution.

Its holding in the crisis-wracked IFCI has invited criticism from some circles.

“If its stake in IFCI were to be marked to market, IDBI will have to make a large provision to offset the depreciation in value,” an analyst said. However, sources say IDBI is committed to helping IFCI along with other institutions in the Rs 600-crore bailout.

In Sidbi too, IDBI holds 49 per cent but believes that the stake does not reflect its core activities. It had already divested its 51 per cent in the previous year, the bulk of which was picked up by SBI and its subsidiaries.

In the case of UTI, the country’s largest mutual fund, IDBI was one of the founder-promoters in the sixties by subscribing to the corpus of its flagship scheme, US-64. However, the overwhelming opinion now is that IDBI has no business to be involved with the UTI.

IDBI, sources said, has also been saddled by an exposure of over 1,100 crore to co-operatives that have defaulted on loans. The exposures were guaranteed by state governments and counter-guaranteed by the Centre. A plea will be made for the commitments to be honoured .

It is estimated that the combined value of all these investments including the exposure towards co-operatives is around Rs 4,000 crore. Thus, any positive feedback from the Centre will result in the institution making a huge gain.

Sources also divulged that in the present times when raising funds at competitive rates is challenging, it is imperative that the Centre give more tax incentives. IDBI here is seeking benefit similar to that granted to Infrastructure Development Corporation Ltd (IDFC) Ltd, thus exempting it from paying tax on income from interest and long terms capital gains among others.

It is understood that in the presentation Vora will also pitch for some vital concessions to facilitate the institution’s foray into universal banking.

   

 
 
TVS, SUZUKI TEETER ON THE BRINK OF DIVORCE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept. 26: 
The marriage was on the rocks, but few believed Suzuki and TVS had drifted so far apart. The doubts were laid to rest when joint venture TVS Suzuki told stock exchanges today that its board would meet on Thursday to decide if they can hold together.

The communication to bourses said the board will consider developments over the possible amicable settlement of the differences between Suzuki Motor Corporation and TVS, “including the possibility of the Japanese major’s disengagement from the company both as a shareholder and a licensor”. Suzuki holds 25.9 per cent in the joint venture.

Reports about the possible split sent TVS Suzuki’s shares into a tailspin on the BSE as investors agonised over the consequences of the separation. The share plunged a whopping Rs 18.15 to Rs 72.80 at the close on volumes of over 46,500.

The scrip has hit a year’s low of Rs 70.80, and a high of Rs 224; the stock has been trading mostly between Rs 75 and Rs 90 over the past two months.

Reports about the fractious relations between the TVS Group and joint venture partner Suzuki Motor Corp first surfaced about a year ago when the going got tough for two-wheeler makers. Matters reached a head last month when it was reported that Suzuki Motor was in talks with Bajaj Auto to bring out scooters.

Suzuki Motor has an agreement with the TVS Group to make motorcycles which runs till 2007. The talk of a possible “disengagement” with Suzuki raises some tough questions for TVS Suzuki which will have to then find a partner soon which will be able to offer new models in a highly competitive market.

Just two weeks ago, Venu Srinivasan, TVS Suzuki’s chairman and managing director had asserted on a SIAM meeting in Delhi that the reports of a tieup with Bajaj Auto would not affect its ties with Suzuki.

Suzuki has a deal with Kawasaki under which the two Japanese giants will join forces to compete in the global arena. Kawasaki, which is Bajaj Auto’s partner in a motorcycle venture, was reported to have offered a Suzuki scooter model to Bajaj Auto.

At that time, Srinivasan had said: “The Kawasaki deal has nothing to do with Indian two-wheeler company. Bajaj may have a deal with Kawasaki separately but that in no way is going to affect Suzuki’s deal with us. We have no fears about Suzuki pulling out of the existing joint venture.”

“It is not going to affect them much”, an analyst affiliated to a FII broking house said.

   

 
 
SOLACE IN BAJAJ AUTO ARMS? 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept. 26: 
The news of the impending divorce will have repercussions in Pune, home to Bajaj Auto (BAL), the largest two-wheeler maker till Hero Honda recently dislodged them from the number one slot. It could well be a prelude to Suzuki joining hands with Bajaj Auto and Kawasaki in a three-way partnership with the new partner Suzuki offering badly needed expertise to Bajaj in making scooters.

Bajaj which is attempting a comeback in scooters will sorely need assistance from a technologically sound partner in scooters to take on the new player on the block- Honda Motor Company, which has made waves in the Indian markets with Activa.

Kawasaki, Bajaj Auto’s technology partner in motorcycles is presently negotiating with Suzuki Motor Corporation for combining their strengths in production and technology upgradation in their global markets. Kawasaki is not known to have a presence in scooters, while Suzuki has a presence in scooters. Confirming this, Sanjiv Bajaj general manager said; “they (Kawasaki) have informally informed us that detailed discussions are under progress with Suzuki Corporation”.

