Suzuki takes over reins at Maruti
Six years to get behind the wheel
ED crack at ITC before Fera death
Tata Steel Q4 net drops 41%
Fresh price hike soon
Nod for Toyota, Reckitt proposals
Hind Petro warms up for Rs 1000-crore flotation
Net profit jumps 30% in fourth quarter
Indian Oil public issue may carry a premium of Rs 180
Foreign Exchange, Bullion, Stock Indices

New Delhi, May 30: 

One model every year, more local content

A model a year — that’s the pace Maruti has set for itself after Suzuki won the control key.

At the signing ceremony to complete the hand-over here today, Suzuki chairman Osamu Suzuki was cagey on details, but said there would be a number of launches in future in the entry level segment. “A and B segments will remain the focus for us in India. New launches will add to the volumes generated by these cars.”

He said his company would increase the local content in Maruti vehicles further. It would also invest Rs 200-250 crore in a dye-cast aluminium foundry. “The foundry, which will come up at Manesar in Haryana, will help us build certain key automobile components, both for existing models as well as the new ones being lined up,” the Suzuki chief executive said.

Indigenisation of vehicles has long been a bone of contention between the Suzuki management and the government and the statement is seen as an olive branch.

“MUL will continue to be run as an Indian company with full support from the parent, and with the same local management,” the SMC chief said after handing a cheque to heavy industries minister Suresh Prabhu.

Maruti chief Jagadish Khattar, who formally resigned earlier this week, was re-appointed in the same slot as an SMC nominee. At a board meeting held this morning, it was decided the SMC would have eight representatives, while the government would get two part-time nominees — K.K Jaswal, additional secretary in the ministry of commerce and industry and Pradeep Kumar, joint secretary in the heavy industries ministry.

Suzuki indicated he would try to fulfil the promise to turn Maruti into an export hub, saying exports of Alto to Europe would continue. “However, in future, we will look at the market for completely built units. But what we are actively considering is the component exchange programme among Asian subsidiaries like Philippines, Malayasia, Indonesia and Burma,” he said.

Speaking on the occasion, Prabhu said privatisation of Maruti would help attract investment to India, especially in the automobile sector. Though Suzuki had a 50 per cent stake — larger than the government’s — in the car maker, it was run on the basis of a pact which gave the two partners equal control.

The government recently approved disinvestment in Maruti through a two-stage process, starting with the reduction of its stake to 45.4 per cent from 49.7 per cent. It received a control premium of Rs 1,000 crore for ceding majority stake to SMC. Also, it will not subscribe to a Rs 400-crore rights issue, helping Suzuki raise its stake. The Centre will then offload its remaining equity through two public offers, by April 2004.

Suzuki paid Rs 400 crore to buy 1.2 million newly issued Maruti shares at Rs 3,280 apiece. That will take its shareholding to 54.2 per cent and dilute the government’s stake to 45.54 per cent from 49.7 per cent. In the second step, the government will offload 20 per cent through an initial public offering (IPO) of shares in this fiscal, and would exit the firm completely by March 2004.

Suzuki met disinvestment minister Arun Shourie and assured him the Japanese auto giant would continue to give full support to Maruti.


New Delhi, May 30: 
Osamu Suzuki will fly to Japan a happy helmsman. He has grabbed a deal that puts his company in the driver’s seat at Maruti Udyog. It took him six years to cross the Rubicon. Having reached his destination, he is gearing up to shovel big money into India’s largest auto-maker at a time when it is racing against leaner and younger rivals. Shashwati Ghosh finds out what the man behind the Suzuki machine has in mind for Maruti.

I believe Suzuki has plans to enter the two-wheeler segment? How true is it?

We will set up a 100 per cent subsidiary for two wheelers in this financial year. But the functions of the two-wheeler company and Maruti Udyog will not be merged. It will be different from the mainline business.

What are your plans for a new millennium car? Will it be made in India?

We have made efforts to design the car at our R&D centre. If my dream comes true, Maruti will be one of the bases where it will be manufactured.

You had plans under which cars of different platforms and companies would have common parts to reduce costs. Will this be introduced in India? Will it help reduce prices?

The process has begun globally. It is not long before this comes to India. The price of a car depends on the economies of scale, which, in turn, is tied to market conditions.

