Govt hints at 49% FDI in aviation
Sanwarmal seeks more time for Forbes Gokak offer
Maruti to up prices again
Lafarge proposal to cement ties with state
British Gas, Gail vie for Dabhol LNG unit
Spanner in Group 4 consolidation plan
Indian Oil signals rethink on HPL terms
Deveshwar pins high hopes on ITC-Bhadra merger
Foreign Exchange, Bullion, Stock Indices

Dec. 7: 
The government today said it was considering a proposal to raise the cap on foreign direct investment (FDI) in airlines to 49 per cent from 26 per cent as part of a new civil aviation policy.

The announcement about allowing more overseas capital, something that could give foreign airlines control, came on a day the Tatas formally withdrew their bid for 40 per cent of Air-India (A-I) after failing to find a partner.

“We are considering a hike in the FDI limit to 49 per cent,” civil aviation secretary A. H. Jang told reporters after a review meeting on the aviation sector convened by Planning Commission deputy chairman K. C. Pant.

While the move is likely to provoke an Opposition outcry, it is not clear if major global carriers, struggling to stay airborne after the September 11 disaster, would be lured into tabling bids for a wobbling Air-India.

The FDI-enhancing proposal, discussed with members of the plan panel, will go to the Cabinet next month. Today’s meeting was attended by civil aviation minister Shahnawaz Hussain and his senior officials, besides the mandarins of Planning Commission, including N. K. Singh.

Reacting to the exit of Tatas, the sole bidder for the government’s stake in A-I after Singapore International Airlines (SIA) walked out two months back, the minister said the “time was not ripe” for disinvestment. “The government will first strengthen the airline to ensure a higher valuation for its shares,” he added.

Ishaat Husain, director of Tata Sons, wrote to disinvestment secretary Pradeep Baijal that his group could not vie for a stake in the national carrier because the terror attacks in the United States made it difficult to find a global airline that could join it in the quest.

“The Tata group has been evaluating various options to sew up another consortium after SIA left. However, no global aviation major has evinced any interest in the aftermath of the September 11 attacks,” Husain said.

A senior Tata official in Mumbai did not share details, beyond saying the government has been informed. In their letter to the government, the Tatas reiterated their stance that their bid depended on whether they were able to get the right partner.

But the search did not pay off, and they could not forge a consortium that would have given them a chance to succeed.

The development is being seen as a setback for Air-India’s selloff, which would have given the cash-strapped airline much-needed funds for fleet expansion at a time when the government has been reluctant to fork out large sums to keep the carrier going.

However, the news of Tatas’ withdrawal did not jangle nerves in the higher echelons of A-I’s Mumbai hub.

Senior officials, cutting a brave front, said the “show must go on”. One of them claimed the carrier has been operating without the support of the government in the recent past.

For instance, money for the recent acquisition of planes was raised without government undertaking, mandatory in mopping up funds abroad.

“Our aim to expand through a liberal injection of funds by the new owners may have come unstuck. However, with interest rates falling internationally, we will borrow abroad to fund our expansion plans. Already, we have had the experience of mobilising funds through external commercial borrowings,” he added.

He said the 10-year business plan, which had been shown to the suitors as a blueprint for the future, would have to be implemented by the airline on its own.


Mumbai, Dec. 7: 
The battle for the control of Forbes Gokak took yet another interesting turn today, when Pawankumar Sanwarmal, the hostile bidder for the company, requested the Securities and Exchange Board of India to defer the opening date for a competing offer to January 3.

Only on Thursday, the Pallonji Mistry group had decided to withdraw its appeal against Sanwarmal, who was the counter bidder for the company.

The hearing before the Securities Appellate Tribunal was slated for December 10, and the sudden withdrawal of the appeal and the request for deferring the date of a counter offer gave credence to rumours that a rapprochement was round the corner.

However, when contacted by The Telegraph, Sanwarmal categorically denied that the warring parties have brokered peace. “They (Mistry group) probably feel that our offer is valid,” he reasoned.

