Goliath abroad, behemoth here
Promoters up BSL holding by 1.36%
Govt plans two-stage divestment in Maruti
IPCL bid pointer to selloff course
US warns India of trade isolation
Scrip trip fears cloud threat of Dancing Dragon
Ficci initiative to be one up on CII
EIH prefers to go slow on new investments
Haldia Petro seeks naphtha lifeline
Foreign Exchange, Bullion, Stock Indices

New Delhi, May 6: 
The merger of Compaq with Hewlett-Packard, which will be formally announced on Tuesday, will create a Rs 4,000-crore computer and peripherals manufacturing company in India with a combined market share of about 19 per cent. It is expected to be headed by Balu Doraisamy.

However, Doraisamy, who now heads Compaq India, will not be able to take any major executive decision for a minimum of six months since the merger has to be approved by a high court. Legal eagles say that this could take anywhere between four to six months.

Three years ago, when Digital Equipment and Compaq announced a worldwide merger, the Indian arms were able to complete the merger only a full year later.

“In normal circumstances, it takes a minimum of four months to complete a merger. But if the High Court or the Securities and Exchange Board of India (Sebi) seek clarifications, then it could take longer,” said Pawan Duggal, a legal expert on IT and communications.

Compaq India has been the market leader in the personal computer (PC) business. It sold 2 lakh desktops during 2001-2002 and captured a market share of about 12-15 per cent in 2000-01. Industry estimates put Compaq India’s revenues at Rs 1850-1900 crore. The company’s revenues grew 60 per cent over the previous year at Rs 1,761 crore during the year ended March 2001.

According to an IT magazine, HP India grew about 35 per cent to record a revenue of Rs 1,540 crore during 2000-01. The company sold 1.31 lakh PCs during the year. Industry mavens estimate that HP’s independent revenues would be in the range of Rs 2,000 crore in 2001-02.

Sameer Kochhar, managing director of Skoch Consultancy Service, says: “There could be some job cuts on both sides of the merged entity. But the new entity will be a major force in the hardware industry and will pose a serious challenge to companies like Dell. It may also undertake inorganic growth through acquisition of a few local Indian PC manufacturers.”

Compaq has 750 employees in India, while HP India has about 320. Kochhar says the combined entity may cut at least 30-35 per cent of its workforce in India over a period of time. If this happens, it will translate into loss of at least 300-400 jobs.

While both companies have offerings in desktops, notebooks, handhelds and servers, HP has been strong in the peripherals business. HP has the highest market share in inkjet printers and leads in other peripherals. Compaq, on the other hand, has no presence in peripherals and has focused on the corporate and home segments for its PCs.

“The merged entity will have enterprise, government, and data centre markets for grabs. It will have a formidable presence and stronghold in almost every market segment. This will also result in other major PC manufacturers reviewing their businesses in India,” said Vinnie Mehta, director of Mait, the apex organisation of hardware firms.

Kochhar agrees. “The new entity can capture at least 10-15 per cent of the market in a year. They will be able to achieve this because of their combined product portfolio.”

HP has another subsidiary in HP India Software Operation, which is a 100 per cent export-oriented development lab. It also has an HP Services business. This, too, will be merged with the new entity, sources said.

Mergers in India are never smooth and the Digital India experience is one to go by. A rump of the Digital business continues to operate independently — and is known as Digital Globalsoft.


Calcutta, May 6: 
The promoters of BSL Ltd—the textile major formerly known as Bhilwara Synthetics—have increased their holding by 1.36 per cent by buying one lakh shares from the market recently.

The move is a response to a stake build-up by the Calcutta-based Sardas, who claim to have cornered 12 per cent of the company’s shares.

BSL’s promoters—the Churiwals and Jhunjhunwalas—held 34.29 per cent in the company until recently, having shored up their holding by 3 per cent through creeping acquisitions.

After the recent purchase of one lakh shares, their stake is understood to have touched 35.65 per cent. BSL informed the stock exchanges today that Shri Vardhman Stock Holding Private Ltd—an entity acting in concert with the promoters—had picked up the shares.

