Wipro feels the price pangs
Sensex settles in two-month trough
Nuclear energy fuels govt’s new power plan
Ahmedabad seeks Lyons Range hand
Multinational pharma stocks gain vigour
Reckitt Benckiser picks three power brands
Power review meet next week
Duracell not to recharge Delhi unit
ICAI report on power accounting norms soon
Foreign Exchange, Bullion, Stock Indices

 
 
WIPRO FEELS THE PRICE PANGS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 19: 
Wipro disappointed the market today by unveiling a 28 per cent rise in fourth-quarter net profit at Rs 231 crore, and soured investors’ appetite by forecasting a marginal sales growth for April-June.

The company expects revenues to grow 2.2 per cent to $ 123 million from $ 120.3 million in the last quarter. Analysts had been looking to a profit of Rs 235 crore, and a projection of “poor visibility” for the first quarter, at worst.

“By all accounts, it now seems that we will have to wait for the first two quarters to see some more improvement in the sector,” an analyst said. The disillusionment spilled on to the market, where the stock was clobbered 11 per cent at the close of the session.

Opening at Rs 1,800, the scrip hit an intra-day high of Rs 1,830 before ending at Rs 1,645.35 on 22,552 deals that generated a turnover of Rs 87.12 crore.

“Looking at the numbers and the projections, it seems the premium the company is getting is unjustified,” another analyst said.

For the quarter ended March 31, net profit was up 7 per cent on a sequential basis; revenues were stagnant at Rs 940.6 crore. For the full year (2001-02), net profit jumped 32 per cent at Rs 885.4 crore, while revenues were up by 12 per cent at Rs 3,492.6 crore.

The tepid sales are seen as an evidence of the pressure on billing rates.

Company officials hinted that prices are unlikely to firm up in the near future, at least in the first half of 2002-03.

Chairman and managing director Azim Premji said the pricing pressure was intense across all service segments.

“Still, we have emerged stronger. Our quality leadership and productivity enhancement through Six Sigma contributed to increasing traction in a market that is witnessing intense pricing pressure,” the Wipro chief said.

For the fourth quarter, while there was a sequential volume growth of 8.5 per cent, sequential decrease of 2.4 per cent in offshore pricing and 4.5 per cent fall in Wipro Technologies’ onsite pricing.

Around 29 new clients were added, including six Fortune 1000 firms.

The company said it expects revenues from clients in the telecom equipment sector to decline by 10 per cent in the first quarter. Technology giants such as Nortel Networks and Lucent contributed about 18 per cent to the firm’s global information technology revenues.

Offshore revenues accounted for 48 per cent of total sales in 2001-02.

The proportion is likely to increase as more foreign companies resort to outsourcing to cut costs.

Wipro Technologies, the company’s global information technology business wing, accounted for 66 per cent of the revenues and 90 per cent of the net profit. For the year, the division’s revenue grew 28 per cent at Rs 2,300 crore.

The fraction of revenues from Europe increased to 36 per cent from 29 per cent in the previous year while that from North America came down to 57 per cent from 64 per cent.

The consumer care and lighting business recorded revenues of Rs 301 crore.

Information technology services and products in India and the Asia Pacific contributed around Rs 737 crore.

Vivek Paul, vice-chairman and chief executive of Wipro Technologies, said various initiatives launched by the company more than offset declines from a planned ramp-down of its largest account and the mounting challenges from the troubles in the telecom equipment industry.

   

 
 
SENSEX SETTLES IN TWO-MONTH TROUGH 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 19: 
Political posturing on the Gujarat carnage and fears that Reliance might be forced out of IPCL’s race hammered down the Bombay Stock Exchange (BSE) sensex to a two-month low at 3364.40 points.

What weakened the sentiment further was the angst over Wipro’s fourth-quarter numbers and predictions that the price the company fetches for its products and services will continue to be weak in the next six months.

The slide was led by Reliance Industries and Hindustan Lever. Market watchers said heavy selling by speculators, foreign and domestic institutions occurred as a ruffled Prime Minister Atal Bihari Vajpayee threw down the gauntlet to the Opposition and asked it to move a no-confidence vote in Parliament over accountability for the Gujarat carnage.

