Suzuki to pick up 5% more in Maruti
S&P gives same rating to merged ICICI entity
Indian unit left in the lurch
Tatas script Bollywood entry plan
Tata-Birla Idea to take on rivals
Funds tied up
Haldia Petro, IOC work on nitty-gritty
BPCL weighs merger of Kochi refinery
PFC recharges batteries
Foreign Exchange, Bullion, Stock Indices

 
 
SUZUKI TO PICK UP 5% MORE IN MARUTI 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 30: 
Suzuki Motor Corporation (SMC) of Japan will pick up another 5 per cent stake in Maruti Udyog, raising its stake in the company to 55 per cent and taking effective control of the country’s largest carmaker.

The Government of India, which has a 49.7 per cent stake in MUL, will be renouncing its share of a Rs 400-crore rights issue and cede the 5 per cent stake to its joint venture partner of close to two decades.

A deal on the divestment has been hammered out with an agreement on the price that the Japanese company will pay the Indian government for the stake as well as a “control premium” for the prerogative. The valuation of the company and the price for the divestment as well as the control premium have not been divulged. The deal will have to be approved by the committee of secretaries and then the Union Cabinet.

“The deal has been finalised,” said divestment secretary Pradeep Baijal. “The Japanese company need not get back to us. But we still have to go through certain formalities and inform the Committee of Secretaries. The disinvestment ministry has also notified the Cabinet about the deal. The Cabinet is expected to take a decision within 10 days or so.” “The terms of the understanding are state secret and can be divulged only after the Cabinet gives its approval,” he added.

However, sources said, the government has agreed to divest up to 5 per cent by not participating in the proposed Rs 400-crore rights issue in lieu of renunciation and control premium. “The two sides have also finalised a price for Maruti’s equity and premium for the rights issue,” the sources said. The Suzuki team and the government reached the decision after three months of negotiations. The Japanese team was led by Suzuki official Nakanishi and the Indian side was represented by heavy industries secretary Ravindra Gupta and disinvestment secretary Pradeep Baijal. The Suzuki team is reported to have already left for Japan.

Currently, the Japanese car company has a 50 per cent stake in Maruti Udyog and any hike in equity stake would automatically give them full management control. Analysts feel that the rights issue price and premium will be 25 per cent of the value of these shares.

The carmaker had to recently halt production at its third plant. It was during the setting up of this plant that MUL called for extra funds and suggested an expansion of the equity base, which is rather small at Rs 132 crore. The total investment at that point of time stood at Rs 1,400 crore.

At present, MUL produces 3.7 lakh cars by utilising capacity at its two plants. Maruti Udyog announced an unaudited net profit of Rs 55 crore for the year 2001-02. The half-yearly results had shown a Rs 10-crore net profit. It also expects to break even this year. In April-August 2000-01, MUL had registered a loss of Rs 100 crore. MUL ended the year 2000-01 in red with a net loss of Rs 269 crore, despite an operational profit of Rs 93 crore. It had a total turnover of Rs 9,253 crore. This year, Maruti made a depreciation allocation of Rs 347 crore.

The carmaker has staged a remarkable turnaround this year after suffering a net loss of Rs 269 crore on a turnover of Rs 9219.6 crore in 2000-01. The company rode back into the black by cutting its workforce and slashing costs.

   

 
 
S&P GIVES SAME RATING TO MERGED ICICI ENTITY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 30: 
Leading international credit rating agency Standard & Poor’s (S&P) today retained the rating applicable to the erstwhile ICICI Ltd for the merged entity, ICICI Bank, when it assigned a BB long-term and B short-term rating to the latter. The outlook is, however, negative.

S&P explained that while not previously rated separately, the business and financial profile of ICICI Bank has always been considered an integral part of the ICICI group and was in the past factored into S&P’s ratings deliberations on ICICI.

