Battle build-up batters rupee
IA to acquire 12 Boeing, Airbus planes
Govt to reduce Bhel stake to 51%
Code puts Bharti in STD club
Sebi seeks details on IPO
WPP to increase Equus stake
Guj Ambuja works off costly loans
Amul plans to venture into eateries
Ficci study sees gains from euro
Foreign Exchange, Bullion, Stock Indices

 
 
BATTLE BUILD-UP BATTERS RUPEE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 26: 
Fears over the build-up along the Indo-Pak border today cast a shadow on the rupee, driving it down the 48-mark to close at 48.05 against the dollar, a steep decline of 13 paise over its previous finish.

The inter-bank forex market, watching with alarm the build-up on the Western border, was keeping its fingers crossed, hoping that a sustained supply of dollars would help check the free-fall of the rupee on Thursday.

“The rupee still looks weaker at this point of time. If dollar buying were to continue tomorrow at the kind of pace witnessed today, the rupee could dip below 48.07. We could even see it plunging to 48.15,” an analyst said. Forex market watchers are gripped by the fear of outbreak of hostilities between India and Pakistan, and the repercussions it would have on a recession-roiled economy.

Finance minister Yashwant Sinha has said the country can weather a war, but there are growing doubts that a conflict would unnerve the foreign investors who help boost the kitty of greenbacks.

“The border has been smouldering, with reports that missiles have been deployed. This has put pressure on the rupee,” a dealer with a nationalised bank said.

Earlier in the day, the rupee opened weaker at 47.94/96 on bouts of dollar buying, against its previous close of 47.92/92.50 on Monday. The continuous buying, largely by banks on behalf of their jittery corporate clients, hammered the rupee beyond the 48 mark.

Market participants said firms that expected to buy greenbacks — fence sitters as they are called by dealers — were seen covering their exposures, though much of it was for the near term. With dollar supplies failing to keep pace with demand, the rupee kept on slipping.

The currency hit an intra-day low of 48.06, at which point dollar supplies started flowing into the market, largely due to selling by nationalised banks. Dealers said few of these banks raked in large profits on their sales.

The rupee clawed back from its trough, recovering to 48.01 after noon, but the rally did not take hold as another bout of dollar buying piled the pressure on the currency. At the end of the session, the rupee rested at 48.05 — the lowest ever finish in the space of the last two weeks.

The jitters in the spot market were reflected in the forward segment, where the premia on the dollar shot up across the board. The six-month premium shot up to 6.85 per cent while the 12-month premium was pegged at 6.43 per cent; the one-month premium was quoted at 7.35 per cent against its previous finish of 7.07 per cent.

Stocks slide

The war hysteria swept Dalal Street too, sending the Bombay Stock Exchange (BSE) sensex sliding 57.11 points at 3175.86. The index had opened slightly lower at 3227.80, and bounced to a high of 3262.92.

However, it later dipped to a low of 3170.23 before ending with a decline of 1.77 per cent over its previous close of 3232.97. The session on BSE and NSE was extended till 4.30 p.m. after a long power cut disrupted pre-noon trading.

   

 
 
IA TO ACQUIRE 12 BOEING, AIRBUS PLANES 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Dec. 26: 
Indian Airlines today decided to buy a mix of Boeing and Airbus planes to partly replace its ageing Airbus 300 and Boeing 737-200 fleet.

The Rs 3,800-crore domestic airline wants to buy half a dozen 100 seaters and the preferred version for this seems to be Boeing’s 737-600, though Airbus-319 is also being evaluated. It also wants another six 150 seaters for which Airbus 321 seems to be the preferred plane though B737-800s and 900s too are being looked at. Engine makers Pratt & Whitney, Rolls Royce, GE subsidiary, CSM, have also placed their bids for supply of aircraft engines.

The IA board, which opened price bids from the two major aircraft manufacturers, decided to go ahead with price negotiations only after doing a detailed cost-benefit analysis of routes to be flown by the aircraft on the basis of quoted and probable real prices.

The state-run domestic airline has a fleet of 56 aircraft, including six leased planes. While its fleet of A320s are relatively new with an average age of 12 years, some 20 planes — 11 B737-200s and nine A300s — are between 18 to 21 years old. In contrast, Sahara and Jet, IA’s two rivals, have recently inducted new planes bringing down their average fleet age to about six to eight years.

