UTI plan to shake off govt fetters
Indian plan on track
SBI net up 11%, rate cut decision in 10 days
Tisco net profit plunges 76%
Oil duty tussle touches boiling point
19% Maruti staff opt for exit package
Reliance Petro net rises 10% in second quarter
Foreign Exchange, Bullion, Stock Indices

Mumbai, Oct. 30: 
The Malegam Committee asked to suggest ways in which Unit Trust of India (UTI) can be revamped for the future says its organisational structure must rest on a sponsor, a trustee and an asset management company (AMC). For that to happen, the government should keep a safe distance and take steps to make appropriate amendments in the UTI Act.

The sponsor should be a company 40 per cent owned by institutions which invested Rs 5 crore in UTI’s equity capital initially, and Rs 445.5 crore in 1999, on the recommendations of the Deepak Parekh Committee.

Chairman M. Damodaran said the Malegam panel wants 60 per cent of sponsoring company’s capital to be held by a strategic partner — an Indian or foreign financial player — who will help win the confidence of investors. Asked if this meant privatisation, Damodaran said it is premature to say if that will happen.

The prospective strategic should quote the value at which UTI’s infrastructure and organisation can be converted into an AMC. If this is more than the assets managed, the surplus should be credited to the schemes.

To retain the confidence of unit-holders in times of a redemption rush, there should be a “lock in” period of three years during which the promoters of the sponsor firm may shuffle stakes among themselves, but cannot farm them out to the partner or to third parties.

“It is not something that is going to be happen in a hurry,” Damodaran said, stressing on the 3-year time-frame.

The trustee firm, in turn, should be incorporated as a wholly owned subsidiary of the sponsoring company, which should have a minimum capital base of Rs 5 crore.

The corporate positioning committee (CPC), as the Malegam panel has been known, says UTI should convert itself into an AMC, which will take over the infrastructure and organisation of the mutual fund major. Also, there should be a single AMC to manage all schemes.

Before US-64 is tied to its NAV, the panel says provision must be made for the contingent liability arising out of the gap, if any, between the assets in US-64 and guaranteed price for investors who hold up to 3000 units.

It is equally necessary that provision is made for the contingent liability arising as a result of the gap between the present value of the future liability under the assured return schemes and the value of their assets.

In order to reduce the size of this gap, the committee has recommended that the portfolios of these schemes should be recast as soon as it is practically possible, to ensure that the portfolio consists only of government securities and debt instruments and all investments in equity are disposed off.

Assured returns for a year should be should be strictly in line with the earning capacity of the schemes. The committee has also recommended tax concessions for UTI’s beleaguered monthly income plans.

The committee has recommended changes in the Income tax Act so that UTI does not have to pay a tax on dividends in assured return schemes floated before June 1999. The exemption has been sought under section 10(33) and section 115R of the 1961 statute.

It further demanded that the development reserve fund should be transferred to the AMC free of consideration after valuing the investments of the fund at their fair market value.

“There should be a valuation made of UTI by an independent agency,” the panel said.


New Delhi, Oct 30: 
The managerial changes at Detroit-based Ford Motor Company will not affect Indian operations and the investment plans. Vinay K. Piparsania, vice president, external affairs, Ford India said, “ We are going ahead with the launch of Mondeo -- the luxury ‘D’ segment car. The launch is scheduled fo November 1 and, by the middle of November, we will have covered the entire country. The Modeo launch in Delhi is scheduled for November 8,” he said.

”The models that we plan to launch will be presented at the auto show as planned. So no change in investment is likely at this stage. Whatever the management changes, the plans for India will not be altered. We are also on target to sell 40,000 cars this year. This target excludes the Mondeo sales,” Piparsania said.

However, Ford India is not looking at break-even in the near future. The have plans to settle for cash-even basis for some time more till the volumes for C and D cars build up in India.


Mumbai, Oct. 30: 
State Bank of India today reported a 10.82 per cent rise in net profit at Rs 643.85 crore for the second quarter ended September 30 as against Rs 580.95 crore in the year-ago period. Total income stood at Rs 8,446.2 crore, including Rs 1,013.49 crore other income, against Rs 904.75 crore in the comparable quarter last fiscal.

