Forbes stake tussle intensifies
UTI Bank in share placement talks with Fortis
Arcus plans mega retail outlet in city
Anti-money laundering Bill put on fast track
Norsk Hydro pulls out of Utkal Alumina
Bangla cargo handling firm shut out under Fema
Gilt yields hold key to rates on bank deposits
SAB’s open offer for Rochees falters

 
 
FORBES STAKE TUSSLE INTENSIFIES 
 
 
FROM SATISH JOHN
 
Mumbai, Dec. 17: 
Attempts to snap up Forbes Gokak (FGL) enter a decisive stage as indications emerge that Pavankumar Sanwarmal will raise the price of his counter-offer bid above the Rs 90 set by the Pallonji Mistry group.

The revision in the bid is expected to come through within a couple of days, merchant banking circles said. Sanwarmal declined to speculate on the exact price, though he confirmed that a “letter of offer” would be despatched to Forbes shareholders on December 19.

Sanwarmal, who has offered Rs 88.50 for each share, is planning to go one up on the price offered by the Mistry group, which had raised its offer from Rs 80 to Rs 90 after his rival went to town with his intentions.

Incidentally, the Pallonji group had acquired the Forbes stake from the Tatas recently, which necessitated an open offer. “The Sanwarmals will offer a price above Rs 90, but we don’t visualise a dramatic rise in the offer price. It will be a little above what the Mistry’s have offered. It is pointless to offer a price lower than Rs 90 as the Mistry camp has already offered that,” a source in the merchant banking industry said. Meanwhile, financial institutions are being wooed by both camps to offload their stake. Led by LIC, the FIs have held talks with Pallonji Mistry, sources close to the group told The Telegraph.

As things stand now, the Mistry group has an edge over the Sanwarmals in the race to acquire the 13 per cent stake controlled by FIs. The institutions are likely to consider crucial issues like the management background of the prospective acquirers before taking a decision. “Price will be only one of the factors,” sources said.

Sanwarmal, however, is unfazed by the fact that the role of FIs could tilt the scales in favour of the Mistry group. “The financial institutions usually take a decision at the fag end, usually after the final offers from the two camps are known,” he said, adding his group has not made any overtures to the institutions so far.

Analysts say the book value of the Forbes share is around Rs 160, and there are growing expectations that the two warring bidders may finally top the Rs 100-mark. It is understood that the Mistry group will have the first right to entertain FIs.

The Pawankumar group made an open offer for Forbes shares at Rs 88.50 per share. The competitive bid was supposed to open on December 12 and close on January 10. However, after the market regulator directed the Sanwarmal group to furnish securities with better liquidity, the group had asked for more time to fulfil Sebi’s fresh demands. The offer will now open on January 3.

Pallonji group’s offer started on November 28 and would close on the same day as counter offer which is February 1 this year.

   

 
 
UTI BANK IN SHARE PLACEMENT TALKS WITH FORTIS 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Dec. 17: 
UTI Bank is in talks with Fortis, a Dutch-Belgian bank, on a possible preferential allotment at a premium to ramp up its equity base.

The bank, which is promoted by Unit Trust of India, is also believed to be in talks with a few other foreign banks on a private placement.

” There are two objectives behind the proposed equity expansion. The first is to expand tier-I capital which is required to increase the capital adequacy ratio and, the second objective is to help UTI reduce its holding by 5 per cent,” sources said.

UTI currently holds a 44.89 per cent stake in the bank while CDC Capital Partners- South Asia Regional Fund and CDC Financial Services hold 26 per cent. LIC and GIC combine hold 9.31 per cent and the public has 19.80 per cent.

Official confirmation of the move could not be ascertained despite several attempts.

Sources said the public sector insurance majors may not be interested in picking up further equity, but will certainly remain as steady investors in the bank.

UTI, being the promoter of the bank, is required to bring down its holding to 40 per cent under RBI regulations.

“Since UTI does not want to reduce its holding through divestment, the expansion of bank’s capital base will help it bring down its stake,” sources said.

Sources have also pointed out that UTI may ultimately bring down its stake to 26 per cent over a period of time. However, it is unlikely that UTI will relinquish management control over the bank.