Additionally, despite ICICI’s minority shareholder position in ICICI Bank and the bank’s relatively independent operations and strategy, “the strong name and franchisee association of the two companies, together with the crossover of some customers between the two, supports the position that ICICI would most likely have supported the bank’s operations. The scaling down of ownership was a regulatory requirement imposed on ICICI as the bank’s sponsor,” S&P added.

The rating agency further noted that additional provisioning will be made to cover non-performing loans and restructured assets following completion of the fair valuation process. “Additional provisioning against standard assets will also be raised as a precautionary measure,” said Peter Sikora, director, financial services ratings, S&P.

ICICI’s 46 per cent shareholding in ICICI Bank has been transferred to a trust, with divestment expected in fiscal 2003 through an appropriate placement with an investor. Any capital gains made on the divestment will be used to additional cushion in the balance sheet.

It may be recalled that last week, the Reserve Bank of India (RBI) had given its accord for the merger. The merger will create the country’s second largest bank after monolith State Bank of India (SBI), with assets of over Rs 1,00,000 crore.

   

 
 
INDIAN UNIT LEFT IN THE LURCH 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, April 30: 
The GM-Daewoo Corp deal ought to have lifted the veil of uncertainty on the Indian operations—but the mood has been decidedly downcast after GM pared the number of plants it would take over under a truncated arrangement from the one that was agreed upon last December.

Daewoo India, which has been badly strapped for cash and run to a cul de sac a year ago because of all the turmoil that its South Korean parent was facing, has not been able to cobble any plans to revive the market for its products.

“Our sales are pretty low; we are able to sell 500-600 cars per month. We still have working capital for three months. We still have enough CKD kits and spare parts to meet the demand and after sales services. The Indian banks came to our rescue. No decision has yet been arrived on the debt repayment,” company sources said.

DMIL is still banking on a takeover and is continuing to streamline its operations. It has been planning to axe another 450 workers from its 1500-strong workforce at the Surajpur plant.

The Indian plant has the capacity to manufacture 72,000 units annually. This will be second round of job cuts at the plant; last October, 237 people were shown the door. The closure of Daewoo’s Engine and Transmission plant led to the retrenchments the last time round.

DMIL has already invested Rs 100 crore in its Indian operations. DMIL has reduced its third quarter net loss by 25.3 per cent at Rs 85.74 crore compared with a net loss of Rs 114.81 crore in October-December 2000.

The cash loss has also come down by 46 per cent to Rs 33.82 crore during the quarter ended December 2001 compared with Rs 62.78 crore in the year-ago quarter. However, sales plunged by 75.2 per cent to Rs 37.54 crore.

Company sources also revealed that its capital has been eroded by almost 50 per cent as of March-end 2001, when it had run up losses of Rs 390 crore in March against a capital base of Rs 792 crore.

Last month, Daewoo had arranged for uninterrupted flow of working capital from ICICI Bank, Industrial Development Bank of India (IDBI) and Exim Bank of India. PriceWaterhouse Coopers had been called in to help the company reschedule payments of loans and interest.

   

 
 
TATAS SCRIPT BOLLYWOOD ENTRY PLAN 
 
 
FROM SATISH JOHN
 
Mumbai, April 30: 
The lights are on, the camera rolls and its time for action. Bollywood has got its latest star—this time one of India’s premier business houses.

Bitten by the glittering glamour of the motion picture industry, the Rs 48,000-crore Tata group, that straddles segments as diverse as steel, fertilisers, hotels, tea to telecom and infotech, has decided to take the plunge into making movies.

Tata Infomedia Ltd, a group company that publishes niche magazines and undertakes high-value printing work, will be its vehicle to Bollywood.

The decision to be part of the world’s premier dream factory was finally scripted today, with the board of directors of Tata Infomedia Ltd giving their approval to a plan to set up a new division devoted to the production of motion pictures, at a meeting held here.

Speaking to The Telegraph, Hoshang Billimoria, managing director of Tata Infomedia, said: “We are going through several film scripts and will shortlist a script within a month”.

