US-64 investors stay indoors
UTI blocks HFCL payout
Move to end dividend tax on companies
Uco asks govt to write off losses
Dollar scramble pushes rupee to 48.27 at close
Exports inch up 0.5% in first eight months
NBFC norms aligned with Companies Act
Freebie Mahajan does a Paswan
Foreign Exchange, Bullion, Stock Indices

Mumbai, Jan. 1: 
Unit Trust of India (UTI) was back in business flinging open the repurchase window of flagship fund US-64 after a four-month hiatus, but fears that investors would hit the panic button and bail out of the fund proved to be completely unfounded.

The new units of US-64, the country’s largest mutual fund with 20 million investors, were being sold at prices that were indexed to the net asset value of the Rs 13,000 crore corpus. The NAV is the notional value of each unit calculated on the basis of the investments made by its fund managers.

Sales and repurchase in US-64 were frozen in June after a shock admission that its reserves had eroded which led to the sacking of its then chairman P.S. Subrahmanyam on the charge that he and a cabal of managers invested in stocks and bonds against the advice of a group of technical evaluators.

Small investors who were trapped in the frozen fund were given a small escape hatch when the repurchase windows opened briefly in August, but with a repurchase cap of 3000 units, many were still stuck in the fund. Incidentally, the sales windows — where new investors buy units — were being opened after seven months since the fund was frozen in June.

Last week, UTI further shocked its investors when it announced that its NAV was Rs 5.94. That was about 60 per cent of the unit’s face value of Rs 10. Today, its NAV sunk to Rs 5.97, apart from a price plunge on the NSE.

However, UTI had tried to assuage fears of investors by giving them the option of returning their units at Rs 10.50 per unit if they sold up to 5,000 units. Anything above that figure would have to be sold at NAV-linked prices.

There was a lurking fear that investors would bail out of the beleaguered fund. But at the end of the day, UTI chairman M. Damodaran and the top brass heaved a collective sigh of relief after reports trickling in from the 54 branches revealed that selling response was tepid to say the least.

The count at the end of the day: sales to new investors yielded just Rs 2.48 crore; repurchases amounted to Rs 12.01 crore, most of the units being bought by UTI at Rs 10.50.

Meanwhile, sales of US-64 units were struck at Rs 5.81 plus the 3 per cent load, which was US-64’s NAV for the day. UTI had pegged sales at a minimum sum of Rs 5,000.

The tepid response came as no surprise to the mutual fund major. UTI officials who were manning the Unit Trust of India’s financial Centre (UFCs) at Churchgate, in the heart of the business centre, were unflappable.

Damodaran and his entourage monitored the reports, keeping a round-the-clock vigil. Officials were apprehensive that the negative publicity surrounding the scheme may create apprehensions and trigger a deluge of redemption requests from skittish unit-holders.

UTI’s pre-emptive measures helped avert a run on the scheme for now, but many fear it could come under pressure if the NAV plumbs new lows in the days ahead.

Sources said a handful of companies, those with more than 5,000 units, opted for repurchase at the NAV price.

The last time, Damodaran spoke to reporters mediapersons he had admitted that the main reason behind UTI’s steady loss of marketshare was due to the derailment of its flagship scheme.


Mumbai, Jan. 1: 
The Unit Trust of India (UTI) has shot down Himachal Futuristic Communications Ltd’s (HFCL) move to dole out a 25 per cent dividend for 2000-01. The mutual fund played spoilsport though it holds 10 per cent in the company, as the latter defaulted on repayment of its Rs 50 crore short-term 5-month, non-convertible debentures, it subscribed to in February.

However, the HFCL counter was the second most traded in terms of turnover today, with a value of Rs 161.12 crore. Total volumes stood at 63.5 million shares, comprising 18.3 million shares on the BSE and 45 million shares on the NSE.


New Delhi, Jan. 1: 
The finance ministry plans to abolish the 10 per cent distribution tax on corporate dividend payouts.

