Stage set for Bangla gas supply
Dark prognosis for family-run units
BoR stake tussle erupts again
Morgan slashes India weightage
IOC offers 24% to Purnendu
New vision for IBP
Foreign Exchange, Bullion, Stock Indices

 
 
STAGE SET FOR BANGLA GAS SUPPLY 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 12: 
The Bangladesh government has sent out feelers, indicating that it is prepared to allow US companies prospecting for natural gas in that country to sell it in India.

“We have been given to understand that Bangladesh will relent at the joint economic council meeting to be held soon,” top officials said. “However, they may set some conditions.”

Indian officials have decided on a two-trunk pipeline route for Bangladesh gas to be brought in through Bongaon or Krishnagar in West Bengal.

One line will run to Khorda in Orissa and then on to Chennai, passing through Andhra Pradesh. The second pipeline will run on to Ranchi in Jharkhand and from there to Jagdishpur in Uttar Pradesh, passing through Bihar. Both the trunk routes will have spur lines linking industrial centres like Vizag and Jamshedpur on the way.

Gas Authority of India Ltd (Gail), which is supposed to set up the lines as part of a consortium with other state-run oil companies, has asked another state-run company—the consultancy service firm Mecon—to undertake the cross-country trunk gas pipeline route survey work. It is expected to be over by November and actual work on building the pipeline could start sometime after that.

Officials said the lines would also be used for gas exports from Myanmar, with links to the proposed pipeline from Haldia and Paradip ports. State-run oil companies—ONGC Videsh and GAIL—have taken a large stake in a major gas rich exploration block in Myanmar as part of a consortium led by the Korean chaebol Daewoo. Officials say that this field is likely to turn out to be a rich source of gas.

Officials said with Pakistani intransigence holding up a planned oil and gas pipeline linking Iran with Gujarat, the Indian government has to look east.

Security considerations also dictate that India actually go in for a proper mix of various sources of supply and not depend solely on gas imports from Iran via Pakistan.

Officials say the gas deal with Bangladesh will be a significant diplomatic victory as Begum Khaleda Zia, before being sworn in as the head of the Bangladesh government, had opposed the sale of gas to India, arguing it could starve future Bangladesh industries of a cheap fuel source.

However, the arduous job of running a country saddled with huge trade deficit and debt burden coupled with pressure from US gas firms have forced Begum Zia to change her stance on the issue. US-based gas companies which have been prospecting gas in Bangladesh are all in favour of sales to India as there is little current demand from within that country.

   

 
 
DARK PROGNOSIS FOR FAMILY-RUN UNITS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 12: 
Family-run businesses are on the skids and only a handful of them will survive in the next 10 years. The dire forecast has been made by McKinsey & Co, the worldwide consultancy which has carried out a study on family-run enterprises that has yet to be published.

McKinsey director Ashok Alexander spoke about the study at a CII-organised panel discussion on the challenges of leadership and succession at family-run businesses here today, but refused to divulge any further details about the study or name the companies that had been studied.

Alexander said a large number of family-run businesses have already gone into decline in just two or three generations.

He said the success of a company depends crucially on the elements of governance and leadership. They will now have to introspect on the role that the family should play in the business.

Several large American and European corporations that were once family-owned are now run by professional managers as in the case of Hewlett Packard and Ford Motor (even though the Dearborn-based automaker recently brought back William Clay Ford, the great grandson of Henry Ford at the helm last year).

In Europe, influential families like the Wallenburgs have professional managers to protect their interests on the boards of companies though there are occasional hiccups as the recent ignominious exit of Percy Barnevik who represented Wallenburg interests in companies like ABB which he once ran.

McKinsey has been called in by several family-run companies to advise them on the way forward—which has given the consultancy some insights on the way they are run.

Alexander said family businesses have to create a non differential board as well as compensation. Family members should not get unjustified compensation and the less competent family members should be kept out of the company, he said. Wives, sisters, in-laws and other relations, unless they have a justification for their presence, should be kept away, he said.

Several industrialists who were present during the panel discussion did not agree with Alexander’s bleak prognosis. Arun Bharat Ram, vice-chairman and senior managing director of SRF Ltd, said he did not agree with the view that there was a dark future ahead of them.

