Govt orders Tatas to back off
Chugh & Sapru cleared, Nestle faces Fera rap
Grasim cements L&T ties
Four more ITDC hotels sold for Rs 85 crore
Huge provisioning pulls down IDBI net
Sun Pharma toes Hind Lever line
IDBI universal bank makeover in a year
Nasscom at one with planners’ remark
Foreign Exchange, Bullion, Stock Indices

 
 
GOVT ORDERS TATAS TO BACK OFF 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 31: 
The government today threatened to haul the Tatas to court for breach of trust if it failed to back down on its plan to funnel Rs 1,200 crore out of Videsh Sanchar Nigam Ltd, the former state-owned telecom giant in which the Tatas picked up a 26 per cent stake in the middle of February.

On Tuesday, the Tata-dominated VSNL board approved a proposal to invest the sum in Tata Teleservices, the group’s venture that provides basic telecom services in Andhra Pradesh and now wishes to expand operations.

“I am requesting them (the VSNL board) to reverse the decision. My secretary will write to them. A government nominee should have been on the board sub-committee that vets investment proposals,” communications and information technology minister Pramod Mahajan said.

Late tonight, the Tatas issued a statement saying they would wait for the letter. “The proposal before the board envisaged that an investment would be made over a 48-month period (not immediately) under the supervision of a board committee for which the government nominee Rakesh Kumar was invited to join,” it added.

The government, which had sold a 25 per cent stake to the Tatas for a sum of Rs 1,439 crore, continues to hold 27.97 per cent in VSNL.

The Tatas have a 45 per cent stake in VSNL after an open offer to buy another 20 per cent of the VSNL stock was oversubscribed in April.

The government is committed to selling a 5.97 per cent stake to VSNL workers and has the option of offering the remaining 22 per cent to the Tatas, which may now be in some doubt after the raging controversy.

“Bombay House (the Tata group’s headquarters) is known for its business ethics. Is it ethical to take out Rs 1,200 crore within a month of investing Rs 1,500 crore?” asked Mahajan.

Terming the VSNL decision as a ‘breach of trust’, Mahajan said, “We will explore all legal options available with the government which will include approaching the Company Law Board, the courts, and calling an extraordinary general body meeting.”

VSNL managing director S.K. Gupta, who flew into the capital yesterday for talks with Mahajan, said he did not wish to join issue with the government and said he would not comment on Mahajan’s statement.

Asked if he would consider reviewing the decision in the wake of Mahajan’s criticism, Gupta said, “No comments.”

When the controversy first surfaced, Gupta had said the decision was irreversible.

When reporters asked the minister to respond to Gupta’s earlier statement, Mahajan roared, “ If this is not done, then the government will do whatever is legally possible and permissible. After all, the government is the government.”

Mahajan also suggested that in future a clause should be appended to the agreement with purchasers of the government’s stake in state-owned companies that will prescribe a cooling-off period during which the investor will not be allowed to drain the company’s cash reserves. “The move by the Tatas is designed to achieve financial closure of Tata Teleservices Ltd which has a few thousand subscribers and no one knows its value,” said Mahajan.

He rubbished the Tatas’ raison d’etre for the investment in Tata Teleservices. “Their attempts to justify the investment on the ground that VSNL stands to benefit because the subscribers of Tata Teleservices will use VSNL services is just a lot of hogwash. Even without the investment, Tata Telseservices subscribers would have used VSNL’s gateway to make ISD calls,” said Mahajan.

VSNL held the monopoly to carry overseas phone call traffic till April. Although private players have been issued licences to offer international long distance (ILD) services, there are none that are up and running just yet.

“The issue is not whether this amounts to asset stripping or cash stripping. It is the whole attitude towards VSNL. We expected the Tatas to strengthen VSNL. Instead, Tata Teleservices, which has no money, is being strengthened. There is a sinister game behind all this,” he added.

