Ambanis mount mission to rescue deal with IOC
HFCL turns into UTI’s biggest Achilles’ heel
Sify selloff buzz sets Satyam alight
Tax cut high on India Inc’s budget wishlist
Sebi to hold sway over new bourse boards
DSE cracks whip on 1100 errant companies
New auto fuel policy hits the high road
Tatas may rope in Gail for Dabhol
Moody’s jeer with Morgan cheer
Foreign Exchange, Bullion, Stock Indices

 
 
AMBANIS MOUNT MISSION TO RESCUE DEAL WITH IOC 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Jan. 8: 
Reliance Petroleum’s vice-chairman Mukesh Ambani has rushed down to Delhi to try change the hardline stance taken by Indian Oil in cancelling a marketing tie-up for his Jamnagar refinery’s output.

Although a late night meeting with Union petroleum minister Ram Naik did not yield much result, a compromise deal might still be in the works. Senior petroleum ministry officials said Naik remained non-committal on the issue, only promising to talk to IOC officials, and adding that commercial decisions were in their jurisdiction.

Ambani, consequently, arranged a meeting with top petroleum ministry officials today to explain his point of view on why IOC was legally bound to pick up Jamnagar’s entire output of 15 million tonnes of oil products.

This happened even as RPL officials held separate meetings with IOC top brass in Mumbai.

Officials said though no conclusion had been reached, a compromise solution might well be worked out, if only to avoid unnecessary litigation.

IOC has been resolutely stating they will lift only 8.5 mt of Jamnagar’s capacity of 15 mt after the oil sector is thrown open in April this year, as it was not possible for the oil major to sell such a huge quantity in addition to its own products in the changed circumstances.

While RPL has been demanding that IOC stick to the letter of the deal signed and lift the entire 15 mt, IOC officials point out the original terms of the deal was that it sell only 52 per cent of the Jamnagar output. At present, IOC lifts this 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 to take over the marketing of this portion now being sold by BPCL and HPCL after April.

This is something that RPL does not seem to be in a hurry to do.

Ministry officials said they could try and persuade IOC to lift a million tonnes to one and a half million tonnes more.

   

 
 
HFCL TURNS INTO UTI’S BIGGEST ACHILLES’ HEEL 
 
 
FROM SATISH JOHN
 
Mumbai, Jan. 8: 
Himachal Futuristic Communications (HFCL), at the heart of the stock market scam engineered by Ketan Parekh, has earned another dubious distinction — of being the biggest Achilles’ heel for the scandal-scarred Unit Trust of India (UTI).

Losses in the share of the swaggering telecom upstart have ripped the Big Daddy of mutual funds by a staggering Rs 962.76 crore. The figure covers the beating taken by all schemes combined, not US-64 alone.

The nasty numbers have been gleaned from the Tarapore Committee, which has been probing where and why UTI’s money soured. According to the panel, investments in HFCL were made through the primary market route (IPO, private placements and off-market deals) between July 1998 and June 2001. They added up to an eye-popping Rs 1050.70 crore, but the market/book value of these assets shrivelled to Rs 87.94 crore — a massive depreciation of over 91.63 per cent.

The revelations shatter claims made by former UTI chairman P. S. Subramanyam that investments in HFCL were lucrative; as it turns out, it was the biggest drag.

The other thorn in the flesh was SSI, the south-based computer training-cum-infotech firm in which UTI sunk in Rs 2121.21 crore — the market value of which fell to Rs 39.25 crore. The depreciation was to the tune of Rs 172.96 crore, almost 81.51 per cent of the amount.

On Pentamedia Graphics, the mutual fund major lost Rs 153.42 crore, indicating a burnout of 87.62 per cent. The market value of these shares are pegged at Rs 21.68 crore against their acquisition price of Rs 175.09 crore.

It is ironic that UTI, criticised earlier for being slow in acquiring shares of ICE companies, started investing in them when their share prices scaled dizzy heights.

Other shares that set it back were Aurobindo Pharma, Adani Ports, Television Eighteen, Cyber Space (where it lost Rs 31.60 crore, or 82 per cent of its investment).

What raises hackles is that UTI burnt its fingers even in scrips like Polaris Software, HCL technologies, Ramco Systems, Shri Ram Multi Tech, Hindustan Lever Chemicals, Planetasia and Shonkh Technologies.

The Tarapore panel scanned stock investments in through IPOs/private placements and off-market deals between July 1998 and June 2001. UTI’s equity exposure increased to Rs 1089 crore in 1999-2000 from Rs 234 crore in the previous year; it fell down to Rs 546 crore in 2000-01.

Investments made through private placements during the three-year period amounted to Rs 1469 crore, almost 82 percent of total amount of Rs 1869 crore. Investments in primary markets depreciated 60 per cent in value.

