Easier rules for FDI in housing
State Bank on Moody’s review list
Merrill scales down Wipro, Infosys billing
Sale-repurchase gap for US-64 to be slim
Indian Oil pulls out of Mobil venture
Global Tele rass opt for voluntary pay cut
Post public offer foreign stake in Bharti to be 49%
Errant OCBs face joint probe
Dry lease, VRS to help Air-India fly high
Foreign Exchange, Bullion, Stock Indices

 
 
EASIER RULES FOR FDI IN HOUSING 
 
 
FROM OUR ORRESPONDENT
 
New Delhi, Dec. 12: 
The government is likely to relax the rules governing foreign direct investment (FDI) in the housing sector, rationalise registration norms and bring down stamp duty fees across the country to a uniform level of 3 per cent.

The gift-wrapped package of measures includes a proposal to relax a key threshold limit by permitting 100 per cent FDI in integrated housing projects of less than 100 acres.

The proposal relating to the relaxation of the minimum land area restriction for FDI inflows has been made by the urban development ministry and is expected to secure approvals from the law and finance ministries by the month-end.

“The proposal is being vetted by the finance and law ministries and we expect the final proposal for Cabinet approval in the next 15 days,” Ananth Kumar, minister for urban development and poverty alleviation, told reporters on the sidelines of a seminar on infrastructure development here today.

Earlier, speaking at the conference, Kumar urged the state governments to rationalise the registration and stamp duty structures. He said the Union government is in talks with the state governments to bring down stamp duty which ranges from 2 per cent to 15 per cent to a uniform level of 3 per cent. Kerala and Karnataka have the highest stamp duty rates at over 15 per cent while Maharashtra has 10 per cent and West Bengal 5 per cent.

“We will be holding a national summit on urban infrastructure next year to be inaugurated by the Prime Minister and attended by finance and state urban development ministers where these issues will be debated,” said Kumar.

He also stressed the need for municipal corporations in the metros and large cities to generate additional revenue to maintain sanitation and water needs. Kumar said the municipal corporations should come forward to access the capital markets as the Ahmedabad Municipal Corporation had done to raise Rs 100 crore through a ‘muni-bond’ issue.

Kumar has also proposed to set up a ‘Challenge fund’ with a corpus of Rs 160 crore. “If the municipal boards are prepared to accept the terminal and transactional cost, we (the Union government) can provide them a grant of Rs 20 crore to undertake development projects,” said Kumar.

The minister also announced setting up of a task force to be headed by secretary urban development as the chairman with member from Confederation of Indian Industry, Federation of Indian Chamber of Commerce and Industry (Ficci) and other bodies.

   

 
 
STATE BANK ON MOODY’S REVIEW LIST 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 12: 
International credit rating agency Moody’s Investors Service today placed the deposit ratings of State Bank of India (SBI) on review for a possible upgrade at or near the home-country deposit and debt ceilings.

Moody’s said “no Indian government” would be able to allow the country’s largest bank to default on its local currency obligations. At the same time it added, the government continues to provide support for its ailing financial institutions, although the aid has not always been timely.

“The review of SBI’s local currency deposit rating will focus on this issue of timeliness and the likely mechanism of support,” Moody’s added. SBI currently enjoys a local currency deposit rating of Ba1.

Moody’s also observed that SBI commands a dominant role in the Indian banking system, with around a 20 per cent market share, while its closest rivals have only 5 per cent. Further, as a public sector bank, it plays a notable role in promoting government policies, it added.

SBI was among nine banks in other emerging markets whose deposit ratings came up for review. Moody’s said in assigning foreign currency bank ratings in the past, the common practice was to rate the strongest banks at the ceiling and go downward for smaller and weaker names.

However, a recent study conducted by the rating agency showed that all such ratings worldwide revealed that in several cases this approach has resulted in lower ratings for some banks than they would have received had the ceiling been higher.

Hence, the nine banks now under review may be eligible for ratings at or near their home country deposit and debt ceilings. Moody’s added that some of these banks have very low financial strength ratings but all have low risk of local currency default, either because they are solvent or too important to be allowed to default, or both. SBI was the lone bank from India on the list which had other banks from Korea, Malaysia, Phillippines, Poland and Uruguay.