Reports that the Standing Conference on Public Enterprises (SCOPE), the apex body of PSUs, has demanded that Reliance be barred from bidding for IPCL also dampened the fervour.

Then, there was the uncertainty over selloff in HPCL and BPCL. PSU shares, the toast of the market in recent months, were pounded.

The benchmark 30-share index opened around overnight level at 3420.04 but later moved downwards and ended at the two-month low at 3364.40 against Thursday’s close of 3420.94, a fall of 56.54 points or 1.65 per cent.

   

 
 
NUCLEAR ENERGY FUELS GOVT’S NEW POWER PLAN 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 19: 
Despite dangers of missile strikes and terrorist attacks from across the border, India is considering setting up nuclear power plants at eight new sites, many of them quite near the international border with Pakistan.

Faced with a cash crunch, the government is also planning to amend the Atomic Energy Act to allow setting up of joint ventures with state governments and private companies to run these new nuclear plants.

The new sites identified as possible candidates by a site selection committee are Kumharia in Hissar district of Haryana, Mahi-Banswara and Rundhgajapur in Dholpur district of Rajasthan, Ratnagiri district of Maharashtra and Patiala district of Punjab. Also being evaluated are sites at Chutka and Rajpur in Madhya Pradesh and Kovadda in Andhra Pradesh.

Interestingly enough, many of these sites are near the international border with Pakistan, within easy striking distance of its Hatf series of missiles. While Hatf-I can strike up to a radius of 60-80 kms, Hatf-II can hit anything up to 150 kms.

Analysts say though nuclear plants near the border is a dangerous proposition, the Hatf missile series are heavy and can be detected in mid-flight, something which could theoretically help Indian forces shoot them down before they reach their destination.

However, if any of these plants is hit, it could spell disaster for the people living in the area, affecting millions. This would be particularly true of densely populated districts like Hissar and Patiala.

West Bengal too would have figured among the new plant site list but for the fact that a site suggested in Purulia had to be turned down due to a geological fault located in the region. The eastern state has “been asked to look out for a fresh site” top officials said. Other sites suggested by the state government, in Darjeeling and 24 Parganas, have been rejected.

The proposed new plants are, however, not expected to come up before 2007. Many of them may go on stream as late as 2010, as gestation period for power plants from the planning stage to actual commissioning remains quite long. “But once they do they will add nearly 6000 megawatts of power generation capacity, something which the power starved states of northern and western India can do with,” officials said.

India currently has a capacity of generating about 2,720 megawatt of power from its 14 plants located at Tarapur, Rawabhatta, Kalpakkam, Narora, Kakrapur and Kaiga.

In the next five years it is expected to be able to add another 1,300 mw by setting up new plants at Tarapur and adding a third phase to its Kaiga project.

“It is the new plants that we are planning will come up 6-10 years from now which will really more than double our nuclear power generation capacity,” officials boasted.

But lack of adequate plan funds is forcing the government to consider an amendment to the Atomic Energy Act and allow private and state governments to join the central government. Nuclear Power Corporation of India Ltd in setting up and running these plants.

   

 
 
AHMEDABAD SEEKS LYONS RANGE HAND 
 
 
BY ANIEK PAUL
 
Calcutta, April 19: 
The members of the Ahmedabad Stock Exchange (ASE) are trying to merge the bourse with the Calcutta Stock Exchange (CSE). Both exchanges are in dire straits now, facing the threat of closure. A marriage, the brokers are convinced, is the best rescue.

The groundwork for the merger has already been done. ASE secured membership of the Calcutta bourse a year ago, but so far, its members have not looked eastwards. The members of the Ahmedabad bourse have finally felt that merging it with Calcutta will be beneficial, and have recently initiated the process of floating a subsidiary through which they can trade on CSE.

The arrangement would give the Ahmedabad Stock Exchange members access to CSE’s cash segment to start with, but in future, they may also be able to trade on the derivative segment that the CSE is trying to set up.

