Bharti sets IPO floor price at Rs 45
Goofs galore
Pallonji winner in Forbes Gokak battle
Rs 600-crore tab for Haldia promoters
Thailand loses out to Taratala in Esab race
VAT put off by a year
Mallya picks S&N as beer ally
British Gas gets Enron Oil stake for $ 350 m
Industry seeks solace in spiritualism
Foreign Exchange, Bullion, Stock Indices

 
 
BHARTI SETS IPO FLOOR PRICE AT RS 45 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 23: 
Bharti Tele-Ventures today announced a floor price of Rs 45 for its maiden public floatation, billed as an elixir for the comatose primary market.

The initial public offer (IPO), which will raise at least Rs 834 crore if the shares are picked up at the minimum price (a theoretical proposition), is the country’s first to be executed completely through book building.

In all, 18.53 crore shares, representing 10 per cent of the company’s capital, will be up for grabs. A green-shoe option for up to 10 per cent of the issue size could push up the final tally by 1.85 crore shares to 20.35 crore shares.

Money raised from the issue, which will remain open from January 28-February 2, will be used to finance expansion of cellular and fixed-line services, besides domestic long-distance and international phone forays.

The company has earmarked 60 per cent of the flotation for qualified institutional buyers, up to 15 per cent for wealthy individuals, expatriates and companies, and the remaining for small (retail) investors.

Trading in the stock, to be listed on Delhi, Mumbai and National stock exchanges, will begin on February 17.

Analysts said the actual price, to be set through the book-building process, will be higher than the floor rate — which is less than the Rs 52 paid by private investors in May. That deal helped Bharti mop up $ 481 million through a private placement of shares to Singapore Telecom, private equity fund E.M. Warburg Pincus, International Finance Corp and New York Life Insurance Co.

Merchant bankers say the issue’s success will make or mar the downbeat primary market, which has not seen a floatation of this size in years.

Nimesh Kampani of JM Morgan Stanley and Hemendra Kothari of DSP Merrill Lynch are pulling out all stops to ensure that the IPO turns out to be a winner. Today, they peddled the issue as Bharti chief Sunil Bharti Mittal made the announcement on the price in Mumbai.

Mittal said the price was fixed after extensive market exercise and feedback received from institutional investors. However, many say the company will have to work harder to convince slowdown-spooked retail investors that the issue is a good bet. He said foreign funds could buy up to 73 per cent of the issue, while domestic investors could get 27 per cent.

“We have no expectations, but whatever it is, after listing, it should be good for the investor. The issue is path-breaking in many ways. It would be a delight for investors. The price should be good enough to spark investor interest when it is listed at the secondary market,” Mittal told reporters after the announcement.

Bharti Tele-Ventures, the holding company for most of the telecom service operations of the Bharti group, has built the country’s largest mobile network, and has bagged licences to service nine new circles.

In addition, it has grabbed permits to start fixed-line services in four more states. It is already providing STD services, the first private company in the country to do so.

“This is an industry which is scalable and, as more cities and towns come under Bharti’s footprint, the costs are expected to come down further,” said Mittal, whose company started out with costs of around $ 400, but has now managed to tamp it down to the region of $ 55.

An internal evaluation puts the funds requirement of Bharti Tele-ventures at Rs 1,564 by end of the current financial year. This includes Rs 894.9 crore for new cellular licences, Rs 207.7 crore for basic services and Rs 462.1 crore for national long distance operations.

   

 
 
GOOFS GALORE 
 
 
FROM M. RAJENDRAN
 
New Delhi Jan. 23: 
When Morgan Stanley’s Naina Lal Kidwai let slip that the floor price for the Bharti Televentures IPO had been fixed at Rs 45 here today, it merely capped a string of boo-boos that have dogged the run-up to the roadshow for the long-awaited telecom flotation.

It all started with Bharti picking a venue in the capital that very few from the media would have been able to attend because of the traffic restrictions arising from Tuesday’s dress rehearsal for the truncated Republic Day parade.

The venue was changed at the last minute as realisation dawned, but none of the officials representing the promoters, the investment advisors and the PR people turned up at the appointed hour. The press conference, which was due to start at 11 a.m., began 45 minutes later. In Mumbai, things were even more tardy, with proceedings starting a full hour late.

