New auto policy hits the road
Bajaj Auto, AV Birla firms join payout rush
Century to exit shipping
RBI cuts repo rate to 6%
S&P lessens Reliance worries
Pechiney sets sights on Nalco
Foreign Exchange, Bullion, Stock Indices

New Delhi, March 5: 
The government today cleared in-principle a new auto policy, while permitting 100 per cent foreign direct investment in advertising and the film sector under the automatic approval route.

The Cabinet was split on certain provisions of the auto policy and the government was able to win over dissenting ministers only after it promised to incorporate some changes in the provisions relating to minimum investment limits.

Last year, the World Trade Organisation’s dispute settlement body had ruled against India’s auto policy after the US and the European Union successfully challenged its provisions on minimum investment limits, higher localisation content in cars, and the requirement that automobile makers balance their forex outflows on imports against their exports.

The draft auto policy, which was prepared in reaction to the adverse WTO ruling, sought to considerably relax norms by setting a market capitalisation floor of $ 100 million for four wheelers and $ 25 million for two- and three-wheelers.

Protests from certain ministers on upfront investment levels of just $ 25 million for four wheelers and $ 5 million for two- and three-wheelers forced the government to promise that these levels and time frame for making them would be made stiffer.

However, the new policy scraps earlier stipulation of a 70 per cent indigenisation level within a 5-year time frame for all carmakers. The concession comes as the WTO ruling had specifically struck down India’s local content rules for foreign car companies setting up shop here.

Automakers say even the stipulation on minimum investment levels violates WTO norms but are willing to live with them as long as the sums involved can be brought in over a longer time frame.

The new norms are likely to allow investors to bring in money through equity as well as through long-term quasi-debt instruments which could have maturity periods of up to 20 years.

The policy will also impose a set of progressive environmental standards that will force auto-makers to bring in their latest technology into the country as well as incentivise use of environment-friendly fuels like CNG.

The government would also encourage research and development and manufacturing efforts towards the development of small car market. The new policy would also encourage setting up of independent auto-design firms.

The finance ministry clarified through a set of notes on the Cabinet policy cleared today that it would be using a differential tariff shield to ensure that carmakers did not turn into a screw-driver assembly point, by simply importing knocked down or semi-knocked down car kits instead of manufacturing them here.

Future customs duty structures would take this into account and continue to levy relatively lower import duty on components and progressively higher levels on kits. However, the overall duty structure will be brought down.

The policy will raise the current weighted tax deduction of 125 per cent. The government also plans to grant an excise rebate for every 1 per cent of the gross turnover of the company spent on research and development.

The decision to allow 100 per cent FDI in advertising under the automatic approval route will be welcomed by large advertising conglomerates like WPP which have been trying to consolidate their hold over their local ad firm associates. Until now, the limit under this route was placed at 74 per cent.

Commenting on the Cabinet decision, Shovon Chowdhury, executive vice-president and general manager of Bates India, said, “Most multinational advertising companies already have majority control. So, raising the level to 100 per cent will not make a major difference.” However, he added, “With 100 per cent investment allowed, it will be great for employees if they get overseas stock options.”

In early January, WPP, the world’s largest ad conglomerate, raised its stake in HTA from 60 to 74 per cent. The stake hike led to changes in the senior management at India’s biggest ad firm. WPP also raised its holding in its other associate ad firms like Equus from 32 per cent to 45 per cent.

The Cabinet today also gave its approval to the signing of the Stockholm Convention on Persistent Organic Pollutants (POPs).


Mumbai, March 5: 
Two-wheeler major Bajaj Auto Ltd (BAL) today announced a total interim dividend of Rs 14 per share (140 per cent), which is inclusive of a special one-time dividend of Rs 2 per share.

In another significant decision, the company has co-opted company president Rajiv Bajaj on the board of directors as an additional and whole-time director with effect from March 5.

A company statement said “A special one-time dividend of Rs 2 per share (20 per cent) has also been declared on account of the one-time premia of Rs 117 crore received during the year from Allianz AG, Germany, the company’s partner in the two insurance joint ventures.” The total dividend, together with the dividend tax thereon, aggregates to Rs 156.11 crore. The scrip has been rising following a distinct improvement in sales figures of its motorcycle business.

Meanwhile, Aditya Birla group companies Hindalco and Grasim were also not far behind in doling out generous interim payouts. Aluminium major Hindalco declared Rs 12 per share as interim dividend, while group company Grasim, with interests in cement and viscose, declared a dividend of Rs 8 per share.

However, other companies declared modest dividends. Dr Reddy’s Labs declared a dividend of Rs 2 per share having a face value of Rs 5. Apollo Hospitals declared a dividend of Rs 2 per share. Cement major Gujarat Ambuja declared a dividend of Rs 4 per share.

Engineering major Siemens declared an interim dividend of 30 per cent. Leading adhesives maker Pidilite announced a 50 percent payout and Tata Honeywell declared a dividend of Rs 6, while Godrej Consumer announced its second interim dividend of 50 per cent.

The board of directors of Tata Metaliks has declared a 20 per cent interim dividend—Rs 2 per share of face value Rs 10. The dividend will involve a total payout of Rs 5.57 crore. The record date for the dividend has been set as March 26, a company release stated.

Further, D-Link has declared an interim dividend of 50 per cent, involving a payout of Rs 3 crore.


