RBI clears air on bank FDI
ING may have to wait
Ruia Coatex ahead in race for Jessop
ICICI to draw up power plan
Bilt warms up for rights issue, mum on size

Mumbai, Feb. 16: 
The Reserve Bank of India (RBI) today clarified that up to 49 per cent foreign direct investment (FDI) from all sources will be permitted in private sector banks through the automatic route.

The RBI clarification is expected to put at rest the confusion in this regard which gained momentum after Bank Brussels Lambert, a subsidiary of the Dutch ING group, announced its plan to gain majority control of Vysya Bank where it holds a 20 per cent stake at present.

Private banks were, so far, allowed to offer up to 49 per cent stake to foreigners with a rider that foreign direct investment would be capped at 20 per cent. Today’s clarification removes that sub-sectoral cap on FDI in private banks.

However, FDI in public sector banks, including State Bank of India (SBI), has been capped at 20 per cent.

The RBI, while stipulating several parameters for determining the 49 per cent FDI under the “automatic route” in respect of private sector banks, said the categories of shares that will be included are initial public offers (IPOs), private placements, ADRs/GDRs and acquisition of shares from existing shareholders.

However, regarding the acquisition of shares from existing shareholders, it ruled that as per government guidelines, those foreign investors who have a financial or technical collaboration in the same or related field cannot issue fresh shares under the automatic route. “This category of investors will have to seek FIPB approval,” it said, adding this should be followed by in-principle approval by the RBI’s exchange control department (ECD).

Moreover, the fair price for transfer of existing shares determined by the RBI on the basis of guidelines laid down by the Securities and Exchange Board of India (Sebi) for listed shares should be followed. It added that after receipt of in-principle approval, “The resident seller can receive funds and apply to the ECD for obtaining final permission for transfer of shares.”

As before, transfer of shares of 5 per cent and more of the paid-up capital in private banks will require the RBI’s approval.

The apex bank further clarified that in view of government policy or applicable provisions, certain categories of foreign investment in banks which have joint venture/subsidiary in insurance sector, and the transfer of existing shares in a banking company from residents to non-residents, cannot take the automatic route.

On the important issue relating to banks having insurance joint ventures, the RBI cited the Insurance Act, which caps the maximum foreign investment in an insurance company at 26 per cent.

“Application for foreign investment in banks which have joint venture/subsidiary in the insurance sector should be made to the RBI. Such applications will be considered by the RBI in consultation with the Insurance Regulatory and Development Authority (IRDA),” it clarified.

This could have a bearing on Vysya Bank’s proposal, as they have a subsidiary partnering ING Bank for an life insurance venture.

The central bank further deemed that as per the available provisions, the maximum voting rights per shareholder will be 10 per cent of the total voting rights for private banks.

In respect of nationalised banks, as per statutory provisions, the maximum voting rights per shareholder (other than the government) are also restricted to 1 per cent of the total voting rights. So far as SBI is concerned, the maximum voting rights per shareholder (other than RBI) is 10 per cent of the issued capital.

Banks will, however, conform to guidelines already in place in regard to reporting and other requirements of the Reserve Bank, Sebi and the Companies Act.


Mumbai, Feb. 16: 
The RBI clarification may not immediately lead to Bank Brussels Lambert, the ING group subsidiary, raising its stake in Vysya Bank to the 49 per cent level. This is because International Finance Corporation (IFC) holds around 10 per cent stake in Vysya Bank. Unless IFC decides to sell its stake, BBL can raise its stake in Vysya to a maximum level of 39 per cent from the present 20 per cent.

Bankers are, however, expecting finance minister Yashwant Sinha to further raise the FDI limit in banking to 74 per cent in this year’s budget.

Apart from Vysya Bank, Centurion Bank is another bank where Keppel Bank, its existing partner, can raise its stake. Keppel Bank is believed to have expressed such keenness on earlier occasions but could not implement it because of the 20 per cent sub-limit.

Other banks that could now be targeted by foreign players like Citibank, HSBC, ABN Amro, BNP Paribas include IDBI Bank, UTI Bank among scores of others. Most of these foreign banks have on various occasions said that they were keen on buying stakes in domestic banks.


Calcutta, Feb. 16: 
Even before the final whistle could be blown in the Jessop selloff bout, rumours are flying thick and fast that Ruia Coatex has pipped other rivals at the post to gain control of the city-based heavy engineering company.

Though no official confirmation on the development is available, labour unions have already shot off a letter to chief minister Buddhadeb Bhatterjee, alleging that the company is being sold off to Ruia Coatex for a measly Rs 18 crore. The unions claimed that the company’s asset base is over Rs 250 crore.

