Markets breathe easy for now
Cabinet hands lifeline to IISCO
BoR invites bids for Rajasthan Breweries
Sardas eye 40% stake in BSL
Fera fails to blot ITC rating
Honda gears up to launch new version of City
Power crisis hits Indica sales
GIC to draw up risk map
Dabur, CGU to invest Rs 300 cr in Aviva Life
Foreign Exchange, Bullion, Stock Indices

 
 
MARKETS BREATHE EASY FOR NOW 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 11: 
The markets breathed easy today as war fears thinned out, sending the sensex racing by 83 points, robbing gold of some lustre, hardening the rupee and boosting government securities.

Mirroring the sense of calm, the rupee closed at a two-week high of 48.96/97 against the dollar, up 1 and 1.5 paise over Monday’s close, in the inter-bank forex market.

On Dalal Street, the bull charge started in shares of automobile companies. Infotech companies also zoomed, lending much-needed support to the rally. The 30-share sensex closed 2.53 per cent higher at 3,362.42 points. Today’s surge took the gains notched up in the past two sessions to 4.5 per cent.

The rebound was witnessed across the board with gainers outnumbering losers by three to one in heavy trade of nearly 13.9 crore shares compared with Monday’s 11.06 crore. Turnover was pegged at a modest Rs 1,460 crore, an indication that valuations are still poor.

“Investors are scouting for value picks in the markets,” said Ajay Menon of Geojit Securities. The impetus came from reports that five Indian warships were being moved away from near the Pakistani waters. What also lifted spirits was the announcement by the government that it would allow Pakistan Airlines to fly over India.

Infosys Technologies, the blue-chip software services major that joined hands with Wipro to offer Union Bank IT solutions on Monday, gained 4.76 per cent to Rs 3,537.35. Telco was also a big draw, finishing 10.66 per cent higher at Rs 155.70 on reports of a sales spike in May. Century Textiles was in the spotlight too, gaining a little more than Rs 9 at Rs 59.40 from Rs 50.25. Bucking the weak trend seen in the past few weeks, Hindustan Lever also gained 2.78 per cent at Rs 203.05.

Foreign institutional investors (FIIs) were, however, not convinced that it was safe enough to pour money. They sold shares worth a whopping Rs 420.9 crore against purchases of a paltry Rs 169.3 crore. Net sales accounted for Rs 251.6 crore and market watchers say if the selloff continues, it could cut short the rally.

Gold prices crashed to Rs 5280 per 10 grams amid persistent selling pressure as investors moved out of the safe-haven avenue into other financial instruments.

Investors had switched to the yellow metal to hedge against the risks that come with a military conflict. The Indo-Pak face-off, a weaker dollar weakened and tensions in West Asia had triggered a rush for the yellow metal.

In Ahmedabad, the country’s main bullion trading town, gold was quoted at Rs 6,200 per kilogram on Tuesday, down from Rs 63,900 rupees on Monday.

In the money market, the benchmark 10-year paper, the 2012 security, rose sharply to 98.68 from 98.50 with the yields moving down to 7.59 per cent from 7.62 per cent.

Call rates in the inter-bank market closed at 6.15-6.30 per cent, an increase from 6.10-6.20 per cent yesterday.

Wipro M-cap zooms

Wipro’s market capitalisation has zoomed 7 per cent to Rs 39,500 crore in 2001-02, based on the market price on March 31 (Rs 1701) from a trough of Rs 36,800 crore, its annual report says.

The report pointed out that the market cap had peaked at hit a high of Rs 90,700 crore in 1999-2000 had subsequently plummeted to Rs 36,800 crore in 2000-01.

“We do not comment on specifics of valuation. The company believes that the market capitalisation should follow profit growth and more importantly operating cash flow growth,” J. Shankar, corporate treasurer, said.

