BSE dolls up for derivatives
Tisco vision to double profit in three years
Disinfectantunit of Lever Johnson to be demerged
Reliance products dearer
Grasim net slumps in fourth quarter
Infotech billings go for a toss
Power funds linked to performance
Tata Tele ready to dial Delhi number
AT Kearney guide for petro retailers
Foreign Exchange, Bullion, Stock Indices

Mumbai, May 2: 
The Bombay Stock Exchange (BSE), having realised it has a lot of catching up to do with its younger and nimbler adversary, today appointed 21 market-makers for 20 futures products in an attempt to revitalise its flagging derivatives segment.

Market-makers are, essentially, brokerages providing much-needed liquidity through buy and sell quotes in a stock.

The 21 market-makers, all bulge-bracket brokers on the exchange, will offer continuous two-way quotes—the bid and ask at pre-defined spreads.

A market-maker will provide bid-ask quotes in the near month for three contracts and one contract in middle month at or less than the maximum spreads set by exchange. It will have to be present in the market for at least 80 per cent of the trading session every month.

The exchange will provide innovative system features, some of which will enable a brokerage to place/modify multiple orders, with predefined spreads, by punching a single key.

The move, BSE hopes, will rekindle interest in the derivatives segment, which has hardly been performing compared with the one at National Stock Exchange (NSE). BSE has not seen its derivative segment take off in the way it expected, in spite of the fact that both bourses launched it around the same time.

After Sebi ushered in derivatives as an alternative to BSE’s much-preferred Badla system, the 125-year-old exchange has struggled to get into the groove. To this day, it has trailed NSE on turnover in derivatives trading.

Dalal Street’s brokers have been slow to adapt to the new concepts that are now a norm in the international markets. Market watchers believe one of the reasons why the National Stock Exchange got a head-start was that it had done enough to brace for change. Now, in an effort to make up for lost time — and, perhaps, money — BSE has announced the market-making scheme for its derivatives segment for two years, starting May 6.

Says Manoj Vaish, deputy ED of BSE: “We have studied the market-making practices world-wide and designed a scheme which offers maximum benefits to BSE’s brokers. Active trading-cum-clearing members and trading members of the derivatives segment are eligible to participate in the scheme.”

Incidentally, NSE doesn’t name market-makers, because its reach and depth obviate the need for it to have them.


For each scrip/sensex futures, an incentive at the rate of Re 1 per Rs 1 lakh turnover, (50 per cent of the current transaction charge) on the total market volume (buy volume and sell volume) will be distributed among the market makers in proportion to their volumes in the product.


Jamshedpur, May 2: 
Tata Steel, the country’s largest steel manufacturer in the private sector, has set a target of increasing profit before tax (PBT) by two-and-half times to achieve a positive economic value addition (EVA) at the current level of investment by 2005-06.

Elaborating on the Vision-2007 before reporters here today, managing director B. Muthuraman said his company would need a pre-tax profit of Rs 800-1,000 crore in order to achieve the target in the next three years.

The company is expected to register a pre-tax profit of Rs 400 crore for the year ending 2002-03. Muthuraman, however, refused to disclose the target turnover that would be needed to achieve the required PBT.

Tata Steel’s current weighted average cost of capital (WACC) is 12 per cent, while return on capital (RoC) is only 8 per cent.

The new vision has underscored the need for “divestment in non-core and unviable units, merger and acquisitions” to attain the target growth before Tisco’s centenary in 2007. “The company will divest in the units that fail to achieve a positive EVA during the process,” said Muthuraman, adding that the process of identifying the non-viable units is currently under way.

While outsourcing strategically the services that are not part of the core activities, the company is looking at opportunities of forging joint ventures for under-performing units. It may sell its bearing unit to Nachi Fuzikoshi Corp of Japan as part of its divestment plan.

At the same time, the Tisco chief has also pointed out that the company is on the look-out for good acquisitions, which will help it achieve its EVA objective.

More important, the company, predominantly a steel manufacturer, has decided to venture into non-steel businesses, through acquisitions. “We have not finalised the areas that we should venture into. But we are open to diversifying into areas with a low asset base but high returns on investment,” Muthuraman said.

The new areas, he said, will be brought into the Tata Steel’s core competence over the next five years. The company will finalise its diversification programmes this fiscal, he said.


Mumbai, May 2: 
Hindustan Lever Ltd (HLL) and SC Johnson & Son Inc (SCJ) have decided to demerge the disinfectants division of Lever Johnson (consumer products) Pvt Ltd, a 50-50 joint venture, into a separate entity with an identical shareholding pattern.