UTI Bank recently issued 4.64 lakh equity shares of Rs 10 each at a premium of Rs 24 to CDC Capital Partners. The issue expanded the capital base of the bank from Rs 130.90 to Rs 178.25 crore. While the CDC Capital Partners and CDC Financial Services acquired 26 per cent stake, the UTI’s holding came down from 60.65 per cent to 44.89 per cent.

The capital expansion, when in place, will help the bank increase its capital adequacy ratio to a considerable extent enabling it to make prudent investment decisions. UTI Bank, which was incepted in 1994 when a fresh batch of banking licences were awarded to the private sector, has performed very well so far.

The bank recorded total income of Rs 1,053 crore during in the year ended March 2001 while net profit rose to Rs 86 crore.

Sources said the bank has achieved commendable growth despite one of the most withering slowdowns in the economy.

   

 
 
ARCUS PLANS MEGA RETAIL OUTLET IN CITY 
 
 
FROM RAJA GHOSHAL
 
New Delhi, Dec. 17: 
Arcus, the Turner Morrison group’s retailing venture, plans to set up a 30,000 square feet one-stop retail shop for home products in Calcutta in two years.

Arcus set up its maiden 30,000 sq feet outlet in Gurgaon in October last year.

The initial investment was Rs 12 crore in the Gurgaon outlet. The company achieved its break even in its 11 month of operation in November.

“With an investment plan of Rs 100 crore, the expansion plan is to have 10 stores in the next three years in six key cities — Delhi, Mumbai, Calcutta, Chennai and Hyderabad and Bangalore,” Aravind Nagarajan, CEO, retail of Arcus Limited.

By the end of this financial year, Arcus will have at least three outlets up and running.

The additional two, each of at least the size of the present one, will be opened between Mumbai and the National Capital territory region of Delhi, either one in each city or both in one.

   

 
 
ANTI-MONEY LAUNDERING BILL PUT ON FAST TRACK 
 
 
JAYANTA ROY CHOWDHURY
 
New Delhi, Dec. 17: 
Under severe pressure from the United States, India is pushing ahead with its plans to bring its re-worked anti-money laundering Bill before Cabinet.

Top finance ministry sources said diplomatic pressure exerted after the September 11 terror attack has forced them to hasten the Bill and this may be approved as an ordinance soon.

The Bill, which was introduced in Parliament last year, had been referred to a parliamentary committee which had sought to dilute some of its provisions. The re-worked Bill accepts some of the recommendations of this committee, but has taken a harder stance against narcotics and terrorist funding.

The new Bill has set a floor limit of Rs 30 lakh for funds generated from any other crime, but there is no minimum amount set for laundering of narcotics or terrorist funding. This implies that the bill does not provide for automatic scrutiny of suspected money laundering transactions in other economic crimes.

Besides terrorism and drug offences, the Bill covers rebellion, culpable homicide, extortion, kidnapping, dacoity, forgery, counterfeiting, prostitution, offences under the Arms Act and the Narcotic Drugs and Psychotropic Substances Act and corruption by public servants only.

However, it does not cover businessmen who generate black money by falsifying accounts and by over- or under-invoicing exports and imports.

Nor will it cover corrupt politicians or their relatives who do not fall within the ambit of the definition `public servant’.

In fact economic, offences other than counterfeiting and forgery are not covered by this Act at all. These categories are supposed to be covered by the even weaker Foreign Exchange Management Act. Offences under the money laundering bill are punishable with imprisonment of three to seven years and fines of up to Rs 5 lakh. In case the offence is related to laundering money gained from drug trafficking or terrorism, the jail term could go up to 10 years.

However, persons accused under this act can be bailed out, something which had originally not been envisaged. The legislation also provides for punishing those who furnish false information with two years imprisonment and or a fine of Rs 50,000. Property of those chargesheeted can be attached by an officer of the rank of at least deputy director by following the Criminal Procedure Code, that is, after informing a magistrate in all cases except those related to drug trafficking where a police complaint is enough.

Similarly, search and seizure of evidence may be authorised by the director of enforcement after informing a magistrate. Arrests can be made under the CrPC which means that those arrested have to be produced before a judicial magistrate within 24 hours. Under Fera, the omnibus foreign exchange law which has now been repealed, officers had far wider powers of arrest, search and seizure. Under the new Bill, an adjudicating authority and an appellate tribunal will be set up to hear cases, besides special courts when needed.