He said the sole purpose behind requesting for the deferment was to seek more time to fulfil the norms stipulated by Sebi in their conditional acceptance of the counter offer.

Sanwarmal had given notice of a counter offer for 20.11 per cent equity shares of Forbes Gokak Limited at Rs 88.50 per share, thus throwing open the deal that the Pallonji Mistry group had sewn up with the Tatas. The Tatas had sold their entire stake in Forbes to Pallonji Mistry at a price of Rs 80 per share.

The competitive bid directly challenges an open offer made by Sterling Investments Corporation in concert with Shapoorji Pallonji & Company Ltd and Cyrus Investments Ltd, for acquisition of 24,90,681 equity shares, representing 20 per cent of the issued and paid up capital of Forbes at Rs 80 per share.

Very little is known of the 42 year-old Sanwarmal, except that his personal net-worth is said to be in the region of Rs 3 crore and he is also a director in various companies engaged in investment and varied activities.

The counter offer was made public by Aryaman Financial Services Ltd, managers to the offer. Sanwarmal, in concert with six associate companies, has already wrapped up 14.8 per cent in the erstwhile Tata group company Forbes Gokak.


New Delhi, Dec. 7: 
Disinvestment minister Arun Shourie heads for Japan next week for talks with Suzuki Motor Corp shogun Osamu Suzuki on the government’s proposal to sell its almost 50 per cent stake in the country’s largest automaker even as Maruti Udyog executives draw up plans to raise prices across the board by 1.5 to 3 per cent by the month-end. This will be third time this year that the carmaker will be raising prices.

Representatives from Suzuki Motor are likely to hold discussions with the minister on the selloff deal. Under the joint venture agreement between the Indian government and Suzuki, either partner has to seek the written consent from the other before effecting a change in the shareholding pattern in the company.

The government has already announced five options that it wants to discuss with its Japanese partner. These include selling the entire government stake to Suzuki, selling to a third party that Suzuki finds acceptable, offering shares to the public, selling the stake to financial institutions/mutual funds, and selling both Suzuki and government’s equity to a third party.

In either of these cases, the government will divest itself of its shareholding in Maruti and the buyer or buyers can only be those to whom Suzuki agrees.

Meanwhile, company sources said they were being forced to raise prices due to the increase in the cost of production, raw material and other inputs during the last quarter. The depreciation of the rupee has also impacted cost.

The company spokesperson claimed that only a part of the increase in cost would be passed on to the customers. Maruti officials confirmed the move but said “the extent of the (price) increase is being worked out.”

A 3 per cent hike would amount to an increase of almost Rs 6,530 over the ex-showroom price of Maruti 800 standard, Rs 8,970 over that of Alto Lx and Rs 10,226 over that of WagonR Lx.

Sources said: “The hike would be in the range of 1.5 per cent to 3 per cent. This will enable the company to increase sales. We expect higher institutional buying this time, which will propel the sales for the Maruti 800 and the B and D segment cars.”

“The individual buyers may defer their purchases during the last quarter or till the budget. But those volumes will not have much impact on the company’s total sales,” sources added.

“A few more car companies will follow us and we expect the market to pick up during the last three months of this financial year,” sources added.


Calcutta, Dec. 7: 
French cement major Lafarge plans to set up its first Indian greenfield project in Bengal.

The move is aimed at consolidating its strength in the state’s cement market and to successfully take on ACC which is the market leader for the last 60 years.

The world’s largest cement company has already started working on a feasibility report for setting up a cement production facility in the state.

In an interview with The Telegraph, Lafarge chairman and chief executive officer Bertrand Collomb said, “The feasibility report will take into consideration the entire gamut of infrastructure facilities in the state before finalising a decision on investment.”

The company felt the eastern market held good potential. Lafarge entered the eastern region a couple of years’ back with the acquisition of Tata Steel’s cement unit in Jamshedpur.

Collomb met chief minister Buddhadeb Bhattacharjee today at Writers’ Buildings to apprise him about the company’s plan for the state.

