VSNL accounts for Tata Tele funding
Britannia net profit leaps 188%
Ambanis take control of IPCL, Mukesh is chief
Ministerial panel balks at sale of healthy PSUs
FIs prefer rate cut on old steel loans
Prabhu plugs for foreign funds in power
Bengal jute swindle stumps Scottish company
Dr Reddy’s net profit soars
Ranbaxy prefers herbal therapy
Foreign Exchange, Bullion, Stock Indices

Mumbai, June 4: 
A defiant Videsh Sanchar Nigam (VSNL) today raised the pitch in its spat with the government, saying investing Rs 1,200 crore in Tata Teleservices (TTL) is a legitimate need for a company struggling to secure inter-connect pacts with MTNL and BSNL.

The VSNL brass went into in a huddle with officials of department of telecommunications (DoT), trying to explain why the Tatas who run the overseas phone carrier now are using its money to bet on a group firm.

From Mumbai, VSNL shot of a letter to DoT giving a blow-by-blow account on how the negotiations for a new settlement with BSNL and MTNL have not produced a deal. Industry watchers say this is the real issue that forced the Tatas to dip into VSNL’s reserves.

Much of the letter points to the uneconomic terms under which VSNL is expected to do business. “Ever since the disinvestment of 25 per cent by the government, VSNL has been endeavouring to negotiate new settlement terms with BSNL and MTNL, bearing in view that the highly competitive environment which has emerged would call for a fair and realistic review by BSNL, MTNL and VSNL of tariff levels on incoming/outgoing international calls.”

VSNL suggests that failure to clinch agreements with telecom PSU like BSNL and MTNL could push it into a financial mess. “Without a realistic settlement rate established for the two-year window defined under the shareholders’ agreement, you will appreciate that the profit VSNL could be eroded immediately.”

Insisting that it has been keen on basic telephony, the letter says the company applied for a licence in early 2001, but the request was turned down. “With the end of monopoly in international long distance services, it has become essential for us to survive amid intense competition,” VSNL explained in its letter to DoT.

Fretting about uneconomic terms under which it is asked to operate, VSNL said there are pitfalls in the terms of disinvestment that guarantee it outgoing calls from BSNL and MTNL for two years “as long as it is competitive”. Sources said the company would have to match a rival’s rate— no matter how poor it is — if it wants to carry the traffic, or lose a large chunk of customers.

“Carrying traffic at uneconomic levels will erode the value of the company and all major stakeholders, including the government, will lose out,” VSNL explained. The tone and tenor of the letter shows that the Tatas have dug in their heels by not wavering on their plan to invest VSNL money in Tata Teleservices, the group’s basic telephony venture. The firm suffered a loss of Rs 148 crore on an income of Rs 86 crore in 2001-02.

Meanwhile, BJP MP Kirit Somaiya today joined communications minister Pramod Mahajan in taking on the Tatas. Somaiya’s Investors’ Grievances Forum lodged a complaint against VSNL with the Department of Company Affairs under sections 628,397 to 399 of the Companies Act, 1956.

He met DCA secretary Vinod Dhall to convince him how shareholders had been ignored by the VSNL board when it decided to go ahead with the plan to invest in TTL.

The provisions under which the complaint has been made pertain to a situation in which a company’s affairs are conducted in a manner prejudicial to the interest of minority shareholders.

According to Sections 397 to 399, any minority shareholder can complain to the Company Law Board against oppression and mismanagement by a company.


June 4: 
Britannia Industries Ltd has registered a 188.2 per cent jump in net profit at Rs 203.2 crore in the last financial year from Rs 70.5 crore.

Net sales was up 9 per cent to Rs 1,451 crore during the reporting period as against Rs 1,332.5 crore in the previous fiscal. The board has recommended 75 per cent dividend subject to shareholders’ approval.

The company is focussing on topline growth by driving volumes of existing products and launch of variants. “Maska Chaska continues to do well. We have recently launched a new Tiger variant (Chai Biskoot) with favourable initial consumer response,” managing director S.K. Alagh said in a statement.

The existing dairy business has been transferred to Britannia New Zealand Foods Pvt Ltd, a joint venture company with Fonterra Co-operative Group.

