Clampdown on OCBs
Talwar’s exit stuns colleagues in India
BPCL plans crude oil terminal at Gopalpur
Cloud over Dabhol meet as Enron comes apart
Playwin to invest Rs 300 cr in online lottery
Lok Sabha okays Bill on buyback
IDBI net drops 47%
Bangurs merge graphite firms
Thomas Bata on a sales boost trip
Foreign Exchange, Bullion, Stock Indices

Mumbai, Nov. 29: 
In a move to check misuse of tax havens like Mauritius, the Reserve Bank of India today banned overseas corporate bodies (OCBs) from investing in the Indian capital market through the portfolio investment scheme (PMS). The OCBs that have already made investments under the portfolio investment scheme may continue to hold such shares and convertible debentures till they are sold on the exchanges, RBI said in a statement here.

The OCBs would continue to enjoy the facility of opening non-resident account and make direct investments, it added.

The sudden RBI announcement, that came long after the stock markets closed for an extended-weekend, took everybody by surprise and operators had hardly any time to react. However, brokers say that the move may not immediately dampen the market mood as only fresh investments have been banned.

According to RBI officials, since the central bank has not set any timeframe for liquidating the current investments of OCBs through the PMS route, the adverse reaction will be limited.

OCBs, with 60 per cent non-resident Indian ownership and 40 per cent foreign holding were initially allowed to invest in secondary market to boost foreign exchange reserves of the country, RBI sources said. However, in the last two years this route was misused by some market participants and over Rs 3,800 crore were taken out of the country which prompted the Securities and Exchange Board of India (Sebi) to look into the matter.

Sebi investigations into the March 2 capital market crash had revealed that some NRIs in collaboration with market operators had set up OCBs with tiny capital of $ 10 in Mauritius and conducted high value transaction in markets to gain tax benefits. Though OCBs are banned from making direct investment in the secondary market, NRIs are free to invest directly and foreigners could bring in funds by having account with foreign institutional investors (FIIs, Sebi sources said.

It had often been alleged that the real beneficiaries of the stock market bull run are OCBs or corporate houses run by non-resident Indians with real or dummy offices on the island nation of Mauritius who play the Indian bourses heavily.

The same taxation treaty between India and Mauritius that allows FIIs to get away with paying just 15 per cent income tax on earnings, allows a large number of OCBs to go scot free with no tax burden at all, Sebi officials had ruled in the past.

A little known clause in the Indo-Mauritius tax treaty, notified in 1983, allows OCBs, registered in Mauritius before July 2000, the option of paying anything between zero and 35 per cent tax tax on their earnings and that too at their discretion.

A circular issued by the finance ministry last year to bail out FIIs who were under attack for using dummy front companies in Mauritius to avoid paying tax on income from capital gains, has given the Mauritian authorities the sole power to decide which OCB or FII is a resident of the island. (Indian authorities cannot challenge this even if they are convinced the OCB or FII in question is using dummy fronts).


Mumbai, Nov. 29: 
News of the resignation of Rana Talwar, director and group chief executive of Standard Chartered plc, has come as a bolt from the blue for his Indian counterparts.

Talwar’s exit was “unexpected,” say Stanchart officials. “It was unexpected and came out of the blue,” a Stanchart official said under conditions of anonymity. His resignation comes amidst thick rumours of Stanchart being taken over by rival Citibank.

However, the official response to the news was one of complete nonchalance, with most putting up a “business as usual” face. “These things are part of corporate life”, a senior Stanchart official said.

“The board wishes to thank Rana for his invaluable contribution to the group. He took decisive action to build and strengthen the franchise, and was responsible for the landmark acquisitions of Grindlays and Chase’s consumer business in Hong Kong,” the bank acknowledged in a press statement.

Talwar was responsible for the foreign bank adopting an aggressive stance in the local banking arena and personally handpicked several senior Stanchart officials for the bank’s India operations including Jaspal Bindra and Harpal Duggal. He was bullish on the future of emerging economies like India and China and was keen to expand Stanchart’s operations in India. His exit, sources said, is expected to leave a void which the bank may find difficult to fill.

In a brief statement, Talwar himself said: “I have relished the challenges of the last three years, transforming the group. I remain confident that the group has the right strategy and direction and will continue to flourish. I recognise that now is an appropriate time to move on. After working for 33 years in the industry, I look forward to taking a break before considering other opportunities. I wish the group well.”

Talwar, who rose from the ranks, already had a high profile career at Citibank before joining Stanchart, having spearheaded its consumer operations in Asia and Japan.

