Fillip for private banks
ONGC backs mega-merger idea
Reliance network in 2 years
Merger bug bites Phillips Carbon
First private commercial satellite next year
IDBI moves court to protect Dabhol assets
Philips eyes 7% share of colour TV market
Tax on deep discount bonds on accrual basis
PNB not to tax perks of staff
Foreign Exchange, Bullion, Stock Indices

Mumbai, March 20: 
Providing more freedom to private sector banks, the Reserve Bank of India today liberalised norms for issue and pricing of shares by these banks. All private sector banks—listed or unlisted—under the revised norms will now be free to issue bonus and rights shares without its prior approval.

Moreover, the bonus issue would now be delinked from the rights issues, the central bank said. However, RBI’s approval would be necessary for initial public offerings and preferential shares.

Private banks were also given the freedom to price their subsequent issues once their shares are listed on the stock exchanges. The issue price should be based on the recommendation of merchant bankers, RBI said.

Pricing of preferential issues by listed banks may be done according to the formula of the Securities and Exchange Board of India (Sebi) while for unlisted banks their fair value may be determined by a chartered accountant or a merchant banker.

In case of pricing of issues where RBI approval is not required, pricing should be according to the Sebi guidelines, in cases where prior approval of the apex bank is required, pricing should take into account both Sebi and RBI guidelines.

Banks would, however, have to meet Sebi’s requirements on issue of bonus shares.

It should be made from free reserves built out of genuine profits or share premium, (b) should not dilute the value or rights of partly or fully convertible debentures, (c) should not be in lieu of dividend and (d) should not be made unless all partly paid-up shares are fully paid-up.

The latest relaxation, according to sources, will not only provide freedom to private banks but will also help them to mobilise resources.

The concessions come at a time when RBI is learnt to have been considering a proposal to withdraw its earlier stipulation that promoters of private sector banks will have to bring down their stake to 40 per cent.

The central bank, it may be recalled had clarified in February that foreign direct investment in private sector banks will be allowed up to 49 per cent.

The RBI, while stipulating several parameters for determining the 49 per cent FDI under the automatic route in respect of private sector banks, had said the categories of share that will be included are initial public offers (IPOs), private placements, ADRs/GDRs and acquisition of shares from existing shareholders.

However, regarding the acquisition of shares from existing shareholders, it had ruled that according to government guidelines, those foreign investors who have a financial or technical collaboration in the same or related field cannot issue fresh shares under the automatic route.


New Delhi, March 20: 
ONGC chairman Subir Raha today came out in favour of a merger of his oil prospecting corporation with Gas Authority of India Ltd (Gail) and Indian Oil to form a mega-state run oil sector giant.

Raha told reporters that “any such merger would add (shareholder) value...mergers and acquisitions are contemplated for just that after all.” However, he quickly added “no formal proposal to this effect exists.”

Petroleum ministry officials say that Raha has been among officials pressing for such a mega-merger as they say this would create an integrated oil corporation with presence in all four segments—prospecting, refining, pipelines and retailing.

An unstated reason is that such a giant would have the muscle to withstand competition from powerful newcomers like Reliance, Shell and British Gas.

While petroleum minister Ram Naik is reputed to be in favour of such an idea as it could be used as a tool by the government to keep a check on prices, his Cabinet colleagues oppose it claiming the concept of opening up the market and bringing in competition would be defeated if such a huge monolith is created in the state-run sector.

Proponents of the view, however, point out that monopolies by themselves are not dangerous but the abuse of their power is and that would be difficult in a deregulated market with several globally reputed players involved.

Raha also said the ongoing corporate rivalry over control of the lucrative Panna-Mukta and Tapti oil gas fields would not affect operations or necessary fund flows into the joint venture project.

“Unresolved operatorship issue has had no bearing on the operations of the (Panna-Mukta and Tapti) fields. Partners are funding operation costs and the fields are operating normally,” the ONGC chief said.

British Gas, which bought over Enron Oil and Gas India’s 30 per cent shareholding in the field for $ 350 million, is operating the field in the interim period, and has sought permanent status as operating or managing partner.

ONGC, which holds 40 per cent stake in the fields, is objecting to this and has pointed out that it holds the larger stake. The third partner, Reliance supports ONGC’s contention and has joined hands with the state-run giant on the issue.

“We are confident of our capabilities of operating the fields ourselves,” Raha said, adding if the three partners are unable to resolve the issue then the government would intervene.