BoB net zooms

Bank of Baroda (BoB) today announced a 98.8 per cent growth in net profit at Rs 545.93 crores in 2001-02 and targets 50 per cent growth this fiscal. The bank has declared a dividend of 40 per cent. The higher profit was on account of Rs 300 crore appreciation in the value of government papers in the bank’s portfolio, BoB chairman P.S. Shenoy told newspersons after a board meeting.

The bank is targeting 50 per cent growth in net profit and a business growth of 25 per cent this fiscal, he said.

BoB’s gross profit grew by over 26 per cent to Rs 1,309.26 crore in the last fiscal and the total income was up by 7.5 per cent to Rs 6,948.71 crores.

“The bank is poised for a quantum leap this fiscal and the years to come. We are hopeful that in 2002-03, we will be able to reach Rs 1,25,000 crore business, which is a growth of 25 per cent,” Shenoy said, adding the bank’s deposits and advances (total business) were at Rs 98,000 crore last fiscal.

BoB’s total deposits grew by 14 per cent to Rs 61,800 crore and advances by over 22 per cent to around Rs 36,200 crore in the last fiscal. Its capital adequacy ratio stood at 11.32 per cent in 2001-02 compared with 12.8 per cent in the previous fiscal, but higher than the RBI-stipulated 9 per cent. The bank’s net non-performing asset ratio declined to 5.06 per cent in 2001-02, as against 6.77 per cent in 2000-01.

It is exploring a rights issue for raising additional capital and increasing its capital adequacy ratio to 15 per cent in two to three years.

“We may go for a public offer if the bank’s value perception improves. Although the bank’s CAR is 2.3 per cent above the RBI-stipulated 9 per cent, our desired goal is to attain a car of 15 per cent,” Shenoy said.

The public offer would be through a rights issue, he said, but declined to give figures.

It is also planning for an ADR or GDR issue after two to three years to dilute the government equity, official sources said.


June 4: 
The Reliance group today formally took over the control of cash-rich Indian Petrochemicals Corporation Ltd (IPCL) and reconstituted the petrochem major’s board with Mukesh Ambani becoming the new chairman. There are 12 directors on the board, including six Reliance nominees, two government nominees and four independent directors.

Reliance completed the acquisition of the Vadodara-based company after paying a cheque for Rs 1,491 crore to the government for a 26 per cent stake.

The company has re-nominated S.K. Anand, operations director, as the whole-time director. The other Reliance nominees are Reliance executive director Nikhil Meswani, RIL president (polymers) K.P. Nanavati, former IPCL chairman and managing director K.G. Ramachandran and Reliance Capital managing director Anand Jain.

The government nominees are, Ashok Chawla, joint secretary, ministry of chemicals and fertilisers, and Harish Gupta.

Announcing its future plans for IPCL, Reliance, in a statement said, apart from restructuring the debt to reduce financial costs, it would optimise sales and distribution infrastructure, enhance production and operational efficiencies, and modernise the infotech infrastructure to improve productivity.

Commenting on the transaction, RIL managing director Anil Ambani said the company was pleased to have acquired IPCL through an open, transparent and fair process of global competitive bidding.

Reliance’s acquisition of IPCL will add value to both the firms and lead to significant benefits of scale, enhanced market leadership, integration, operational synergies, cost reduction and productivity gains, he added. Reliance had won the right to take over IPCL when bids for the Rs 5,897-crore petrochem giant was opened last month. It had bid Rs 200 a share compared with detergent maker Nirma’s bid of Rs 185-190 a share and Indian Oil’s bid of Rs 160.

Net profit drops

IPCL today reported a 56 per cent drop in its net profit at Rs 107.47 crore for the year ended March 31, compared with Rs 248.90 crore posted last fiscal. Turnover dipped 5.3 per cent to Rs 4,739.89 crore in 2001-02 as against Rs 5,005.97 crore sales recorded the previous year, a company statement said.

During the fourth quarter, net profit slipped 47.8 per cent to Rs 51.66 crore compared with Rs 99.12 crore in the previous year.