The FMCG major said both the partners have carried out a comprehensive review of the joint venture and proposed that the disinfectants division be spun off into a new entity to be led by HLL while the existing Lever Johnson will now be managed by SC Johnson.

“It is, however, the intention that the demerged company will focus on insect control and air fresheners, while the new entity will focus on the disinfectants part of the business,” HLL said in a release here today.

Lever Johnson was set up in 1999 with an initial capital of Rs 15 crore to cater to the Indian market in insect control products supplemented with aircare and disinfect products, it said.

“It is the intention of both partners that, over a time, SC Johnson will gain management control and substantial shareholding in Lever Johnson, while HLL will gain the same in the new entity,” the FMCG major said.

The revised structure would be achieved through a scheme of arrangement between two companies and their respective members and creditors through the Mumbai High Court.

The partners said they believed that this move would be in keeping with Hind Lever’s strategic intent of focussing on core categories and core brands and also enable SCJ to pursue its vision in the insect control and air care products segment in India.


Mumbai, May 2: 
The prevailing trend of firm raw material prices and tight product supplies in the international markets have come as a boon to domestic suppliers of polyester yarn and fibre, long hit by a state of excess capacity and low prices.

This was evident today when Reliance Industries Ltd (RIL) announced sharp increases in prices of partially oriented yarn (POY) and polyester staple fibre (PSF). In fact, the hike in POY prices of over Rs 7,000 per tonne announced today, according to industry circles, has been the steepest carried out by the petrochemical giant in recent times.

For the month of May, RIL raised prices of POY to Rs 63.82 per kg from Rs 56.55 per kg, a rise of Rs 7.27 per kg over the previous month. Similarly, PSF prices too were hiked, but not to the extent as in POY, which rose by Rs 4.50 per kg to Rs 52.25 per kg.

Analysts pointed out that there were two reasons for such a drastic rise in POY prices. While international prices of intermediates like PTA have shot up in recent times following firm crude oil prices, overseas prices of POY too have soared over concerns of product shortages following plant shutdowns in certain Far Eastern nations.

International prices of PTA are put at over $ 480 per tonne compared with $ 385 per tonne prevailing earlier. On the other hand, overseas prices of POY that were once languishing below $ 1 per kg at $ 0.84 have since then firmed up to $ 0.95 per kg. Sources added that if the present trend would continue, prices could surpass the $ 1 mark, though the industry continues to face a situation of excess supply.

However, an official from one of the leading polyester firms points out that the industry’s deliveries have shot up to over 70,000 tonnes during the month of April, a rise of 10,000 tonnes over the previous month.

Apart from POY and PSF, RIL today hiked the prices of PET by Rs 3.50 per kg to Rs 60, and that of PTA by Rs 4.70 per kg to Rs 33.30, MEG to Rs 30 from Rs 25.75 per kg, PVC to Rs 44.10 from Rs 41.10. However, prices of PE, PP and LAB were left unchanged.


Mumbai, May 2: 
Grasim Industries Ltd has reported a 40 per cent fall in net profit for the fourth quarter of the year ended March 31. Net profit after exceptional items declined to Rs 79.23 crore against Rs 133 crore in the previous year.

The company, it may be recalled, had to make provision for three exceptional items, that includes the shut down of the Mavoor plants, disposal of the Gwalior unit and divestment of shares of Birla Technologies Ltd.

Nevertheless, it added that net profit after current taxes, but before exceptional items, was Rs 136 crore, which is higher by 7 per cent, despite the impact of losses sustained in the textile business and poor performance of the sponge iron and chemical businesses.

A charge of Rs 55 crore has been provided for payment made to the 2,300 employees at its Mavoor plants, which were shut down, and an obsolescence charge of Rs 19 crore towards the value of fixed assets retired from active use at these plants. Consequent to the disposal of its loss-making textile unit at Gwalior, the company has provided for an exceptional charge of Rs 32 crore accounting for loss on sale of the undertaking and payment of a negative consideration to the buyer. Grasim said these moves would yield substantial savings to the company in the long run.

Meanwhile, the board of directors, at its meeting held today, recommended a dividend of 90 per cent.

After acquiring a 10 per cent stake in Larsen & Toubro from the Ambanis, the AV Birla group today said that it is exploiting the synergies between the two companies.

Marginal rise in Rolta net

Rolta India Ltd has posted a net profit of Rs 31.20 crore for the first quarter ended March 31 this year, a marginal growth over Rs 30.70 crore registered a year ago.

