Sebi to step up rogue hunt
PF books to be scanned
Maharashtra crack team to dig out the dirt
CMIE figure nixes high growth hope
Tata offer for VSNL oversubscribed 153%
HPL shuts down yet again
HDFC loans become cheaper
Dividend bonanza
Allahabad, UBI out of gilts scam
Foreign Exchange, Bullion, Stock Indices

New Delhi, May 14: 
The Securities and Exchanges Board of India (Sebi) has decided to tighten its vigil on both listed and unlisted companies to be in a better position to deal with future financial scamsters.

The market regulator will now routinely and randomly check share price movements on bourses for listed stocks and monitor off-market deals for unlisted companies.

Stung by accusations of regulatory failure, the watchdog has decided to increase the ambit of market vigilance maintained by its investigative officers to cover both the entire spectrum of listed and unlisted companies.

The Home Trade brokerage scam — the latest in a long line of shenanigans by rogue traders — saw the Sanjay Agarwal firm siphon off funds entrusted to it by co-operative banks for deployment in the gilts market.

Home Trade was listed on the Pune Exchange and its derring-do has not been monitored by any agency despite its flashy style of doing business.

Sebi chief G.N. Bajpai today told reporters after a meeting held here on investigations into l’affaire Global Trust Bank: “We are continuing with our probe into Home Trade...the ramifications have to be looked into.”

The brokerage scam, which wiped out Rs 250 crore that several urban co-operative banks had routed via the brokerage and a fourth of the funds owned by the Seamen’s Provident Fund, has largely been viewed as yet another failure on the part of the government’s regulatory authorities to curb malpractices.

Sebi is investigating to see where this money has been deployed. Investigators feel much of the money made its way into stock market operations and were lost in one or more of the many downswings the equities market suffered over the past year. However, with the trail not yet clear, investigators are tightlipped on the complexity and magnitude of the scam.

Meanwhile, Bajpai said Sebi has yet to take a decision on allowing UTI to further dip into its development reserve fund (DRF) to shell out shortfalls in its 11 monthly income plan schemes.


Calcutta, May 14: 
Following revelations that Home Trade duped a number of large provident fund trusts, besides co-operative banks, the Centre has ordered an audit of the 2,500 autonomous provident fund trusts under the jurisdiction of the Central Provident Fund Commissioner.

“The audit was ordered on Monday to determine the loss on provident funds. A clear picture will emerge within the next two weeks,” Ajai Singh, the central provident fund commissioner, told reporters here today.

The department’s inspectors will conduct the audit across the country. Assets declared in the books of the provident funds will be matched with securities in the possession of the trusts.

Also, the government is likely to bar provident funds from trading in government securities in the physical mode, Singh said. This implies they would have to trade only in the paperless (dematerialised) mode — substantially reducing the probability of a default.

Home Trade siphoned Rs 93 crore out of Seamen’s Provident Fund. It had taken the money to buy government securities from the market, but did not deliver them to the fund. A number of co-operative banks, too, have been cheated in a similar fashion. Reserve Bank of India estimates their losses at Rs 400 crore.

Extensive investigations have already been launched by the Reserve Bank, National Bank for Agriculture and Rural Development (Nabard) and the Securities and Exchange Board of India (Sebi), apart from other regulatory authorities, to assess the damage.

Speaking at a seminar at the Indian Chamber of Commerce here today, Singh said: “Until recently, around 56 per cent of the employers contributing to the Employees’ Provident Fund Organisation (EPFO) did not comply with the regulations. There are instances of non-compliance among independent trusts too. Most of this is due to companies not remitting their provident fund dues to the trusts in time.”

The aggregate shortfall in provident funds’ contributions is around Rs 1,100 crore. Of this, dues to independent trusts could be around Rs 500 crore, even after recovery of Rs 2,000 crore in the last couple of years. “Much of this amount cannot be recovered,” Singh said.

Totalisation agreement

The Centre is in talks with Japan and the United States to work out an arrangement that would enable Indians working in these countries to bring back to India contributions made by them to various social security funds there.

“If these countries agree to offer this facility, we would certainly try to work out similar arrangements with other countries,” Singh said.

The US offers the facility to nationals of a number of countries. If the arrangement works out, India too, would have to offer reciprocal benefits to American and Japanese nationals working here.


May 14: 
The Maharashtra government today decided to constitute a special taskforce, comprising members of all investigative bodies, to probe the government securities scam rocking the state’s co-operative banks.

