Tata group honchos call on VSNL brass
IBP open offer in mid-March
Cess on crude to go up
Company deposit rate cap lowered to 12.5%
Stake sale buzz fuels Tips rally
Pre-budget baits to drive up car sales
SAIL plans to cut staff by 40,000
Jindal Strips to cut stake in US firm
Sky’s the limit for Sky Bus
Foreign Exchange, Bullion, Stock Indices

 
 
TATA GROUP HONCHOS CALL ON VSNL BRASS 
 
 
FROM SATISH JOHN
 
Mumbai, Feb. 11: 
A week into being declared the successful bidder for Videsh Sanchar Nigam Limited (VSNL), Ratan Tata today discussed the change of guard and nitty-gritty of acquisition with senior officials of the international telephone major.

The chairman of the Rs 41,290-crore Tata group trooped into VSNL headquarters at Prabhadevi, in Central Mumbai, with his entourage of four senior officials who are perceived to have played key roles in the deal.

Tata and his team were introduced to the VSNL top-brass, starting from senior general managers. Later, they went into a huddle with chairman and managing director S. K. Gupta.

“The meeting would have taken place last week, had it not been for the VSNL chief’s other commitments during the week,” sources said.

On February 4, the Tatas were crowned the winner in a two-horse race — the other contestant was Reliance Industries — with a block-buster bid of Rs 1,439 crore.

Accompanying Tata were J. J. Irani and N. R. Gopalkrishnan, members on the board of Tata Sons, the main holding company for the Tata Group, besides Ishaat Husain, director (finance) of Tata Sons and Kishore Chaukar, managing director of Tata Industries, the group’s vehicle for its foray into telecom.

The meeting that lasted for more than an hour was described by senior VSNL officials as a “courtesy call”, but it is believed to have led to some important decisions. It was, for instance, agreed that the VSNL board meeting on February 13 would put on record the change in ownership that happened when 25 per cent of its equity went from the government’s kitty to the Tatas.

Four Tata nominees will be co-opted on the board at Wednesday’s meeting, which interestingly, will be held in the Tatas-owned five-star Taj Hotel. Rakesh Kumar, senior director-general (ML) at DoT, will represent the government.

Communications minister Pramod Mahajan will fly down to Mumbai to attend a function where agreements will be signed to mark the transition. As a photo opportunity, Tata is expected to present a dummy cheque for Rs 1439.25 crore, the amount he must pay the government for its 25 percent stake in VSNL. An actual demand draft will be issued simultaneously.

Till late in the evening, confabulations were on at Bombay House, the Tata group hub, to name the four nominees to the VSNL board. It is also learnt that Panatone Finvest, the special purpose vehicle (SPV) created to acquire VSNL, will enter the debt market in the next few days to raise funds for the acquisition. Tatas are planning to go in for a 1:1 debt-equity offer for VSNL.

The Tatas own 50 per cent of the SPV, of which 40 per cent is with Tata Power and the rest is split between Tata Steel and Tata Industries. Deutsche Bank is expected to help raise the debt portion, market watchers said.

The next few days will be a turning point in VSNL’s destiny. Not only will it change from being a government-owned giant to a private sector entity, it will also lose its monopoly status as an international telephone provider.

Investment plan

Tata Teleservices will decide about the management structure of VSNL by next week and plans to invest about Rs 10,000 crore over a period to enhance its existing telecom infrastructure. “We will decide about the management structure by next week and will also pay up the Rs 1439 crore for the 25 per cent stake in VSNL,” Chaukar, managing director of Tata Industries, said here today.

   

 
 
IBP OPEN OFFER IN MID-MARCH 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 11: 
Indian Oil Corporation (IOC) is likely to come out with an open offer to pick up another 20 per cent in IBP Ltd in the second week of March.

According to the takeover norms set by the Securities and Exchange Board of India (Sebi), Indian Oil—which acquired a 33 per cent stake in IBP Ltd from the government on February 5—will have to make the mandatory open offer by March.

The oil major will need around Rs 700 crore to pick up the additional 20 per cent stake in IBP as the reference price, settled in the disinvestment bidding, is Rs 1,153 per share.

IOC has formed an investment committee to oversee the funding aspects of the acquisition.

