Sensex sinks to two-month low
Goodlass Nerolac soars on buyback buzz
Wipro logs into bio-infotech
CEA decides to crack the whip on Gridco
Glaxo links adspend to brand profitability
SK Modi lands in land-for-share row
Pension scheme for poor gets in-principle okay
Govt clears Astra plan to raise stake to 100%
Pharma majors lobby for customs duty cut
Foreign Exchange, Bullion, Stock Indices

 
 
SENSEX SINKS TO TWO-MONTH LOW 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 16: 
A selloff in Hindustan Lever (HLL) drove down the BSE sensex to a 69-day low at 3461.51 points as the political brinkmanship between the BJP and a key coalition ally left markets groping for clues.

The fast moving consumer goods major was among the index heavyweights that suffered sharp losses in a market where both foreign investors and mutual funds turned sellers. It contributed almost 32 points to the slide in sensex, which closed with a 48-point decline from Monday.

Opening lower at 3459.08, the benchmark 30-share index kept slipping for the best part of the day in narrow trading. In percentage terms, the loss was 1.38 per cent.

Other key shares that ended in the negative territory were Reliance Industries and ITC. The session was marked by intermittent FII selling as political jitters prompted them to wind down positions.

Lever tested an intra-day low of Rs 210.50 before LIC stepped in to mop up the highly defensive stock. The scrip closed at Rs 211.15, surrendering almost Rs 11.80 over its previous day’s finish. The clobbering took Rs 2,695 crore away from the company’s market capitalisation, which fell to Rs 46,480 crore from Rs 49,075 crore on Monday.

ITC advanced in the early hours of trading, but retreated in the post-noon session as the weak market sentiment and coalition convulsions rocked the tobacco major.

Investors of Hindustan Lever, which announced first-quarter numbers after trading hours on Monday, fretted about the 10 per cent decline in sales. Analysts were worried how long the company would be able to turn in a 26 per cent net profit if the topline was squeezed.

Market fervour was also dampened by reports that Reliance, Lever, Raymond and other big export houses would be hit by an anticipated rise in freight rates to the US.

Foreign institutional investors were wary, ending net sellers to the tune of Rs 81.3 crore today. Many fear these drops could turn into a deluge if the political equilibrium is upset by TDP’s possible withdrawal of support. The party has been mum on whether it will stick by the Vajpayee government or call off the alliance.

In the specified group, 107 shares, including 20 from the index, registered sharp to moderate losses, while 59 others finished with gains. The volume of business was lower at Rs 1212.10 crore from Rs 1395.70 crore on Monday.

A few second-rung counters did buck the downtrend in a session where losers outnumbered gainers by 727 to 531.

Among the big losers, apart from Lever, were Reliance Industries, which dropped by Rs 4.75 at 289.10, ITC by Rs 10.70 at Rs 633.85, SBI by Rs 2.25 at Rs 239.35, Telco by Rs 2.45 at Rs 132.15, Glaxo by Rs 4.25 to Rs 398.90, Grasim by Rs 1.75 at 287.75, Hero Honda by Rs 8.40 at Rs 355.10.

The gainers included Digital Global, which rose by Rs 14.85 at Rs 675.05, Visual Software by Rs 6.60 at 275.05, Bhel by Rs 1.30 at Rs 172.70, Cipla by Rs 13.95 at Rs 1025.60, Nestle by Rs 4 at Rs 525.75, Ranbaxy by Rs 23.20 at Rs 873.80, Zee Telefilms by Rs 3.40 at 167.40 and Rolta by Rs 6.45 at Rs 116.50.

Rupee steady

The rupee held its ground against the dollar, closing at 48.94, though it did rally to 48.93 in a forex market affected by the nation-wide strike by banks and FIs.

“There was hardly any activity as most major players participated in the strike. A brief rally in the morning was aborted by late afternoon. Nobody was willing to give quotes in a shallow market,” a forex dealer said.

   

 
 
GOODLASS NEROLAC SOARS ON BUYBACK BUZZ 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 16: 
Goodlass Nerolac Paints (GNPL) has become another company to join the ranks of those which expect their foreign parent to announce a share buyback.

This speculation sent the Goodlass scrip racing past its 52-week peak during intra-day deals today. Having opened at Rs 144.95, it scaled the day’s high of Rs 163.50 before closing at Rs 151.30. That still represented a gain of around 7 per cent over its previous finish.

According to market watchers, interest in the stock, which usually does not witness large volumes, was aroused by the buzz that Kansai Paints Company, its Japanese parent, would consolidate its stake in the company. The counter witnessed 691 deals with 36,260 shares being traded, generating a turnover of Rs 55.91 lakh.