The committee has said the UTI chairman overstepped his authority in several cases, some times in companies whose shares were classified as NPAs in June 1999.

Recently, almost 99 per cent of the US-64’s portfolio — by value — was disclosed, but the details of how much was forfeited on each investment were not made public.

   

 
 
SIFY SELLOFF BUZZ SETS SATYAM ALIGHT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 8: 
The Satyam Computer share has zoomed 45 per cent in the past five sessions over reports that talks to sell Satyam Infoway (Sify), the company’s bleeding internet subsidiary, will lead to a deal soon.

The stock has been a big draw with foreign institutions and local speculators as rumours swirl that a deal with AOL-TimeWarner is close. However, there are others who feel Satyam will sell a part of its Sify stake to Commonwealth Development Corporation (CDC).

The Hyderabad-based firm had said last year it would consider the sale of its holding in Sify if the valuation was attractive. Since then, sources say, expressions of interest from prospective strategic investors have been pouring in regularly.

Today, the share vaulted 10 per cent, the second time it did so in as many days, on the Bombay Stock Exchange. The scrip opened at Rs 301, shot up to a high of Rs 331.15 before finishing a shade weaker at Rs 328.60 — a jump of close to 9 per cent over its previous finish.

It racked up volumes of 50 million shares on NSE and BSE, and was the top traded scrip on Dalal Street with 80,808 deals for 180.17 lakh shares on a turnover of Rs 563.40 crore. Today’s spike takes the total gains in the past five days to Rs 102. “Foreign funds expecting a deal have bought heavily in the share,” an analyst said.

   

 
 
TAX CUT HIGH ON INDIA INC’S BUDGET WISHLIST 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 8: 
Leading industrialists of the country today demanded a cut in corporate tax from 35 per cent to 30 per cent, abolition of the minimum alternate tax, re-introduction of investment allowance and lobbied hard for a pro-growth budget with a heavy dose of public spending to kickstart the stuttering economy.

Confederation of Indian Industry (CII) president Sanjiv Goenka said, “We asked the government to re-introduce investment allowance for five years at the old rate of 25 per cent of actual cost of new fixed assets acquired to arrest the declining growth in industrial sector. We also discussed drastic reforms required in agricultural sector, including doubling the outlay for rural irrigation, unified food and consumer laws and a dynamic futures market to enable farmers do better crop planning.”

At the pre-budget meeting with finance minister Yashwant Sinha, industrialists called for the softening of real interest rates which is still around 12 per cent, financial sector reforms and sops for agricultural sector to perk up rural demand.

Ficci president R.S. Lodha said, “As an emergency measure to increase demand, we can aggressively go for tax cuts. This will restore confidence in people who are fighting uncertainty.” He cited the example of the recession-racked US economy which pushed for a huge tax cut of $ 1.35 trillion over a 10-year period.

He said, “Industry is hamstrung by six factors—power, interest, taxes, infrastructure, labour and transaction costs. This is rendering the industry non-competitive in the era of globalisation. Corporate restructuring with new rules are due.”

Assocham president K.K. Nohria stressed on controlled fiscal deficit but sought provisions to increase demand in the economy. “Moderate taxation on perquisites and enhanced public spending on infrastructure projects will stimulate demand for basic and capital goods industry. Agriculture planning should be made for the mid-term,” he said.

Finance minister assured the industrialists of rationalisation of tax structure and said, “The government was committed to lowering customs tariff to 20 per cent in three years and to continue with the trends in rationalisation and simplification of tax rates.”

The industry also wanted protection from cheap imports and asked government to keep import duties untouched for at least a year. Apart from the presidents of the chambers, Reliance vice-president Mukesh Ambani, Telco chairman Ratan Tata, Bajaj Auto chairman Rahul Bajaj, Maruti chairman and managing director Jagdish Khattar, and Gujarat Ambuja chairman Suresh Neotia were present at the meeting.

   

 
 
SEBI TO HOLD SWAY OVER NEW BOURSE BOARDS 
 
 
BY ANIEK PAUL
 
Calcutta, Jan. 8: 
The Securities and Exchange Board of India (Sebi) will exercise greater control on the governing boards of the demutualised stock exchanges even without nominating its own officials as directors.

In the new dispensation recommended by the M.R. Mayya committee, Sebi can appoint up to three representatives on the board of the stock exchanges. What’s more, the Sebi nominees will not have to retire by rotation. The market regulator will, however, withdraw its officials from the boards of various stock exchanges in keeping with its December 28 decision.

The governing boards of the bourses will comprise six public representatives, with the market regulator clearing each appointment. The board will have to prepare a panel of at least two public representatives for each vacant slot and seek Sebi’s approval for appointment. The regulator may, however, choose to ignore the suggestions of the board, and pick anyone from outside the suggested panel.