   

 
 
CABINET HANDS LIFELINE TO IISCO 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 11: 
The Cabinet Committee on Economic Affairs (CCEA) today approved in principle a restructuring package for the ailing Indian Iron and Steel Company (IISCO).

As per the decision, the government would work out a detailed package for IISCO, a unit of Steel Authority of India (SAIL) on the lines of a package being implemented by the West Bengal government, an official spokesperson told reporters after the CCEA meeting.

The state government has closed a unit of IISCO at Kulti and promised to waive sales tax besides the concession on electricity consumed, she said, adding the Centre will stand guarantee for raising funds to offer voluntary retirement to the employees.

In addition to this, efforts would also be made for a joint venture partnership with the private sector, she added.

A revival package for Bharat Refractories Ltd was also cleared by the CCEA under which Rs 55 crore would be given as non-Plan loan assistance to liquidate statutory dues in respect of employees who have accepted the VRS.

A sum of Rs 90 crore would be given as non-Plan loan for implementation of a VRS scheme, Rs 35 crore as equity to replace obsolete machinery and conversion of existing plan and non-plan loans as on 2000-01 amounting to Rs 97.89 crore into equity.

BRL, a subsidiary company of Bokaro Steel Plant, had 2,766 employees on its rolls as on March 31, 2002, and is engaged in manufacturing basic bricks and fire clay and masses.

In another decision, the government approved the revised cost estimate of the Kishenpur-Moga transmission system at an estimated cost of Rs 938.48 crore, based on the fourth quarter of 1999 price level.

   

 
 
BOR INVITES BIDS FOR RAJASTHAN BREWERIES 
 
 
BY A STAFF REPORTER
 
Calcutta, June 11: 
Bank of Rajasthan (BoR), a private sector bank promoted by the Tayals, has invited bids for selling off Rajasthan Breweries Ltd to recover its loans from the company.

Rajasthan Breweries Ltd was promoted by two Delhi-based industrialists Sanjay Jain and Ashok Jain in the early ‘90s. In September 1991, the Jains went in for a public issue of Rs 9.96 crore to set up a 75,000 hectalitre state-of–the-art Rajasthan Breweries at Shahjahanpur in Alwar district.

The sale offer will remain open till June 20. Earlier, both the UB group and Shaw Wallace had shown interest in buying out Rajasthan Breweries.

BoR sources said that the company owed it Rs 16 crore. “The account became a non-performing asset in 1998 and the company went to the Board for Industrial and Financial Reconstruction in 2002,” they added.

Even though the loan was given to the Jains from the Delhi branch of BoR, the bank however filed a recovery suit at the Jaipur Debt Recovery Tribunal in 2000 since the plant and the assets of the company were within the jurisdiction of Jaipur.

The Jains moved the DRT and obtained a stay order. Meanwhile, BoR filed a winding up petition against the company in the Rajasthan High Court. A division bench of the court, in an order dated May 23, has held that the restraint imposed on the bank by the debts recovery tribunal in the matter of exercise of right of sale of the hypothecated assets of the company stand vacated.

The bank is free to exercise its rights under security documents executed by the company in favour of the bank.

On June 3, the bank took possession of the entire plant and machinery of the factory premises of Rajasthan Breweries, which was charged by way of hypothecation with the bank against the loan advanced by the company.

Deepak Sood of S. G. Consultants has been appointed as receiver.

Speaking on the bank’s move to recover sticky assets in this way, K.M. Bhattacharya, BoR managing director said, “This is a new dimension of the bank’s power to exercise its contractual right of taking possession of the charged assets pending litigation in the DRT and a decision by BIFR. If this succeeds it will give more teeth to the bank to recover bad loans.”

   

 
 
SARDAS EYE 40% STAKE IN BSL 
 
 
BY A STAFF REPORTER
 
Calcutta, June 11: 
The Sardas are aiming to acquire over 40 per cent equity stake in BSL Ltd—the textile company formerly known as Bhilwara Synthetics. The Sardas have so far bought 11.86 per cent of BSL’s shares from the market. They said they were preparing themselves to make an open offer.