However, he conceded that by the time the business gets to the third generation, only 5 per cent of family-run businesses survive in the form intended by the founder. The rest go bust or become fragmented because of family break-ups or takeovers, he said.

He said the key to successful family businesses lies in separation of ownership from management and pointed out that there are enough examples of companies going beyond the third generation and surviving for more than 300 years, running into several generations.

Bharat Ram said, “In my own family company, which is now into its fourth generation, we were falling apart by the third generation. But now we have taken steps to run the business with more professional managers,” he said.

“In SRF, we now have only two family members as directors, and eight outside members as directors. Six months back, we had four family members and six members from outside,” he said. SRF also has a family council, including the family members.

Anand Burman, deputy managing director of Dabur India said, “Dabur has beaten the 5 per cent rule by surviving as a healthy family-run business well into its fifth generation.”

He emphasised the distinction between family-owned and family-run business in order to create value for all stakeholders.

Sunil Kant Munjal, managing director of Hero Corporate Services Ltd, said that only about 7 per cent of family-run business manage to align the interests of the family with that of the business.

   

 
 
BOR STAKE TUSSLE ERUPTS AGAIN 
 
 
FROM SATISH JOHN
 
Mumbai, April 12: 
The Jaipur-based Bank of Rajasthan Ltd (BoR) is in the eye of a storm again. This time, because the Tayals, who took over the ailing bank from the Keshav Bangur group and nursed it back to health, say they are being stalked by the Jaipurias who have ramped up their stake to 14 per cent.

The Jaipurias, bank sources say, held 0.5 per cent of the equity before a rights and warrants conversion pushed up the equity capital to Rs 107 crore. The Keshav Bangur group had renounced its share of the rights issue in favour of the Jaipurias, who now have acquired 14 per cent.

The Jaipurias, like the Bangurs earlier, were associated with the bank at one point of time. It is believed that C. Jaipuria was on its board in the early nineties.

The Tayal family, currently at the BoR helm, controls around 40 per cent of the bank’s equity. While the group’s stake in a bank is comfortable, there is some concern because the remaining equity is spread across 40,000 shareholders.

Bank sources say the regulators have been informed of the development. There is a possibility the Jaipurias and Bangurs are acting in concert, a situation that would trigger an open offer. Under the Substantial Acquisition of Shares and Takeover Regulation, 1997, a group must make an open offer for 20 per cent of equity once its stake rises above 15 per cent.

Estimates prepared by the bank’s sources show that Keshav Bangur and Jaipuria group could, together, be holding around 20 per cent.

“We are still making an inventory of the BoR’s shareholding,” they said.

On February 20, the bank was informed that Devyani Foods, a company based in Noida, near Delhi, was controlling close to 14 per cent.

While the promoters are reportedly comfortable with 40 per cent — the maximum they can own under Reserve Bank norms — they fear the Jaipurias and Bangurs have ganged up.

BoR, under the Tayals, has turned the corner and is likely to report a net profit in the last financial year and resume paying dividends after a gap of seven years.

Its paid-up equity has shot up from Rs 2.5 crore in 1993 to Rs 107 crore. The Tayals were asked to infuse funds into the bank, as the new promoters, by way of equity. Its net worth is currently Rs 300 crore and deposit holders’ funds are pegged in the region of Rs 4,500 crore.

   

 
 
MORGAN SLASHES INDIA WEIGHTAGE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 12: 
Morgan Stanley Capital International (MSCI) today slashed India’s country weightage in its composite Emerging Markets Free (EMF) Index by 1.6 per cent from 5.55 per cent to 3.93 per cent.

The bourses, however, shrugged off the blow dealt by the influential index tracked by foreign fund managers for their investment portfolio. The benchmark BSE index ended in positive territory at 3510.90 as against the previous close of 3497.67, a gain of 13.23 points.

Market circles here said that the cut in India’s weightage announced by MSCI was lower than initial estimates of a cut to around 3.86 per cent. They also added that the changes would have limited impact as many of the foreign funds are not overweight on India.

While Reliance Industries Ltd, Infosys and HDFC emerged as top three companies with the highest contribution of above 10 per cent each in MSCI’s India Standard Index, HDFC Bank and Satyam Computer have received a higher standing in the revised index. The biggest losers were State Bank of India, Hindustan Petroleum and Hindustan Lever. Other losers include Cipla, Castrol, VSNL and Zee.

