ICICI soars above country rating
Border balm for edgy markets
Imported models to drive Daimler
Ford, HM forge alliance
Six variants of Telco trucks
Enfield set to take the fair by thunder
Jalan pep talk for banks to face new-age challenges
Plan to manage risks
Foreign Exchange, Bullion, Stock Indices

Mumbai, Jan. 14: 
Moody’s Investor Service today upgraded ICICI a notch above the country’s sovereign rating of Ba2 — to Ba1.

This makes it the first Indian corporate entity that enjoys a rating higher than the country’s own, paving the way for it to raise funds at considerably lower costs.

The international rating agency said it had revised its ratings on ICICI’s foreign currency bonds to reflect the institution’s inherent financial strengths, its nimble management and diminished concerns over asset quality.

The fresh rating is also an indication that the risks of the institution’s foreign currency bonds being affected by a government-imposed general moratorium on forex obligations are much lesser now than before.

The upgrade comes at a time when ICICI is in the process of converting itself into a universal bank through a reverse-merger with ICICI Bank. The agency has said the union will lead to an improvement in the credit risk profile of the new entity by speeding up the process of business diversification, but that would not immediately necessitate a change in the rating.

Moody’s had indicated in the previous year that it would relax the traditional country ceiling policy, a move that allow companies to beat their country’s (sovereign) rating.

The ability of a firm to pierce the country ceiling will depend on three things: credit worthiness, the probability that there will not be a general moratorium in the event of default by the government of the country and the special circumstances of the borrower in terms of its access to foreign capital markets.

The agency had put 38 companies it felt could qualify for ratings higher than their country’s. ICICI — then rated Ba2 — was the sole Indian entity, and only one of two Asian banks/financial institutions on that list. Apart from ICICI, Moody’s has rated around 14 Indian companies with ratings ranging from Ba2 to Ba3.

Commenting on the upgrade, K. V. Kamath, managing director and CEO of ICICI, said: “We are delighted at the upgrade, and believe it is an affirmation of our inherent financial strength and focussed business strategy.”

The institution, with total assets of Rs 74,371 crore and an equity of Rs 8,777 crore on September 30, 2001, is awaiting a Reserve Bank (RBI) approval for conversion into a universal bank. A shareholders’ meeting to ratify the plan is slated at the end of this month.

ICICI is now likely to leverage the rating in borrowing at finer rates from the international markets. Hinting that the institution is likely to go on overseas fund-raising trips, executive director Kalpana Morparia told The Telegraph that there is an “appetite for international borrowing” and that plans in this direction will be finalised within the next few days.

Reacting to Moody’s upgrade, she said it would give ICICI the benefit of pricing in terms of more competitive borrowing costs. “It gives us the comfort that a leading international agency has singled us out for the honour.”


Mumbai, Jan. 14: 
Pervez Musharraf turned out an unlikely rescue angel for stock exchanges living on the edge as the nuclear twins faced off on a bristling border.

The Pakistan President’s weekend pledge that he would do his best to rein the agents of terror sent investors on a buying binge that propelled the Bombay Stock Exchange (BSE) sensex to 3407.85 today in a net gain of 44.96 points, or 1.34 per cent, over its previous close.

The 30-share index opened on a promising note at 3373.69 and surged to an intra-day high of 3446.92 as retail investors and speculators made sizeable purchases on the first clear indication of an Indo-Pak thaw.

The rally, triggered by Musharraf’s declaration that he would halt support to all militant organisations, was cut short when local funds booked profits at high prices. The surge, though led by infotech stocks, was helped brisk buying in a few old-economy shares.

In the specified group, 141 scrips, including 24 from the index, logged sharp to moderate gains; 28 suffered reverses. The improvement in sentiment did not boost volumes though: BSE’s turnover was down to Rs 1596.95 crore compared with Friday’s figure of Rs 2008 crore. Satyam was the top traded share with a turnover of Rs 331.51 crore, followed by Infosys, Reliance, Digital Global and Wipro). The top gainers included Satyam, Infosys, Digital Global, Wipro, ACC, Bajaj Auto and Bhel. Reliance, ITC and Grasim Industries were the main losers.

The buoyancy on bourses spread to the forex market too, where the rupee rallied to 48.33/34 per dollar from Friday’s lowest-ever finish of 48.4100/4150. Dealers said inflows and the unwinding of long dollar positions by banks towards the end of the day raised hopes that the currency would extend its gains on Tuesday. Bond prices also saw an upsurge, with prices of some government securities rising more than 50 paise. Among them, the 9.85 percent 2015 government stock was quoted at Rs 114.45, up from Rs 114.15 in the previous session.


New Delhi, Jan. 14: 
DaimlerChrysler India, having fattened its bottomline to Rs 41 crore in 2001 from Rs 20 crore a year ago, will rely on imported models to cater to customers. Government clearance for the plan, which has been devised to adjust to a market where demand for premium cars is limited, has been received.