What marked him out from other senior bankers is the fact that he was not an MBA. One of Citibank’s achievers, he was the blue-eyed boy of chairman John Reed.

Talwar was assigned key jobs which included devising a strategy to make Citibank a global brand.


Calcutta, Nov. 29: 
Bharat Petroleum Corporation Ltd (BPCL) has lined up plans to set up a crude oil terminal along with a captive jetty at Gopalpur in Orissa.

Sources said the company is already in talks with the Orissa government for acquiring the land and also for the right-of-way to lay the pipeline. Initial estimates suggest that investment in the project is likely to be in the region of Rs 3,000 crore.

“We need about 300 acres of land nearer to the coast to set up the oil terminal. The Orissa government is in the process of identifying the land,” they added.

The terminal will be connected with a 7 million tonne refinery that BPCL proposes to set up at Allahabad through a 1,000-km long pipeline. The Allahabad refinery, which will cater to the north Indian markets, will need an investment of around Rs 8,000 crore.

The oil major is currently in the process of preparing a detailed project report for the Gopalpur and Allahabad ventures, along with the pipeline.

“For a 1 kilometre pipeline, the usual expenditure is Rs 1.6 crore to Rs 2 crore. Hence, the pipeline alone will need investment of Rs 2,000 crore,” sources said. The ambitious project is being considered in view of the additional demand expected after the oil market is deregulated in April 2002.

The company now has an oil refining capacity of 18 million tonne and it requires around 2 million tonne of additional petroleum products to meet its demand.

Besides increasing the capacities of its refineries, BPCL is also in the process of revamping its retail network in order to make it consumer friendly.

“We have already received a very encouraging response from our ‘Pure-for-Sure’ programme which is aiming at providing best quality and quantity fuel,” executive director R. K. Chaturvedi said. The company plans to increase the number of outlets from the existing 98 to 150 by March 2002.

It has also entered into agreements with several companies including Hindustan Lever, to offer a chain of products. “We have now 34 convenience stores from where we offer these products. Our target is to increase the number to 75-100 by the end of this financial year,” Chaturvedi said.


Mumbai, Nov. 29: 
The board of Dabhol Power Company (DPC) will meet on Friday under the shadow of the imminent collapse of its parent, US energy trading major Enron Corp. The DPC board will meet in London to consider authorising managing director K. Wade Cline to serve the final termination notice on the Maharashtra State Electricity Board (MSEB).

Local institutional investors have decided to stay away from the meet. “Institutional nominees are not attending the London meeting,” IDBI chairman P.P. Vora said today. Vora, said “the matter has become extremely interesting”. However, he refrained from commenting any further on the plea that the matter was still ‘sub-judice’. The Mumbai high court had restrained DPC from issuing a final termination notice.

Global lenders to the Enron-promoted DPC comprising Credit Suisse First Boston, Citibank, Bank of America, ANZ Investment Bank and IDBI will, however, meet separately on the sidelines of the DPC board meeting.

Clarifying queries on DPC loans, Vora said DPC loans were not non-performing assets and that the beleaguered subsidiary of Enron has paid interest on the loans till September 30.

Enron shares, which was only recently ranked seventh on the Fortune 500 list of the biggest US corporations, slumped 85 per cent to an all-time closing low of 61 cents on Wednesday after a rescue deal by rival Dynegy Inc fell apart.

If the company files for bankruptcy under Chapter 11, it would mean that a liquidator may take-over all the assets of the company, which will have a significant impact in India. Indian bidders for DPC may then have to wait longer as the liquidator embarks on the process of taking over the assets of the company. “The process has been delayed by at least 6-7 months,” an institutional source said.

Meanwhile, Enron’s European arm filed for creditor protection on Thursday after its crisis-hit US parent company cut off funding to the trading business. Accountant PricewaterhouseCoopers said it had been appointed administrator of Enron’s London-based European operation and that job losses were inevitable after a rescue deal with rival Dynegy failed.

An Enron spokesman said the European operation, which employs about a quarter of the company’s 21,000 workforce, had stopped receiving cash from its group headquarters on Wednesday. “London is effectively operating separately,” the spokesman said.

Enron operates in over 40 countries around the world, employing 21,000 people in operations ranging from marketing electricity and natural gas to delivering commodities such as metals, coal, pulp and paper.

Its collapse would be one of the biggest corporate failures in US history.

Activity at many of its units ground to a halt on Thursday. In Australia, where Enron set up a unit in 1998 to trade mostly in the wholesale electricity market but also in renewable energy, coal and weather derivatives, operations were suspended.

“We are now waiting for clarification about Enron’s situation globally and will advise the local market once we have received that advice,” Enron Australia legal counsel Rob McGrory said.