The executive director of the Calcutta Stock Exchange, P.K. Sarkar, did not comment on the matter. He said he was not aware of the development, but governing board members and leading brokers of the Ahmedabad Stock Exchange confirmed it.

However, the effort has already run into teething troubles: the move is hamstrung by the market regulator’s decision to collect taxes from the brokers on their turnover for the last ten years.

Unless the brokers of the Ahmedabad bourse clear their tax dues, the Securities and Exchange Board of India (Sebi) will not grant them the clearance to trade on the Calcutta bourse.

The market regulator has also started clipping the wings of the broker-directors of Ahmedabad Stock Exchange, which is still governed by brokers. Recently, they have been asked to quit. The present broker-led management of the exchange is likely to be replaced with independent managers, who may not think a merger is needed and, therefore, abandon it.

At present, the turnover of the two bourses is similar. While the turnover of CSE has been hovering around Rs 50 crore, Ahmedabad’s is a little higher at Rs 60 crore. It benefits from the fact that some badla financiers still trade on the exchange, while Calcutta hardly has any.

The brokers feel the merger will help both the exchanges since it would bring together 800-odd brokers and increase the depth of the Calcutta market. There are few other bourses that could also be drawn in if the plan succeeds.

   

 
 
MULTINATIONAL PHARMA STOCKS GAIN VIGOUR 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 19: 
After being edged out in the valuation race by their Indian peers over the past few months, multinational pharma stocks are back in the reckoning. The optimism in some of these counters follow restructuring exercises undertaken by them, which is expected to be reflected in their bottomlines during the current year.

Most of these companies, industry circles said, have sought to prod their bottomlines through a combination of measures on product, manpower and manufacturing fronts. “Nearly all of them have offered voluntary retirement packages to their workforce and in the process are bringing down costs,” an analyst with a local brokerage pointed out.

While Glaxo recently gave a huge VRS to all its employees at the company’s Worli unit, E-Merck has given a golden handshake to its managerial staff after having offered a similar package to around 400 employees at its Taloja unit. Aventis Pharma is yet another company that has taken recourse to a similar measure to reduce expenses, which has yielded results in the form of lower staff cost for the year ended March 31 this year.

Market circles said that such actions have come at a time when valuations of many of the domestic pharma companies, particularly leading ones like Ranbaxy Laboratories and Dr Reddy’s Laboratories are unlikely to show any significant rise in the coming days.

“A correction in valuations is therefore being witnessed among the pharmaceutical stocks with some of the multinational pharma companies being re-rated. There are hopes that benefits of their restructuring will soon be seen in their bottomlines,” says an analyst.

Reflecting the new found confidence, stocks like Glaxo, Burroughs Wellcome, E Merck, Novartis, Pfizer and Parke-Davis have shown a double-digit appreciation during the past few days. In fact, Glaxo had, on Wednesday, rallied by close to 10 per cent to hit a 52-week high as market participants built up fresh positions on reports that the company is expecting its profits to double over the next couple of years.

Though the counter subsequently witnessed profit booking on Thursday, its close still marked a 26 per cent gain over the corresponding prices prevailing over the beginning of this month. Brokers, however, aver that there is still some steam left in the counter in the days to come even as the Centre is set to announce details on the dilution of the Drug Price Control Order (DPCO).

Glaxo has also taken other initiatives that include selling tail-end brands and focussing on profitable products. Other companies too are adopting a similar approach of focussing on strategic brands. For instance, Aventis Pharma has identified brands like Cardace, Combiflam, Allegra, Clexane and Amaryl as strategic brands.

Apart from Glaxo, other stocks which have displayed double digit growth since the beginning of this month include Novartis, up 16 per cent, Parke-Davis (23 per cent), Pfizer (17 per cent), E Merck by 21 per cent and Burroughs Wellcome by a whopping 44 per cent.

Sources said the rise in Burroughs was largely due to speculations that it is in the process of being merged with GlaxoSmithKline Pharmaceuticals Ltd. Similarly, the rise in the Parke-Davis counter has also been largely attributed to an imminent merger with Pfizer.

