Ex-UTI boss did a Cyberspace in other deals too
CMC scrip plunges 20% on divestment worries
Air charters on govt radar
Slew of steps to bail out airlines
Shourie move to hasten VSNL selloff
SCI, Concor weigh tie-up
RCF to bid for Hind Organic Chemicals
Cars look for festival mileage
IndusInd gears up for stake dilution
Foreign Exchange, Bullion, Stock Indices

New Delhi, Oct 1: 
The financial shenanigans of Unit Trust of India under P.S. Subrahmanyam are slowly being uncovered and they reveal that Cyberspace Infosys, the Lucknow-based company, wasn’t the only bad investment that the trust’s head honchos made after overruling the recommendations of the equity research cell.

A report submitted by UTI, in response to pointed queries by the Joint Parliamentary Committee (JPC) investigating the stock market scam, says the former UTI chief and his cabal did much the same thing when investing in the private placement issue/initial public offerings of companies like Broadcast Worldwide Pvt Ltd, IQ Infotech, Vintage Cards and Creations, Aksh Optifibres besides two government-owned entities—Vijaya Bank and PNB Gilts.

The fund also invested in companies like Baron International, Binani Zinc, Spun Industries, Rama Phosphates and Shonkh Technologies even though the equity research cell had prepared no reports on these companies.

The top officials of UTI, who met the officials of the finance ministry to discuss the revitalisation strategy, are also believed to have discussed the report and the ways to chalk out a quick recovery of the fund in the wake of the worsening stock market.

The equity research cell, which has been giving specific recommendations on primary market equity proposals since 1998, had suggested that UTI should shun Broadcast Worldwide’s private placement of equity and said the decision to invest could be reviewed when the company came out with its IPO. Over-ruling this recommendation, UTI bought 15 lakh shares of the company at Rs 50 each aggregating Rs 7.5 crore. The company has yet to make its IPO.

Similarly, UTI agreed to invest in IQ Infotech’s IPO by picking up 2 lakh shares at Rs 16 each aggregating Rs 32 lakh in February this year even though the research cell found little worth in the stock. The shares are currently ruling at Rs 3 which translates into a depreciation of Rs 26 lakh at current prices.

In the case of Vintage Cards and Creations Ltd, the equity research cell in its report has categorically stated that investment in its IPO should be avoided as the issue is fully priced and there was very little chance of profitability on the upside.

However, UTI put in an application to purchase 2.35 lakh shares of Rs 10 each at a premium of Rs 225 aggregating Rs 5.29 crore. However, the company allotted it only 22,450 shares aggregating Rs 50.51 lakh. As of now, the shares are ruling at Rs 14 resulting in a depreciation of almost Rs 47 lakh in a span of two years.

UTI sanctioned Rs 3 crore for subscribing 5 lakh shares at Rs 60 each in the IPO (through the book-building route) of Aksh Optifibre even though the research cell counselled against it on the ground that it entailed high-risk below average returns.

Subsequently, the company allotted 2.25 lakh shares aggregating Rs 1.35 crore to UTI. The present market price is Rs 62—the only instance where the market price is higher than the offered price.

Unit Trust also subscribed to 33.18 lakh shares of PNB Gilts at Rs 30 each aggregating Rs 9.96 crore and 7.78 lakh shares of Vijaya Bank at Rs 10 each aggregating Rs 77.8 lakh overruling the recommendation of its research cell.

At present, PNB Gilts shares are ruling at Rs 14 while Vijaya Bank is being quoted at Rs 6.50 resulting in a depreciation of Rs 5.32 crore and Rs 27.23 lakh respectively.


Mumbai, Oct. 1: 
Shares of CMC plummeted 20 per cent as investors agonised over the fact that an offer to sell the government’s equity in the computer maintenance and software company brought forth only one bid — that, too, at a price far below its market worth.

The scrip languished at Rs 246.85, its lower-end circuit filter, having lost Rs 61.70 over its previous close.

There are reports that only Tata Consultancy Services (TCS) has tabled a bid for a controlling stake, at a price less than a third of what the stock commands in the market.

What has also unnerved investors is the government’s dilemma on the firm’s privatisation amid a debate on whether to accept TCS’ bid.

The uncertainty is believed to have forced a postponement of a meeting of the Cabinet Committee on Disinvestment slated for today.

TCS is reported to have quoted Rs 200 for each CMC share, sparking fears that the stock will remain under pressure until its market price matches that of the bidder’s. It shot past Rs 350 in August, slipped to Rs 199.40 on September 17 and rallied again to Rs 312.05 on September 27.

