Indian Oil, Shell lead race for IBP
Stocks sizzle
Flexi-duty structure for petro goods
ICICI picks up 5.7% in George Williamson
IPCL to exit GE Plastics
LIC funds prop for markets
Foreign Exchange, Bullion, Stock Indices

New Delhi, Feb. 4: 
Royal Dutch Shell and Indian Oil Corporation (IOC) have emerged as front-runners in the race to buy a controlling 33.5 per cent stake in IBP. Reliance, which had put in two bids, is believed to have drawn a blank.

A fresh Cabinet note has been drawn up for the disinvestment in international phone carrier Videsh Sanchar Nigam (VSNL) to set aside a 5.97 per cent stake for employees, instead of the earlier 1.97 per cent.

The Reliance group is also believed to have been bested in the contest to pick up a strategic 25 per cent stake in VSNL by the Tatas, who are reported to have bid close to Rs 200 for the telecom major’s share. The two companies are the only shortlisted bidders for the telecom giant.

Sources said the core group of secretaries have cleared the bids, without putting specific comments on which of the suitors are best placed. The Cabinet Committee on Disinvestment, headed by the Prime Minister, will take a final decision on the issue at Tuesday’s meeting. The secretaries also cleared a draft shareholders’ agreement, which includes a three-year lock in period for the stake being sold to the strategic buyer.

Besides IOC, Shell and Reliance, which had bid through Reliance Industries and Reliance Petro, others who had thrown their hats in the ring were HPCL, BPCL and Kuwait Petroleum.

Winning the race will help Shell enter the Indian market again after losing it when the government nationalised IBP, which was part of the global petroleum group.

If IOC manages to buy out IBP it will give them a market share of over 60 per cent just before the government goes ahead with opening up petroleum retailing to private companies.

IBP, which has a market share of around 5 per cent and a retail network of close to 1,500 outlets, is considered a prime buy. Buyers will have to invest about Rs 2,000 crore in the petroleum sector within three years of the acquisition.

IBP posted a net profit of Rs 35.66 crore for the quarter ended September 30, 2001 compared with Rs 14.1 crore in the corresponding period of last fiscal. Total income increased from Rs 1,958.81 crore in the second quarter of 2000 to Rs 2,004.41 crore in the quarter ended September 30.

Though VSNL currently enjoys a monopoly in the international calls out of the country, the dominance is set to end soon. Its value as an investment proposition has taken a big beating as a 750 per cent special dividend was paid from its reserves. Another decision has delinked the company’s real estate and vested the ownership of these assets in a separate company.

Meanwhile, Credit Suisse First Boston has ceased to be an advisor for privatisation of VSNL as it failed to sign a mandate letter with the disinvestment ministry.


Mumbai, Feb. 4: 
Public sector companies (PSUs) turned out to be the scene-stealers on bourses a day before a Cabinet panel picks up the winner from a bevy of suitors vying for Videsh Sanchar Nigam Limited (VSNL) and IBP.

Shares of the two PSUs, whose fate will be decided on Tuesday, were among the smartest gainers as investors were fired by hopes that bids will be attractive.

The runaway rise in the two stocks came amid a falling market and the gloom enveloping other sectors. The rally was also remarkable given that it happened on a day when the BSE sensex closed with a 17-point loss.

Brokers attributed the decline in the market to the Friday’s weak closing on the technology-based Nasdaq.

Bourses were rife with rumours that the bids would be aggressive and that prices quoted by successful bidders will be much higher than market quotes. According to stock watchers, bids for VSNL shares could go up to Rs 200, while IBP’s may hit Rs 1000.

Speculative buying in the two companies triggered a general rally in PSU stocks, which have languished at low prices in comparison with private sector firms with similar potential.

Experts expect a correction if Tuesday’s announcement of price by the Cabinet Committee on Disinvestment is in line with market predictions.

Hindustan Petroleum Corporation gained six per cent, while Bharat Heavy Electricals, the power equipment maker, rose 3.3 per cent; Mahanagar Telephone Nigam, the telecom operator in Mumbai and Delhi, was up 1.5 per cent.

State Bank of India went up 2.9 per cent. Corporation Bank, in which the life insurance major LIC holds a major stake, also soared.

Other PSU banks rose on hopes that the government would dilute its stake.

There were some brokers who tried to tread cautiously even as investor infatuation with PSUs touched new highs.


New Delhi, Feb. 4: 
The Cabinet will decide on a policy of ratcheting up or down customs and excise duties to keep the domestic prices petroleum products stable.

A Cabinet note on the post-administered pricing mechanism, which is to be cleared tomorrow, reveals the ministry of petroleum and natural gas had demanded that a fresh oil fund be set up which would be used to subsidise prices in the domestic market if they shot up in the international market.

However, this has been shot down by the finance ministry, which has come up with a counter policy of ratcheting up or down duties to keep petro prices reasonably stable. It has pointed out this policy will be similar to the one followed for essential commodities like wheat and rice.

The finance ministry has also shot down a demand from the petroleum ministry to replace ad-valorem duties on petro goods with specific excise duties.

The note also states that after the dismantling of APM, uninterrupted supply of petroleum products in various part of the country will be ensured by getting the state-run oil companies to enter into product exchange arrangements on a commercial basis for a period of around two years, as was done earlier when bulk products were decontrolled. It also states that the oil market regulator being set up will enforce retail service obligations and marketing service obligations by all oil companies and their retailers.

This is significant in the light of the battle between Reliance and Indian Oil, over the latter’s refusal to pick up higher production from Reliance’s Jamnagar refinery. As it implies the new regulatory body could well be the final arbitrator in this case.