Mahajan said the two nominees of the government on the VSNL board had not cleared the investment proposal and it was, therefore, not a unanimous decision.

Asked to comment on the government’s first reaction to sack its nominees on the VSNL board, Mahajan said, “There is a need for nominees who are brighter. But we have not yet taken a decision on replacing the current nominees.”

   

 
 
CHUGH & SAPRU CLEARED, NESTLE FACES FERA RAP 
 
 
OUR BUREAUS
 
May 31: 
Kishen Lal Chugh and Jagdish Narayan Sapru, former chairmen of ITC, were reprieved but Nestle and its former directors faced a last-minute legal rap for Fera violations as the guillotine fell on a two-year sunset clause that permitted the Enforcement Directorate to file charges under the draconian exchange control law.

Although Chugh and Sapru were let off, the Enforcement Directorate today filed six formal complaints—the equivalent of chargesheets—against ITC Ltd and six former officials for violations of the Foreign Exchange Regulation Act (Fera).

The directorate filed the complaints with the chief metropolitan magistrate. The court admitted the complaints and ordered initiation of prosecution.

Those named in the chargesheets are three former directors of ITC—G.K.P. Reddy, R.K. Kutty and R.P. Agarwal—and senior executives E. Ravindranathan, N. Laxminarayanan and M.B. Rao.

Besides Chugh and Sapru, those discharged were Saurabh Mishra—who is now a director of Grasim Industries—and P.K. Talwar.

“The complaints were filed in accordance with instructions received from the directorate’s head office. We had to exclude those against whom charges could not be substantiated,” said Awadh Kishor Tiwary, the special public prosecutor representing the directorate.

In Delhi, a local magistrate issued summons to Nestle India Ltd and three of its top executives for allegedly receiving about Rs 200 crore from Russia in their parent company’s account in Finland.

Taking cognisance of a complaint filed by the directorate, additional chief metropolitan magistrate V.K. Maheshwari directed the company, its former director D.E. Ardeshir, executive vice president Rajit Raj and head of exports R.K. Sharma to appear before him on July 3.

The Nestle case relates to export of coffee to Russia in 1995-96 under the Indo-Russian debt repayment scheme. The directorate said the accused diverted shipments of coffee meant for Russia to Nestle World Trade Corporation in Helsinki.

ITC’s Fera violations date back to the early nineties; Virginia House was shaken to the core in October 1996 when Chugh and Sapru were picked up in a late-night swoop for extensive interrogations. The directorate had also carried out a massive countrywide search and seizure operation at all ITC installations including the company’s headquarters in Calcutta.

The accused may face imprisonment up to six years and a fine of up to five times the amount involved, he added. The court will now issue summons to the accused. “The matter will come up for trial in a little over a month’s time,” Tiwary said.

   

 
 
GRASIM CEMENTS L&T TIES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 31: 
Taking advantage of the modest discount in Larsen & Toubro share prices, Grasim Ltd, the Aditya Birla group flagship, has raised its stake in the engineering and cement major by 2.84 per cent to 12.89 per cent.

The move is being perceived in the markets as an attempt by the Aditya Birla group to average out the high price at which it bought the over 10 per cent stake in L&T from the Reliance group.

Only late last year, Grasim had bought a 10.05 per cent stake in L&T from Reliance Industries at Rs 306.60 per share in a deal worth Rs 766 crore.

Aditya Birla group officials confirmed the development and said the move was to augment its holding in the company.

Sources said Grasim has been mopping up L&T shares for the past two-to-three weeks from the market place at a price ranging between Rs 175 and Rs 180 per share.

Grasim would have incurred a cost of around Rs 130 crore for the additional 2.84 per cent stake, analysts said. The entire transaction was financed by internal accruals, company officials said.

The acquisition will not trigger an open offer, as the stake has not crossed 15 per cent.

Despite the announcement, the L&T stock tumbled on the BSE to close at Rs 173.35, indicating a loss of Rs 4.40 per share.