“The chief minister has promised us all co-operation in our proposed venture,” he said.

Besides Bengal, the company also has plans to set up a greenfield project in the north-east.

Collomb, however, reserved his comment on the size of the two projects and the probable investment that the company will have to make.

Regarding its strategy for India, Collomb said the company is looking at all possibilities for suitable acquisitions in order to strengthen its market share.

“Our current manufacturing capacity is 5 million tonnes per annum and we are optimistic that this will be doubled in another 10 years’ time,” he said.

Collomb further pointed out that the company will have to increase its capacity either by way of acquisitions or setting up greenfield projects to cater to future demand.

The chairman, however, declined to comment on whether the company is in talks with any major Indian player for acquisition of existing plants.

In Asia—which contributes about 10 per cent to Lafarge’s total turnover—acquisition remains the major route for growth.

“We are, however, setting up a greenfield project in China where we could not find a suitable facility for acquisition,” Collomb said.

The company does not, however, have any plans to take a minority stake in any Indian company.

“We are not in a hurry and we have a long-term vision for the country. Our first priority is to consolidate our position in areas where we have already made our presence felt,” he said.


Calcutta, Dec. 7: 
British Gas and the Gas Authority of India Limited (Gail) are vying for the LNG terminal of troubled US energy trader Enron’s subsidiary Dabhol Power Corporation.

British Gas (India) chairman C. R. Prasad, while confirming the company’s plans of picking up Enron’s stake, said it is looking into all aspects of such a move. “We have also approached IDBI to get the financial institutions’ view on DPC’s LNG facilities.

The Centre, on the other hand, has given the green signal to the state-owned Gail to bid for the LNG terminal. Gail chairman Prashanto Banerjee, said here today that the company would immensely benefit if it could acquire the LNG import terminal, located on the western side of the Indian coastline.

However, both the Gail and British Gas chairmen declined to reveal the price at which they are willing to buy out the terminal.

If Gail is successful in buying out the terminal, then it would be able to supply two million units to industries in Maharashtra and the balance three million units to the rest of the country, Banerjee said.

The British Gas (India) chief on the other hand outlined his company’s long-term view on the global LNG business.

“We have large facilities in Trinidad and Egypt from where we are already exporting to several countries. We will be able to bring LNG in India once we can acquire the Enron facility,” he said.

Another global gas multinational, Unocal of the US, is also working on bringing gas from Bangladesh to India through West Bengal.

The company has already submitted a detailed proposal for a pipeline project to the Bangladesh government with an investment of around $500 million.


New Delhi, Dec. 7: 
The government has scuttled the proposal of Group 4 Falck of Denmark—the world’s largest private security service provider—from consolidating its investments in its heavily-fragmented Indian operations.

Group 4 Falck and a clutch of non-resident Indians had invested in 12 security agencies in India. Group 4 Falck, which was created as a result of the merger of Group 4 with Falck of Denmark, had routed its investments through its subsidiary Group 4 Securitas (East Asia) B.V.

In its application to the Foreign Investment Promotion Board (FIPB) in early November, Group 4 Falck had said that after the merger of Falck with Group 4, there was a need to consolidate its operations in the country. Furthermore, since the NRI/OCBs were no longer interested in pumping in more money into the Indian operations, it moved a proposal to transfer the shares held by the combine to Group 4 Falck.

The administrative ministry—the department of economic affairs (DEA)—pointed out that the investment in the company was made under RBI rules that permit NRIs/OCBs to invest up to 100 per cent on non-repatriation basis in specified sectors. The proposal was, however, deferred and comments were sought from the ministry of home affairs.

Subsequently, at the FIPB meeting held on November 22, the DEA clarified that the original investment need to have been made in foreign exchange and that since the company as an OCB was carrying on multifarious activities, FDI from Group 4 Falck could be permitted only if a separate NBFC is set up with a minimum capitalisation of $ 50 million as laid down by the RBI.