More bizarre was the fact that one of the country’s largest communications companies failed to establish connectivity between the two venues in Delhi and Mumbai through a simple teleconference facility. That left group chairman Sunil Bharti Mittal and brother Rajan Mittal fumbling over the crucial announcement—neither certain over who would announce it.

Meanwhile, Kidwai spilled the beans by naming the floor price, which created a flutter as the PR persons scrambled to gag her. “Mumbai has not announced it yet...no...wait for them do it first,” screamed the executive of the public relations agency hired specially to manage the IPO from the back of the hall.

Kidwai tried to extricate herself from a gaffe-ridden show with a lame: “I was giving the price as an example.” But within minutes, Rajan Mittal said the company has set the floor price at Rs 45 per share.

The press was also handed out what the company calls its “red herring prospectus”.

When asked to explain the expression on Page 164 of the book, a company spokesperson said: “This expression has been used basically because the final price has not yet been decided. The offer is through the book-building route and the price will be determined only when the issue closes.”

   

 
 
PALLONJI WINNER IN FORBES GOKAK BATTLE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 23: 
In a tame end to the takeover tussle over Forbes Gokak (FGL), Pavankumar Sanwarmal, the man who ignited the stake spat, today sold his 14.8 per cent equity to the Pallonji Mistry group.

“The deal was struck at Rs 93 each for the entire lot of 18 lakh shares in my control,” Sanwarmal told The Telegraph.

Sanwarmal had hiked the offer price to Rs 92, which prompted the Mistry group to increase it to Rs 93. Today was the last day for revisions in the two offers.

Sanwarmal, asked why he threw in the towel after a long fight, said he did so to “benefit smaller shareholders”. The final price quoted by the Mistry group, which controlled over 50 per cent until Tuesday, is 15 per cent higher than its initial offer of Rs 80.

Sanwarmal has wrested an undertaking from the Mistry group to buy out all shares his open offer garners. However, this will be done at Rs 92 per share. Other investors will be paid at the final offer price of Rs 93.

The Sanwarmal group’s offer price was hiked to Rs 92 from Rs 88.50, while Mistrys went from Rs 80 to Rs 90 to Rs 93. The Pallonji group had acquired the Forbes stake from the Tatas recently, necessitating an open offer.

Market watchers had reckoned that the Mistry group — whose offer is now expected to be also accepted by FIs — had an edge over the Sanwarmals in the race for shares, the book value of which is around Rs 160.

Pallonji group’s offer opened on November 28 will close on the same day as the counter-offer — February 1.

In view of the fresh dates, the offer can be revised seven days before the closure. That means a deadline of January 23.

   

 
 
RS 600-CRORE TAB FOR HALDIA PROMOTERS 
 
 
BY A STAFF REPORTER
 
Calcutta, Jan. 23: 
The promoters of Haldia Petrochemicals (HPL) will have to tie up Rs 600 crore in fresh funds to revive the company through debt restructuring.

They are talking to various companies that could come in as a strategic partner, and there are signs that the financial tangle will be sorted by March 31.

The HPL board met today for the first time after the decision that the Tatas would sell out in favour of the state government and Purnendu Chatterjee.

“We will talk to anyone keen on investing, even Indian Oil Corporation (IOC),” the TCG chief said after the meeting. HPL chairman Tarun Das said the divestment of Tatas’ shareholding is expected to take place “at par”.

The government-owned petroleum major had earlier indicated it could invest up to Rs 500 crore in return for at least a 26 per cent stake, but insisted that the shares come with management control of the project.

HPL is likely to send IOC a fresh proposal, even as Chatterjee is believed to have approached a number of other companies, including some non-resident Indians.

The project had an equity base of Rs 1,010 crore, split in the ratio of 43:43:14 among the state government, TCG and the Tatas. The promoters had been asked to cough up another Rs 500 crore as advance against equity, in two installments, after Bengal’s showpiece industrial venture ran into a financial quagmire.

In the first installment of Rs 250 crore, the state and the Tatas have forked out their share of Rs 107 crore and Rs 36 crore. Chatterjee has, however, paid only Rs 53.5 crore against his obligation of Rs 107 crore in the deal. He has promised to clear the pending amount “soon”.

Industrial Development Bank of India had disbursed a bridge loan of Rs 500 crore, while an additional Rs 500 crore was raised through convertible debentures.

A part of these debts is believed to have been repaid with the fresh capital infused by the promoters.