Calcutta, Nov. 29: 
Essel Group company Playwin Infravest will invest over Rs 300 crore in a year, to set up more than 5,000 outlets in the country for its online lottery business.

Playwin has already been appointed as agents by the Karnataka and Sikkim state governments and is awaiting the signal from the Maharashtra and Punjab governments.

“The paper lottery market in India is estimated at Rs 50,000 crore. We expect to corner at least 10 per cent of this revenue in the first year,” says R K Singh, chief executive officer.

“We plan to start operations by February-end or beginning of March next year,” he added. Prizes up to Rs 5,000 will be given out by the dealer immediately.

Regarding revenue distribution of the company, Singh said that 47 to 50 per cent of the revenue will be given away as prize money, 20 per cent will go to the state government, while 5 to 7 per cent will be given to the dealer.

“Only 3 to 4 per cent will go to the company’s coffers and the rest will be spent by the company on infrastructure, maintenance and other expenditure.” Earnings from each outlet per week are expected to be around Rs 1 lakh.

Singh says online lottery has replaced the paper lottery market world-wide, and the project is a logical offshoot of the group’s activities in the entertainment sector.


New Delhi, Nov. 29: 
The Companies Amendment Bill to relax share buyback rules was passed by a voice vote in the Lok Sabha today.

The Bill restricts the cooling-off period — the time period between a share buyback and the fresh issue of shares by a corporate house — to six months from 24 months.

Legal eagles scotched fears generated by reports in a section of the media that the provisions of the Bill would spark a rash of insider trading on the ground that company boards were not required to inform the stock exchanges about a buyback. They said there was no such provision in the Bill and the fears were unfounded.

The Bill which seeks to amend section 77 A of the Companies Act, 1956, by way of relaxation, authorises the board of directors of a company to buy back shares up to 10 per cent of its paid-up equity capital and free reserves without having to move a special resolution. At present, a special resolution needs to be passed at a meeting of the shareholders before a company can buy back its shares.

G.D. Aggarwal, legal consultant and practising company secretary, said companies were bound by the terms of the listing agreements with the stock exchanges to inform them of any price-sensitive information as soon as possible.

Stock exchanges need to be informed at two stages — once when the item is placed on the agenda for a board meeting and again when a decision is taken. The board has to communicate the decision to the stock exchanges within 15 minutes of its being taken, said Aggarwal.

The buyback Bill called the Companies (third amendment) Bill, 2001, was approved after CPI-M member Ajay Chakraborty withdrew his resolution disapproving an ordinance to this effect promulgated on October 23 last.

The Bill also stipulates a minimum one year gap between two share buybacks.


Mumbai, Nov. 29: 
The Industrial Development Bank of India (IDBI) has suffered a 46.7 per cent drop in net profit at Rs 207 crore for the half-year ended September 30 as against Rs 388.4 crore in the corresponding period last year.

Income from operations is marginally lower (1.42 per cent) at Rs 4,056.1 crore compared with Rs 4,114.7 crore in the year-ago period. The leading financial institution has attributed the dismal performance to the slowdown in the economy.

Other income of IDBI stood at Rs 71.2 crore in the first half of the current fiscal compared with Rs 65.6 crore in the corresponding six months of the previous year.

IDBI has provided Rs 426.9 crore in the first half towards bad and doubtful debts (Rs 210.9 crore in the first half of the previous year). During the period, Small Industries Development Bank of India (Sidbi) has ceased to be a subsidiary of the financial institution.

IDBI also said total borrowings during April-September this year were Rs 4,119.3 crore (Rs 5,338.80 crore during April-September 2000).

The rupee borrowings were through Omni bonds (Rs 2,378.20 crore, term money bonds (Rs 256.9 crore), fixed deposits worth Rs 148.20 crore, certificates of deposit of Rs 84.4 crore and short-term deposits of Rs 1,042.80 crore.

On prudential consideration and as an appropriate risk containment strategy, internally determined exposure norms have been reviewed and tightened. IDBI said it has decided to stipulate physical limits on exposure which would be lower than the RBI norms.

Among the new norms, the maximum exposure to an individual borrowing entity would be Rs 500 crore or 75 per cent of the net worth of the company or 40 per cent of the total loan amount, whichever is lower.

The total maximum exposure to a group would be Rs 2,000 crore or 75 per cent of the combined net worth of a group, whichever is lower.

The total exposure to an individual industry would be 10 per cent of IDBI’s industry portfolio or Rs 5000 crore in absolute amount whichever is lower, IDBI said.


