Zee gets a mean & lean look
Rupee ends at new low of 48.76
Dabhol bidders grope in the dark
Steel scrips sparkle on hope of excise sops
IBP may put engineering, chemical wings up for sale
UBI set to get rid of weak stigma
Fakes frustrate FMCGs
Concern over brand piracy
Rejig tonic for Alembic
Foreign Exchange, Bullion, Stock Indices

 
 
ZEE GETS A MEAN & LEAN LOOK 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 22: 
Zee Telefilms (ZTL) is on a treadmill — sloughing off flab and discarding excess baggage. The entertainment major said it would pull the plug on 11 of its subsidiaries, bringing down their number to 12, as part of a sweeping restructuring plan.

Under the proposal cleared by the board today, the 11 subsidiaries will cease to exist, subject to necessary regulatory approvals, a Zee press release said.

“The restructuring highlights Zee’s continued commitment to create value for shareholders and ensure better business practices. Going forward, we will continue to innovate and seek opportunities to improve business efficiency,” chairman Subhash Chandra said.

Of the subsidiaries supposed to be wound up, five are in India, while six are abroad. E-Connect India Ltd, Programme Asia Trading Company Ltd (Patco), Elzee Television Limited, Kaveri Entertainment Limited and Dakshin Media Limited are the ones that will shut shop at home.

The overseas arms that will be axed are Winterheath Company Ltd in Mauritius, Hokushan Trading Limited in Hong Kong, Expand Fast Holdings Ltd, BVI, Zee Multimedia Worldwide Ltd, BVI, Asia TV in the US and Zee TV SA (Proprietary) Ltd in South Africa.

“In the past few years, because of both organic and inorganic growth, the corporate structure had become multi-layered and complex. Also, due to changes in the regulatory and tax frameworks, inefficiencies had crept in. We aim to achieve better tax efficiency and move to a leaner corporate structure by reducing the number of subsidiaries,” Sandeep Goyal, group broadcasting CEO of Zee Telefilms, told The Telegraph.

Many of the subsidiaries being closed, he said, became redundant after the government allowed up-linking from the country. Their functions have been folded into existing arms.

E-Connect India, for instance, is Zee’s internet subsidiary that has been singed in the dotcom burn-out. Patco became defunct after the creation of the Zee-Turner joint venture to distribute its bouquet of channels.

Kaveri and Dakshin are Kannada and Tamil language channels respectively, which will be beamed under Alpha now, Hitesh Vakil, chief financial officer of Zee, said.

Zee TV SA (Proprietary), a distributing company operating in South Africa, became redundant after the company licensed its programmes to local service providers. The Hong Kong subsidiaries were rendered redundant after their business was shifted to Singapore.

Winterheath, a joint venture with Star, lost its utility after Zee bought out its partner in the firm last year.

Zee officials did not say how much they expect to save from the closure of arms, but Goyal said the amount would be substantial.

The move will facilitate consolidation of accounts of the remaining subsidiaries, lead to better utilisation of resources and simplify legal, tax and financial integration of Zee Telefilms.

Analysts say the new corporate structure will release resources that would have gone into the management of subsidiaries and paying for the army of executives.

On bourses, it appeared as though investors had responded to the cost-cutting drive with appreciation.

The Zee scrip, which has been flaring up in the past few days, gained Rs 1.60 and closed the day at Rs 152.35.

   

 
 
RUPEE ENDS AT NEW LOW OF 48.76 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 22: 
The rupee today crashed to a new closing low of 48.74/76 due to heavy dollar buying by nationalised banks compared with 48.65/66 on Thursday. It plunged below its previous lowest-ever finish of 48.71/72, a trough it had tested on February 11.

The dash for dollars has led to a feeling that the rupee is likely to lose more ground on Monday, possibly sinking to 48.80. “Everybody is now on the long side of the dollar. The US currency is likely to open higher on Monday and we might see the rupee slipping to 49 next month,” said Manbir. S. Bawa, an analyst at e-Mecklai. Another reason for the decline has been indications in recent weeks from the Reserve Bank that it is comfortable with a weaker currency, provided the fall is orderly.

There were conflicting reports about who might have scooped up dollars in the market today. While some unconfirmed reports pointed to the fact that nationalised banks were buying for a large corporate house (the Reliance group), others hinted that it was being done on behalf of the central bank. The RBI has been buying dollars from the market in recent times to bolster the forex reserves, now close to $ 50 billion. The late-session dollar purchases by state-run banks caught some traders on the wrong foot. It pushed them into covering short positions, driving up the value of the dollar.

   

 
 
DABHOL BIDDERS GROPE IN THE DARK 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 22: 
Foreign and domestic bankers to the bankrupt Enron Corp’s 2184 MW Dabhol Power Company ended a three-day session in Singapore today, without making any significant headway on the modalities of selling the controversial unit.

