Hefty jump in topline
Tax troops to dig out arrears
Lever exonerated
Courier firms set to charge more
Local petro majors eager to open united front
Revamp to recharge slump-hit Telco
Om Kotak targets rural market
Durgapur Steel in production overdrive
Bharti Mobitel plan to net more users
IT firms on talent hunt

 
 
HEFTY JUMP IN TOPLINE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct. 2: 
Bayer’s latest move is expected to strengthen its local crop science business because of the strong research & development base (R&D) of Aventis CropScience (India) Ltd.

Bayer India officials, however, refused comment on the implications of the acquisition in India.

Analysts said the acquisition would lead to the addition of at least Rs 250 crore to the topline of Bayer India Ltd. Aventis, they said, has gradually increased its presence in the agrochemical sector through product introductions.

“The acquisition will certainly benefit Bayer the most. It will now have a wide portfolio,” an analyst said.

Earlier, known as Agrevo (India), Aventis CropScience is a 50.1 per cent subsidiary of Hoechst Schering AgrEvo. The company changed its name after the worldwide merger of agriculture business of Rhone Poulenc and AgrEvo.

However, Rhone Poulenc Agrochemicals (India) and Aventis operate as separate entities in the country. The Aventis crop science group also has two other companies—Bilag (India) and ProAgro Seeds.

On the other hand, Bayer India, which is a 51 per cent subsidiary of Bayer AG, has products for pest control and crop protection.

   

 
 
TAX TROOPS TO DIG OUT ARREARS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Oct. 2: 
Strapped for cash and short of options, the finance ministry is planning tough-love measures to recover excise duty arrears worth Rs 68,000 crore and other revenue dues locked up in court contests.

Revenue department officials say they have been asked to accord high priority to collection of arrears and to freely use Section 11 of the Central Excise Act, which allows them to deduct dues from refunds and to attach goods on which manufacturers are liable to pay taxes.

In intractable cases, authorities have even been told to invoke 230 — a little-used rule that allows them to attach the plant and machinery of defaulters. Appellate authorities are being asked to speed up resolution of cases against pending demands and the Central Board for Excise and Customs (CBEC) has been ordered to review important petitions on tax arrears.

Over Rs 9,200 crore in excise dues remains locked up in legal wrangles, of which nearly Rs 8,500 crore is in the form of confirmed demands on June 30. Similarly, in the case of income tax, the dues stand at a staggering Rs 60,000 crore. However, more than half of the amount is stuck in various court and tribunal proceedings.

The income tax appellate tribunal has been told to dispose appeals within 180 days from the stay order. “This has been formalised through clause 78 in this year’s Finance Bill,” officials said.

Coercive action, wherever necessary, has also been allowed. “Co-ordination of revenue intelligence has been improved to achieve breakthroughs. The idea is that even if we can garner 20 per cent of the dues, we may be able to bridge the fresh deficit anticipated. This does not mean a return to the Raid Raj but it does imply stricter and more pro-active measures than those which have been adopted in the past,” officials said.

The fiscal deficit — the gap between the government’s revenue and expenditure — has shot up to Rs 56,079 crore in the first five months of 2001-02, almost half of the figure projected for the year; around this time last year, it was 32 per cent of the full-year estimate.

Much of the problems arise from the revenue deficit, which has shot up to Rs 43,640 crore, more than 55 per cent of the targeted figure for the year. Although direct tax receipts have been reasonably good, the shortfall in indirect taxes has been steep due to sluggish imports and a recession-roiled domestic economy.

What is significant is that the deficit has been fuelled not by burgeoning expenditure but by falling tax collections. Evidence of this is that only Rs 31,015 crore, or 19 per cent of the budgeted taxes for 2001-02, has been collected; the mop-up was 27 per cent same time last year.

   

 
 
LEVER EXONERATED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 2: 
Hindustan Lever Ltd has been cleared of a raft of charges filed eight years ago for disproportionate increases in product prices and profiteering at customers’ expense.

The Monopolies and Restrictive Trade Practices Commission (MRTPC) said the director general (investigation and registration) had failed to substantiate the serious charge that HLL had abused its dominant position to ratchet up prices and undermine the interests of its customers. The DG had argued that based on the pricing patterns of its products, the trade practices by HLL were monopolistic as their trade practices attract the provisions of clauses(i) (ii) (iv) and (V) of section 2(i) of the MRTP Act.

A two-member MRTPC bench comprising C.M. Nayar and RL Sudhir concluded that the complainant had failed to establish these cases.

