Sebi dams up dividend deluge
Forward deals in the dock
Stake sale buzz propels Federal Bank
HM to recharge Contessa sales
Go-ahead for GM plan
Strategy paper on export of services
Skoda revs up to roll out Fabia
Go global with poor man’s cellphone
Foreign Exchange, Bullion, Stock Indices

 
 
SEBI DAMS UP DIVIDEND DELUGE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 6: 
The rush of interim dividend payouts by companies eager to issue fat cheques to shareholders before the taxman plays spoilsport has got the Securities and Exchange Board of India (Sebi) cracking. The capital market regulator has directed stock exchanges not to waive the 30-day notice for dividend announcements, mandatory as per listing rules. For most companies—those traded in the paperless mode—the minimum notice period for fixing record dates is 30 days and that for convening board meetings is seven days.

Responding to the Sebi diktat, major stock exchanges, including Bombay, National and Calcutta, have announced that they would stick to listing agreement norms. A notice of less than the stipulated 30 or 42 days would be considered as “non-compliance with the listing agreement clause,” thay added.

The regulator swung into action as most of India Inc made a beeline to beat the March 31 deadline for avoiding dividend tax. Starting April 1, dividend income will be taxed at the recipients’ end, which effectively means a tax rate of 31.5 per cent for most individuals (the highest bracket), whereas companies now pay only 10 per cent distribution tax on dividends.

Sebi, in its letter dated March 5, told the bourses, “to take a uniform view in the matter, namely to advise companies of the requirement of the due notice period under clause 16 of the listing agreement”. The regulator added that “no relaxation of the said notice period of 30 days or 42 days as applicable” be permitted.

There are broadly three options before companies that have already declared dividend. They can distribute dividend as planned defying the Sebi order, or defer it till next fiscal, or withdraw the dividend altogether. The market believes most companies with a large promoter holding may choose to defy the order because the penalty they face is negligible in comparison to the financial benefits.

Housing finance major HDFC has already reviewed its intention of declaring an interim dividend, finally deciding against the move. Most companies, including the Tatas and the AV Birla group, declined to comment. Two-wheeler major Bajaj Auto Ltd told The Telegraph that it is “studying the implications of the Sebi move”.

The move came as a blow to the bourses, with the BSE sensex shedding 69 points from its intra-day high. The sensex fell from its intra-day peak, as scrips fattened largely by generous dividend announcements were deflated.

However, Mirc Electronics Ltd (makers of Onida TV) remained defiant. Vijay Kumar, company secretary at Mirc said, “The stock exchange letter is dated March 6, and therefore not applicable to companies who have already announced the board meeting and interim dividend.”

   

 
 
FORWARD DEALS IN THE DOCK 
 
 
BY ANIEK PAUL
 
Calcutta, March 6: 
The market regulator’s fiat to stock exchanges to ensure that companies are adhering to listing norms in declaration and distribution of dividend has caught dividend-strippers off guard.

The traders who had gone for the kill while hedging their cash market purchases by selling stock futures, will suffer huge losses if the companies defer the distribution of dividend till the next financial year or withdraw it altogether in keeping with Sebi’s directive.

Consider this: Kuber, a trader, buys stock A at Rs 100 on the day dividend is declared. The company recommends a dividend of Rs 4 per share. To hedge his risk in the cash market, Kuber sells the stock’s March future. Even if he sells it at a discount, say at Rs 98, he books a tax-free profit of Rs 2, without bearing any market-linked risk.

The transaction generates a profit of Rs 2 on an investment of Rs 100 in less than a month’s time. This translates into an annualised yield of over 25 per cent. But if the company withdraws the interim dividend now, Kuber will suffer a loss of Rs 2.

If the company distributes the dividend in the next financial year in keeping with the listing norms, Kuber will have to pay tax on his dividend income. This will not only upset Kuber’s yield calculations on the investment, but may also result in losses.