While participants at the Singapore meeting have declared that a plan of action for sale of the troubled unit has been devised, the eight bidders are still in the dark on several issues pertaining to the sale.

At stake is the 85 per cent foreign equity in DPC. While Enron owns 65 per cent of DPC, General Electric Co and US contractor Bechtel Corp each own 10 per cent. The remaining 15 per cent is held by the Maharashtra State Electricity Board.

“Transparency is the last thing that DPC has ever been associated with ever since its inception,” rued an official affiliated to one of the domestic bidders.

None of the bidders are clear about the current operational status of the plant. It is also not clear on who actually calls the shots at DPC—the promoters, the lenders or the government.

Also uncertain is whether the government will lift 2184 MW of power generated at DPC’s peak capacity, or if the new owner would be offered some concessions.

Strangely, however, it is learnt that the promoters want the lenders to provide the $ 3 million required to set up the data centre at London. Again, why the data centre is being set up at London remains in the realm of conjecture.

On January 30, IDBI placed full-page advertisements in major Indian dailies asking for expressions of interest for DPC, where the FIs have an exposure of around Rs 6,000 crore.

The advertisement sought to shortlist “qualified interested buyers” for DPC. However, instead of shortlisting, the list went up four times from two to eight bidders.

Moreover, only five bidders have deposited the earnest money for the EoI. Sources say the bidders who have deposited the money are Reliance Industries, Tata Power, Gaz de France, Shell and British Petroleum.

Moreover, no deadline Hs been fixed for the other three to pay the sum.

Another grouse of the bidders is that the data room at London for the due diligence process is not ready yet.

The countdown for the due diligence is slated to begin on February 25 and will feature 350 sets of documents related to approvals and 700 sets of documents related to contracts.

It is learnt that the bidders have been given three-five days to sift through the 1,050 odd sets of documents at London to decide what amount to bid.

Industry observers are further puzzled on the background of the bidders. Shell, British Petroleum, TotalFina, Gaz De France and Gas Authority of India Ltd are all gas majors with little or no experience in running power plants, which would mean that they are basically eyeing DPC’s LNG facility and would ultimately like to enter into a tieup with the power producers to run the plant.

While Reliance Industries has some experience in operating large captive power plants, BSES, which has been operating a 500 MW coal-based power plant, is a transmission and distribution major and has been in the business for the past five decades. Tata Power has a total generation capacity of over 2200 MW and has been in the generation business for almost eight decades across various fuel types.

   

 
 
STEEL SCRIPS SPARKLE ON HOPE OF EXCISE SOPS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 22: 
Hopes of finance minister Yashwant Sinha granting excise sops to the steel industry in the Union budget today led to a smart rise in prices of steel scrips on the bourses.

Long hit by huge capacities and rock bottom prices, industry is looking forward to a reduction in excise duties.

The markets are optimistic that Sinha would lower excise duty from 16 per cent now to 8 per cent on February 28. Though reports say that the government may also bring down customs duty on the commodity, it is felt that a likely rupee depreciation will negate any adverse impact of such a move on the domestic industry.

Reflecting the equity market’s interest in steel scrips, shares of Tisco, the country’s largest private sector steel manufacturer, vaulted over 9 per cent to Rs 113.15 after opening at Rs 103 and touching a day’s high of Rs 113.70. The counter witnessed 1418 trades, resulting in over 18 lakh shares being transacted.

The rise in prices of the Steel Authority of India Ltd scrip was even more pronounced at over 18 per cent.

The stock closed at Rs 6.15 after opening at Rs 5.30 and rising to a high of Rs 6.20. The counter saw 1,418 trades, with over 22 lakh shares being traded.

Shares of Essar Steel were also firm at Rs 4.55 after opening at Rs 3.90. Similarly, Jindal Iron and Steel Co finished higher at Rs 5.55 after beginning at Rs 5.40.

The domestic steel industry is passing through a crisis with low global and local prices. Exports suffered a rude shock when the US levied anti-dumping duties on it.

   

 
 
IBP MAY PUT ENGINEERING, CHEMICAL WINGS UP FOR SALE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Feb. 22: 
Within days of coming under the control of Indian Oil Corporation, IBP Ltd is mulling over the idea to sell its engineering and chemical divisions as these wings are not in sync with the core business of the company.

A senior IBP official said, “In the new scenario, the future business strategy has to be very clear and core areas need to be strengthened. Engineering and chemical businesses don’t fit into this strategy.”

Both the divisions are currently making losses despite stringent cost-cutting measures adopted by the company.

The average loss per year in the two divisions, which have 400 employees, is around Rs 30 crore.

