Mumbai ovation for Delhi volley
AV Birla Group weighs bid for HPCL
Booster dose for drug multinationals
FIs await open offer for IBP
Licence blow to couriers
Stamp of approval for digital signature
Eveready set to rejig focus
Foreign Exchange, Bullion, Stock Indices

 
 
MUMBAI OVATION FOR DELHI VOLLEY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 6: 
Dalal Street toasted the pre-budget welter of reforms with a 116-point leap in the Bombay Stock Exchange (BSE) sensex at 3,428.16 as state-owned firms basked in a new-found popularity and pharmaceutical companies received a shot in the arm.

The 3.5 per cent gain in the 30-scrip benchmark index came amid a surge in traded volumes. A measure of the enthusiasm in the market was the fact that 749 scrips ended as gainers, and only 389 as losers.

The sensex opened on a bullish note at 3329.23, which was also the day’s low, but shot past the 3400-barrier to 3433.02, the day’s high, before easing a little. Today’s surge marks a four-week high, reversing two days of losses. Mirroring the euphoria, NSE’s nifty index rose 3.62 per cent at 113.10 points.

What sparked the rally was the divestment of VSNL and IBP and Cabinet approval for a new drug policy that ended price control on many key medicines.

Multinational pharmaceutical firms put on weight, bouncing back into the reckoning after a long time. There is optimism that the new drug policy will considerably enhance the bottomline of these firms.

Shares of all public sector undertakings perked up, breathing life into other sectors as well. Upbeat retail investors and operators stepped in to make fresh purchases.

Hindustan Petroleum Corporation Corporation (HPCL) and Bharat Heavy Electricals (Bhel) jumped by the maximum possible 10 per cent. While Bhel closed at Rs 180.65, HPCL ended at Rs 225.40.

Foreign institutional investors, who had kept a low profile in recent days and had been waiting for the right clues and leads, returned in droves to make the best of the rebound. This sent many new-economy stocks zooming despite the recent Nasdaq slide.

In the specified group, 145 stocks, including 23 from the index, registered gains while 25 suffered losses.

The total volume of business improved substantially at Rs 1779.83 crore from Rs 1320.57 crore on Tuesday. MTNL, Bhel, BPCL, HPCL, IPCL and SBI were the most sought-after stocks, hitting their upper-end 10 per cent price bands. Shipping Corporation of India hit the 20 per cent upper circuit filter.

Rupee dips

Steady dollar demand from banks drove the rupee to another new low closing low at 48.68/69 against 48.64/65 on Tuesday. It plumbed the day’s trough at 48.70/72 after opening a little stronger at 48.65/66.

   

 
 
AV BIRLA GROUP WEIGHS BID FOR HPCL 
 
 
FROM VIVEK NAIR
 
Mumbai, Feb. 6: 
Even as Hindustan Petroleum Corporation Ltd (HPCL) and the AV Birla Group put their heads together to resolve the MRPL imbroglio, the impending divestment of the former could spring a surprise in the months to come.

That surprise could be in the form of the Birla group bidding for the government’s stake in the oil PSU, in the event of it successfully wresting management control in MRPL.

Industry circles say a bid for HPCL could be a serious possibility as the company could bestow it with several positives that include enhanced refining capacities apart from a significant retail presence of over 4,500 outlets through which it could market MRPL’s products.

However, the group’s bidding for the corporation would largely depend on how successful it is in resolving the imbroglio over MRPL and gaining management control over the company.

The AV Birla group presently has diverse interests in cement, readymade garments, VSF, VFY and information technology.

“If HPCL and the Birlas were to iron out their current differences with regard to MRPL, it would make lot of sense for the group to bid for the government’s stake in the corporation when it is put on the disinvestment list. The Birlas would then not have to focus on setting up fresh retail outlets and spend over Rs 800 crore for this purpose,” an oil sector analyst with a foreign brokerage pointed out.

Sources close to the Birlas however, denied that the group was considering a bid for HPCL. “It is premature to comment now,” they pointed out.

HPCL accounts for over 20 per cent of the country’s refining capacity. It has two refineries with a capacity of over 13 million tonnes. It had earlier announced its plans to set up another 9-million tonne refinery at Bhatinda in Punjab.

MRPL, jointly promoted by HPCL and Indian Rayon, had an initial 3 million refining capacity, which was expanded to 9 million tonnes in 1999.

   

 
 
BOOSTER DOSE FOR DRUG MULTINATIONALS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 6: 
The government’s decision on Tuesday to ease price controls on certain drugs, is likely to benefit multinational pharma firms led by GlaxoSmithKline, Aventis Pharma, E Merck and Pfizer more than their domestic rivals. The relaxation brings down the number of controlled drugs from 67 to 40.