Banks and FIs have to maintain records of transactions for a period of 10 years. It will also cover chit funds, co-operative banks and housing finance companies.

   

 
 
NORSK HYDRO PULLS OUT OF UTKAL ALUMINA 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 17: 
Norwegian industrial conglomerate Norsk Hydro ASA today said it plans to withdraw from the Utkal Alumina International Ltd, thus putting a question mark on the feasibility of the multi-million dollar project.

Norsk, with a 45 per cent stake, decided to opt out of the greenfield project in Orissa in view of its dismal perception of the future outlook for alumina markets. Now it remains to be seen whether the two remaining partners, Alcan and Indal, are willing to pick up the gauntlet.

In a media statement in Oslo, Norsk Hydro gave no further details of the project. However, the company informed that construction in the proposed project area was yet to start.

Indal holds 20 per cent stake in the 4 million tonne Utkal Alumina project. It was said to be in talks for a majority stake of 40 per cent in the project along with the responsibility of executing the project at Rayagad district in Orissa.

Alcan, the Canadian aluminium major, with 35 per cent stake still appears to be interested in the project.

Subsequent to Indal raising its stake in Utkal Alumina, the holdings of Alcan and Norsk Hydro would reduce to 30 per cent each. Alcan’s role was defined as technology supplier for the project.

The project is currently awaiting environmental clearance from the Centre, which is pending in lieu of a public interest litigation. This project was earlier touted as an important part of Hydro’s strategy to secure the supply of raw materials necessary for the production.

   

 
 
BANGLA CARGO HANDLING FIRM SHUT OUT UNDER FEMA 
 
 
FROM DEVLIN ROY
 
New Delhi, Dec. 17: 
In a strange interpretation of law, the government has rejected the proposal of a Bangladeshi company to set up a base in India to provide cargo handling services citing unnamed provisions of the Foreign Exchange Management Act (Fema) 1999 which, it claims, prohibits any investment from individuals or corporate from Bangladesh and Pakistan.

Sources say that at its meeting on November 8, the Foreign Investment Promotion Board (FIPB) rejected a proposal submitted by Green Delta Investments Ltd, a company registered in the British Virgin Islands, to set up a cargo handling firm in India called Transmarine Logistics Ltd.

The reason: Green Delta is a subsidiary of MG Group of companies of Bangladesh.

Under the proposal, Transmarine would be engaged to provide services to European retailers in cargo consolidation, warehousing, sea forwarding, shipping line agencies and cargo handling and would have an initial capital base of Rs 23 lakh.

The administrative ministry -- the ministry of shipping — subsequently indicated that the sum of Rs 23 lakh that Green Delta proposed to invest in Transgenic would not be sufficient to cover its range of activities and therefore recommended its rejection.

The Secretariat for Industrial Assistance subsequently came up with a unique point. It said the applicant company was a wholly-owned subsidiary of a company incorporated in Bangladesh.

Apparently, Fema regulations provides for a total prohibition on investment from Bangladesh either through citizens or through incorporated entities.

“The instant proposal amounted to backdoor entry of a Bangladesh-owned company and should be accordingly rejected,” the board decided.

However, legal experts say this is a clear case of gross misinterpretation of the law.

There is no provision in Fema that states that individuals or corporates from Bangladesh are not allowed to invest in India.

The only rider is that these investment proposals cannot be made under the automatic approval route.

   

 
 
GILT YIELDS HOLD KEY TO RATES ON BANK DEPOSITS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 17: 
The industrial slowdown and anaemic credit growth are expected to play a crucial role in determining the yields of government securities over the short run — and, therefore, how much investors earn on their deposits stashed away in banks.

Money market analysts predict more declines in the yields on government securities are likely if the economy fails to come out of the funk over the next couple of months. And, once that happens, there is a possibility of interest rates on deposits coming under pressure as banks struggle to maintain their spreads — the gap between the returns on their investments and deposit rates.

The declining yields on government securities recently prompted leading commercial banks led by State Bank of India (SBI) to offer less to their depositors, affecting millions of pensioners and investors who are looking for safe investment avenues.