Chatterjee and Das said the long-pending debt restructuring would be completed by this financial year.

   

 
 
THAILAND LOSES OUT TO TARATALA IN ESAB RACE 
 
 
FROM SATISH JOHN
 
Mumbai, Jan. 23: 
Thailand’s loss is Calcutta’s gain. The city, that has seen big business pass by and many existing firms shift base to more investor-friendly climes, may finally have something to cheer about.

The Esab group, the welding engineering major headquartered in Sweden, has closed its welding equipment operations in Thailand and shifted the plant to Calcutta. The Taratala plant, slated to be the global manufacturing hub for welding power compact MIG machines, has already achieved the required global standards.

Confirming the development, Sanat Bhattacharya, managing director of Esab India said operations of the Thailand plant would be relocated to the company’s equipment factory in Calcutta. “It demonstrates the confidence in our Indian operations.”

Further, in view of the growing importance of the Indian operations in the Esab group’s new scheme of things, Bhattacharya has been included in the “global leadership team” comprising 11 officials from Esab world-wide.

As a result, the company’s Indian management that used to report to the Asia-Pacific regional office will now report directly to the global chairman of the Esab group.

“I talked to unions yesterday,” Bhattacharya said. “They will decide whether or not to accept the new proposition that will entail them to further improve productivity, as capacities are bound to increase to meet global requirements,” he added.

   

 
 
VAT PUT OFF BY A YEAR 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 23: 
The introduction of value added tax (VAT) has been deferred by a year; it will now come into force from April 1, 2003.

The decision was taken by the empowered committee of state finance ministers here today. The committee also decided to abandon the two-speed process under which 16 states were scheduled to kick off the process this April with the rest due to join them next year. Under the new schedule, 28 states and Union territories are expected to introduce VAT which seeks to replace the sales tax regime in states.

Speaking to reporters after the meeting, Union finance minister Yashwant Sinha said the amendment to the Central Sales Tax (CST) Act will be taken up in Parliament in the budget session, which will pave the way for introduction of VAT by April 2003.

“We have decided to delay the process by a year in view of the fact that the CST Act has not been amended yet. Other considerations like the slowdown of the economy and apprehensions over the levy raised by industry also weighed on us. The extended time will also enable all 28 states and Union territories to join in as against the maximum possible participation of 16 states had we decided to implement VAT from April this year,” he said.

Asim Dasgupta, chairman of the empowered committee, said 16 states were ready with their draft VAT legislations. The 12 other states and Union territories, which fall under the new/special category states, are expected to have theirs ready by the time VAT is introduced.

“Although VAT could have been introduced this year, the committee decided against it as it would have led to accounting problems with two sets of accounts to be maintained. This would have posed problems in accounts,” Dasgupta said.

Dasgupta said the meeting also discussed issues like bringing services within the ambit of VAT with most states wanting it to be placed on the concurrent list.

   

 
 
MALLYA PICKS S&N AS BEER ALLY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 23: 
The UB Group (UBG) today forged a strategic alliance with leading European brewer Scottish and Newcastle (S&N), in a complicated yet unique deal, which will see S&N invest over Rs 430 crore in the group. This includes an investment of Rs 250 crore in UB’s demerged beer business and close to Rs 175 crore in a new joint venture.

Under the deal hammered out late evening here today, the initial investment of Rs 250 crore will be through a combination of preference shares (Rs 200 crore) and external commercial borrowings (ECB) worth Rs 50 crore, where S&N will earn an interest of 2 per cent over the US prime rates.

The redeemable optionally convertible preference shares (carrying a duration of five years) to which S&N will subscribe, will carry an interest rate of 5 per cent per annum. It will have the option to seek redemption/repayment of the instrument at the end of this period. S&N will also have the option of converting both instruments into equity of the demerged brewing company. This could result in its holding in the latter going up to 26 per cent.

The Scottish & Newcastle group comprises Scottish Courage, Britain’s leading beer maker, French beer major Brasseries Kronenbourg, Alken Maes, Belgium’s number two beer manufacturer and Scottish & Newcastle Retail, one of UK’s leading pub, bar and restaurant operators.

Speaking to newspersons here today, Vijay Mallya, chairman of the UB Group, said the deal will enable the company reduce its debts to the tune of Rs 250 crore.

Mallya added that the combination of preference shares and ECBs would lead to significant savings in interest charges and have a positive effect on the company’s EPS.