New Delhi, June 4: 
An inter-ministerial report on restructuring public sector units (PSUs) has asked the government to retain firms that are strategically important, highly profitable, large revenue earners, monopolistic in their market or are discharging social responsibilities.

The report urges the government to do what swadeshi hawks have been asking it to — sell weak and sick PSUs, reform and strengthen the good ones and think about selling them later. For a start, it says all 66 sick public sector units should be put on the block as soon as possible.

The rationale for privatisation, it says, should be “whether taxpayers’ money can be saved from commercial risk by transferring the risk to a private enterprise”.

The panel, chaired by a secretary-rank officer in the ministry of industry, had the Planning Commission and finance ministry top-brass as members. The fact that senior bureaucrats have been asked to write a report calling for PSU sales is considered significant after a decade of sweeping reforms.

If the proposals are accepted, even in part, as a guideline for government policy, it could jeopardise disinvestment minister Arun Shourie’s plan to sell cash-rich, highly profitable oil and telecom sector PSUs.

Sources said the panel’s suggestions echo views held by Manohar Joshi, who was heavy industries minister earlier, and of Planning Commission deputy chairman K.C. Pant, who is known for his opposition to Shourie’s right-wing stance on privatisation and reforms.

That the finance ministry representative accepted the saffron-tinged report is seen as pointer to who calls the shots on disinvestment, and to the cloak-and-dagger intrigue aimed at isolating reform warriors like Shourie.

Pant, sources say, goaded plan panel member S.P. Gupta, into releasing a report on employment that debunks an earlier study done by a committee headed by Montek Singh Ahluwalia, another liberalisation votary.

Arguing that reforms have swallowed jobs in the industry, Gupta raises the spectre of widespread joblessness unless labour-intensive sectors like small-scale industry are protected. This goes against the reformers’ line that small units should be mechanised and the sector opened up to large industrial groups and multinational companies.

The inter-ministerial report, yet to be made public, calls for more powers to be given to public sector units.

State-run firms should have the freedom to invest without prior governmental approval, if they can arrange their own funds.

The report also says public sector units should be free to forge joint ventures with multinational corporations for technology transfers and marketing.

It also insists that public sector units must scale down staff through attractive voluntary retirement packages and outsource contract work to bring down costs.


Mumbai, June 4: 
Financial institutions (FIs) working on a relief package for steel companies have preferred an outright reduction in interest rates over a ballooning interest rate structure proposed by the industry.

The reduction of interest rates forms part of a “credible business plan” being drawn up by institutions. Senior officials have indicated they were open to the idea of giving firms more time to repay, a concession that was earlier granted to some steel majors.

Much of these loans had been disbursed in the 90s at a fixed rate of 18-19 per cent to firms that were supposed to repay in eight years. There is a feeling that institutions will bring interest rates down to 11-12 per cent and extend the repayment schedule to 12 years.

The package is crucial not only for the steel industry, but for institutions which have sunk in massive funds.

For instance, Industrial Development Bank of India’s (IDBI) outstanding loans to the sector is Rs 7,000 crore. The industry accounted for around 9 per cent of all non-performing assets (NPAs) in the institution.

Steel makers had proposed a flexible interest rate package they said was necessary to cope with the rough patch. Under that plan, FIs would initially charge an interest rate of 5 per cent for three years, following which they could charge higher rates of even 14 per cent to compensate for the lower rates in the beginning.

However, the proposition did not find favour with institutions, which insisted that the step-up schedule would not work for an industry affected by cyclical swings.

A big psychological boost has been the spike in share prices of steel companies in recent weeks, inspiring confidence in the industry and institutions that were grappling with a slump until early this year.

“The industrial conditions have changed considerably. We are now confident that the sector will perform better,” a senior FI official said. Sources say three rounds of price hikes in the current financial year have started yielding steel manufacturers cash surpluses.

The increases mirror the international trend, where steel prices have shot up to around $ 270 per tonne, up almost $ 100 per tonne over the levels in March.

Though questions remain on whether the current surge is sustainable in the absence of a demand acceleration, industry watchers say the sector would be in a position to raise prices over the next two quarters.