The petroleum ministry has maintained that the operatorship issue would have to be decided by the three partners and the government would intervene only when all three asked it to.

Boost to crude output

ONGC will invest around Rs 9,000 crore per annum during the 10th five year plan period to boost crude oil production by 1.5-2 million tonnes by the fourth year of the plan period (2002-07).

“We will invest about Rs 46,000 crore during the 10th plan. Large part of the Rs 9,000 crore per year investment would be for deep water exploration,” Raha said.


Calcutta, March 20: 
Even as a solution to the marketing dispute between the Reliance group and Indian Oil Corporation remains elusive, the former has embarked on a strategy to set up its own countrywide distribution network by April 2004.

Sources said Reliance Industries (RIL) has finalised a blueprint to set up around 2000 retail outlets on national highways in the next two years.

The company, which has a 27-million tonne refinery at Jamnagar, is expected to invest Rs 8,000-10,000 crore to put in place its own network.

While most of the proposed investment will be met from internal accruals, the company may also borrow funds to bridge the gap.

On an average, each retail outlet will need an investment of around Rs 4-5 crore. Sources said the outlets, each of which will be built on 10,000 sq mts, will match international standards.

“These (the outlets) will be more like a supermarket where you get everything. Fuel will be only a little part of the entire offering,” they added.

This apart, the company has proposed to make a sizeable investment in several pipeline projects, including Petronet, so as to make the distribution infrastructure ready on time.

While RIL has a 10 per cent stake in Petronet, it has a 13 per cent stake in the 113-km long Vadinar-Kandla pipeline and proposes to take a 20 per cent stake in the 1615-km long Central India Pipeline Project.

Sources said with the completion of the pipeline projects, the company will be able to transport most of its products through pipelines across the country.

“The company plans to transport 10 per cent of its products by road, 15-20 per cent by rail and the rest through pipelines and sea routes,” they said.

Besides pipelines, the company has already set up evacuation infrastructure like port jetties and loading terminals.

“For a good retail outlet to run, one needs to have a very smooth delivery system as well as the quality of fuel. While we are one-up in quality, it is the delivery system which we are set to strengthen,” sources said.


Calcutta, March 20: 
RPG group company Phillips Carbon Black Ltd (PCBL) is weighing options to merge three of its subsidiaries—Transmission Holdings Limited, South Asia Electricity Holdings Ltd and PCBL Industrial Finance Ltd—with itself. The company is also working out a cost-cutting strategy to make itself more competitive.

Addressing the shareholders, Paras K. Chowdhary, chief of the carbon black division and member of the RPG supervisory board said, “The company is currently examining the proposal. We have to see what will be the impact on PCBL if these three companies are merged with it. The final decision will be taken within another six to nine months. We are also working out a cost reduction strategy. The areas that are being addressed are reduction in both power and employee costs,” he said.

The cost control drive is on in full force and its effects have been reflected in the first quarter results, he said. Although the turnover and income from operations came down to Rs 115.59 crore from Rs 124.68 crore, profit before tax rose to Rs 1.70 crore from Rs 75 lakh.

The company has put on hold its expansion plans in Sri Lanka and China. “We are taking a fresh look at the proposal. We have to first see how the international demand grows and then draw up our plans for investment in those countries,” he said.

Chowdhary also read out the speech of company chairman Sanjiv Goenka, who was not present at today’s AGM. In his speech, Goenka said the year ended September 30, 2001, was a difficult period, largely because of the slowdown in road transport activities, which forced a slump in the automobile industry. The slowdown in tyre production ignites a downturn in the demand for carbon black, he added.


Mumbai, March 20: 
Agrani Satellite Services Ltd (ASSL), France-based Alcatel Space Industries Ltd (ASI) and Arianespace will jointly launch the country’s first private commercial satellite in the fourth quarter of 2003.

Essel group chairman Subhash Chandra said there would be 24 C band transponders and 14 KU band transponders on the satellite, in which Essel group would use about 15-16 per cent capacity.

Agrani Satellite is planning to woo broadcasters and telecom service providers with competitive rates, Chandra said while speaking to reporters on the occasion of signing the shareholders’ agreement between ASSL, ASI and Arianespace to provide launch services.

The contract was signed by ASI chairman and CEO Pascale Sourisse. Arianespace president-director general Jean Marie Luton was also present.