According to market analysts, there is a widespread apprehension that the government may either sell its equity in CMC at a discount to the present market price, or put off the disinvestment process for few more months till conditions on bourses improve.

The government has put on block the 57 per cent it holds in CMC, and several companies had shown an interest in picking up that stake in the past.

However, the selloff process suffered a setback when conglomerates like the A V Birla and the Reliance groups pulled out.


New Delhi, Oct 1: 
The government today set up a committee to review the procedures for buying, maintaining and running private aircraft and helicopters, including those hired out on charters.

Shaken by the sudden crash of a Beach Kingair C 90 aircraft that killed Congress leader Madhav Rao Scindia and four journalists, civil aviation Shahnawaz Hussain ordered the formation of the committee headed by Indian Airlines’ chairman Sunil Arora which will look into all aspects of operations by these small aircraft and submit a report within 15 days

Although the committee has Director General of Civil Aviation as a member, it will also be looking into the loopholes in the current system—particularly the manner in which airworthiness certificates are given.

Officials said the ministry is also likely to order more rigorous pre-takeoff checks on private charter aircraft.

Last Sunday, a helicopter carrying scientist A.P.J. Abdul Kalam crashlanded in Bokaro. Although Kalam escaped unhurt, mechanical failure of parts is being blamed for the accident.

Sources said the Directorate General of Civil Aviation is likely to be asked to ensure conduct of more rigorous pre-takeoff checks on these aircraft.

Strict adherence to rules on overhaul of old aircraft will be made mandatory for these planes to get certificates of airworthiness.

Stringent action is likely to be taken against owners of planes found flying without airworthiness certificates.

At present, aircraft flown by scheduled airlines are subject to these tests whereas smaller privately-owned aircraft are allowed to take off with cursory checks. Since the number of small aircraft flying various kinds of charters are increasing, the government is considering a number of measures designed to ensure greater safety.

Single engine aircraft will be allowed to take a maximum of ten passengers only and will not be allowed to fly over hilly or otherwise difficult terrain.

Twin-engined aircraft and jet planes will be allowed to take on more passengers and fly over hilly terrain but will be subject to pre-takeoff tests which will be as rigorous as those conducted on aircraft flown by scheduled airlines.

The committee which periodically meets to clear aircraft purchases and leases is also likely to be asked to insist on stricter checks for second hand and old aircraft before they are allotted Indian call signs.

Meanwhile, an insurance surcharge of Rs 100 per flight coupon will be collected by Jet Airways for travel on all its flights. This surcharge will be levied on all tickets.


New Delhi, Oct. 1: 
State-owned general insurance companies are likely to come up with a slew of measures on October 3 for helping airline companies, including Air-India and Indian Airlines, which are facing problems due to rise in reinsurance rates worldwide. Officials of finance ministry, Insurance Regulatory and Development Authority, New India Assurance, Oriental Insurance, National Insurance, United India Insurance, discussed the present situation to find a way out to help the aviation industry.

The meeting comes after the civil aviation ministry asked the finance ministry to provide a letter of comfort for lessors of aircraft to Air-India and Indian Airlines for third party war risk cover, after A-I grounded two leased Airbus A310s and was likely to ground one more shortly.

“There has been a discussion in regard to the contraction of the insurance market and the rise in reinsurance costs, and what needs to be done to mitigate the problems faced by the aviation industry,” New India Assurance chairman K.N. Bhandari told reporters after the meeting here today.

He said the officials would meet again on October 3 to find out ways of helping the Indian airline companies.

Insurance companies are likely to provide the airliners with cover which were not available or available at high cost.

At present, the third party liability limit offered by insurers to Air-India is about $ 1.5 billion while it is $ 500 million for Indian Airlines, $ 300 million for Jet Airways and $ 150 million for Sahara Air. “The market situation is such, we can’t provide more than that to the airline companies,” Bhandari said.

Reinsurance costs have gone up in the international market considerably after the September 11 terrorist attack in the US which has put pressure on domestic companies to raise their premia also.

Last week the civil aviation ministry sought a letter of comfort for lessors of aircraft to Air-India and Indian Airlines for third party war risk cover.

Similar cover was provided to the national carriers during the Gulf War.

While two A-I aircraft, leased by Singapore Airlines (SIA), were grounded last week, one more belonging to US leasing firm Gecas was expected to be grounded soon, ministry sources said.

Only three days back Air-India grounded a A310 after French lessor BNP Paribas sought a third party insurance cover.

Air-India was facing an increase of about Rs 10 crore in its insurance premia which would have to be borne by the national flagship itself.

