VSNL beats itself with 750% payout
Bonanza for staff
Reliance to tighten grip on BSES
Chandra to hawk 26% more in Agrani
Task force on housing development under way
Calcutta brokers sniff power
Lever bonus debenture okayed
Liquor firms want uniform tax rates
Court seal on NHB-ANZ 60:40 deal
Foreign Exchange, Bullion, Stock Indices

Mumbai, Dec. 14: 
The board of Videsh Sanchar Nigam Ltd (VSNL) has recommended a whopping 750 per cent (Rs 75 per share) dividend to its shareholders, effectively cleaning up the telecom major’s coffers before it heads for the divestment altar.

The dividend, declared a month before price bids are to be invited for the PSU, comes close on the heels of a 500 per cent payout announced in March this year, involving an outgo of Rs 1,600 crore.

The government, which owns 52.97 per cent of the telecom behemoth’s equity, had earned Rs 900 crore on that occasion. Today’s move will entail an outgo of Rs 2,150 crore as dividend and an additional Rs 258 crore as dividend tax, which will again go straight into its coffers. This makes the government the largest beneficiary of the Rs 2,408-crore bonanza. It will rake in an additional bounty of Rs 1,350 crore, taking the amount to a whopping Rs 2,250 crore this fiscal.

Meanwhile, the VSNL scrip zoomed to a high of Rs 246.75 on the Bombay Stock Exchange today and hit a low of Rs 233.05, before closing at Rs 239.10.

In fact, the bounty surprised market analysts as they had expected a figure in the region of 300-350 per cent.

Since the GDR proceeds pegged at Rs 800 crore cannot be used for today’s largesse, the dividend will have to be paid from VSNL’s own coffers, bringing its cash reserves down to Rs 300 crore, from Rs 3,500 crore at present.

The decision to pay the interim dividend was taken at an emergency meeting of the board of directors in New Delhi. VSNL will now have to call an extraordinary general meeting to ratify the board’s decision. It will also need the government’s approval as the dividend outgo is more than the Rs 1,000 crore the company expects to earn as profits this year. Net profit for 2000-01 rose a whopping 112 per cent to Rs 1,778.83 crore, compared with Rs 840.28 crore last year.

The board’s decision, however, invited criticism from certain quarters as they said the move will leave VSNL’s coffers virtually dry and force the once cash-rich company to line up before banks to fund various expansion projects.

The government has, however, argued that the company had enough time and opportunity to utilise its cash surplus, but the management delayed taking a decision on the issue. Disinvestment minister Arun Shourie had also indicated last month that VSNL’s cash surplus may be lowered substantially before inviting financial bids, as these may not reflect fully in its valuation.


Mumbai, Dec. 14: 
VSNL employees are now laughing their way to the bank after the telecom major announced an eye-popping dividend of Rs 75 per share today.

On an average, VSNL employees were allotted 200 shares by the government when the telecom major was listed on the stock exchanges. These 200 shares multiplied to 600 when the company allotted a generous bonus in the ratio of 1:2—this is under the assumption that the employees had retained their share holdings.

The 500 per cent special dividend declared on March 31 this year saw an individual employee rake in Rs 30,000.

The latest dividend bonanza of Rs 75 per share (750 per cent) would make that employee richer by another Rs 45,000. Thus the total dividend income for an average shareholder employee of VSNL amount to Rs 75,000 this year.

This payout will not only be the envy of the shareholders of multinational companies but also of the employee shareholders of infotech majors who saw their earnings through employee stock options declining sharply in the recent past in view of the meltdown in their share prices.

The VSNL employee shareholders can be third time lucky if post-selloff the new owners of the telecom major makes an open offer.


Calcutta, Dec. 14: 
Reliance Industries is weighing the option to raise its stake in BSES Ltd. Though a definite timeframe has not been set, sources said the Ambani-owned company is keen to raise its stake, either through the creeping acquisition route or via negotiated deals, to over 50 per cent to gain management control in BSES.

