VST stake scramble hots up
Indian Oil scraps deal with Reliance Petro
Bank strike hits forex trading
Fitch deals rating blow to IDBI
Morepen sets sights on Abbott
Toyota small car plan on hold
Three-year lock-in, dual cap on FDI in housing
Marginal rise in import of sensitive items
Centre wakes up to dumping threat
Foreign Exchange, Bullion, Stock Indices

 
 
VST STAKE SCRAMBLE HOTS UP 
 
 
FROM G. S. RADHAKRISHNA AND ANIEK PAUL
 
Hyderabad/Calcutta, Jan. 4: 
ITC and Bright Star Investments are likely to pitch for the Andhra Pradesh government’s 4.69 per cent stake in VST Industries—the country’s second-largest cigarette manufacturer.

The Andhra Pradesh government took an “in-principle” decision last week to divest its stake in various companies including Hyderabad-based VST Industries, where BAT plc is the principal shareholder with a 32.16 per cent holding.

Bright Star Investments—the Mumbai-based investment firm owned by stockbrokers R.S. and G.S. Damani—had made an open offer for the VST Industries last year, after its holding reached the 15 per cent threshold. In response, ITC investment subsidiary Russell Credit made a counter-offer.

ITC and Bright Star are now on the warpath again, this time for the Andhra Pradesh government’s stake.

Apart from VST, the AP government has decided to divest its stake in eight other companies including Telco, ACC and Nagarjuna Fertilisers and Chemicals Ltd.

The World Bank had advanced a Rs 1,475-crore towards the VRS and rehabilitation programme of the state-level public sector enterprises (SLPEs) on the condition that the government offload its stake in these firms.

Sources in ITC said: “We had discussed the matter with the Andhra Pradesh government in the past. We were told that they had no intentions of offloading their stake. Now that they have decided to divest its stake in the company, we will again offer to buy it,” a top-level official of Russell Credit said.

John Band, CEO of ASK Raymond James—the Damanis’ merchant banker—said: “We have not decided on the matter as yet, but we are likely to pitch for it.”

BAT plc, however, is unlikely to throw its hat into the ring this time though it had earlier expressed its interest in increasing its stake in VST Industries. To acquire the Andhra Pradesh government’s stake, it will have to seek the approval of the Foreign Investment Promotion Board. Given the fact that the Union government is opposed to foreign investments in the tobacco industry, BAT is unlikely to get the FIPB’s consent.

   

 
 
INDIAN OIL SCRAPS DEAL WITH RELIANCE PETRO 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Jan. 4: 
Indian Oil Corporation (IOC) has decided to terminate a marketing pact it had signed with the Reliance Petroleum Limited after the Reliance group company announced that it would stick to its demand that IOC sell the entire output of its Jamnagar refinery on a take-or-pay basis against a contractual commitment of 52 per cent.

The state-run oil giant said it had terminated the agreement with RPL, the country’s largest refinery with a capacity of 32 million tonnes (mt) a year, since the latter wanted IOC to lift their entire output of 15 million tonnes on a take-or-pay basis as opposed to the commitment of about 8.5 mt. Under the terms of the original agreement, IOC committed to marketing 52 per cent (about 8.5 million tonnes) throughput of RPL on a take-or-pay basis till 2008 while the remaining was to be marketed by a joint venture company of IOC and RPL.

IOC officials said they had proposed that they lift 8.5 mt out of Jamnagar’s capacity of 15 mt after the oil sector is thrown open in April, as it was not possible for IOC to sell such a huge quantity, in addition to its own products. But RPL did not agree.

Currently, IOC lifts 52 per cent of the output, leaving HPCL and BPCL to lift and market the rest. A joint venture to be formed by RPL and IOC was supposed to take over the marketing of this portion now being sold by BPCL and HPCL after April .

With no sight of the joint venture getting approval, RPL wanted the remaining 6.5 million tonnes also included in the marketing arrangement with IOC on a take-or-pay basis which the state-run company opposed.

In a faxed response, Reliance group spokesperson Yogesh Desai said: “The agreement is valid and effective. RPL has not accepted the purported termination ... unless matters are resolved by negotiations, we will fully enforce our rights against IOC.”

It was not clear whether RPL has received any termination notice as yet. However, though RPL did not spell it out, the statement is being viewed as a veiled threat of going to court against any such termination notice.

While skirting away from this controversy, the RPL statement termed as “totally invalid” the “purported termination” of its marketing agreement with IOC.

IOC officials claimed they had intelligence that RPL had no intentions of going in for the marketing joint venture and instead had planned to go it alone with its own marketing outfit at a later date. This, they claimed would sell the additional capacity produced at Jamnagar, estimated at around 2 mt. RPL’s insistence that IOC take over the responsibility of selling all 15 mt of Jamnagar output, seems to have been the last straw for IOC.

