CSE fumbles with scam posers
IndusInd case
Singapore bourses beckon India Inc
Insurers want higher foreign equity
Shipping majors form consortia to stay afloat
Versa debut in mid-Oct

Calcutta, Oct. 14: 
The Joint Parliamentary Committee probing the stock market scam has found the action taken by the Calcutta Stock Exchange (CSE) against the defaulting brokers at the root of the payment crisis earlier this year, to be woefully inadequate.

The panel has asked the CSE to initiate fresh action against the defaulters and CMC — the software vendor held responsible for the bug in the bourse’s margin software. Besides, it has asked the bourse to file criminal proceedings against Harish Chandra Biyani for depositing invalid DSQ Software shares to diffuse liabilities.

However, it was sceptical of CSE’s claim that IndusInd Bank, the exchange’s clearing banker, was late to report the bouncing of defaulters’ cheques. The 30-member panel met officials of the stock exchange, former broker-directors and deposed executive director Tapas Datta last week. Some members even quizzed CSE chairman Dipankar Basu on the decision to remove Datta.

“Basu’s explanation for the removal was ‘loss of Sebi’s confidence’, which did not sound convincing to us. But there is no denying that Datta too failed to discharge his duties properly,” a JPC member said.

The panel has been zeroing in on the role of the broker-directors, who some members suspect were largely responsible for the crisis.

“The CSE payment crisis was caused by a handful of brokers who enjoyed the support of some brokers on the CSE board,” a JPC member said, adding the panel will recommend penal action against those broker-directors found guilty of having helped others dodge regulations.

The JPC interrogated former president Kamal Parekh and vice-president K. K. Daga extensively on whether IndusInd Bank had indeed informed them about the bounced cheques on March 7.

Though they denied having any information about the bounced cheques, another broker-director R. Bachhawat said he was witness to IndusInd officials visiting Daga and Parekh that evening. The panel feels CSE’s case against IndusInd is weak, and indications are the bank will get a clean chit.

While rejecting the exchange’s claims against IndusInd, the panel has recommended action against CMC.

“The software vendor does not appear to have conducted the mandatory tests before delivering the software. Even connivance between interested brokers and employees of the software firm cannot be ruled out,” a JPC member said. The bug in the software upset margin calculations, and CMC has argued that it was as much CSE’s responsibility as its own to examine whether the software was working properly. The exchange has already claimed damages.


Calcutta, Oct 14: 
IndusInd Bank has initiated criminal proceedings against Harish Chandra Biyani and civil suits against Dinesh Singhania for bouncing of cheques and reneging on commitments. A JPC member said contempt proceedings are being considered against Singhania for not responding to the panel’s summons. The JPC had twice asked Singhania to appear before it — once while it visited the exchange, and again in Delhi last week .


New Delhi, Oct. 14: 
Singapore, though wracked by a recession, has invited Indian companies to list on its bourses, saying its bond market could help them diversify their portfolio.

“Indian companies should consider listing on the Singapore Stock Exchange and raising capital through the Singapore bond market,” the managing director of the Monetary Authority of Singapore (MAS), Tharman Shanmugaratnam, said at a meeting between his agency and a Confederation of Indian Industry (CII) delegation of CEOs, led by chamber president Sanjiv Goenka. MAS is the regulator of financial services, capital market and banks that operate in the City State.

“Singapore would consider time-bound incentive packages to attract Indian companies. It would like to work with India-based investment bankers and accountancy firms and other organisations in order to deepen the financial services market,” Shanmugaratnam said.

“I am aware of the aspiration of Indian companies to get listings on the Nasdaq and the New York Stock Exchange. The Singapore stock exchange does not compete with them. However, companies that were not ready for NYSE and Nasdaq could get themselves listed on the Singapore Stock Exchange in the meantime,” he added.

He expressed the hope that a few firms would choose Singapore, a suggestion endorsed by most Indian CEOs who were part of the delegation. He promised that Singapore would continue to deregulate its financial sector, including retail banking and the current restrictions would be removed over time. “Citing the small size of Singapore”, he said “his country had to be outward looking, needed to be useful for the rest of the world and had to create a neutral, trusted environment”.

The Singapore economy and said the -3 per cent growth that was forecast in the current year would be followed by a growth rate that would range between -2 and 2 per cent in the next year. The general view is that a turnaround might be seen in the second quarter of 2002 but it was largely dependent on the external environment.


New Delhi, Oct. 14: 
Insurance companies find the foreign equity cap of 26 per cent too restrictive and believe that it ought to be increased to at least 49 per cent, according to a survey conducted by the Federation of Indian Chambers of Commerce and Industry (Ficci).