The interest in Goodlass mirrors the recent trend in the market where companies with overseas parentage notched impressive gains. Recently, Colgate Palmolive recorded good volumes on hopes of a buyback by its parent. The company, however, denied it.

The Tata group had pulled out of Goodlass Nerolac Paints when Forbes Gokak Ltd divested its 28.56 per cent stake to Kansai Paints at a price of Rs 250 per share for a consideration of Rs 98.56 crore.

After this deal, Kansai emerged as the majority shareholder in Goodlass with a holding of around 65 per cent. The Japanese major previously held around 36 per cent of the company’s equity. Kansai Paint Company is Japan’s largest paint maker, and among the world’s top ten.

Goodlass is the domestic leader in industrial paints, one of the two segments in the industry, other than decorative paints. Some estimates say the company has almost half of the auto paints market in its clasp.

However, the domestic paints industry has so far been dominated by those who are leaders in decorative paints.

At the forefront of the pack is Asian Paints. But, the sector, according to some analysts, is undergoing a structural shift towards industrial paints.

This structural change is expected to spur the under-developed industrial paints market into a high-growth phase.

The industry is heading for brand competition, a tussle where distribution network holds the key. It has been focusing on user industries like automobiles for the past few years to boost growth.

Goodlass was established in 1920 by the Tata group in collaboration with Goodlass of UK, a part of the Cooksons Group. The Tatas held 40 per cent through Forbes Gokak. In 1983, Goodlass entered into a technical and financial collaboration with Kansai Paints.

   

 
 
WIPRO LOGS INTO BIO-INFOTECH 
 
 
OUR BUREAUX
 
April 16: 
Wipro today announced it was entering biotech-IT—an area where information technology converges with life science—by carving out a new division, Wipro Healthcare and Life Science. The business is worth an estimated $ 25 billion and expected to grow at an annual rate of 20 per cent over the next few years.

Announcing the decision in Bangalore, company chairman Azim Premji said: “The launch of Wipro Healthcare and Life Science is in continuation of our strategy to identify growth opportunities that enhance shareholder value. We believe that information technology can revolutionise healthcare and life science. Our domain knowledge in IT, customer relationships built in our healthcare business through Wipro GE Medical Systems and Wipro Biomed provide us a with a distinct edge to address the requirements of this emerging segment.”

The new division of the Rs 3123.45-crore Wipro will offer solutions to hospitals, health insurance companies, life science firms, medical and analytical device makers.

In the US, where the biotech industry is the most developed, there are around 1,200 companies with over 1,50,000 skilled workers in high-salary jobs. In India, the biotechnology industry was valued at $ 2.5 million in 2001.

As part of a larger effort to leverage customer relationships and ties with manufacturers of medical and life science equipment, the business interests of Wipro Biomed will be transferred to the new healthcare and life science division. In addition, the existing client base of Wipro Technologies in the healthcare vertical will be shifted to Wipro Healthcare and Life Science.

Biomed is a division of Wipro that sells and services instruments meant for the bio-analytical and healthcare markets.

D. A. Prasanna, who has been appointed as vice-chairman of Wipro, will head Wipro Healthcare and Life Science. He will also be chairman of Wipro Fluid Power, and continue to be on the board of Wipro GE Medical Systems. “Healthcare IT is a big market and life science is soon emerging as an industry. Wipro has a network of relations with global leaders like GE Medical Systems, Beckman Coulter, Agilent, Fujinon and Cerner,” Prasanna said.

Infosys launch

Infosys Technologies today announced the launch of its business process management (BPM) venture, called Progeon Ltd, a company in which it would hold a majority stake.

Infosys has also acquired additional funding of $ 20 million from Citigroup Investments for Progeon, a company statement said. Last week Infosys had said it has plans to start a BPM initiative with an investment of $ 5 million.

Progeon would be headquartered in Bangalore and is incorporated in India, the release said. The company would currently operate out of the Infosys state-of-the-art facilities in Bangalore.

Together Progeon and Infosys would offer their clients a complete cost-effective solution based on service and technology outsourcing, the release said.

Phaneesh Murthy, Infosys board member and head — worldwide sales and marketing said, “We welcome Citigroup Investments as an investor and we see this as a great partnership”.

“Infosys is a leading brand in India and this is a significant investment for us”, said Robert Druskin, executive vice-president-chief operations and technology officer of Citigroup.