Does Suzuki intend to promote Maruti as a global sourcing hub for the models it currently makes in India?

It will be our effort to use India as a base to source some of our models. However, two critical considerations that weigh on customers’ mind will have to be seen: quality and price. We are working on both fronts. These are the things that help a product find a market. At the same time, we are looking at the component exchange programme within the Asian subsidiaries.

Is it true that weak demand has forced Maruti to operate at a lower capacity?

Ups and downs in the market affect all industries. It is nothing new to the automobile sector. What is critical is that around 1.2 million cars can be manufactured in India. Maruti has 45 per cent of the capacity, and 60 per cent of the market.

Maruti conducted market research on Ignis and Vitara. Now that Suzuki is in control, what are the plans? When will these models come to India and in what form, CKD or CBU?

No comments on the details, but there will be one model each year.

How does Suzuki intend to strengthen Maruti’s manufacturing and technical capability so that it can roll out cars internationally competitive in quality and cost?

Wait, watch and see. But have trust in us.


Calcutta, May 30: 
The Enforcement Directorate is likely to file chargesheets on Friday against ITC Ltd for violations of the Foreign Exchange Regulations Act (Fera), and initiate prosecution against the company and its officials.

Friday is the last day for filing of chargesheets for violations committed under the Act, before it lapses and is replaced by the more benign Foreign Exchange Management Act (Fema).

Fera was repealed in June 2000. But the directorate, under a ‘sunset clause’, was allowed to file chargesheets till May 31, 2002, for offences committed before June 2000.

The Enforcement Directorate has so far registered close to 25 cases against the Calcutta-based conglomerate.

ITC would be getting a reprieve in at least four to five cases, as the Reserve Bank of India had extended the deadline for recovery of its “export dues” till September 30, K.N. Sinha, the deputy director of the directorate, said.

It does not mean, however, that the directorate will file chargesheets in all other cases. “We have completed the investigation and will be filing chargesheets only for the deserving cases,” Sinha said. He did not specify how many ITC officials would be chargesheeted.

The chargesheets will be filed with the Chief Metropolitan Magistrate, following which the ITC officials named in them, will have to obtain bail from the court.

Fera allows the authorities to press criminal charges against the offending company and its key officials.

Past and present ITC officials could face charges for Fera violations that date back over a decade and run up to over Rs 700 crore.

Senior officials of the directorate had earlier classified the violations in two broad categories: “wilful loss of foreign exchange and procedural lapses in dealing with foreign companies”.

The directorate had alleged that ITC’s International Business Division had violated the provisions of Fera in trading with EST—a company owned by the Chitalias, based in the US. Top officials like Y.C. Deveshwar and K.L. Chugh were interrogated by the directorate in the mid-nineties for alleged violations of the Act.

Even recently, the directorate had alleged that ITC had violated the Act by offering to pay $26 million for settlement of dues of the Singapore-based ITC Global, though ITC had said that it would seek all necessary approvals before disbursing the payment.

Matters came to a head in October-November 1996, when the directorate unveiled a barrage of charges against the company and its officials and rounded up top officials to question them on deals with the Chitalias.


Mumbai, May 30: 
Notwithstanding sluggish demand and over-capacity in the industry, Tata Iron and Steel Company Ltd (Tisco) put on a spirited performance, with net profit falling only 41.6 per cent for the fourth quarter of the current fiscal year ending March 31, 2002. Net profits declined to Rs 122.47 crore in the period against Rs 209.01 crore in the same period previous year.

The decline in net profits was far lower than what analysts had expected. “They have put a better performance if one were to look at the industry scenario last year,” an analyst pointed out.

With steel prices headed north in recent months, most analysts expect the company to post a better performance in the first quarter of the current fiscal year.

Net sales during the quarter also slid to Rs 2160.93 crore, as against Rs 2353.50 crore.

For the financial year ending March 31, 2002, while net profits slid to Rs 204.90 crore from Rs 553.44 crore a year ago, net sales were at Rs 7,607.48 crore, lower than Rs 7,759.44 crore in the previous year.

Addressing newspersons here today, B Muthuraman, managing director, Tata Steel, said that despite the challenging conditions in the industry, sales were higher at over 35.33 lakh tonnes and it achieved a higher overall share both in the domestic market and the value added segments.