Industry circles say that a clearer picture will emerge shortly, which will have implications in India. The two players in the two-wheeler segment are exploring ways to share productions costs and new product development costs”.

If the talks fructify, it is expected that the partnership will support the larger partner locally said industry circles. As Bajaj Auto has a larger presence in the two-wheeler segment it is expected that they might choose Bajaj over TVS.

This probably could have been a major reason for the separation between TVS and Suzuki, say analysts. Interestingly, while Kawasaki shares a technological tie-up with Bajaj Auto it does not have a equity stake in the company, while Suzuki had a equity stake in TVS-Suzuki.

Worldwide, auto players are merging in a bid to cut down costs while maintaining separate marketing networks.

   

 
 
HCL TECH BUYS 51% IN DEUTSCHE SOFTWARE 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
Bangalore, Sept. 26: 
HCL Technologies has acquired a majority stake in the Bangalore-based Deutsche Software Ltd, a subsidiary of Deutsche Bank of Germany. This was announced by HCL chairman Shiv Nadar today.

“It is a cash and stock deal,” he said. HCL will have a 51 per cent stake in the joint venture. Shiv Nadar, however, refused to disclose details of the deal.

HCL Technologies would acquire the balance 49 per cent at the end of three years through the issuance of equity shares to Deutsche Bank.

“The joint venture will provide a strong platform to strengthen its global presence in the financial services segment,” Nadar said.

Deutsche Software has extensive experience in, and an established track record of, providing a full range of it services from high end consulting work to application development and maintenance. It executes consulting and software engineering projects for the Deutsche Bank group from here and at various Deutsche Bank locations in Frankfurt, Singapore, London and New York.

“The joint venture was consistent with HCL’s strategy of growing its business both organically and through selective partnership,” Nadar said.

   

 
 
TAXMEN FACE SINHA WRATH 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Sept. 26: 
Finance minister Yashwant Sinha today pulled up the Central Board of Excise and Customs (CBEC) for not being able to meet customs and excise targets for the first half of this financial year. The minister, who had a four-hour long review meeting with CBEC officials, was apparently told that the government could fall short of targeted indirect revenues by as much as 20 per cent if the current trends continued.

Officials warned that with global trade shrinking and economic slowdown continuing in the country, customs and excise collections were likely to fall short of the indirect tax targets of Rs 1,40,000 crore by as much as 20 per cent.

Finance ministry officials later said the government was considering urging the public sector units to either advance planned imports or at least stick to the time-table. This would not only help tax collections but would also help these companies to save on foreign exchange as the ministry expects both the rupee-dollar rate to worsen as well as prices of certain key materials increasing due to war fears.

The finance minister also asked officials to lay greater stress on service tax collections to try and make up a part of the indirect tax shortfall. “We will evolve the necessary mechanism to ensure that targets are met in customs, excise and service tax collections,” Sinha told reporters.

However, a separate meeting within the finance ministry also decided against the government going in for any additional market borrowings to tide over the current shortfall in indirect tax collections. The idea is that the government should not burden itself with more debt, annual interest on which has now crossed the Rs 1,00,000-crore mark.

Officials, however, added that the trend in direct revenue collections was encouraging. Buoyancy in tax collections is expected to offset the 45 per cent higher direct tax refunds during the period between April to September. The total revenues from corporate and income tax during April to September 17, this year stands at Rs 20,406 crore, just Rs 234 crore less than the amount collected during the same period last year, a difference of just 1.1 per cent.

   

 
 
BARE-ALL BUZZ IN CORPORATE CORRIDORS 
 
 
FROM RAJA GHOSHAL
 
New Delhi, Sept. 26: 
India Inc will start lifting the veil of secrecy just a little more to give their shareholders a greater peekaboo into the way they run their various businesses.

The Old Order under which companies reported consolidated financial results is over. Starting from the second quarter ended September 30, companies will have to give the breakdown of the numbers to indicate how their various business segments have fared—a concept that is fairly de rigeur in the West but has yet to gain currency in India.

There are two pieces of rule changes that will bring about this greater corporate transparency: firstly, the Securities and Exchange Board of India has announced a change in the provisions of the listing agreement that the companies sign with the stock exchanges that will make it mandatory for them to report the turnover figures for the various business segments on a quarterly basis starting from the second quarter of this fiscal.

Secondly, the Institute of Chartered Accountants of India has come out with a new accounting standard —called AS 17—which makes it mandatory for all companies (listed and non-listed) to furnish the numbers for each business segment for the financial period starting April 1 this year.

Rajan Verma, chief financial officer at Dabur India, says the company will start reporting segment-wise financials when it comes out with its first half results for the period ended September 30.

“At Dabur, we always had financial statements for our divisions—family products, health, pharmaceuticals, ayurvedic and foods—but that was meant for the management and not disclosed. The new rules require us to disclose them publicly. The companies are allowed to choose their primary and secondary segments,” he added.