Announcing the results, SBI chairman Janki Ballabh said the bank will take a decision in the next 10 days whether to cut interest rates or not following the reduction in bank rate by 50 basis points and two percentage point cut in the cash reserve ratio in the mid-term monetary credit policy of Reserve Bank of India.

“We are examining the impact of the mid-term credit policy and will announce it in the next week to 10 days,” Ballabh told reporters after the board meeting to announce the half yearly unaudited results.

The net profit for the first half stood at Rs 1,223.64 crore (Rs 1,042.65 crore last fiscal) and income was Rs 16,578.09 crore (Rs 13,823.71 crore).

Ballabh said in the second half of the current fiscal, SBI would strive to further reduce non-performing assets (NPAs), focus on the retail segment and increase non-interest income.

According to the SBI chief, total provisions during the first half amounted to Rs 1,678.72 crore compared with Rs 1,193.12 crore mainly due to increased provision of NPAs at Rs 800 crore as against Rs 700 last year.

Asked about universal banking and if SBI would consider the merger of its seven subsidiaries, Ballabh said it was a necessity for financial institutions to merge with banks.

The capital adequacy ratio of the bank stood at 13.43 per cent as of September this year, as against 11.34 per cent last fiscal and there was no need for any further capital infusion.

Ballabh said there has been a decline in large advances as clients have now access to commercial paper. He said the net NPA ratio as on September 30 had come down further to 5.58 per cent compared with 6.03 per cent at end-March.

Compromises approved by the bank under the RBI one time settlement (OTS) scheme aggregated Rs 1,059 crore (3.31 lakh accounts).

Cash recoveries made under the scheme so far amount to Rs 633 crore, he said. Encouraged by the response, SBI has introduced a similar scheme for compromise settlements of NPAs with dues up to Rs 1 crore operative up to end-December, he added.

By then it hoped to bring down NPAs to around five per cent of the net advances.

Higher provisions have been made for income tax at Rs 763.89 crore (compared with Rs 463.73 crore in the first half of last fiscal) and investment depreciation at Rs 116.18 crore as against a meagre Rs 3.86 crore in first half last year, he added.

Ballabh said the growth in operating profit was achieved due to increases in net interest income and other income as well— Rs 1,013.49 crore in the first half this fiscal against Rs 904.75 crore in the same period last fiscal.

He said global deposits stood at Rs 2,18,818 crore as on September 30 and domestic deposits were Rs 2,07,126 crore while net global advances stood at Rs 1,13,412 crore.

Ballabh said domestic advances, which had declined by rs 4,213 crore during the first quarter rose sharply by rs 4,035 crore during the second quarter.

In the area of international banking business, sale and purchase of foreign exchange showed a growth of 6.52 per cent and 8.68 per cent during the first half over those of previous fiscal.

Forex income rose by 26.56 per cent in the first half of this year compared to a fall of 18.39 per cent last year, he added.


Mumbai, Oct. 30: 
Tata Iron and Steel (Tisco) today reported a 76.14 per cent plunge in second-quarter net profit at Rs 27.51 crore against Rs 115.34 crore in the same period last year.

Buffeted by weak prices of hot rolled coil, its net income grew marginally to Rs 1,931.99 crore compared with Rs 1,809.5 crore, company managing director S. Muthuraman said.

First-half net slid 77.58 per cent at Rs 48.58 crore from Rs 216.74 crore, while net income stood at Rs 3,543.40 crore compared with Rs 3,537.77 crore in the first half of 2000.

Realisations from the sale of hot rolled coil and flat products dropped Rs 352 crore in first half, a predicament worsened by a Rs 50 crore wage-revision bill.

In the second quarter, production increased to 9,17,392 tonnes from 8,75,044 tonnes in the same period last fiscal; sales went up to 9,02,491 tonnes from 8,43,654 tonnes. Expenditure was higher at Rs 1,931.99 crore compared with Rs 1,809.5 crore in first half of last year.

