State Bank’s dollar deposits put under strain
Satyam net leaps 100% in second quarter
Maruti takes wraps off Versa
Final call for ICICI bank plan
Reliance output defies recession
Move to build consensus on real estate laws
Rogue brokerages in a losing gamble
Wider ambit for FIIs
Bajaj Auto net zooms 132% to Rs 142 cr
Foreign Exchange, Bullion, Stock Indices

 
 
STATE BANK’S DOLLAR DEPOSITS PUT UNDER STRAIN 
 
 
FROM SATISH JOHN
 
Mumbai, Oct. 24: 
State Bank of India (SBI) has been rattled by the possibility that it may have to park 5.5 per cent of the $ 9.46 billion raised from India Millennium Deposits (IMD) and Resurgent India Bonds (RIBs) as cash reserve ratio (CRR) with the central bank.

Two days after the Reserve Bank of India (RBI) decided to remove CRR exemptions on non-resident deposits, the country’s largest commercial bank, already reeling under the impact of a weak rupee and a decline in interest rates, is finding itself in a quandary.

“We believe that CRR of 5.5 per cent will have to be deposited with the Reserve Bank,” a senior official in the IMD cell said. It is not clear yet whether the bank will make a representation before the central bank, which is also its main promoter, to relax the CRR norms on IMDs.

The India Millennium Deposits had mopped up around $ 5.23 billion, and almost 50 per cent of the collections came from West Asia. CitiBank had helped SBI garner the lion’s share of the mop-up, almost $ 750-800 million. HSBC, StanChart and AbuDhabi Commercial Bank also made significant contributions to the total kitty. The rupee was ruling at 46.66 paise against the dollar at the time the deposits were garnered.

The collections in IMD — aimed at boosting the forex reserves — were higher than $ 4.23 billion raked in from the Resurgent India Bonds (RIB) in 1998. The bank was expecting to raise over $ 4 billion through the bond issue, designed to lure the large pool of NRI savings.

The core size was fixed at $ 2 billion for an issue in which US banks served as an important mobilising mechanism: American Express (Amex) offered investors commissions of 3.20 per cent, almost 1.20 per cent higher than the amount given by SBI to collecting banks.

Certificates of deposit under the India Millennium Deposits are transferable by endorsement and delivery. The proceeds are to be invested mainly in infrastructure projects. The scheme, launched on October 21, cost State Bank more than Resurgent India Bonds, largely because global interest rates had firmed up.

While RIBs were raised at 7.75 per cent (2.25 per cent above the then prevailing six month Libor), the IMD fund raising cost amounts to 8.50 per cent (1.75 per cent above the six-month Libor). The scheme offers 7.75 per cent on sterling and 6.85 per cent on euro deposits. State Bank pays a coupon rate of 8.50 per cent, bears 0.5 per cent as the annual issue expense and foots an amount equivalent to one per cent of the exchange rate risk.

Funds from the IMD scheme, designed after assessing the NRIs’ appetite for long-term instruments, were meant to be invested only in core sector projects, not to support the government’s borrowings. Since it skipped the US, 40-45 per cent of the proceeds was expected to flow in from countries in the Gulf.

   

 
 
SATYAM NET LEAPS 100% IN SECOND QUARTER 
 
 
OUR BUREAUX
 
Oct. 24: 
Satyam Computers Services Ltd has recorded a whopping 100.29 per cent rise in net profit at Rs 134.08 crore for the second quarter ended September 30 this year compared with Rs 66.94 crore in the same period of the previous fiscal.

The board has recommended an interim dividend of 25 per cent for the financial year 2001-02, the company informed the Bombay Stock Exchange today.

However, the stock market was not much impressed with the result and the Satyam scrip dipped Rs 14.25 to end the day at Rs 148.10 on BSE.

Total income in the second quarter was higher at Rs 453.50 crore as against Rs 283.92 crore in the corresponding period of last year, it added.

Satyam chairman B. Ramalinga Raju, however, cautioned that heightened uncertainty after September 11 may affect the business in the next two quarters.

In this backdrop, Satyam expects income of Rs 420 crore to Rs 430 crore from services in the next quarter.

The prevailing industry-wide uncertainty has been brought about by a multitude of circumstances, including the events of September 11, Raju said.