Mumbai, March 5: 
Century Textiles and Industries Ltd,the B K Birla group flagship, is exiting the shipping business. The company plans to sell the remaining two ships that are now in its shipping division, which will effectively mean closing down the business.

In a communication issued to the Bombay Stock Exchange, Century Textiles said its board will meet on March 9 to consider the proposal for sale of the balance two ships and the consequent closure of shipping division after such a sale. The consent of the shareholders will also be taken on this issue through postal ballot.

The date for the postal ballot is likely to be fixed in the proposed board meeting which will also seek shareholders’ consent for authorising completion of sale and incidental functions relating to the sale, a company official said. Analysts welcomed the move and pointed out it would lead to a greater emphasis on its existing line of businesses, led largely by textiles and cement.


Mumbai, March 5: 
Moving along anticipated lines, the Reserve Bank of India (RBI) today lowered the repo rate by half a percentage point to 6 per cent. Though the reduction has triggered hopes of a cut in lending and deposit rates, sources said commercial banks are unlikely to act in haste.

Expectations are now building up that the central bank will take further measures to lower the interest rate structure, including a cut in the bank rate. At present, the bank rate is 6.5 per cent. That the central bank was going to nudge down the repo rate was made clear yesterday when RBI announced that it will hold a one-day fixed repo auction today at 6 per cent. It was after nine months that RBI had tinkered with the repo rate. Last time the repo rate was cut was on May 28 when it was brought down by 25 points to 6.50 per cent. Rates at the reverse repo auctions too have been at 8.5 per cent since May.

The repo instrument is used by RBI to absorb liquidity from the market while reverse repos are used to inject liquidity into the market. RBI uses these instruments to manage liquidity in the system. Repo rate is often seen as the benchmark for short-term interest rates and a reduction leads to a cut in inter-bank call money rates.

The money markets have been looking forward to the repo rate cut and this had led to government securities rallying yesterday. In the early morning trades today, the gains were further extended.


Mumbai, March 5: 
Leading global rating agency Standard & Poor’s today said the proposed merger announced by Reliance Industries Ltd (RIL) and Reliance Petroleum Ltd will not have any impact on its credit rating.

The proposed merger between RIL (foreign currency rating BB-) and Reliance Petroleum Ltd (which is yet to be rated by the global rating agency) would create an integrated energy company and strengthen RIL’s average business profile. The merged entity will have interests in oil and gas exploration and production, refining and marketing, petrochemicals, power, and textiles, which will enable RIL achieve significant size, scale and integration benefits, S&P said.

In addition, the financial profile of the merged entity is likely to remain consistent with RIL’s historic moderate prudential measures. Based on annualised nine-month results as on December 31, 2001, the merged entity would generate about Rs 58,000 crore in sales and earn about Rs 4,000 crore in net profit.

The refining and marketing assets of RPL will comprise about 58 per cent of total group sales, with Reliance’s petrochemicals business accounting for 40 per cent of total group sales.


New Delhi, March 5: 
Pechiney, the French aluminium maker and packaging giant, today announced that it wanted to bid for India’s largest aluminium maker Nalco “whenever the government decides to divest a strategic stake in it.”

The Cabinet Committee on Disinvestment is slated to meet later this month to consider a planned 30 per cent divestment in Nalco by issuing overseas depository receipts and follow it up with a strategic divestment later. The sudden announcement by Pechiney, which has been Nalco’s technological partner for the past 21 years, may cause the government to change plans.

Jean-Pierre Rodier, the chairman of the former French state-run company, said here, “The government has not formally announced anything yet, but if Nalco is divested, we think we are the obvious candidate to play the strategic partner’s role.”

Rodier also said Pechiney had applied to set up an approximately Rs 3,500-crore ($ 700 million) greenfield bauxite alumina project in Orissa and was now awaiting clearances from the central and state governments.

The decision to set up its own project comes after months of silence from Nalco to a proposal made last year to set up a joint venture project with the Indian company as an equal partner.

With Nalco coming up for sale, Pechiney has probably realised it would be difficult for the domestic aluminium maker to join it in any fresh venture. Hence, the twin decisions to bid for it and to simultaneously set up its own 100 per cent owned alumina project, which could be integrated with Nalco, if the purchase went through.

Rodier, however, made it clear that his firm would never bid “if the majority of the current management and I mean not only the top management but the bottom of the ladder as well, is not with us.” The French firm’s chief executive said he had held informal talks with top Indian government officials and has “informally made it clear that we are offering ourselves as candidates.”

Pechiney is also probably keen to buy Nalco, as otherwise the technology it has sold to the aluminium maker could fall into rival hands. Nalco, which has a 1.6 mt a year alumina refinery and a 2.2 lakh tonne a year aluminium smelting capacity, is rated as India’s most profitable aluminium maker.

As part of an aggressive global expansion strategy, Pechiney has earmarked Euro 500 million for investments abroad. “We will invest whenever we can get a return of 5 points more than whatever is the cost of the investment,” Rodier said, adding that Orissa and Venenzuela were currently on top of its list of target destinations, though sites in Australia and Brazil were also being studied.

The Pechiney chief is leading a high-level team in India to assess and lobby for both a strategic stake in Nalco and for the greenfield project.

The French team said it would pay “a full and fair price” for Nalco “which would be better than anything any of our rivals could put up.”

Besides disinvestment and mining ministry officials in New Delhi, the team is expected to meet the Orissa government leadership to discuss their twin goals in India.



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