Tata Tea net up

Tata Tea unveiled a 45.29 per cent increase in second quarter after-tax profit at Rs 52.39 crore compared with Rs 36.06 crore in July to September 2000.

The bottomline gains were fuelled by a hefty increase in dividend income, which surged to Rs 16.95 crore against Rs 1.60 crore in the same quarter last year.

Income from operations took a beating, dropping 18.23 per cent at Rs 186.01 crore against Rs 227.49 crore as a result of the depressed conditions in the tea industry.


New Delhi, Oct. 30: 
Union petroleum minister Ram Naik has locked horns with finance minister Yashwant Sinha over a demand that the government agree to a fixed rate of duty on mass consumption petro-goods like diesel, cooking gas and kerosene, replacing the current ad valorem rate.

Naik is insisting that the finance ministry clear the proposal as it will help mitigate the effect of future price hikes on consumers. Explaining how an ad-valorem rate can be a killer for the common man, top petroleum ministry officials said that in January 1999, oil prices were at $10 barrel; by August next year, it had reached $ 34.

At a 10 per cent customs duty this meant the tax incidence on oil went up from $ 1 to $ 3.4. This translated to a 34 per cent increase in price just on account of tax besides the 340 per cent price increase. “Our main concern is diesel prices. If they go up by too great a margin, there will be a cascading effect on the entire economy. Diesel, after all, runs the entire country’s trucking fleet ... the prices of all goods will shoot up,” officials said. The finance ministry’s, or rather the revenue department’s, main objection to this is that they would be losing considerable amount of money besides the fact that the fixed rate structure would be standing out like a sore thumb in the face of ad valorem taxes for almost everything else.

Naik also wants the finance minister to take up with the states the issue of fixed rate and uniform sales tax on petro-products. States also charge ad valorem sales taxes on products like diesel and this rate tends to vary from state to state. While its is 12-15 per cent in Punjab for diesel, it is as high as 34 per cent in Maharashtra.

The petroleum minister wants Sinha to use his clout to get the states to agree to a uniform fixed rate sales tax on these mass consumption goods before April next year.

There is also simmering discord over the timing of ending subsidies on cooking gas and kerosene.

Naik wants the government to continue subsidising cooking gas and kerosene fully till the crucial elections to Uttar Pradesh assembly are over. Sinha, on the other hand, wants a three-phased increase in cooking gas prices by about Rs 90 spread over the next six months and a Rs 1.20 increase in the price of kerosene.

Naik has made it very clear that any such move at this juncture would have a an adverse fallout on the UP elections slated for early next year. BJP MPs from the state are also concerned about a precipitate decision on raising the prices of these two mass use products which could impact their middle class voter base.


New Delhi, Oct. 30: 
Maruti Udyog Limited—the biggest automaker in India—has received applications from 1,050 employees who have opted for the voluntary retirement scheme that was announced on September 24.

The scheme, which was open for a month, will bring down the company’s employee strength to 4,596 workers. “About 19 per cent of the company employees have opted for the scheme,” a Maruti spokesperson said.

“Even with the decreased workforce we will be able to manufacture at 120 per cent capacity—the same as before. Our car production capacity is 3.5 lakh units a year. Due to enhanced productivity, we had been producing 4 lakh cars a year. Even after the exit of these workers, we aim to stick to the same performance,” he said.

Maruti drew up the VRS plan for those employees who could not meet the performance expectations of the company and did not expect a career growth within the company. The employees opting for VRS came from all categories, including technicians, assistants, supervisors and senior managers. It cost Maruti Rs 65 crore to hand out VRS to these 1,050 employees.

“These employees who have opted for the VRS are offered a number of alternative scheme to help them choose another career. In some of them Maruti is directly involved—like training for opening up service centres. We even drew out a blueprint about the cost for a Maruti authorised service stations,” the spokesperson said.

“In the other alternative schemes, we may not be able to help them directly, but guide them with the way to get a project done—right from licensing, leasing land and chalking out cost. These projects include employment with dealers, be a truck owner, run a cyber cafe, run Esteem or Omni taxis, run a PCO or a grocery store,” he said.


