Ministry lines up $ 1-bn power fund
India Inc remains awash with optimism
Bajaj Allianz slows down auto insurance
Indica revs up Telco

Calcutta, June 2: 
The Union power ministry is planning an India Power Fund — along the lines of the Resurgent India Bonds and India Millennium Deposits — to mobilise $ 1 billion that would be used to generate more electricity and improve tottering transmission systems.

While the Power Finance Corporation (PFC) and the central government are expected to contribute to the seed capital, other banks and financial institutions will be asked to chip in with contributions to the corpus.

Ministry sources said the idea to float a $ 1-billion India Power Fund was first mooted by PFC to mobilise resources for transmission and generation. “The ministry took up the matter, and is now looking at ways to set up the fund,” sources said. FIs like Industrial Development Bank of India, ICICI have been approached; nationalised banks like State Bank of India, Bank of Baroda and Bank of India have also been sounded out.

Power minister Suresh Prabhu formed a committee of experts to identify the sources of funding, including government funding, multi-lateral and bilateral assistance, institutional financing, market borrowings, internal resources, private investment. An action-plan to hasten the financial closure of private sector projects is also on the anvil, they said.

Most regions in the country are plagued by power shortages. The problem is acute during peak hours, necessitating planned load shedding by many utilities to maintain the grid in a healthy condition. The all-India average shortages in 2001-02 was 7.8 per cent in terms of energy and 13 per cent in terms of peak load.

Based on the projections of demand made in the Sixteenth Electric Power Survey, additional generation capacity of over 1,00,000 MW is required to ensure ‘Power on Demand by 2012’. This means a near doubling of the existing capacity, pegged at 1,00,000 MW.

Capacity addition has been fixed at 46,185 MW in the Tenth Plan, and 60,885 MW in the Eleventh Plan. Central utilities are aiming to add 43 per cent of required capacity against 23 per cent in the Ninth Plan.

It is estimated that Rs 8,00,000 crore will have to be invested over the next decade to generate 1,00,000 MW of additional power and to set up the transmission and distribution infrastructure.

Of the Rs 8,00,000 crore required to double the power capacity to 1,00,000 MW by 2012, about Rs 2,00,000 crore will be needed for the associated transmission system, including creation of a National Grid. Of this, Rs 70,000 crore will have to be poured into transmission systems of central power sector companies alone.


New Delhi, June 2: 
The bi-annual Business Outlook Survey, conducted by the Confederation of Indian Industries, has shown that most entrepreneurs are positive about their business prospects for the next six months.

The survey said after four quarters of cautious outlook and continued focus on managing bottomlines, India Inc is riding higher now on expectations of a pick up in both domestic as well as export market demand.

The survey, which covered over 175 member companies, observed, “This relates to the actual performance of industry during October 2001-March 2002. It has been conducted over the past one month, and thus have not taken account of the recent political factors.”

However, if fears of an imminent Indo-Pak war are dismissed, 56 per cent of the respondents foresaw an improved performance for their company compared with only 16 per cent in the last survey. Although only 41 per cent were optimistic about the prospects for their industry sector as a whole, it was again a quantum improvement compared with the previous survey when only 9 per cent felt the sectoral performance would improve.

While 36 per cent of the respondents were of the opinion that the same trends would continue, only 8 per cent felt that they would experience a worsening of the general business scenario. In comparison, the previous study had as many as 44 per cent of the respondents predicting a worse picture.

The respondents are also planning to hike production, undertake more investments and add to their workforce. About 70 per cent expect to increase production, 20 per cent will continue at the current production levels and only 10 per cent foresee it declining in the next six months. In terms of a percentage increase in production, 69 per cent are still cautious, predicting a 0-10 per cent increase and 24 per cent of the respondents expect a double digit growth.

Expecting to make capital investments in their existing operations, 53 per cent of the respondents said that they would expect to pump in more capital in the next six months. The same number also envisaged an increase in employment in their organisation in the next six months.

The primary reason for the optimistic outlook is the expectation that demand will pick up considerably in the next six months. While the past six months saw 49 per cent of the respondents registering an increase in their order books, 69 per cent foresee an increase in the next six months.

Most of the respondents also expect to continue their bid to improve bottom lines with 42 per cent expecting an increase in their profit margins. Only 34 per cent reported an increase in profit margins in the past six months.