As part of its budget formulations, the Central Board of Direct Taxes (CBDT)wants to scrap dividend tax. At the same time, it wants the tax on foreign companies reduced to the level of domestic firms. Currently, foreign companies are taxed at the rate of 48 per cent while Indian companies pay 38 per cent. The reason for the higher taxes paid by foreign companies is that they do not pay dividend tax.

Although the government collects tax on dividend distributed from companies, the impact is felt by individual shareholders as their dividend incomes are reduced to the extent of the tax. The current move to abolish this tax is prompted by a group on taxation set up recently by the ministry.

The reason for this largesse, CBDT officials say, is that most companies hold back dividend and retain the sum in forms that cannot be taxed. “Besides, personal incomes are being taxed in any case,” they said.

Instead, the CBDT wants three things: one, the administration of corporate tax should be done in a more efficient manner so that the current practice of hiding profits in the form of capital gains (which attract preferential treatment) is discouraged.

Second, various kinds of exemptions available to companies should be reduced so that tax leakages are limited in number, if not altogether stopped.

Third, a reformed minimum alternate tax, which will incorporate a 10 per cent tax on dividend payouts besides a 0.75 per cent tax on the net worth of a company.

Currently, MAT — a tax imposed on those profit-making companies that use various tax shelter schemes to avoid paying normal corporate taxes — is pegged at 7.5 per cent of book profits or commercial profits.

“Of course, the immediate impact of such a step would be “a market boom,” income tax practitioner Sudatta Sen pointed out. “It will bring back the feel-good factor in the market which the series of scams and general recession has managed to suck out,” he added.

The stock market has been sliding and any steps taken to prop it up would obviously be welcome. The dividend tax had otherwise been attacked by various organisations as highly inequitious because it was seen as a kind of double taxation of individuals who were paying out a dividend tax and a personal income tax.


Calcutta, Jan. 1: 
The city-based Uco Bank has asked the Union finance ministry to write off its accumulated losses by making the necessary adjustments with its equity capital.

The exercise will help the bank clear its balance sheet and enable it raise fresh capital from the market in future. The bank’s accumulated losses as on March 31, 2001 stood at Rs 1,764 crore, while its equity capital is at Rs 2,264 crore. “Under the proposal, the accumulated loss has to be knocked off the capital, thus reducing the size of the equity,’ senior officials of the bank said.

The bank had twice sought a recapitalisation fund of Rs 200 crore from the finance ministry, in 2000-01 and 2001-02, but it is yet to receive anything from the ministry. “Had the bank received a capital infusion of Rs 200 crore, it would not have asked for writing off the accumulated losses,” Uco officials said. Writing off accumulated losses is not new to the banking industry. Several banks have resorted to this method earlier, including the city-based Allahabad Bank.

With the expansion of Uco’s assets, the size of its risk-weighted assets too would rise and, with it, the need for additional capital to conform to the capital adequacy norms. The additional capital could be obtained through four possible routes — infusion of fresh capital by the government, through an improvement in profits, by accessing the capital markets and by resorting to Tier-II capital.

The bank has already come out with an offer of Tier–II capital this year to raise Rs 100 crore with a greenshoe option to retain an additional Rs 50 crore. Uco officials said that if the government does not allow them to write off the accumulated losses then the bank may have to float another round of Tier-II bonds in the current financial year. “Nothing has been decided as yet,” the officials further added.

In the current financial year, the bank’s strategy of asset expansion through acquisition of quality credits and mid-market products has paid good dividends. In the first half of the current year, the bank has been able to disburse a credit of Rs 700 crore under various schemes in the mid-market segment.


Mumbai, Jan. 1: 
Late noon dollar demand from nationalised banks and corporates today pushed the rupee to a new low to close at Rs 48.2650/2750 against the dollar.

Today’s trading saw dollar supplies remaining relatively thin due to holidays in other markets. Analysts said this was another factor that pushed the rupee to the fresh low against the greenback. Though the Indian currency is expected to face some pressure Wednesday, dealers aver it is likely to now settle around the 48.20-30 range in the days to come.