Sources said the company is planning to rely on short-term loans to meet its investment need.

The IBP board of directors will resign en bloc on February 19 and the new board will be reconstituted on the same day.

IOC is likely to have three nominees on the IBP board.

IBP chairman S.N. Mathur said the company is trying to expand its dealers’ network.

“Some unremunerative outlets will also be closed down,” Mathur said.

According to Mathur, the two companies will form a small working group soon to prepare the futures strategy for IBP.

   

 
 
CESS ON CRUDE TO GO UP 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Feb 11: 
The government is likely to raise the cess on domestic crude. Domestic crude prices, which are set by the government under its administered price mechanism (APM), are currently far lower than those at which crude is sold in the global markets. However, the price is expected to be raised to equal international prices once the Indian petro-goods market is opened up on April 1.

The finance ministry believes this will open up a window of opportunity for it to tax oil companies through a higher cess on domestic crude as they stand to gain considerably from a price revision.

At present, there is a 20-25 per cent difference between global and domestic prices.

The finance ministry has, however, yet to finalise the exact quantum of the increase on cess which currently is a low of Rs 900 on locally produced crude. The decision on raising the cess is part of a series of moves that can be expected to be taken to raise finances to fund the subsidy bill for cooking gas and diesel, after the market is thrown open.

Petroleum minister Ram Naik and finance minister Yashwant Sinha who met today as part of a series of similar meeting to discuss a post-APM scenario, have not been able to thrash out a formula to fund the subsidy bill which is expected to be over Rs 10,000 crore.

Sinha has not seen eye to eye with Naik on how to go about this and has also been at odds over the quantum of subsidy to be paid out. The petroleum minister, however, denied any disagreement with Sinha on the issue after he emerged from his meeting with the finance minister this morning.

Naik told reporters, “No decision has been taken. Issues discussed today relate to budget and would naturally be addressed in the budget for 2002-03.”

“Only two issues now remain—guidelines for marketing of petroleum products and the regulatory bill for marketing and distribution—which would be decided by the cabinet soon,” he added.

Sources said there were differences even on prices to be charged after the market is opened up. Global prices have come down sharply while domestic prices more or less remain the same as they are administered or pre-ordained by the government .

The finance ministry wants to implement a policy of ratcheting duties up or down to keep petro-prices reasonably stable as this would not allow any huge fall in the prices.

However, Naik wants a fixed levy to be extracted from imported crude and customers given the benefit of lower prices whenever possible.

Naik in fact had mooted an oil fund to be set up which would be used to subsidise prices in the domestic market, if they shot up in the international market from crude is imported. However, the finance ministry has shot down this proposal as well as the petroleum ministry’s demand for specific duties in place of ad-valorem duties.

   

 
 
COMPANY DEPOSIT RATE CAP LOWERED TO 12.5% 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 11: 
The government today brought down the interest rate ceiling on company deposits by 1.5 percentage points to 12.5 per cent with immediate effect.

The department of company affairs (DCA) issued a notification reducing the interest rate cap on company deposits from the existing level of 14 per cent.

The move is designed to stop fly-by-night operators from seducing investors with some pie-in-the-sky scheme that promises fabulous returns.

Industry mavens said most of the big companies had already brought down their interest rates on their fixed deposit schemes—which used to be a major investment avenue over a decade ago—in line with market rates which have been steadily falling in a soft interest rate regime.

“As it is, good companies are not offering more than 10-11 per cent,” said B. Hariharan, finance director of Ballarpur Industries Limited. (BILT).

“In the last one and a half years, we have brought down the interest rate by 2 per cent from 13.5 to 11 per cent.” He claimed that even at this rate, the company is getting adequate deposits.

“The reduction is a positive move but is directed at reining in those who offer higher than market rates,” Hariharan said.

A.K. Kinra, finance director for JK Industries Ltd, said the move was in tune with the reality where a whole suit of interest rates were tending downwards—bank deposits and lending rates, interest on government securities and even the cash reserve ratio (CRR).

“The major companies like JK, Ballarpur or Ranbaxy will not be affected,” he said. “At JK, we have brought down our deposit rates over the past year to less than 12 per cent.”

Kinra said some non-banking finance companies (NBFCs) could be affected by the move.

