Market rates for small savings
Bharti fails to go above IPO floor price
Debt tribunals asked to improve recovery record
Maadhyam takeover by Publicis challenged
You’ve got mail, via convergence
Ketan’s eye-popper in Calcutta

Mumbai, Feb. 3: 
Finance minister Yashwant Sinha is likely to touch the political hot potato of linking yields on small and contractual savings to market interest rates even as government borrowings are expected to be budgeted 18 per cent higher at Rs 1,40,000 crore in 2002-03.

The possible removal of administered interest rates on small savings, as recommended by the Y. V. Reddy Committee, will be a minefield, but if he pulls it off, it could lead to an all-round reduction in interest rates. There will then be a strong case for the Reserve Bank of India (RBI) to follow it up by bringing down its bank rate.

The bond markets have already begun warming up to the possibility of a post-budget decline in interest rates. Yields on key government securities have dropped by over 30 basis points during the past three weeks; more falls are not ruled out in the budget build-up.

The yield on the benchmark 10-year security, for instance, is now quoted around 7.56 per cent, 230 basis points below the prevailing rate same time in the previous year.

“The hope is that there will be a positive budget from the finance minister this time. There is, particularly, an expectation that interest rates on small savings will be tied market rates so that there can be a reduction of interest rates by the Reserve Bank,” said a senior debt market analyst with a nationalised bank.

In his previous budget, the finance minister had announced a committee that would look into the structure of interest rates.

He had expressed satisfaction that interest rates in the economy were largely market-determined, but was concerned that rates on contractual savings, such as provident fund and small savings schemes, are still set by the government — putting an onerous burden on the public exchequer.

The committee suggested linking the interest rates to be paid on small savings to the market-determined rates on debt instruments when it presented its report. On other savings, such as PPF, the panel recommended that its interest rates be benchmarked to the average secondary market yield on government securities, which have a residual maturity of around 10 years.

The gross market borrowing programme of Rs 1,40,000 crore expected for 2002-03 represents an increase of around 18 per cent from Rs 1,19,000 crore that was budgeted in the 2001-02 budget. However, the government has overshot the limit and has so far, mobilised around Rs 1,22,500 crore. Market circles believe that ultimately, the government could end up borrowing close to Rs 1,37,000 crore in the current fiscal.

In this regard, it is estimated that close to Rs 16,000 crore will be mobilised by March. “In the month of February, around Rs 10,000 crore could be mopped up and the last tranche could be completed by March,” a dealer said.

Bond market analysts say a figure of Rs 1,40,000 crore is reasonable given the borrowing levels of the current year. “This can be expected as defence spending will go up. We are likely to see surging expenditure despite precarious government finances,” says Sanjeet Singh, senior debt market analyst at ICICI Securities.


New Delhi, Feb. 3: 
Bharti Tele-Ventures Limited (BTVL), completed its 100 per cent book-building Initial Public Offering (IPO) on Saturday oversubscribed over 2.5 times.

Bharti Tele-Ventures, a company promoted by Bharti Telecom, offers telecommunications services and has approximately 1,340,000 total telecom customers, about 1,048,000 cellular, 135,000 fixed-line and 157,000 Internet customers.

The company has been unable to get a good price for the issue which opened last month for a total of 18.5 crore equity shares representing 10 per cent of the post issue capital of the company.

According to a company spokesperson, the demand was built at higher than the floor price of Rs 45 per share largely between Rs 46 and Rs 48 per share. “The company in the interest of all the investors has decided to fix the issue price at Rs 45 per share in consultation with the book running lead managers, JM Morgan Stanley and DSP Merrill Lynch,” spokesperson said.

The total demand at a price of Rs 47 per share was at 25.91crore shares, while the demand at Rs 46 per share was 39.88 crore shares against an issue size of 18.53 crore shares. The issue received over 25,000 applications.

Sunil Bharti Mittal, chairman and group managing director, Bharti said: “We are pleased to have received an excellent response in a challenging market environment. The overwhelming response from foreign investors reinforces their confidence in Bharti and India as an attractive investment destination.”

JM Morgan Stanley and DSP Merrill Lynch, the book running lead managers to the offer claimed, that “India’s first 100 per cent book built Bharti Tele-Ventures IPO has been a great success and has received a very good response across categories.”