Respondents felt the existing ceiling was much too less and could jeopardise the prospects of private insurers. The survey, which polled companies that have already started operations, found 70 per cent of the respondents saying the present cap would pose problems later. There is a wide consensus among industry watchers investments of Rs 400-500 crore will be needed in the coming years for insurance companies to keep functioning effectively. Since most of them are unlikely to break even before 7 to 10 years, this essentially means that the insurance industry requires massive funds which will be locked up for long. To tackle this problem, only multinational companies can step in, which are technically and financially more equipped to handle markets like India.Ninety per cent of the respondents felt that the rural market offers viable business opportunities; 70 per cent plan to generate more business from villages than they are required under norms laid down by the regulator. Better and new products are also being designed to tap the higher and middle-income segments of the rural market. However, there are many hindrances, which will restrict this sector from achieving its full potential.

Eighty per cent of the respondents felt that regular collection of premia is a huge problem for the rural sector. Sixty per cent of them were of the view that claims settlements could also pose a huge problem in the rural market. Seventy per cent of the respondents felt that the present mindset of the rural consumers needs to be changed. According to the study, the middle-income group is expected to experience maximum growth in a year’s time, with 75 per cent of the respondents expecting that it could exceed 10 per cent; 70 per cent of the respondents said the high-income category is likely to grow between 7 and 10 per cent

Almost 50 per cent of the respondents still believe in offering incentives to customers through tax benefits, while the need to change the traditional customer mindset of buying policies for availing tax benefits is only partially felt. The respondents were favourably disposed towards the need to create consumer awareness about the general “need to insure”. They do not believe in short-term benefits from advertising but reckon it is the best medium for long term. Newer means of creating awareness such as participation in rural fairs and setting up of Internet information centres also figured in the priority list of respondents.

Most of the new entrants feel that Bancassurance is going to emerge as an important component for the purpose of distribution.

Ninety per cent of the respondents supported this view and they either already have, or are planning to have tie-ups with banks.


Mumbai, Oct. 14: 
Domestic shipping companies, already reeling under the impact of the September 11 terrorist attacks and fearing even tougher times ahead, are now forming consortiums with international shipping lines to stay afloat.

“The over-capacity which is currently faced by container ships will be further accentuated next year. We feel that excess of supply over demand will be to the tune of at least 25 per cent,” avers S. Ragnekar, director, Shipping Corporation of India (SCI) Ltd.

Industry circles say in the container segment, companies are ‘bleeding,’ with rates falling 50 per cent. For instance, in the India-European sector, while the tariff was $ 1300 per container earlier this year, it has now whittled down to $ 500. Dry bulk rates have declined by 30 per cent.

The sharp dip in cargo rates has forced domestic shipping companies to enter into consortium agreements with international majors.

“Shipping companies are now pooling resources to beat the trend of lower capacity utilisation. Thus, one consortia could see around 8 ships, with each company obtaining one-eighth capacity in each ship,” said Ragnekar.

He added that SCI has entered into a consortia agreement with CGM of France, and Contship of UK, for the US region, while for the European, agreements have been firmed up with international lines from Zimbabwe, Isreal and Taiwan.

The adverse impact of the expansion is likely to be most felt in container and dry bulk carrier vessels, which have already witnessed a sharp fall in freight rates from what they were at the beginning of this year, completely reversing the good times witnessed in the previous fiscal.

Sources added one of the prime factors that led to the current glut was the tendency of many companies to hike capacity in view of the attractive growth rates projected earlier.

Some more additions are expected next year as orders placed earlier get delivered. Presently, nearly all the shipping companies are focussing on crude movement. For instance, over 70 per cent of SCI’s revenues and 90 per cent of its profits is generated by crude carriers.

“The container cargo movement was growing at least 9 per cent every year. So everybody went ahead and placed orders for new container ships.

There were not only too many, but their size also got very large, on the hope of obtaining huge orders,” bemoans a senior executive from a domestic shipping major.


New Delhi, Oct. 14: 
Maruti Udyog Limited, the country’s largest car maker, has decided to launch Versa, its long awaited multi-purpose vehicle (MPV), sometime between October 24-26. Sources declined to disclose the exact date of the launch but said, “it will be one big event.”

The MPV, to be priced between Rs. 6.5-7 lakh, will be placed in the C segment where it will take on Ford’s Ikon and Hyundai’s Accent. As of now, there are no MPVs in this segment.

“The high-profile launch is due to the new segment it will be creating. The Versa will combine the space of a utility vehicle with the ride and comfort of a passenger car for the first time,” the source said.


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