However, the company’s net profit, when viewed sequentially, shows a growth of 101.3 per cent over Rs 15.50 crore posted in the quarter ended December 31, 2001.


New Delhi, May 2: 
Software firms have been Bush-whacked by the fall-out of 9/11: onsite and offsite billing rates have plunged sharply. However, the National Association of Software Services and Companies (Nasscom) is trying to play down the damage and claims that average onsite billing rates have fallen by 8-10 per cent from $ 60-65 an hour to $ 55-58. Offsite billing rates have dipped by up to 30 per cent from $ 28-35 per hour to $ 18-25.

Nevertheless, Nasscom sources admit that if the small and medium enterprises (SMEs) are taken into account, the fall in billing rates could work out to as high as 80-90 per cent.

“Both offshore and onshore billing rates have come down very drastically. The individual who used to get $ 50 per hour is now getting only $ 15-20. Major firms manage to bargain but the SMEs do not have much of a say,” industry sources observed.

Outgoing Nasscom chairman Phiroze Vandrevala said, “During 2001-02, offshore projects grew nearly 70 per cent while onsite grew only by 10 per cent. When adjusted for offshore billing rates, industry growth is nearly 60 per cent (offshore billing rates are only 1/3rd of onsite). Industry growth is increasingly polarised.”

The top five players contributed 55 per cent to industry growth while the top 10 players accounted for 73 per cent of growth during the financial year 2001-02.

Only a few small and medium enterprise (SME) players grew more than the industry average. According to Nasscom, there was increased vendor consolidation by customers, which saw the latter reducing the number of vendors they outsource their projects.

Last year also saw an increase in the number of fixed price multi-year contracts, with many large players winning high-value global projects, Nasscom officials claimed.

Nasscom president Kiran Karnik said, “The industry today has become one of the biggest contributors of Indian exports, with its share going up to 16.5 per cent. The 29 per cent export growth is enviable in view of the 2 per cent export growth for the economy.”


Calcutta, May 2: 
The Deepak Parekh Committee, set up by the power ministry to look into the capital restructuring of the state electricity boards (SEBs), has suggested that disbursal of funds under accelerated power development programme (APDP) should be linked to performance, not per capita power consumption.

At its meeting in Delhi on Wednesday, the panel proposed that the ministry immediately enter into a memorandum of agreement with states, binding them to milestones in power sector reforms. The states will have to spell out how they intend to achieve these targets.

The meeting was attended by joint secretaries in the finance ministry — R. Banerjee, joint secretary in the department of expenditure and Ashok Lavahsa, joint secretary, department of economic affairs. R.V. Shahi, Union power secretary, was also present at the session.

The committee has suggested that if a particular SEB fails to make proper use of the funds allocated under APDP, the money should be given to another board that has been showing progress in resource utilisation.

Sources said the Parekh Committee feels that the disbursal of funds, which was hitherto linked to per unit consumption of power and the Gadgil formula (revenue earning), needs to revised. This piece of advice will now be put forward to the Union power ministry.

The committee said the main condition for getting funds would be reducing aggregate technical and commercial loss in the system and to improve revenue collection.

Apart from Parekh, the 15-member committee comprises Harish Salve, solicitor general of India, K.V. Kamath, CMD of ICICI, R. Gopalkrishnan, director and CEO of Tata Sons, K.D. Kulkarni, director of BSES, K. K. Maheswari, executive president of the Birla group, G.D. Gautama, chairman of West Bengal State Electricity Board and P.K. Basu, director general, Strategic Management Group, apart from others.

The ministry has asked the panel to examine the current initiatives under APDP, with a focus on the distribution apparatus, and suggest improvements in them.

The committee will also have to identify them approaches to reforms being pursued by states, find out the reasons why they have chosen to follow the strategy and critically evaluate the various methods. The committee will then have to work out reform strategies to restore and sustain financial viability of the sector.

It is identifying five to six states, and devising, in consultation with state governments, state-specific reform programmes that are fair and equitable to all major existing and prospective stakeholders in the power sector.


New Delhi, May 2: 
The Tatas are coming to town—ready to take on Bharti, Mahanagar Telephone Nigam Ltd (MTNL) and late-entrant Reliance in the capital’s hot and buzzing fixed-line telephony business.

The Tatas, who have bought a part of Spectranet—the Punj Lloyd group’s fibre optic cable laying outfit—is hoping to turn the heat this summer on cellular service operators like Bharti and Essar, with their aggressive limited mobility service that is being tacked on to the fixed-line service.