Private domestic operators, Jet Airways and Sahara Airlines, would also have to fork out crores of rupees as part of the special surcharges being imposed by insurance firms globally after the recent terrorist strikes on the US and the LTTE attack on Colombo’s Bandaranaike airport.

However, Jet Airways had not sought any additional cover as their insurance year would end only in April next year and had taken care of war risk despite being a domestic carrier which does not fly on war zones.

A hull war risk cover of 0.05 per cent has been imposed globally on all airlines to cover damage to the aircraft and passengers. This would be calculated as per the value and size of the fleet as well as the number of passengers carried.

A special surcharge of $ 1.25 per passenger would also be charged by the insurance companies.

According to Air-India sources, the new insurance surcharges would cover its current fleet of 27 aircraft, including the four leased aircraft.

The hike in the insurance cover is expected to hit the bottomline of the airliners.

Admitting the rise in the insurance premia, Bhandari said that the premia would now come at a cost but declined to elaborate on the extent of rise in the cost of policies charged to the airline companies.


New Delhi, Oct. 1: 
The government today asked officials of Videsh Sanchar Nigam Ltd (VSNL) to break the technical and administrative logjam in the public sector unit that is holding up the process of divestment.

Disinvestment minister Arun Shourie today summoned senior officials in VSNL and the department of telecommunications to discuss these issues even as he hunkers down to the tough task of privatising one state-owned unit every fortnight in the remaining part of this fiscal.

The government has already signalled its resolve to sell stakes in 13 PSUs over the next six months.

Sources in the communications ministry said, “The strategic partner or partners can be picked from the companies that have submitted the expression of interest. We are yet to finalise the price for the 25 per cent stake in VSNL. However, even at the current market value, it would be more than Rs 2,500-3,000 crore.”

“The scrutiny of the bids will be undertaken in the next few months. We hope to complete the whole process by year-end,” sources added. SBI Caps-Credit Suisse First Boston are the advisors for the VSNL disinvestment process.


Mumbai, Oct. 1: 
The Shipping Corporation of India (SCI) and Container Corporation of India (Concor) are planning an alliance that could lead to the shipping major picking up a stake in the container carrier.

It is learnt that senior officials from Concor recently approached the SCI top-brass with the tie-up proposal. The developments are still in an “embryonic stage” but officials familiar with the events said it was an interesting idea that could facilitate vertical integration of the companies’ businesses.

It is not clear what shape the link-up will assume. What is known at this stage is that it is Concor, a public sector undertaking (PSU) floated by the railways, which is keen on turning the idea into reality. Sources said the alliance can be forged in two ways — either SCI buys a part of the government’s stake in Concor or the two sides forge a consortium.

In case of a business-sharing agreement, both companies will tap each other’s customers. While SCI will pass on containers for onward despatch from ports to the hinterland using Concor’s distribution network, Concor will send the containers meant for exports from the hinterland to SCI.

However, there are indications that senior SCI officials are not excited at the proposal. They are credited with the view that the company’s core business should be consolidate and expanded. The feel a shipping company with an overwhelming presence in the industry should not fritter away its resources in other lines of activity.

SCI acknowledges that there are advantages in the alliance between the two PSUs, but it would like Concor to look at the pitfalls before rushing into a deal. The shipping major fears that the proposed joint venture may force its competitors to look elsewhere for transporting containers contracted to Concor.

Concor, seen as a top-heavy organisation, was incorporated in March 1988 with the prime objective of developing modern multi-modal transport logistics and infrastructure to support the growing international trade and to encourage containerised cargo movement within the country. The government holds 63 per cent of the company’s equity capital.

SCI posted an after-tax profit of Rs 382.56 crore in 2000-01 and paid a dividend of 30 per cent; its net profit was Rs 11.72 crore in the first quarter of this fiscal.


Mumbai, Oct. 1: 
The state-owned Rashtriya Chemicals & Fertilizers Ltd (RCF) today joined the fray to pick up the government’s stake in Hindustan Organic Chemicals Ltd (HOCL).

RCF, which is one of the major fertiliser and industrial chemicals manufacturing and marketing companies in the country, has submitted a letter of expression of interest (EOI) to the advisors appointed by the government to look after the disinvestment process.

The company, in a communication sent to the exchanges today, said the EOI is to enable the company “to look more closely at the proposal made so as to arrive at the feasibility or otherwise of acquiring the majority stake in HOCL.”

HOCL is slated to offer a majority stake to a strategic partner for which the government has already appointed A.F. Ferguson & Company as the advisor.

RCF, however, said the matter is at a very preliminary stage and it will start the process of due diligence and other exercises connected with it after it qualified for the bidding.