Though Indian drug majors such as Ranbaxy Laboratories, Cipla Ltd, Dr Reddy’s Labs Ltd, Sun Pharma and a few others are expected to have their share of positive news from Tuesday’s move, industry circles opine that their MNC rivals are better placed to see an upside in terms of profits arising out of the expected rise in prices.

Sources here added that a number of products manufactured by domestic companies were competitively priced in the control era, thereby somewhat erasing the gains that can now accrue from these products going off the list.

“MNCs who had to sell most of their products at controlled prices now have pricing power. But that is not the case for domestic pharma companies,” an analyst with a local broking firm pointed out.

Though precise details of drugs that have now been freed from controls are not yet available, it is believed that GlaxoSmithKline and Burroughs Wellcome is likely to see the shackles going off products like Zinetac, Septran, Cobadex Forte. For Aventis, the windfall is likely to come in products like Combiflam, Soframycin and Novalgin, apart from few others.

E Merck is expected to be yet another winner as controls are expected be lifted from several of its vitamin products (barring vitamin E). Similarly, Pfizer is likely to benefit in Becosules, its major vitamin product.

Among Indian companies, Ranbaxy may benefit in Cifran, Fortwin and Histac, while DRL will gain in Ciprolet and couple of other products. Cipla too will have positives in Asthalin (anti-asthma). Analysts added another advantage for domestic pharma majors, particularly those with a strong research base such as DRL, Ranbaxy among others, lay in the major sops for R&D proposed by the government.

Some of those initiatives, such as exempting drugs patented in the country from controls for 15 years, are likely to be announced in the budget.

Consumers can, therefore, now look out for some price increases though industry circles aver that the extent of such a rise could vary on a case-to-case basis.

   

 
 
FIS AWAIT OPEN OFFER FOR IBP 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 6: 
Financial institutions, banks and mutual funds, which together hold 21.29 per cent in IBP, are likely to subscribe to Indian Oil Corporation’s open offer en bloc. Indian Oil will be making an open offer for 20 per cent of IBP’s equity after it acquired 33.58 per cent from the government.

According to analysts, the price at which the open offer is being made—Rs 1,551.25—is “simply irresistible”.

“Most institutions had acquired the share at Rs 100-200—some at prices even lower than that. There is absolutely no rationale for holding on to the stock when the market expects the stock to quote at around Rs 500 after the offer closes,” said an analyst.

Besides the 21.29 per cent held by institutions, 18.21 per cent of the company’s equity is held by the public. The total non-promoter shareholding in IBP is 40.42 per cent.

Assuming that the entire non-promoter holding is tendered in the public offer for 20 per cent, Indian Oil will have to accept half of the shares tendered by each subscriber.

According to investment gurus, investors should take a call on whether to sell out in the market or subscribe to the open offer, after watching how the stock moves over the next few days till the offer is made.

If the market price comes close to Indian Oil’s offer, exiting through the market would be more profitable than subscribing to the offer.

Profits arising from the stock in less than a year’s time of investment will attract 33 per cent tax unless set off against short-term capital loss elsewhere.

   

 
 
LICENCE BLOW TO COURIERS 
 
 
FROM M. RAJENDRAN
 
New Delhi, Feb. 6: 
One of the Cabinet decisions that got lost in the welter of blockbuster pre-budget measures announced Tuesday, is the levy of a licence fee on the Rs 2,900-crore courier industry.

The fee has not been spelt out clearly, but it has the potential to trigger a massive shakeout in an industry that has about 2,300 players who operate on sliver-thin margins.

Industry analysts predict a 20 per cent growth in the courier industry over the next five years, but the imposition of a licence fee could ruin the sector and send all those calculations awry.

The fee is aimed at bringing about regulation in a notoriously unregulated market and will be introduced through an amendment to the 104-year-old Indian Postal Act that will make it mandatory for courier companies to register with the department of posts (DoP).

The amendment will form part of a Bill that is expected to contain many proposals designed to boost the DoP’s revenue earnings. The Bill is likely to be introduced in the next session of Parliament.

S.C. Dutta, secretary, department of posts, told The Telegraph, “We had been trying for years to change the century-old Act to allow the postal department change with the times. The amendment announced by the government on Tuesday relates to the registration of courier companies, which as of today do not have any legal status.”

“The courier companies will have to get registered with the department of posts and pay a registration fee. The amount of the registration fee and other details will form part of the Bill that will be introduced in Parliament. This will give the courier firms legal status,” Dutta added.