The DCA notification amends the Companies (Acceptance of Deposits) Rules, 1975. It has been issued under Section 58A read with Section 642 of Companies Act, 1956 in consultation with the Reserve Bank of India.

The reduction in the interest rate is in line with the current trends in the banking and financial sectors, said the notification. It intends to safeguard the interest of depositors and investors so that they are not taken for a ride by companies and that the returns on their deposits are realistic, it added.

The principal rules were first promulgated on February 3, 1975 and have since then been amended 36 times. Section 58A of the Companies Act states that the central government in consultation with the Reserve Bank of India (RBI ) may prescribe the limits, the manner and the conditions according to which deposits may be invited or accepted by a company either from public or its members.

   

 
 
STAKE SALE BUZZ FUELS TIPS RALLY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 11: 
Rumours that Universal Music Group—the world’s leading music company—is set to acquire an equity stake in Tips Industries put the scrip on fire on the stock markets and the scrip jumped by over 18 per cent during intra-day trade with operators making a beeline for the counter.

The activity at the Tips counter was particulary significant on a day when the general trading trend was lacklustre and the 30-share Bombay Stock Exchange sensitive index inched up by just around 22 points.

The Tips scrip opened strong at Rs 154.35 as against the previous close of Rs 151.95. It soared to touch a day’s high of Rs 180.55.

However, there was disappointment in store for the bourses, as senior management of the company denied any talks with Universal.

This led to the scrip giving up much of its intra-day gains and finishing off at Rs 160.75, still a rise of 6 per cent over the previous close. The counter witnessed over 23,000 trades.

The strong showing by the scrip during intra-day levels, in fact, flummoxed some observers who were expecting a sell-off in the counter following reports that Subhash Ghai of Mukta Arts has entrusted the audio rights of Badhai Ho Badhai to Universal for over Rs 2 crore. This was expected to come as a disappointment as Tips had earlier scored well with the music release of films like Rahul and Yaadein.

Universal Music Group is the world’s largest music company and its global operations includes the development, manufacture, marketing, sales and distribution of recorded music through a network of subsidiaries, joint ventures and licensees in 63 countries around the world, including India. UMG’s businesses also include music publishing, and mail order music/video clubs.

Tips, which has a major share in the domestic audio market, is run by the Taurani family.

During the year ended 2001, it posted a turnover of over Rs 104 crore. During this year, the company acquired all the shares of Dashmesh International Ltd a Mauritius-based company and converted it into a 100 per cent subsidiary company.

During the previous year, the company signed an exclusive 3-year licensing deal with the global music conglomerate Warner Electra Atlantic (WEA) to manufacture and market audio products of WEA through India and its neighbouring countries.

   

 
 
PRE-BUDGET BAITS TO DRIVE UP CAR SALES 
 
 
BY ANIEK PAUL
 
Calcutta, Feb. 11: 
It’s budget time again, and passenger car manufacturers are holding out carrots to shore up sales. From cash discounts to free registration — car manufacturers and dealers are offering a wide variety of sops to get the better of the consumers’ dilemma on whether to defer their purchases till after the budget.

Led by market leader Maruti, which is offering free insurance on all its cars till February 25, Hyundai is offering free stereos with all models of the Santro, and Fiat, a cash discount of Rs 30,000 on Uno and Sienna. However, Fiat is not offering any sops for Palio, which dealers say, is doing well.

“There is a waiting time for the Palio, ranging from four to eight weeks, depending on the model, and hence such a scheme limited by time would not work,” a Fiat dealer said. The cash discounts on Uno and Sienna were aimed at clearing stocks, and were likely to be available till March 31, he added.

Hyundai is offering free stereos worth Rs 6,000 with Santro, and an extra year on its two-year warranty. What is more, free trips to Seoul and tickets to the opening ceremony of the World Cup soccer, are up for grabs for buyers. All you have to be is a little lucky!

Maruti is offering free insurance for a year, which translates into a saving of Rs 7,202 on a plain-vanilla Maruti 800, to Rs 24,534 on the high-end Baleno Sedan. Maruti’s package — Triple Bonanza — also includes free personal insurance of Rs 2.5 lakh and air travel insurance of Rs 10 lakh.