When contacted in Delhi, divestment department sources said: “A meeting was held this morning to evaluate the Jessop bids but no details are being given out yet. An announcement will be made only after the next meeting of the Cabinet Committee on Disinvestment.”

The Coatex management was also not available for comment.

While Coatex is believed to have made the highest bid at Rs 18 crore for the 72 per cent stake in Jessop, Titagarh Steel is reported to have bid Rs 11 crore. The reserve price, it is claimed, has been fixed at Rs 17 crore.

Worried by the prospect that the company will finally be sold for a song, the Joint Forum of Unions & Associations of Jessop (JFUAJ) is now planning to move the court to stall the selloff.

JFUAJ joint convener Aloke Brahmachari said there is enough ground to believe that corruption on the part of the government has played a key role to undervalue the age-old company at such a meagre price.

“We are considering options to save this company from a distress sale. If required, we will not only move the Calcutta high court against the government but we will also physically block the private party to enter into the factory premises,” he said.

The joint forum has apprised West Bengal chief minister Buddhadeb Bhattacharjee of the development and urged him to hammer out a solution. According to the forum, the state government is supposed to get over Rs 40 crore from the company on account of unpaid sales tax.

“We will request the state government to take over the company by writing off the dues. The company has potential to do well if the state government co-operates,” Brahmachari said.

“We have 70 acres of land in and around Calcutta and five apartments in posh areas like Alipore and Ballygunge Circular Road. Only the price of the apartments will be double the amount that Ruia Coatex have agreed to pay,” Brahmachari alleged.

Moreover, he said, a sum of Rs 14 crore, which is expected to come from a deal with the Metro Rail for a five-and-half acre land, will flow into the buyers account. “So essentially, the buyer will have to fork out only Rs 4 crore for the plant, built up on 34,000 sq. feet of area,” he said.


Calcutta, Feb. 16: 
The Union power ministry has appointed ICICI to draw up a project report for converting distribution centres across the country into independent profit earning centres.

Initially, the government had decided to restrict the programme to 63 circles, but now plans to extend it to 350 circles across the country, to reduce transmission and distribution (T&D) losses and increase the quality and reliability of power.

Power ministry sources said ICICI would table the report soon after which it will be put up before the Cabinet for approval.

“The project report that is being prepared will help the government to approach multi-lateral funding agencies,” ICICI officials said.

The cost of introducing reforms works out to about Rs 80 crore per distribution circle.

Covering all the distribution circles during the Tenth Plan period will mean an outlay of Rs 50,000 crore, which will be funded through a combination of grant and loans in the ratio of 50:50 for non-special category states and in the ratio of 90:10 for special category states. The target of generating an additional 36,000 Mw during the Plan period is ambitious, as power generation during the Ninth Plan was way below the target of 40,245 MW.

“The real problem of power sector reforms lies in the distribution sector where all consumers need to be metered, power theft needs to be eliminated and technical losses reduced,” power ministry officials said. The nation loses Rs 20,000 crore annually on account of power theft. For example, the T&D losses of the West Bengal State Electricity Board (WBSEB) stand at around 40 per cent, with power theft accounting for a major portion.

The project will mostly be funded by the centrally-sponsored accelerated power development programme (APDP) scheme. “The government has already approached multi-lateral funding agencies like IFC and the Asian Development Bank for funds. Talks are on with them. They have sought a detailed report and we have appointed ICICI for the purpose,” sources said.

The government has already decided to double the current year’s allocation of Rs 1,500 crore for the APDP.

The government is also setting up a national level information system covering all distribution feeders for power distributed and consumed. The cost of revamping the distribution system will be shared equally between the Centre and the states.


New Delhi, Feb. 16: 
Paper major Ballarpur Industries (Bilt) will file its prospectus for the proposed rights issue with the Securities and Exchange Board of India (Sebi) on Tuesday, confirmed vice-chairman and managing director Gautam Thapar.

The board is set to meet on Monday to finalise the terms and conditions for the proposed issue.

“Since we will file the prospectus for the forthcoming issue on Tuesday as per Sebi guidelines, the size of the rights issue cannot be revealed now,” Thapar said.

He said the flotation of the rights issue would depend on how long it takes to tie up all the formalities.

He also refused comment on whether the proceeds from the issue would go towards any particular project.

For the six-month period ended, December 31, the net profit of Ballarpur Industries stood at Rs 27.49 crore as against Rs 30.58 crore in the previous corresponding period.

While turnover stood at Rs 757 crore as against Rs 773 crore, operating profit was Rs 153.34 crore compared with Rs 150.34 crore in 2000.

For the quarter ended December, net profit stood at Rs 13.88 crore as against Rs 15.26 crore in the corresponding previous quarter.


Maintained by Web Development Company