   

 
 
CEA DECIDES TO CRACK THE WHIP ON GRIDCO 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, April 16: 
The Central Electricity Authority (CEA) has taken a tough stand against Gridco, which has been overdrawing 350-400 MW of power from the eastern grid. The CEA has said if the frequency in the eastern grid falls below 49 hertz, then one tie-line supplying power to Gridco will be snapped by the Eastern Regional Load Despatch Centre (ERLDC).

Grid discipline is a pre-requisite for maintenance of primary grid parameters— namely frequency and voltage—within permissible limits, for safe, secure and stable operation of the grid. The permissible range of grid frequency is 49-50.5 hertz.

The decision was taken at a meeting held yesterday which was attended by the CEA chairman, representatives of Gridco, Powergrid Corporation of India, National Thermal Power Corporation (NTPC), member secretary EREB, and the additional general manager of ERLDC.

Gridco had been overdrawing power from the eastern grid, following regulation of power supply by NTPC. This resulted in power cuts in Bengal and adjoining areas. NTPC had regulated power to Gridco from March 10 on account of non-payment of dues worth Rs 850 crore. Sources said that the regulation has now been extended to June 10. Gridco argued that it was unable to pay NTPC since the distribution companies were not paying them in time.

The eastern grid also suffered due to non-availability of power from NTPC’s Farakka, Talcher and Kahalgaon plants. The shortage of power, which was around 1,200 MW, combined with the overdrawal by Gridco, saw frequency fall to 48.2 hertz, putting the stability of the grid in jeopardy. Speaking to The Telegraph, G.D. Gautama, chairman, West Bengal State Electricity Board said, “We took up the matter with the Union power minister and the CEA, following which the latter has adopted a tough line.”

   

 
 
GLAXO LINKS ADSPEND TO BRAND PROFITABILITY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 16: 
GlaxoSmithKline Pharmaceuticals Ltd has decided to hike its promotional expenditure on a select clutch of brands that have been identified as yielding high margins and with potential to be money-spinners.

This was recently indicated by the company’s senior management to a select group of analysts.

Sources here said Glaxo has segregated its gigantic product portfolio into four categories—those that have recorded high volumes but low margins, products with high margins yet showing medium volume growth, brands which have huge potential, and a few tail-end products that would be divested in the months to come.

While products like Zinetac (anti-ulcer) would come in the first category, sources said increased marketing support is unlikely to be provided to such products. However, support is slated to be hiked in products that include Seretide (anti-asthma), Phexin, Ceftum (cephalosporins), Zyban, Augmentin among others. Sources here added that anti-infectives, respiratory, dermatology and diarrhoea have been identified as segments that can deliver.

“Henceforth, major investments in advertising and promotion will only be focussed on profitable brands, that currently account for around 30 per cent of the company’s sales. These brands are projected to grow at rates more than that witnessed in their respective therapeutic segments,” sources pointed out.

Glaxo, it may be recalled, faced tough conditions in the 2000-01 fiscal when the pharmaceuticals market registered single digit growth rates and de-stocking was observed at the wholesaler level. Yet another threat that emerged was from “generic generics”.

However, the company has over the past one year done a broad restructuring of its brand portfolio through the sales of a few tail-end brands and an extensive voluntary retirement package at its Worli unit aimed at cutting costs. Sources said following previous experience, sales to stockholders with high inventory levels have also been curtailed.

Additionally, the company is also learnt to have been considering the possibility of evolving a lean structure through a merger of its subsidiaries. Sources said that Glaxo has also not ruled out the possibility of divestment in some of these subsidiaries. The company’s subsidiaries include Biddle Sawyer Ltd, Croydon Chemical Works, Meghdoot Chemicals, Samgir Investments, Glindia Investments.

Analysts point out that various initiatives taken by the company over the past one year are likely to be felt positively in its bottomline during the current fiscal year. Glaxo is now hoping that this will lead to profits doubling over the next couple of years.

SmithKline Beecham Pharmaceuticals India Ltd had merged with Glaxo India on January 1, 2001, which consequently saw the company’s paid-up capital rise to Rs 74.47 crore.

   

 
 
SK MODI LANDS IN LAND-FOR-SHARE ROW 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 16: 
Beleaguered industrialist Satish Kumar Modi has landed in the thick of another controversy — this time in a land-for-shares deal involving Royal Airways, an airline he had promoted and later sold.

Auditors S.R. Batliboi have blown the whistle on several fishy transactions that put Modi in a spot. The auditors have taken exception to a deal that a Modi-run firm had struck five years back with ModiLuft, the airline he had promoted—now renamed Royal Airways—where a piece of land at 15, Ratan Babu Road in Kashipur, Calcutta, was leased out to the airline for a security deposit of Rs 36 crore, which went to pay for equity shares held by three other Modi-run investment arms.