However, the company would take appropriate steps to sustain growth and continue to invest in building competencies and strengthening customer relationships, he added.

The income from software services has recorded a growth of 3.58 per cent.

Satyam Infoway move

Satyam Infoway Ltd (Sify), a leading internet and e-commerce company, will divest its software IT services business to Satyam Computers.

Announcing this in Chennai today, R. Ramraj, Sify’s managing director and CEO, said Satyam Computers also intends to divest its current stake in Sify.

This was with the objective that Satyam Computers would become “a pure player in software services and Sify, a pure player in internet services.”

As part of these plans, Sify had proposed the sale of its software services business, which principally involved web services to Satyam Computers.

Sify’s software services business covers IT services in India, Australia and the US and represents about 20 per cent of Sify’s turnover during the July-September quarter of this year.

“The acquisition of Sify’s software services business by Satyam Computers will ensure that Sify’s software customers in India, Australia and the US will get high quality continuity of services,” Ramraj said

“It is expected that the sale of the software services business will not have any adverse impact on Sify’s earning levels and path to profitability,” he added.

Ramraj said Sify would continue to focus and pursue growth in the broad range of profitable corporate internet services, including networking services and premium bandwidth.

Over the last four quarters Sify had cut down losses significantly and reduced “cash burn” rapidly in its path to profitability, he added.

Sify’s net reduction in cash burn during the July-September quarter this year stood at $ 4.6 million against $ 7.7 million in the previous quarter.

The company’s revenues during the quarter had grown by 16 per cent to touch $ 10.9 million compared with $ 9.3 million in the previous quarter.

   

 
 
MARUTI TAKES WRAPS OFF VERSA 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct. 24: 
Versa, the newest offering from the Maruti Udyog stable and the company’s first multi-purpose vehicle, hit the road today.

Billed as ‘Two Luxury Cars In One’, the car had two stars—Big-B Amitabh Bachchan and son Abhishek—endorsing it as brand ambassadors, with the superstar and the rising star giving the star of ceremonies a stiff challenge in the glamour race.

The car is powered with a 1300cc MPFI (multi-point fuel injection) engine and delivers 82 brake horse power. It comes in three variants— the DX and DX2 (8-seater deluxe versions) and the SDX (a 7-seater super deluxe version), are priced at Rs 5.15 lakh, Rs 5.45 lakh and Rs 5.80 lakh (ex-showroom Delhi) respectively and Rs 5.25 lakh, Rs 5.55 lakh, and Rs 5.95 lakh respectively for ex-showroom Calcutta.

“This is an attempt to carve out a new segment in the domestic automobile market. The Versa is a popular model from the Suzuki line-up and we expect a good response here too,” Maruti managing director Jagdish Khattar said.

Though the company claimed its vehicle had no rivals, it is obviously being pitted against Toyota’s Qualis, Mahindra’s Bolero and Telco’s Tata Safari and Tata Sumo. While the Qualis is priced at a range of Rs 5.24-8.27 lakh, Tata Safari is priced between Rs 8-9 lakh and Tata Sumo Rs 5-6 lakh. Total unit sales in the multi-utility vehicles segment in the first five months of this fiscal have been nearly 50,000.

However, Maruti seemed to think otherwise. “The competition will be with premium small cars and entry level mid-size or ‘C’ segment cars. Once the multi-utility-vehicles of other companies come in and the segment will be developed, competition will become focused,” Khattar said.

JD Power study

Meanwhile, Maruti Udyog has been ranked first in customer satisfaction for automotive dealer service by global market research firm JD Power. The company is ahead of other car makers like Honda Siel, Hyundai, HM/Mitsubishi, Toyota Kirloskar, Daewoo, Ford and Mahindra in this year’s customer satisfaction index (CSI) study conducted by JD Power Asia Pacific.

This was the second consecutive year that Maruti has come at the top of the study. Maruti was tied for the first position with Honda Siel in 2000 which came second this year.

The CSI study deals with factors like problems experienced, service advisor, service performance, service timing and facility appearance.

Maruti led the domestic automotive industry in service advisor, service performance and service timing which contributed 60 per cent to the CSI.