“The positive factor we have seen after successive price rises is that the consumers have absorbed them,” a spokesperson from one of the steel majors told The Telegraph.


Mejia (Bankura), June 4: 
Shrugging off the bitter experience with Enron, the power ministry has asked central power sector utilities — NTPC, PGCIL, NHPC, PFC and REC — to explore the possibility of raising foreign funds.

The money will be used to generate an additional 41,000 MW in the Tenth Five-Year Plan. “These organisations have healthy balance-sheets, which should be leveraged to raise funds from the international market,” said Union minister for power and heavy industries, Suresh P. Prabhu, at a press conference. He was here to inaugurate Damodar Valley Corporation’s (DVC) fourth 210MW thermal power plant.

“The plan allocation for power has been increased by 212 per cent in this year’s budget. But I feel these companies should go to the international market to raise cheap funds to finance new projects,” Prabhu said.

Most of the central power companies have already appointed financial advisors to help them find ways in which they can mobilise funds.

“Road-shows are expected to begin in the next few weeks,” the minister said.

He did not specify how much would be raised, but indicated the power PSUs — most of which are not listed on bourses — would have to borrow through debt.

Prabhu, however, said 10 per cent of the financial requirement for the power development programme would be met from the market, including those overseas.

Asked about the progress in generating the 41,000 MW envisaged in the Tenth Plan, the minister said 50 per cent of the new projects are in the works, while 25 per cent have reached advance stages of implementation. The rest will be cleared in six months.

The government has worked out an ambitious plan to add another 1 lakh MW by 2012 so that it can supply power on demand. Producing the additional electricity will require an investment of Rs 8,00,000 crore over the years.

Coming down heavily on the stodgy state electricity boards (SEBs), the minister said: “The extent of losses in almost all boards has come down this year. The absolute figure was Rs 26,000 crore last year.”

Prabhu said he expected SEBs to turn into profit-making bodies in four years, helped by structural changes that started a few years back. “After structural changes are implemented completely, will the boards be able to attract private investment,” he said.

He cited the case of Rajasthan State Electricity Board, which has been able to bring down losses by 45 per cent and the Maharashtra power board, which has pruned losses by 40 per cent. Others are also looking up.

Mrinal Banerjee, West Bengal power minister who was present at the inaugural function, said his government has already passed a law to curb the theft of power in the state. It will come into force from July 1.

The power ministry has appointed a committee headed by Deepak Parekh to work out a package for structural re-engineering of SEBs so that they can get private investments.

Prabhu said the panel is drawing up restructuring plans for eight state power boards, including those in Andhra Pradesh, Karnataka, Haryana, Uttar Pradesh and Maharashtra.

In an effort to use information technology to reduce the massive transmission and distribution losses, the government has formed an infotech taskforce, headed by Nandan Nilekani, managing director of Infosys.

Prabhu said Andhra Pradesh is talking to Satyam and Karnataka to Infosys to widen the use of infotech in power.


Calcutta, June 4: 
When Graham Avery was called from Calcutta, he was sailing.

Back here, his fortune was sinking. Three jute mills owned by Azmara Plc of Scotland, the company he heads, had been auctioned off by the regional provident fund office to recover provident fund dues.

Avery claimed that the assets of the mills—Samnuggur, Victoria and Angus—were valued at £ 40 million, or close to Rs 300 crore. The shares of the mills were sold by the regional PF commissioner for Rs 1.53 crore.

Last week, The Telegraph had reported suspension of two senior officials of the PF office for Bengal. At the time, the official reason given for the decision was that complaints, unspecified, had been received against the two.

It is now clear that the complaints had originated in Scotland, where Azmara is based. The company told the British government that the Indian provident fund office had connived with local businessmen to usurp its assets. Azmara also owns a fourth jute mill, Titaghur, which was not put up for auction. The 117-year-old Scottish firm was formerly known as Titaghur Plc.

The Central Bureau of Investigation is investigating the allegation of usurpation, along with the office of the central provident fund commissioner.

Avery, executive chairman of Azmara, said: “We have communicated our problems to the UK government. They have been very co-operative and we anticipate they have taken appropriate steps to help us resolve the problem. It is now a political and diplomatic issue between the two countries.”