The state-run oil major has also objected to RPL’s pricing decisions — it says the way prices are calculated, it is being forced to pay for two rounds of terminalling of oil, instead of one.

IOC has proposed to the petroleum ministry that instead of it being made responsible for selling all of RPL’s output, this responsibility should be assigned to a new arrangement under which PSU oil firms will pool and share marketing costs.

This will mean that RPL’s products will also have to go into this pool and be sold by any or all of these public sector companies.

   

 
 
BANK STRIKE HITS FOREX TRADING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 4: 
The one-day nation-wide strike called by the All India Bank Employees Association (AIBEA) had a mixed impact on the banking system today. While money and forex markets reported very few deals and there were no cash transactions in many branches, work at the clearing house in Mumbai remained near normal.

According to union officials, the strike was largely successful with more than 26,000 bank employees from over 50 banks in Mumbai striking work. The strike call centred around the twin issues of transfer of Standard Chartered Bank employees to distant places like Chennai and Delhi and large-scale outsourcing of jobs.

They added it was also successful across the country, with cash transactions not reported in more than 50 banks, or around 50,000 branches. Officials also claimed that clearing operations in the metro were paralysed and clearing to the tune of over Rs 400 crore affected.

This was however, dispelled by the Reserve Bank of India which said the clearing house functioned smoothly. An RBI spokesperson told The Telegraph that 1.25 lakh instruments worth Rs 20 crore were processed and 89 out of 117 banks participated in the clearing. Co-operative banks in the state also stayed away from the strike.

Banking operations in Calcutta were also affected. AIBEA general secretary Tarakeswar Chakroborti said, “The strike called by the AIBEA and actively supported by all other bank unions—AIBOC, NCBE, BEFI, AIBOA, INBEF, INBOC, NOBO—has been a success.”

He said the AIBEA central committee will meet soon to take stock of the situation and decide the future course of action, which may include rejecting instruments issued by StanChart.

The association said talks this week between the government, union and SCB management failed to break the deadlock. The SCB management has denied the AIBEA allegations saying that it was well within the management’s rights to transfer its staff to meet the changing business needs.

“In face of new customer needs and expectations, we are re-organising and restructuring business. As a part of this, back-office operations are being centralised in Chennai where there is a large requirement of staff. Any transfer order is within our legitimate management rights,” the bank added.

   

 
 
FITCH DEALS RATING BLOW TO IDBI 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 4: 
International rating agency Fitch today downgraded the existing ratings of Industrial Development Bank of India (IDBI) in view of its progressively deteriorating profile and its uncertain future outlook in its present form.

The leading financial institution’s individual rating (which is the stand-alone financial strength rating) was downgraded to ‘D/E’ from ‘D’ and its national long-term senior debt rating to ‘AA+’ (ind) from ‘AAA’ (ind), a press statement from London said.

Fitch said the long-term foreign currency rating was affirmed at ‘BB,’ which is the same as India’s sovereign rating, although the outlook of this rating was changed to negative from stable. The support rating remains unchanged at ‘2T’.

The international ratings agency added that the decision to downgrade the individual and national rating was prompted by IDBI’s progressively deteriorating financial profile and a somewhat uncertain future outlook in its current form.

Taking into consideration the vastly different operating environment from that the financial institution was accustomed to until the early 1990s, the rating agency was constrained to take the action.

Among the reasons attributed to the move was the withdrawal of subsidised long-term government funds to the institution which coupled with its worsening asset quality, has affected the bank’s performance to an extent that fresh infusion of capital has become increasingly necessary, the rating agency said.

The net NPL ratio and the net NPLs to equity ratio in the fiscal year ended March 31, 2001, were high at 14.8 per cent and 91.4 per cent respectively, even though regulatory asset classification and provisioning norms in India are relatively lax compared with internationally acceptable standards.

   

 
 
MOREPEN SETS SIGHTS ON ABBOTT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 4: 
Morepen Laboratories is in the race to acquire a majority stake in Abbott Laboratories (India) from its parent, Abbott Laboratories of the US.

Morepen shot into the spotlight recently when it acquired leading over-the-counter (OTC) — non-prescription drugs — brand Burnol.

Industry watchers say Abott’s takeover will catapult the Delhi-based company to the top rungs of the local formulations market.

However, but there are strong indications that Abbott Inc. will not offload its shares in Knoll Pharmaceuticals India, which it recently bought as part of a global deal.

Industry sources said apart from Morepen, Pharmacia and Nicholas Piramal India are the others keen on Abbott’s stake in its Indian arm. While Pharmacia officials were not available for comment, sources close to Nicholas said the company was not keen.

A spokesperson for Morepen confirmed his firm was interested in Abbott India, but insisted that only “details” had been sought.

