Blue-chips under JPC lens
11 KP firms ticked off
Four vie for Jessop
British Gas sews up Enron Oil deal
Escape hatch for stillborn ISPs
ICICI twins leap in stock surge
Liability insurance finds few takers
Sanmar arm in tieup with US firm
Foreign Exchange, Bullion, Stock Indices

 
 
BLUE-CHIPS UNDER JPC LENS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Feb. 15: 
The Joint Parliamentary Committee (JPC) investigating last year’s stock scam will consider whether a Rs 1,900-crore withdrawal from the system by certain groups had triggered the market collapse in March.

Reliance Industries was one of the major players in National Stock Exchange’s automated lending and borrowing mechanism (ALBM) and Bombay Stock Exchange’s borrowing and lending of securities scheme (BLESS).

JPC sources said members were consequently curious about possible links between big business and the market collapse. Sebi officials deposing before the JPC have reported the huge withdrawals from the system, sources said. “We will be looking into the sudden withdrawals,” JPC chief Sriprakash Mani Tripathi told reporters.

Separately, Sebi officials told newsmen that the market regulator would soon take a final view on the Reliance deal in selling off its stake in L&T in violation of the takeover code. RIL sold off 10.5 per cent in L&T to the Kumarmangalam Birla-run Grasim Industries just after crossing the takeover code trigger mark of 5 per cent.

Sebi, which concluded a two-day deposition before the JPC, also listed a series of policy measures, which it said could help protect the market from these aberrations.

Keeping in mind its findings in the case of Ketan Parekh, as well as an ongoing probe into overseas corporate bodies, Sebi has sought, among other things, prohibition on brokers from opening subsidiaries, measures to prevent proliferation of shell companies, disclosure of participation, a special court to deal with stock market violations and a central authority for controlling fund flows.

In its deposition before the JPC, Sebi tried to keep its nose clean by claiming that micro-level surveillance of stock markets was a job till now entrusted to bourses. Tripathi quoted Sebi chief D. R. Mehta as telling the JPC that “if things go wrong and is reported, (only) then does Sebi look into it”.

Sebi, however, placed before the JPC its own set of reform measures, which stressed on totally banning brokers from operating through a maze of subsidiaries. It has specifically pointed out how the KP group misused this provision.

It sought major policy changes in the treatment of OCBs, seeking far more transparent disclosure norms for them and greater accountability to Indian regulators. It sought a total ban on brokers setting up shell companies, which could be used to play the market. This came about as a result of its probe into overseas corporate bodies, especially those based in Mauritius. These OCBs have been accused of using various shell firms to do what financial analysts have described as circular trading.

   

 
 
11 KP FIRMS TICKED OFF 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Feb. 15: 
The capital markets regulator has charged 11 firms owned by Big Bull Ketan Parekh of violating take-over norms in Global Trust Bank, Aftek Infosys and Shonkh Technologies.

In its third interim report submitted to the Joint Parliamentary Committee probing last year’s stock market scam, Sebi also pointed out serious irregularities in the way Overseas Corporate Bodies (OCBs) functioned, using a circular trading pattern to reap windfall profits that roiled the stock markets. Further, it highlighted several irregularities by the OCBs, such as the conduct of board meetings over the telephone.

“Investigations have revealed that the Ketan Parekh entities acquired shares of Shonkh in excess of 15 per cent and/or 5 per cent of the company’s entities in February 2001, without complying with Sebi’s take-over regulations,” the report said.

Sebi had earlier charged Parekh with using the proprietary account of Credit Suisse First Boston to rig prices of Nirma, DSQ Biotech and Adani Export.

The KP firms in the latest case include Classic Credit Ltd, Panther Investrade Ltd, Panther Fincap and Management Services, Luminant Investment Ltd, Triumph Securities and Triumph International Finance India Ltd, NH Securities, Chitrakut Computers Ltd, Goldfish Computers Ltd, Nakshatra Software Ltd and Saimangal Investrade Ltd.

The report said Sebi officials were still unravelling trading deals of these KP firms in various scrips.

   

 
 
FOUR VIE FOR JESSOP 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 15: 
The Centre today received four bids for the ailing Calcutta-based engineering giant Jessop & Co Ltd. The government will divest a 72 per cent stake in the company.

Although there was no official confirmation on the number of bids received or the price range, sources said the bidders were Titagarh Industries, Srei International, Hindustan Development Corp and Coatex.

“We have received the bids today, but details regarding the quotations or the companies that have submitted the bids will be revealed only after the process is complete,” disinvestment secretary Pradip Baijal said.

“The value of the bids will be known only next week. At present, nothing is clear,” said Samir Malhotra, vice-president of Srei Finance.

The Cabinet Committee on Disinvestment had earlier announced a financial restructuring package for the company to attract bidders. The scheme involved writing off government loans and interest and infusion of fresh funds.

The government also decided to extend purchase price preference to Jessop for two years after privatisation, in the form of orders to build 36 coaches a year for Indian Railways, as well as a wagon order reservation of 8 per cent a year out of the PSU quota.