On Friday, the company told bourses that three companies—Kolmak Chemicals, Sun Biotechnology and Super Jupiter Couriers Private Ltd—owned by the Sardas had amassed a combined stake of 8.6 per cent on April 24 — that translates into 6,30,742 shares.

The Sardas, however, maintain that they have acquired a 12 per cent stake. This would mean that purchases made by the Sardas after April 24 have not been registered with the company yet.

The Sardas have already bought out the 6.33 per cent stake held by the SMIFS group of investment companies. However, the deal was not a negotiated one between the Sardas and the promoters of the SMIFS group.

“The transfer took place through the market, and we were not aware that we were buying the shares being offloaded by SMIFS. We realised this only after we made some enquiries in the market,” Ghanshyam Sarda, one of the promoters of the group, said.

The Sardas have since written to the Life Insurance Corporation and the Unit Trust of India, seeking to acquire their combined 10 per cent holding in BSL.

“Though we have indicated a price to LIC and UTI, we are ready to negotiate,” Ghanshyam Sarda said. The group has, at the same time, been buying the stock from the market.

Explaining the rationale for the acquisition, Ghanshyam Sarda said: “BSL should be worth more than Rs 200 crore, but it has a disproportionately small market capitalisation. It is a long-term investment for us and will make an open offer to the public on reaching the 15 per cent threshold for substantial acquisitions.”

The Sardas have, so far, acquired eight companies—seven jute mills and a chemical company. Ghanshyam Sarda, however, denies having any designs of acquiring management control of BSL.


New Delhi, May 6: 
The government today said it intends to bring down its stake in Maruti Udyog Ltd, the country’s largest carmaker, to around 25 per cent in two phases.

“The government’s stake in Maruti Udyog will come down to around 25 per cent following the recent understanding with its joint venture partner Suzuki Motor Corporation of Japan,” divestment minister Arun Shourie said here today.

Shourie’s statement confirmed speculation that the government would sell its stake in the carmaker first through a rights issue and then through a public flotation.

The Cabinet Committee on Divestment (CCD) is expected to meet in the capital on Friday to clear the deal with Suzuki. The Japanese carmaker has agreed to pay a premium to gain majority control of Maruti Udyog as well as a rights issue premium to the government.

In the first phase, the government will not participate in the Rs 400-crore rights issue that is designed to raise the equity capital of the company from the current level of Rs 132 crore.

Although no figures have been mentioned, media reports suggest that Suzuki will pay a rights issue premium of Rs 2,200 per share. This is in addition to the payment of Rs 1,000 crore as control premium for Maruti Udyog.

The government currently holds a 49.7 per cent stake in MUL while 50 per cent of the equity is held by Suzuki Motor. The remaining equity is held by the employees.

Under the terms of the agreement reached last week, Shourie revealed the government stake in the company would decline to 46 per cent after the rights issue. This is less than the expected 5 per cent divestment that was expected in the first stage.

If the government had participated in the Rs 400-crore rights issue instead of renouncing its rights, both the government and Suzuki Motor would together have been entitled to 15 per cent of the present capital. The government would have had the right to subscribe to an additional 7.5 per cent stake.

Initially, the plan was to renounce the government’s share in the rights issue, in favour of state-owned financial institutions, but the latter balked at the prospect.

Now, the financial institutions and banks will be allowed to pick up shares in the carmaker only after the rights issue.


Mumbai, May 6: 
As the disinvesment process of Indian Petrochemicals Corporation Ltd (IPCL) approaches the finish line, the euphoria in the petrochemical counter is expected to rub off on other public sector units that are next on the block.

Analysts say that an aggressive bid by either Indian Oil Corporation (IOC) or Reliance Industries Ltd (RIL), the two foremost contenders for the government’s stake would automatically rub off on other PSUs like HPCL, BPCL and SCI, which are coming up for divestment during the course of this year.

However, the prime area of interest in the run-up to the IPCL divestment among marketmen is on two counts: who wins the race, and, the winning bid price. Going by the conservative stance adopted by Reliance in the case of IBP, brokers feel that the petrochemical monolith is likely to bid in the region of Rs 120 per share.