Reacting to the decision, O.P. Raj Garhia, chairman and managing director of Overnite Express, said, “This is a good move and will lead to a shakeout in the courier industry where only those companies with good track record and financial standing will remain in the game.”

However, leading courier companies like DHL and BlueDart gave a more guarded response.

Spokespersons for both companies said they would wait for a formal announcement from the government before reacting to the move.

   

 
 
STAMP OF APPROVAL FOR DIGITAL SIGNATURE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 6: 
It’s now official: you can sign your cheques online. The government today put its stamp of approval on digital signatures — which have been available on the Net for quite sometime but haven’t had the force of legal sanction here in India — when Union communications minister Pramod Mahajan received the first digital signature certificate issued by SafeScrypt, the country’s first certifying authority (CA) for digital signatures.

Netizens can now carry out financial transactions in the country by signing cheques or booking orders on the strength of their digital signatures.

“SafeScrypt has ushered in an era of secure internet-based transactions to promote online transactions and e-commerce in the country. This will prove to be a vital link towards implementing the IT Act 2000, and pave the way for the growth of eCommerce, eLearning and eGovernance in India as well as the growth of IT-enabled services with the rest of the world,” Mahajan said at the ongoing Information and Communications Technology meet in Mumbai.

A digital signature certificate is a secure electronic digital identity of an individual on the internet. It will enable consumers or professionals to digitally sign emails, documents, or any other electronic data. The certificates issued by a CA are legally recognised in a court of law in the country and are given the same status as that of physical signatures.

   

 
 
EVEREADY SET TO REJIG FOCUS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Feb. 6: 
Eveready Industries India Ltd (EIIL) has decided to get out of its non-core businesses as part of its debt restructuring exercise.

To begin with, the B.M. Khaitan company which is saddled with a debt burden of Rs 849.25 crore, has offloaded a part of its holding in India Foils Ltd (IFL) to ICICI.

The company also sold its investments in SBI Mutual Fund, SBI floating interest bonds, UTI Master Plus and Housing Development Finance Corporation, to ICICI last month.

“The Khaitans are in talks with ICICI for selling their investments in CESC as well. Negotiations are on and the exercise may be over in the current financial year,” sources said.

Confirming the move, Deepak Khaitan, executive vice-chairman and managing director of the company said, “Those investments that do not make any sense to our group will be gradually offloaded. A beginning has been made. We are, however, not in a hurry and will exit the businesses as and when we get a good price. The exercise will also enable us clean up the company’s balance sheet.”

Khaitan added that the company is seriously considering selling its non-performing assets, which include land, buildings and flats. “In the present scenario we are not keen to hold on to these assets. If they generate liquid cash for the company, we will sell them.” The Khaitans sold their majority stake in India Foils Ltd to Sterlite Industries a couple of years ago. It currently holds 27,08,255 shares in IFL and has sold 60,9263 shares to ICICI.

Similarly, the company has sold 50,000 magnum units of SBI Mutual Fund, 2,500 floating interest bonds of State Bank of India, and 3,500 units of Master Plus to ICICI. The company has also divested its 5.7 per cent stake in George Williamson to ICICI.

The entire exercise has generated nearly Rs 20 crore, which has gone to ICICI as upfront fees.

Eveready is also weighing a move to bring down the promoters’ stake in EIIL from the 55 per cent to 51 per cent in three to four years’ time to a strategic partner. “An exercise is on to rope in a strategic partner,” sources further added.

The company’s debt restructuring exercise has been completed. When contacted, director R.S. Jhawar said, “All the financial institutions and banks led by ICICI have rescheduled our loan. They have given us a two- to two-and-a-half per cent waiver in interest rates which will enable the company save Rs 20 crore annually. Similarly, the repayment schedule of loans has been reworked.”

As part of the restructuring exercise, the FIs have changed part of its rupee loan to foreign exchange loan.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.69	HK $1	Rs.  6.15*
UK £1	Rs. 68.87	SW Fr 1	Rs. 28.25*
Euro	Rs. 42.23	Sing $1	Rs. 26.20*
Yen 100	Rs. 36.42	Aus $1	Rs. 24.45*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4905	Gold Std(10 gm)	Rs. 4890
Gold 22 carat	Rs. 4630	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7575	Silver (Kg)	Rs. 7545
Silver portion	Rs. 7675	Silver portion	NA

Stock Indices

Sensex		3427.39		+115.66
BSE-100		1694.32		+ 78.30
S&P CNX Nifty	1113.10		+ 38.85
Calcutta	 114.92		+  3.58
Skindia GDR	 524.60		-  0.60
   
 

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