Savings prop for salaried class
Govt critical of dividend pullout rush
Charred IDBI edgy about power loans
Oil dealership in for overhaul
Reckitt pegs open offer price at Rs 250 a share
Court ruling brings back foreign funds to the market
Knowledge solutions to propel NIIT revenues
Foreign Exchange, Bullion, Stock Indices

 
 
SAVINGS PROP FOR SALARIED CLASS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March 13: 
The government is planning to devise a savings scheme that will benefit the salaried class in both the public and private sectors, specially those opting for early retirement schemes.

“We are considering a savings scheme for the entire salaried class,” finance minister Yashwant Sinha announced here today. He, however, refused to spell out the details.

Sinha’s announcement of a special saving scheme comes less than a fortnight after he announced a 50 basis point cut in the interest rate on small savings schemes like NSS, NSC and Kisan Vikas Patra to around 9 per cent.

This is the second year running that the government has slashed interest on small savings: in March 2001, the rate had been reduced by 1.5 percentage points pushing it below double digits for the first time.

Justifying the second cut in the small savings rate, Sinha asked: “Should the economy be run for a class of people who live on interest income?”

In his latest budget, Sinha extended the tax waiver on VRS compensation up to Rs 5 lakh to employees of “certain institutions of national and state-level importance,” adding that the list would be notified later.

The new savings scheme is expected to provide relief to those who have been affected by the reduction in small savings rate by 0.5 per cent announced in the budget.

The cut in the small savings rate had drawn howls of protest from taxpayers who have always banked on these schemes to stay ahead of the real interest rates in the economy, which are far higher than the prevailing rate of 1.32 per cent as measured by the wholesale price index.

The move for a special savings scheme for the salaried class could be a part of the pension reforms, which was spelt out by Sinha in the budget. The roadmap for the pension sector will be formally announced by June.

At present, the pension cover is provided to the government employees only. But the Insurance Regulatory and Development Authority (IRDA) and insurance industry had demanded reforms in the pension sector, specially in the unorganised and services sector to boost long-term savings.

The industry has demanded a three-pillar pension structure—the first pillar to cover government and public sector employees, the second pillar for private employers and employees, and the third pillar will be a voluntary scheme for everyone.

The finance minister had delivered a double whammy when he pared the tax rebate on investments under section 88 for income-tax payers from 20 per cent to 10 per cent for income between Rs 1.5-5 lakh while withdrawing the concession for income above Rs 5 lakh.

Sinha defended this move as well. “The middle class does not earn Rs 40,000 a month or Rs 5 lakh per annum. It (the reduction in concessions) will affect only 3.65 lakh taxpayers of the total 20 crore middle class,” Sinha said.

Dividend taxation

Sinha said small investors would not be asked to pay tax or furnish tax-deducted at source certificates (TDS) after getting dividends from companies, reports PTI.

   

 
 
GOVT CRITICAL OF DIVIDEND PULLOUT RUSH 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 13: 
The sudden rush by listed companies to cancel interim dividends for 2001-02, is unethical and against investor interests, department of company affairs (DCA) secretary Vinod Dhall said today.

Several companies had initially announced hefty dividends after the finance minister announced that dividends would be taxed in the hands of recipients, but later reversed their decision following the Securities and Exchange Board of India’s (Sebi) fiat to the bourses to stick to the notice period norm.

Defending the Sebi clampdown on the stock exchanges, Dhall said the government was compelled to take steps to prevent tax avoidance.

The companies could have gone ahead with the payouts and pay tax for benefit of the investors, he told reporters on the sidelines of a seminar on employee stock option plan (ESOP) organised by the Confederation of Indian Industry here.

Earlier, speaking on ESOP schemes introduced by Indian companies, he said “Most of them have provisions for senior management personnel only and schemes should be extended to cover lower rung staff as well to ensure their involvement in company operations.”

Companies from knowledge-based industries have introduced ESOP schemes to ensure sense of involvement and participation but companies from other sectors have yet catch up with the trend.

Indian companies have to be clear as to why ESOPs are offered to employees—to retain and attract them, he said, adding transparency and disclosures were necessary for success of the stock plans.

Manab Bose, managing partner of connectivity international, said ESOP as a part of a variable pay structure would help companies link employees’ performance with the compensation. Proper balance between ESOP-based compensation for higher level managers and other employees had to be maintained to ensure parity of benefits, he added.

Many large multinationals from the US and UK are extending domestic employee ownership plan to staffers working abroad, he said.

   

 
 
CHARRED IDBI EDGY ABOUT POWER LOANS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, March 13: 
Scarred by the Dabhol experience, Industrial Development Bank of India (IDBI) has decided to go back to the traditional three-tier payment security mechanism comprising an escrow cover, letter of credit and a state guarantee.

The move by the financial institution, which has the largest exposure to power projects in the country, is a clear indication that the reform-based approach to financing power projects, introduced last year, has failed to take off. IDBI’s exposure to Dabhol is to the tune of Rs 2,158 crore.