“The markets were earlier afraid of a war between India and Pakistan. However, with that feeling now receding, we can look forward to a relatively stable rupee,” an analyst with a private sector bank said.

In today’s trading, the rupee that opened at 48.23/15 per dollar was trading firm in early morning deals on dollar sales by banks who were seen reducing long positions built in the past weeks. The Indian currency then appreciated to the intra-day high of Rs 48.18/19 per dollar.

While volumes were not significant, dealers said dollar demand surfaced in late noon trades, which put pressure on the rupee. The demand largely came from nationalised banks and corporates. However, with supplies remaining thin as the US markets were closed, the rupee began losing value.

The currency hit an intra-day low of 48.31 per dollar, after which some dollar selling was observed. This led the rupee to close at 48.2650/2750, a loss of 2 paise over previous close, but still a new historic low against the dollar.


New Delhi, Jan. 1: 
Exports during the April-November increased by a marginal 0.5 per cent at $ 28.8 billion, up from $ 28.7 billion last year, even in the face of the ongoing global recession.

In rupee terms, exports were pegged at Rs 13,6608.78 crore, which is 5.15 per cent higher than the value of exports during April-November 2000-01, according to a government release.

Data compiled by the Directorate General of Commercial Intelligence and statistics reveal that exports during November 2001 show a growth of 3.29 per cent at $ 3.7 billion, compared with $ 3.6 million last year.

In rupee terms the exports were Rs 17864.15 crore, which is 5.97 per cent higher than the value of exports during November 2000.

With imports growing marginally at 1.19 per cent during the first eight months of the current fiscal, trade deficit touched $ 5.8 billion against $ 5.6 billion, in the corresponding period last year.

Imports during November 2001 are valued at $ 4.18 billion as against the level of $ 4.69 billion in November 2000.

Oil imports during April-November 2001-02 declined by 13.18 per cent at $ 9.85 billion compared with $ 11.3 billion last year, the official release said.

Non-oil imports during April-November 2001-2002 are estimated at $ 24.87 billion, which is 8.30 per cent higher than the level of such imports valued at $ 22.96 billion in April-November 2000-01.


Mumbai, Jan. 1: 
The Reserve Bank of India (RBI) has rationalised regulations on non-banking finance companies (NBFCs) and residuary non-banking companies (RNBCs), aligning them with the Companies Act.

The change in laws will make it mandatory for NBFCs to report defaults on repayment of deposits to the Company Law Board. Statutory auditors of these firms have been asked to inform the central bank about violations or irregularities in the course of their evaluation.

On the issue of adhering to the Companies Act, the RBI has said audit committees should be constituted for companies which have a paid-up capital of at least Rs 5 crore, or have an asset size of Rs 50 crore and above.

NBFCs, which turn from being a private limited company to a public limited firm under the Companies Act (because they holding public deposits), have been advised to approach the RBI for changes in certificate of registration.

The RBI has asked companies whose applications for certificate of registration have been rejected or cancelled, to continue repaying deposits on due dates. The appointment of audit committees, the RBI said, has been prescribed for companies with paid-up capital of not less than Rs 5 crore or asset size of Rs 50 crore and above.

In another significant announcement, the central bank has said loans against hypothecation of automobiles, aircraft registered with DGCA and ships registered with Director General of Shipping, along with other equipment leasing and hire-purchase assets, will be taken into account in classifying an NBFC as an equipment leasing or hire purchase finance company.

The apex bank said NBFCs should maintain the prescribed minimum capital ratio not only on the reporting dates but on an on-going basis. They have also been told to frame investment policies and categorise investments into current and long-term slots.

Lending a degree of flexibility to NBFCs and RNBCs, the RBI has now permitted them to warehouse their securities with a Sebi-registered depository participant, Stock Holding Corporation or their designated banker. Earlier, finance firms had to keep investment in securities only with a bank.