Top IA officials said: “This replacement is top priority as otherwise we will be left with a fleet of just 30 and odd flying planes and 20 junks.”

Indian Airlines turned in a loss of Rs 159 crore last fiscal after three years of generating profit. It hopes to cut this loss figure drastically by inducting a dozen planes over the next 12 to 18 months.

The main reason for IA trying to renew its fleet is that new planes will mean a far lower operational cost. A large chunk of the airline’s cost goes into maintaining old aircraft.

The older an aircraft gets the more money an airline has to spend on it for engineering overhauls and modifications. Maintenance costs have been on the rise for the airline. While it was about 14 per cent of the operating costs in 1997-98, it was nearly 20 per cent in 1998-99 and it is further expected to go up to touch 35 per cent in this fiscal.

The airline has also been planning a major expansion of international operations. Among others, it is planning new flights to Hong Kong and Riyadh, as well as adding flights to existing frequencies in south east Asia and the Gulf.

Indian Airlines officials also plan to directly connect domestic hinterland cities like Hyderabad, Amritsar, Cochin with foreign destinations. With new aircraft and a faster turnaround time it can easily service some of these routes.

   

 
 
GOVT TO REDUCE BHEL STAKE TO 51% 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Dec. 26: 
The government plans to bring down its stake in Bharat Heavy Electricals Ltd (Bhel) from 67 per cent to 51 per cent, Union minister for heavy industries and public enterprises Manohar Joshi has said.

Joshi said his ministry has approved the proposal and it will be placed before the Cabinet Committee on Disinvestment (CCD) by March.

The proposal is now before the department of disinvestment. The minister expects the sell-off process to begin in about a year after the proposal is cleared by the CCD.

Joshi told reporters that the evaluation process for the disinvestment of Maruti will be completed by January. Maruti Udyog Ltd, which is on the disinvestment list, is a joint venture project under the ministry of heavy industries.

He said 20 PSUs have been referred to the disinvestment ministry to provide the requisite thrust to the government’s joint venture/disinvestment programme. In addition, steps have also been initiated to divest or form joint venture with regard to 13 PSU subsidiaries, the minister said.

The 20 PSUs include seven from Bengal—RBL Ltd, Howrah, Bharat Brakes and Valves Ltd, Jessop & Co, Hindustan Cables Ltd, Burn Standard Company Ltd, Braithwaite & Co Ltd, Tyre Corporation of India Ltd and National Instruments Ltd.

The PSU subsidiaries to be handled by the disinvestment ministry include Hooghly Printing Co Ltd, a subsidiary of Andrew Yule and Company Ltd, Calcutta: BBJ construction Co Ltd, a subsidiary of Bharat Bhari Udyog Nigam Ltd, Calcutta, and Bridge and Roof Ltd, subsidiary of Bharat Yantra Nigam, Calcutta. He said a policy paper on the auto sector is being finalised which includes upgradation of existing testing/facilities and setting up of two new testing facilities in the country at an estimated cost of Rs 750 crore.

   

 
 
CODE PUTS BHARTI IN STD CLUB 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Dec. 26: 
The Union communications ministry today allotted the carrier access codes (CAC) to private operators, clearing the way for them to slash mobile-to-fixed line STD rates by half from January 26 when they intend to bypass the long-distance networks of the state-run Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL).

The ministry has said Bharti Telesonic — the only private licensee for offering domestic long distance telephony services — has been assigned the carrier code ‘50.’

From January 26, a cellular subscriber in Delhi making a call to a Calcutta mobile user will have to dial 010-50-33 followed by the seven-digit telephone number to route the call over Bharti’s STD network.

The prefix 010 signifies it is a mobile call, 50 is the Bharti access code and 33 is Calcutta’s STD code.

However, BSNL and MTNL will still continue to provide last-mile access to the fixed line subscriber’s end. Announcing the government’s approval of the carrier access code for private long distance telephony operators, communications minister Pramod Mahajan said: “The Telecom Regulatory Authority of India had recently sent its guidelines regarding CAC which we have examined and allotted the code to the only existing licensee. The rest of the codes will be allotted as and when the private operators take up the licence to offer domestic long distance services.”

Launching the fixed line services to be offered by private operator Bharti in Haryana, Mahajan added, “The ministry has cleared the CAC. It is now up to BSNL and private telecom operators to sort out the interconnection and other issues to implement the reduction in STD rates that the private cellular operators have announced from January 26.”