While Honda Siel improved on service advisor and service performance, its performance fell short of its industry-leading benchmark in 2000, the study said.

   

 
 
FINAL CALL FOR ICICI BANK PLAN 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct. 24: 
The boards of ICICI and ICICI Bank will on Thursday consider a proposal to unite the two entities through a reverse merger that will bring financial institutions closer to their goal of turning into banks.

If cleared by the directors and the Reserve Bank, the marriage will spawn a financial powerhouse and the country’s second largest bank with an asset size of over Rs 95,170 crore. “The plan to merge ICICI, along with its wholly-owned subsidiaries, ICICI Personal Financial Services and ICICI Capital Services, with ICICI Bank will be taken up on Thursday,” a source said.

A swap ratio between 1.75:1 and 2:1 is being forecast for the merger, and industry experts feel ICICI will take 12 to 15 months for its transition into a bank to be completed.

An approval for the proposal, besides fulfilling ICICI’s long-cherished dream of being a universal bank, will help it raise cheaper funds through retail deposits and to improve its presence in the domestic financial industry.

However, the merger will not be an unmixed blessing: the new entity will be subject to reserve requirements, considered crucial to its financial health. That includes having to maintain a cash reserve ratio (CRR) of 5.5 per cent and statutory liquidity ratio (SLR) at 25 per cent of the net demand and time liabilities.

Though there are few other compulsory requirements such as priority sector lending, industry observers feel that the issue of meeting CRR and SLR norms are the most significant ones to be addressed by ICICI.

There is a perception that the Reserve Bank is unlikely to give relaxation on reserve requirements, even though the company’s bottomline will be hit initially.

Analysts said among the two requirements, it is the SLR the institution is more worried about. “ICICI has not been subject to such reserve requirements. Considering the massive asset base, investment of 25 per cent SLR in government securities could increase the market risk in the combined entity,” an analyst remarked.

Speaking to The Telegraph, Manish Kharwa, senior banking analyst at Pranav Securities, said a lot would depend on whether the RBI would grant the concessions. Calling the merger proposal positive, he said financials of the entity could be affected in the near term.

In a communication issued to the stock exchanges today, ICICI said its board would consider the share exchange ratio based on the recommendations to be made by J M Morgan Stanley, the investment banker appointed by ICICI, and Deloitte, Haskins and Sells, the accounting firm enlisted jointly by ICICI and ICICI Bank.

The proposal, once approved by the boards, will be sent to the Reserve Bank for the final stage of clearance.

   

 
 
RELIANCE OUTPUT DEFIES RECESSION 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct 24: 
Petrochem major Reliance Industries Ltd (RIL) today said it has managed to increase production by 9 per cent, despite the industry-wide recession. During the first half of the current fiscal, Reliance Industries said its production went up 9 per cent to 5.7 million tonnes, as compared with a production of 5.3 million tonnes for the same period of the previous fiscal.

The company will announce its first half results on October 30.

“Overall production volume increase has been achieved against a backdrop of the overall demand slowdown in the Indian as well as the global economy,” the company said.

“RIL’s production volumes are expected to continue to grow over the medium to long-term,” the statement added.

Revealing its future strategy, the company said the volume increase will be achieved through a mix of low gestation, cost-efficient debottlenecking and creation of fresh capacity, attractive acquisitions and improving efficiency.

RIL’s polyester production continued to grow at higher rates during the first half of the fiscal as compared with industry growth rates. RIL’s total polyester output grew by 16 per cent vis-a-vis the corresponding half of the previous year.

The company has posted higher growth rates by virtue of acquiring additional polyester capacity. Over the last three years, Reliance has acquired control over 2.6 lakh tonnes per annum of polyester capacity through several low-cost transactions.

RIL’s polymer production grew by 10 per cent during the period under review, while industry production rose 16 per cent. The company explained that the higher industry production was a reflection of the new competitive capacities operating at higher rates during the period.

Meanwhile, Reliance, by its sheer presence, has become the largest private sector exploration and production (E&P) operator, with total acreage of over 1.75 square kms.