Defending their move to dabble in motion pictures, Billimoria said, “Our core competence lies in being a content provider. Whenever we launch a magazine, we are new to the area that the magazine focuses on. We learn on the job.” He sounded confident that the company will similarly gain experience and confidence on the way.

Analysts tracking the industry aver that the move is a reflection of the respectability that the industry has attained over a period of time.

With movie production houses getting organised and the film world becoming corporatised , more and more big names are expected to get associated with the industry.

Already, leading term lending institutions like IDBI, and banks like ICICI Bank and Bank of Baroda are financing films. Insurance companies are also willing to stick their neck out by providing risk cover to such enterprises.

Tata Infomedia will set up a new division devoted to the production of motion pictures. Billimoria said the company may logically consider producing a Hindi movie by virtue of its market potential.

The company brings out Tata Yellow Pages, which is by far the largest listing business publication in India.

   

 
 
TATA-BIRLA IDEA TO TAKE ON RIVALS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 30: 
Birla-Tata-At&T (BTAL) today unveiled a new brand and corporate identity to reflect its merged identity better as it rolls out services in the competitive, but highly lucrative, New Delhi circle as the fourth cellular operator.

Birla-Tata-At&T re-christened itself as “Idea Cellular”. The new brand “!dea” will replace the AT&T brand in Maharashtra, Goa and Gujarat, the Tata Cellular brand in Andhra Pradesh and the RPG Cellular brand in Madhya Pradesh and Chattisgarh. Idea cellular, a prestigious Rs 4,500-crore project, is setting up a network in Delhi, which will start operations before the monsoons.

The “!dea” brand will be unveiled in Maharashtra (excluding Mumbai), Goa, Gujarat, Andhra Pradesh, Madhya Pradesh and Chattisgarh. “Idea Cellular” will provide a new identity and a persona of pan-Indian presence.

Unveiling the brand at a formal ceremony today was Ratan Tata, chairman of the Tata group. Speaking on the occasion, Sanjeev Aga, president and CEO, said: “Idea Cellular aspires to offer the most comprehensive and innovative services to assist people to go beyond what they thought was possible.”

“We will cross the bridge when it comes,” Aga said when asked whether the new identity will be retained once talks with BPL for a merger with Birla-Tata-AT&T fructify in a deal.

While the brand !dea will be rolled out from Wednesday, the transition to the new corporate identity will take place once the Registrar of Companies approves it.

The Aditya Birla group has deputed Aga for three months, until the cellular company appoints a new CEO in his place. Batata was formed after a merger between Birla AT&T and Tata Cellular in January 2001.

Explaining the logic behind selecting “!dea” as the brand, Aga said the power of !dea lies in its ability to transcend age, gender, geography and mindsets, and to be easily understood across languages. “Indeed, !dea is a word that gets freely interwoven with Gujarati, Marathi, telugu, Tamil, Bengali, Hindi and other Indian languages,” the company said.

Idea Cellular, in addition to the existing breadth and depth of services, will extend coverage to 80 new towns and cities. The company hopes to provide a deep indoor coverage in major towns, interference-free network for superior voice delivery and path-breaking value added services (VAS) like vernacular SMS, pre-paid roaming, interactive games and new generation voice mail.

   

 
 
FUNDS TIED UP 
 
 
FROM SATISH JOHN
 
Mumbai, April 30: 
Idea Cellular Ltd, the cellular phone company promoted by the Birlas, the Tatas and AT&T, is close to achieving its second financial closure.

The merged entity with an equity size of Rs 2,250 crore, each partner contributing one-third of its equity, has been busy refinancing its old high-cost loans with cheaper rates.

Speaking to The Telegraph, Vikram J Mehmi, chief financial officer, said “The debt/equity ratio of 1:1 will be maintained even after making huge investments in rolling out cellular services in the highly competitive and lucrative New Delhi and adjoining territories”.