The six-member team, to be led by Pune-based additional director general (CID) of police, A. K. Agarwal, is expected to submit its report in a month.

Representatives from the Enforcement Directorate and the Central Bureau of Investigation (CBI) will assist in the investigation as members of the group, finding out if money has been salted away abroad, a state government spokesman said in Mumbai today.

Other members include officials of Mumbai Police’s Economic Offences Wing, financial experts and chartered accountants. They will look into the technical aspects of various deals. A state co-operative department official will also help.

The decision to constitute a probe team was taken at a meeting convened by Maharashtra chief secretary V. Ranganathan. Representatives of the RBI, Sebi and Nabard took part in the discussion, though they have not been inducted into the taskforce.

Agarwal remand

Home Trade CEO Sanjay Agarwal, a key accused in the Rs 150-crore government securities scam involving the Nagpur District Central Co-operative Bank, was today remanded in police custody till May 18. The court also granted a request by the state CID to take him to Mumbai for further interrogation.

Meanwhile, Ketan Sheth of Gilt Edge Securities, another accused in the Rs 92.78-crore Seamen’s Provident Fund Organisation scam, gave himself up to the CBI in Mumbai this evening. He will be produced before a magistrate’s court on Wednesday.


Mumbai, May 14: 
The cassandras have started to come out of the woodwork—and their predictions will sap nascent business confidence that this is going to be the turnaround year.

The Centre for Monitoring Indian Economy (CMIE) today said the economic slowdown will exacerbate this year and GDP growth will tumble to 4.5 per cent from the 5.7 per cent estimated for 2001-02.

The CMIE, the independent Mumbai-based think-tank, has said in its latest monthly review that the previous fiscal was the worst since the 1991 crisis. But it nixes all fanciful notions of a break out into the sun this year with the dark prediction that the situation will only worsen during 2002-03.

The CMIE prediction is the worst for this year and comes on top of the 5.2 GDP forecast made by the Confederation of Indian Industry (CII) in its State of the Economy report released yesterday.

The two predictions fly in the face of the forecasts made by the Reserve Bank of India and the government—which have been talking of the long haul back to the glory days of the second quarter of 2000-01 when GDP hovered around 6.2 per cent.

In its recent credit policy, the RBI said GDP this year would be anywhere between 6 and 6.5 per cent. Finance minister Yashwant Sinha said at the start of the week that the economy would notch up a GDP growth of over 6 per cent this year.

What is particularly worrying for corporates is that both CMIE and the CII predict a sharp fall in agriculture growth this year. CMIE puts it at only 2 per cent (against 6.5 per cent last year) while CII projects 3 per cent which it said was “the average growth rate it has achieved over the past decade”.

That is bad news for companies—especially fast moving consumer goods makers—who have been targeting rural markets to ratchet up growth and compensate for crimped sales in the urban markets.

CMIE says foodgrain production will remain stagnant this year and this will only be alleviated somewhat by good performance on the oilseeds front.

The higher growth that Reserve Bank governor Bimal Jalan had projected when he released the credit policy was predicated on the assumption of a speedy recovery in the industrial sector and expected growth in agriculture.

CMIE has estimated that production of agricultural commodities will grow by only 1.5 per cent. Of these, the production of cereals is expected to remain flat though production of oilseeds will rise by 6.4 per cent.

According to CMIE, the food products and capital goods groups are projected to post declines. Along with the anticipated slowdown in the petroleum sector, this will restrict growth in industrial sector.

While the cement sector is projected to continue to do well, industrial growth, it added, would post a small improvement from 2.7 to 3.5 per cent in the current fiscal.

The CII has projected a 4 per cent industrial growth this year, slightly higher than last year’s 3.3 per cent.


Mumbai, May 14: 
The Tata group’s open offer to acquire an additional 20 per cent in Videsh Sanchar Nigam Ltd (VSNL) has been oversubscribed 153 per cent, with 87.6 million shares being tendered under the offer.

However, Panatone Finvest (PFL), the special purpose vehicle floated by the Tata group, will accept only 57 million equity shares of VSNL on a pro rata basis, a Tata statement said. The Tata holding in VSNL will go up to 45 per cent by virtue of the offer from 25 per cent at present.

Scrutiny of the documents is under way to determine the valid tenders, sources close to the Tatas said. “We are still tabulating the shares tendered in the offer, and, therefore, the shareholders who have decided to tender the shares are not known at this point of time,” a source said.