At present, Reliance holds around 30 per cent in the Mumbai-based power utility major. It is, in fact, the single largest shareholder in BSES.

Apart from management control, sources said, if Reliance is in a position to call the shots at BSES then it may push for a merger of the power utility with Reliance Power.

Already BSES and Reliance Power are drawing up joint action plans for project implementation.

Apart from the 30 per cent owned by Reliance, financial institutions and banks hold 39.42 per cent in BSES, while foreign holding is around 15.55 per cent. The remaining 14.33 per cent is held by the public.

Reliance made an open offer for BSES last year and has, so far, spent Rs 800 crore to pick up the 30 per cent stake in the company.

According to sources, RIL will continue to pursue attractive opportunities in power on a competitive bidding basis with an objective of achieving aggregate capacity of over 5000 MW in the medium term.

BSES, which is one of the leading power companies, has the 100 per cent distribution right in Mumbai and 75 per cent in Orissa. The present license for Mumbai is valid till August 15, 2011.

The company, which was incepted on October 1, 1929, did not have a generating unit till 1995 and bought the entire requirement from Tata Electric Company. It has now its own 2x250 MW thermal power unit at Dahanu in Maharashtra.

BSES, which notched up a healthy net profit of Rs 321 crore last fiscal on a sales of Rs 2283.21 crore, has ambitious plan to have additional 1000 MW generating capacity in the short term.

“Reliance already has a very strong presence in BSES. But less than 40 per cent stake in a good performing company is never a very comfortable level, particularly when hostile takeover is the rule of the game,” sources said.

BSES is also working on a plan to take over 100 per cent control in the Rs 2909-crore Pet coke based power project at Jamnagar, promoted by Reliance Power.

The BSES board has approved the move and authorised chairman R.V. Shahi to carry out dialogue with the Reliance subsidiary.

“The discussion is on and we are hopeful of arriving at a tangible alliance very soon,” sources said.

The Jamnagar plant will produce 500 MW of power for which a power purchase agreement (PPA) has already been signed with the Gujarat Electricity Board.

According to the PPA, third party sales to any of the Reliance group of companies will also be allowed.

Moreover, in case of any payment default, GEB will have to allow third party sale to customers directly anywhere in Gujarat grid.


Mumbai, Dec. 14: 
After selling a 13 per cent equity in Agrani Satellite Services Ltd (ASSL) to Alcatel and Arianespace, Subhash Chandra is now toying with the plan to divest another 26 per cent to a foreign satellite major. The sale is expected to yield around $ 50 million to Chandra.

Though discussions are now at a preliminary level, sources close to ASSL said a decision is likely to be made shortly. As and when the deal is clinched, foreign equity in the Agrani project will go up to 39 per cent.

According to the existing norms, 74 per cent foreign direct investment is allowed in Agrani. Sources, however, said the promoters, led by Chandra, will retain 51 per cent stake to enjoy management control.

The remaining 49 per cent is likely to be held by foreign players, including Alcatel and Arianespace. Sources indicated that the party to whom the 26 per cent will be divested is a leading player in satellite business.

Recently, the Foreign Investment Promotion Board allowed Alcatel and Arianespace to invest around $ 20 million in Agrani, the satellite venture promoted by ASC Enterprises Limited.

While Alcatel will pick up a 9.5 per cent stake for a consideration of $ 15 million, Arianespace, the launch service provider, will pick up another 3.25 per cent at a consideration of $ 5 million.

The project, which costs Rs 1,150 crore, is entirely being underwritten by Subhash Chandra. The debt-equity ratio of the project is 1.5:1. Sources said ASSL’s transponders will support a broad range of applications ranging from TV broadcasting and DTH to providing internet backbone bandwidth.


