RBI seal on ICICI-Bank merger
Federal Bank, SIB stakes secure
PNB debuts on bourses with a bang
Maruti, IPCL divestment in a month
Philips turns around with Rs 19cr profit
Fresh tariff policy for power
Central listing body soon
Centre for corporate excellence on anvil
Shree Cement power unit by Dec
Foreign Exchange, Bullion, Stock Indices

Mumbai, April 26: 
The Reserve Bank of India (RBI) today approved the merger of ICICI with ICICI Bank with some relaxation in areas of priority sector lending and equity investments for the combined entity.

The merger will be effective from March 30. The process, set in motion in October last year, will create the country’s second largest bank after State Bank of India (SBI). It will have assets of over Rs 1,00,000 crore. SBI, on the other hand, has assets of over Rs 3,00,000 crore.

The approval paves the way for ICICI to work towards its stated goal of becoming the country’s first universal bank. The merger application was made on October 25, 2001.

The merged entity, to be known as ICICI Bank, will be headed by K. Vaman Kamath, the 53-year-old chief executive and managing director of ICICI. Narayan Vaghul will be its chairman. Though the entity would trail SBI in the number of branches, analysts said it would be strong on cross-selling products and technology.

The concessions include more time to conform to priority sector lending norms. Since ICICI did not have to lend a minimum fraction of its funds to the sector, the merged bank would have to set aside 50 per cent of its “incremental advances” for priority sector lending.

Under the existing norms, a bank must provide at least 40 per cent of its total credit to the sector. The additional 10 per cent will have to be lent until the aggregate priority sector advances increase to 40 per cent of the total net bank credit of the merged bank. Analysts say this is something that could put the bank’s profits under pressure, at least in the short term.

ICICI Bank was also given more room for equity investment. Investments of ICICI acquired by way of project finance on date of the merger would be kept outside the 5 per cent cap on funds that can be poured into and equity-linked instruments for a period of five years. This will prevent any adverse effect on viability or expansion.

However, such instruments will have to be marked to market, and provisions made for any loss in a manner prescribed for investments of the bank. “Any incremental accretion to the above project-finance category of equity investment will be reckoned within the 5 per cent ceiling for equity exposure of the bank,” the RBI said.

The approval for the merger sent spirits soaring at the ICICI headquarters. “We are delighted that we have been able to obtain regulatory and statutory approvals for the merger within six months,” K. V. Kamath, managing director and CEO of ICICI Bank, said.


Mumbai, April 26: 
The suspense over the fate of ICICI’s investments in Federal Bank and South Indian Bank is over: it will not be required to sell these stakes, which is around 21 per cent and 15 per cent respectively.

The air was cleared today when the Reserve Bank of India (RBI) granted its approval for the merger of ICICI with ICICI Bank.

The bank said it should be ensured that investments made by ICICI prior to the merger are in consonance with Section 19 (2) of Banking Regulations Act, 1943. That part of the law “prohibits holding equity in excess of 30 per cent of the paid-up share capital of the company concerned, or 30 per cent of its own paid-up share capital and reserves, whichever is less.”

Kalpana Morparia, director of ICICI Bank, confirmed to The Telegraph that the bank would continue to hold on to these stakes now that the RBI has enunciated the precise legal position on the investments.

The development came as a damper for a section of the stock market, which have been expecting ICICI Bank to offload its stake in the two banks. The stock prices of the two south-based banks had surged in recent months on hopes that ICICI will have to sell the holding following regulations that a bank cannot hold an equity stake in another, except for purposes of investment.

However, there were unconfirmed reports in the market that ICICI Bank may sell this piece of investment given that the shares do not give it voting rights.

Playing a White Knight, ICICI had picked up slices of equity in Federal Bank and South Indian Bank eight years ago, when they were crying out for a capital infusion.

ICICI will have to bring down its equity in few companies in keeping with the norm cited by the central bank in its directive today.


Mumbai, April 26: 
Punjab National Bank, the leading Delhi-based public sector bank, today made its debut on the bourses to a volatile response that saw the scrip closing the day at a 20.64 per cent premium to its IPO price.