The MRTPC order has stated that mere high prices and high profits are not enough to sustain charges of monopolistic trade practice. ‘Highly profitable ventures are not always a bane to society, they can be a bliss from the point of their positive contribution to employment and state revenues,” it added.

   

 
 
COURIER FIRMS SET TO CHARGE MORE 
 
 
FROM VIVEK NAIR
 
Mumbai, Oct. 2: 
Courier companies are considering a hike in service charges to meet the rising costs of moving consignments after terror attacks in the US tightened security and forced airline users to pay more.

The increase could range from 10-15 per cent for domestic consignments. It will be higher for mail and parcels sent abroad.

A senior official from a leading European courier with operations in India said his company was considering a hike of at least 2 euros on India-to-Europe consignments.

The attacks and the threat of US retaliation, he said, have increased delays because airliners cannot fly over Afghanistan, and take a detour.

The strikes have also meant longer and harsher security, adding to the delays and costs. Many countries have increased the cooling period for cargo, and most airlines have made their screening more rigorous.

Costs have also gone up for companies which now have to purchase consignment-scanning machines.

“The process of screening has become costlier in recent times because we have to buy such machines. Therefore, the costs will have to be passed on to customers,” the official said.

Unlike in other countries where courier companies have to invest in security equipment, those in India get it done by domestic airlines.

“We feel the costs and delays could rise on domestic consignments too. Some of that will have to be shared with customers,” officials said.

The unorganised sector accounts for almost half of India’s highly fragmented courier industry, worth an estimated Rs 2,000 crore.

Blue Dart, DHL, Elbee, Gati are some of the key local players while Federal Express, UPS, TNT Express are among the bevy of multinational companies which have a presence in the country, either through independently outfits or tie-ups.

Some of the convulsions faced by courier companies have come from the troubles dogging the airline industry.

The September 11 suicide hijack attacks sent airlines into a tailspin with many international carriers reported to be teetering on the brink of bankruptcy. In India, domestic airlines have responded to the crisis by calling for increased insurance.

   

 
 
LOCAL PETRO MAJORS EAGER TO OPEN UNITED FRONT 
 
 
BY A STAFF REPORTER
 
Calcutta, Oct. 2: 
The domestic oil companies — both government and private — are discussing the possibility of forging a long-term product supply and marketing arrangement. The objective is to create a front that will compete with foreign majors once the administered pricing mechanism (APM) is dismantled in April.

The companies in talks include IBP, the Rs 8380-crore petroleum marketing major, in which the government intends to divest 33 per cent, apart from the three other public sector undertakings and private sector refiners.

“The alliance will lead to optimum utilisation of the installed capacity of refineries and foster growth of local companies,” said a senior official of IBP, which is believed to be in talks with the Reliance group for a long-term product-procurement alliance. Arrangements like these are expected to enhance the company’s intrinsic worth.

At the same time, it has decided to pull out of Indian Oil Tanking Corporation, a three-way joint venture between IBP, Indian Oil and Oil Tanking GmbH of Germany. IBP will divest its 25 per cent stake to Indian Oil, which holds an equal stake in the company; Oil Tanking of Germany holds the balance 50 per cent.

IBP chairman S.N. Mathur said his company has invested Rs 37 crore in Indian Oil Tanking and earned a dividend of a little over Rs 1 crore in 2000-01 — the first year of business, in which the venture turned in a profit. IBP and Indian Oil are evaluating the price at which the 25 per cent stake will be divested. IBP has sold off its stake in Numaligarh Refineries and demerged its subsidiary Balmer Lawrie in the run-up to divestment.

Though the bids for the selloff are likely to be invited this month, there are a number of issues on which the government has yet to make up its mind. The government has to decide whether the company or consortium keen to acquire the government’s holding in IBP will have to invest Rs 2000 crore in petroleum infrastructure over 10 years. Though the mode of bidding has yet to be determined, there are indications the government will prefer single price bids, sources said.

Another issue being considered by the government is whether the bidders can team up now, or at a later stage, and share control of IBP. There are already three consortia in the race, with signals that some of them are planning to join hands after the divestment process.

The present IBP management is confident that the process of divestment will be over by the end of this calendar year.

Fifteen firms had thrown their hats in the ring, but the contest has narrowed down to 12. Half of those in the fray are Indian, including the three state-owned oil firms.

HSBC has been appointed as the global advisor for the IBP selloff, and its report on the valuation of the company will be examined after the price bids have been filed in. If all bids fall short of the valuation made by HSBC, the divestment plan will have to be called off,sourcessaid.

   

 
 
REVAMP TO RECHARGE SLUMP-HIT TELCO 
 
 
FROM SATISH JOHN
 
Mumbai, Oct. 2: 
Tata Engineering and Locomotive Company (Telco) believes small is beautiful, and a sure-fire way to beat the blues of a slowdown.