Besides initiating legal action in the UK and India to reclaim his assets, Avery also wrote to Ben Bradshaw, member of the British Parliament and Parliamentary under secretary of state, Foreign and Commonwealth Office, detailing the series of events leading to the alleged usurpation of three jute mills—Samnuggur, Victoria and Angus—owned by Azmara.

In his letter to the Foreign & Commonwealth Office, he alleged: “In collaboration with errant operators of our jute mills, former company agents/employees and statutory authority officers have tried to defraud, cheat and steal our entire assets in India, which are valued in excess of £ 40 million.”

Avery appealed to the British government to seek an inquiry by the CBI into the matter. “Due to what appears to be corruption at the very highest levels we are getting very little relief,” the company wrote to the British foreign office.

Avery took over Titaghur Plc from R. J. Brealey and associates some four years ago. Brealey had acquired the company from the Mehtas in the mid-eighties after they ran into trouble with the PF authorities. Over the last four years, Avery has been trying to gain control of the four jute mills, which were being run by operators under licence issued by the Brealey-led management.

Avery said the shares of the three jute mills were “stolen” from an office of the company in Calcutta by an ex-employee and handed over to the provident fund commissioner for being “purportedly” auctioned by the provident fund office in Calcutta “without Azmara being notified” about it. He alleged that one R. K. Poddar and his associates acquired the shares “illegally” from the provident fund authorities.

When contacted, Poddar—who is the chairman of the Indian Jute Mills Association (IJMA)—denied having anything to do with the three jute mills. “Neither me nor any of my companies bought the shares of the jute mills owned by Azmara,” he said.

Avery, however, said: “Poddar and his associates had management control of Samnuggur and Victoria, which they had obtained under a licence agreement with the Brealeys. But even after expiry of the licences some 12-18 months back, they refused to leave. Instead, they set the provident fund authorities on us to prevent us from acquiring control of the two jute mills.

“The third one—Angus—is under the BIFR, and under management control of a special officer. Poddar bought over the BIFR-appointed official, and for all practical purposes, exercises management control over Angus as well.

“Our objective, since we took over Titaghur Plc, was to re-gain control of the jute mills and pay-off our creditors from the operating profits of the mills.”

Azmara has effective control only on Titaghur, but even that is run by an operator under a management contract. “We earn only a management fee, varying between Rs 6-10 lakh per month from the jute mills, which is a pittance,” Avery said.

Avery claims to have settled huge historic dues of Titagurh Plc to banks, financial institutions and other statutory authorities in India. “The company owed £ 5.5-6 million to the banks and institutions in India. To prove our bona fide to the institutions, wor kers and shareholders, we settled the dues with the banks by paying a discounted amount on which the company and the creditors agreed,” Avery said.

“But settling the dues with the provident fund authorities was impossible as we were not allowed to reconcile their claims with our records. We were denied access to their records, and hence could not determine the company’s dues to the provident fund office,” Avery said.

Azmara has huge land assets—of about 600 acres—locked up in the four mills, including a 33-acre golf course inside the Samnuggur Jute Factory.

The value of vacant land inside the Samnuggur mill has been assessed at Rs 8 crore, while that inside Angus, at over Rs 11 crore. Moreover, Angus owns a 25-cottah vacant plot in Alipore, which is valued at over Rs 5 crore.


June 4: 
Dr Reddy’s Laboratories Ltd has posted a net profit of Rs 459.65 crore for the year ended March 31 up 218.18 per cent from Rs 144.46 crore in the previous fiscal. Total Income (net of excise) has increased from Rs 930.25 crore in 2001 to Rs 1,572.66 crore last fiscal.

The board has recommended a dividend of Rs 2.50 per share subject to approval of shareholders.

The company has posted a net profit of Rs 101.18 crore for the quarter ended March 31, up 137.51 per cent from Rs 42.6 crore in the corresponding period previous fiscal. Total income (net of excise) has increased to Rs 403.12 crore in the quarter ended March 31, 2002 from Rs 272 crore in the previous corresponding quarter.