The shares of Punjab National Bank, whose initial public offering was recently mopped up at Rs 31 per share, was listed on the Bombay Stock Exchange on Friday. The first trade was transacted at Rs 37.50 per share, above the IPO price of Rs 31. In initial trading, the price went up to a high of Rs 40.10 and by noon it was hovering around Rs 35 per share. Trading in the scrip also commenced on the National and Delhi stock exchanges.

Profit booking however saw the scrip shed its gains, but it was still quoted at an attractive premium to its initial offer price. The counter saw transactions to the tune of 5,543 trades for almost 1.81 lakh shares.

Meanwhile, probably encouraged by the response to the PNB public issue, the south India based Canara Bank also revealed its plans to make an IPO. The issue size, however, will depend on the capital repayment to the government.

Almost all public sector banks are slowly catching up with their private sector peers on the bourses. Shares of Syndicate Bank, Andhra Bank, Bank of Baroda, Bank of India and even Dena Bank, have risen in the last few days.

PNB chairman and managing director S.S. Kohli said this was the first IPO by any bank after a considerable gap and would be a benchmark for Union Bank of India and Canara Bank.

Kohli said the bank’s total advances and deposits at the end of March last had crossed the Rs 1,00,000-crore mark, registering a 17.5 per cent growth over the previous year.


New Delhi, April 26: 
The sale of government’s stake in Maruti Udyog and Indian Petrochemicals Ltd (IPCL) is likely to be wrapped up within a month’s time.

Disinvestment minister Arun Shourie told reporters on the sidelines of CII’s annual conference being held here that the issue of the selloff in the country’s largest carmaker would come up at a meeting of the Cabinet Committee on Disinvestment (CCD) to be held soon after the current session of Parliament is over.

“Maruti’s rights issue is almost in its final stages. Detailed negotiations are on and have been very fruitful,” Shourie said.

Asked whether the rights issue would be announced in a month’s time, he said: “ I would think so. However, it depends on a lot of things and I have to revert to the CCD. May be, they will approve, may be they won’t on the agreements that have been negotiated.”

The minister said the government would divest its holding in 30 other state-owned companies in the current financial year.

Shourie identified measures that should be followed to ensure that reforms are carried out in an uninterrupted manner.

First, he said, both the Centre and states should stop announcing the steps that they plan to take, as their non-implementation has a negative impact on the credibility of governments.

Shourie also stressed that the government should make sure that the announcements that are made are implemented within the planned time-frame.

He also said there was a need to support individuals and governments that adhered to the reform process.

Shourie felt that in the short term, the government should focus on reforms that did not incorporate changes in legislation, as past experience has revealed that altering legislation required a substantial amount of time.

The other issue that the minister spoke was about the effective review of judgements that were impeding economic reforms by the judiciary. Shourie also urged the industry to adhere to rules as not doing so would lead to the disruption of the entire structure of reforms.

On forecasts made for the Indian economy by international organisations, Shourie felt that the government should focus more on analysing forecasts made by International Monetary Fund and other countries across the globe, than follow them blindly.

Shourie also came to the defence of corporate houses wondering as to why Official Secrets Act condition be applied to bidders for government stake in public sector undertakings at a time when Parliament is considering freedom of information Bill.

Asked about the recommendations of the parliamentary standing committee on disqualifying corporate houses which have committed offences under the Act from bidding for stake in PSUs, Shourie said “the Act is of 1923... Everybody is talking about scrapping or modifying the Act.”

“At the same time we are being told that it should be applied to the corporate houses,” Shourie said.


Mumbai, April 26: 
Philips India Ltd today posted a smart turnaround when it posted a net profit of Rs 19.08 crore for the first quarter ended March 31 2002, compared with a net loss of Rs 6.36 crore a year ago. The company clocked a total income of Rs 374.17 crore for the quarter under review as against Rs 346.56 crore in the quarter ended March 2001.

During the current quarter, exceptional items (net) income stood at Rs 5.04 crore, the company said. Exceptional items include a Rs 7.39 crore payment under employees’ voluntary retirement scheme and profit on sale of property of Rs 12.43 crore. The exceptional item (net) charge stood at Rs 8.55 crore for the March 2001 quarter.

