Daewoo India on GM rescue raft
Gold surges to 5-year high
Moody’s warns of debt trap
RBI watch on rupee
Auto sales spurt bypasses Maruti
Alstom to merge three arms
VSNL open offer on April 10
Specific excise duties for petro-goods likely
BoB arm set to launch string of MF schemes
Foreign Exchange, Bullion, Stock Indices

 
 
DAEWOO INDIA ON GM RESCUE RAFT 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, Feb. 8: 
General Motors of the US has finally agreed to take over the ailing Daewoo Motors’ plant in India.

The world’s largest car maker has made a fresh offer to Daewoo Motors to take over the Indian plant at Surajpur in Uttar Pradesh along with eight other overseas facilities that were not part of the $ 2 bn deal that the US automaker clinched with the South Korean carmaker’s creditors last September.

At that time, General Motors had signed a memorandum of understanding to take over two of the three car plants in South Korea, two of its 12 overseas plants in Vietnam and Egypt, and all 24 overseas sales units.

The new offer by GM has been made after a fresh evaluation of Daewoo Motor’s debts and assets.

General Motors is now trying to expand in Asia even as it combats shrinking market share at home.

Confirming the development, Daewoo Motors India officials said, “A GM team completed a week-long due diligence exercise yesterday. But nothing was clear till they submitted their report. This is very positive news for us.”

Daewoo’s Indian operations have improved over the past nine months. It has pared its third quarter (October-December) loss by 25.3 per cent to Rs 85.74 crore compared with Rs 114.81 crore in the same period a year ago.

Cash losses also came down by 46 per cent to Rs 33.82 crore during the quarter ended December 2001 compared with Rs 62.78 crore in the year-ago quarter.

However, sales fell by a massive 75.2 per cent to Rs 37.54 crore.

Company sources have also revealed that its capital has been eroded by almost 50 per cent at the end of March 2001, when it had run up losses of Rs 390 crore against a capital base of Rs 792 crore.

“We have no plans to introduce new cars to exploit a steadily reviving market until a new GM-Daewoo deal is signed. We have developed a new six-cylinder engine that can be built at half the cost of existing engines and weighs only 500 kg. It can be used to power the Matiz and Magnus. We cannot bring it into India because of the deal. The plans to launch the Magnus is on hold. The Kalos is the model that could come out from the GM-Daewoo platform; it was scheduled to come out in July-August. Now, of course, everything could be speeded up,” the spokesperson said.

Daewoo Motor India, which has the capacity to make 72,000 cars a year, sold just 6,436 cars in the last fiscal. General Motors is still to announce the amount it is ready to pay for the new acquisitions.

But before a deal is clinched, it will have to take into account the hidden debts, the price for the inventories and the different accounting standards in the different countries.

The proposed sale of Daewoo Motor to General Motors is a crucial part of South Korea’s economic reform programme.

Banks have spent hundreds of millions of dollars keeping the carmaker operating. It is now South Korea’s third largest after production was scaled down.

   

 
 
GOLD SURGES TO 5-YEAR HIGH 
 
 
OUR BUREAUX
 
Feb. 8: 
Gold shot up for the third consecutive day to a five-year high of Rs 4,960 per 10 grams due to heavy stockists’ buying on the back of soaring global prices. If the present trend continues, the price could surpass an all-time high of Rs 5,713, hit on February 6, 1996.

Overseas, yellow metal prices pierced the psychological barrier of $ 300 per troy ounce following heavy Japanese buying. It closed at a three-and-a-half year high of 1,280 yen per gram in Tokyo, $ 305.75-306.75 in Hong Kong and was quoted at $ 304-305 an ounce in early London trading.

At home, standard gold vaulted to Rs 5,150 per 10 grams in Chennai. In Mumbai, it opened at a high of Rs 4,970, and ended at Rs 4,960 in a steep gain of Rs 60 over Thursday’s close of Rs 4,900 and a rise of Rs 200 over Monday’s Rs 4,760.

In Delhi, the price shot up by Rs 120 to close at a five-year high of Rs 5,080. Gold prices had temporarily touched a peak of Rs 5,050 on Monday, a record since January 3, 1997, and heavy bouts of buying today drove it up further.

“Whenever the economy faces problems and avenues for parking funds are shut, gold is bought as a safe-haven investment,” Ravi Jalan, a Delhi-based bullion merchant, said.