   

 
 
RECKITT BENCKISER PICKS THREE POWER BRANDS 
 
 
BY A STAFF REPORTER
 
Calcutta, April 19: 
Taking the cue from FMCG major Hindustan Lever Limited (HLL), Reckitt Benckiser (India) Limited has identified Dettol, Mortein and Harpic as major power brands of the company.

Addressing the shareholders at the annual general meeting (AGM), managing director C.M. Sethi said, “We have identified these three brands as the power brands and we will invest more in their promotion. Alongside, we will also introduce new products for the Indian market.”

Though his company suffered a net loss of Rs 2.17 crore in the first quarter compared with a net profit of Rs 6.74 crore in the corresponding previous period, Sethi claimed that Reckitt will become the largest company in householder cleaning segment in the next two to three years.

Total income in the first quarter decreased to Rs 118.26 crore as against Rs 148.48 crore in the corresponding previous quarter. In a communication to the stock exchanges, the company said that since it disengaged itself from joint venture Reckitt Piramal in July last year, results for the first quarter are not on a like-to-like basis with the previous corresponding quarter.

The company today had a stormy AGM where the shareholders raised questions on its financial performance and frequent changes in the management. The shareholders demanded a bonus issue but the management remained non-committal on this issue. The company said that the buy-back offer will open in mid-May and the price has been fixed at Rs 250 per share. The management informed the shareholders that it does not have immediate plans of shifting the registered office from Calcutta. Chairman Alfred Kurt Caspers said that they have identified Mysore factory as their “focused” factory. The company has four factories — two in Calcutta and one each in Mysore and Hosur.

Briefing shareholders about the performance of the company, Caspers said that the company’s Mortein brand has witnessed 73 per cent growth in the last financial year.

The launch of ‘Rat Kill’ in the rodenticide segment has been a big success for the company. The segment grew by 167 per cent where Moretin Rat enjoys 65 per cent share. Caspers said that Harpic continues to dominate the lavatory cleaning category with 78 per cent market share.

Cherry Blossom continued to be the market leader in the shoe polishes segment with a market share of 67.7 per cent and Dettol, the most well-known brand in Reckitt kitty, controls about 85 per cent market share.

   

 
 
POWER REVIEW MEET NEXT WEEK 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, April 19: 
Union power minister Suresh Prabhu has called a meeting of all state electricity boards (SEBs) on April 24 to review the progress of power sector reforms in the country and discuss further allocation of funds for the year 2002-03.

This meeting is extremely crucial for the state governments which had signed a memorandum of understanding on May 5 last year for undertaking a time-bound power sector reform programme.

“All allocation under the Accelerated Power Development Reforms Programme (APDRP) for the current year depends on whether the respective states can show marked improvement in power sector reforms,” sources said.

The Accelerated Power Development Programme (APDP) has been renamed as the Accelerated Power Development Reforms Programme (APRDP) for the year 2002-03.

Improvement of the transmission and distribution system is one of the major pillars in the development of the power sector, which aims at reduction of T&D losses. The government has identified as many as 63 circles across the country for improving the transmission and distribution system.

The power minister will make a circle-wise assessment before granting any further assistance under APDRP to the states.

Keeping that in mind, the Central Electricity Authority (CEA) has prepared a set of formats that will help the states provide instant information about the reforms programme.

CEA chairman V. V. R. K. Rao had called a meeting today for the West Bengal State Electricity Board, which was attended by WBSEB chairman G. D. Gautama.

West Bengal had received Rs 43 crore in 2000-01 under the APDP. “In 2001-02 we have received Rs 91 crore,” Gautama said. For the year 2002-03, nothing has been allocated yet. However, the power ministry has earmarked Rs 3,500 crore for the APDRP.

WBSEB has demanded that Howrah, Bidhannagar and 24 parganas (South) be brought under the APDP programme.

The power minister will enquire about the status of metering, energy accounting at circle level, programme for reduction in losses, collection efficiencies and several other issues.

High T&D losses are one of the main reasons for the poor financial health of the SEBs. Technical losses account for about 15-20 per cent of these losses and commercial losses account for another 20 to 25 per cent.