Further, the managing director of the bourse will be a member of the board, which will comprise a maximum of 10 non-broker directors. This means not more than 6-7 brokers can become directors of an exchange, given that broker-representation has been capped at 40 per cent.

The managing director will wield greater power than executive directors do at present and will not be “liable for retirement by rotation”. Besides setting the term of the managing director at five years (as compared with three years for executive directors now) Sebi has said the governing board would require its approval for removing the MD on expiry of his term.

Moreover, the Mayya committee has said that the governing board can seek an explanation from the MD only if the move is supported by three-fourth of the board members. The recommendations are aimed at giving more power to the managing director, since he is responsible for the day-to-day administration of the bourse.

   

 
 
DSE CRACKS WHIP ON 1100 ERRANT COMPANIES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 8: 
The Delhi Stock Exchange (DSE) is preparing to suspend over 1,100 companies—roughly one-fourth of the entities listed on the bourse—for failing to pay listing fees and flouting other regulatory guidelines. The code violations include lack of connectivity with a depository and non-compliance with various clauses in the listing agreement.

At the top of the list are companies like JK Synthetics, Usha (India) Ltd, PAL-Peugeot, Orkay Industries, Modern Syntex, the Mideast group companies—Mideast Integrated Steels and Mideast (India) Ltd—and the companies of tainted market operator Chain Roop Bhansali—CRB Mutual Fund Ltd and CRB Corporation Ltd.

“We have already suspended 427 companies on Monday and the rest will be suspended on Wednesday,” DSE president Vijay Bhushan told The Telegraph. According to him, notices have already been sent to all the companies prior to the suspension but none of them have provided satisfactory replies.

“Some of the notices that have been despatched are coming back to us with the remark that the addressee was not found and so it is possible that some of the companies have vanished. Once all those cases are collated we intend to pass on the information to Sebi for necessary action,” he said.

Bhushan said some of the erring companies have also applied to the DSE to get themselves de-listed in order to duck payment of listing fees. “We are also in the process of scrutinising those cases. Based on our preliminary estimates, there are around 300 companies that fall under this category,” he said.

According to him, the exchange started the practice of writing off listing fees not recoverable since the year 1996-97. Based on the records of the past five years, it has written off a sum of Rs 6.3 crore till the financial year ended March 31 this year.

According to Bhushan, the exchange has taken into account the interest of shareholders before going ahead with its decision. “We have selected all those companies that witnessed no trading for even a single day in the calendar year 2001. Besides this, the companies have not complied with the Sebi directive to get themselves connected with either of the depositories—NSDL and CDSL—nor have these companies adhered to various listing agreements like submission of financial results or other information to the exchange,” he said.

   

 
 
NEW AUTO FUEL POLICY HITS THE HIGH ROAD 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 8: 
The Union Cabinet today approved a new auto fuel policy which sets tighter tail-pipe emission standards to wage the war against rising pollution in cities.

The decision marks the acceptance of the R.A. Mashelkar committee report and slams the door on the gaggle of green groups that have been clamouring for the use of a ‘cleaner fuel’ like compressed natural gas (CNG) to power public transport systems across the country.

The environmental groups, which have fought hard to get the Supreme Court to set a January 31 deadline for buses and autorickshaws to switch over to CNG in the capital, will be disappointed that the government chose to go with Mashelkar committee’s views.

The committee had said the government should only prescribe vehicular emission norms and matching fuel specifications, leaving it to the consumer to decide the type of vehicle he wants and the fuel he should use.

The Cabinet has decided to authorise the ministries and departments concerned to take necessary steps to implement the multi-fuel auto policy, parliament affairs minister Pramod Mahajan said here today.

The Mashelkar committee, which submitted its report only on January 1, has come up with a roadmap for vehicular emission norms and auto fuel quality.

The Bharat stage II emission norms will be enforced in the cities of Bangalore, Hyderabad and Ahmedabad by the end of 2003. This will be extended to the entire country from April 2005.

Euro III equivalent emission norms will be introduced in the four metros and Bangalore, Hyderabad and Ahmedabad form April 2005 and in the rest of the country from 2010.

The committee had stressed the need for provision of fiscal incentives to the oil industry and the auto industry which will have to invest Rs 35,000 crore and Rs 25,000 crore respectively to upgrade their facilities and harness new technologies.

Sterling ADR issue cleared

Mahajan also announced that the Cabinet Committee on Economic Affairs (CCEA) has approved the proposal of Sterling Infotech Ltd, to issue ADRs and/or GDRs to raise up to $ 500 million. The funds will be used to set up an eight-fibre pair fully-protected cable form Chennai to Guam (a US territory).

The approval is subject to the condition that foreign equity will not exceed 49 per cent and management control at all times will remain in the hands of Indian shareholders.

The project will address the bandwidth requirements of South Asia in general and India in particular.