The Ford Ikon has more josh now as dealers in Calcutta are offering free Blaupunkt stereo with the EXi model and free registration for all models. Some dealers in the city are offering a small cash discount on the Hyundai Accent as well.

Telco, however, has decided against jumping onto the bandwagon. Sales of its flagship passenger vehicle, Indica, have been scorching in the last few months. “We believe we can sustain sales without any sops,” a company spokesperson said. General Motors, too, is staying out of the race. It has, however, recently slashed prices of Corsa, and dealers feel that should compensate.

An industry analyst pointed out that freebies and discounts are being offered mostly on cars that fall in the “aspiration segment” and not on the high-end ones like Ford Mondeo and Hyundai Sonata.

“People who are keen on buying cars priced at Rs 15 lakh, or anything above that threshold, are unlikely to be attracted by small freebies and cash discounts,” he said.

   

 
 
SAIL PLANS TO CUT STAFF BY 40,000 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Feb. 11: 
Steel Authority of India Ltd (SAIL) is planning to reduce its manpower by 40,000 through a voluntary retirement scheme (VRS) over the next three years.

At present, the steel major has a staff of 1.48 lakh at its plants and offices. SAIL director (personnel) M.K. Moitra said his company has set a target of reducing staff to 1 lakh by 2005.

“About 8,000 employees will go through normal retirement in the next three years. Hence, if our VRS succeeds, we will be able to rationalise manpower,” Moitra said.

Last year, over 7,500 employees accepted the voluntary retirement offer, for which the company spent about Rs 520 crore.

SAIL, which needs over Rs 3,000 crore to meet its VRS obligation in the next three years, is believed to have approached the National Renewal Fund (NRF) for a Rs 1,000-crore loan to part-finance its separation scheme. Even if it does not get the loan from NRF, it will try to fund the scheme from internal funds.

The company, which is in dire straits, needs a sharp cut in manpower in order to stay afloat amid cut-throat competition.

While SAIL’s four integrated plants are loaded with heavy manpower, other steel companies, including Tata Steel, are operating with much lower staff strengths.

SAIL sources said sharp reductions in the number of employees in non-productive segments, like marketing and administration, are likely. Even in plants, the traditional department-wise manning system may also be done away with.

“Under the new concept, an employee will be required to work almost in any department where there is a need. They will be trained accordingly so that they can perform well,” the sources added.

Moitra, who was here today to chair the International Steel Seminar, organised by Steel Scenario Journal, is hopeful that the last quarter will augur well for SAIL, which has suffered huge losses in the first three quarters. “The stocks are getting cleared, although prices are still under pressure,” he added.

Moitra said his company is producing in line with market demand. Earlier, the four SAIL plants used to produce as much as possible, even at the cost of running a huge inventory. Now, the production of hot-rolled and cold-rolled coils has been cut, while the volume of long products, which have a steady market, has been increased.

Moitra is optimistic that the steel sector will turn around soon, both in the country and abroad, and SAIL will be able to bounce back into the black.

   

 
 
JINDAL STRIPS TO CUT STAKE IN US FIRM 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 11: 
O P Jindal group company Jindal Strips Ltd is planning to dilute stake in its US subsidiary, Massilon Stainless Inc, to below 50 per cent from the present 62 per cent as the US policy gives advantage to a company having US promoter with a majority stake.

“We are planning to bring down our stake in the US subsidiary Massilon Stainless Inc from 62 per cent to below 50 per cent. This is being done in the wake of the US policy to give advantage to a company having US promoter with a majority stake,” said Arvind Parakh, finance director, Jindal Strips.

As per this policy, buyers have been giving preference to supplier companies where majority stake is held by an US promoter.

It is learnt that Jindal Strips is planning to dilute the stake to strategic US investors. It would, however, continue to exercise control over the US company’s management.

Earlier, Jindal Strips was planning to acquire complete control of the US company. Later, the company said that it has put the plan on the backburner following bearish trends in the global stainless steel market and decided to restrict its equity holding in the venture to 62 per cent.

The subsidiary had started commercial production in March last year and it has enabled the group to obtain a firm foothold in the American market. The raw material requirements of the US subsidiary are met through the stainless steel mills in the US and Jindal’s Hisar plant in India. The fully integrated stainless steel plant at Hisar has a production capacity of over 4 lakh tonnes.