“RIL may go by the book-value of IPCL which is around Rs 120 per share if it were to adopt a conservative stance. But the company is known to spring surprises and there is a strong possibility that it could give a higher tag,” a broker pointed out.

On the other hand, Indian Oil is largely expected to bid aggressively and analysts point out that the corporation would price the government’s stake in the range of Rs 125-Rs 150 per share with some estimates saying that it could even touch Rs 160, or over Rs 1,000 crore. However, the third contender, detergent maker Nirma Ltd is not expected to be an aggressive bidder in the entire process.

“An aggressive bidding will certainly reflect on other PSU stocks, particularly the oil majors such as HPCL and BPCL,” said Satyam Aggarwal, analyst at Khandwala Securities.

The divestment of IPCL is slated to be crucial both for IOC and Reliance. For IOC, which is set to ally with ONGC, it could mean a critical entry point into the country’s petrochemical sector. For RIL, the acquisition of IPCL could catapult it into an enviable status in the industry, many segments in which it already is the leader.


New Delhi, May 6: 
The US today warned that India may be left in the lurch and not taken seriously in the next round of WTO negotiations unless it allows greater market access and trims its bureaucratic red tapism. William H. Lash, US assistant secretary of commerce for market access and compliance, said: “US investment has shrunk here, our trade has decreased. We don’t want India to be left behind in the trade game, but unless India shows it wants to be taken seriously, the possibility that India will be left behind is all too real,” he said addressing a CII meeting.

Lash is leading a four-member delegation, which will be meeting a host of ministers including finance, commerce, mines, chemicals and agriculture over a span of three days.

He said, “India is too important a partner to ignore. Instead of once a year, the trade officials will now visit India every four months.”

However, even before the talks could begin with the finance ministry, S.N. Menon, additional secretary in the ministry of commerce and industry, the department of commerce cautioned Lash not to expect dynamic steps from India. “The developed countries will have to bear with us. They should not expect dynamic growth like China. We can only promise to be slow but steady.”

He added, “We are open to any negotiations and want to revive the flagging trade partnership between the two countries. But we think special importance should be given in negotiating about the non-tariff barriers imposed by the developing nations. I would also request that socially desirable objectives, that has no direct relation with trade be kept out of the trade negotiations.”

Lash, however, said: “We want bilateral ties and want to solve all disputes into successful economic relation. We were a very giving group at Doha. In the market access negotiation in Geneva, we will present an aggressive tariff line.”


New Delhi, May 6: 
The Chinese are coming—or are they? Software companies in India are spooked by the prospect that Chinese IT companies will muscle into the US and European markets in the near future, but are afraid to voice that fear because it could precipitate a slide on the already skittish stock markets.

Is that an uncharitable or alarmist thought? Not really. “The truth is that the listed IT companies are also leading software firms with the National Association of Software and Services Companies (Nasscom). This has serious implications not only for these companies but also for the new breed of IT firms that are trying to widen their portfolio. Admission of a Chinese threat will bring down shares of the software firms like a pack of cards,” says a senior marketing manager with TCS.

Early this month, a Nasscom delegation returned from a visit to China in a very upbeat mood. Nasscom chairman Phiroz Vandrevala had said, “China does not pose an immediate threat to the Indian software and service industry as its software industry is currently focused on catering to its domestic IT market. India is far ahead of China in quality certification and project management skills.”

So even as Nasscom adopts an ostrich-like attitude and refuses to acknowledge the threat, the ground realities tell a different story. Small software firms in the capital and those based in software technology parks of India (STPI) are already feeling the heat from rivals in dragon land.

“It is true that China is emerging fast as an IT superpower in the Asia-Pacific region. The companies here (in STPI) are already facing problems with demand going down,” said a proprietor of a software firm (a Nasscom member) that exports financial services solutions to the US and Europe.

While Nasscom officials were unavailable for comment, the association’s public relations firm said, “Contrary to the myth that China can offer cheap labour, the average wage costs in China are comparatively 15-20 per cent higher than in India.”