   

 
 
DURACELL NOT TO RECHARGE DELHI UNIT 
 
 
FROM RAJA GHOSHAL
 
New Delhi, April 19: 
In a case of reverse investment, Duracell Belgium which is acquiring all equipment at Gillette India’s alkaline battery plant at Manesar near Delhi, has decided not to reopen the factory, and will, instead, cart the equipment valued at $ 6.5 million to its mother plant at Belgium.

Normally, multinational companies are known to transport old machinery from European or US locales to new Third World plant sites to take advantage of the cheaper labour there.

But in this case, officials told The Telegraph that Gillette has already given a voluntary retirement package to all its 175 employees, halting its production of alkaline batteries in this country. The company will now import batteries into the country for sale here. For Gillette, India will remain just a marketing hub now as far as alkaline batteries are concerned.

The company will now source all alkaline batteries from other Duracell facilities across the globe. However the company’s plant at Mysore will continue to manufactures zinc batteries under the brand name Geep.

The proprietary Gillette plant equipment will be physically transported to Belgium, said company spokesperson Vijay Mathur, Gillette’s director of legal and corporate Affairs for India and South Asia. The company is charting out alternate plans for the use of the vacant real estate at the plant.

The company incurred a one-time cost of Rs 60.64 crore on the closure of the Duracell plant, Mathur said. The Manesar plant, which made alkaline batteries (AA), used to export 85 per cent of its production. The company claimed that in the changed global market conditions, exports from the Manesar plant were no longer cost-effective.

   

 
 
ICAI REPORT ON POWER ACCOUNTING NORMS SOON 
 
 
FROM RAJA GHOSHAL
 
New Delhi, April 19: 
The Institute of Chartered Accountants of India (ICAI) will present a report next week on the total accounting policy in the power sector, to bring uniformity in the financial information of the various entities in the sector.

Apart from making the financials of different power entities comparable, it will seek to bring it in line with the Generally Accepted Accounting Principles (GAAP). This will make it easier for these power entities to raise loans and capital from the market, especially from global lenders like IFC and the World Bank, ICAI sources said.

Different accounting practices are being followed by different categories of power sector entities. To bring about uniformity in the financial information or disclosures, the ministry of power had asked ICAI to do a study for developing a proper framework of financial accounting and reporting practices for power sector entities.

At present, the state electricity boards (SEBs) are following the Electricity (Supply) Annual Accounts Rules 1985 (ESAAR). Power sector companies follow the Companies Act provisions pertaining to disclosure of financial information while the state electricity departments (SED follow the governmental financial and accounting rulings, said ICAI sources.

Senior ICAI officials said the idea is to make all entities in the power sector follow accounting standards which are in tune with those of other economic entities. The prescribed model will be an Indian accounting standard, duly harmonised with international accounting standards, officials said.

In another project, ICAI is in the process of converting the accounting norms of the Municipal Corporation of Delhi to the accrual system and computerising their accounts. According to an MoU with MCD, ICAI will complete the phase-I of the project by March 31 next year.

At present, municipal bodies use the age-old cash-based system of accounting ICAI sources said. In 2000, Tamil Nadu became the first state to introduce an accrual-based double entry accounting system in the municipal bodies, with technical assistance from a USAID programme.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.90	HK $1	Rs.  6.20*
UK Ł1	Rs. 70.86	SW Fr 1	Rs. 29.30*
Euro	Rs. 43.59	Sing $1	Rs. 26.50*
Yen 100	Rs. 37.54	Aus $1	Rs. 26.05*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5185	Gold Std (10 gm)Rs. 5050
Gold 22 carat	Rs. 4895	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7875	Silver (Kg)	Rs. 7795
Silver portion	Rs. 7975	Silver portion	   NA

Stock Indices

Sensex		3364.40		-56.54
BSE-100		1685.64		-42.95
S&P CNX Nifty	1100.30		-28.70
Calcutta	 114.16		- 1.02
Skindia GDR	 545.86		- 3.66
   
 

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