Calcutta, Nov. 29: 
In its bid to consolidate the graphite electrode business, the city-based K.K. Bangur group has decided to merge Carbon Everflow with the flagship company Graphite India Ltd.

The boards of the two companies today approved the merger which will consolidate the group’s position as the leader in graphite electrode business with 60 per cent market share.

The combined sales of the merged company will be close to Rs 450 crore at the end of the current fiscal.

For the first six months of the current year the combined sales of the two companies stood at Rs 192 crore. “The name of the amalgamated company would be Graphite India Limited with its registered office in West Bengal,” Graphite India officials said after the meeting.

Graphite India company secretary S. Chowdhury said as per the proposal, Graphite shareholders’ will receive 14 shares of CEL for every 10 shares held on a record date to be fixed later.

He said Carbon Investments Ltd, a fully-owned subsidiary of CEL will also merge with the company.

Graphite Holdings Ltd and Graphite Investments Ltd, the two wholly-owned subsidiaries of Graphite India will also be merged with each other and their scheme of merger will be considered separately, Chowdhury said.

CEL has three units in Nasik manufacturing graphite electrodes (10,000 mtpa), anodes and carbon paste, impervious graphite equipment and glass fibre reinforced plastic pipes and tanks besides a 7.5 MW multi-fuel power generating plant. It exports about 77 per cent of its total production.

Chowdhury said the merged entity will have a total power generation capacity of 33 MW and will consolidate the group’s position as the market leader with domestic market share of around 60 per cent.

Explaining the rationale behind the merger, Chowdhury said it will bring in higher operational synergies due to reduction in sales, administrative and manufacturing overheads and operational efficiencies and at the same time will enhance competitiveness of the operations of both the companies.


Calcutta, Nov. 29: 
Thomas J. Bata, chairman of the Toronto-based Bata Shoe Organisation (BSO), will be in the city this week to discuss strategies with the Bata India top brass to jack up sales.

The corridors of the Bata India office in Calcutta are also rife with rumours that the chairman might decide to hike BSO’s stake in Bata India from the present level of 51 per cent to 71 per cent.

Moreover, there are speculations in the stock market that BSO might soon make an open offer, even though the company denies any such move. Sources said that Thomas J. Bata is expected to arrive tonight and meet the Bata India top brass in the next two days.

He will visit the Batanagar factory on Friday they said, adding he will also attend the meeting of the India Economic Summit in New Delhi which begins on Sunday.

BSO has already initiated steps to tighten management control over Bata India and improve fiscal management.

These include induction of a new managing director Fernando Garcia, setting up a Bata Asia office in Calcutta headed by Chandu Morzaria and importing six top officials from Toronto to head important positions at Bata India. Under the restructuring in the sub-continent, CEO’s of all Bata subsidiaries now directly report to Bata Asia.

One major area of concern for Bata India is to improve the bottomline. In the third quarter it suffered a net loss of Rs 4.45 crore and sales too have dipped to Rs 163.6 crore from Rs 173 crore in the previous corresponding period.

“The chairman will discuss means to increase the company’s profitability through better management and proper merchandising. He will set a vision for the company after the recent top-level reshuffle and restructuring of the entire organisation,” sources said.

Company officials are, however, mum on the chairman’s visit. When contacted, senior vice-president of the company M. J. Z. Mowla said, “I am not aware of the matter.”

Thomas J. Bata’s business strategies have been guided by the founding principles of focussing on customers, marketing and employees.

Branded products, innovative retail store concepts, lifestyle merchandising, non-footwear products and participative retailing have been introduced.

Thomas Bata manages 48 shoe-making operations and nine tanneries together with a network of 4,700 and 100,000 franchise retail stores.

Bata India manages a network of five factories, two tanneries, over 1,500 showrooms, 26 wholesale depots and eight retail distribution centres across the country. The Indian operations manufacture 33 million pairs annually.

Bata India has already undertaken some measures including revamping the entire merchandising setup, introducing changes in the distribution network and controlling expenditure.

The company has also decided to focus on volume sales and outsource shoes from China, Indonesia and Singapore to market them in India.



Foreign Exchange

US $1	Rs. 47.95	HK $1	Rs.  6.05*
UK £1	Rs. 68.47	SW Fr 1	Rs. 28.75*
Euro	Rs. 42.65	Sing $1	Rs. 25.85*
Yen 100	Rs. 38.94	Aus $1	Rs. 24.65*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4635	Gold Std (10 gm)Rs. 4565
Gold 22 carat	Rs. 4375	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7125	Silver (Kg)	Rs. 7210
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Stock Indices

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