Last year, UB Group flagship United Breweries announced its intentions to demerge its beer business into a separate entity, where it would induct a strategic foreign partner. He added S&N would invest between Rs 165-175 crore in the joint venture, where it will hold an equal 40 per cent stake with the UB group. The remaining 20 per cent will be held by the UB management. Mallya further pointed out that this money will be used to make further acquisitions in the brewing business.

The venture will be headed by Ravi Jain, formerly managing director of Shaw Wallace.

   

 
 
BRITISH GAS GETS ENRON OIL STAKE FOR $ 350 M 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 23: 
British Gas today signed a revised agreement for the purchase of the entire share capital of Enron Oil and Gas India Limited (EOGIL) for $ 350 million from Enron Corporation.

British Gas forced Enron to accept a lower price than the $ 388 million the two had agreed on in October. At the same time, it relented from its earlier stance that it should automatically become the operator of the Mukta-Panna gas fields which Enron controlled as part of a three-way consortium with Reliance Industries and Oil and Natural Gas Corporation (ONGC).

The two other partners have refused to accept the pre-condition and have instead staked their claims to the operatorship of these gas fields.

Nigel Shaw, chief executive of BG India said: “We are pleased to end the uncertainty over the sale and purchase of these assets. Enron Oil and Gas India Limited is the operator of these fields and, as purchaser, we expect to carry on as operator. We will continue our discussions with ONGC and Reliance Industries, the partners in the assets, to reach a mutually satisfactory outcome on operatorship.”

The original agreement announced on October 3, 2001, was terminated in December 2001, following slower than anticipated progress to close the transaction and Enron’s recent Chapter 11 bankruptcy protection filing in the US.

The revised agreement has been reviewed by Enron’s Creditors’ Committee and is subject to a number of conditions including the approval of the Bankruptcy Court. Enron is expected to file a motion with the court shortly seeking such approval. The transaction is expected to be completed by mid-February.

“We hope to be the operator. It is an issue which we are still negotiating with the concerned partners. The original sale and purchase agreement has been re-negotiated to take into account Enron’s current position.”

   

 
 
INDUSTRY SEEKS SOLACE IN SPIRITUALISM 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, Jan. 23: 
Move over dot.com, industry is looking for a new mantra now. With growth plunging below 1 per cent and the economy slipping off the rails, business is turning to spiritualism for succour.

The Confederation of Indian Industry (CII) has arranged for spiritual guru Swami Tejomayananda, head of Chinmaya Mission—based in south India—to address a seminar titled ‘Faith—A Force For Success’.

“The seminar is aimed at giving people a break from the rigours of daily life, which incidentally, isn’t a very smooth one for industrialists at the moment. This will provide a whiff of fresh air and restore confidence in work. Spiritualism is a force that helps people tick even in hard times. So we feel that this will provide a reprieve from the hard-core business environment,” a CII source said.

The businessman never had it so bad. Already struggling to stay afloat by slashing costs and trimming manpower, terrorist attacks abroad and at home have dealt him a double blow.

So, it’s time to bring back some faith in the system and the Almighty to clear the air. They will be hoping that the business cycle will go the full circle and propel industry on the road to recovery.

This is not the first time that the CII has gone spiritual. Just a month back in December, during their annual general meeting, they had called upon Sri Ravi Shankar, another Bangalore-based guru, to address the gathering.

Apparently, factors like the sharp dip in investor sentiments, poor performance of the manufacturing sector and falling GDP growth rates are driving businessmen to look for some spiritual bearings.

Industrial growth in November last had hit rock bottom at 0.9 per cent as against 7.4 per cent during the same month of the previous financial year.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.27	HK $1	NA*
UK £1	Rs. 68.69	SW Fr 1	NA*
Euro	Rs. 42.78	Sing $1	NA*
Yen 100	Rs. 35.96	Aus $1	NA*
*SBI TC buying rates; others are forex market closing rates

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Calcutta			Bombay

Gold Std (10gm)	NA		Gold Std(10 gm)	Rs. 4710
Gold 22 carat	NA		Gold 22 carat	NA
Silver bar (Kg)	NA		Silver (Kg)	Rs. 7470
Silver portion	NA		Silver portion	NA

Stock Indices

Sensex		3373.07		+  4.79
BSE-100		1608.09		-  0.95
S&P CNX Nifty	1089.40		-  3.45
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