At present, about 2 per cent of Jessop’s equity is held by the general public and the rest is with the government. After Paradeep Phosphates Ltd, this will be the second loss-making concern to be put on the block. The CCD had decided to link the implementation of financial restructuring with the successful privatisation of the company. The purchase price preference will be subject to the company matching the price of the lowest bidder.

Jessop is engaged in the design and manufacture of a diversified range of products such as railway rolling stock, earth-moving equipment, cranes, structural fabrication, hydraulic gates and paper machinery. It has a workforce of 1,500 and over 100 acres of prime property in Calcutta and Durgapur.

Hotel selloff

Meanwhile, the government today received 150 bids for nine ITDC hotels in the third round of bidding for the state-run hotels. The ITDC hotels include the ones at Khajuraho, Calicut, Patna, Ahmedabad, Jaipur, Bhubaneshwar and Kovalam.

The government will start a due diligence exercise for the hotels next week, official sources said, pointing out that it has already received Rs 60 lakh as due diligence fee from national and international bidders.

It has mandated Lazard Capital to act as global advisors for the deal.

The response for the nine hotels in the third tranche is in contrast to the two earlier efforts, where the government had to be content with a single or no bidder in most cases.

Out of the nine ITDC hotels that were put on the block, the government could approve financial bids only for three.

   

 
 
BRITISH GAS SEWS UP ENRON OIL DEAL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 15: 
British Gas (BG) today consummated the deal to buy Enron Oil and Gas India Limited (EOGIL) from fallen giant Enron Corp for $ 350 million.

Last month, BG Group announced a revised agreement to acquire Enron Oil and Gas India, whose assets include a 30 per cent stake in the Tapti and the Panna/Mukta oil and gas fields, besides a 62.64 per cent holding in the CB-OS/1 exploration project. Enron Oil and gas India will be renamed BG Exploration & Production India Limited (BG E&P India).

British BG E&P India will operate all assets under Enron Oil and Gas. “Discussions with partners regarding the precise arrangement are now continuing.”

The price of $ 350 million is a revision from the $ 388 million quoted by the group in October last year. However, in December, BG had said that although progress has been made to close the deal, it was slower than anticipated. Later, things were complicated by Enron’s Chapter 11 bankruptcy protection filing in the US.

Even as the original agreement expired, British Gas continued discussions with Enron and local partners in the oil fields to clinch a mutually acceptable deal.

Oil and Natural Gas Corporation (ONGC) holds 40 per cent and Reliance Industries 30 per cent in the Tapti and Panna/Mukta offshore fields. In the CB-OS/1 project, Hindustan Oil Exploration Company owns 17.36 per cent, Tata Petrodyne 10 per cent and ONGC 10 per cent.

The Panna-Mukta fields have recoverable reserves of 184 million barrels of oil, and oil equivalent in gas, while Tapti fields have reserves of over 96.3 million cubic metres of gas.

Wrapping up the deal is expected to enhance the position of British Gas as a leading player in the country’s energy market. The group has said earlier that exploration and development would be part of its strategy.

It intends to tap gas markets in Gujarat and Maharashtra, which will be in addition to the liquefied natural gas being imported through its Pipavav project. India is seen as a core area of its global operations.

BG has been around in India for over a decade now, its distribution routed through two companies, Gujarat Gas Company Limited and Mahanagar Gas Limited.

   

 
 
ESCAPE HATCH FOR STILLBORN ISPS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 15: 
The government has opened the escape hatch for all those who entered the over-hyped internet service market and have been just waiting to get out.

The department of telecommunications (DoT) has finalised a simplified exit policy to allow internet service providers (ISPs) to give up their licences without starting the service after paying surrender charges.

At present, there are 500 ISP licensees and only 150 are operational; this means that DoT will suffer a notional loss of Rs 200 crore by way of bank guarantees that it would have been able to encash if the licensees were unable to establish services.

The charge for surrendering the ISP licences has been fixed at 5 per cent of the Performance Bank Guarantee (PBG) amount.

The simplified exit policy will provide an easy exit route to ISP licensees and is in tune with the liberal approach envisaged in the internet policy.

The ISPs were given 18 months to launch their service from the day of signing the licence. Amitabh Singhal secretary general Internet Service Providers Association (ISPAI) said, “It is a good move and will immensely benefit the government and the industry. There were many companies that were unable launch their services due to financial problems and the technological and regulatory changes in the telecom industry.” When it threw open the ISP domain, the government had handed out the licences without charging an entry fee but had insisted on bank guarantees.

The licences were divided into category A, B and C. The performance bank guarantee was fixed at Rs 2 crore for category A (about 90 companies had applied). The bank guarantee amount was set at Rs 20 lakh for Category B licensees and Rs 3 lakh for Category C. There are about 150 Category B licensees and about 110 category C licensees.

The ISP policy had permitted 49 per cent foreign investment and a 15-year holiday from any licence fee (unlike telecom services providers who had to bid prohibitively for their licences). The department of telecommunications (DoT) had also grudgingly permitted the ISPs to provide “last mile links” that would enable them to connect subscribers to their computer servers. However, last mile links included a rider whereby ISPs could only set up such links if they were “point to point” and of “leased line capacity” (64 kilobytes per second or above).