However they also admitted, that in spite of the fact that the book was fully built at Rs 47 per share the company had decided to fix the price at Rs 45 per share." The move, the company and the lead managers claimed was done in the interest of the investors.

While the total demand received under the book has been Rs 2137.5 crore, the amount retained by the company at the issue price of Rs 45 per share is Rs 833.85 crore. After the final allocation of shares, the foreign ownership of the company has gone up to 46.7 per cent and the 2.3 per cent for secondary market trading.

Hemendra Kothari, chairman, DSP Merrill Lynch, the book running lead manager to Bharti Tele-Ventures IPO said: “The blend of the strong fundamentals and attractive valuation has contributed to the success of the Bharti Tele-Ventures IPO. The success of this IPO will allow other fundamentally strong companies to raise capital from the markets.”

The book building and the entire bidding process were completed online on the NSE and BSE terminals of the syndicate members.

Nimesh Kampani, chairman, JM Morgan Stanley, the book running lead manager to Bharti Tele-Ventures IPO said: “The success of Bharti Tele-Ventures domestic IPO will open the gates for the primary capital markets in India and boost investor confidence.”


Calcutta, Feb. 3: 
The Reserve Bank of India has expressed concern over the poor progress made by debt recovery tribunals. In a recent circular to the DRTs, the central bank has conveyed its concern on the rising non-performing assets in the banking industry and asked the tribunals to speed up the settlement process.

Figures available with The Telegraph show that till early December, 27 DRTs and five appellate tribunals have been able to settle around 10,000 cases and recover a little over Rs 1,800 crore. When contacted in Mumbai, the official spokesperson of the RBI said while initially the DRTs faced certain constraints regarding the execution of decrees, these were later addressed in amendments to the Recovery of Debts due to Banks and Financial Institutions Act, 1993, carried out in 2000.

“It is too early to judge their performance as the impact of legislative amendments can be observed only after some time. However, by the end of June 2001, the DRTs have decided upon nearly 9,029 cases filed with them and banks have been able to recover a sum of Rs 1770.51 crore,” he added.

Bankers, however, are of the view that the DRTs should become more effective in settling the NPAs. “Even though the government has set up DRTs all over the country, the process of settlement takes a long time,” banking sources said.

The gross NPAs of the banking sector as on March 31, 2001, formed 12.04 per cent of the total advances as against 13.11 per cent as on March 31, 2000. The spokesperson further claimed that there has been a decline in the proportion of NPAs.

“The data regarding recovery of NPAs and fresh addition to the volume of NPAs in the current financial year is yet not available,” RBI officials said. They added that the central bank’s scheme to settle small loans up to Rs 25,000, which have been classified as NPAs, is expected to yield some results for the banking industry.

Formation of an asset reconstruction company (ARC) for transferring the bad debts of the banking industry is yet to take final shape, though the Indian Banks Association has already submitted its report on it. According to the proposal, the ARC will have an initial equity of Rs 100 crore, which will come from all the public sector banks and three financial institutions—IDBI, ICICI and IFCI.

When contacted, senior finance ministry officials said that the formation of an ARC is being actively considered, adding that a formal announcement will be made in the next Union Budget.


New Delhi, Feb. 3: 
A year after multinational advertising major Publicis took over Maadhyam Advertising Pvt (Ltd), minority shareholder and erstwhile director Pinaki Dasgupta has filed a case before the Company Law Board (CLB) challenging the agreement for the transfer of ownership and demanding that his stake be restored.

Dasgupta, an artist, held a 20 per cent stake in Maadhyam, which he founded along with Michael Menezes 15 years back. At the time of transfer, Menezes, who was the managing director, held 42 per cent of the equity. The rest was held by the smaller stakeholders.

Dasgupta says he was forced to sign the agreement for the transfer of shares in January 2001 without probity.

He has moved the CLB under section 397 of the Companies Act which pertains to oppression of minority shareholder.

The CLB bench hearing the case comprises Justice AK Banerjee and S. Balasubramanium.

Counsel for Dasgupta argued that the respondents had not even complied with the disputed term of agreement.