Apart from focussing on value addition, Tisco is looking at new markets, which include manufacturing steel for the automobile sector, Muthuraman revealed.


Mumbai, May 30: 
Tata Steel, the private sector steel maker, plans to hike steel prices for the third successive month following continuous hardening of global steel prices.

“We expect to hike prices by Rs 500-800 per tonne by the first week of June,” Muthuraman told newspersons at a press briefing to announce the company’s annual results.

“Last year has been one of the most difficult years for the steel industry,” he observed. The turnaround in the industry has been noticed in the past three months as steel companies successively hiked rates twice.

However, Tata officials were still reluctant to confirm that a recovery was underway.

“Steel prices behave unpredictably,” Muthuraman pointed out, as his company had just managed to come out of a downturn. Despite the price increase, Tata officials say the steel prices are still lower than the prices prevailing during the corresponding period of the last year.

Among the main concerns is whether the price hikes are sustainable. Muthuraman was emphatic that the prices are sustainable but hedged his bets on the demand scenario in the local markets. The demand should continue to sustain the current levels.

Over capacity is also a major concern, as the domestic steel industry production has been pegged at 28 million tonnes while overall capacity is around 40 million tonnes.

According to Tata officials, the US markets primarily influence steel prices across the world and the steel rates prevailing in the US have hardened by over $ 75-100 in the last three months.

Steel industry analysts believe that the hike in prices announced by Tisco would be followed by similar hikes by other producers such as SAIL and Essar Steel. The hikes announced last month were to the tune of Rs 200 to Rs 2000.


New Delhi, May 30: 
The government today cleared 53 foreign direct investment proposals worth Rs 957 crore, including a proposal by Reckitt Benckiser to increase foreign stake in its Calcutta-based Indian arm from 49 per cent to 100 per cent for Rs 403 crore, and Toyota’s plans to invest Rs 304 crore in an auto parts joint venture in the country. The proposals, which mainly pertained to NBFC activities, textile machinery, automobiles, software development, telecommunications and tourism, were cleared by the commerce and industry minister Murasoli Maran today on the basis of recommendations made by the Foreign Investment Promotion Board.

Japanese automobile company Toyota’s plans to invest Rs 304 crore in a joint venture to outsource automobile parts from India, which was given the go-ahead, will see the Japanese company investing Rs 303.75 crore in picking up 90 per cent equity in a joint venture with Kirloskar, at Bidadi, Bangalore.

A Rs 100-crore proposal by Toyota Automatic Loom Works to increase foreign equity to 94.4 per cent from 89.38 per cent in Kirloskar Toyota textiles machinery was also cleared by Maran.

Among other major proposals was a Rs 110-crore proposal by the Canada-based Next Generation Telecom, for providing international long distance telephone services in India.

Other proposals that got the nod included Mauritius-based Cadmen Investments’ proposal to invest Rs 95.99 crore for increasing its stake to 99.99 per cent in Indian company Vulcan Exports Ltd. The investment will be used in software development activities.

American Express International’s proposal to buy out the Tatas in their credit card joint venture, Tata Finance Amex Ltd, for Rs 15 crore, also got the nod. The US company plans to increase its stake in the joint venture from 35 per cent to 100 per cent.


Calcutta, May 30: 
Close on the heels of Bharat Petroleum’s proposed public issue, Hindustan Petroleum Corporation Ltd (HPCL) is planning to raise around Rs 1,000 crore through an initial public offering during the current financial year.

The proceeds from the IPO will be used to part finance the Rs 12,500-crore Bhatinda refinery project in Punjab. The greenfield project is being implemented by HPCL’s wholly-owned subsidiary Guru Gobind Singh Refineries Ltd (GGSRL) at Phulokhari in Bhatinda.

Sources said the downstream oil major has decided to reduce its stake in GGSRL to 51 per cent in a phased manner. The public issue, which will be a mix of debt and equity, will be the first step.

“Although the exact instrument is yet to be finalised, it should be a combination of equity and quasi-equity issue like optionally convertible debentures. The final decision will be taken shortly,” they added.

The date of the issue, however, is yet to be finalised although the Securities and Exchange Board of India has cleared it.

The Bhatinda project will have a capacity of nine million tonnes per annum.

Sources said HPCL is also looking for a strategic partner for the project.

