Sebi floats scam-buster plan
Sceptics cite hurdles to 7% growth
Second HFCL preferential issue on cards
IT spending to go up 25%
NYSE sees spurt in Indian listings
UTI mulls equity switch, yet to knock on Infy door
Sanitiser for bad loans in two months
Arun Nanda joint chief of Rubicam new entity
FIs play down impact on Dabhol
Foreign Exchange, Bullion, Stock Indices

New Delhi, Dec. 3: 
The Securities and Exchange Board of India (Sebi) has said it should be allowed to strike plea-bargain deals with rogue players on the market in order to blow the lid off securities scams that have rocked the bourses at regular intervals since the Great Scam of 1992.

A plea-bargain system permits the prosecutors to give market manipulators the opportunity to co-operate with their investigations into the rackets in exchange for a less rigorous sentence.

“Plea bargains allow the accused to pay up a certain portion of the defrauded amount to the authorities in lieu of a leaner sentence. But we don’t have a provision for that in the Indian markets,” Sebi chairman D.R. Mehta told reporters on the sidelines of the India Economic Summit organised by the World Economic Forum (WEF) here today.

The trouble is that the Indian legal system itself has no provision for plea bargains, which is typically an American concept where small-time felons were persuaded to spill the beans in order to nail several mafia dons back in the thirties and forties.

The Securities and Exchange Commission (SEC) -- the US markets regulator — has also used plea bargains to unravel securities frauds. Mehta said over 100 securities fraud cases were settled in the US over the past two years under the plea-bargain mechanism.

He also cited the case of the infamous junk bond king Mike Milken of Drexel Burnham Lambert, who rocked the markets with his big-ticket deals back in the mid-eighties, and then paid up $ 600 million by way of fines in a plea-bargain deal that also involved a short jail sentence. After his release, Milken was banned from going anywhere near the stock markets for life.

The biggest securities fraud in the country -- the 1992 scam that was engineered by Big Bull Harshad Mehta and his cohorts -- is still nowhere near being resolved with the special court that was appointed to try the cases still trying to figure out where all the money disappeared. Mehta reckons an effective plea bargain system would have resolved the issue long ago.

Mehta, who was making a strong plea for more powers for the market regulator, suggested that there should be a lead regulator to streamline the various functions conducted by different but connected regulators. He also wanted Sebi to have the right to retain documents uncovered in a raid and the power to disgorge the ill-gotten profits of rogue brokers. “At present, a maximum penalty of, say, Rs 5 lakh is nothing for the rogue trader who may have usurped millions,” he said.“What the Sebi is looking for is not necessarily the power of search and seizure. What we want is the power to retain documents and be in a position to present them to the court,” he added.


New Delhi, Dec. 3: 
World Economic Forum (WEF) founder Klaus Schwab has expressed his scepticism over India actually achieving over seven per cent growth on account of several domestic and global constraints.

“I am not taking any position, nor am I hazarding a guess over the growth rate. The Indian economy has the potential to achieve over 7 per cent growth but it will depend on how it ovecomes the impediments” Schwab told reporters at the India Economic Summit here.

Schwab, who refused to be drawn into any comment on what those impediments are, asserted that the independent nation theory with better governance within the global framework should solve the problem. “The immediate need is to fight global recession, improve global governance and improve cultural relations” he said.

The hyperbole generated by Schwab comes in sharp contrast to the projections made by finance minister Yashwant Sinha who had asserted that a 7 per cent growth rate in near future was not impossible if 200 million people are brought over the poverty line by end of the decade.

In fact at the inaugural session, former finance minister and architect of liberalisation Manmohan Singh also criticised the government for the sharp dip in the growth rate to 5.5 per cent as against the over 7 per cent rate when the Congress government was in power.

“Our slowdown predates the global slowdown and we cannot blame it on the global phenomena. If we had taken advantage of the global boom earlier, we would have been in a better position to cope with the global recession,” Singh said.


Mumbai, Dec. 3: 
Himachal Futuristic Communications (HFCL) is planning a preferential issue, the second after the one it made to Australian media tycoon Kerry Packer, who has since sold his way out of the firm.

The difference between the last share-offer and the one coming up now is that the size and scale of this issue may be more modest and the share premium lower, market watchers said.