After making an initial payment of Rs 1.13 crore, they had refused to pay the next four instalments on the ground that this was conditional on the company making profits, which was not the case.

Morever, Dasgupta argued that the agreement guaranteed him employment with the company as consultant till September 2002 on a salary of Rs 1.2 lakh plus commission on revenues generated through his contacts. The sum comes to about Rs 80 lakh, it is learnt, estimated on past records.

However, in May last year, Dasgupta was sacked on charges of negligence and embezzlement, which was later thrown out by courts.


New Delhi, Feb. 3: 
Snail mail looks all set to jump on to the convergence gravy train. The postal department is the only patch in the communications ministry’s bailiwick that has been left out of the technology loop that binds entertainment, internet and the telephone.

Industry has now cobbled a set of proposals to bring the slow and stodgy postal department up to speed with the latest available technologies.

As a first step, the Federation of Indian Chambers of Commerce and Industry (Ficci) has proposed that the postal department, one of the oldest public sector undertakings, be initially corporatised, as a precursor to its eventual privatisation.

Ficci has suggested the beginning be made with its Speed Post service. Efforts should also be made to promote the use of e-mail services at the 1,50,000 postal branches spread across the country.

The chamber has also suggested the setting up of a regulatory body that will ensure quality of services, determination of right tariffs, and provide a level playing field for private companies who enter the postal services arena once it is privatised. Ficci has also proposed overhauling outdated services like the telegraph and the provision of technology-based services at affordable prices.

Besides, it suggested a reduction in the postal deficit — which has ballooned from Rs 91.81 crore in 1992-93 to Rs 1,683 crore as per the budget estimates for 2001-02 — by targeting the subsidised targets at the weaker sections of the society.


New Delhi, Feb. 3: 
Ketan Parekh has admitted transferring Rs 3,191.02 crore to Calcutta-based brokers during January 2000 to March 2001, which is far in excess of Rs 2,810 crore estimated by Securities and Exchange Board of India (Sebi) in its preliminary investigation report.

The Big Bull, who has been accused of manipulating the markets before it collapsed in March last year, has also admitted taking Rs 817 crore from Madhavpura Mercantile Co-operative Bank but has flatly denied the charged that he flouted laws in the transfer of these amounts saying Sebi’s charges in this regard are ambiguous.

Stating that a sum of Rs 1,418.61 crore was transferred by Classic Credit and Rs 1,772.41 crore by Panther Fincap and Management Services (both being KP group entities), Parekh in his deposition to the Joint Parliamentary Committee (JPC), which is investigating the securities fraud that convulsed the bourses, has said that there was been no contravention of law as these were paid specifically for the purchase of shares, payment of margins and meeting losses in respect of trades carried out on his behalf by Calcutta brokers.

Parekh has also specifically denied any links with Mukesh Babu Securities or its group entity Madhur Shares saying that it had no knowledge of sanction limits or loans taken by them from Madhavpura Mercantile Co-operative Bank.

KP has admitted taking money from some companies through his group entity Classic Credit including Rs 42.4 crore from Intercontinental and Rs 12 crore from Adani Impex — both Adani group companies. However, this is significantly less than the charge put by Sebi which had estimated the money forwarded by Adani group entities to KP group entities at Rs 250 crore of which Rs 151 crore was repaid by KP group companies.

Classic Credit also received Rs 12 crore from Shahi Property developers. Even pharma-major Kopran invested in Classic Credit Rs 77.95 crore by way of inter-corporate deposits out of which it has repaid Rs 50.1 crore.

Brushing aside the charges of the market regulator that the KP group companies had engaged in circular trading and matched trades with Credit Suisse First Boston (CSFB) to ramp up prices of Aftek Infosys, Lupin labs, Global Trust Bank and Shonk Technologies, Parekh has said that “circular trading” itself was not defined by Sebi.

Stating that matched trades were a common practice in the market, Parekh said this was a popular way of raising finance in the markets. “The orders placed through CSFB for sale were matched with the buy orders placed by a different entity through another broker. Further, on the same day this trade was reversed as a cross deal with CSFB at a different rate. The money due to the entity from CSFB would be paid after deducting there from commission or interest.


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