“Completely built unit (CBU) imports will account for 10-15 per cent of our 2002 turnover. We hope to double revenues this way next year,” Jurgen Ziegler, managing director and CEO of Daimler Chrysler India, said.

He said 100 orders for models now imported as finished units have already been placed. “The figure is two-thirds of the number we expected to sell this year. This has given me hope that though the car market is in the throes of a slump, there are signs of a pick-up,” he added.

In addition to S-class, E-class and C-class, a range of sleek cars have been lined up for the well-heeled. These include SL class (SL 500), M class, C-class sports coupe, SLK-class, CLK-class cabriolet and A class — the smallest from the company’s stable, 170 meters long.

Though prices of finished models have not been fixed, the four-seater CLK Cabriolet with a soft top will cost Rs 48.7 lakh.

There are no plans to add more models, but Ziegler said capacity expansion will not be a problem if demand is forthcoming. “First, let the concept of big cars catch on in India. The range of imports could be widened depending on the response and market maturity.”

The company is also looking at jeep and multi-utility vehicles. In the jeep segment, it intends to bring in Jeep Cherokee, while Voyager from the Chrysler stable could be pitted against rivals who make multi-utility vehicles.

“Daimler is aware of the future potential of the Indian automobile market and the tremendous economic power it can generate. The company is targeting 25 per cent of the total turnover from Asia. Given that situation, the Indian arm of the company will play a major role in strategic forays in this part of the globe.”


New Delhi, Jan 14: 
Ford India Ltd and Hindustan Motors today formed a strategic alliance under which HM’s Pithampur plant will assemble automobile engines and transmission systems for the Ikon model. The alliance is part of a cost-cutting exercise at Ford India which used to import the powertrains.

The outsourcing deal with HM will save on costs though the company refused to say how much that would be. Company officials also said that they had no plan to pass on the benefit to customers.

Ford India managing director David Friedman told reporters that the engines to be outsourced will be used for the 1.3 and 1.6 litre petrol versions of Ikon besides IV5 transaxles.

Friedman said HM will assemble the engines from imported completed knocked down (CKD) kits which will raise the localisation content in the Ikon to 90 per cent from almost 75 per cent at present.

“The assembling will require certain changes to the production facilities and re-tooling that will entail an investment of nearly Rs 70 crore, the bulk of which will be borne by HM,” Friedman said.

HM chairman C.K. Birla said the Pithampur plant near Indore will start supplying the engines by the end of 2002. HM is expected to supply almost 20,000 engines every year.

“We will be starting with CKD engines but will move on to cased engines eventually,” Birla said. HM expects to record an income of Rs 135-150 crore from this agreement.

At present, the Pithampur plant supplies engines for Mitsubishi Lancer cars and Isuzu engines to Mahindra and Mahindra. HM also exports engines to HG Wilson of the UK.

Friedman said Ford India is in the process of consolidating its presence in India by introducing the Ford Mondeo and a sporty version of Ikon called the Ikon 2002. Among the cars that FIL has displayed at this year’s auto expo is a concept car Ikon Cross Trac designed by designer Dilip Chabbria. The other vehicles that Ford India has displayed and plans to launch in the Indian market at a later stage are its sports utility vehicles (SUV), ncluding the popular Ford Escape and a pick-up truck Ford Splash.


New Delhi, Jan. 14: 
Tata Engineering Limited (Telco) has come up with six new variants of its heavy commercial vehicles, medium commercial vehicles and light commercial vehicles which promise higher productivity and savings to the customer.

“In freight management, the railways are not performing up to the mark. So people have to depend on road transport. The present line of commercial vehicle is aimed towards this demand of first class freight vehicle,” said Ravi Kant, executive director, commercial vehicle business unit of Telco.

“Telco is working on the commercial vehicle category to add value to its offerings. We have a competent in-house engineering research capability which cater to our need. We aim to give maximum fuel efficiency in this category and hope to meet the customers demand,” he added

In the current fiscal, Telco had sold 10,642 units of commercial vehicles till December.


New Delhi, Jan. 14: 
Royal Enfield Motors has finally bitten the Bullet: it has broken with a glorious tradition and placed the brakes on the right side like everyone else.

This may sound like heresy to all those Bullet lovers who prided themselves on owning a bike that no one else could ride without feeling totally disoriented at just that heart-stopping moment when you needed to slam the brake.

The company has pulled the wraps off the 350 cc Thunderbird which makes a complete break with the past.

“For a long time now, consumers have been demanding that like all conventional bikes the brake ought to be on the right,” said Siddhartha Lal, chief executive of Royal Enfield Motors.

Royal Enfield Motors, a unit of Eicher Ltd, is part of the Rs 1,000 crore Eicher group.

Lal admitted that someone who rode other bikes found it difficult to make the switch to an Enfield because of the right foot brake pedal.