The Sardas are a major player in jute. They control seven jute mills in Calcutta and its suburbs, and Kolmak Chemicals, a company they bought over and turned around. Besides the seven jute mills that they directly control, they run a few others under management contract. They, however, refuse to name the mills they own or manage.

Ghanshyam Sarda, chairman of Kolmak, said: “Our open offer is likely to be bigger than the Sebi-mandated minimum size of 20 per cent of the company’s equity. We will not gain any say in the management of BSL unless we acquire 40 per cent of the company’s equity.”

The promoters of BSL—the Churiwals and Jhujhunwalas—hold close to 36 per cent in the firm. The market anticipates the promoters to launch a counter-offer to the Sardas’ bid in defence of their position in the company.

They have fortified the board of the company by recently inducting two new additional directors: Riju Jhunjhunwala and Sekhar Agarwal. Both are said to be members of the promoter families. The Churiwals and Jhunjhunwalas were not available for comment.

The Sardas had, in the past, offered to buy out the shares held by the financial institutions (FIs). However, they have not responded to the offer yet.

The FIs (including Unit Trust of India) held 12.43 per cent as of December-end. UTI is the largest shareholder among the institutions, with a 3.21 per cent stake.

The public holding in BSL stands at 36 per cent. The Calcutta-based SMIFS group, a major shareholder, has a score to settle with the promoters. The SMIFS group has threatened to initiate criminal proceedings against the company’s management for not transferring shares held by one of its firms.

   

 
 
FERA FAILS TO BLOT ITC RATING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 11: 
Notwithstanding pending disputes over Fera violations, leading rating agency Credit Rating Information Services of India Ltd (Crisil) today re-affirmed its rating on ITC Ltd, stating the company’s potential earnings can take care of liabilities on that score.

Assigning an AAA rating to the cigarette major, Crisil said despite a volume contraction in the business during the last four years, ITC continues to maintain a favourable financial risk profile as seen in its high profitability, low gearing, strong cash accruals and liquidity position.

This it attributed to ITC’s high overall realisation on account of its strong presence in the premium cigarette segment, favourable cost structure arising from the direct procurement of tobacco from farmers and economies of scale.

“Crisil believes that ITC’s strong cash accruals and liquidity position will be sufficient to mitigate any risks that may arise on account of the ongoing excise and Fera litigation,” it pointed out.

The rating agency was of the belief that access to BAT’s international brands like Benson & Hedges Special Filters and Lights and State Express 555 further enhances its strong product profile. Despite these inherent strengths, in line with the industry trend, the company’s cigarette volumes have come under pressure over the last few years.

This, the agency said, is largely due to unfavourable government policies in the form of continued excise duty hikes, which have impacted volumes. “Growing grey market sales of cigarettes, especially in the premium segment, too, add to the industry’s concerns,” Crisil added.

The AAA rating was assigned to the Rs 10.43 crore non-convertible debenture programme and an FAAA rating has been assigned to the fixed deposit programme of the company. These ratings, it revealed, have been assigned following the merger of the subsidiary, ITC Bhadrachalam Paper Boards Ltd (ITCBPL), with ITC, following which the rated debt instruments of ITCBPL have been transferred to ITC.

The agency noted that the ratings reflect ITC’s leadership over the domestic cigarette industry, which is endorsed by its large product portfolio, strong brands, extensive distribution network and geographic diversity.

   

 
 
HONDA GEARS UP TO LAUNCH NEW VERSION OF CITY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 11: 
Honda Siel Cars India Ltd is preparing to offer a new variant of its best selling model—the City Dxi—in a 1.3 litre version. At the same time, Honda will also be phasing out the low-end model City LXi, whose sales have been dwindling due to absence of some basic features in the sedan category.

It has also upgraded the City 1.5 litre version with a refined two-tone colour scheme to boost sales. This version will now be available in mint opal green, night-hawk black, satin silver and naples gold.