The open offer made by PFL, together with other Tata companies to acquire up to 57 million equity shares (including shares underlying the ADSs)—representing 20 per cent of the paid-up share capital of VSNL—at a price of Rs 202 per share closed on May 9.

PFL, set up to acquire the 25 per cent government stake in VSNL Ltd, had floated zero coupon non-convertible debentures with a size of Rs 1,300 crore. To facilitate this, Tata Sons Limited, the group’s main holding company and Tata Power Ltd, the main promoters of the SPV, had issued unconditional and irrevocable corporate guarantees. This enabled the SPV to get a high rating for its non-convertible debentures. Tata Steel and Tata Industries have a token presence in the SPV.

Crisil has assigned a P1+(SO) rating to the one-year zero coupon non-convertible debentures (NCDs) issued by PFL. The rating indicates that the degree of safety regarding timely payment of financial obligations on the instrument is very strong.

In its statement, Crisil had said the rating was based on the strength of the unconditional and irrevocable corporate guarantees provided by TSL and TPL to the debt instrument. The guarantees, which are legally enforceable, and the payment structure, are designed to ensure full and timely payment to investors.


Calcutta, May 14: 
Haldia Petrochemicals (HPL) is lurching from one crisis to another after a stop-go year in business.

The plant was shut down this morning, ostensibly because of a snag in one of its units, but sources say it is the failure to cough up customs duty on imported naphtha that has forced yet another closure in recent times.

The company claims a technical problem in one of the heat exchangers of the naphtha cracker unit made it difficult to keep the complex going. At the same time, it said that work would not resume before May 19.

HPL expects the naphtha consignment that has been shipped to the Haldia port to be cleared even as Indian Oil Corporation ratchets up pressure on the company to wrap up the equity recast it has been insisting on, and hand over management control by June.

“The shutdown has taken place due to some technical problem. It has nothing to do with customs clearance,” an official spokesperson of the company said.

However, he did not deny that the company owes customs duty on the 25,000-tonne naphtha consignment. “We need around Rs 7-8 crore to pay the customs duty. Since the plant has been shut down, we have not paid the duty. We are saving this amount. Once the operations resume, we will clear the customs duty.” The naphtha — the company’s main feedstock — is imported from Itochu, Mitsui and other companies.

Bengal’s show-case project has been dogged by frequent shutdowns in the recent past, all of them blamed on technical glitches. Industry watchers have found it difficult to buy the line peddled by the authorities, saying a state-of-the-art plant like HPL’s cannot shudder to a halt because of technical reasons so often.

“Operations at the plant have been affected by the lack of naphtha. It has been facing problems since it started commercial production,” the spokesperson said.

Nirupam Sen, the state commerce and industry minister, was not available for comment on today’s closure.

The fresh trouble in running the plant comes at a time when HPL’s financial crisis is deepening by the day. The promoters are yet to sort problems in equity restructuring.

“We had asked Purnendu Chatterjee to submit an amended proposal. We have not heard anything from him so far. However, a few days back, Dipankar Chatterjee, adviser to the West Bengal government on HPL, had informed us that they are working out some proposal. It is expected that the proposal will come to us shortly. In any case, we will not extend our offer beyond June,” Indian Oil officials said from Delhi today.


Mumbai, May 14: 
Housing Development Finance Corporation Ltd (HDFC) has cut its interest rates varying between 25 and 75 basis points.

The new interest rates would come into effect from tomorrow, executive director Renu S. Karnad told reporters here today.

On the other hand, HDFChas embarked on a loan restructuring drive last year that saw the housing finance major considerably prune its borrowing costs and thus reduce its lending rates.

Consequently, despite the several cuts in housing loan rates, the company’s interest rate spreads rose to 1.96 per cent in the past year from 1.8 per cent the preceding year.

The year also saw the company finally appointing direct sales agents called “service associates” to steamroll its sales network, mirroring the strategy adopted by its competitors. They contributed 10 per cent of the new business during the year under review.

The maximum reduction in interest rates on housing loans was in the 6-10 year and 11-15 year tenure, where the reduction is 50 basis points to 10.75 per cent and 11 per cent.

HDFC’s cut in housing loan interest rates follows similar moves by rivals like State Bank of India and ICICI Bank over the last two months.

The interest rates on other individual lending products including loans to NRIs, home improvement loans and home extension loans have also been reduced. The revised rates on housing loans will be effective from Wednesday.

In a simultaneous move, HDFC has reduced the interest rates on individual deposits and trust deposits by 25 basis points with effect from May 22.