Of the companies that have declared interim dividend recently, stocks of 11 are traded on the derivative segment. These are Bajaj Auto, Cipla, Dr Reddy’s, Gujarat Ambuja, Grasim, Hindalco, Tata Power, Tata Steel, Tata Tea, Reliance Industries and Reliance Petroleum.

What is more, most of these 11 companies, except Reliance Petroleum, offered hefty dividends. Higher the dividend, better the return on investments, a trader said.

Bajaj Auto, for instance, recommended a dividend payout of Rs 14 per share, Hindalco Rs 12, Tata Tea Rs 7, and Grasim Rs 8.

Traders said, investment on these stocks offered a risk-free annualised return of 24-30 per cent. “Perfectly judicious investments may turn bad and result in big losses now,” said a trader. “We are hoping that the companies defy the Sebi directive and distribute dividend as planned,” he added.

Three other companies, whose shares are traded on the futures and options segment—Mahindra & Mahindra, HDFC and BSES—had said they would consider declaring interim dividend.

   

 
 
STAKE SALE BUZZ PROPELS FEDERAL BANK 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 6: 
Shares of the private sector Federal Bank and South Indian Bank (SIB) hit yearly highs today on market talk that ICICI Ltd, which holds a significant stake in the two, is close to selling its share.

ICICI, which is planning a reverse merger with ICICI Bank, has to sell its stake in the two, as the Reserve Bank of India’s (RBI) regulations bar a bank from holding a stake in another, other than for investment purposes. Such investments are capped at 5 per cent of the overall exposure limit.

While ICICI holds close to 24 per cent in Federal Bank, it holds over 11 per cent in South Indian Bank.

Among the two, Federal Bank scored a handsome gain of over 17 per cent and closed at Rs 114.65, after opening at Rs 100 and rising to a day’s high of Rs 117.35 against the previous close of Rs 97.80.

On the other hand, the South Indian Bank scrip soared close to 20 per cent to touch Rs 47.15 after opening at Rs 40, against the previous finish of Rs 39.30.

Though a senior ICICI official denied any stake sale move, market circles have their doubts as the RBI has been clear in its regulations relating to a bank holding equity in another.

An important factor that attracted attention to these counters was the feeling that they were prime take-over candidates.

Most private sector banks have gained handsomely in recent times, largely owing to the RBI clarification permitting 49 per cent foreign direct investment in such banks.

Further, the budget has lifted the FII limit, which means that foreign stake in private banks can now go up to 98 per cent.

   

 
 
HM TO RECHARGE CONTESSA SALES 
 
 
BY A STAFF REPORTER
 
Calcutta, March 6: 
Backtracking from its earlier plan of completely phasing out Contessa cars, Hindustan Motors has decided to give it a new lease of life, relaunching it as an inter-city luxury car.

Addressing a press conference here today, G.L. Reddy, vice-president (marketing) said: “We are currently selling 10 to 20 Contessa cars per month and it has a niche market even today. We want to give it a last try. We may come up with a fresh marketing strategy for Contessa after a couple of months.”

Sales of Contessa stood at 200 units per month in 1997-98, but dwindled with the entry of luxury cars in the Indian market. “Even today, the car is good for a long drive. So we want to cash in on this parameter,” Reddy said.

A. Sankaranarayanan, managing director of HM, had said last year that since sales of Contessa were not picking up, the company may have to stop its production at the Uttarpara factory.

HM today launched power steering facilities for its Ambassador 2000 DSZ and Ambassador Classic 1800 ISZ.

“Our internal research had indicated that a power steering version of Ambassador has been a long-standing demand of our customers. The new Ambassador with power steering is an amalgamation of both style and comfort. Customers will experience smooth driving and easy parking,” Reddy said.

The ex-showroom prices (Calcutta) of Ambassador Classic 2000 DSZ and Ambassador Classic 1800 ISZ with power steering will be Rs 4.64 lakh and Rs 4.21 lakh respectively.

The company will also provide retro fitting facility for its earlier variants at a cost of Rs 33,000.

The company expects the sales of Ambassador to go up by about 3,000 units in the next financial year due to the addition of the power steering facility.