   

 
 
ICICI TWINS LEAP IN STOCK SURGE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 15: 
Shares of ICICI and ICICI Bank surged today on rumours that a plan by the parent to sell its stake in a proposed special purpose vehicle (SPV) will come to fruition much earlier than expected.

Though sources close to ICICI denied any such development, operators bid feverishly for the stocks, sending them soaring by 10 per cent to the maximum possible in a day.

ICICI opened at Rs 55.75 and closed at Rs 60, up Rs 5.45 over its previous close, amid 3,170 deals with over 8.37 lakh shares. On the other hand, ICICI Bank opened at Rs 118.10 and closed at a high of Rs 127.05 on a volume of 3,261 transactions, in more than 5.76 lakh shares.

The surge came on a day the BSE sensex breached the 3600-level for the first time in about nine months on renewed buying by speculators and foreign institutional investors. Opened at 3560.98, the 30-share index scaled an intra-day high of 3612.83, before ending at 3602.02 against Thursday’s close of 3557.06, a rise of 44.96 points.

The application for the reverse merger of ICICI with ICICI Bank is expected to be cleared before the March-end by the Reserve Bank of India (RBI). The financial institution said its stake in the bank — that will fall from 46 per cent to 16 per cent, post merger — would be transferred to the SPV.

   

 
 
LIABILITY INSURANCE FINDS FEW TAKERS 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 15: 
Liability insurance in India is still at a nascent stage even after 10 years of globalisation, insurance experts feel.

Addressing a seminar here today on corporate liability organised by the Bengal Chamber of Commerce and Industry, K.K. Srinivasan, secretary, Tariff Advisory Committee said: “Liability insurance is yet to take off in the country, even though there is immense scope. However, some of the new private sector insurance companies have floated liability insurance products and we expect large corporate houses should opt for these products.”

Liability insurance covers, in principle, any liability imposed by the law for injury or damage that is not deliberately or criminally caused. A person who causes accidental injury or damage to a third party is required, under the law, to compensate that person for the loss.

Liability exposures are influenced by a plethora of factors—laws, rules, regulations, cases, customs, products, processes, people, environment, courts, legal systems and others. “It is difficult to quantify liability exposures. But, it is possible to identify key factors influencing them. Indian insurers will have to do the task,” Srinivasan said.

He said three types of liability insurance are likely to emerge in the country—employers liability, employment practices liability and environment liability insurance products.

Some private insurers have already launched their liability insurance policies, such as Iffco-Tokio General Insurance’s Directors’ and Officers’ Liability Insurance policy. The policy covers the legal liability, including costs, to defend any civil and/or criminal action against the directors and/or officers holding a responsible position in an organisation, made by any shareholder/employee/customer/competitor/member of the public or any regulatory body for any wrongful act, error or omission committed by them.

Similarly, Royal Sundaram is offering Broadform Corporate Liability Policy to selected clients. Srinivasan said Indian insurers are more keen on claims made/occurrence basis liability insurance products. Under this, the accident giving rise to a claim should have occurred during the period of insurance and it should be intimated to the insurer in writing before the expiry date of the policy period, or within the time limit of 90 days allowed under the extended claim reporting clause when the policy is not renewed/cancelled, and no policy has been taken with any other insurer.

   

 
 
SANMAR ARM IN TIEUP WITH US FIRM 
 
 
FROM M.R. VENKATESH
 
Chennai, Feb. 15: 
Indchem Software Technologies Ltd today announced that it has entered into a partnership with the Michigan-based Decision Consultants Inc (DCI), an information technology services provider to Fortune 1000 companies and government organisations.

DCI’s Offshore Performance Centre of Excellence (OPCOE), which will be set up under the tieup, will be operated by Indchem Software, a subsidiary of the Chennai-based Sanmar Group.

“Our relationship gives each partner new access into the other partner’s market and this is the right time to start the centre of excellence,” N. Kumar, chairman of Indchem Software said, adding that OPCOE was being converted into a joint venture resulting in the creation of one company. The partnership involves adding an offshore component to DCI’s services and its software mix, DCI president Ed Longo said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.67	HK $1	Rs.  6.15*
UK £1	Rs. 69.57	SW Fr 1	Rs. 28.30*
Euro	Rs. 42.44	Sing $1	Rs. 26.35*
Yen 100	Rs. 36.66	Aus $1	Rs. 24.80*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5045	Gold Std (10 gm)Rs. 4970
Gold 22 carat	Rs. 4765	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7800	Silver (Kg)	Rs. 7770
Silver portion	Rs. 7900	Silver portion	   NA

Stock Indices

Sensex		3602.02		+44.96
BSE-100		1753.67		+14.96
S&P CNX Nifty	1159.95		+ 9.95
Calcutta	 122.81		+ 1.98
Skindia GDR	 541.78		+ 3.03
   
 

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