During the first half of this fiscal, production from RIL’s existing fields at Panna, Mukta, and Tapti has increased nearly 3 per cent to 5.40 tonnes compared with the previous corresponding period. Oil production has increased 8 per cent during the first half to 2.06 tonnes. Gas production remained largely unchanged at 3.34 tonnes. In view of its dependence on the oil sector, the company plans to significantly expand its presence in the oil and gas exploration and production sector.

The share of revenues and profits coming from this business is likely to increase over the years,” it said.

Analysts aver the impact of price reduction in a few RIL products may be minor by virtue of its higher production for the current quarter.

   

 
 
MOVE TO BUILD CONSENSUS ON REAL ESTATE LAWS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct. 24: 
The central government plans to convene a meeting of all state governments to build a consensus on real estate laws and policies. Before the meeting a draft policy framework will be chalked out by a task force which will be set up for this purpose.

Urban development minister Ananth Kumar today said, “Urban land ceiling, taxation and rules are settled by the states in general. But for a higher rate of growth, the Centre will try to build a consensus among states.”

“There will be a national summit of chief ministers chaired by Prime Minister Atal Bihari Vajpayee this year in a bid to evolve a consensus for carrying out reforms in housing and real estate sector,” Kumar said while inaugurating a real estate conference organised by the Confederation of Indian Industry.

Kumar said, “The central government can only form strategies but the states have to agree on key issues like Urban Land Ceiling Regulation Act, property tax and rent controls.”

He said the government will soon come out with secondary urban development rules for allowing 100 per cent foreign direct investment in townships.

   

 
 
ROGUE BROKERAGES IN A LOSING GAMBLE 
 
 
BY ANIEK PAUL
 
Calcutta, Oct. 24: 
The Securities and Exchange Board of India (Sebi) is ready to stamp out stock broking outfits that, for all practical purposes, function like casinos. In Bengal, there are hundreds of them doing brisk business in Calcutta, and even in upcountry centres like Siliguri and Burdwan, mostly using National Stock Exchange (NSE) terminals.

The market regulator has asked bourses to ensure that trading terminals are granted only to registered sub-brokers and withdraw those given to unregistered sub-brokers immediately.

A Sebi circular issued earlier this week asks exchanges to take action against brokers who have let out terminals to unregistered sub-brokers. All intermediaries dealing in shares are required to register themselves with the regulator. Besides mandatory disclosures, registration requires an intermediary to go through a stringent screening, including an NSE-conducted test on capital markets.

A large number of Calcutta-based brokers have farmed out terminals in the city and upcountry centres to run casino-like outfits. There is one behind Writers’ Buildings, the seat of the state government. Its Burdwan branch is yards away from the local police station. The brokerages have set their own norms for punters to follow. For instance, transactions are essentially speculative, and no delivery-based trades are allowed. Some, however, allow investors to take delivery of stocks, but that happens because they offer trade financing facilities — badla in simple terms.

The most insidious are illegal operators who have developed chit funds, claiming they are experts in investing in equities. The extra-ordinary returns offered by them are paid from profits made on stocks. The web of these illicit outfits penetrating the state deeper and faster have been barred from issuing advertisements. The chit funds are among the most aggressive advertisers, followed by the casinos and the small-time badla financiers lending money to investors at an interest rate of 18-20 per cent.

The market regulator’s decision to crack down on these illegal outfits is likely to benefit the Calcutta Stock Exchange (CSE). The exchange had taken some initiative in the past to crack down on fraudsters operating on CSE, but they switched to NSE promptly, making CSE’s initiative redundant.

“If these crooks can be driven out of the capital markets, CSE’s turnover should revive,” said a senior CSE surveillance department official.

   

 
 
WIDER AMBIT FOR FIIS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Oct. 24: 
The Securities and Exchange Board of India (Sebi) has taken an in-principle decision to allow foreign institutional investors (FIIs) to trade in derivative products other than index futures where trading has already been allowed. The market regulator is also finalising operational guidelines for dual fungibility of ADR/GDR issues, Sebi chief D.R. Mehta told foreign fund managers at a cross-border teleconference organised by Citibank here today.

Mehta assured the FIIs that operational issues in paying margins due to different practices in Indian markets would be referred to Sebi’s consultative group. While there was no plan to abolish margins on the sales side, Mehta said, suggestions received from the FIIs and other intermediaries would be considered by the risk management committee.