HM has sold about 13,000 Ambassador cars, 2,500 rural transport vehicles and about 2,000 Trekkers till February.

Strike at Uttarpara

Both the Citu and the Intuc unions at Uttarpara factory have called a strike on March 8 to protest the company’s decision to freeze wages, adjust leaves against non-production days, non-payment of annual increment to the workers and non-settlement of annual bonus for 2000-01.

Ajit Chakroborty of the Intuc-affiliated unions said, “If the management fails to settle these issues we will go in for a bigger movement.”

   

 
 
GO-AHEAD FOR GM PLAN 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March 6: 
General Motors today received a Tallboy-sized headroom to raise its investments in India when the government cleared its proposal to raise its authorised equity capital to Rs 400 crore and preference share capital to Rs 200 crore.

GM’s investment is being earmarked for its Halol operations where it makes the Opel Astra, Corsa and the Swing — all vehicles in the so-called C segment.

GM plans to bring in the Vectra, a 1.8 litre Opel saloon model, which will be brought in as completely built unit. In January, GM had said that it planned to introduce some models of Subaru, the Japanese small car maker, in which it has a 49 per cent stake.

GM is already in talks to wrap up a deal to take over Daewoo Motors of South Korea and rumours have swirled about a possible acquisition of Daewoo Motors’ Indian operations as part of a revised agreement.

The GM proposal was among a batch of 38 foreign direct investment proposals worth Rs 940 crore that were approved by commerce minister Murasoli Maran on the recommendations made by the Foreign Investment Promotion Board.

Maran also cleared a Rs 151.56-crore proposal of Holland-based Cooperative Centrale Raiffeisen Boerenleebank to enhance foreign equity to 100 per cent from 75 per cent in Rabo India Finance.

A Rs 20-crore proposal of Timex Watches to raise its foreign stake in Indian arm to 83.54 per cent was also cleared.

Shiv Calor Asia of the Netherlands was allowed to raise its stake to 100 per cent in Haldia-based SHV Energy India Pvt Ltd with an inflow of Rs 45 lakh.

   

 
 
STRATEGY PAPER ON EXPORT OF SERVICES 
 
 
BY A STAFF REPORTER
 
Calcutta, March 6: 
The government is preparing a medium-term strategy paper pertaining to export potential in the services sector, commerce and industry minister Murasoli Maran said.

Speaking to reporters after an interactive session with exporters, organised by the Federation of Indian Exports Organisation (FIEO) here today, Maran said the country has enormous potential to tap the global market.

“A committee has been set up under the commerce ministry to study the prospects and accordingly make recommendations,” he said.

Export growth for 2001-02 is expected to touch the revised target of 3 per cent if the upswing witnessed in January continues for the rest of the year, Maran said.

“The export sector witnessed a robust 18 per cent growth in January. If this trend continues throughout the last quarter the revised target of 3 per cent will be achieved,” Maran said.

Growth during April-December 2001 was 1.8 per cent compared with 20 per cent during the same period last year.

Maran explained the ‘intervention package’ announced by the Centre in October 2001, had helped largely to turnaround the dismal export situation in the aftermath of terrorist attacks on World Trade Center on September 11. The government will also come out with a more export-friendly policy document in order to enable Indian industry become more competitive in the global arena.

Maran said the Centre aims to simplify procedures and attain more transparency in the system.

   

 
 
SKODA REVS UP TO ROLL OUT FABIA 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, March 6: 
Czech automaker Skoda is changing tack and plans to introduce the Fabia sedan as its next model in the country after Octavia.

Fabia will be manufactured in India and will cost Rs 8-8.5 lakh which will be pitted against Honda City and Mitsubishi Lancer.

Skoda sources say they have been forced to put off plans to introduce Octavia Combi, which it showcased at the auto expo in January, as the government’s auto policy was designed to boost manufacturing of small cars.

Last October Skoda had launched Octavia, the cheapest ‘D’ segment car in the country, priced at Rs 10.6 lakh (ex-showroom Delhi). Both the petrol and diesel versions of the notchback are sold at the same price.