The Cabinet also decided to give greater powers to Lok Adalats to handle disputes relating to public utility services barring banking and railways. To enable this, the Cabinet has approved the introduction of Legal Services Authorities (Amendment) Bill, 2001 in Parliament to insert a new chapter in a 1987 Act, Mahajan said.

At the Cabinet meeting it was also decided that India will join the International Jute Study Group (IJSG) as a member.

The CCEA also approved the proposal to augment the capacity of the 500 mw Gazuwaka HVDC back-to-back project at an estimated cost of Rs 769.25 crore. The project is designed to increase inter regional capacity between the eastern and southern regions.

The committee also approved an expenditure of Rs 94.54 crore towards pre-construction of infrastructure development of Kameng Hydroelectric Project being undertaken in Arunachal Pradesh.

   

 
 
TATAS MAY ROPE IN GAIL FOR DABHOL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 8: 
Private sector energy giant Tata Power Ltd and public sector major Gas Authority of India Ltd (Gail) are weighing an alliance to make a joint bid for the bankrupt Enron Corp-promoted Dabhol Power Company.

“We have a long standing and cordial relationship with Gail as it is our main supplier of gas at the Trombay plant. I do not rule out an association with the company as a strategic partner in our final bids for DPC,” Tata Power managing director Adi Engineer said.

Engineer said while he has had informal discussions with Gail chairman Proshanto Banerjee over the proposed partnership, further progress on the issue has been stalled due to the “inordinate” delay in signing of the confidentiality agreement with Enron and its two GE and Bechtel.

Analysts say if plans for a joint bid eventually crystallise, then the proposed combine would be the team to watch. “The synergies of the proposed alliance would be tremendous”, an analyst said. While Tata Power has experience in running mega capacity power plants, Gail has the wherewithal to transmit gas, the main raw material for DPC’s 2184 MW power plant.

“The partnership makes a good business proposition. If our bid gets through, Gail will need a strategic partner to run the power plant and if Tata Power gets the mandate then it will need an expert to operate the LNG terminal,” Banerjee said.

He said though both the companies had submitted solo expressions of interest for acquiring an 85 per cent equity in DPC, “a future partnership was always welcome”. “We are awaiting a green signal from DPC for signing the confidentiality agreement,” the Gail chief said.

Both Gail and Tata Power were partners in Indigas, a joint venture with French energy major Totalfina for setting up a 2.5-million tonne LNG terminal near the power utility’s plant in Trombay. The project was shelved after the Tatas evinced interest in DPC.

Last week, Gail officially announced its interest in the $ 3 billion plant, stating it had appointed KPMG to evaluate the prospects of buying the plant.

Videocon in DPC race

The Videocon Group has joined the race for DPC, which already has contenders like the Reliance-controlled BSES, Tata Power and Gail, adds PTI.

When contacted, group chairman V N Dhoot said, “We are interested and will place bids for Dabhol soon.”

However, he refused to comment on whether the company had communicated its intent to DPC, financial institutions or the Maharashtra State Electricity Board.

Asked how Videocon planned to raise funds for the proposed acquisition, Dhoot said finances would not be a problem.

   

 
 
MOODY’S JEER WITH MORGAN CHEER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 8: 
Moody’s Investor Services today lent voice to the chorus of concern over the parlous state of public finances, saying the tendency to run up high deficits was pushing the economy inexorably into a debt-trap.

The global rating agency warned the government in its annual update of the Indian economy about the grave repercussions if the widening fiscal deficit is not checked.

“A rising debt-service burden is consuming an overwhelming share of the government’s limited financial resources, leaving the authorities with little fiscal room to redress infrastructure and social problems, much less to handle business cycle slowdowns. The fiscal dilemma also constrains monetary policy, leads to high real interest rates, dampens longer-term investment and stunts growth prospects,” the agency said in its report released today.

Moody’s grim assessment came on a day leading investment banker J. P. Morgan raised the growth forecast for the current fiscal to 5.1 per cent from 4.8 per cent earlier.

It said the revision was prompted by a better-than-expected economic performance in the second quarter. However, its report (dated Jan. 7) makes no bones about lingering fiscal and political concerns.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.28	HK $1	Rs.  6.10*
UK £1	Rs. 69.45	SW Fr 1	Rs. 28.80*
Euro	Rs. 42.93	Sing $1	Rs. 25.75*
Yen 100	Rs. 36.40	Aus $1	Rs. 24.65*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4705	Gold Std(10 gm)	Rs. 4640
Gold 22 carat	Rs. 4440	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7750	Silver (Kg)	Rs. 7915
Silver portion	Rs. 7850	Silver portion	NA

Stock Indices

Sensex		3437.78		+ 35.98
BSE-100		1642.42		+ 10.31
S&P CNX Nifty	1109.90		+  9.75
Calcutta	 111.16		-  0.13
Skindia GDR	 526.92		+  6.24
   
 

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