Ten-tola gold bar (.999 purity) resumed on a strong note at Rs 58,500 and closed at Rs 58,400, showing a sharp rise of Rs 800 over its previous finish of Rs 57,600. Ready silver (.999 fineness), after a weak start at Rs 7530, recovered sharply in line with gold and closed at Rs 7,600, revealing a handsome gain of Rs 50 over the last close of Rs 7,550.

   

 
 
MOODY’S WARNS OF DEBT TRAP 
 
 
OUR BUREAU AND AGENCIES
 
New Delhi, Feb. 8: 
International credit rating agency Moody’s today said that India was heading towards a debt trap owing to the government’s inability to rein in its huge public sector deficit.

“The current trend of public finances is leading inexorably to a debt trap,” Moody’s said in its new annual report on India.

Analysts Kristin Lindow and Atsi Sheth, authors of the report, cited the inability of the government to rein in the huge public-sector deficit as responsible for the negative outlook on its ‘BA2’ domestic debt rating.

Another factor contributing to the outlook was lack of progress on fiscal reform and “crowding out of the private sector from the credit markets.”

At the same time, the rating outlook on India’s ‘BA2’ country ceiling for foreign-currency debt is stable, reflecting its sizeable foreign reserves and manageable external debt service position.

The analysts pointed out that a rising debt service burden is consuming an overwhelming share of the government’s limited financial resources, leaving the authorities with little fiscal room to redress the country’s infrastructure and social problems, much less to handle business cycle slowdowns.

The fiscal dilemma also constrains monetary policy, with the consequent high real interest rates hindering longer-term investment and growth prospects.

“Even with growth at 5-6 per cent, average living standards are stagnating,” Moody’s said.

The rating agency noted that “dependence upon non-resident capital to finance the current account gap is also not sustainable, which again raises concerns about the unfavourable reputation that India has earned with foreign investors.”

Sheth acknowledges that Indian policy-makers have become “more willing of late to acknowledge the country’s structural economic weaknesses and have taken politically unpopular decisions in the interests of long-term economic efficiency such as divestment of public enterprises and lowering trade barriers.”

Nevertheless, the analyst believes that “the efforts have not been sufficiently aggressive.”

“With the economy in a slump and after recent political scandals,” Lindow concludes, “it now appears that the current administration may have lost its opportunity to achieve substantive progress in many areas of economic and corporate reform.”

   

 
 
RBI WATCH ON RUPEE 
 
 
OUR BUREAUX
 
Feb. 8: 
The Reserve Bank today said it would intervene to stem volatility in the forex market while at the same time building up reserves which are surging towards $ 50 billion.

“We want two things—orderliness and as high reserves as possible,” RBI governor Bimal Jalan said after meeting finance minister Yashwant Sinha in Delhi.

Earlier in the day, speaking at the ‘International IT Conference’ organised by Nasscom in Mumbai, Jalan said the reason the central bank was building up massive forex reserves was to create a comfort level to meet any external liabilities or obligations that may crop up during the next 24-30 months.

Responding to queries on why the RBI was building up huge reserves, the governor pointed out this was not being done to support the rupee, but to ensure that even if the country goes through a period of uncertainty it has strong reserves to cover liquidity risks, such as demand for dollars from foreign institutional investors, foreign debt servicing and the like.

India’s forex reserves, which have been hitting record highs during the recent few months, is close to touching $ 50 billion. However, the rupee has been losing ground during the past few weeks largely due to dollar buying by nationalised banks.

Jalan said the RBI is not targeting any specific level for the Indian currency.

“We are keeping a careful eye on the rupee, we are not targeting any level. It is wrong to say that the RBI wants a weakening rupee,” he added.

The central bank will also continue its “softer interest rate bias”, he said.

He added that the fundamentals of the economy were strong with the low inflation and the low interest rate scenario.

   

 
 
AUTO SALES SPURT BYPASSES MARUTI 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 8: 
Car sales grew 3.1 per cent in January, but Maruti went into reverse gear — its figure falling 7.9 per cent at 31,180 units against 33,877 in January 2001.

Overall, car sales jumped to 55,453 units from 53,739, the fourth straight month of increases, driven largely by Telco, Hyundai and Fiat, according to figures released by the Society of Indian Automobile Manufacturers (Siam). Measured against the 36,627 cars sold in December 2001, January sales represent an increase of 51.3 per cent.

Cumulative sales (between April 2001-January 2002), however, dropped a marginal 1.8 per cent at 4.50 lakh cars from 4.58 lakh units sold in the year-ago period.