The company had acquired 51 per cent in Massillon Steel at an investment of $ 1.6 million in 1999-2000. It had acquired the Massillon facilities situated at Massillon in Ohio from Bethlehem Steel to strengthen its foothold in the overseas market, mainly the US. The unit then had a capacity of 50,000 tonne per annum stainless steel cold rolling facilities.

With acquiring a stake in the Massillon plant, Jindal Strips has bought 35 per cent of Bethlehem Steels’ stainless steel business. It had initially bid for all the stainless steel facilities of Bethlehem Steel, but lost the Pennsylvania mill to the Allegheny Group.

Jindal Strips is among the largest integrated manufacturer of stainless steel in India. According to sources close to the company, it caters to over 40 per cent of the total domestic demand for stainless steel.

   

 
 
SKY’S THE LIMIT FOR SKY BUS 
 
 
FROM RAJA GHOSHAL
 
Margaon (Goa), Feb 11: 
It’s called the Sky Bus — light weight rail coaches suspended from a height of 8 metres on twin rails that serve as rail guides.

In the search for solutions to meet the mass transport needs of bustling metropolises where space is always at a premium, Konkan Railways Corporation (KRC) is touting the virtues of the Sky Bus which typically comprises two electric-powered bogies that are remotely controlled by microprocessors.

It rather looks like a tram car in the sky — without the tackiness of the lumbering road-jammer in Calcutta.

KRC officials say they have already broached the idea of setting up Sky Bus projects in seven cities, including Calcutta, where a preliminary survey has already been done. The railway has already submitted a report to establish a 26-km Sky Bus project at a cost of Rs 797 crore. It will have two routes — an 18-km route from Garia to Dharmatala, and an 8 km stretch between Sealdah station and BBD Bagh.

KRC is taking its Sky Bus programme abroad too. It recently signed a memorandum of understanding (MoU) to start a Skybus Network Service in Iraq that will cover 800 kms at a cost of $ 1 billion. It has proposed another $ 1-billion Sky Bus metro project to connect Baghdad and Kirkuk, which is Iraq’s main oil centre.

“In all, the business opportunity with Iraq is more than $ 2 billion. There has been an inter-government agreement and will be based on clearance from UN Security Council,” said KRC managing director B. Rajaram. After the Gulf war, investments in Iraq are very closely monitored by the UN.

In India, KRC has signed an MoU to build a Rs 900-crore Sky Bus project in Kochi, covering a distance of 11.6 kms. It has also received a letter of intent from the Maharashtra government to build a Rs 400-crore Sky Bus project between Andheri and Ghatkopar in Mumbai. A Rs 2,000-crore Sky Bus project for Goa is pending with the state government.

Speaking about the advantages of the Sky Bus, Rajaram said the project is cost-effective as there is no need to acquire land. The charge per km comes to 50 paise per person.

The average speed is 50 kmph. “A Sky Bus project costs 50 per cent less than an elevated rail system and 25 per cent less than underground metro,” said Rajaram.

KRC has made a proposal for seven metro cities at an estimated cost of Rs 25,000 crore over the next five years with an additional investment of Rs 5,000 crore to augment power supply.

“The entire investment is recoverable in three years because of the savings on fuel bills,” said Rajaram. Besides the four metros, the other cities where the Sky Bus projects are planned include Bangalore, Hyderabad and Pune.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.72	HK $1	Rs.  6.15*
UK £1	Rs. 69.29	SW Fr 1	Rs. 28.45*
Euro	Rs. 42.64	Sing $1	Rs. 26.25*
Yen 100	Rs. 36.28	Aus $1	Rs. 24.60*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5025	Gold Std (10 gm)Rs. 4945
Gold 22 carat	Rs. 4745	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7650	Silver (Kg)	Rs. 7635
Silver portion	Rs. 7750	Silver portion	   NA

Stock Indices

Sensex		3515.45		+21.53
BSE-100		1707.20		+15.88
S&P CNX Nifty	1131.55		+ 7.80
Calcutta	 121.10		+ 2.71
Skindia GDR	 544.19		+ 0.05
   
 

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