Sunil Bharti Mittal, chairman and managing director of Bharti Enterprises, said, “A few issues like interconnection and numbering plan are yet to be sorted out before BSNL can offer the choice of carrier to subscribers directly. But we have been assured by the minister that these issues pending with BSNL and Trai will be sorted out soon.”

Fixed line services

Bharti today launched its fixed line services in Haryana, becoming the seventh private fixed-line operator in the country. The company will offer services under brand name TouchTel in Haryana. Consumers opting for this service will get a free voice mail facility and a free internet connection.

The company has partnered with telecom majors like Siemens, Nortel, Cisco and Duraline for its network.

   

 
 
SEBI SEEKS DETAILS ON IPO 
 
 
OUR BUREAU
 
New Delhi, Dec. 26: 
The Securities and Exchange Board of India (Sebi) has sought a few clarifications from Bharti Televentures regarding the offer document for its initial public offer (IPO).

“We are on schedule and are in the process of completing the formalities. Sebi has sought some clarifications regarding the offer document for our IPO. The company will son send its response to the market regulator and we expect to get the final clearance by the month end,” said Bharti Enterprises chairman and managing director Sunil Mittal.

Sebi has also asked Grasim Industries to provide details of the agreement reached between the Aditya Birla Group company and Reliance Industries on the sale of RIL’s over 10 per cent stake in Larsen & Toubro to the former, to examine any breach of the takeover code.

“Based on representations by the Investors Grievances Forum (IGF) and National Association of Small Investors (NASI), the market regulator has sought information from Grasim and L&T by January 4,” a senior Sebi official said.

   

 
 
WPP TO INCREASE EQUUS STAKE 
 
 
FROM RAJA GHOSHAL
 
New Delhi, Dec. 26: 
WPP, the world’s largest advertising conglomerate with revenues of $ 17 billion, is bringing one more group affiliate to India — Red Cell.

Red Cell, which is dubbed as its challenger network, will enter the country in March when it ties up with Equus, the Rs 62 crore boutique ad agency run by the Seth brothers — Suhel and Swapan.

WPP will also be raising its stake in Equus to 45 per cent from 30 per cent from January 1. The Seth brothers will also be raising their stake in the ad firm they founded six years ago from 40 per cent to 55 per cent.

This is being made possible by the decision of Korad, the Korean ad conglomerate, to pull out of Equus and offer its 30 per cent stake equally to WPP and the Seth brothers.

WPP directly holds its stake in Equus unlike its other affiliate firms in India like HTA, O&M and Contract in which the stake is held through its network agencies.

Early this week, WPP received an approval from the Foreign Investment Promotion Board (FIPB) to raise its stake in HTA to 74 per cent from 60 per cent at an investment of Rs 57 crore. The stake in HTA is held by J. Walter Thompson.

WPP owns a 51 per cent stake in O&M, through its network of O&M world-wide. In Contract, it has a stake of 40 per cent through J. Walter Thompson.

Equus chief executive Suhel Seth said, “For Equus, the idea is to come into the Red Cell network which at present does not have affiliation with any ad agency in India.”

Seth said the hike in WPP’s stake in the ad firm would “mean greater partnership between WPP and Equus”. Asked if the alliance with Red Cell would lead to any dilution of the Seths’ stake in the ad firm, he said there has been no decision on this. He also refused to say how much the Seth brothers would invest in the ad firm to raise their stake.

WPP has been steadily expanding its operations in India. Indian agencies like Rediffusion DY&R and Everest have also come into the WPP fold after the ad conglomerate acquired the Young & Rubicam network world-wide. Last year, it also picked up a majority stake in RMG David, a sister agency of O&M.

Apart from advertising agencies, WPP in India also has stake in communication consultancy Quadra Advisory, corporate communication firm Burson-Marsteller Roger Pereira Communications Pvt Ltd and research agency IMRB.

   

 
 
GUJ AMBUJA WORKS OFF COSTLY LOANS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 26: 
Gujarat Ambuja Cements Ltd (GACL) is looking at substituting its high-cost debt with low-cost borrowings to bring down its massive debt burden now pegged at Rs 1,200 crore.

The company, sources said, has been able to bring down its debt burden from over Rs 1,500 crore, by paying back around Rs 300 crore to the Industrial Development Bank of India (IDBI) this year.