The cuts were the result of a situation in which banks were inundated with deposits, even as credit to the commercial sector did not show any signs of picking up. The upshot of this was that a large part of banks’ resources found their way into government securities.

Banking statistics available so far this year from the Reserve Bank of India (RBI) also show that a rise in deposits at commercial banks has been accompanied by a surge in gilt investment of commercial banks.

The fresh crop of numbers for the fortnight ended November 30 shows aggregate deposits of the banking system rising by over Rs 5,000 crore to Rs 10,61,981 crore.

Even as non-food credit declined by Rs 85 crore to Rs 4,97,310 crore, banks’ investment in government securities galloped by over Rs 3,600 crore to Rs 3,91,695 crore.

To compound the problem of banks, yields on government securities have shown a significant slide over the past couple of months, dipping to as low as 7.76 per cent from a level of 9.12 per cent in early October.

With cost of deposits remaining the same and interest rates available on government bonds falling, banks were finding their margins getting squeezed. This led to few of the large nationalised banks cutting deposit rates.

The spectre of lower interest rates is not restricted to banks’ alone. Even insurance companies, led by LIC who invest a bulk of their investible funds into government securities is now planning to bring down interest rates on some of its schemes.

Analysts say the government may either cut the administered rate of 9.5 per cent on small savings or link them with market rates of gilts in the budget.

   

 
 
SAB’S OPEN OFFER FOR ROCHEES FALTERS 
 
 
FROM DEVLIN ROY
 
New Delhi, Dec. 17: 
The open offer by South African Breweries to acquire a 46.46 per cent in Rochees Brewery at Rs 10.15 per share, which opened today, appears to have hit a roadblock with the Foreign Investment Promotion Board (FIPB) yet to clear SAB India’s proposal to buy out the brewery for an overall consideration of Rs 29.7 crore.

SAB India filed for an open offer in anticipation of the FIPB clearance of its proposal under which it intends to acquire a 53.54 per cent stake from the Rochees’ promoters — the Moolrajani family — at Rs 10.15 per share for Rs 9.7 crore.

The proposal also seeks approval to acquire the 46.46 per cent outstanding stake with the public offer for a sum not exceeding Rs 20 crore, which provides a reasonable headroom for a higher open offer price of up to Rs 24 a share.

The FIPB has had two meetings to discuss the SAB India proposal but a decision has been deferred because of some confusion over whether Rochees has a valid industrial licence.

SAB India’s open offer, which opened today, is scheduled to close on January 15.

After it acquires the company, SAB India intends to use Rochees’ Rajasthan-based manufacturing facilities to manufacture its own brand of beer for which SAB India will charge royalty at 5 per cent on domestic sales and 8 per cent on export sales (net of taxes).

Sources say SAB India’s application is currently pending before FIPB as the board wants to obtain further details on the industrial manufacturing licences issued by the government of Rajasthan, even though the company claims that it has the requisite industrial licence as well as beer licence.

Despite efforts to contact him, SAB spokesperson Chris Barro was not available for comment.

Earlier, SAB India successfully purchased Mysore Breweries and Pals Distilleries from its Indian owners and has completed the open offer process with the public at a price of Rs 500 and Rs 35 respectively in August.

SAB India is a joint venture company in which 60 per cent is owned by South African Breweries International (Asia) BV, and the balance by Narang Industries Limited and Hallvard Limited, a non-resident Indian investment company.

The company is bidding along with three other international players -- Heineken, Carlsberg and Interbrew -- to pick up a strategic stake in UB Beer, the demerged beer business of Vijay Mallya-owned United Breweries.

SAB India kicked off its entry into the brewery market by acquiring a 100 per cent stake in Narang Breweries, a brewery situated in Nawabganj, Uttar Pradesh. SAB is planning to modernise and upgrade the brewery to make its brands.

At present, the $ 4.2 billion South African Brewery group is believed to own and operate over 100 breweries in 24 countries, employing over 31,000 people.

SAB India has already made investments of around $ 26 million in the Indian market and, with the purchase of Rochees, SAB India’s beer-making capacity is expected to go up to 7.7 lakh hectolitres.

SAB India hopes to grab a 20 per cent share of the Indian beer market by the year 2004 and has drawn up plans to invest up to $ 100 million.

   
 

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