“After the Octavia sedan, we had aimed for Octavia Combi. But the estate versions have not yet kicked off that well in India yet. Moreover, the government’s auto policy signals that they prefer smaller cars. The mentality of the crowd also suits us. We will go for Fabia Sedan as the next model,” Skoda sales and marketing head Bipin Datar told The Telegraph.

Both Octavia Combi and Fabia Combi are now rescheduled for early launch next year. “The response to Octavia has been overwhelming. After the initial glitches, we have sold 350 cars in the first two months of this year. All the cars have been manufactured from SKD kits. We plan to sell 6,000 units by the December end,” Datar said.

   

 
 
GO GLOBAL WITH POOR MAN’S CELLPHONE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March 6: 
The poor man’s cellphone can now go global. Technological advancements have made it possible for cellular service providers like Reliance and MTNL—the champions of code division multiple access (CDMA) technology—to offer a global roaming facility to their customers.

The question is: will the policymakers and regulators give them that overarching access which could knock the bottom out of GSM service providers like Bharti’s Airtel and Hutchison’s Orange.

Cellular companies like Bharti and Hutchison have already hunkered down for an increasingly raucous war of words with wireless in local loop (WiLL) service providers like Reliance and MTNL on the issue of limited mobility.

But technology waits for no one and renders even the most vociferous debate pointless.

Qualcomm Inc of the US, which developed CDMA technology and is Reliance’s technology partner, has now come up with a double whammy: first, it is offering global roaming facility which it plans to test worldwide at the World Cup starting in June in South Korea and Japan. Second, it has devised the ultimate cellphone—a 55 gm handset that allows its user to toggle between GSM and CDMA users.

The normal handsets weigh anywhere between 80-100 gm, with a few model weighing as low as 35 gm. But the CDMA handset will be able to support new applications.

In India there are about 5 million GSM subscribers and 1.2 million CDMA users.

Delivering the keynote address at the Convergence India 2002 here today, Qualcomm chief Irwin Jacobs said, “We will support manufacturers in India who wish to manufacture CDMA phones and build infrastructure and also those wishing to develop new applications that can be downloaded into phones. I see a large potential for research and development in the software area.”

Qualcomm plans to invest about $ 20 million in research and development in India and also plans to invest another $ 5 million in software development.

“We would like to join hands with a software company which can write application for software devices on CDMA platform. We have not yet finalised about setting up our own R&D centre but if we have to set up it will have an investment of about $ 20 million,” said Jacobs.

The company which had set its base in Chennai around 1994-95 had withdrawn from India in 1996.

“Due to economic slowdown we had decided to sell our handset manufacturing units to Ericcson, as a result we decided to close our operations in India. We see a tremendous opportunity for CDMA now,” he said.

TDSAT directives

The Telecom Dispute Settlement Appellate Tribunal today asked the private cellular operators to submit separate affidavit if they wish to intervene in the issue of fixed line operators providing limited mobility.

The Cellular Operators Association of India on Tuesday had filed a petition in TDSAT requesting its intervention, to direct the fixed line operators to use V5.2 software in the wireless in local loop system.

This would help limiting mobile calls made from CDMA-based WiLL phones within a specified area.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.69	HK $1	Rs.  6.15*
UK £1	Rs. 69.28	SW Fr 1	Rs. 28.30*
Euro	Rs. 42.44	Sing $1	Rs. 26.30*
Yen 100	Rs. 36.94	Aus $1	Rs. 24.95*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5000	Gold Std(10 gm)	Rs. 4930
Gold 22 carat	Rs. 4720	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7775	Silver (Kg)	Rs. 7785
Silver portion	Rs. 7875	Silver portion	NA

Stock Indices

Sensex		3614.44		- 26.66
BSE-100		1764.67		-  3.02
S&P CNX Nifty	1172.60		-  5.90
Calcutta	 122.78		+  0.03
Skindia GDR	 562.54		-  1.26
   
 

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