He also assured the FIIs that the Indian “markets were mature and safe” with settlements taking place in a timely manner. He also pointed out that with 90 per cent of the scrips in the rolling settlements mode and 98 per cent of the settlements in dematerialised form, the cost of transaction to FIIs here is the second lowest in the world.

Emphasising Sebi’s commitment to attract more investments into the Indian market, Mehta said the registration process for FIIs had been simplified and proper documentation now took only up to four weeks.

   

 
 
BAJAJ AUTO NET ZOOMS 132% TO RS 142 CR 
 
 
OUR BUREAUX
 
Oct. 24: 
Bajaj Auto Ltd (BAL) has posted a 131.58 per cent rise in net profit at Rs 142.03 crore for the second quarter ended September 30 compared with Rs 61.33 crore in the same period of previous fiscal.

Sales and income from operations in the reporting quarter was also higher at Rs 1,033.51 crore as against Rs 907.57 crore in the corresponding quarter of last year, BAL said in a release here today.

Other income stood at Rs 103.73 crore as against Rs 72.02 crore in the corresponding previous quarter, it added.

The company has sold 3,27,713 two and three wheelers during this period compared with 3,13,557 last fiscal.

The sales of motorcycles in the reporting quarter stood at 1,52,312 (1,16,880).

The drive towards reducing costs through indigenisation, value engineering, supply chain management and review of fixed costs with special focus on motorcycle segment has started yielding dividends, it said.

The operations in the second quarter contributed significantly towards the increase in profits, BAL added.

For the half-year ended September the net profit was higher at Rs 264.47 crore (Rs 170.15 crore) while sales and income from operations stood at Rs 1,972 crore (Rs 1,913.33 crore), it said.

L and T net soars 224%

Larsen & Toubro Ltd’s net profit for the second quarter ending September soared by 223.94 per cent to Rs 40.46 crore compared with Rs 12.49 crore in the same period last fiscal.

Total income in the second quarter increased marginally to Rs 1,845.14 crore, including other income of Rs 69.32 crore against Rs 1,804.53 crore (Rs 63.34 crore) in the corresponding quarter last year, the company said in a release here today.

During the six months ending September the net profit stood at Rs 105.53 crore (Rs 31.37 crore) while net income was Rs 3,606.79 crore (Rs 3,404.55 crore), the release said.

The engineering and construction division did not get attractive business due to stagnant investment demand in the core and infrastructure sectors, the release said.

“We expect a modest revenue growth of 10 per cent from the engineering and construction division. The slower growth in revenue is on account of longer execution cycle,” said A.M. Naik, managing director.

The revenue from cement and clinker sales at Rs 1,220 crore in the first half accounted for 34 per cent of the company’s turnover, Naik said adding average sales realisation was Rs 1,357 per tonne (Rs 1,147).

“The demand for cement is projected to grow at 5-6 per cent and its prices are likely to remain stable,” he said.

Indian Hotels net up

Indian Hotels Company Ltd (IHCL) net profit rose sharply to Rs 82.61 crore for the second quarter ended September 30 compared with Rs 8.47 crore in the same period of previous fiscal following the transfer of its airline catering business into a separate entity.

Sales and other operating income in the second quarter was higher at Rs 147.27 crore as against Rs 142.94 crore in the corresponding previous quarter.

For the first half ended September IHCL reported a net profit of Rs 94.69 crore (Rs 23.22 crore in the corresponding period last year).

while sales and other operating income stood at Rs 305.25 crore (Rs 283.31 crore).

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.04	HK $1	NA*
UK £1	Rs. 68.55	SW Fr 1	NA*
Euro	Rs. 42.90	Sing $1	NA*
Yen 100	Rs. 39.16	Aus $1	NA*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay

Gold Std (10gm)	NA	Gold Std(10 gm)	Rs. 4585
Gold 22 carat	NA	Gold 22 carat	NA
Silver bar (Kg)	NA	Silver (Kg)	Rs. 7355
Silver portion	NA	Silver portion	NA

Stock Indices

Sensex		3040.16		- 21.75
BSE-100		1408.68		-  8.49
S&P CNX Nifty	 991.20		-  2.00
Calcutta	 NA	          -
Skindia GDR	 473.52		+  7.27
   
 

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