The company’s Dutch parent recently bought out most of its Indian shareholders and proposes to delist its shares from the bourses.

Meanwhile, the board of Philips India today approved the scheme of amalgamation of Punjab Anand Lamp Industries, Philips Glass India and Electrical Lamp Manufacturers with the company.

It also approved the share exchange ratio, as recommended by chartered accountants SB Bilimoria & Co and NM Raiji & Co in their valuation report. As per the recommendation the shareholders of Punjab Anand will be entitled to receive 11 equity shares of Philips India for every 10 equity shares held by them in Punjab Anand.


New Delhi, April 26: 
The Union power ministry is likely to announce a new tariff policy and a special legal framework to resolve matters in the power sector.

“The power ministry is in final stages of consultations with the Central Electricity Regulatory Commission (CERC). The regulator has received comments from all the concerned parties and we have also collected our data. We will soon work out the tariff policy,” power secretary R.V. Shahi said here today.

He came down heavily on power subsidies doled out by various state governments and said this must be reduced and, if necessary, avoided to make the state electricity boards more efficient

“A legislative framework to solve all matters related to legal issues in the power sector would be created by the government soon,” power minister Suresh Prabhu while addressing a session at the CII annual conference.

Prabhu also said a new policy framework to evolve a transparent supply and tariff policy was on the cards to give a boost to the reforms in the country’s power sector. Referring to the Enron episode, the minister said the failure of one company to do business in India should not be taken as the failure of reforms in the Indian power sector.

With the restructuring of state electricity boards, the minister said financial and technical problems have been solved and past dues amounting to $ 10 billion would be taken care of.

However, to encourage cash flows in the sector, attempts should be made to reduce the incidence of theft, increase interaction between consumers and providers. In addition, there must be grassroot accountability between generators and providers of power, Prabhu said.

An important task, he said, is to explore the possibility of raising the generation capacity. However, he expressed his confidence that the Tenth Plan target of adding 40,000 MW is realistic and achievable.

He also hinted at transporting gas from Bangladesh for supply to power utilities and private power producers. However, he refused to divulge any details of the plan. “It is a proposal and we are examining the various issues such as infrastructure cost, security and related aspects.”

Prabhu said the government plans to invest Rs 150 crore in infrastructure for power distribution in each of the 60 districts identified as profit centres.


New Delhi, April 26: 
Chairman of Securities and Exchange Board of India (Sebi) G.N. Bajpai has said that moves are afoot to set up a central listing authority that will look into the listing agreements of the bourses and carry out due diligence of companies.

Addressing the annual session of the Confederation of Indian Industry (CII) here today, Bajpai said, “UK is experimenting with a national listing authority. However, here we are considering a central listing authority which will not be a regulatory authority or part of the regulator. It will look into listing agreements and then carry out due diligence.”

Stating that the proposal was still at an ideation stage, Bajpai declined to give a time frame for setting up such an authority.

“At present, a company can list on a small stock exchange like Pune and get automatically listed on the BSE and NSE,” the Sebi chief said.

Earlier in the seminar, former finance minister P. Chidambaram had pointed out that experts had suggested a national listing authority. He said that there has to be a mechanism by which clause 49 of listing agreements are monitored by the stock exchanges.

Chidambaram also said that there are around 10,000 companies listed on Indian stock exchanges of which 3,000-4,000 companies are not eligible to remain listed.

“The stock exchanges themselves can delist 3,000-4,000 companies. If stock exchanges delist transgressers there is no need for a separate listing authority,” he said.

Referring to the debate whether Sebi should have “search and seizure” powers, Bajpai said even if the regulator gets that power, it will be the “last resort” to get to the bottom of an offence.

“It is for the government to decide. The regulator should be empowered to get to the truth,” he added.

“The regulator should also be empowered to impose penalty in proportion to the offence,” he said indicating that the current penalty limit of Rs 10 lakh was not adequate for scams involving hundreds of crores of rupees.

The government is currently vetting the Sebi Act for empowering the regulator with more powers, specifically after a series of scams in the capital market and the inability of the regulator to punish the offenders.