The telecom major today informed the Bombay Stock Exchange (BSE) that its board of directors will meet on December 6 to discuss ways of raising funds — by issuing further securities/warrants to promoters and others.

Consolidated Press Holdings (CPH), the holding company of media and entertainment czar Packer, had picked up a 10 per cent stake in HFCL for $ 238 million last year.

He paid Rs 1,450 each for 72 lakh shares, which were then quoting at Rs 2,450 on the BSE. The scrip has nose-dived, and is languishing at Rs 93.45 now. However, the planned offer will be made at the stock’s average price in the last six months.

Consolidated Press Holdings pumped in Rs 1,039 crore into HFCL. Group chairman Mahendra Nahata bandied the amount as the largest foreign investment made by a company in the country’s telecom industry. HFCL used the money from the stake-sale to achieve its turnover target of Rs 1,550 crore and profit of Rs 250 crore in the last fiscal.

The well-laid plans unravelled when Packer divested his shares at what many in the market said was a big discount to the value at which he had purchased them. His departure also touched off rumours in the market that there would be a fresh sale of equity.

“Turnkey solution projects need large working capital, and the fresh funds will help HFCL meet that requirement,” analysts tracking the company said. One of the major investments made by the company in recent times was the acquisition of Hindustan Tele-Printers, a state-owned company sold off by the government.


New Delhi, Dec. 3: 
Expenditure on IT services in India is projected to grow by 25.2 per cent at $ 1.6 billion in 2001 as against $ 1.3 billion revenues last year; IT spending is likely to touch $ 5.8 billion by 2005.

A Gartner Dataquest study says while the global economic slowdown and the uncertainty resulting from September 11 terrorist attack on US are expected to dampen growth somewhat through 2002, many segments and countries will continue to experience double-digit growth from 2003 through 2005. “Following 2002, increased confidence in the economy and business will present vendors with an opportunity to benefit from renewed demand among end users of IT services based on exploiting technology innovations,” said Rolf Jester, research director for the Asia/Pacific IT Services market at Gartner.


New Delhi, Dec. 3: 
The New York Stock Exchange (NYSE) expects the number of Indian companies listed on the bourse to double from nine at present over the next two to three years with Reliance and Nalco being the most probable candidates in the near future. NYSE group executive vice-president Georges Ugeux said: “The number of Indian companies starting to adopt the US’ Generally Accepted Accounting Practices is also seeing a sharp rise and this shows the growing interest in them to list on the US markets,” Ugeux said.

According to him, Dr Reddy’s is the most successful ADR this year, with others being HDFC Bank, Satyam and MTNL. Ugeux said the tendency of the ADRs being traded at a premium to the domestic price is likely to continue due to the absence of full convertibility.


Dec. 3: 
Infosys Technologies is yet to hear from Unit Trust of India (UTI) regarding the latter’s proposal to convert its entire equity holding in the infotech major into American Depository Receipts (ADRs) even though a top Trust official today indicated the same in Bangalore.

Speaking to reporters in New Delhi, Infosys boss N.R. Narayana Murthy, however, said, “UTI has not yet contacted us on any such proposal.”

That UTI is giving a serious thought to such a proposal was clear from the UTI official’s comment in Bangalore. “Nothing has happened till now. But the thinking process has started. No idea how long it will take,” Madhav Kumar, UTI general manager (business development and marketing) and its spokesperson, told reporters.

According to a company spokesperson in Bangalore, UTI currently holds 5.7 per cent equity in Infosys, which translates into 37,72,035 shares.

Acquisition plan

Infosys is also looking for acquisition of companies in the US, Europe or Japan. “We are looking for acquisition of companies which have a visibility, can offer us growth opportunities, and compliment our strengths,” Murthy said.

Profitability path

Indian industries will have to show profitability in the short term as well as long term to survive competition in the sluggish world market.

It also needs to look inside the organisation to harness potential which could be used to enhance performance of the organisation. The companies should not depend too much on the experts and consultants to improve the profitability.

“Consultants are like obstetricians and gynaecologists who can reduce the pain, but the lady has to bear the labour pain which is a challenge. The Indian industry too should be prepared to meet the challenges by developing indigenous methods,” Murthy said.