According to a chartered accountant with ICAI, the “segments” in a company denote the lines of business whose risks and returns are different from other businesses of the company.

The ICAI standards are in tune with its policy to be at par with International Accounting Standards. “By the end of this fiscal, ICAI expects the Indian GAAP (Generally Accepted Accounting Principles) will be at par with International Accounting Standard (IAS).

Meanwhile, Union minister of law justice and company affairs Arun Jaitley today released a study entitled ‘Comparative study of accounting standards: US GAAP, Indian GAAP and IAS’. He said, “With investments coming from all over world, balancesheets needs to be compared, transnationally, and therefore Indian accounting standards need to be brought at par with international standards.”

   

 
 
ICICI TO DRAW UP POWER BLUEPRINT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept 26: 
Union power minister Suresh Prabhu has asked ICICI to submit a report within a few weeks suggesting measures to revamp the sub-transmission and distribution in power sector.

The power ministry has an action plan to turn 60 distribution circles into profit centres. Prabhu will submit a proposal before the Cabinet within two weeks to make all distribution circles in the country profit centres.

“Five institutions—NTPC, CEA, PowerGrid Corporation, PFC and one of the IITs—have identified the 60 centres; they will identify the others as well. They will soon be able to bring out a database which will help in setting up of a separate monitoring agencies to supervise the flow and use of funds for the project,” said Prabhu.

“This will help the private companies to draw up their investment plans,” he added.

Focus will also be placed on accountability at the distribution circle level, improving quality of power and revamping of the distribution network.

Prabhu said he was confident that results would be visible in the medium term if this approach was adopted.

Earlier inaugurating the fourth India Power Forum here today, Prabhu said there was no simple solution to the various problems faced by the sector. He called for the implementation of comprehensive action plan drawn up by the centre. Under this plan, the public sector will have an increased role in generation in the short term. At the same time, power ministry was not averse to private investment.

He reiterated that it was necessary to meter every consumer in the country, to make distribution circles profit centres.

   

 
 
SAHARA GEARS UP FOR FEEDERSERVICE DEBUT 
 
 
BY A STAFF REPORTER
 
Calcutta, Sept. 26: 
Undeterred by the global showdown in the airline business, Sahara has finalised plans to enter feeder services. This will help it service destinations in the north-eastern states from Calcutta.

Company chief Subrato Roy said orders have been placed for 12 aircraft, all of which are 50 to 70 seater carriers. The first batch is likely to be delivered in February-March and the entire fleet by October, Roy told reporters here today. He said services on the Calcutta-Mumbai and Calcutta-Delhi sector will be augmented in the near future.

Roy made a presentation to the chief minister Budhadeb Bhattacharjee on his Rs 915-crore tourism project spread over the Sundarbans and the Teesta River in north-Bengal. He expressed hope that these areas will turn into global tourist hotspots in four to five years.

   

 
 
CHANGES IN PERK TAX NORMS HAILED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept 26: 
The tax on perquisites will burn a hole in pay packets, but neither the corporate houses nor the executives are complaining. After the final guidelines were issued yesterday, there have been no squeals of protest—they reckon it could have been a lot of worse.

The final guidelines provided some concessions which have been welcomed. In any case, executives had already been prepared to bear the brunt of the tax axe on perks which was announced by finance minister Yashwant Sinha in his budget speech in February.

“We welcome the government for taxing the perks that executives receive from the company. But they in turn should remember that the same taxpayers should not be taxed over and over again. The government should now look out to increase its tax base. We are comfortable with the present directives as some of the recommendations of the chambers and corporates have been incorporated in the final version. But the burden should not be increased,” a Federation of Indian Commerce and Industry (Ficci) spokesperson said.

He added, “With the recommendation on these taxes we had suggested ways to increase the tax base, by bringing commercial agricultural activities within the tax net. This includes horticulture and related activities. The rural rich also should be considered. We accept that government needs to increase its revenue. But the target group should increase rather than being burdened.”

K.C. Ravi, director of Confederation of Indian Industry (CII) said, “The taxable value of the perquisites in respect of housing and company-provided cars have been modified after taking into account our suggestions. So though it will push up the tax burden, we cannot really complaint.”

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.86	HK $1	Rs.  6.05*
UK Ł1	Rs. 70.63	SW Fr 1	Rs. 29.75*
Euro	Rs. 44.19	Sing $1	Rs. 26.70*
Yen 100	Rs. 40.65	Aus $1	Rs. 23.30*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4855	Gold Std(10 gm)	Rs. 4760
Gold 22 carat	Rs. 4585	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7600	Silver (Kg)	Rs. 7650
Silver portion	Rs. 7700	Silver portion	NA

Stock Indices

Sensex		2667.34		+ 49.99
BSE-100		1265.30		+ 24.77
S&P CNX Nifty	 873.70		+ 12.30
Calcutta	  89.54		+  2.01
Skindia GDR	 392.31		-  2.10
   
 

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