   

 
 
FOUR MORE ITDC HOTELS SOLD FOR RS 85 CRORE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 31: 
The Cabinet Committee on Disinvestment (CCD) today approved bids for sale of four ITDC hotels at Kovalam, Calcutta, Aurangabad and Manali which would fetch the government over Rs 85 crore.

The panel also decided to offer 51 per cent equity to a strategic partner in loss-making Fertiliser and Chemicals Travencore Ltd (FACT).

Disinvestment minister Arun Shourie said, “While bids for ITDC’s loss-making properties at Kovalam, Calcutta, Aurangabad and Manali were approved, there was no taker for its hotel at Khajuraho.”

The Airport Ashok in Calcutta went to Bright Enterprises, a subsidiary of the MBD group, for Rs 20.02 crore as against the reserve price of Rs 14.83 crore.

The Kovalam Ashok Beach Resort was bagged by M Far Hotels for Rs 43.68 crore against the reserve price of Rs 41.7 crore. T. Mohammad Ali, who owns M Far, also owns Cochin Meridien, Cochin Airport Hotel and two other hotels in Trichur.

Hotel Aurangabad Ashok and Hotel Manali Ashok were bagged by Lok Sangam Hotels and Resorts and Auto Impex Ltd respectively. Lok Sangam Hotels shelled out Rs 17.40 crore for Aurangabad Ashok against a reserve price of Rs 15.05 crore. Auto Impex Ltd paid Rs 4 crore against a reserve price of Rs 1.91 crore for Manali Ashok.

Shourie said, “The four properties together posted a loss of over Rs 11 crore on sales of Rs 17.3 crore during 2001-02.”

   

 
 
HUGE PROVISIONING PULLS DOWN IDBI NET 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 31: 
Indulging in a massive cleaning up exercise, the Industrial Development Bank of India (IDBI) made a total provision of Rs 3,273 crore—the highest in its history—for the financial year ending March 31, 2002.

The figure included Rs 773 crore of normal provisions as per Reserve Bank of India (RBI) requirements and Rs 2,500 crore as “accelerated write-off of bad and doubtful debts” by withdrawal from its Reserve Fund. Thus the provisions as a percentage of gross NPAs climbed up to 54 per cent from 28 per cent last year.

Combined with the provisions and write-offs of Rs 2,509 crore made for the year ending March 31, 2002, the total provisions and write-offs for these two years are placed at Rs 5,785 crore.

The huge provisioning saw the institution’s net profit plummet to Rs 424 crore for the year, as against Rs 691 crore in the previous year, a drop of 38 per cent.

However, P.P. Vora, chairman and managing director, told a news conference here today that if the Rs 260 crore capital gains made by the institution for 2000-01 on account of its stake sale in Sidbi were excluded, profits for 2001-02 would be comparable.

Explaining that these provisions/write-offs are being made with a view to make a “healthy” balance sheet even as aggressive recovery efforts are on, Vora said the year has witnessed a reduction of total non performing assets (NPAs) as a percentage of total assets. This declined to 11.69 per cent from 14.8 per cent last year. During the year, loss assets were fully written off.

As far as IDBI’s asset the quality is concerned, in terms of RBI guidelines for asset classification, around 88 per cent of loan and other assistance portfolio were classified as standard, 4.52 per cent as sub-standard and 7.17 per cent as doubtful.

IDBI, he added, is now stressing on quality of assets, bringing down its NPA levels, and containment of costs.

In asset recovery, the institution has met with fair amount of success, Vora claimed. Here he said that around 901 accounts, which were hitherto non-performing, “had gone out of the books of IDBI”.

   

 
 
SUN PHARMA TOES HIND LEVER LINE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 31: 
Taking a leaf out of FMCG major Hindustan Lever’s book, Sun Pharmaceuticals Ltd, a leading drug company, today declared its intention to issue bonus preference shares to its shareholders.