Refuting the Nasscom findings, a senior executive with Satyam Infoway Ltd responsible for recruiting IT professionals said, “The Chinese professionals are equally qualified and are now able to read, write and speak English as Indians and they also do not demand a high salary. So, the competition is inevitable.”

Indian software companies are already finding it hard to sustain the quicksilver 50 per cent growth rates that they registered two years ago. Most of them have found average job work rates in the US have plunged to as low as $ 6-7 per hour from around $ 75 a years ago. Result: the growth rates in the industry have tumbled to around 20 per cent on an average and are tending lower.

Some of the biggest competition to Indian companies is coming from Beijing Zhongke Hope Software Company Ltd, Legend Software Ltd, Dalian Hi-Think Computers Technology Company Ltd, Nasscom sources said. These companies develop software for financial, security and e-commerce applications.

AT Kearney Ltd, a consultancy firm, said, “We would term the Chinese IT industry as an opportunity now but it could become a serious threat at a latter stage.”

The Indian IT education institutions abroad like NIIT are also under threat from the Chinese firms specialising on latest tools. Neusoft, a leading IT education company, has already made deep inroads into Europe and Africa.

But NIIT is not worried. “There will be a competition (from Chinese firms) but the IT education market worldwide is big and many quality players are needed,” a spokesperson said.


New Delhi, May 6: 
Ficci is trying to steal a march over arch rival CII by roping in big name corporate houses, including top state-run enterprises into its fold.

Campaigning for members in an aggressive mode, Ficci enrolled nine new corporate members, including five major state run enterprises, along with 58 associate members during the last six months.

The nine roped in by Ficci include PSU biggies Oil and Natural Gas Corporation, Indian Oil Corporation, Life Insurance Corporation, Unit Trust Of India, and Bharat Sanchar Nigam Ltd as well as well-known private sector companies like Indo Rama Synthetics, Shaw Wallace & Company, Universal Cables and Bharat Seats Ltd.

Ficci says there is no special drive by them to get on board PSUs as members though it is happy to have them with them. “These PSUs want to broaden their involvement in private-public partnership,” said Ficci president R.S. Lodha.

The mega-state run corporations have recently come around to understanding the advantages of chamber lobbying on industry-based issues, said sources in a rival chamber who also added “(they) are now queuing up for membership as the market is getting deregulated.”

The focus of Ficci is, however, on roping in infotech, telecom, pharmaceuticals and entertainment giants. Lodha said, “Our thrust is to give a boost to the knowledge-driven sectors as well as the entertainment sector.”

A striking development is that several major entertainment companies have now also become associate members in the last six months. These include Sony Entertainment Television and Sri Adhikari Brothers.

The Ficci president said, “It has been our effort to create multiplex theatre association in the entertainment industry. We have over a period developed the entertainment sector into a high quality forum for taking value-addition forward with time.” Speaking on the other developments in this sector, he said, “We have now got a new convergence on e-entertainment.”

There are a total of four companies enlisted as corporate members in the information technology and telecom sector. Excluding BSNL which gained corporate membership in the last six to eight months, the others who have become already members are Mahanagar Telephone Nigam Limited, Rolta India and Videsh Sanchar Nigam Limited.

Four well-known names in the pharma sector, have become corporate and associate members in the last six to eight months. The corporate members include Sun Pharmaceutical and Wockhardt whereas the associate members are Torrent Pharma and Pfizer.

The other companies which were already corporate members of the chamber include Dr. Reddy’s Laboratory, Piramal Enterprises, Alembic Ltd and Panacea Biotech Ltd.

Several other big names which have joined as associate members in the last six months period include Arthur Andersen India, Coca-Cola, Infosys Technology, ITC Grand Maratha, JK Papers, Wipro, BBC Worldwide, Borosil, Bata, Aptech, Dabur, Deutsche Bank, Gas Authority of India Limited, HCL Infosystem, Hewlett Packard, Godrej, Wipro Ltd, Aptech, Canon India Ltd, Engineers India Limited, Indian Rayon and Kanodia Chemicals who chose to become associate members after they gave up corporate membership.


Calcutta, May 6: 
EIH Ltd—the company that runs the Oberoi chain of hotels—has decided to phase out investments in its new properties in Mumbai and Marrakesh (Morocco) to address cash flow problems.