“I will like to question, whether the regulator has the structural capability to regulate the market? Whether the regulator has the competency of people and the capability to foresee the trends of the future?” he said putting forward his point for empowering Sebi with more powers.


Calcutta, April 26: 
In a bid to bring in better governance among companies, the government is planning to set up a centre for corporate excellence.

The Centre will rope in the best brains of both the corporate and the professional world.

The centre will be entitled to give accreditation to companies for remarkable performance in corporate governance. It will also impart training and guidance to the companies to make their functioning more transparent.

This was informed by V. K. Dhall, secretary Department of Company Affairs (DCA) at a workshop on the Companies (Amendment) Bill, 2001 organised by Bengal Chamber of Commerce & Industry.

Dhall said the government will initially provide the funds required to set up the centre and the companies will subsequently provide financial support.

“We expect that the centre will come up in the current financial year. However, we have not yet decided the location of the centre,” he said.

Dhall, who was very critical about the way of functioning of Indian companies, said that most of the times they fail to comply with the accounting standards.

He suggested that the management should first send the accounts of the company to the audit committee comprising independent directors. “The directors on the audit committee should not be on the board of the company. The audit committee should be the watchdog,” he said.

From the audit committee, the accounts should go to the statutory auditors. After reviewing the accounts it should again go back to the audit committee who will give the final nod.

“Then only it can be produced before the shareholders of the company,” Dhall said.

He said that the role of the company secretary should also be reviewed. “He should act as a compliant authority and should not be influenced by the management,” he said.

He said that the role of the Registrar of Companies also needs to revamped.

“It becomes difficult for the RoC to scrutinise the accounts of such a huge number of companies. Suggestions have come up for setting up an independent body which will carry out random scrutinisation of the accounts and see whether the accounts are true and fair,” he said.

He was also of the opinion that the penalties in the company law should be drastically revised and penalty fees should be increased substantially.

The DCA secretary said that some of the multinational companies are trying to delist themselves.

“We have to see whether they want delisting to avoid compliance in their accounts or whether they are not interested in raising money form the capital markets,” he said.

S. K. Dhall, president of BCCI also gave certain suggestions for amending the Companies Bill which is lying before the Parliamentary Committee.


Calcutta, April 26: 
Shree Cement, the Rs 554-crore Bangur group flagship, will invest Rs 130 crore during the current financial year to set up a 36 MW captive power plant and modernise its cement plant at Beawar in Rajasthan.

Shree Cement chairman H. M. Bangur said Rs 120 crore will be invested for the power project while the rest of the funds has been earmarked for the modernisation.

The captive power unit, which is likely to be commissioned by December this year, will lower the cost of production at least by Rs 30 crore. “Power being a very important input in the cement industry, it has a great bearing on the profitability of a company, no matter whatever the volume of production. And you can not control this cost if you are dependant on sourcing power from outside,” said Bangur.

He added this was the reason why the company was investing so much to set up such a project.

Currently, Shree Cement, which has a capacity of producing 2.6 million tonnes of cement, pays a power bill of around Rs 80 crore at Rs 4 per unit. Once the captive unit is commissioned, the total cost of generation will be around Rs 50 crore for the same quantity of power.

“This alone will help us increase our profitability by around 30 per cent,” he said. Shree Cement, which has registered a turnover of Rs 397 crore for the nine months ended March 31, has set a target of achieving a turnover of Rs 600 crore for the current financial year.

“We are optimistic that we will be able to run our plant at 100 per cent capacity this year, which will substantially reduce production costs. The previous best production figure stood at 2.38 million tonnes,” he said.

Shree Cement, which is emphasising on value additions to its products, is also on the look out for a strategic partner in order to grow at a much faster rate. Bangur said the company had earlier had talks with a number of potential buyers for its cement plant but the negotiations could not produce results.

“We have now decided to add more value so that we can extract a good price as and when we get a serious buyer. Our option is open, now let the interested buyers come to us with good offers,” he said.

Bangur said a plant of Shree Cement’s stature should get a price of Rs 5,000 per tonne of cement produced. “Currently, we are more keen on increasing our market share through better marketing efforts which include spreading over to rural areas in the north-India.”



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