While the equity composition will be in the region of Rs 2,250 crore, the total debt envisaged will be to the tune of Rs 2,000 crore.

The three promoters have put in Rs 550 crore each, while preference capital of $ 150 million was recently arranged through Standard Chartered Bank.

Idea Cellular has also obtained a loan for Rs 400 crore from leading financial institution while Rs 1,200 crore has been raised through a consortium of banks and lending institutions.

The company is also targeting to bring down the high interest rate loans. The interest rate of old loans have been successfully pared down by the company.

   

 
 
HALDIA PETRO, IOC WORK ON NITTY-GRITTY 
 
 
BY A STAFF REPORTER
 
Calcutta, April 30: 
Haldia Petrochemicals Limited (HPL) is currently drafting the details of a joint venture agreement with Indian Oil Corporation (IOC), which is expected to take a final shape within a few weeks’ time, company chairman Tarun Das said here today.

Talking to reporters after the board meeting, Das said three options are being worked out for bringing in IOC in the company with management control. However, he refused to divulge the details of the options.

Even though Das sounded optimistic about bringing in IOC in the company, he did not say whether Purnendu Chatterjee will bring down his stake from 43 per cent to 24 per cent — one of the key riders put forward by IOC for investing in the company.

Chatterjee, who was also present at the meeting, did not say whether he would prune his stake in the company. “I am committed to Haldia Petroleum and I will do whatever is beneficial for the company. All these things are part of a total package. It is a very sensitive negotiation and cannot be discussed openly,” he said.

Das said another meeting with IOC will be held in the next seven days to agree on a blueprint. “We have had three meetings with IOC. Lawyers from HPL and IOC are working on the joint venture agreement,” he said.

IOC has said it wants management control of HPL with a 26 per cent stake in return for a Rs 468-crore infusion. The HPL board has also taken the decision to hand over the management control of the company to IOC.

There were reports that financial institutions led by Industrial Development Bank of India have rejected IOC’s proposal of investing Rs 468 crore because they feel that the company immediately requires Rs 1,000 crore.

V. R. Mehta, ICICI nominee on HPL board, said: “We have not rejected IOC’s proposal. This is not true. There is a total package from IOC, which is being discussed by all parties.”

Apart from injecting Rs 468 crore directly, IOC has said it will provide a credit of Rs 500 crore on naphtha to HPL.

Commenting on Gas Authority of India’s (Gail) proposal to participate in Haldia Petro’s equity, representatives from IDBI and ICICI said: “We have not heard about it. So far, we know IOC will invest in the project alone.” Das said Gail has evinced interest in the company, but said “there has been no formal proposal”.

Richard B. Saldanha, the outgoing managing director of the company, said the equity restructuring is the main problem for a company, which is doing very well in operations. “The company has earned positive EBDIT for the year ending March 31, 2002.” Saldanha is going to join a media company next month.

   

 
 
BPCL WEIGHS MERGER OF KOCHI REFINERY 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, April 30: 
Bharat Petroleum Corporation (BPCL) is planning to merge its subsidiary Kochi Refineries (KRL) in an attempt to prop up its valuation.

Sources said the move is aimed at jacking up BPCL’s share price prior to the disinvestment programme.

BPCL holds 55.04 per cent in KRL, while banks and financial institutions have a combined stake of 23.69 per cent. The public holding is a little higher than 13 per cent. BPCL had acquired the stake in KRL, which has an annual capacity of 7.50 million tonnes, in March 2001 at Rs 83 per share.

According to sources, KRL’s stock is highly undervalued, although it is performing well in recent years, especially after BPCL took over its management.

“If KRL is merged with BPCL, the latter’s valuation is bound to increase substantially. The government is weighing all options, including the amalgamation of both companies, to push up the value of BPCL share,” they added.

Rumours about the possible merger of two companies, and the excitement building up ahead of disinvestment, have pushed up the share prices of KRL and BPCL over the past three months. The KRL stock has soared 92 per cent from Rs 28.20 on January 11 to Rs 54.80 on April 29. The BPCL scrip zoomed 39 per cent during the same period, from Rs 201 to Rs 281.50.