MSCI also brought down India’s weightage in the all country world index by 0.12 per cent.

The changes announced by MSCI are a result of the ‘May quarterly index rebalancing,’ including a full review of the free float of all constituents, as well as the second and final phase of the implementation of the enhanced methodology, MSCI pointed out. The first changes were announced in May last year and the final changes will be effective from the close of business on May 31. The revised MSCI index covers 26 emerging markets.

MSCI, while revising the index, has excluded the promoters’ holding and stake which has been held for a long period, to calculate floating stock available for trading. It had earlier stated that securities with a free float below 15 per cent will not typically be eligible for inclusion in the MSCI equity indices.

   

 
 
IOC OFFERS 24% TO PURNENDU 
 
 
BY A STAFF REPORTER
 
Calcutta, April 12: 
Indian Oil Corporation (IOC)—offered management control of Haldia Petrochemicals (HPL)—wants Purnendu Chatterjee’s stake capped at 24 per cent as part of the conditions it has laid down to run Bengal’s showcase petrochem project.

Under a proposal it has drawn up, IOC wants 26 per cent, along with management control. At the same time, it is keen to ensure that The Chatterjee Group and Bengal have no more than 24 per cent each. That would give IOC absolute control over HPL.

“We have prepared a different shareholding pattern for HPL to ensure absolute management control. We have already offered 24 per cent to Purnendu Chatterjee. He had a meeting with our finance director P. Sugavanam last week. It remained inconclusive as Purnendu was not agreeable to the proposal,” Indian Oil chairman M.S. Ramachandran said today.

“IOC’s entry into HPL will take place only after the promoters agree to our proposal. Now, everything depends on Purnendu as the state government and Tatas have practically no objection to our proposal. We are committed to investing in Haldia Petrochem,” he added.

Under its own formula, IOC would hold 26 per cent, while Purnendu and the state government will have 24 per cent each; the rest will be with the financial institutions (FIs).

HPL’s present paid-up capital is Rs 1,260 crore, of which Purnendu and the state government own 43 per cent each. They have paid Rs 541.8 crore each for their stakes.

IOC is ready to invest Rs 468 crore for 26 per cent and management control in a move that would raise HPL’s equity to Rs 1,728 crore.

If Purnendu’s holding falls to 24 per cent in the expanded equity, his contribution will come down to Rs 414.72 crore. To scale down his stake in the company, he would have to offload shares worth Rs 127.08 crore.

Asked about Tata’s desire to exit HPL, Ramachandran said, “IOC will not pick up Tata’s share. It will go to the FIs.” Queried if there was a time-frame to resolve the imbroglio over HPL, he said: “There is no deadline.”

   

 
 
NEW VISION FOR IBP 
 
 
BY A STAFF REPORTER
 
Calcutta, April 12: 
Indian Oil Corporation has drawn up a new vision for IBP, the city-based oil marketing company which it took over in February. IOC chairman M. S. Ramchandran said IBP will focus on strengthening its marketing network and not on building up oil infrastructure.

“IBP will not invest in storage tanks and oil terminals because there will be no shortage of supply with IOC having seven refineries and refineries owned by two subsidiary companies. More so, a cross-country pipeline of over 6,500 kms is coming up. So IBP’s investment will be very focussed,” Ramchandran said.

The IOC chairman was here today to hold an extra-ordinary general meeting with IBP shareholders, in order to pass a resolution for amending the company’s article of association.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.90	HK $1	Rs.  6.20*
UK £1	Rs. 70.25	SW Fr 1	Rs. 29.00*
Euro	Rs. 43.04	Sing $1	Rs. 26.25*
Yen 100	Rs. 37.05	Aus $1	Rs. 25.85*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5155	Gold Std (10 gm)Rs. 5015
Gold 22 carat	Rs. 4870	Gold 22 carat	  NA
Silver bar (Kg)	Rs. 7900	Silver (Kg)	Rs. 7875
Silver portion	Rs. 8000	Silver portion	  NA

Stock Indices

Sensex		3510.90		+13.23
BSE-100		1752.97		+ 3.81
S&P CNX Nifty	1146.50		+ 2.90
Calcutta	 118.84		+ 0.28
Skindia GDR	 559.54		- 2.28
   
 

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