Hyundai sold 9590 cars, up 16 per cent from 8,266 units in the same month a year ago. Fiat sales zoomed 268 per cent, while Fiat sold 2701 units compared with 733 units in January 2001. General Motors sold 648 units against 558, a spike of 16 per cent on a year-to-year basis. Sales of Hindustan Motors, however, declined 12.4 per cent at 2,069 cars against 2,363 in January 2001.

Commercial vehicle sales, a key barometer of economic growth, inched up one percentage point to 12,475 cars compared with 12,349 units in January last year.

Only 10,327 multi-utility vehicles (MUV) were sold last month, a decline of 3.3 per cent against 10,681 in January 2001. Three-wheeler sales went up 21.3 per cent at 17,409 units compared with 14,346 same month last year.

   

 
 
ALSTOM TO MERGE THREE ARMS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 8: 
Alstom Power India Ltd, the Indian subsidiary of the global power producer, is considering an amalgamation of three companies — Alstom Transport Ltd, Alstom Systems Ltd and Alstom Power Boilers Ltd — with itself, in a bid to consolidate its operations in the country.

In a notice to the Bombay Stock Exchange, the company said the board of Alstom Power will meet on February 13 to consider the merger of the three into itself.

Alstom Power, which has a presence in three areas in the country — power, transmission and distribution, and transport — has long been weighing a move to consolidate its Indian operations, which is at present spread among 16-odd outfits.

Of these, Alstom Power Ltd is mainly into the power sector, supplying turnkey projects, turbines, equipment, boilers and electrical supply systems.

The company has hired global consultancy group KPMG to explore various options for consolidating its operations in the country.

The Alstom group, which has two listed companies and 14 subsidiaries, has a business of around Rs 1,500 crore in the country, while its overseas business stands at Rs 480 crore.

The latter is slated to grow substantially as the Indian operations have been earmarked as a global hub for manufacturing select equipment in power generation.

Alstom Power was created when the Alstom Group bought out Asea Brown Boveri India’s stake in ABB Alstom in August 2000.

Earlier, ABB Alstom was created following the demerger of ABB’s Power generation equipment division during April 1999.

All the erstwhile power generation units in the country, namely those of ASEA, English Electric, GEC, Alstom, Combustion Engineering, EVT, Stein, Flakt, ABL, GEC Alstom, ABB, ABB Alstom Power, come under the single operational umbrella of APIL.

   

 
 
VSNL OPEN OFFER ON APRIL 10 
 
 
OUR BUREAUX
 
Feb. 8: 
The Tatas today announced an open offer for a 20 per cent stake of Videsh Sanchar Nigam Ltd (VSNL) at Rs 202 per share, the price at which they acquired the government’s 25 per cent stake in the telecom major. The public offer will open on April 10 and close on May 9.

JM Morgan Stanley will be the lead manager to the open offer, a notice issued by the Tatas to the stock exchanges said. The offer will be made jointly by Tata Sons, Tata Power Company, Tata Iron and Steel Company, Tata Industries and Panatone Finvest—a special purpose vehicle that acquired the government’s stake.

A maximum of 5.70 crore VSNL shares will be accepted in the open offer. The Tatas, who have already acquired 7.125 crore shares from the government for a consideration of Rs 1,439.25 crore, will have to shell out another Rs 1,151.40 crore for the open offer. The total cost of the acquisition will be Rs 2,590.65 crore.

Meanwhile, Indian Oil Corporation (IOC) today said that it would not merge IBP with itself. IOC—the country’s largest petroleum company—signed the shareholders’ agreement today after wresting control of 33.58 per cent of the government’s stake in the petroleum marketing major earlier this week.

While revealing the company’s decision to let IBP run on its own, IOC chairman M.A. Pathan said: “IOC will complete the acquisition of an additional 20 per cent stake within the stipulated 120 days from today.” IBP will become a subsidiary of IOC after it acquires a 20 per cent public holding through an open offer.

IOC bagged the government’s stake in IBP with an astounding bid of Rs 1,551.25 per share. Its open offer for the additional 20 per cent stake—or 4,429,254 shares—will be made at the same price. The total non-promoter shareholding in IBP stands at 40.42 per cent. If the offer attracts the entire non-promoter holding, roughly one out of two shares from each shareholder will be accepted.

IOC, which paid Rs 1,153.68 crore to acquire the government’s stake, will have to pay another Rs 687.12 crore to the shareholders subscribing to its open offer, taking the total acquisition cost to Rs 1,840.80 crore.

Pathan said most of the funds would be sourced from IOC’s internal reserves. “The shortfall, if any, will be met through short-term borrowings from the market which will later be converted into long-term borrowings,” he said.