A top-level IDBI official told The Telegraph from Mumbai, “The DPC incident has been a major blow to all the financial institutions, including for us. We would not like to repeat it again. The board recently decided that a security mechanism should be in place before any new projects are taken up.”

For new projects, the board has decided that escrow must be ensured up front before the loan disbursement.

“We also want a state guarantee on the loan so that it does not turn into a bad debt. Similarly, we also want a letter of credit from the party. Despite all these, we will be more cautious before financing power projects,” the official added.

Explaining the rationale behind IDBI’s huge exposure to the power sector, the official said, “Three years back, there were over two dozen investment bankers devoted to the power sector. The entry of private players in the sector promised a lot of business. Non-recourse financing was in. Some bankers were involved in arranging offshore debt, others were pitching in with funding, and still others were advising promoters on a variety of issues. There was excitement and hope. Though fraught with risks, IPP financing was also an exciting business opportunity.”

But slowly, the dynamics of the sector changed. Deals that were meant to happen fell through. Credit enhancement mechanisms that could support non-recourse financing like state government guarantees and escrows dwindled. There was not much progress on the reforms front either.

Under the reform-based financing, the state government, state electricity boards and other lenders to the project have to enter into a memorandum of understanding. The states and SEBs also have to undertake reforms in a time-bound fashion. The escrow cover would have to be available to the lenders 31 days before the commercial production of the project.

“Payment risks even today continue to hamper finance to the power sector. The financial health of the SEBs all over the country has not improved. Right now most of the FIs and banks will shy away from power sector financing,” bankers said.

   

 
 
OIL DEALERSHIP IN FOR OVERHAUL 
 
 
FROM VIVEK NAIR
 
Mumbai, March 13: 
With the imminent decontrol of the oil sector, public sector majors are likely to see several constraints on marketing being lifted, even as questions remain whether the Dealer Selection Board—which nominates dealers for PSU oil companies—will now be disbanded.

Though the government is yet to formally apprise industry in this regard, it is expected that the entry of the private sector into retail marketing of petro products will lead to lifting of restrictions on PSU majors. Among the other strictures that could at least be partially lifted are giving preference to SC/ST candidates and army personnel.

According to industry sources, the removal of restrictions on appointing dealers would not only end malpractices such as ‘benami’ ownership, but also benefit the PSUs. “We will now be in a position to appoint the right kind of dealers. This will not only help us, but the consumers as well,” a senior official from one of the public sector oil majors pointed out.

Under the present regulations, oil companies, including HPCL, BPCL and IOC, are permitted to allot only one outlet to a dealer, which also includes his near relatives. Further, the appointment of dealers is determined by the board, which consists of a representative from the petroleum ministry and representatives from the oil industry. “But, in this case, the controlling authority is the ministry, which has a major say in appointing our dealers,” an official said, lamenting the absence of any significant autonomy in this case.

The issue of granting autonomy in the appointment of dealers, particularly to existing PSUs, has assumed significance as the private sector is set to enter the retail business beginning April 1. Players like Reliance Industries, Essar Oil, Shell, British Petroleum are among the few that are expected to draw up their battle plans in the months to come.

Sources pointed out that in such a scenario, while the presence of a good distribution network is of utmost importance, the nomination of a dealer with a sound financial acumen and good connections with potential customers also plays a vital role.

“All this cannot be fulfiled in the present system where there are several restrictions. Therefore, removal of these restrictions will only be beneficial to all concerned,” the source noted.

Among the public sector majors, while HPCL has over 4,600 retail outlets, BPCL has a network of over 4,500 stations. Analysts here point out that more than 50 per cent of the networks of these majors are owned by franchisees.

   

 
 
RECKITT PEGS OPEN OFFER PRICE AT RS 250 A SHARE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 13: 
FMCG major Reckitt Benckiser has joined the growing list of multinational companies planning to delist its shares from the local bourses.

The company’s UK-based parent Reckitt Benckiser plc today announced an open offer to buy out the remaining stake in the Indian arm at Rs 250 per share, entailing an acquisition cost of Rs 403.19 crore.

The Reckitt stock surged 9.83 per cent to Rs 238.50 per share and closed the day at Rs 238.50. The company saw 3.35 lakh shares being traded on the Bombay Stock Exchange (BSE).

In a notice to the stock exchange, HSBC Securities & Capital Markets Private Ltd said it is making an open offer on behalf of Reckitt Benckiser plc, along with Lancaster Square Holdings SL.

“A voluntary offer to the equity shareholders of Reckitt Benckiser India Ltd (RBIL) to acquire 16,127,462 equity shares of Rs 10 each representing 49 per cent of the paid-up equity share capital of RBIL at a price of Rs 250 per share payable in cash,” the notice said.

The specified date is April 1 this year. The date of the opening of the offer is May 14. The date of the closing of the offer is June 13, the BSE notice said.