“The DXi has been planned after a lot of customer feedback. The LXi has not been selling for nearly a year now. The customers were demanding some basic features like power windows and power steering, which were absent in the LXi, though present in the top-end version of EXi. The new DXi will be slotted between the LXi and EXi,” said Rajiv Gupta, marketing head.

The new version will have the same exterior design as City and its engine and transmission will also remain the same. However, Honda will add on some more frills in order to make it more acceptable sedan, at a price Rs 30,000 cheaper than the EXi. The EXi is priced at Rs 7.17 lakh (ex-showroom Delhi) whereas LXi was offered at Rs 6.41 lakh. DXi will be priced higher than the existing LXi model.

The new DXi will have power windows, power steering, power door lock, digital clock, a few door pockets, door open indicators, sun visor and a central console box.

   

 
 
POWER CRISIS HITS INDICA SALES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 11: 
The sales of Telco’s Indica in the passenger car segment was adversely affected in May due to a planned closure and power crisis in Maharashtra even as the company posted an 82 per cent jump in commercial vehicles sales at 7,230 units.

Sales of Indica stood at 3,018 units during May, a drop of 36.78 compared with 4,774 units in the same period last year.

The volumes have been impacted adversely due to the ramp up of Indica production being restrained to an extent by the power crisis in the last week of the reporting month, which affected the industrial belt of Pune, as well as due to a planned closure for Tata sedan switchover activities, said the company.

The passenger car business registered a total sale of 5,223 vehicles last month when the industry declined by 12.4 per cent. The cumulative sales for the first two months in this fiscal stood at 8,436 units.

Utility vehicle sales stood at 2,205 units, a decline of 8 per cent over May 2001.

Sales of Tata Engineering Company Limited’s commercial vehicles, which began to show an upward trend at the start of 2002-03, continued their climb in the reporting month.

Meanwhile, the launch of Tata sedan is expected later this year.

Today Tata Engineering Company Limited’s shares on the Bombay Stock Exchange were up 10 per cent at Rs 155.70 as against yesterday’s close of Rs 140.70.

   

 
 
GIC TO DRAW UP RISK MAP 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 11: 
General Insurance Corporation (GIC), plans to undertake catastrophe-mapping (Cat-map) of the country for the first time, to carry out risk analysis of different locations.

Cat-map will take into account major insured perils like earthquakes, floods and storms to arrive at the accumulation of insured values.

A district-wise and Pin code-wise risk profile of the country is being worked out for all large insured risks. This will help in identifying catastrophe prone zones or pockets of the country and accumulation in these areas.

Cat-map will also facilitate decision making in insurance and re-insurance companies, both in the domestic and international markets, to arrive at terms and conditions the insurance and re-insurance contracts based on such data.

“For both insurers and re-insurers, it is important to know the range and quantity of vulnerability of any place. That helps them to define the local risk and provide a cover to it with the necessary premium,” senior GIC officials said.

In India, Cat-mapping of industrialised states like Maharashtra and Gujarat is necessary for covering property in these areas. Insurance companies all over the world undertake Cat-mapping of different countries to develop awareness of local risks.

“This has become more important following the earthquake in Gujarat. Cat-mapping

will be an important tool in the hands of the insurance companies,” the officials said.

They added that GIC, the country’s official re-insurer is in the process of finalising Cat-mapping operations based on the location of the risk in consultation with the various government agencies like the Tariff Advisory Committee, seismological institutes and meteorological department.

The consistency in GIC’s business approach and strategy, particularly towards their Afro-Asian clientele, has resulted in creation of good business contracts over a period of time.

During the past 10 years, GIC has carved a niche in the Afro-Asian markets as a re-insurer, securing lead shares in several insurance/re-insurance companies business.

Post-September 11 events have virtually affected all reinsurance markets in the world, including foreign inward business and domestic businesses of GIC.