Stock market analysts believe the government will fetch over Rs 500 per share from disinvestment of around 39 per cent in BPCL this year. At this price, they said, the government can expect over Rs 4,250 crore.

Asked whether talks on the issue have been opened with financial institutions, which hold a substantial stake in KRL, sources said it would take place once a concrete decision is taken by the boards of both companies.

“It will not be a problem to get financial institutions and banks into the exercise as it will increase the return on investments in the refinery,” sources said.

BPCL currently has a refinery at Mahul, near Mumbai, with a six million tonne per annum capacity. It also has plans to set up a large refinery at Allahabad in order to have a strong presence in the northern region.

The major strength of the public sector oil giant is its formidable dealers’ network with 4,489 retail stations spread across the entire country. Besides this, it has 147 installations/depots, 16 aircraft fuelling stations and 27 LPG bottling plants.

   

 
 
PFC RECHARGES BATTERIES 
 
 
BY A STAFF REPORTER
 
Calcutta, April 30: 
Power Finance Corporation (PFC) expects more business this fiscal following an organisational restructuring.

PFC has set up a commercial and business development group which will interact with existing clients to create possibilities in new areas of financing, develop tailor-made financial products to cater to specific needs, besides exploring possibilities of extending financial assistance and other services to new clients.

“This approach is poised to strengthen the relationship with existing partners and to further long-lasting relationships with new customers,” senior PFC officials said.

PFC has also set up an “asset, liability and risk management” group to address and mitigate risks relating to various operations. With the creation of this group, the corporation will be able to effectively address various risks such as credit risk, interest rate risk and liquidity risk, which will consequently enable it to improve its profitability.

Till December 2001, PFC sanctioned Rs 8,078 crore and has disbursed Rs 2,219 crore. The corporation has registered a net income of Rs 158.61 crore and a profit after tax of Rs 59.29 crore. “PFC enjoys a good rapport with all its clients which is reflected in the high recovery rate of 99.5 per cent, with nil non-performing assets. In the last five years, PFC progressed from a recovery rate of 83 per cent in 1994-95 to 99.5 per cent in 2000-01,” the officials said.

They said that PFC will increase its products which may include both funded and non-funded facilities covering coal, lignite, oil and gas companies, railways, port trust and other agencies associated with the power sector.

PFC has already added new activities such as working capital, lenders’ engineering services and consultancy services to its portfolio. Officials said PFC will have to play a crucial role in the years to come when the demand for electricity will shoot up drastically. The electricity generation capacity now stands at 1,01,154 MW. However, there is a huge gap between demand and supply.

The average shortage of energy is now in the range of 8.4 per cent and peak shortage is about 13 per cent. The generation capacity needs to be doubled to 200,000 MW in the next 12 years to meet the goal of “power on demand” by 2012 as envisaged by the ministry of power.

PFC has helped the government in its endeavour to reform the power sector. “In order to provide support during the transition stage, PFC has been extending financial and technical assistance with a flexible approach for states undertaking reforms, so that they can up the process of reforms at an early date,” the officials said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.95	HK $1	Rs.  6.20*
UK £1	Rs. 71.33	SW Fr 1	Rs. 29.85*
Euro	Rs. 44.09	Sing $1	Rs. 26.75*
Yen 100	Rs. 38.13	Aus $1	Rs. 26.10*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5285	Gold Std (10 gm)Rs. 5170
Gold 22 carat	Rs. 4990	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8075	Silver (Kg)	Rs. 7960
Silver portion	Rs. 8175	Silver portion	   NA

Stock Indices

Sensex		3338.16		+36.95
BSE-100		1671.63		+20.62
S&P CNX Nifty	1084.50		+10.30
Calcutta	 113.13		+ 1.12
Skindia GDR	 534.26		- 9.16
   
 

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