The government had earlier announced that it will divest its 33 per cent equity that it holds in HOCL.

At one point many multinationals, including Bayer, BASF and Japanese major Mitsui, had evinced interest in RCF which is under the department of chemicals and petro-chemicals.

HOCL is the country’s largest player in phenol and it has a capacity of 65,000 tonnes per annum. Aniline capacity, another chemical, is pegged at over 25,000 tonnes.


New Delhi, Oct. 1: 
The going hasn’t been easy for auto-makers, but they are putting economic woes behind them and limbering up for the festival hard-sell.

They are not sure if the campaigns will bring customers into showrooms at a time when hopes of a revival are fading away.

However, they have been counting on the festival fervour and the belief that festival purchases make good investments to unveil special packages for new-edition or upgraded car models.

Maruti Udyog’s (MUL) festival offer of Esteem “Limited” edition, for instance, hits the shop-floors this weekend. The attractions are the brand’s enhanced luxury appeal and an improvement in the car’s attributes of power, performance and fuel efficiency.

“Festivities and the feel-good feeling they generate help push a product. A limited-edition offer whips up an excitement in the market. The successful ad-campaign for Esteem convinced us that new versions of the car would prove to be a big draw,” a Maruti official said.

Esteems peddled as part of the Puja offering will be embellished with leather upholstery, alloy wheels, rear spoiler with stop-lamp, key-less entry-cum-theft deterrents, rear de-fogger, fog-lamps and a power antenna. The company plans to launch only 1,000 units, in starlite silver, pearl silver and superior white colours, at prices ranging from Rs 4.9 lakh to Rs 6.1 lakh.

Ford is ready to roll out its new-look, all-improved Ikon. Says Bhuvana Ramalingam, the company’s public affairs manager: “There will also be an anniversary package for customers. We do not believe in discounts, so prices will stay unchanged, but purchases will be accompanied by a package of accessories.”

Despite the aces up its sleeve, the US car major does not see exciting times this season. “Sales have been flat. We do not expect a pick-up in sales this month and the next. May be, things will change after Monedo’s — our D segment car — launch in December.”

Honda new range of City cars to be unveiled during the Pujas have better interiors and additional rear seat belts. “The update has been made come in response to the demand from customers,” a company official said.

There are others, like Hyundai’s corporate affairs manager Sirish Sinha, who know Indians are compulsive festival shoppers. His company is working on campaigns expected to be unleashed by the end of this week. “We know that sales perk up in the festival season.”

General Motors has uncorked a marketing blitz driven by easy credit facilities and interest-free loans for Opel Astra, Corsa and Swing. Says Rajeev Chaba, vice-president (marketing): “We are launching an exchange plan that offers buyers to swap their old Esteem, Ikon, City and Corsa cars for an all-new Astra. Discounts will range from Rs 15,000-25,000. In addition, we plan to offer zero per cent loans to buyers of Corsa. The schemes for both cars will be launched in this week.”


Calcutta, Oct. 1: 
The promoters of IndusInd Bank are likely to dilute their stake by 16.25 per cent to reduce the promoters equity from 56.25 per cent to 40 per cent level by the end of this fiscal.

The two promoter companies —IndusInd Enterprise & Finance Limited (IEFL) and IndusInd International Holding Limited (IIHL)—currently hold 31.25 per cent and 25 per cent of the total equity of the bank respectively.

Bank managing director Bhaskar Ghose told reporters here today “as per the Reserve Bank of India directives, the promoters of private sector banks have to bring down their exposure to 40 per cent. The IndusInd promoters are likely to dilute their stake to that level by March 2002.”

While the two promoter companies hold a combined 56.25 per cent share in the bank, the rest were being held by the non-resident Indians and public, he said.

The bank, which started in 1994 with a total capital base of Rs 100 crore, had a net worth of Rs 544 crore as on March 31 this year.

According to Ghose, the bank is maintaining a credit-deposit ratio of about 62 per cent. Ghosh said: “Our credit-deposit ratio is satisfactory given the present economic scenario.” The industry average is believed to have slipped below 60 per cent in recent times.

Alongside, the bank is in the process of improving its retail banking services. It has tied up with an Irish company, CR2, to upgrade its internet banking technology.

The bank is also spreading its branch network rapidly: it aims to set up at least 100 branches by the end of this financial year. It had 31 at the beginning of the year.

Ghosh said the bank had decided to foray into film financing leveraging the long-standing experience of its promoters in the business.

The bank has been examining the idea for some time, and now believes that it has greater core competence than others in exploring the industry.



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