Part of the payment, they added, was done through a bond issue for which the company had offered attractive rates. Sources here did not rule out the possibility of the cement major taking recourse to such a route in the coming months as a means to shore up its bottomline.

“We are working towards reducing our debt levels and the company will look at substituting it by low-cost borrowings. The objective is to bring the debt levels down significantly over the next couple of years,” the official pointed out.

Industry analysts, who term the move as positive, point out that despite being recognised as one of the most cost efficient cement producers in the country, one of the crucial issues that Gujarat Ambuja needs to address is its staggering debt levels.

“Reduction of debt levels in such a scenario will only add to its strengths,” an analyst pointed out.

GACL’s debt levels have been on the rise even as it had drawn up aggressive expansion plans, apart from acquiring the 14.4 per cent stake in cement major ACC Ltd, a process which was completed last year.

Company circles further noted that after a sluggish growth in cement demand earlier this year, growth has now picked up with demand even rising by about 15 per cent recently. The growth in the first half is estimated to be 5.2 per cent, at 49.4 million tonnes.

Though sources from Gujarat Ambuja Cement said that the growth in the second half will be good, the industry is looking at a growth rate of at least 5 per cent over the previous year.

Gujarat Ambuja Cement has set up a 2-million tonne plant in Maharashtra as part of its expansion plans.

The company has, however, decided against pursuing a cement unit of similar capacity in Andhra Pradesh in the immediate future. The project is likely to be taken up only during 2003.

The cement major had earlier struck a deal with Warburg Pincus following which it received a total consideration of Rs 360 crore.

   

 
 
AMUL PLANS TO VENTURE INTO EATERIES 
 
 
FROM RAJA GHOSHAL
 
New Delhi, Dec. 26: 
Amul plans to enter the the restaurant business. The Gujarat Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns the Amul brand, plans to set up a separate company to run the restaurants — two in India and one in Dubai —in which it will have a substantial stake.

In India, the two fast food outlets will be opened in Ahmedabad and Mumbai. The co-operative federation has allotted funds for the venture to this company, which it did not name, to incubate the restaurant concept for a one-year period. If it runs well, the it will be hived off.

The name of the restaurant has not been yet decided, but sources said it is unlikely to bear the Amul brandname. However, if the venture clicks, it may be renamed as Amul. Once Amul gets into the business, the menus and decor will be standardised.

Sources say these will be fast food outlets and, depending on the success of the pilot project, the chain of restaurants will be expanded. “We will not go into elaborate cooking”, said the source in Amul.

Apart from selling pizzas, products from its frozen foods portfolio and those from its sweets portfolio like ‘mithai mate’ and gulab jamun, the restaurants could serve food items that has nothing to do with Amul’s products like dosas and idly, said the source.

   

 
 
FICCI STUDY SEES GAINS FROM EURO 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Dec. 26: 
A study conducted by Federation of Indian Chambers of Commerce and Industry (Ficci) suggests that the currency changeover to euro in the European Union from January 1 will provide unique opportunities for Indian companies to work on their existing systems to increase their external competitiveness for trading in the unified Euro-12 zone.

The study looked into the possibilities of the Euro currency to become an international transaction (and reserve) currency and perhaps even replace the dollar as the most preferred currency for holding for India.

The interviews conducted among exporters, companies and business houses with trade interests in the EU and also with the national and private banks dealing with Euro accounts shows that 44 per cent of the respondents feels that changes are required in their legal instruments involved new contracts being drawn with Euro as the trading currency.

About 20 per cent of the respondents said that their organisational restructuring included changes in cash handling system, while 8 per cent mentioned the requisite software changes in their Electronic Data Interchange systems.

The study has listed a number of benefits towards using Euro as a single currency.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.05	HK $1	Rs.  6.05*
UK £1	Rs. 69.37	SW Fr 1	Rs. 28.05*
Euro	Rs. 42.30	Sing $1	Rs. 25.70*
Yen 100	Rs. 36.78	Aus $1	Rs. 24.05*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4695	Gold Std(10 gm)	Rs. 4625
Gold 22 carat	Rs. 4435	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7575	Silver (Kg)	Rs. 7645
Silver portion	Rs. 7675	Silver portion	NA

Stock Indices

Sensex		3175.86		- 57.11
BSE-100		1525.49		- 25.86
S&P CNX Nifty	1034.25		- 14.25
Calcutta	 105.86		-  1.82
Skindia GDR	 513.53		-  1.19
   
 

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