In a communication sent to the stock exchanges, Sun Pharma said the board has decided to hold the board meeting on June 28 “to consider recommendation of issue of bonus preference shares to the equity shareholders of the company.”

No further details were made available by the company officials stating that the board of directors are yet to crystallise its view on the proposal.

Only recently, Hindustan Lever announced its plan to reward the shareholders by announcing a dividend that will take care of tax liabilities of the shareholder arising out of the bonus debentures.

Sun Pharma, on the other hand, has announced plans to offer preference shares to its shareholders. The company has been doing well for itself with Caraco Pharma its US subsidiary making a turnaround this year.

Analysts, however, opine that the trend by corporate houses to reward shareholders with such schemes will only increase in the days to come.

By contemplating bonus preference shares for its shareholders, Sun Pharma hopes to derive the benefits of long-term capital gains tax, said analysts.

On the stock exchanges, the Sun Pharma scrip experienced a roller coaster ride. The stock that closed at Rs 592.75 on Thursday, opened at Rs 600 today and touched an intra-day high of Rs 625 before dropping to the day’s low of Rs 551. It finally closed the day at Rs 558.30 with 877 trades recorded for 27361 shares.

Sun Pharma, in its communication, also informed the stock exchanges that the company had to fork out Rs 1.16 crore to pay shareholders who were given an exit opportunity when the company delisted its shares from the stock exchanges in Calcutta, Delhi, Chennai and Ahmedabad.

Acceptances to the offer accounted for 19,493 equity shares of Sun Pharma at Rs 600 per share, the company said.

On the merger of MJ Pharma with Sun Pharma, the company said shareholders of MJPL are entitled to one equity share of Sun Pharma for every 210 equity shares of MJPL held.

MJ Pharma, one may recall, was a sick company which was referred to the Board for Industrial and Financial Reconstruction.

Meanwhile, the Sun Pharma board has recommended a 50 per cent dividend on the equity share capital of the company.

   

 
 
IDBI UNIVERSAL BANK MAKEOVER IN A YEAR 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 31: 
The Industrial Development Bank of India (IDBI) has set a time-frame of 9-12 months for its conversion into a universal bank. The process would also involve a merger with a large nationalised bank.

Claiming that the institution has made “decent progress” with regard to its universal banking plans, P. P. Vora, chairman and managing director, today said this process would also involve conversion of the institution into a corporate entity, which would bring it under the Companies Act. While the existing assets and liabilities of IDBI will be transferred to this company, likely to be called IDBI Ltd, this will be followed by the repeal of the IDBI Act.

“The repeal of the Act and conversion into a corporate entity will give us more flexibility,” a senior IDBI official told The Telegraph.

Vora was, however, categorical in saying that a reverse merger with IDBI Bank is not being pursued. In this regard he pointed out that the institution was in talks with two foreign investors for bringing down its stake from the existing 58 per cent. Here, two methods are being looked into, one which involves directly bringing IDBI’s stake down to 40 per cent in one go, or bringing it to down 44 per cent in the first stage and subsequently to 40 per cent. “In any case, the stake dilution will not be less than 20 per cent,” Vora added.

While IDBI made a huge provision for the year, Vora pointed out that loans from Dabhol Power Corporation (DPC) did not form part of this provision. Here he added that DPC has paid dues till the quarter ended January 31, 2002.

IDBI, meanwhile, also plans to borrow another $ 300 million as a line of credit from the Asian Development Bank (ADB) which will be used for lending in the infrastructure sector. While the loan will carry a maturity of 20 years, this comes in addition to $ 300 million already raised from the body. IDBI has also borrowed $ 20 million through a syndicated loan, raised at a fine rate of Libor plus 90 basis points.

On Dabhol Power Company, Vora said it “still remains a standard asset and it has good amount of money to continue with its interest payments.”

Though the interest payment was due on April 1, DPC has 90 days to pay its quarterly installment, he added.