The year saw the corporation pruning its costs drastically, as it retired high-cost borrowings of around Rs 1,100 crore. Thus, while expenses grew by 10 per cent, HDFC’s income grew by 20 per cent.

HDFC is likely to take benefit from the recent concessions in the Finance Bill (that enables securitisation of housing loans) and RBI’s recent monetary policy announcements that required 50 per cent risk cover on mortgage-backed securities from the earlier 75 per cent.

The board of the housing finance major has given its assent to raise a sum of Rs 300 crore in the coming months through a securitisation programme. HDFC managing director Keki Mistry said it will be rolled off in the next few weeks when it floats a securitised loan portfolio worth Rs 150 crore in the markets.

Further, the company has also armed itself to borrow funds to the tune of $ 200 million. Chairman Deepak Parekh said it will enable the company to take advantage of the overseas debt markets where interest rates are currently ruling at historically low levels.

“We can borrow at Libor plus 80 basis points and with a forex risk cover we can easily obtain loans at 7.5 to 8 per cent levels. The benefit of replacing high-cost liabilities with cheaper funding was felt in the fourth quarter,” said Conrad D’Souza, head of HDFC’s treasury.


Mumbai, May 14: 
Buoyed by better-than-expected annual results, the board of Housing Development Finance Corporation (HDFC) has approved a dividend of Rs 25 per share (250 per cent), as against Rs 12.50 per share paid in the previous year.

Dividend for the current year includes a one-time special silver jubilee dividend of Rs 10 per share. HDFC said the dividend would absorb Rs 304.28 crore and the balance Rs 275.73 crore is being transferred to reserves.

The premier housing finance major has beat analysts’ expectations by posting a 22.4 per cent rise in net profit, aided partially by its strategy to lower borrowing costs coupled with a sharp rise in loans.

Profit after tax for the year amounted to Rs 690.93 crore, compared with Rs 555.65 crore for the previous year—an increase of 24.4 per cent. After providing Rs 110.92 crore for tax (previous year Rs 82 crore), the profit after tax has increased by 22.5 per cent to Rs 580.01 crore, from Rs 473.65 crore in the previous year. Total income of the corporation in 2001-02 increased to Rs 2,700.15 crore from Rs 2382.35 crore in the previous year.

Total assets during the yearrose to Rs 21,459 crore compared with Rs 17,842 crore in the previous year—an increase of 20.2 per cent. Loan approvals during the year were Rs 9,041.25 crore compared with Rs 6879.77 crore in the previous year, representing a growth of 31 per cent. Loan disbursements during the year were Rs 7616.56 crore against Rs 5,803.01 crore in the previous year representing a growth of 31 per cent.


Calcutta, May 14: 
The Uco Bank-sponsored Cuttack Grameen Bank has been taken for a ride by HomeTrade, but Allahabad Bank and United Bank, the two other Calcutta banks, say they have not been affected.

Madhukar, chairman and managing director of United Bank of India, said the gilts scam has not touched the RRBs sponsored by his bank. UBI has sponsored 11 such banks, spread across Bengal and north-east. A preliminary review has shown no discrepancy.

“We had taken a decision earlier that all investment proposals before our rural banks should be sent to us. Our officers go through them and allow it only if these are found feasible. After all, any wrong decision made by RRBs will affect the parent bank,” he said.

Cuttack Grameen Bank is the first RRB in the country to have been snared into the gilts scam. In a deal similar to those it struck with rural and urban co-operative banks elsewhere, Home Trade did not deliver the government securities for which Grameen Bank paid it a little less than Rs 10 crore — an amount that is now believed to have been pinched by the brokerage. The Sanjay Agarwal-promoted firm is the main accused — and the fountainhead — of the raging gilts scam.

Uco chairman V.P. Shetty declined comment on the matter. The bank’s achievement of having shaken off the “weak” stigma has been smudged somewhat by the revelation that an RRB sponsored by it engaged Home Trade.

B. Samal, chairman and managing director of Allahabad Bank, said none of the RRBs his bank helped set up are embroiled in the scam. “We have checked the operations of all our RRBs. There has been no such problem. But it is a matter of grave concern. As a parent bank, we have to be more cautious. After all, any wrong decision will affect us first.”

A week back, National Bank for Agricultural and Rural Development (Nabard) told the RBI the scam could spread to RRBs. This was likely because some of these banks have been dabbling in the government securities market.

The board of RRBs comprise representatives of Nabard, the RBI, chairman of the sponsor bank and state government nominees.



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