The IPO is being planned in such a manner so that the induction of a partner at a later stage will not be a problem, they said, adding, “We plan to go to the market in stages. Ideally, we would like to bring down our equity in GGSRL to 51 per cent.”

The cost of the project, conceptualised in November 1998, was initially pegged at Rs 9,806 crore.

But the delay in implementation has enhanced the project cost to Rs 12,500 crore. The project is being financed at a debt-equity ratio of 1.5:1.


Mumbai, May 30: 
The Hindustan Petroleum Corporation Ltd’s (HPCL) net profit rose by 30 per cent to Rs 424.90 crore compared with Rs 326.40 crore in the previous corresponding quarter.

However, for the year ended March 31 net profit were lower by 27 per cent at Rs 787.9 crore compared with Rs 1,088 crore in the previous fiscal. Sources in the company attributed this decrease to higher deferred tax and a long-term settlement with its workforce where the corporation paid over Rs 88 crore as arrears.

Gross sales for the fourth quarter was lower at Rs 11,012.9 crore as against Rs 12,231 crore. The sales were also lower for the entire year at Rs 45,286.5 crore as against Rs 47,117.5 crore in the previous year. The board has decided to offer 100 per cent dividend for the year which will absorb close to Rs 340 crore.

Speaking to newspersons here today, chairman and managing director H.L. Zutshi, who is laying down office tomorrow, said that the fourth quarter was marked by a rise in refining margins despite the tough environment.

The refining margins of HPCL’s Mumbai refinery went up to $ 1.81 per barrel and that of Vishakhapatnam refinery rose to $ 1.7 per barrel.

The Mumbai refinery achieved a crude thruput of 5.63 million tonnes while Vishakhapatnam refinery attained a crude thruput of 6.70 million tonnes. In the retail segment, the corporation’s market share of motor fuel increased to 24 per cent. HPCL also resorted to converting around 340 dealer-owned retail outlets to company control, thus bringing over 65 per cent of the total retail outlet network under its control.

Regarding the Mangalore Refinery and Petrochemicals Ltd, Zutshi said that while its joint venture partner A.V. Birla group has indicated its decision to exit the project, the corporation has been looking at inducting another strategic partner.


New Delhi, May 30: 
The petroleum ministry plans to allow Indian Oil Corporation to come out with an initial public offering (IPO) at a probable premium of Rs 180 a share which could increase its equity base by approximately 12 per cent.

However, this plan along with plans to allow Bharat Petroleum Corporation Ltd and Gas Authority of India Ltd to float similar public issues will need Cabinet approval and may well face opposition from the ministry of disinvestment, as allowing public flotation would mean delays in placing any of these companies on the block.

The increase in equity will increase IOC’s capital base to about Rs 875 crore, reducing government ownership to about 72 per cent. However, the amount which may be mopped up by the issue would probably amount to about Rs 1,800 crore.

The IOC plan which has been sent to the government says the fresh cash infusion will help the oil major finance its Rs 15,000-crore Panipat complex which comprises a refinery project and a petrochemical factory.

Official sources said the government has also given the green signal to BPCL’s plans to issue some 50 million equity shares, for its expansion plans.

This IPO will come before any divestment takes place and is considered by many as a strategic move by the ministry to stall any immediate divestment move. The IPO would reduce government holding by about 10 per cent to 56 per cent.

BPCL’s issue will be preceded by a financial restructuring, including a splitting its Rs 10 face value shares into 10 separate shares of Rs 1 each. The issue is expected to have a premium of about Rs 19 to a share.

Analysts said if the plan is okayed by the Union Cabinet it will delay disinvestment by about a year. However, the plan is likely to face stiff opposition from the disinvestment ministry which is keen to sell off both Hindustan Petroleum Corporation Ltd and BPCL in one lot.

Gas Authority of India Ltd too wants to divest about 5 per cent stake for similar needs, officials said. The flurry of IPO plans being unveiled by the ministry seems to have caught the disinvestment ministry by surprise. Divestment ministry officials, who were contacted for comments, said they cannot say anything without going through the proposals.

The disinvestment ministry is already on the backfoot because of a controversy over the Tatas who bought a strategic stake in VSNL and has sought to take out Rs 1200 crore from the telecom major for investment in another Tata company. This move is seen by many in the telecom ministry as akin to asset stripping.



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