J&K Bank net up

Having posted an impressive 55 per cent growth in net profit at Rs 260 crore in 2001-02, Jammu and Kashmir Bank has declared a 50 per cent dividend to its shareholders.

Unveiling its long-term plans, bank chairman M.Y. Khan said in a statement that Jammu and Kashmir Bank has targeted business of Rs 40,900 crore with a sustained 40 per cent rise in net profit by 2004-05.

He said the deposits are expected to reach Rs 27,300-crore level and advances to Rs 13,600 crore by 2005.

The total income of the bank was up by near 40 per cent to Rs 1,610.86 crores for the year ended March 31, 2002.

Total deposits grew by 16 per cent to Rs 12,911.11 crores, higher than the national average of 14 per cent, he claimed.

The capital adequacy ratio of the bank stood at 15.46 per cent, much higher than the Reserve Bank mandated 9 per cent.

Aiming a less than 1 per cent net non-performing assets ratio by 2005, the bank’s net NPA stood at 1.88 per cent in the last fiscal.

Maintaining that the bank believed in safe and liquid securities, he said the investment portfolio recorded an over 6 per cent increase to Rs 5,752.54 crore in 2001-02.

The bank, which tied up with MetLife for life insurance business and Bajaj Allianz for distribution of non-life insurance products, plans to set up call centres at its zonal office and area office in Mumbai in a bid to maximise value for customers.

Khan said the bank had already received in-principle approval from RBI to act as composite insurance agent.

Dena Bank in the black

Dena Bank has turned around and posted a net profit of Rs 11.36 crore for the financial year ended March 31, 2002, compared with a net loss of Rs 266.12 crore in the previous fiscal.

The total income in the year 2001-02 rose to Rs 2,061.36 crore as against Rs 1,915.46 crore in the previous year, the bank informed the Bombay Stock Exchange today.

For the fourth quarter ended march 2002, the bank has reported a net profit of Rs 37.46 crore compared with a net loss of Rs 272.71 crore in the corresponding previous quarter, while total income increased to Rs 549.12 crore (Rs 474.81 crore), it added.


New Delhi, June 4: 
Herbal products and over-the-counter (OTC) healthcare products will drive future growth at Ranbaxy Laboratories and be its new thrust areas.

The pharmaceutical major also proposes to switch some of its existing prescription products in areas such as nutrition, cough and cold and general well-being, into OTC products.

The company is however, tight-lipped about the brands which it plans to switch to the OTC segment. Senior vice-president, Bimal K. Raizada told The Telegraph: “We do not want to name the brands we want to switch to the OTC segment until we get the necessary clearances.”

“By August, Ranbaxy will identify the entire range of herbal products that it wants to be present in,” he said. By the end of this year, Ranbaxy would have spent more than Rs 5 crore for research on herbal and OTC products, he said. The products are expected to hit the market within a year.

For the brands that will make the switch to the OTC basket, Ranbaxy plans to reach consumers through a distribution system of both chemists and select FMCG outlets, while continuing with communication and promotion to doctors for these brands.

In the first phase in 2002, Ranbaxy is setting up a sales and distribution organisation across the country. Subsequently, it proposes to expand the consumer healthcare business to other countries in phases. “As a pharmaceutical company making a foray into herbal products, our approach is different. We want to set aside some of the wild claims of ayurvedic products, and instead lay down specific standards which can determine the efficacy of the products,” he said.

The Rs 2,500-crore natural and herbal healthcare market is a growing one. Morepen Laboratories has already made a foray with its Dr Morepen brand of OTC healthcare products. Himalaya Drug Co is aggressively building its portfolio of herbal products. While Dabur is already an established player, FMCG major HLL also announced plans to foray into OTC ayurvedic products under the brand name Ayush.

FDA approval

Meanwhile, Ranbaxy Pharmaceuticals Inc, (RPI), the wholly-owned US subsidiary of Ranbaxy Labs, today announced that it has received final approval from the US Food and Drug Administration to manufacture and market Cefpodoxime Proxetil for oral suspension 50 mg (base)/5 ml and 100 mg (base)/5 ml. The drug will be available in three sizes including 50, 75, and 100 ml bottles.



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