   

 
 
MERRILL SCALES DOWN WIPRO, INFOSYS BILLING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 12: 
Merrill Lynch, one of the few global financial powerhouses whose opinions sway investors and fund managers alike, has scaled down its recommendation on Infosys Technologies and Wipro — two technology bellwethers that mirror the fortunes of Indian software companies better than any other.

While Infosys gets a ‘buy’ billing, against ‘strong buy’ earlier, Wipro fetches a ‘neutral’ grade compared with ‘buy’. The revisions have been prompted by a perception that the two stocks have been overbought, leaving them more vulnerable to a wave of profit booking. Infosys’ long-term prospects and its attempts to move up the value chain have appreciated and, therefore, its ‘buy’ recommendation remains.

In the case of Wipro, Merrill Lynch blamed its rating revision on the stock’s high valuation. It is, however, optimistic about the ADR in the long term, and the efforts made by Wipro to expand its business to other areas such as systems integration and business process outsourcing.

The downgrades have come at a time when the two software stocks have felt the heat of profit booking in the past couple of sessions, after weeks of handsome gains.

The markets ignored Merrill’s change of mind though, with both stocks ending the day significantly higher over their previous close. Broking houses said speculators and a few foreign institutions made brisk purchases in the shares, even as domestic institutions like UTI were seen selling early in the day.

The rise in the scrips confounded some analysts, who predicted the possibility of a “sideways correction” over the next few days.

   

 
 
SALE-REPURCHASE GAP FOR US-64 TO BE SLIM 
 
 
FROM SATISH JOHN
 
Mumbai, Dec.12: 
The board of Unit Trust of India (UTI) will decide on ways to re-open the sale and repurchase windows for Unit Scheme-64 (US-64) at a meeting which has been slated for the last week of this month. The event assumes significance because it would be the first time ever that the Trust discloses the net asset value (NAV) of the scheme — a matter of conjecture till today.

The modalities of arriving at the sale and repurchase price will also be worked out. The mutual fund major has indicated that US-64 would be tied to its NAV — something that is done in the case of other schemes. However, sources in UTI say a decision allowing the sale of units to take place along with repurchases is almost certain. This will be done through a special window for small investors selling a maximum of 3,000 units.

The Securities and Exchange Board of India (Sebi) is believed to have allowed mutual funds to maintain a gap of 7 per cent between the sale and repurchase prices of units. UTI, however, is expected to opt for a realistic 3-to-3.5 per cent between US-64’s sale and repurchase quotes.

The change in perception follows an overhaul of the asset portfolio of UTI’s flagship plan as part of a sweeping recast. The real estate portfolio, comprising UTI offices and residences in the US-64 portfolio, was recently transferred to the Trust’s Development Reserve Fund for a consideration of more than Rs 700 crore. Much of it was ploughed back into “AA” corporate paper. US-64 retains 61 per cent of its corpus in equity at this point of time, the rest being invested in debt instruments.

The recent effort to shake up the flagship scheme, coupled with a recovery in the capital markets, has emboldened the mutual fund major to allow sales and repurchase window to be opened simultaneously, industry circles said. Another factor that helped ease some of the pressure on UTI is that redemptions in some of its schemes were more than offset by a tendency among investors to switch over to other investment plans it offers.

“We do not expect redemption pressure in US-64 to escalate in view of the improvement in market sentiment,” a senior official said. UTI believes that the existing unit holders will wait for a while, and recover their losses before they decide on exiting from the scheme.

Meanwhile the Big Daddy of the mutual fund industry, in tune with Malegam panel’s prescription, is modifying its investment, valuation and provisioning norms.

It may be recalled that the decision to suspend all sales and repurchases in US-64 had not gone down well with legions of UTI’s small investors who swore by the scheme. Within days of taking the decision, P. S. Subramanyam, UTI chairman was forced to resign. UTI got a new chairman in M. Damodaran who is steering the mutual fund towards recovery. The board meeting may also consider the appointment of a executive trustee which has been in limbo for more than two years now.

   

 
 
INDIAN OIL PULLS OUT OF MOBIL VENTURE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 12: 
Indian Oil Corporation (IOC) has decided to sell its entire equity holding in Indo Mobil Pvt Ltd—a joint venture with Mobil Petroleum Corporation of the US—for Rs 22 crore.

In a communication sent to the stock exchanges today, the public sector oil major said the 50:50 joint venture with the US company was incorporated on March 4, 1994. Indo Mobil was set up to import, blend and market Mobil branded lubricants in India, Nepal and Bangladesh.