One of the country’s frontline auto-makers laid low by falling sales and piling inventories, it has sewed up a new management structure called “lines of business” (LoBs) in six key areas. Under the new dispensation, executive director Ravi Kant will oversee four commercial vehicle lines of business, while Rajeev Dube will head two LoBs in the passenger car segment — Indica and multi-utility vehicles like Sumo and Safari.

The lengthening shadow of an economic slowdown crimped net sales by 7 per cent in 2000-01 at Rs 6803.55 crore compared with Rs 7,302.09 crore in the previous year. The drop in sales volumes has been blamed on poor economic conditions and loss of market share to rival Ashok Leyland.

The company hopes the plan will help it arrest the downslide and enter new businesses compatible with existing ones. The new business initiatives are aimed at limiting the effects of business cycles — which have been the bane of Telco and other auto companies in recent times.

Heavy and medium commercial vehicles make up one line of business while light commercial vehicles (LCV) — a segment which has borne the brunt of the slowdown — has been spun off into an independent LoB.

To drive LCV sales, the plan is to lure freight operators with three-wheeler Minidors to opt for a Tata product on the ground that it offers more space and value for money. Buses, perceived as a segment with high growth potential and a revenue-spinner, will now be earmarked as a new line of business to sharpen focus.

The LoBs will be responsible for new product improvements in their segments. All updates in the medium and heavy vehicle segment, for instance, will be controlled by head of the LoB. The company hopes this will make improvements and developments quicker and more responsive to market needs. The results are expected in launches planned in the near future.

Non-vehicular businesses is being slotted as a separate profit centre which can contribute a significant portion to the company’s business. Transport solutions, spares and annual maintenance contracts are some of the areas that the firm has set its sights on.

Preliminary negotiations have been opened with major cement, fertiliser and iron & steel companies to wean away their freight movement business from the Railways. The plan is to offer them a competitive transport solution which will be the best in terms of price and service, a senior Telco official said. “However, we are yet to bag a significant deal,” the official added.

In the area of auto spares, the company hopes to target unwary customers in a business plagued by spurious fare. The aim is to improve turnover from non-cyclical businesses — reconditioning and spare parts —over the next couple of years. There are plans to offer annual maintenance contracts to transport fleets. The auto giant will maintain vehicles anywhere in the country for a fee. The vehicles will be tracked by its call centre at Thane which will link its service centres.

   

 
 
OM KOTAK TARGETS RURAL MARKET 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Oct. 2: 
Om Kotak Mahindra Life Insurance, a joint venture between Old Mutual plc and Kotak Mahindra Finance, will apply to Insurance Regulatory Development Authority (IRDA) at the end of the month for approval to introduce policies targeted at rural clients.

It will be the third private insurer to launch products meant for villagers after Iffco Tokio General Insurance and HDFC Standard Life Insurance Company.

Company managing director Shivaji Dam said: “We will come up with a single-premium product where the insurer will have to make a one-off payment. We are working on the policy and will seek approval for it at the month-end.”

IRDA norms require insurance companies to generate 5 per cent of their annual business from the rural market. “To comply with the stipulation, 5 per cent of the 30,000 policies we expect to sell in the current fiscal will be peddled in rural Maharashtra. We have identified 300 villages in Thane, Pune and Raigarh to market our products,” Dam said.

The company has three products — Om Money Back Plan, Om Endowment Plan and Om Insurance Bond. There are plans to introduce a “critical illness” rider in its schemes. “We have sought IRDA’s nod for this and expect to introduce it in November,” Dam said. The Om name in its policies will be replaced with Kotak.

The company aims to achieve a sum assured of Rs 300 crore with a premium income of Rs 15 crore in its first year of business. It expects to achieve break-even in the seventh year, though Dam could not say how much it would mop up in premium income by that time.

Under IRDA guidelines, 50 per cent of the policyholder’s funds must be invested in government securities. “We have invested more than 50 per cent in G-Sec funds. We are also picking up short-term infrastructure bonds, bank deposits and AAA+ rated securities,” Dam said.

There is no immediate plan to increase its capital base of 153 crore. “It is sufficient for two years of business. We can look at expanding it after three years,” he added.

The company has 10 corporate agents, but says it is talking to banks and financial institutions to market its products.

“However, we cannot appoint them unless IRDA amends the law,” he said. The number of advisors will rise from over 500 now to 2000 by the year-end.