Indicating the increasingly important role that economic policies and their reforms will play in the months ahead, 44 per cent majority of the respondents felt that a loss of momentum could impact growth prospects in the next six months. An equal number felt that besides a slowdown in the reforms momentum, any other factor restricting a pick up in demand could also potentially be a limiting factor in the next six months.


Mumbai, June 2: 
Bajaj Allianz General Insurance, which has captured an incredible 65 per cent share of the insurance market for new vehicles in the early part of this year, may put the brakes on its current pace of garnering business in the segment.

Auto insurance, especially new vehicles, is a risky proposition and many players are getting increasingly wary of treading into this area.

Hence, other insurers are closely watching Bajaj Allianz review its strategy. Bajaj, through its tieups with car makers like Maruti, Hyundai, General Motors and Ford Motors, had ramped up its presence in the sector in a short time.

Auto insurance accounted for almost two-thirds of Bajaj Allianz’s total portfolio, chief operating officer Kamesh Goyal said. “We plan to bring it down to 45 per cent this year,” he added.

Speaking to The Telegraph, Goyal said: “We have built some decent volumes and are currently monitoring this portfolio.”

For general insurers, the business generated from the fire insurance segment is most profitable while auto ranks lowest on the profitability scale.

“An ideal portfolio for a general insurance company would be to peg the motor insurance exposure at a maximum level of 35 per cent,” M. D. Garde, general manager, New India Assurance Company, a public sector general insurance major said.

“Anything above this will put an insurance company at risk,” he averred. He said New India Assurance has maintained its exposure to motor insurance at 35 per cent. This is all the more in the case of business generated from new vehicle owners.

“This is because new vehicle owners are a finicky lot who would file claims even for small dents, a possibility which is remote for owners who have aged cars,” concurred a senior official affiliated to Tata AIG.

Goyal, while admitting that the company has received insurance claims on this score said his company, has, through the cash-less route, settled claims through manufacturers’ dealers who repair the vehicles and later file the claim on the insurer. At 15 per cent, the claims are high but not alarming, he declared.

Bajaj Allianz hopes to garner a 50 per cent renewals from the new car owners when their policies come up for renewal, a hope rivals feel are highly ambitious.

Meanwhile, Bajaj Allianz notched up Rs 142 crore as premium income and has targeted an income of Rs 185-200 crore in the current year, with motor insurance premium contributing just 45 per cent.


Calcutta, June 2: 
Tata Engineering and Locomotive Company (Telco) has achieved a cash breakeven in the financial year ended March 2002. Telco had suffered a loss of Rs 500 crore in 2000-01 on a turnover of Rs 7,927.63 crore primarily because of the heavy interest and depreciation burden following the commissioning of the Indica project.

Sources said the company is set to report a very encouraging performance for the last fiscal year, thanks to the robust performance of Indica since October last year. “The company has sold 64,000 units of Indica which has helped Telco to register a good financials although critics felt otherwise,” they added. Telco is also gearing up for a grand launch of Tata Sedan sometime in September. “These two cars will help us to bounce back into profits very soon,” sources said.

The company has resorted to several initiatives that include business process reengineering, rationalisation of manpower and financial restructuring in order to retire high cost borrowing. In 2000-02, while interest charges stood at Rs 491.49 crore in 2000-01, depreciation was Rs 347.37 crore. “The fiscal situation is much better now,” they added.

What is more important is that since the Tata Sedan is being manufactured on the Indica platform, it did not require heavy investment.

“The versatility of the Indica platform and the success of the Indica V2 are extremely encouraging indicators for the success of the Tata Sedan,” sources said, adding, “The plant has undergone the necessary changes required to build flexibility in the production line.”

Telco’s highly automated plant at Pune, that currently manufactures the Indica, is being augmented to create greater flexibilities and to handle variety. This includes higher level of robotisation in the weld lines, enhancing the engine shop facilities to prepare for the volume manufacture of the new turbo powered engines, a senior Telco official said. Sources also noted that the UK auto major, Rover has shown keen interest to come into a joint venture with Telco.

The Telco official, while admitting that the talks are going on with the Rover, refused to divulge any further detail. “The talks with Rover are at a preliminary stage and it is too early to say anything on concrete developments,” he said.

Telco and Rover have also been discussing the potential of various alliances in order to have a mutual benefit out of the whole alliance. This includes export of Indica through Rover in the UK in completely built unit form.

Telco, which is harping on Indica for a big jump in its turnover, expects to ship around 70,000 units of this small car to the UK in the next five years time if the tie-up with Rover materialises.


Maintained by Web Development Company