Reality check in stock rebound
Bharti Tele debut on bourses today
Poor volumes, cash woes hit Lyons Range
Govt weighs two-fold hike in ECB cap
Auto firms crave duty cuts
Bengal asks FIs to go ahead with Haldia debt rejig
Vikrant, JK Tyres considers merger

 
 
REALITY CHECK IN STOCK REBOUND 
 
 
FROM SATISH JOHN
 
Mumbai, Feb. 17: 
It is the time of the year when there is more adrenaline than wisdom, especially in stock markets awash with pre-budget optimism. Indices zoom, shares put on weight, but come next month, many find out they have been backing the wrong horse.

Not so this year. The Bombay Stock Exchange (BSE) sensex topped 3,600 points at 3602.02 on Friday, a nine-month high and a leap of over 8 percentage points since January.

However, the February frenzy this time has been different. Not all scrips have been gaining. The ones that have, are those with financial force and market muscle.

Unlike the trend seen in the past few years, when even companies with unproven worth enjoyed dizzy valuations, investors have been more discreet and wiser. There is a lot of reflection before shares are picked up and retained.

Market watchers attribute the upturn to the recent raft of economic decisions, and stronger confidence that the slowdown-stalked economy may be on the mend.

Leading the pack are PSU banks like SBI and BoB, private banks like ICICI Bank, Vysya Bank, besides FMCG companies and auto makers.

“It is not similar,” says Rakesh Jhunjhunwala, a prominent BSE broker. “The markets moved in a more orderly manner, showing good breadth and depth as quality stocks led the rally.”

Jignesh Shah, a strategist at ASK Raymond James Securities, points to the enthusiasm among foreign funds.

“Market volumes are up, derivative deals have improved and FIIs are investing in the present upsurge.”

Foreign funds have poured in Rs 956 crore at a time when the sensex is hovering a shade above 3,600. In 2000 and 2001, it was testing 5,400 and 4,200 respectively. “The next resistance could be seen around 3700-3760 levels,” Shah said.

Jhunjhunwala is of the opinion that the low valuations of many shares have made investing in the market an attractive proposition.

He cites the example of ITC, whose earnings have gone up 30 per cent in the past two years, but whose stock is still quoted at a lower price/earnings ratio.

“Also, unlike the earlier years, economic reforms have been accelerated, interest rates have moved southwards, making industry competitive. There is a sea change in the quality of software exports too,” he added.

Asked whether the recent government selloff in IBP and Videsh Sanchar were the “triggers” that set off the rally, he preferred to call them “catalysts” instead. Shah pointed to several other indicators to argue that the rally is different.

“NCAER’s business confidence index figures are positive, and so are the advance-decline ratios, which show that advances in stock values outnumber the declines,” Shah added.

Market watchers talk about other reasons as well: retail investors are flocking back and bears are on the run from regulators, allowing stocks to find their right prices.

   

 
 
BHARTI TELE DEBUT ON BOURSES TODAY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 17: 
The shares of Bharti Tele-Ventures will be traded on the National Stock Exchange, Bombay Stock Exchange (BSE) and the Delhi Stock Exchange (DSE) from Monday under the ‘Bharti’ symbol. Bharti Tele raised approximately Rs 834 crore through an initial public offer of 185 million shares at the rate of Rs 45 per share.

“We will be listed on the BSE, DSE and the National Stock Exchange on Monday as per our earlier plans,” Bharti sources said.

Bharti group chairman and managing director Sunil Mittal and joint managing director Rajan Mittal will ring the bell at the Bombay and Delhi stock exchanges respectively to mark the formal listing of the shares, they added.

The IPO, which closed on February 2 was over-subscribed by 2.5 times and is the country’s first 100 per cent book-building issue.

Company officials claimed that the complete allotment and transfer of shares to qualified institutional buyers, non-institutional buyers and retail investors was completed in a record time of one day from the last day of payment. Further, permission to list the shares has been obtained in a record time of 10 working days, they said. JM Morgan Stanley and DSP Merrill Lynch were the book running lead managers to the offer.

“I would like to thank all our investors for making the Bharti IPO a grand success. Today we begin a long term relationship with all our investors to share the fruits of growth at Bharti,” Sunil Mittal said.

Bharti Tele-Ventures, a company promoted by Bharti Telecom, offers telecommunications services and has approximately 1,340,000 customers, of which about 1,048,000 are cellular, 135,000 fixed-line and 157,000 are internet customers.

BTVL is embarking on a major expansion plan in the next few years and will set up cellular services in nine more circles, four fixed line circles and national and international long distance services.