With the exit of IOC from Indo Mobil Private Limited, the joint venture agreement entered into between Indian Oil and Mobil Petroleum would thus stand terminated, the notice said. This would take immediate effect.

The termination of the joint venture will help Indian Oil to focus on its own lubricants. In fact, Servo is the market leader in the lube segment which is believed to have a market share in excess of 40 per cent.

The lube sector has become extremely competitive with more than 30 players vying to woo retail customers.

Apart from the public sector majors, whose greatest strength lie in their strong distribution network, there are players like Castrol and Shell among others.

Among the public sector majors, Bharat Petroleum Corporation Ltd has an joint venture understanding with Shell to market the latter’s lubes.

   

 
 
GLOBAL TELE RASS OPT FOR VOLUNTARY PAY CUT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 12: 
Faced with the slowdown in the domestic and global IT industry, Global Telesystems Ltd (GTL)—once the darling of the bourses—has embarked on a unique cost cutting and restructuring exercise. The restructuring will see the company’s top management take a voluntary pay cut and a redeployment of its manpower.

GTL has said that as per the restructuring plan, chairman and managing director Manoj Tirodkar, and joint managing director and chief operating officer Fritz D’Silva, will take a voluntary pay cut of 25 per cent, apart from a waiver of commission. In a communication issued to the stock exchanges today, the company said these decisions have been taken at its board meeting on November 30.

GTL, which has been promoted by Manoj Tirodkar, D’Silva and Gajanan Tirodkar, has interests in e-commerce services, software and engineering services among other areas.

The scrip had a tumultuous run on the bourses in its heydays, when it featured in fallen Big Bull Ketan Parekh’s top 10.

The company has transformed itself over the past few years from being a supplier of telecom equipment to a tele-solution provider, by concentrating on networks and software, apart from telecom infrastructure.

Other measures contemplated by the company include rationalisation of capital expenditure.

   

 
 
POST PUBLIC OFFER FOREIGN STAKE IN BHARTI TO BE 49% 
 
 
FROM DEVLIN ROY
 
New Delhi, Dec. 12: 
Bharti Televentures plans to raise its foreign equity stake to 49 per cent after it completes the initial public offer (IPO) early next year. The company, which is the holding entity for the Bharti group’s cellular and basic telephony ventures, has sought the government’s approval to offer its shares to a clutch of foreign institutional investors (FIIs).

The FIIs that have evinced interest in subscribing to the Bharti issue are International Finance Corporation, Washington, New York Life International India Fund, Mauritius, Brentwood Investment Holdings BV, Palmobile Corporation Ltd, Comnet (Mauritius) Ltd, Pastel Ltd, India Continent Investment Ltd, Mauritius, Rusell-AIF India Telecom Ltd, Mauritius, AIF (Mauritius) India Telecom Ltd, Mauritius, and Seejay Cellular Ltd, Mauritius.

Bharti’s proposal for a private placement of equity with the FIIs is expected to be taken up at the next meeting of the Foreign Investment Promotion Board scheduled for December 13. The FIPB had deferred decision on the company’s proposal at its November 29 meet at the behest of the Department of Economic Affairs.

In its application, the company has stated the move is essential to meet the additional finance requirements for its subsidiaries’ business expansion plans. Bharti Televentures, which has already filed its prospectus with the Securities and Exchange Board of India for its IPO, is keen on inducting NRIs/FIIs/overseas corporate bodies through the IPO route in addition to the existing foreign partners.

Reuters plan

Reuters India Online has sought the government’s approval to introduce its Reuter Market Monitor Services (RMM) for Indian subscribers, directly through the internet.

In its application made to the FIPB, the company has stated that the service would provide direct access to market data, news and research databases to subscribers in India, which will enable them to transact financial products more effectively. The proposal will be taken up by the board on December 13.

Although Reuters has not given the details of the payment structure and fees, it has stated that servicing and maintenance of the network will be done by Reuter India Ltd, a wholly-owned subsidiary of Reuters.

Reuters has already received the government’s approval to introduce Reuters India Trade Direct and permission to provide support to its Luxembourg entity—Reuters Inter Trade Direct.