“We have made it clear that we are on the lookout for potential acquisitions,” she said.

Morepen had recently acquired Burnol for a consideration of close to Rs 6 crore. The spokesperson said due diligence to acquire two more brands is under way.

Industry analysts are now watching for the price at which Morepen buys Abbott Labs.

Many are concerned that there is “little” synergy in the product portfolios of the two companies. Therefore, there is a feeling that the buyout will only make business sense if Morepen is successful in clinching a deal at a cheap price.

“If we compare the product portfolios of Abbott and Morepen, it can be seen that the former focuses on hospitals, while the latter is more of an OTC drug maker,” said C. Srihari, pharmaceutical analyst at Khandwala Securities.

Abbott India makes hospital products, apart from medical and paediatric nutritionals. It has a presence in the OTC segment through its Selsun shampoo. Its other key product is Claribid, a fourth-generation antibiotic, for which its parent is the original patent holder.

On the BSE today, the Abbott scrip ended weaker at Rs 142.30 after opening at Rs 145.25 and rising to the day’s high of Rs 147.95. The share notched up a turnover Rs 3.37 lakh in 77 deals.

Abbott Labs (India) had recently said it wants to transform itself from focused pharmaceutical company into an integrated healthcare firm with a presence in pharmaceuticals, hospital products and paediatric nutrition.

It unveiled plans to launch over 20 products in five different segments which includes medical nutritional, paediatric nutritional, pharmaceuticals, hospitals and diagnostics segments.

   

 
 
TOYOTA SMALL CAR PLAN ON HOLD 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, Jan. 4: 
Toyota Kirloskar Motor appears to have put on hold its plans to launch a small car — below 1000 cc. After the relative success of its multi-utility vehicle Qualis, the automaker will have to choose between a mid-size sedan like the Camry and a sports utility vehicle like the Prado as its next offering to increasingly discriminating car buyers.

Sometime ago, the company had been mulling the possibility of launching a Daihatsu small car version in the country. Toyota has a 50 per cent stake in Daihatsu, the Japanese small car maker.

The Auto Expo, which opens later this month here, will provide some interesting pointers to the new models and versions of its existing Qualis that the carmaker is considering for Indian roads.

The company has already got its regulatory approvals in place depending on the model that it eventually decides to go with. It had already received permission to start manufacture of eight-to-ten seater vehicles which would indicate either an SUV or an MUV. Recently, it secured permission from Foreign Investment Promotion Board (FIPB) to import passenger cars. The final choice is still open.

The runaway success of Qualis has put the management in a spot: it has a range of options to choose from. It can go forward with the previous plans to bring in smaller vehicles from Daihatsu and the much-talked-about Camry (a medium passenger vehicle) or the Corolla (a light passenger car) or go for sports utility vehicles (SUVs) and multi-purpose vehicles (MPVs).

“We are currently studying the market have and not yet decided which vehicle we should bring to India. While the success of Qualis is phenomenal, we have not yet shelved plans for passenger cars. But for the time being, we will not be displaying smaller cars of 1000 cc at the Auto Expo. Rather there will be variants of Qualis, other SUVs and two larger passenger cars. Our final decision will depend on the response that the models generate at the fair,” Toyota sources said.

Toyota will be displaying some variants of Qualis — Qualis GS, Qualis GST, Qualis FS and Qualis GST Super.

Also on display will be the Prado, its famed sports utility vehicle; Rally, another mutli-utility vehicle, and the Camry.

At one stage, the company was trying to choose between two small car models — Move and Cuore — both from the Daihatsu stable.

“We will come out with the petrol version of the Qualis by the month-end. We have plans to manufacture any model that is able to generate sufficient volumes. But at the same time with imports becoming easier, we are studying the CBU routes for other high-end models that have a limited market in India,” the source said.

Toyota Kirloskar — a 74:26 equity partnership between Toyota and Kirloskar — has an equity capital of Rs 600 crore and a total investment of Rs 900 crore in the country.

   

 
 
THREE-YEAR LOCK-IN, DUAL CAP ON FDI IN HOUSING 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 4: 
Foreign companies planning to set up wholly-owned subsidiaries to develop integrated townships in the country will have to invest at least $ 10 million in the venture. The minimum capitalisation requirement will be halved to $ 5 million in the case of joint ventures with an Indian company, according to the government’s guidelines for the 100 per cent FDI inflow into integrated townships which was released today.

The guidelines also state that at least 50 per cent of the integrated project development must be completed within a period of five years from the date that the investor gains possession of the first piece of land. However, if the investor intends to exit earlier due to reasons beyond his control, it shall be decided by FIPB on a case-to-case basis.

The development of integrated townships will include housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transit systems and manufacture of building materials. Development of land and providing allied infrastructure will form an integrated part of township’s development.