“Thunderbird will be the first ever bike from our stable that will feature a conventional gear and braking system, this will making it convenient for 100 CC and 150 CC to upgrade to a powerful bike,” said Lal.

This five-speed bike makes another break with the past—it’s also introducing a heal-and-toe operated gear system on the left side, the little device that came in with the Japanese bike invasion in the early eighties. The old bike like the Bullet and Yezdi used to have toe-operated gear systems.

The powerful Thunderbird, the four-stroke engine that has a full-throated 18 bhp, has been priced at Rs 70,000 for the base model.


Calcutta, Jan. 14: 
Reserve Bank of India (RBI) governor Bimal Jalan has directed banks to set up an internal special task force which will suggest ways to implement guidelines of the new Basle accord on capital adequacy.

“It may be useful to set up a core team of four or five middle-level officials with adequate technical background. The team, which will be provided technical assistance by the RBI, will help banks enforce international standards and codes. Our objective should be to put in place a viable action-plan for banks by mid-2003,” said Jalan, who was in the city to attend the Bank Economist’s Conference (Becon), the theme of which is ‘Indian banking — A paradigm shift’.

The RBI governor said banks should not delay or compromise in accepting and implementing internationally recognised prudential standards within a time-frame. “More attention should be paid to minimum capital requirements, the process of supervisory review and on market discipline,” he added.

In determining the minimum capital requirement, the main emphasis of the new capital norms will be on risk assessment. At present, the risk weights used to determine capital adequacy are prescribed by the Reserve Bank of India and are uniform across all banks.

The expectation is that larger banks with international operations will employ a more rigorous internal ratings-based approach that takes into account the probability of default, the maturity of exposure and the type of credit. The higher the risk, the larger will be the amount of capital required to undertake the exposure. “Under the new system, the responsibility of banks for internal risk assessment would increase substantially,” the central bank chief said.

Under the new Basle accord, the internal processes would be subjected to evaluation by supervisors, review and intervention, if required. “The other thing is to enhance disclosures that strengthen market discipline.”

The Asian crisis, he said, has intensified the trend towards international assessment of a country’s adherence to internationally accepted standards and codes. “Banks in India should conform to norms that help boost businesses with the rest of the world,” Jalan said.

To cope with international standards, banks will, for instance, have to go for computerised credit approvals, offer better customer service and reduce transaction costs for fund management and inter-bank activities, he said.

Human resource development is another important area banks must focus on. “The change in the global environment, deregulation and liberalisation, and the emergence of new forms of financial intermediation have major human resources implications,” Jalan said.

Universal banking

The Reserve Bank has not a set out a time-table for the transition of development financial institutions (DFIs) into universal banks. Jalan said the transformation is no panacea for the ills that afflict the institutions, most of which suffer from liquidity and solvency problems and/or operational difficulties from under-capitalisation, NPAs and asset-liability mismatches.

The overriding consideration should be the objectives and strategic interests of FIs in meeting the needs of customers within the framework of prudential norms.


Calcutta, Jan. 14: 
Nationalised banks should develop a capital base over and above the minimum capital to risk weighted asset ratio (CRAR) — a common feature in the regulatory regimes of developed countries like UK, RBI deputy governor G.P. Muniappan said.

Speaking at the three-day Becon conference here today, he said CRAR can be fixed at 12 per cent — a standard many banks already meet now — to provide much-needed cushion for growth in risk-weighted assets and to cope with unexpected erosions in asset values.

Muniappan, speaking on the paradigm shifts in the regulatory framework, said banks are yet to take serious steps towards implementing the new set of regulatory norms, such as scaling down exposure to capital market and the tightening prudential guidelines.

The RBI deputy governor criticised banks for letting their profitability come under strain.

“Despite the resilience shown in recent times, income from recapitalisation bonds accounted for a significant portion of the net profit for some nationalised banks. Their return on assets has, on an average, declined from 0.54 in 1998-99 to 0.43 in the previous financial year.”

He urged bank chiefs to initiate +cost-cutting measures to rein in operating expenditure and to impart a customer-oriented thrust to their business. That would mean offering improved services to attract quality clientele and, therefore, boost their profitability.



Foreign Exchange

US $1	Rs. 48.34	HK $1	Rs.  6.10*
UK £1	Rs. 70.03	SW Fr 1	Rs. 28.85*
Euro	Rs. 43.17	Sing $1	Rs. 25.95*
Yen 100	Rs. 36.71	Aus $1	Rs. 24.70*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4755	Gold Std(10 gm)	Rs. 4740
Gold 22 carat	Rs. 4490	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7750	Silver (Kg)	Rs. 7840
Silver portion	Rs. 7850	Silver portion	NA

Stock Indices

Sensex		3407.84		+ 44.96
BSE-100		1621.97		+ 31.46
S&P CNX Nifty	1109.80		+ 21.25
Calcutta	 114.49		+  1.08
Skindia GDR	   NA		    -

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