   

 
 
ERRANT OCBS FACE JOINT PROBE 
 
 
FROM JAYANTA ROY CHOWDHUY
 
New Delhi, Dec. 12: 
Mauritius is prepared to launch joint investigations into the affairs of errant overseas corporate bodies (OCBs)— owned by non-resident Indians—that use the Indian Ocean tax haven to channel funds into India.

The OCBs have been accused of being at the heart of a sensational bear scam that rocked the stock markets in March this year.

Speaking to The Telegraph in an exclusive interview hours after a closed-door meeting with finance minister Yashwant Sinha, Mauritius minister of economic development and financial services, Sushil K. C. Khushiram, said the island nation was open to joint probes and action against suspect OCBs.

He said Mauritius was concerned that the errant OCBs have blighted the country’s image as a financial hub with impeccable credentials and is at pains to stress that its legislative and regulatory standards match the best in the world.

“We have offered our co-operation and are open to joint action,” Khushiram said.

The minister added Mauritius is setting up a new super-regulator for the financial sector — Financial Services Commission — to keep the OCBs under watch.

“Having understood that these funds could be misused for manipulating shares in India, the FSC will keep them under watch,” he said.

The role of the OCBs in the stock market scam which rocked the bourses early this year is currently being investigated by a Joint Parliamentary Committee, the Securities and Exchange Board of India and the Central Bureau of Investigation.

The Mauritius-based OCBs, which enjoy tax-free status on the island, have been accused of siphoning away several thousands of crores of rupees from the bourses. In one case, a firm with a token paid-up capital of just $ 1 took out over Rs 470 crore from the country.

Sources said Khushiram also outlined to Sinha the legislative changes that his country planned to introduce to plug existing loopholes. Although he did not comment on his talks with the finance minister, Khushiram said Mauritius will soon introduce a Collective Investment Bill which would tighten regulation of both domestic and offshore investment firms.

A financial investigation unit being set up by Mauritius will also co-operate with Indian authorities to detect and bring to book hawala operators and market manipulators, he said.

However, Khushiram made it clear that he had not discussed renegotiation of the double taxation treaty which allows OCBs and FIIs operating out of the island, to avail of huge tax breaks. “It’s a win-win situation for both countries ... if there is no need, why fix it,” the minister asked.

Obviously, Mauritius is not keen to change the taxation treaty which has turned it into a major financial centre in the Asia-Africa region. Some 50 per cent of the funds flowing through the island are headed for India. China comes second, accounting for just 15 per cent while South Africa is a poor third with just 10 per cent of the monies earmarked for it.

   

 
 
DRY LEASE, VRS TO HELP AIR-INDIA FLY HIGH 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Dec. 12: 
The Air-India board today agreed on a business restructuring plan which includes offering a voluntary separation package to trim its bloated workforce. It also reviewed plans to dry lease four Airbus 3310/300 aircraft, which will be deployed on the Gulf and European routes.

The airline decided to go ahead with plans to divert part of its fleet to carry some 20,000 out of the 70,000 Haj pilgrims from India to Mecca and back.

The plan to restructure the Rs 5,000-crore airline follows a directive from the civil aviation ministry that it should try to improve its financials before it is put on the block afresh.

An earlier bid to sell off Air-India flopped as the sole bidder — the Tatas — pulled out following the reluctance of its partner Singapore Airlines in entering the Indian market in the aftermath of the September 11 terror attacks which has hit airlines world-wide.

Besides the dry leasing of four planes in the next five to six months, A-I wants to replace some of the old craft in its fleet — about another three next year with other leased planes.

The restructuring plan provides for reshaping routes, focusing on certain areas while reducing the emphasis on others.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.81	HK $1	Rs.  6.05*
UK £1	Rs. 68.95	SW Fr 1	Rs. 28.65*
Euro	Rs. 42.76	Sing $1	Rs. 25.80*
Yen 100	Rs. 37.92	Aus $1	Rs. 24.45*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4590	Gold Std(10 gm)	Rs. 4515
Gold 22 carat	Rs. 4335	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7250	Silver (Kg)	Rs. 7320
Silver portion	Rs. 7350	Silver portion	NA

Stock Indices

Sensex		3412.15		-  6.98
BSE-100		1641.18		+  4.34
S&P CNX Nifty	1107.65		-  2.55
Calcutta	 111.35		-  0.43
Skindia GDR	 526.32		-  0.73
   
 

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