Calcutta, Dec. 14: 
Union minister for urban development Ananth Kumar today said a special task force will be set up to prepare a roadmap for housing development in the country. The team would comprise representatives from the government, state housing developing corporations and trade organisations like Ficci and CII.

While addressing a conference organised by the CII here, Kumar said: “Over the next 10 years, we need to build 3.3 crore houses and improve urban infrastructure to support the growing population. An investment of Rs 400,000 crore will be required for this.”

To bridge the gap, the government is considering various means of raising resources from the public.

“The Centre will launch a bond bank for municipal corporations, arrange financial credit lines from the banks and financial institutions for urban infrastructure and create a challenge fund,” he said.

While the bond bank would extend technical and financial expertise to municipal corporations to enable them access the market, the challenge fund would meet the transactional and transitional cost of these bodies to outsource municipal services.

UK-based Department for International Development would give $ 116 million for setting up the fund, he added.


Calcutta, Dec. 14: 
Some members of the Calcutta Stock Exchange (CSE) are now angling for management control of the bourse after the Securities Exchange Board of India (Sebi) failed to make up its mind on demutualisation. The Sebi board was supposed to meet today to discuss the matter. All eyes were on the crucial Sebi meeting today, but it could not take place as some members were unable to attend.

Return of the brokers to power would obviously turn the clock back. Following the market upheaval in March, finance minister Yashwant Sinha had said that brokers would not be allowed to have any say in the administration of stock exchanges. He also said the ownership, trading rights and the management of the stock exchanges would be separated.

A large number of CSE brokers today met the Sebi-appointed management committee headed by former State Bank of India chairman Dipankar Basu. After the meeting, a section of the brokers said they intended to contest the elections to be held at the exchange’s annual general meeting on December 29.

However, a relatively larger section of the 300-odd brokers is opposed to fielding candidates for the election as it feels that the market regulator would debar the elected members from the management of the exchange. The section also feels that the bourse’s AGM should be deferred till the government or the market regulator issued clear guidelines on demutualisation and management of stock exchanges.

The brokers of the exchange will again meet tomorrow to take a final call on the matter. Saturday is the last day for filing of nominations. The brokers will meet the management team again after they have discussed the matter amongst themselves to inform the authorities about their decision. So far, only one member of the exchange has filed nomination, but even he too did not technically qualify to contest the elections, CSE officials said.

The brokers willing to contest the elections said they were unfazed by the possibility of the market regulator barring them from the management of the bourse. “We would be happy to help the exchange in any capacity whatsoever,” said a former CSE broker-director who is leading the team seeking polls.

Sebi chairman D.R. Mehta refused to comment on what action Sebi was likely to take in response to the move by the CSE brokers. He said, “We are planning to meet this month itself and discuss the matter.”

Citing the examples of Ahmedabad and Delhi stock exchanges, the CSE brokers, seeking board berth, argue that the market regulator should not debar them from the management of the bourse. Sebi has, however, debarred the broker-directors of the Bombay Stock Exchange from attending board meetings.

The meeting today was aimed at overcoming the stand-off between the management and the brokers of the exchange, which could have resulted in the brokers boycotting the AGM.

“Though a boycott cannot still be ruled out, it looks likely that elections will be held and the AGM will take place,” CSE officials said. However, if the brokers finally decide against contesting the elections, they are likely to boycott the AGM as well.


Mumbai, Dec. 14: 
The shareholders of Hindustan Lever Limited (HLL) have approved the novel scheme to issue bonus debentures by drawing upon the general reserves of the company, which were created through retained earnings and undistributed profits.

The court-convened meeting approved unanimously the proposal to raise the limit of foreign institutional investors’ holding in the company up to 49 per cent from the current 24 per cent and also raise the company’s borrowing limit to Rs 3,000 crore.

The proposed bonus debenture issue was supported by 87.27 per cent of the shareholders present at the meeting and holding 112.32 crore shares representing 99.99 per cent of the value of shares on which poll was held.