As on September 30 last year, the parent company held a 51 per cent stake in the Indian subsidiary, financial institutions and mutual funds 19.86 per cent and 5.83 per cent respectively, while the Indian public held nearly 29.14 per cent.

According to analysts, like other companies in the FMCG sector, even Reckitt is feeling the pinch as it is seen struggling with sluggish topline growth in its key household and fabric care businesses.

During the third quarter, Reckitt Benckiser actually witnessed a 6 per cent decline in sales turnover.

The slowdown was mainly attributed to a declining trend witnessed in Mortein mosquito repellent and soaps market.

Marketmen say though the offer price is above the 52-week high of Rs 225, the scrip used to hover around Rs 300 even a couple of years back. Analysts had expected the open offer price to be between Rs 280 and Rs 320.

   

 
 
COURT RULING BRINGS BACK FOREIGN FUNDS TO THE MARKET 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 13: 

The market today witnessed a renewed buying support from foreign funds following the “status quo” ruling given by the Supreme Court on Ayodhya issue. Share prices of old economy stocks like Hindustan Lever, Reliance Industries, Hindustan Petroleum, Mahanagar Telephone Nigam, ACC, L&T regained a portion of their overnight losses which lifted the sensex by 33.82 points.

The BSE-30 sensitive index opened slightly lower at 3531.48 and moved irregularly in a range of 3601.82 and 3531.02 before closing at 3569.62 as against Tuesday’s close of 3535.80, up by 0.96 per cent.

The day’s upsurge was led by index heavyweight Hindustan Lever. Infosys, however, could not sustain the uptrend after Moody’s Investors Services cut the rating of its key client Nortel Networks Corp.

Infotech counters continued to drift lower in today’s trading.

In the specified group, 111 stocks, including 26 index-based scrips, registered sharp to moderate gains while 58 others closed with losses.

The bullish fervour was reflected in the exchange’s turnover. The volume of business was up at Rs 1,616.27 crore from Rs 1,484.32 crore on Tuesday.

Infosys Tech was the top traded counter with a turnover of Rs 187.96 crore followed by Satyam Computer (Rs 178.35 crore), Visual Soft (Rs 156.45 crore), Polaris Soft (Rs 91.93 crore) and Mastek (Rs 76.54 crore).

HLL scrip rose by Rs 5.80 to Rs 238.25, Reliance Industries by Rs 1.45 to Rs 293.45, HPCL by Rs 2.15 to Rs 292.90, ACC by Rs 2.90 to Rs 160.35, Bajaj Auto by Rs 7.25 to Rs 489.20, Dr Reddy by Rs 34.40 to Rs 1,073.35, ITC by Rs 1.80 to Rs 719.45, L&T by Rs 3.15 to Rs 193, MTNL by Rs 7.90 to Rs 151.50, Ranbaxy by Rs 25.25 to Rs 875.90, and Hughes Soft by Rs 26.30 to Rs 374.25.

However, Infosys scrip dropped by Rs 140.95 to 4,050.25, GACL by Rs 3 to Rs 215.75 and Wipro by Rs 10.80 to Rs 1,772.35.

   

 
 
KNOWLEDGE SOLUTIONS TO PROPEL NIIT REVENUES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, March 13: 
NIIT today launched its suite of enterprise knowledge solutions (EKS) for businesses world-wide.

The Delhi-based company claimed that it is the first in the country to offer customised knowledge solutions for enterprises and expects to generate revenues worth $ 30 billion by September 2003 from sales of the product.

Enterprise Knowledge Solutions (EKS) is a comprehensive technology, content and services package, which enables organisations to maximise employee productivity and improve business results. In addition to conventional learning applications, EKS addresses areas like product launch, process dissemination, product support and induction.

“EKS brings performance-centric, role-based content and individualised services to enhance personal effectiveness,” chairman Rajendra S. Pawar said.

A recent International Data Corporation report has projected corporate spending on online training and education in the US to touch $ 8.23 billion by 2005.

Commenting on NIIT’s entry into this sunrise area Pawar said, “NIIT’s Enterprise Knowledge Solutions guarantees specific business and financial results. Our alliance with Click2learn enhances the capability of EKS in the global e-Learning market.”

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.72	HK $1	Rs.  6.15*
UK Ł1	Rs. 68.75	SW Fr 1	Rs. 28.60*
Euro	Rs. 42.60	Sing $1	Rs. 26.40*
Yen 100	Rs. 37.65	Aus $1	Rs. 25.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4970	Gold Std (10 gm)Rs. 4910
Gold 22 carat	Rs. 4695	Gold 22 carat	  NA
Silver bar (Kg)	Rs. 7750	Silver (Kg)	Rs. 7800
Silver portion	Rs. 7850	Silver portion	  NA

Stock Indices

Sensex		3569.62		+33.82
BSE-100		1741.96		+13.88
S&P CNX Nifty	1157.05		+ 6.60
Calcutta	 120.09		+ 1.31
Skindia GDR	 557.40		- 6.40
   
 

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