EIH deputy managing director S.S. Mukherji said: “Given the present state of the industry, we have decided to phase out our investments in new properties in such a way that most of the cash outflow takes place in the last one to one-and-a-half years of construction.”

EIH had entered into an agreement with the ONA group of companies—a Moroccan conglomerate—last year, to construct a property in Marrakesh. EIH would hold 65 per cent in the property. The two companies had agreed to construct another property at Casablanca later.

Following the agreement, a plot in Marrakesh was identified and an architect for the construction had also been appointed. EIH has about four years to construct the property, and as Mukherji says, most of it will be done in the last 12-18 months. The projected investment in the property is about $ 35 million.

Groundwork for the property in Casablanca has yet to begin. The property in Mumbai will be the group’s third in the city. The group owns and manages 35 properties now in seven countries.

Speaking about the company’s performance in the last financial year (results of which have not been declared yet) Mukherji said: “It was a tough year. We did not do any better than the rest of the industry, but our cash flow position is still better than many others in the industry.”

Mukherji, however, assured that the company generated enough profits during the year to distribute dividend to its shareholders. “We closed the year with a positive bottomline, and will not skip dividend,” he said.

In the 2000-01 financial year, the company posted a post-tax profit of Rs 94.82 crore on a total income of Rs 519 crore. The company’s performance in the last financial year suffered from the attack on the United States and the economic recession which dealt a terrible blow to the hospitality industry.

Over the last couple of years, EIH has attracted a lot of attention as three investment companies close to tobacco-to-hotels major ITC Ltd built up a substantial stake at an investment of over Rs 150 crore. Their combined stake is close to 14 per cent now.

In response to the investment by ITC, the EIH promoters too have been shoring up their holding in the company. They have increased their holding by over five per cent over the last two years to about 41 per cent.


Calcutta, May 6: 
Its feedstocks fast running out, the cash-strapped Haldia Petrochemicals Limited (HPL) has asked Indian Oil Corporation (IOC) to increase the naphtha credit from Rs 300 crore to Rs 400 crore, but the navratna oil company has not responded to the request.

“We have not received a communication from IOC on the matter. We feel it should consider the difficult situation our company is passing through,” the HPL officials said.

Non-availability of naphtha because of irregular payments had forced the company into a temporary shut-down earlier.

“All these are linked to the investment package that has been drawn up by us. Once that is finalised, we will enhance the naphtha credit to HPL,” IOC officials told The Telegraph.

The oil major said it will invest Rs 468 crore in return for management control of HPL with a 26 per cent stake. It is also ready to provide a Rs 500-crore naphtha credit. IOC has spelt out certain riders for investing in HPL, one of which requires Purnendu Chatterjee to bring down his stake to 24 per cent from 43 per cent at present.

The present paid-up equity of HPL is Rs 1,260 crore, of which the state government and Chatterjee group hold 43 per cent each; the remaining 14 per cent is with the Tatas.

“We have not heard anything from Chatterjee on lowering of his stake in the company. However, we have been informed that he is negotiating with the financial institutions and banks for a debt restructuring plan. May be, the issue of equity restructuring has also been discussed,” the IOC officials said. With Indian Oil taking time to invest, there is an air of uncertainty over Bengal’s showcase project.

Banks and the FIs have a combined exposure of Rs 4,200 crore to HPL, and annual payout on account of servicing the borrowings is close to Rs 500 crore.

Meanwhile, the company has broad-based its corporate executive committee (CEC), which handles day-to-day functions in the absence of a managing director. Bani Banerjee, a finance executive from The Chatterjee Group and S.R. Ghosh, vice-president (maintenance and construction), have been inducted into the panel. The appointments were confirmed by HPL’s spokesperson.

Other members on the committee are Swapan Bhowmick, chief executive officer, Ashutosh Bose, executive vice-president (finance), Swapan Chakroborty, executive vice-president (projects and maintenance), Somen Das, managing director, Haldia Riverside Estates, an HPL arm and Sabyasachi Chakroborty, general manager, (HRD) and the member secretary of the panel.



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