   

 
 
NASSCOM AT ONE WITH PLANNERS’ REMARK 
 
 
FROM M RAJENDRAN
 
New Delhi, May 31: 
The fundamentals of the Indian software industry are very strong and neither unrealistic euphoria nor pessimism will affect it, Nasscom said today.

Nasscom strongly defended the observation made by the Planning Commission that the IT industry should not depend on short-term performance to extrapolate long-term trends.

A special group study targeting 50 million employment opportunities per year released on Wednesday by the Commission stated that, “in assessing India’s potential in this (IT) industry over the next decade, we must try to avoid both unrealistic euphoria and unrealistic pessimism that results from relying on short-term performance to extrapolate long-term trends.”

In a written reply to The Telegraph, Nasscom president Kiran Karnik said the Nasscom-McKinsey study 1999 provided a vision for the Indian software industry by analysing the then existing business climate and the measures that were necessary to be taken at the government and industry level to meet the target of $ 50 billion software exports and employment to 2.2 million people.

“The IT industry has reached a stage of maturity and reports—whether euphoric or pessimistic —are unlikely to affect its performance or mood to any substantial extent,” Karnik said.

Nasscom fully adheres to the long-term vision set for the Indian IT industry, which was based on a CAGR (compounded annual growth rate) of 30-35 per cent, which is conservative compared with the CAGR of 50 per cent witnessed by the industry till 1999-2000.

“This indicates clearly that the long-term vision/projections were not based on mere extrapolation of short-term results,” said Karnik.

The bursting of the dotcom bubble, the global economic slowdown and the September 11 terrorist attacks on the US have had an impact on the IT industry world-wide and India too was affected by these uncertainties. The Planning Commission report had also stated that the IT industry in the country was not growing as rapidly as it was a year ago or was projected during that time.

“Despite this challenging environment, the Indian software and service industry clocked an export turnover of Rs 36,500 crore in 2001-02, showing an aggregate growth of 29 per cent from a revenue base of Rs 28,350 crore in 2000-01,” Karnik said.

“This industry is the fastest growing sector in India and across the world. This segment accounts for 16 per cent of the country’s overall exports; provided over 5,00,000 jobs and attracted about $ 1.6 billion in investments.”

The Nasscom-McKinsey study 2002, scheduled to be launched in the second week of June in Hyderabad will chart out the short and long term strategies for all levels of players in the IT sector.

The report would also highlight the sectors and geographies which need to be pursued more vigorously to ensure sustainable growth of the Indian IT industry and what needs to be done to strengthen the domestic and export markets. The report also discusses the various threats and challenges India faces from emerging countries and the pro-active steps needed to counter it.

“In order to further boost growth in the IT-enabled services (ITES) sector, Nasscom will work actively with various state governments to address labour and regulatory issues and draft a city specific report on ITES infrastructure,” said Karnik. The ITES like call centres and medical transcription services are likely to generate indirect employment in future.

As per the Nasscom study, currently (2001-02) the number of knowledge professionals employed in the Indian IT sector are 5,22,000 (including direct employment in the software export sector, software-domestic, software-captive in user organisations and in ITES).

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 49.04	HK $1	Rs.  6.20*
UK £1	Rs. 71.90	SW Fr 1	Rs. 30.95*
Euro	Rs. 46.02	Sing $1	Rs. 27.10*
Yen 100	Rs. 39.56	Aus $1	Rs. 27.35*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5545	Gold Std (10 gm)Rs. 5435
Gold 22 carat	Rs. 5235	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8550	Silver (Kg)	Rs. 8385
Silver portion	Rs. 8650	Silver portion	   NA

Stock Indices

Sensex		3125.73		-10.16
BSE-100		1596.71		- 4.71
S&P CNX Nifty	1028.80		- 3.35
Calcutta	 111.35		+ 0.05
Skindia GDR	 506.38		- 0.68
   
 

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