Since GIC is not present in the US and Canadian markets, it has not been directly affected by the September 11 events.

With the losses to several foreign insurers following September 11 mounting, resulting in a severe re-insurance capacity crunch, GIC got the opportunity to participate in a number of new business proposals, even figuring as the leading re-insurer in a few of them.

   

 
 
DABUR, CGU TO INVEST RS 300 CR IN AVIVA LIFE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 11: 
Dabur Group and UK-based insurer CGU is planning to invest Rs 200-300 crore in their joint venture Aviva Life Insurance while exploring possibilities of foraying into mutual funds sector within the next five years.

”We started with an initial capital of Rs 110 crore. We may require additional Rs 200-300 crore in the next five years depending on the business growth,” Aviva Life CEO Stuart Purdy said after announcing its tieup with American Express Bank.

American Express is Aviva’s fourth bancassurance partner after its strategic tieups with Canara Bank, Lakshmi Vilas Bank and ABN AMRO Bank. Aviva Life Insurance will work closely with American Express to provide its bank and card customers the flexibility to balance their savings and protection needs by designing an appropriate level of insurance cover.

“We lead with our knowledge and understanding of bancassurance model in the country. We are here to have a long-term profitable relationship with our customer. Our customer service will be the key differentiator for our financial services,” Purdy said.

Aviva has started its commercial operations in the four metros and will shortly start its operations from Bangalore and Hyderabad. The Bangalore branch is scheduled to open early next week while the Hyderabad branch will start operating from July 1 this year. With each year of its operations, Aviva plans to add six new branches to its credit.

Aviva has come up with eight base products specifically designed for the urban sector. These have been cleared by the insurance watchdog-Insurance Regulatory Development Authority (IRDA). The company has also designed five products tailored for the semi-urban and rural sections of our society. These products are in the pipeline and are yet to be cleared by IRDA.

Purdy said, “We are also introducing an innovative product called -Easy Life. In addition to our base products we have introduced three riders. These are hospital cash benefit, critical illness rider and accident death benefit.”

Purdy also said that “in order to meet our rural obligations, are focus area for procuring the rural business will be in Guwahati, Asansol, Tamil Nadu and Andhra Pradesh. Our business will be facilitated through the financial advisers, agents and the micro financial institutions.” Aviva’s branches in Guwahati and Asansol will start its commercial operations after three months.

Purdy believes that the insurance company will garner 15-20 per cent of its sales through bancassurance whereas their direct and corporate agents will probably corner 75-80 per cent of its sales.

“In the coming years, we plan to open our branches in Lucknow, Ludhiana and Cochin. We are also confident that with each year of our operations we will definitely increase the paid-up capital base, which is currently Rs 110 crore,” he said.

Meanwhile, the Dabur board has approved the appointment of Sunil Duggal as the CEO designate of the company from July 1.

Dabur net down 17.3%

Dabur today reported a 17.3 per cent dip in net profit at Rs 64.44 crore during 2001-02 against Rs 77.92 crore in the previous year. Net sales were at Rs 1,163.19 crore over Rs 1,166.47 crore a year ago. The declared 50 per cent interim dividend would be final.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.97	HK $1	Rs.  6.20*
UK Ł1	Rs. 71.73	SW Fr 1	Rs. 31.00*
Euro	Rs. 46.25	Sing $1	Rs. 27.00*
Yen 100	Rs. 39.12	Aus $1	Rs. 27.50*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5365	Gold Std (10 gm)Rs. 5280
Gold 22 carat	Rs. 5065	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8425	Silver (Kg)	Rs. 8320
Silver portion	Rs. 8525	Silver portion	   NA

Stock Indices

Sensex		3362.42		+82.93
BSE-100		1703.38		+41.57
S&P CNX Nifty	1097.05		+27.15
Calcutta	 117.97		+ 1.83
Skindia GDR	 521.18		+10.00
   
 

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