ASSL has been formed to harness the market opportunities available by leasing out the satellite capacity to several end-users. Chandra said that the satellite will be delivered in a span of 18 months to Agrani.

He also said the company is looking out for a strategic partner.

When asked about the financial institutions’ stipulation that the promoters stake should not come below 51 per cent, Chandra said, “We hope the financial institutions will not mind reducing our stake by inducting a new partner.” He, however, refused to divulge any further details in this regard.

The project is estimated to cost around Rs 1,150 crore. ASI and Arianespace have picked up 13 per cent for $ 20 million in the equity of ASSL and the balance is underwritten by Essel group.

Chandra today signed the turnkey satellite contract, thus agreeing to procure a geostationary, C&Ku band satellite from ASI. The deal not only involves in-orbit delivery of the satellite, but also a ground control station by Alcatel.

The transponders will also support other applications including DTH, rural and remote area communications, domestic and international internet backbone bandwidth as well as direct access and international connectivity.

Chandra was optimistic that despite the low usage of satellite capacities in India, This business has large potential which still remained untapped.


Mumbai, March 20: 
Financial institutions led by the Industrial Development Bank of India (IDBI) today filed a separate petition before the Mumbai high court seeking an injunction to stop US courts from getting the authority to oversee distribution of the assets of the beleaguered Dabhol Power Company.

The case will come up for hearing on Thursday, IDBI officials said. The petition, filed today, seeks the court’s intervention to protect and preserve the $ 2.9-billion assets of DPC.

“We have filed a case restraining DPC and Enron from taking any action harming our interest in the project assets. The lenders are only asking for protection and preservation of DPC’s assets. There are no plans to take them over,” an FI official said. He said the lenders were not even enforcing security and that no court receiver has been appointed for attachment of assets.

Officials at IDBI said the action was prompted by a move by other Enron creditors to give a US court authority to handle all claims against the bankrupt Houston-based energy major.

IDBI chairman P.P. Vora told newspersons today that Enron’s creditors’ committee “has written a letter to us, saying all matters relating to Dabhol be transferred under the jurisdiction of a New York court.”

“We are moving the Mumbai high court with a plea that this letter be treated as null and void,” he added.

Enron had filed for bankruptcy on December 2, becoming the biggest US corporate failure ever. The rapid collapse of the global energy major, precipitated by vast debts hidden from its books, is now the subject of US Congressional and Justice Department investigations.

IDBI officials said the creditors of Dabhol’s US parent, which had formed a committee to press their claims, now wanted a say over Enron’s Indian assets too. “Our stand is that the Mumbai court’s jurisdiction is appropriate to deal with matters relating to Dabhol, including the sale of stake by foreign shareholders in the power project,” Vora said.

However, IDBI officials denied reports appearing in a section of the press which stated that the financial institutions—both foreign and domestic—would soon file a petition in a Mumbai court to put the $ 2.8 billion Dabhol facility into receivership.

The lenders’ move to “protect their interests,” according to another FI official, could have been triggered by the fact that DPC has given them an ultimatum for releasing funds of about $ 10 million for its sustenance, including critical care and preservation of the plant, payment of salaries to over 150 employees at the plant site and the Mumbai office.

“On March 18, DPC had again petitioned the lenders to release funds of about $ 10 million. Setting a deadline of March 25, the company had said it would be compelled to commence termination process of all its employees if the required funds were not provided,” the official said.

Further, the domestic lenders fear that Dabhol is unlikely to make its next payment to them due at the end of this month.

The 2,184 MW Dabhol power project has been jinxed right from inception. The 740 MW first phase started operating in May 1999. The 1,444 MW second phase was nearly complete when construction was halted after the Maharashtra State Electricity Board (MSEB), its sole customer, started delaying payments of more than $ 240 million. MSEB was obligated by the contract signed with the energy producer to buy 90 per cent of Dabhol’s output. The second phase however, saw costs shoot up, making it impossible for the state utility to buy power from DPC. Enron owns 65 per cent of the project, its largest investment in Asia, while GE and Bechtel Corp own 10 per cent each, and MSEB the remaining 15 per cent.


Calcutta, March 20: 
Philips India Limited (PIL), which has lined up Rs 10 crore for a promotional campaign during the football World Cup, is targeting a 7 per cent share of the colour television market in the current financial year.