The Cabinet will also clear a plan to give a freight subsidy of Rs 3.30 a litre of diesel and Rs 142 a cylinder of cooking gas for supply of these goods to far flung areas, including north-eastern States, Sikkim, Jammu and Kashmir, Himachal Pradesh, Uttaranchal, Andaman & Nicobar Islands and Lakshwadweep Islands.

This amount has been worked out on the basis of the cost of freight between Delhi and Leh, the note states.

The note also states that 90 per cent of the Rs 12,600 crore in cumulative outstandings of the oil companies from the oil pool account will be liquidated through government bonds.

The remaining amount will be liquidated after a special audit of oil companies’ accounts by the Comptroller and Auditor General of India.


Calcutta, Feb. 4: 
ICICI Ltd has acquired 5.73 per cent of George Williamson (Assam) Ltd from Eveready Industries and other Brij Mohan Khaitan group companies for a consideration of Rs 6.5 crore.

While ICICI informed the stock exchanges that it had acquired 8,12,749 shares of George Williamson—now controlled by the Magors—a senior official of Eveready Industries said the stake was transferred from the B.M. Khaitan group.

Eveready and other group companies held 10.6 per cent stake in George Williamson.

“The sale of shares was part of Eveready’s ongoing debt restructuring exercise. The remaining 4.87 per cent is also likely to be sold though we do not have any immediate plans,” the Eveready official said.

According to the Eveready official, the price paid per share was around Rs 80. The company’s stock closed at Rs 81.95 on the Bombay Stock Exchange today. Eveready’s outstanding debt, including borrowings for working capital, stands at around Rs 800 crore, of which about half is with ICICI.

According to the company’s filings with the stock exchanges, the foreign promoters hold 70 per cent of the company’s Rs 14.17 crore equity, while banks and financial institutions held 4.67 per cent as of December 31. The mutual funds and the public held 4.23 per cent and 10.5 per cent respectively.


Calcutta, Feb. 4: 
Indian Petrochemicals Ltd (IPCL) has decided to pull out of GE Plastics India Ltd (GEPI), the 50:50 joint venture which was floated in June 1991 along with the Dutch multinational General Electric Plastics B.V. (GEP).

Confirming the move, an IPCL spokesperson said the company has opened talks with the Dutch partner to sell its stake in GE Plastics which manufactures engineering plastics. Indian Petrochemicals will rake in over Rs 49 crore from this sale, he added.

While the petrochem major is likely to get Rs 23.63 crore by selling its 50 per cent equity, another Rs 25.40 crore will come from the sale of assets.

GE Plastics has a capital base of Rs 50 crore in which IPCL had invested Rs 25 crore through 25 lakh equity shares of Rs 100 each.

The petrochem major also made substantial investment in several constructions on the land owned by GEPI in Gurgaon and Vadodara where its two plants are located.

GEPI had appointed international consulting firm Deloitte Haskins and Sells (DHS) for the due diligence. The firm has already submitted its recommendation on the market value of the equity held by IPCL as well as the assets that it had built.

IPCL sources said the Dutch partner insisted on buying out its stake in the Indian firm after the government decided to put the petrochem major on the block.

“The Dutch firm has expressed anxiety about the change in management in IPCL if a competitor eventually takes over,” he added.

Sources said the Dutch company wants to continue manufacturing engineering plastics in order to protect its technology and that is why it wants complete control of the India outfit. IPCL, too, wants to sell its stake because the product mix does not have any synergy with its main line of business.

“Neither there has been any return on the investment nor has there been any synergy between production and compounding facilities set up by GEPI,” they said.


Calcutta, Feb. 4: 
There’s some good news for the insipid capital market: Life Insurance Corporation, the public sector insurance behemoth, has decided to pump in another Rs 2,000 crore in the equity market this fiscal.

The insurance major had already invested around Rs 2,000 crore in the equity market this year. LIC’s target is to pump around 8 per cent of its premium income, which is expected to cross Rs 50,000 crore this year, into stock markets.

LIC chairman G.N. Bajpai said: “We have so far invested about Rs 2,000 crore in the stock market this year. We also see some opportunities in the government securities market, where we intend to invest about 60 per cent of our premium collected this year.”

In the last financial year, the corporation invested about 6 per cent of its premium collection in stocks. The corporation’s total premium income last year was Rs 32,000 crore. “For six months the equity market was flat, but it has now come alive,” he said, adding that the corporation was a buyer even when the Bombay Stock Exchange sensitive index tumbled to 2,500.

Asked whether the corporation was planning to acquire shares from Unit Trust of India, Bajpai said: “There has been no discussion yet, but we will certainly consider if anything is offered at an attractive price.”

Besides investing 60 per cent in government securities and 8 per cent in equities, the corporation intends to invest 16 per cent in infrastructure projects, 8 to 9 per cent on its own resources and development and the balance in corporate debt instruments.

Going abroad

The corporation intends to take on the multinational insurance companies that are competing with it on the Indian soil in markets where they are leaders. It has decided to restructure its operations in the United Kingdom and enter the United States market soon.

Bajpai said: “We will have to tie up with local partners in both the countries so that we can leverage their experience and knowledge of the local markets.”

The corporation has an office in the United Kingdom, and intends to set up one in the United States. Bajpai said, the office in the United Kingdom would service other European countries too.

Explaining the rationale of going abroad, Bajpai said: “With the entry of multinational companies, the Indian insurance market will soon become fiercely competitive. To compete with them here, we must understand the markets where they are the leaders.”



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