Oct. 30: 
Reliance Petroleum Ltd (RPL) Tuesday reported a lower-than-expected profit for the July-September quarter, as sales rose only slightly in the face of a brusque economic slowdown.

The country’s only private refiner posted a 10.48 per cent increase in net profit at Rs 411 crore for the second quarter ended September 30, 2001, compared with Rs 372 crore in the previous corresponding quarter. Net sales for the reporting quarter were marginally up at Rs 8,446 crore as against Rs 8,325 crore in the second quarter last year, RPL said in a release today. The company’s other income stood at Rs 133 crore and includes an extra-ordinary income of Rs 60 crore as insurance claim received towards loss of profit due to business interruption caused by the January 26 earthquake in Gujarat. “We are encouraged by RPL’s strong financial performance in a difficult operating environment, characterised by weakness in domestic demand, and significant volatility in crude and product prices,” managing director Anil Ambani said.

Analysts said the gross refining margin — the cost of crude minus the average price of products sold, and a key determinant of a refinery’s performance — had fallen to about Rs 1,650 rupees a tonne from Rs 2,078 rupees a year earlier and Rs 1,910 in the first quarter.

“The operational results are largely as expected,” said Karthik Ramakrishnan, an analyst at Sunidhi Consultancy. “Refining margins were weak as operating margin, excluding other income, dropped to 9.31 per cent from 10.25 per cent in the first quarter.”

For the half year ended September 30, India’s largest private company by sales clocked a net profit of Rs 867 crore, up 29 per cent from Rs 672 crore in the same period last year. Net sales in the six months stood higher by 21 per cent at Rs 17,331 crore as against Rs 14,308 crore in the previous comparable period. Exports in the first half stood at Rs 3,581 crore with products being exported to the US, Europe, Japan and other developed countries.

VSNL net up 6%

Videsh Sanchar Nigam Ltd (VSNL) has posted a 6.13 per cent rise in net profit at Rs 368.5 crore for the second quarter ended September 2001, compared with Rs 347.2 crore in the same period last fiscal. Total income was down 4.53 per cent to Rs 1744.2 crore, from Rs 1827.1 crore in the quarter ended September 2000, the company informed the BSE today.

Hindalco slide

Aluminium major Hindalco today reported a marginal 0.4 per cent decline in second quarter net profit to Rs 167.1 crore from Rs 167.8 crore in the previous comparable quarter.

The company also saw a decline in net profit for first half of the year from Rs 330.6 crore to Rs 328.3 crore. Net sales in the quarter rose from Rs 550.8 crore to Rs 557.3 crore, while first half net sales fell to Rs 1106 crore. Export realisations have grown at 4.7 per cent even as volumes fell by 2.1 per cent in the same period.

Meanwhile, Hindalco raised Rs 50 crore in September through non-convertible debentures with a seven-year maturity. The company also added 33,000 tonnes of capacity and has already embarked on a Rs 1,800-crore expansion programme to triple smelting capacity to 342,000 tonnes per annum, while refining capacity will be augmented to 450,000 tonnes per annum. Expansion programmes are expected to be complete by 2002.

The Aditya Birla group flagship expects savings to the tune of Rs 40 crore to accrue on account of cost and inventory reduction and warned of continued weak market sentiment.

IOC net falls

Indian Oil Corp today reported a 31.4 per cent dip in its net profit to Rs 1019 crore during the six months ended September 30, 2001 as against a net profit of Rs 1,487 crore in the same period last year.

Income from sales and operations during April-September stood marginally higher from Rs 57,893 crore to Rs 58,371 crore registered during the corresponding period in the previous year, a 0.8 per cent increase. “The volatility of crude prices in the international market leading to lower refining margins and lower demand for petroleum products in the country have impacted profits during the first half,” a company statement said.

The country’s sole Fortune 500 company achieved a 7.9 per cent increase in gross turnover for the first half of the current fiscal to Rs 59,376 crore, as against Rs 54,998 crore during the same period last fiscal.



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