The company has also decided to roll out new models of CTVs—an international collection of 21 to 29 inches—with an in-built interactive football game. It has appointed legendary football player P. K. Banerjee as brand ambassador to promote the company’s World Cup Football campaign—Ceetee Bajao, World Cup jao.

Rajeev Karwal, senior vice-president, consumer electronics said the company expects to become the market leader in CTV sales in West Bengal in the next three months time.

PIL has increased its market share in CTVs from 3.7 per cent in December 2000 to 5.2 per cent in December 2001. The company sold 4.59 lakh CTVs in 2001, clocking a sales turnover of Rs 304 crore.

In the audio segment, the company’s share improved from 27 per cent in December 2000 to 37 per cent in December last. It had spend around Rs 50 crore in promotional campaigns.

“In the real flat segment, we have gained a market share of 10 per cent and in the 29 inches we have gained a 22 per cent market share. We are targeting a 15 per cent market share in CTVs by 2005,” Karwal said. Overall, the consumer electronics division grew by more than 20 per cent.

The performance of the domestic appliances and personal care businesses of the company had been disappointing last year. Sales were flat in a difficult market with no improvement in profitability.

Similarly, sales of the semi-conductors and components business of the company also declined last year due to price erosion of over 30 per cent.

Even though the market share of the lighting division of the company increased, the GLS incandescent lamps market registered negative growth and the market for luminaries and lighting electronics and professional lamps grew only marginally. Intense competition led to price erosion affecting margins. The price erosion was particularly severe in the compact fluorescent lamps (CFL) category owing to cheap imports.

Sales and income of the company’s wholly-owned subsidiary Electric Lamp Manufacturers (India) decreased last year. Sales decreased to Rs 787 million against Rs 825 million in 2000. Operating profit for the year, after charging interest and depreciation however, amounted to Rs 36 million as against Rs 21 million for the previous accounting year.


New Delhi, March 20: 
The tax on income accruing from deep discount bonds will be charged on an accrual basis every year which, the government says, is a settled practice globally.

The new tax treatment for deep discount bonds will not be applied retrospectively—this means existing bondholders will not come under the modified tax treatment. The modification will be applicable to only those bonds that are issued after the notification of the CBDT circular dated February 15, 2002. A clarification issued by the revenue department in the finance ministry says that non-corporate persons who invest small amounts in new issues (face value up to Rs 1 lakh) can still opt to be taxed under the old system.

Defending the move, the government said the modified tax treatment for deep discount bonds corrects the anomalies in the system by providing a mechanism for taxing income accruing from year-to-year on these bonds on the same lines as the income from normal coupon-bearing bonds is taxed. The transfer of the bonds before maturity will attract capital gains tax as in the existing system.

A press note issued today said the earlier system of taxing the entire income received from such bonds in the year of redemption as interest income was anomalous, as it gave rise to a sudden and huge tax liability in one year, whereas the value of the bond had been progressively increasing over the period of the holding.

If the bonds were redeemed by a person other than the original subscriber, the person was taxed on the entire difference between the bid price and the redemption price as interest income. Such a system created tax-induced distortions in the debt market, also posing an impediment to the development of a market in STRIPS, that are essentially zero-coupon instruments derived from normal coupon bearing bonds.


New Delhi, March 20: 
Taking a cue from Life Insurance Corporation of India (LIC), Punjab National Bank has directed all its offices not to tax perquisites of its employees following interim stay orders from several high courts on employees’ petitions on the issue.

The finance division of PNB has issued circulars to all zones and head office divisions to restore the earlier practice of not taxing perquisites. However, this only grants exemption from TDS and the employees’ income tax liability is not altered.

The circular further says, “In case the stay granted is vacated and the income tax department makes a demand, including interest and penalty on the bank, these would be recoverable from the officers concerned.” LIC has also issued directives to its zonal offices not to deduct tax on the perquisites of Class I Officers and employees of Class III and Class IV, claimed an official of the All India Insurance Employees Association.

All India Punjab National Bank Officers Association had filed a petition in Karnataka High Court in February. The court granted an interim stay on March 13 and the case is due for final hearing four weeks from the day the stay order has been issued.

The decision to tax perquisites was taken by the finance ministry last year and will be implemented from April 1,2002.The Central Bureau Of Direct Taxes (CBDT) had come out with detailed rules on taxing various perks through a notification issued on September 25, 2001. CBDT sources maintain that the Finance Act, 2001 is explicit on the issue of taxing the perquisites and there has been no re-think on this issue despite representations at various levels.



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