The company also aims to quickly expand the footprint for fixed line telephony operations and is in an advanced stage of negotiations with Hughes for the Maharashtra circle. It also plans to pick up Punjab, Haryana and Kerala either by buying out existing players or acquiring fresh licences.

Tata Teleservices Ltd (TTL), which will draw on the strength of the group’s strong brand name, plans to launch its fixed-line telephony service in Delhi by September. Positioning itself as the complete telecom company, TTL’s product offerings will include wireline, fixed wireless, limited mobility, data services and a host of integrated telecom solutions. In addition, the company may offer short messaging service (SMS) over the Code Division Multiple Access (CDMA) based phone.

The company believes that its limited mobility option will be a big draw as it will provide mobile advantage at low fixed-line costs.

Though the Tatas will not be the first to offer the limited mobility service in the capital, the biggest sales pitch for its service is that it will offer speeds of 144 kilo bits per second, as against the normal speed of 14.4 kbps available on the CDMA-based phones. This will be possible because it plans to upgrade the CDMA network to the 3G-1X system, the latest available network world-wide.

“Without limited mobility, the basic service would have been unviable,” admitted S. Ramakrishnan, managing director Tata Teleservices. “Trai should offer flexibility in tariffs for the service, as some use it extensively while others use it more sparingly,” he said. The company plans to invest Rs 800 crore over the first six years. This investment will generate employment of about 5,000 from within the company and the wider TTL family of franchisees and PCOs. TTL plans to rope in one lakh subscribers within the first year of operations. It expects to have a mix of 50 per cent fixed line and 50 per cent limited mobile users.

TTL provides basic telecom services in Andhra Pradesh for the last three years and has over 150,000 customers in that state. It has invested Rs 1,400 crore to build the network, which includes 1,050 kms of optical fibre cable across the state.

“We reaffirm our commitment to the people of Delhi and to the business community that we will provide them with world class telecom solutions. As in AP, we are confident that in Delhi too we will be able to do full justice to the trust commanded by the Tata brand,” he said.

TTL will also offer its corporate customers in Delhi customised telecom solutions for various business verticals. This means that business enterprises—big or small—will have the freedom and flexibility to adopt telecom solutions to their needs.

Rajiv Kataria, chief operating officer, Delhi circle said, “Being a complete telecom company means helping customers access solutions or services that they need, and the skills to integrate them.”


New Delhi, May 2: 
The Bargain Hunter is the joker in the pack—and the petroleum retailing companies that are cobbling their elaborate marketing strategies to take advantage of the opportunities thrown up in a post-APM scenario had better watch out for him.

A psychographic profile of petro-product purchasers put together by AT Kearney, the US-based management consultancy, reads like characters in a Old World Morality Play: they are Prestige Seeker, Trust Seeker, Routine Chore Doer, Time Poor.

“Each of these segments represent a potentially profitable target group,” says Sue Evans, associate principal consultant at AT Kearney. The profiling will be relevant for all the metro cities though the number of people in each group may vary. In any case, the present study has not quantified the numbers in each category.

The Routine Chore Doer is the guy who zips into a petrol station and wants hassle-free service. He’s also the chap who seeks additional vehicle repair and maintenance services.

The Time Poor person is self-evident: he’s the go-go man and is known by his need for quick service and convenience. He is most likely to be a professional—a 24x7 worker—with a strong need for locational convenience and other non fuel-related services.

The Prestige Seeker is relatively more brand conscious; he has a higher level of emotional and needs reinforcement of self esteem. He is the ideal target for international or premium brands.

The fourth is the Trust Seeker for whom the quality-guarantee is the underlying driver for purchase decisions. The study says that this type is probably unique to emerging markets such as India.

But the most important guy will be the Bargain Hunter—low on loyalty, and on the prowl for a good deal. He is the guy who is still discernible as a silhouette: he will emerge from the shadows when a price-differentiated regime takes shape in a post-APM scenario.

AT Kearney reckons that the Bargain Hunter will be the most difficult that the petro-retailing companies will have to deal.

The profiles emerged after the consulting firm undertook a qualitative market research among petroleum consumers in New Delhi.

The study prescribes the brand positioning of a superior product for the discerning consumer. For him or her, the look of the petrol stations would be ‘international’ with technology enabled services.

For Time Poor person, the brand positioning has to be build entirely on a ‘time is money’ value proposition.



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