The funny thing about the deal, auditors said, was the fact that “the possession of the said property” is still not with Royal Airways. The airline has now started “efforts to recover the security deposit,” according to the report filed by Batliboi.

The report, which is quite hard hitting, will be discussed at an annual general meeting of the airline’s shareholders on April 18. S. K. Modi and his lawyer, Neeraj Sharma, refused comment on the report, saying they had a case pending in court over the management control of the airline.

The deal was to enable Royal Airways to set up a training school-cum-airline catering outfit at the Kashipur property which was being leased from Agache Associates, an investment firm owned by S.K. Modi.

Agache assigned the Rs 36-crore security deposit in favour of three other Modi-owned investment firms—Modi Overseas Investment Ltd, Paradise Credit Pvt Ltd, and Kesha Investments Pvt Ltd. The three, in turn, asked Royal Airways to utilise the money as part payment for some 11.54 million shares of the airlines, which they had bought without making full payment.

The report says “in view of the fact that all flights of the company’s airline originated from New Delhi and the company in any case ceased operations in mid-November 1996, the space acquisition (for which book transfer of funds were made in 1997) could not have been of any use to the company. Further, the possession of the said property is not with the company.”

The Batliboi audit report which has Notes to Accounts running into seven pages, also lams the management team led by Modi, the previous promoter of the airline (it has since been taken over by an NRI family — the Kansagras), for neither keeping in the company’s possession some 1.25 million shares of Modi Hoover it had bought, nor recording any sale of this asset.

The spat between the Kasangras and the Modis started last year over S.K. Modi’s bid to take control of airline’s bank accounts and its functioning. Modi had handed over control by issuing cumulative redeemable preference shares worth $ 17.5 million to the Kasangra-controlled Royal Holdings two years back. The shares were converted into equity on February 28, 2001, giving the Kasangras what they argue is real control. However, the Modis say they are in charge till the regulatory authorities confirm the new equity structure. Once that happens, Modi’s stake will be limited to 15.58 per cent, leaving with little say in the airline’s affairs.

The company’s previous management had apparently also not kept any record of the fixed assets brought forward from earlier years as well as any record of inventories of aircraft spares and in-flight equipment it had.

The auditors took exception to the fact that there are no records of why a sum of Rs 3.04 crore was drawn through cheques issued “to various parties” from an account it had with ICICI Bank, New Delhi.

   

 
 
PENSION SCHEME FOR POOR GETS IN-PRINCIPLE OKAY 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, April 16: 
The Group of Ministers on pension reforms today decided in principle to go ahead with a pension scheme for the informal sector with a minimum monthly contribution of Rs 100.

The new pension policy for the middle class and poor is politically being viewed as part of a bid by the BJP to brush off the ‘pro-business’ tag, reinforced after this year’s budget increased income tax rates and cut tax sops for the middle class, while allowing up to 100 per cent foreign investment in most sectors and reducing taxes on multinationals.

Despite the in-principle decision, the group will, however, still have to thrash out several key details like the agency which will regulate the sector, norms for starting the scheme and the limits on how the money will be deployed, including in the stock market.

Planning Commission deputy chairman K.C. Pant, who chaired the meeting, told reporters that it could take up to June to thrash out the details and up to November to actually kick start the scheme.

The Insurance Regulatory and Development Authority today gave a presentation on the entire concept and the ministers will now deliberate on the fine print, Pant said.

Among other things, the IRDA has sought tax sops, to make the scheme—which will start paying back after a minimum contribution period of 20 years—workable. The IRDA scheme, based on an earlier report prepared by a group set up by the ministry of social welfare, is purely voluntary.

That report had suggested that collections could be made through post offices and nationalised banks to widen the reach of the policy to cover people in the urban self employed and rural sectors.

“A presentation was given by the IRDA chairman N. Rangachary on its report. We will like to work on a pension scheme for the unorganised and self-employed sector, which has so far been untouched,” Pant said.

A major bone of contention is which body will regulate the pension sector. IRDA has suggested that a fresh body under it could take up this responsibility, but this is not yet acceptable to all members of the GoM.

Among others who attended the meeting were finance minister Yashwant Sinha, labour minister Sharad Yadav, rural development minister Venkaiah Naidu, and social justice and empowerment minister S. N. Jatiya.

Pant hinted the pension sector could be opened up for private players, including asset management companies, to manage the pension funds so as to bring in competition and spread risk cover. LIC and other life insurers could be asked to provide the annuity.