The proposal was rejected by the FIPB on the ground that the original investment was made on a non-repatriation basis and the proposal was to transfer investments in 12 such companies to foreign wholly-owned subsidiaries.

Group 4 provides security services to some of the top corporates in India. Its client list includes Coca-Cola, Pepsi, IBM, GE-Caps and Citibank.


Calcutta, Dec. 7: 
In what is being seen as a breakthrough initiative, Indian Oil today hinted that it is willing to review the conditions for participation in Haldia Petrochemicals Ltd.

Indian Oil, as one of its conditions, had been demanding a 26 per cent equity stake along with full management control in HPL. This proposal had met with stiff opposition from The Chatterjee Group (TCG), which is one of the promoters of the showcase industrial project in Bengal.

Indian Oil chairman M.A. Pathan today held a detailed meeting with West Bengal commerce and industry secretary Jawhar Sircar and HPL chairman Tarun Das to thrash out the problems facing the beleaguered project in the state.

“The meeting was suddenly called today. Both IOC and HPL representatives held detailed discussions on the latter’s debt restructuring, including our participation, since that is crucial for financial restructuring,” top level IOC officials.

“This month is very crucial for HPL as the company urgently requires capital infusion for its survival. We will hold a series of discussions next week too. At the moment, all discussions are centred around our earlier proposal,” the official said.

When asked whether IOC will review its proposal the official said, “I cannot say yes or no at the moment. What I can say is that everybody should agree to our proposal. We are eager to participate in the project and several things are likely to mature in the coming weeks.”

The official added that banks and financial institutions are eager to rope in IOC as the fourth equity partner in the project.

“We held long discussions with FIs and banks who have put in Rs 4,000 crore in the project as advances,” the official further added.

Apart from its demand for a a 26 per cent stake, India Oil had pegged the project cost at Rs 4,800 crore, while HPL put the cost at Rs 5,600 crore. The authorised share capital of the company is Rs 2,000 crore, while its paid-up capital is Rs 1,010 crore.

The Chatterjee Group and the West Bengal government each hold 43 per cent in HPL while the remaining 14 per cent is held by the Tatas.

The official said discussions were also held on the supply of naphtha to HPL. “A decision on restoring of naphtha supply will be taken soon,” he added.

Sources said there will be another round of talks between the state government and the petroleum ministry on IOC’s participation in the project.

The Chatterjee Group was not available for comments regarding their future course of action.


Calcutta, Dec. 7: 
ITC shareholders today approved the merger of subsidiary ITC Bhadrachalam Paper Boards with the company. This was ITC’s first step towards the integration of its diversified businesses. Besides tobacco, the company has interests in hotel, paper, infotech, packaged food and lifestyle retailing.

ITC chairman Y.C. Deveshwar said the merger was expected to have a far-reaching impact on the performance of both companies in future.

He said the merger will help Bhadrachalam compete with international players.

Asked whether there was any plan to merge ITC Hotels with its parent, ITC chairman Deveshwar said it was a price sensitive issue and hence he could not comment. Deveshwar had earlier said after the annual general meeting that the ITC brand was stronger than the subsidiaries and hence the idea of spinning off new ventures into separate subsidiaries was a wrong decision.

Deveshwar also expressed concern over declining cigarette sales in the country in the past couple of years and hoped the Centre would initiate measures to counter the threat of contraband cigarettes.

He said the share of cigarettes in total consumption of tobacco in the country had come down to 14 per cent from 19 per cent three years back due to loopholes in customs laws and the Foreign Exchange Management Act (Fema).

Seeking moderation of duties, Deveshwar said the decline in sales volumes was not only a concern for industry, but also affected government revenues. Annual revenue losses to the government due to the flood of contraband foreign cigarettes have been estimated at Rs 2,000 crore.

Of the total consumption of about 95 billion cigarettes annually, contraband cigarettes account for about 10 billion.

However, ITC managed to sell 66,478 million cigarettes in 2000-01 against sales of 66,145 million in the previous fiscal.



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