IBP’s chemicals division, set up in 1974, is the only public sector producer of explosives. The division, which has a payroll of 350, produced 55,717 tonnes of bulk explosives in the last fiscal.

Sources said the division lacks economies of scale and thus lags behind other major private sector players. There are about 38 private producers of similar products in the country.

They further pointed out that the company took various initiatives to counter depleting margins. A voluntary retirement scheme was introduced and it was able to reduce manpower by 36.6 per cent, with over 600 employees opting for the VRS.

The engineering business, too, is witnessing very depressed market conditions. The division manufactures cryo-containers and cryo-vessels for industrial and biological applications.

Although the division does not account for much overheads in terms of staff costs, the demand for products is far from encouraging, sources added.

IBP director (finance) S.K. Sinha said the two divisions need to be restructured, “but it is too premature to comment on whether they would be sold off.”

Sinha said a four-member core group is being set up with equal representation from both IOC and IBP.

The group will look into all the aspects of future strategies of both the oil companies in the wake of IOC becoming the parent of the Calcutta-based oil marketing company.

“The group will study the viability of operations of both companies and try to ascertain the synergies between the two. Accordingly, the future course of action will be chalked out,” he said.

   

 
 
UBI SET TO GET RID OF WEAK STIGMA 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Feb. 22: 
The city-based United Bank of India (UBI) is confident of getting rid of the ‘weak’ tag this fiscal, and is on a drive to clean up its balance sheet. It plans to provide about Rs 300 crore as deferred liability and come up with a net profit at the end of the year.

Speaking to The Telegraph, Madhukar, chairman and managing director of the bank said: “In all our earlier balance sheets, auditors had commented on our inability to provide for deferred liabilities like pension and gratuity. After I took over as the CMD, I decided to provide for all these and present a clean balance sheet. I am on the right course. This year the balance sheet will be robust.”

The finance ministry has also expressed satisfaction with the performance of the bank in the first nine months of the current fiscal.

“We have kept the finance ministry posted about the developments in the bank and have not received any extra queries from them. The RBI directors on the bank’s board are also not unhappy with the bank’s performance,” he said.

UBI has also decided not to shut down any branch even though it had earlier planned to close down 55 of its branches, as part of its restructuring exercise. “Before I joined, the bank had closed down 21 branches, but I have decided not to shut any of them. Of the remaining 23 branches, 16 have already achieved profitability, while seven branches will turn profitable in the current fiscal itself.”

The CMD is not keen to raise the Tier-II capital of the bank for increasing the capital adequacy. “The cost of Tier-II capital is high and it gets depleted by 25 per cent each year,” he said. The CAR of the bank presently stands at 10.4 per cent.

The bank has taken the decision to manage its assets in such a way so that the interest spread is higher. This has yielded results and the net interest margin increased to 3.2 per cent as of December 2001 compared with 2.6 per cent in December 2000. Return on assets increased to 0.51 per cent in December 2001 against 0.09 per cent in the year-ago period.

The bank has also taken a unique measure for recovering lost assets. “In case of lost assets up to Rs 1 crore, we have decided to settle up to 50 per cent of the book due and the bank will forgo the accrued interest. We are offering this till March 31,” Madhukar said.

“We have been able to make a real recovery of Rs 85 crore of non-performing assets till early this month as against Rs 71 crore last fiscal,” he said.

The operating profit of the bank till December went up to Rs 276.37 crore as against Rs 91.19 crore in the previous corresponding period. The net profit of the bank as on December 2001 stood at Rs 82.45 crore.

The growth in profitability has enabled the bank to absorb and provide an amount of Rs 193.92 crore as deferred liability and expenditure towards VRS.

The cost of deposits has gone down to 7.4 per cent from 8 per cent and the yield on advances has increased to 9.7 per cent.

   

 
 
FAKES FRUSTRATE FMCGS 
 
 
FROM RAJA GHOSHAL
 
New Delhi, Feb. 22: 
Imitation may well be the best form of flattery, but FMCG majors, spending crores on building brands, aren’t amused watching fakes walk away with a sizeable chunk of the profits that should have been their due.

A study conducted recently by ORG MARG on behalf of the Brand Protection Committee of the Federation of Indian Chambers of Commerce and Industry (Ficci) estimates FMCG firms suffer an annual loss of Rs 2,500 crore on account of counterfeits and pass-offs.

FMCG behemoth Hindustan Lever Ltd loses 5 per cent of its Rs 11,000-crore turnover—about Rs 55 crore—due to fake products.

Of every 10 Fair & Lovely and Clinic Plus that reach the market one is a fake, says M.K. Sharma, vice-chairman HLL. In all, 18,608 units of fake Fair & Lovely and 12,306 kilolitres of spurious Clinic Plus shampoo is being churned out by the grey market. About 8 per cent of Sunsilk shampoo and Wheel detergent powder sold are counterfeits, while 5 per cent of Clinic All Clear and Surf Excel are fake.