   

 
 
GOVT CLEARS ASTRA PLAN TO RAISE STAKE TO 100% 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 16: 
The government today cleared foreign direct investment (FDI) proposals worth Rs 123 crore, including a Rs 82-crore equity infusion by Swedish pharma giant Astra Pharmaceuticals AB, to hike its stake in the Indian arm to 100 per cent from the current level of 54.99 per cent.

Today’s approvals also included Abbey National’s plan to pick up 7 per cent more stake in Tata Home Finance taking its total equity to 37.04 per cent.

The government also approved changes in the Hindustan Motors-Mitsubishi FDI pact to allow lump sum payment for technical know-how transfer and royalty payments to Mitsubishi for Pajero, which is being imported for sale in India.

B.K. Chaturvedi, president and executive director of Hindustan Motors said, “Mitsubishi is not investing any money to bring in Pajero here. But we will have to pay a lump sum amount towards technology transfer.” He, however, did not specify the royalty terms or the lump sum amount involved. The Toyota-Kirloskar automobile venture, which plans to import Prado multi-utility vehicle for sale here, too had sought changes in their FDI agreement as has Honda.

Among other proposals cleared by the government today is a proposal by US-major Cargill Asia Pacific Ltd to set up a vegetable oil refinery in collaboration with DLF. Similarly, Colombo-based New Unity Enterprises got the nod to procure pulses, rice, utensil and other items from India for export to the UK, the US, Singapore and Malaysia.

The proposal by Japanese Denso Corporation to manufacture, assemble, sell and distribute engine management systems or fuel injection systems was also cleared today.

Another proposal pertaining to auto components that got the approval was one of Hyundam Industry Co Ltd, based in Korea, to manufacture and supply sophisticated fuel pump assembly and module for the production of passenger cars.

   

 
 
PHARMA MAJORS LOBBY FOR CUSTOMS DUTY CUT 
 
 
FROM RAJA GHOSHAL
 
New Delhi, April 16: 
Pharma MNCs are lobbying the government to scrap the 5 per cent basic customs duty on 88 imported life-saving drugs that was imposed in the recent budget.

The lobbying is being done through the 68-member Organisation of Pharmaceutical Producers of India (OPPI), which includes all the pharma MNCs and a few Indian companies. Their grouse is that the duty was imposed on the grounds that indigenous variants of these drugs were available in the country. They claim that the indigenous producers manufacture the drugs in very small quantities.

Several pharma MNCs like Eli Lilly, Pfizer, Aventis and Fulford have contended that the list of indigenously manufactured drugs are based only on data made available by the office of Drugs Controller General of India, according to the ‘registration status’ of these drugs.

They say that in some cases the manufacturers have obtained registration but have yet to start actual production.

In its individual representation to the finance ministry, Eli Lilly had submitted a list of five of its drugs which have become part of the 88 drugs (in the newly created list 3), with a statement on the local manufacturing status of these drugs.

In the case of Somatropine and Vancomycin, it has argued that no local manufacturing facility is available. Somatropine—a biotech product—is a human growth hormone. Vancomycin is a special antibiotic that acts against multiple resistance Staphylococcus Aureeus—a bacteria acquired in hospital after an operation. It said only one local manufacturer was producing Dobutamine and that its marketshare was negligible.

Eli Lilly says that a majority patients use the imported drug. Dobutamine, a positive Inotrope, is a cardiac product which enables the heart to pump more blood when the latter is failing.

For its drug Gemcitabine, Eli Lilly contends that only a penultimate conversion with local formulation is available and that the majority of lung cancer patients use the imported form, which has a higher isomeric purity. For its Tobramycine drug, Eli Lilly says there is no manufacturer of this bulk drug in India. Tobramycine acts against the bacteria Amino Glycopeptide.

For Elli Lilly, the collective turnover of these five drugs is about Rs 35 crore, a company spokesperson said. Following its meeting with the revenue secretary, the company has been told that the finance ministry will consider a review only if it gets a justification from the department of chemicals and petrochemicals on why these drugs should not be exempted from the duty.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.94	HK $1	NA*
UK £1	Rs. 70.31	SW Fr 1	NA*
Euro	Rs. 43.09	Sing $1	NA*
Yen 100	Rs. 37.22	Aus $1	NA*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay

Gold Std (10gm)	NA	Gold Std(10 gm)	Rs. 5010
Gold 22 carat	NA	Gold 22 carat	NA
Silver bar (Kg)	NA	Silver (Kg)	Rs. 7755
Silver portion	NA	Silver portion	NA

Stock Indices

Sensex		3413.72		- 47.79
BSE-100		1712.82		- 18.45
S&P CNX Nifty	1118.75		- 15.40
Calcutta	  NA	           —
Skindia GDR	 551.51		-  7.60
   
 

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