   

 
 
DURGAPUR STEEL IN PRODUCTION OVERDRIVE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Oct. 2: 
Buoyed by the sudden jump in demand for long products, the loss-making Durgapur Steel Plant (DSP) has stepped up its production at a time when several other steel plants in the country have slashed output.

DSP sources said the plant which had undergone a Rs 5000-crore modernisation in the nineties is expecting to jack up its production to 110 per cent of its rated capacity in the current financial year.

“The continuous casting plant has produced at 126.4 per cent capacity while the merchant mill registered 111 per cent capacity utilisation in July. This is certainly a very encouraging sign,” a senior DSP official said. The official is hopeful that the target of making an operating profit of Rs 500 crore this year will be fulfilled once the third blast furnace comes into operation in January.

DSP, which recorded a turnover of Rs 1900 crore during the last financial year, has been able to pay off its total interest burden. “It is only the depreciation of around Rs 450 crore, which is our major concern,” the official said. The plant has adopted several stringent cost control measures which has yielded over Rs 125 crore last year and a target has been set to achieve at least Rs 100 crore this year.

It is also in the process of pulling out of non-core activities to focus on its main product mix.

“We are expecting to garner around Rs 60 crore by selling 17000 quarters in our township alone,” he said.

The plant had recently issued a circular to invite offers from employees in other public sector units, including banks and insurance sector, for its quarters.

   

 
 
BHARTI MOBITEL PLAN TO NET MORE USERS 
 
 
BY ALOKANANDA GHOSH
 
Calcutta, Oct 2: 
Bharti Mobitel Ltd, one of the cellular service providers in the Calcutta circle, has projected a 125 per cent subscriber growth within the next 12 months.

“We have adopted a five-pronged strategy to achieve this growth target. The company has decided to focus on strengthening its distributor network, upgrade infrastructure, improve customer orientation, and introduce new technology. Of these, our main focus will be on the customer and improving quality of connections. This can be achieved only through an excellent distribution network,” Deepak Gulati, chief executive officer of Bharti Mobitel said. Presently, Bharti has around 84,000 subscribers in the city.

Gulati said the company plans to introduce a number of customer interfacing processes like call centre technology and customer relationship management. Bharti is investing Rs 60 crore in a centralised billing system across all the 15 locations where it has a presence.

“The new billing system will allow more flexibility and give customers the option of receiving a customised bill according to their requirements,” says Gulati. The financial accounting and data warehousing systems are already in place in Karnataka, Andhra Pradesh and Delhi.

Bharti has invested Rs 50 crore in upgrading its infrastructure network. “First, we will take the number of base stations from 61 to 101 and optimise existing infrastructure,” adds Gulati.

The model is the same as followed by Bharti in Karnataka and Andhra Pradesh. The company has increased its market share to 50 per cent, from 30 per cent at the time when it took over operations.

Bharti is also beefing up its distribution network, setting up one-stop shops for all services provided by the company. These shops, called ‘Connects’ and ‘Points’ will dot key locations in the city.

Gulati was optimistic that with an improved network and efficient customer management in place, the company would soon emerge as the market leader.

The company, has however, not yet decided on when the AirTel and Magic brand names will replace Spice and CashCard in the city.

   

 
 
IT FIRMS ON TALENT HUNT 
 
 
FROM M RAJENDRAN
 
New Delhi, Oct. 2: 
The slowdown in the global IT sector and, at the same time, the increasing demand for specialisation, has created a paradox of sorts: notwithstanding the flurry of pink slips being handed out, IT companies are finding it difficult to retain the best and weed out the rest.

IT companies in India are struggling to stay at par with international trends while trying to establish their own strengths that would set them apart.

One of the few to have bucked the trend is AmSoft Information Services (India) Ltd. The software solutions service provider has come up with a novel way to retain the best in the field despite the current downtrend in software sector. Faced with this problem, the AmSoft management hit upon an idea that has not only helped it retain talent but also set a benchmark for other companies in the process.

“We leveraged in-house talent and built up our strengths in processes and technology,” said Sudhir Goel, vice president. “Initially, our employees were asked to come up with an idea which would be implemented in-house and it was a huge success. While no hike in perks was offered, they received special recognition in the company since their ideas were implemented in day-to-day operations and also in executing the business,” Goel said.

An employee with an idea which has major commercial value also stands chance of being made a partner in the company. The management plans to take this up with the board of directors.

“We would like to wait and watch the response this generates. If any spectacular idea comes up, we may take it to the board for consultations and make the employee a partner in implementing it,” said Goel.

However, the contracts signed by the employees stipulate that the company will have all rights over their inputs.

Goel agrees that it is a hurdle, but is optimistic that rules will have to be changed if the companies wants to retain people with best ideas.

   
 

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