According to Sharma, rural areas account for 75 per cent of sales of all fake products. Of the remaining 25 per cent that sells in urban areas, 20 per cent are sold in the slums. “The maximum spurious makes of HLL products sell in the Hindi heartland belt of Uttar Pradesh, Madhya Pradesh, Punjab, Haryana as also Bihar and Orissa. However, 50 per cent of these fakes are made in the industrial bylanes of Delhi,” he said.

It is a similar story at Procter & Gamble. It loses 5 per cent of its turnover of Rs 800 crore—about Rs 40 crore—to fakes and imitations, said Bharat Patel, chairman Procter & Gamble. One in every 10 Vicks Vaporubs is a fake, he said, adding 1,757 fake units were made in 2001. But perhaps among the worst sufferers is Vicks Action 500, with every second Action 500 being a fake, he said. Again, 5 per cent of P&G’s Head & Shoulders and New Pantene Pro-V were counterfeits, he added.

   

 
 
CONCERN OVER BRAND PIRACY 
 
 
OUR BUREAU
 
New Delhi, Feb. 22: 
Expressing concern over increased counterfeiting, including brand piracy, the government today said such commercial offences have to be brought under criminal offences and simplified legal procedures should be introduced for compensating the victim.

“Unless we create simplified legal procedures where you are able to pinch the pocket of copiers, one cannot compensate the legitimate,” minister for law Arun Jaitley said here.

Addressing a Ficci seminar on ‘Protecting brands — a war against counterfeiting’, he said such commercial offences had to be brought under criminal procedure. Citing that there was Fema against money made through smuggling, Poto for terrorism and Narcotics Act for drugs, he said simple methods needed to be evolved for compensating the legitimate industry.

   

 
 
REJIG TONIC FOR ALEMBIC 
 
 
OUR BUREAU
 
Mumbai, Feb. 22: 
The Vadodara-based Alembic Ltd has finalised a business restructuring plan whereby it will create a new division for cardiovascular (CVS) and diabetic drugs while hiving off some old brands into a franchisee company for their marketing.

The new business model would also include growth through brand acquisition route, mainly in cardiovascular and anti-infective areas, Alembic informed the Bombay Stock Exchange (BSE) today.

The company plans to go for sourcing through third party manufacturing arrangement for product launches in CVS and diabetic segments. Moreover, Alembic would also shift some of its existing products in diabetic segment under the new division.

Alembic has lined up six products in these two segments, which were expected to be introduced in the near future, it said, adding the Vadodara-based entity would also look for brand acquisition in these areas for enhancing its market presence.

The company plans to spruce up its over-the-counter (OTC) business through acquisitions and in-house development.

A foray into the biotechnology sector is also planned as part of its new growth strategy and the company is currently finalising the specific areas for making an entry, it said. Strengthening its nutraceutical division by entering into some strategic tie-ups for new product launches is also on the cards.

Alembic has just finalised a tie-up with US-based Cognis Health and Nutrition for sourcing ‘soy isoflavons’, the raw material used in manufacture of ‘Isovon’, used for treatment of pari-menopausal and menopausal symptoms. Isovon is available as a pack of 10 capsules priced at Rs 10 per capsule.

New formulations

While speaking to reporters in New Delhi recently, Malika Amin, whole-time director of the company, said the company plans to make formulation drug Nateglinide for diabetes, Laflunomide for arthritis and third and fourth generation cephaloshorins, which are anti-bacterials.

The company has plans to introduce 15 new formulations in 2003, out of which seven will be new ones and the rest will be prevailing formulations in different dosages, said N.C. Mukherjee, marketing manager, Alembic Limited.

“The new products are expected to contribute around 12 per cent to our turnover, Amin said Amin though no specific investment figure was available for new products.

The other new formulations will be in the area of respiratory and anti-infective segment as also two neutraceuticals meant for age-related problem and for weakness of bones.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.76	HK $1	Rs.  6.15*
UK £1	Rs. 69.51	SW Fr 1	Rs. 28.20*
Euro	Rs. 42.41	Sing $1	Rs. 26.20*
Yen 100	Rs. 36.30	Aus $1	Rs. 24.65*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4990	Gold Std(10 gm)	Rs. 4890
Gold 22 carat	Rs. 4710	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7600	Silver (Kg)	Rs.7665
Silver portion	Rs. 7700	Silver portion	NA

Stock Indices

Sensex		3604.08		+ 33.62
BSE-100		1747.81		+ 20.56
S&P CNX Nifty	1163.50		+ 13.65
Calcutta	 123.04		+  0.94
Skindia GDR	 548.13		-  2.18
   
 

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