New Delhi, Jan. 1: 
So far Yashwant Sinha was known to make flip-flops; now, it’s time for Pramod Mahajan to make a few sharp about-turns.

After resolutely setting his face against the freebie-laden regime of predecessor Ram Vilas Paswan, Mahajan has succumbed to the temptation to announce grand populist measures which he had decried earlier on the ground that they undermined the telecom PSUs ability to compete against nippy private sector adversaries.

For a start, state-run Mahanagar Telephone Nigam Ltd (MTNL) is preparing to offer in Delhi and Mumbai a free 100 days of call time to net surfers, starting from January 26.

The three-month carte blanche means that internet users in the two metropolises have to just dial a number — 48880000 — and surf the Net without having to worry about paying telephone charges. There are over 1 million internet subscribers in the two cities.

MTNL has also waived the Rs 800 installation charges for new connections given in January. In April, when Paswan announced that new telephone subscribers would not have to pay registration charges, there was a storm of protest by telecom officials against the practice of offering such inducements to attract customers. Now, there is not even a whimper of protest against Mahajan’s grand announcements in Mumbai yesterday.

When Mahajan took over as the Union communications minister in September, he was astounded to see the loads of freebies that predecessor Ram Vilas Paswan had been doling out.

’War on freebies’, he declared: in one stroke he scrapped three telecom advisory committees 16,000 committee members of the benefit of making 1100 free calls per two-month billing cycle along with a rental waiver. The cost was estimated at about Rs 500 crore a year. He then nixed Paswan’s offer of a free phone facility to 3 lakh employees of the department of telecom (DoT) that was expected to cost about Rs 100 crore a year. “The telecom PSUs cannot compete in the market if such largesse is doled out,” Mahajan had said then.

While Mahajan swears that MTNL/BSNL’s boards are fully independent, he never loses the opportunity to hog the limelight when it comes to announcing the sops, but ducks responsibility for those decisions.

“I am here because the chairman and managing director of BSNL has invited me to this occasion. BSNL is free to take it is own decisions. I do not interfere with their decisions,” Mahajan retorted when reporters asked him why he was announcing BSNL’s decision to slash STD rates last week. Senior officials in BSNL and MTNL says the decision to join the rate war initiated by the Bharti group, which is slashing its mobile-to-mobile STD rates by 50 per cent from January 26, is far too precipitate.

They fear that their networks will be jammed when callers scramble to take advantage of the rate cuts. While work is going on to upgrade the networks, it will not be ready to deal with the anticipated surge in STD calls. “Not all networks are geared to meet the rush which is expected during both the peak and off-peak hours from next fortnight. We are preparing to meet the rush and are upgrading the network, but we are likely to take some more time in a few places,” a senior official said.

MTNL officials say that 25-30 per cent of the total STD traffic during peak hours flows between the two cities and this will pose a serious challenge.

“We are geared to meet the surge but we cannot guarantee that there will not be any congestion. These glitches exist even at the present rate of traffic,” said an MTNL board member.



Foreign Exchange

US $1	Rs. 48.27	HK $1	Rs.  6.10*
UK £1	Rs. 70.20	SW Fr 1	Rs. 28.60*
Euro	Rs. 42.93	Sing $1	Rs. 25.75*
Yen 100	Rs. 36.68	Aus $1	Rs. 24.20*
*SBI TC buying rates; others are forex market closing rates


Calcutta		Bombay

Gold Std (10gm)	Rs. 4675	Gold Std (10 gm)Rs. 4630
Gold 22 carat	Rs. 4415	Gold 22 carat	  NA
Silver bar (Kg)	Rs. 7650	Silver (Kg)	Rs. 7750
Silver portion	Rs. 7750	Silver portion	  NA

Stock Indices

Sensex		3246.15		-16.18
BSE-100		1552.87		- 4.35
S&P CNX Nifty	1055.30		- 3.75
Calcutta	 108.08		- 0.26
Skindia GDRNA	 501.06		- 1.55

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