   

 
 
POOR VOLUMES, CASH WOES HIT LYONS RANGE 
 
 
BY ANIEK PAUL
 
Calcutta, Feb. 17: 
Even as the markets are on the road to revival, the Calcutta Stock Exchange (CSE) is threatened by a sharp decline in business volumes. Not only has the bourse seen its turnover plummet as the stocks driving the recovery are not actively traded on the exchange, it continues to face a shortage of long-term funds. Though the trend was same for all bourses, it is now reversing on the National and Bombay stock exchanges.

CSE saw its turnover fall to Rs 68 crore on Friday after hovering between Rs 80 to 120 crore for several months. Its turnover shot up to around Rs 140 crore when the erstwhile momentum stocks—the likes of Himachal Futuristic Communications Ltd (HFCL), DSQ Software, Pentamedia Graphics and Zee Telefilms—recovered a bit, thanks to private financiers. With interest in these stocks flagging again, the turnover at the bourse has fallen.

“The number of shares traded on the CSE has not gone down, but with the fall in prices of popular stocks like HFCL and DSQ Software, the total value of transactions—or the turnover of the exchange—has declined,” a CSE broker-director explained.

The newly appointed executive director of the exchange, P.K. Sarkar said: “The situation is alarming, but CSE is not the only exchange where business has declined. The turnovers of the Mumbai and National stock exchanges have also fallen in recent times.

“I am optimistic that activity will increase with the introduction of the T+3 settlement cycle from April 1. A shorter settlement cycle will be beneficial to brokers, as it will increase liquidity. This should boost activity on the stock markets, and Lyons Range too should benefit.”

While there has been a clear shift in market sentiment, trends in Calcutta have not changed much. Not only have stocks like HFCL and DSQ Software gone out of favour, delivery-based transactions have been rising.

The recent rally is being driven by public sector companies like Bharat Petroleum, Hindustan Petroleum, IBP, National Aluminium, Mahanagar Telephone Nigam Ltd and Videsh Sanchar Nigam Ltd, and old timers like Larsen & Toubro, Tata Engineering and Hindustan Lever Ltd.

Delivery-based transactions too have picked up, with over 20 per cent of the total traded shares being delivered these days. “This indicates that more long-term funds are now entering the market,” an analyst said. On February 13, delivery-based transactions on the National Stock Exchange shot up to a record high of 27 per cent of the total turnover.

“For the market, these are good signs, but legacy looms large over Lyons Range, where day trading is still the order of the day. What is more, only a handful of stocks are actively traded on the CSE,” a senior Calcutta-based broker said.

   

 
 
GOVT WEIGHS TWO-FOLD HIKE IN ECB CAP 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Feb. 17: 
The government plans to double the amount of external commercial borrowings that holding companies and promoters can bring in through the automatic route for infrastructure projects to $ 100 million, even as it does away with all tax exemptions on interest on foreign borrowings.

The finance ministry wants to scrap the large number of tax exemptions enjoyed by non-resident Indians and foreign firms on interest earned from ECBs under Section 10 of the Income Tax Act.

Top revenue department officials said the reason why such tax incentives were given was to help ease conditions for companies trying to tap the foreign debt market.

But, they pointed out, this hardly helped as the interest earned by lending banks, institutions or individuals, were taxed in any case by the country where these entities were based.

“It is better to tax them here itself and earn some revenues. In any case, any taxes they pay here can be offset against taxes to be paid in their home countries,” officials said. The policy is expected to find place in the forthcoming budget.

“Tax exemptions on outgoing interest may have been justified when our rates of taxation were far higher than that in developed countries from where our corporates mostly access loans. Now that our rates are closer to international standards, this justification is no longer valid,” officials said.

Merchant bankers said this would actually be useful, as tax rates here were expected to come down marginally and would in some cases be lower than the tax these interest incomes would attract in their home countries. “It is going to help us swing deals faster I think instead of the other way round,” leading merchant banker K.K. Sengupta said.

Revenue officials added they planned to do away with tax exemptions that were being given on foreign exchange earnings by Indian consultants from foreign governments and international organisations.

These were available under Section 10(8), 10(8A), 10(8B) and 10(9) of the Income Tax Act. The revenue department’s logic is that income, regardless of where it is from, is a remuneration that should be taxed irrespective of the source.

This would largely impact consultants who are working for international bodies like World Health Organisation or United Nations International Children’s Emergency Fund.

   

 
 
AUTO FIRMS CRAVE DUTY CUTS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 17: 
The auto industry is looking forward to a budget that will bring back the “feel good factor” in the economy. The reduction in excise and customs duties will follow in time, they say, as the government is bound by its commitment to reduce them within a stipulated three years.

B.K. Chaturvedi, president and executive director, Hindustan Motors said: “Stability should be the mantra of the budget. This can start off with a stable auto policy, specifying export facilities and a clarified fuel policy. Controversy in these two fields will only add to the chaos in the industry which, as it is, has experienced a negative 3 per cent growth.”