The minimum area to be developed by such a company should be 100 acres for which norms and standards are to be followed as per local bylaws and rules. In the absence of any such bylaws, the investor will have to develop a minimum of 2,000 dwelling units for about 10,000 population.

A minimum lock-in period of three years from completion of minimum capitalisation shall apply before repatriation of original investment is permitted.

The foreign company intending to invest, shall be registered as an Indian company under Companies Act 1956 and will henceforth be allowed to take up land assembly. The cases will be processed by FIPB on the recommendation of ministry of urban development & poverty alleviation.

   

 
 
MARGINAL RISE IN IMPORT OF SENSITIVE ITEMS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 4: 
The total import of 300 sensitive tariff lines during April to November has gone up by 1.30 per cent at Rs 7,279 crore against Rs 7,186 crore in the corresponding period last year.

At the broad group level of commodities, imports of rubber, marble and granite, automobile, spices, cotton and silk, alcoholic beverages and edible oil have increased. However, import of milk and milk products, foodgrain, fruits and vegetables, tea, coffee have sharply declined during the period under review.

Imports of edible oil have increased to Rs 4,409.38 crore from Rs 4,290.57 crore in the corresponding period last year.

A significant feature of edible oil import is that while import of soyabean and palm crude oil have gone up, that of refined soyabean and palm oil have gone down leading to better utilisation of the processing capacity in the country. However, import of sunflower oil, both crude and refined, has gone down.

On the basis of the country of origin, the data reveals decrease in imports from The Netherlands, Ivory Coast, Afghanistan, Malaysia, Hong Kong, South Africa, Russia and China.

However, imports from Iran, Brazil, Cameroon, Japan, Australia, Uzbekistan, Sri Lanka, the US, and the Czech Republic have shown some increase.

The imports of spices have also gone up marginally from Rs 115.49 crore to Rs 174.20 crore this year.

Alcoholic beverages worth Rs 20.52 crore were imported during April to November compared with Rs 18.76 crore import in the corresponding period last year.

Import of rubber was worth Rs 75.88 crore compared with Rs 25.69 crore last year.

The value of cotton and silk import rose to Rs 1,860.65 crore compared with Rs 1379.64 crore last year. Marble and granite also registered a high import rate at Rs 11.61 crore compared with only Rs 5.29 crore in April-November 2000. Automobiles import rose to Rs 76.70 crore against Rs 47.88 crore in the previous corresponding period.

The fresh crop of numbers comes days after data compiled by the Directorate General of Commercial Intelligence and statistics revealed that exports during April-November went up 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, 5.15 per cent higher than the value of exports in April-November 2000-01, a government release stated.

   

 
 
CENTRE WAKES UP TO DUMPING THREAT 
 
 
BY AMIT CHAKRABORTY
 
Calcutta, Jan. 4: 
The commerce ministry has finally woken up to the need to get an effective anti-dumping mechanism in place and at the same time protect Indian exporters from getting the stick under similar laws abroad. On the cards is an administrative level co-operation between the commerce ministry and the United States International Trade Commission (USITC)— an independent, non partisan, quasi-judicial federal agency— to streamline the Indian anti-dumping mechanism.

The USITC provides trade expertise to both the legislative and executive branches of the US government, determines the impact of imports on domestic industries and directs actions against unfair trade practices such as patents, trademark and copyright infringements.

Top officials of the ministry’s anti-dumping directorate held an informal dialogue earlier this week in New Delhi with Robert Rogowsky, director of operations USITC, to chalk out a long-term agenda for streamlining the Indian system.

Rogowsky, currently on a visit to the country, said a dialogue with government officials started three days ago when an informal decision was taken to “develop a process’’ of co-operation between USITC and the Indian commerce ministry.

L.V. Saptarishi, additional secretary in the commerce ministry and director general, anti-dumping, along with the joint secretary and directors of the anti-dumping directorate, met Rogowsky primarily to understand the process and procedures adopted by the US in protecting domestic industry by imposing anti-dumping duty on imports.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.27	HK $1	NA*
UK £1	Rs. 69.52	SW Fr 1	NA*
Euro	Rs. 43.37	Sing $1	NA*
Yen 100	Rs. 36.90	Aus $1	NA*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4685	Gold Std(10 gm)	Rs. 4640
Gold 22 carat	Rs. 4425	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7700	Silver (Kg)	Rs. 7815
Silver portion	Rs. 7800 	Silver portion	NA

Stock Indices

Sensex		3375.74		+ 67.72
BSE-100		1618.27		+ 32.83
S&P CNX Nifty	1096.20		+ 23.95
Calcutta	 111.83		+  2.95
Skindia GDR	 509.35		+  4.66
   
 

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