IOC and IBP will have a combined share of 55 per cent in the petroleum distribution market, IBP chairman S.N. Mathur said.

   

 
 
SPECIFIC EXCISE DUTIES FOR PETRO-GOODS LIKELY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 8: 
The government is considering the demand of domestic oil refineries to allow them to switch over to specific excise duties from the present ad valorem rates levied on petro products. This will help the refineries to neutralise the impact of volatility in international oil prices.

A move is also afoot to eliminate some of the tax anomalies that the locally produced petro-products have to bear vis-a-vis the imported products. At present a three stage ad valorem duty structure (customs, excise and sales tax) would, in a post-APM regime, have a cascading impact on domestic prices whenever there is a sharp variation in global oil prices.

An industry study estimates that at the current excise duty rates of 20 per cent on diesel and 90 per cent on petrol, an increase of one rupee per litre in the product prices at the international level would jack up prices by Rs 1.73 per litre for diesel and Rs 2.74 per litre for petrol in states that have a sales tax rate of 20 per cent.

The study says that in the post-APM scenario, oil prices would fluctuate on two counts—the first would be because of the normal fluctuation in prices and the second because of excessive price swings in the overseas market. Industry reckons it will be necessary to put in place a specific mechanism to deal with the fluctuations on account of the second factor.

The oil refiners want the government to ratchet up or down excise duties on petroleum duties whenever there are excessive price fluctuations in overseas prices.

The government is also considering a demand to grant a post-APM freight subsidy to petro-product supplies to far-flung areas. Without such a subsidy, the difference in retail prices between the coastal regions and the far-flung areas will be as high as Rs 9 per litre for petrol/diesel and Rs 100 per cylinder of domestic LPG.

Domestic oil refiners, whose margins are badly squeezed because of the falling demand, excess capacities, capital investments made to meet environmental-friendly norms and the fall in the margins of global refiners, say that the decision to delay the introduction of a value-added tax (VAT) regime by a year will put a further crimp on their wafer-thin margins.

   

 
 
BOB ARM SET TO LAUNCH STRING OF MF SCHEMES 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 8: 
Unable to rope in a strategic partner as yet, Bank of Baroda Asset Management Co (BoBAMC) has decided to launch a series of new mutual fund schemes after a four-year gap, taking the present corpus of Rs 40 crore to Rs 200 crore at the end of the next financial year.

BoBAMC, a wholly owned subsidiary of the Bank of Baroda, manages the bank’s mutual fund business.

The company, which will launch three debt-related open ended schemes on February 14, has also received approval from the Securities and Exchange Board of India (Sebi) for another two schemes — BoB Growth Fund (50 per cent equity and 50 per cent debt-linked) and BoB Balanced Fund (entirely equity-linked).

Addressing a press conference here today, B. Krishna Kumar, managing director of BoBAMC said: “We do not know if Bank of Baroda has located a strategic partner for us. However, we have decided to go ahead and expand our mutual fund business.” Bank of Baroda had been scouting for a strategic partner for its asset management subsidiary for the last couple of years.

“The two new schemes for which we have already received Sebi approval will be launched in end June. We are also watching how the capital market behaves in the coming months. If we see a positive outlook then we will be launching some more schemes which will also include the index fund,” Krishna Kumar said.

The new schemes to be launched by BoBAMC are BoB Income Fund, BoB Gilt Fund and BoB Liquid Fund. BoB Income Fund will generate regular income by investing in a portfolio of fixed income instruments. The BoB Gilt Fund corpus will be invested in government securities, while BoB Liquid Fund plans to generate income with a high level of liquidity by investing in a portfolio of money market instruments and debt securities with a year’s maturity.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.71	HK $1	Rs.  6.15*
UK £1	Rs. 68.78	SW Fr 1	Rs. 28.40*
Euro	Rs. 42.52	Sing $1	Rs. 26.25*
Yen 100	Rs. 35.37	Aus $1	Rs. 24.55*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4995	Gold Std (10 gm)Rs. 4960
Gold 22 carat	Rs. 4715	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7575	Silver (Kg)	Rs. 7600
Silver portion	Rs. 7675	Silver portion	   NA

Stock Indices

Sensex		3493.92		+56.98
BSE-100		1691.32		+14.58
S&P CNX Nifty	1123.75		+13.30
Calcutta	 118.39		+ 1.63
Skindia GDR	 544.14		+ 3.68
   
 

FRONT PAGE / NATIONAL / EDITORIAL / BUSINESS / THE EAST / SPORTS
ABOUT US /FEEDBACK / ARCHIVE 
 
Maintained by Web Development Company