“As an industrialist, I feel that tax rationalisations will follow as they are a sub-set of long-term policies. Any reduction in excise duty will come as a cap. But at present, the government needs to concentrate more on the healthcare and education sectors. On the sidelines, if taxes on ambulances and school buses are eased, we will be happy enough,” he added.

   

 
 
BENGAL ASKS FIS TO GO AHEAD WITH HALDIA DEBT REJIG 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Feb. 17: 
The West Bengal government has asked the financial institutions to go ahead with the debt restructuring of Haldia Petrochemicals Ltd (HPL), with Purnendu Chatterjee as the majority shareholder.

When contacted, state commerce and industry minister Nirupam Sen said, “Debt restructuring is going on as usual. We have also clarified to the FIs that the state government has entered into an agreement with Chatterjee for handing over majority control. The FIs will therefore restructure the debt accordingly.” The agreement was entered into on January 12.

Recent media reports have stated that the FIs, led by the Industrial Development Bank of India (IDBI) are unwilling to restructure HPL’s debt with Chatterjee as the majority shareholder.

The Chatterjee Group officials said, “We have not received any such communication from the FIs. We are eagerly waiting for the restructuring to take place in the shortest possible time. The financial institutions are currently scrutinising the debt restructuring proposal that has been sent to them from HPL. We are also ready to infuse funds in the project as and when required.”

HPL has asked for reschedulement of loans and a waiver of interest. Company officials also confirmed that they have not yet received any communication from the financial institutions on debt restructuring.

The financial institutions and the banks have an exposure of more than Rs 4,000 crore in HPL.

TCG officials refused to comment on what sort of sops they have sought from the FIs.

“It is too early to comment on these issues. We may ask for many things but may not get so much. Let’s see what we get. Only then can we comment on the matter. Protracted negotiations with the FIs is currently on.” Following the debt restructuring, HPL will require an equity infusion, which will hopefully take place in the next financial year.

TCG is also holding talks with different parties for inducting them as the strategic partner to the project.

“Negotiations are currently on with many of them. But one thing is clear that TCG will bring in someone who will provide technological support to the plant,” officials added.

It is also not yet clear when the Tatas will offload their 14 per cent stake in HPL. “No agreement has been entered into with the Tatas and the state government on the sale of the stake. It is expected that by March 31, the government will be able to enter into an agreement with the Tatas,” senior commerce and industry ministry officials said.

Valuation of HPL shares has not yet been carried out. The Tatas are, however, willing to offload their stake at par.

Meanwhile, with the revival on the markets, business is looking up for HPL.

“The plant is working at 110 per cent capacity. Sales are also improving substantially,” HPL officials said.

   

 
 
VIKRANT, JK TYRES CONSIDERS MERGER 
 
 
FROM RAJA GHOSHAL
 
New Delhi, Feb. 17: 
A move is afoot to merge Vikrant Tyres Ltd with JK Tyres, the flagship division of the JK Industries Ltd.

The merger could take place before the tyres division is spun off into a separate company, and before JK Agro Genetics and JK Sugar, the two loss-making divisions of JK Industries, are hived off.

Vikrant Tyres, a subsidiary of JK Industries, was acquired about five years back. The company, which has two plants at Mysore, makes radial as well as conventional tyres.

Senior company sources said there was no time-frame set for the spin-off as it was difficult to find buyers for the ailing divisions, which have a high capital employed.

JK Industries Ltd reported a net loss of Rs 4.10 crore for the nine-month period ended December 2001. As per the segment revenue, the tyre division reported a profit-before-interest-and-tax figure of Rs 53.79 crore.

Last year, JK Industries reported a net profit of Rs 16.59 crore. “Of course, this year it will be much lower, but we think we will be in the black,” said T.K Banerjee, marketing director. “The tyre industry is going through a sluggish time and that is reflected in the balance sheets.”

JK Tyres has garnered a 25.5 per cent share of the Rs 7,000 crore truck and bus tyre industry, according to April-December figures for the segment released by the Automotive Tyres Manufacturers Association (ATMA).

As per the industry production figures, JK is followed by Apollo Tyres, with a market share of 23.1 per cent. JK produced 1.76 lakh tyres (which includes the production of Vikrant Tyres), against 15.97 lakh tyres produced by Apollo Tyres.

Ceat has a market share of 17.1 per cent, MRF 15.3 per cent, Birla 9.7 per cent, Goodyear 4.7 and Modi 4.4 per cent. Total tyre production in the nine-month period was 6.91 lakh units.

Last year, with a production figure of 1.58 lakh tyres, JK and Vikrant tyres had a combined market share of 22.4 per cent. The company is hoping to grab a 26 per cent market share by the year-end, said Banerjee.

   
 

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