HLL said it will be submitted to the Bombay high court for its approval. The issue and allotment of the debentures will account for approximately Rs 1,320 crore from the general reserves. The dividend distribution tax will account for about Rs 135 crore.


New Delhi, Dec. 14: 
Liquor makers are lobbying hard for the harmonisation of state excise levies — which are as disparate as 100-200 per cent in some cases — and have suggested a uniform alcohol content-based specific single-point tax on India-made foreign liquor (IMFL) at Rs 120 per bulk litre that could be levied over and above the 20 per cent value-added tax that is proposed to be introduced in 12 states from next April.

The recommendation, which is based on a study conducted by the National Council for Applied Economic Research (NCAER), is rooted in the principle that disparity in state taxes leads to heavy tax evasion and revenue leakages that could be plugged by levying a specific single-point tax.

The NCAER study, which was commissioned by the Confederation Of Indian Alcoholic Beverages Companies (CIABC), says at present there is a slew of heads under which tax is levied by the states apart from the prime component of the state excise.

NCAER’s chief economist Subir Gokarn said the harmonisation of state excise policies will prevent liquor smuggling across the states which result in revenue loss.

Deepak Roy, president UDV(South Asia Russia and Baltic), said the rationalisation of the tax rates will increase the industry’s profitability.

The underlying principle for the Rs 120/per litre specific tax is based on alcohol content. For IMFL with a 42.8 per cent alcohol content, the rate arrived was Rs 150/per litre. However, in view of the impending VAT, the rate was recommended at Rs 120 per litre.


New Delhi, Dec. 14: 
The Supreme Court today approved an agreement between National Housing Bank (NHB) and ANZ, the foreign bank, to settle a nine-year-old dispute between the two entities over the sharing of a sum of Rs 1,646 crore that stems from the infamous securities scam of 1992. NHB and ANZ will share the amount in the ratio of 60:40.

A bench comprising Justice B.N. Kirpal and Justice K.G. Balakrishnan said, as per the agreement, NHB will get Rs 1,025.43 crore while ANZ will get the remaining Rs 620.43 crore out of the disputed amount of Rs 1,645.87 crore.

Directing the two parties to work out the remaining issues pertaining to the dispute, the apex court asked them to submit before it the final settlement by the next date of hearing on January 10, so that the matter could be disposed of.

NHB had constituted a committee in November this year to resume negotiations with ANZ Grindlays Bank over the protracted dispute following a Supreme Court order during the last hearing.

The court had asked the two parties to make efforts to arrive at an “amicable settlement”.

The dispute stemmed after the 1992 share scam when NHB lost Rs 506 crore. NHB had given nine cheques to ANZ Grindlays which had wrongly credited the amount to big bull Harshad Mehta’s account.

Following the share scam, NHB asked ANZ to return the fund but was unable to retrieve it. The Reserve Bank intervened and asked ANZ to return the funds which sparked to bitter legal wrangle.

NHB’s nine cheques worth Rs 506 crore issued for buying securities during 1992, compounded to Rs 1,522 crore till March this year on account of the 18 per cent interest on the principal amount.

ANZ had appealed to the Supreme Court after a verdict by a special court in Mumbai in favour of NHB.

ANZ had deposited Rs 1,522 crore at State Bank of India in favour of the NHB. But the amount compounded to Rs 1,645.87 crore after inclusion of the interest.

In 1997, an arbitration award went in favour of ANZ and NHB had to pay the principal amount and accrued interest thereon amounting to Rs 912 crore into an escrow account pending the resolution of the dispute.

The agreement finally rings down the curtain on one of the murkiest deals in the securities scam.

Several other cases are still wending their way through the courts even as the key protagonists of the scam — Harshad Mehta and his associates — are embroiled in fresh allegations that they sold a mountain of shares in the market through a network of sub-brokers which should have been confiscated by the scam court investigating the cases but disappeared mysteriously.



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