Calcutta, Dec. 3: 
The asset reconstruction company (ARC), planned as a repository of banks’ non-performing assets (NPAs), will be up and running in two months.

Being set up under the Companies Act with an initial capital of Rs 200 crore, it will draw public sector banks and three financial institutions as members. Now being shaped by the finance ministry along contours mapped by the Indian Banks’ Association (IBA), the ARC will have an authorised share capital of Rs 2,000 crore and a borrowing capacity of Rs 24,000 crore.

It will take over “loss” and “doubtful” assets, almost 45 to 50 per cent of the industry-wide gross NPAs of Rs 58,000 crore. An expert committee will steer it, valuing assets and issuing bonds to banks in return.

“Suppose a bank has loss and doubtful assets worth Rs 100 crore, which is valued at Rs 40 crore by the ARC. Bonds worth Rs 40 crore will be issued to the bank, which will have to make a provision of Rs 30 crore — representing 50 per cent of the remaining amount (Rs 100 cr-Rs 40 cr). That would leave Rs 30 crore, which will be booked in the accounts of the bank,” a source in the banking industry told The Telegraph.

The bonds dished out against the assets will carry market-related coupon rates, and mature in seven to ten years.

“Doubtful” assets are loans that remain non-performing for over two years, but are not treated as loss assets; a loss asset is one where the fall has been quantified but the amount has not been written off, wholly or partly. Such an asset is considered beyond recovery, even though some of it might be salvaged or retrieved.

Export credit

IBA chairman Dalbir Singh, responding to plaints that exporters are not getting enough credit, said banks would make their loan-granting rules transparent.


Mumbai, Dec. 3: 
Arun Nanda, chairman and managing director of Reduffision DY&R, has been named as a co-chairman of communications major Young & Rubicam Inc’s Asia Pacific territory following the integration of DY&R and Wunderman’s leadership in the region.

Nanda’s appointment is an indicator that Indian advertising has finally come of age in the global arena.

The other co-chairman of the alliance would be DY&R Asia’s Yasuo Yoshitome, Young and Rubicam said in a statement here today.

“Arun Nanda and Yasuo Yoshitome are ideal leaders to invigorate our integrated strategy. They have the trust and respect of clients and the highest creativity standards. This blend of talent and experience will be invaluable to our global clients,” the company chairman and chief operating officer Mike Dolan said.

“DY&R and Wunderman have a long history of working together in the region, and they share many key clients,” Dolan said.

Nanda is the founder of Rediffussion Advertising and today heads the Rs 700-crore communications conglomerate, the release stated.

Rediffusion’s clients in India include Colgate Palmolive, Citibank, Maruti, Telco, Godfrey Phillips and Eveready.

Young & Rubicam ranks among the world’s leading consolidated marketing communications companies, and is a member of the WPP group.


Mumbai, Dec. 3: 
The domestic financial institutions, which together have an exposure of over Rs 6,000 crore to Dabhol Power Company (DPC), are not unduly perturbed by Enron’s woes but at the same time exploring the possibility to approach the bankruptcy judge following the filing of Chapter 11 by the US energy major.

“Following Enron’s filing for bankruptcy, we are studying this very Chapter 11 and trying to figure out a possibility of recovering our amount,” a senior FI official said.

He said financial institutions need not panic as DPC’s loans were pledged to the lenders and were covered with a security of mortgage.

The official said as DPC was a special purpose vehicle and funded on a non-recourse basis, there would not be much damage to the company.

The Indian lenders have an exposure of Rs 6,204 crore, with IDBI at Rs 2,121 crore, ICICI at Rs 1,473 crore, SBI at Rs 1,749 crore, IFCI at Rs 454 crore and Canara Bank at Rs 407 crore.

In order to allay fears, DPC today came out with a press statement saying that the bankruptcy suit filed by the embattled US energy major Enron will not have any effect on the company, as it is not among the multinational’s 14 affiliated entities to be reorganised under Chapter 11 in the US courts.

“DPC is an Indian company with a separate legal entity and Enron is one of the four independent shareholders from India and the US. Therefore, it functions independently of Enron Corp,” the company spokesperson said in a statement here today.



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