Dead end for van-car crossovers
Industry opens year on positive note
IDBI prefers to stay single
Ranbaxy to license drug to German firm
Digital to seek nod for buyback, FII cap hike
Placid waters await shippers
Tariff tiff stalls CESC recast
DCA hikes filing fees for foreign firms
Paper industry turns new leaf
Foreign Exchange, Bullion, Stock Indices

 
 
DEAD END FOR VAN-CAR CROSSOVERS 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, June 12: 
When Maruti Udyog launched the Versa last October, it was introducing a concept that had never been tried before in the country—the multi-purpose vehicle (MPV), a cross between a van and a car. Eight months down the road, the verdict is out: the MPV has failed to ignite the market.

So, is Hyundai Motors—which achieved such a massive success with the Tallboy Santro—being a little too adventurous in entering the segment with its Carens, when the country’s largest automaker acknowledges that it had overestimated the appeal of the MPV?

Hyundai’s gambit raises serious questions about the marketability of the MPV, a hybrid concept that was first introduced by Renault with its Espace in 1984 that became one of the most successful cult cars in Europe, sparking a rash of clones the world over.

“People do not know in which category they should place this car (the Versa). Sales have been pretty low due to the ignorance of the people about the MPV category. We are trying to educate the customers about the benefit of having an MPV on city roads,” Maruti Udyog sources said.

Sales of the Versa have sputtered since the high-octane ad campaign featuring the Big B—Amitabh Bachchan—and beta B (Abhishek) accompanied its launch. The vehicle, which is priced at Rs 5.80 lakh, and competes in the price range against the Esteem and the Ikon, has racked up sales of only 1,500 units in the past eight months.

Hyundai, which intends to launch the Carens this October, aims to price its MPV in the Rs 7-8 lakh range which puts it in the price bracket with its own Accent and the Honda City.

Carmakers, who have diced up the market into sedans and a confusing clutter of alphabet soups (SUVs, MPVs, MUVs and MAVs), have been scrambling to catch the next wavelet that will help them ride out a difficult period in the Indian market.

Although Toyota says it has pioneered the MPV concept in India with its Qualis, its claim is as bogus as Chrysler’s which has always argued that it offered the concept to the world with its Voyager. The Qualis is a multi-utility vehicle (MUV)—a people mover—and cannot masquerade as an MPV, which combines spaciousness with the elegance and ride handling characteristics of a car.

Meanwhile, Maruti Udyog is struggling to find ways to stoke interest in the Versa. The company is now looking at the corporate sector and hotels who use car pools. It is also looking at the new ‘N2N’ service to make the car more acceptable for the frequent travellers. The ‘N2N’ —which implies ‘end-to-end’ services —will give corporates the freedom to hire the cars without encountering the attendant hassles of buying the car.

In the ‘N2N’ category, Maruti will provide the drivers, look at the servicing of the cars and maintain them for a period of three years. The companies will have to pay Rs 6,000-Rs 7,000 per month per car. After that, the company can choose to buy out the vehicle at the price of second hand vehicle. Otherwise, Maruti will sell them through its ‘True Value’ programme.

“In this way, the product will become popular, but the consumer does not have to invest in the car. We are confident of the quality of the product; once people get used to this type of vehicle, it will be only a matter of time before Versa becomes popular,” he said.

At the same time, the carmaker will be trying to persuade hotels to buy the Versa. “Hotels have the practice of bringing people to and from the airport or stations. We are trying to push the sales of Versa in this segment as it will be economical for the hoteliers also,” he said.

   

 
 
INDUSTRY OPENS YEAR ON POSITIVE NOTE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 12: 
The Index of Industrial Production rose marginally by 0.3 per cent to 2.9 per cent in April over the previous year.

The industrial sector looked up after stagnating for over six months.

Though the marginal recovery cannot be called a recovery for the economy, industrialists felt that it is an optimistic sign for manufacturers as a whole. The estimates released by Central Statistical Organisation showed that the increase was mainly due to good performance by the electricity and mining sectors, even as the manufacturing sector continued to suffer from a slowdown.

Growth in electricity generation was 4.9 per cent compared with a mere 1.5 per cent in April 2001, while the increase in mining was 4.6 per cent against 3.4 per cent in the same period last year.

The manufacturing sector, however, recorded a 2.5 per cent growth in the first month of this fiscal as against 2.7 per cent in the corresponding period a year ago.

In product wise division, it is the consumer goods and consumer non-durables that showed maximum growth. Consumer durables clocked a growth of 6.1 per cent against 6.4 per cent a year back, whereas consumer non durables showed a growth of 4.1 per cent in April 2002-03 against a growth of only 1.3 per cent in the same month last fiscal. The overall consumer goods segment showed a growth of 4.7 per cent against 2.5 per cent for the month of April.

The basic goods, however, showed a growth of 3.2 per cent against a growth of 3.8 per cent in April 2001.

Though the capital goods sector made a recovery at a negative 1 per cent growth rate compared with a negative 4.4 per cent in the previous year, it is yet to show positive results.

   

 
 
IDBI PREFERS TO STAY SINGLE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 12: 
The Industrial Development Bank of India (IDBI) today squelched reports that suggested it was better off merging with IFCI, saying the aim to turn into a universal bank and the pitfalls of development funding dictate that it should stand alone.

In a statement issued today, the Mumbai-based institution said it is the considered opinion of IDBI that such merger would not serve the intended purpose.

Pointing out that the model of development banking has been fraying over the past few years in the wake of financial sector reforms, IDBI said its road-map to a universal bank has been charted. “In the circumstances, the question of merger with any other development financial institution does not arise at all.”

Today’s response came after reports that McKinsey has proposed a merger with IFCI as a way to shore up IDBI’s financial health. IDBI has a shareholding of over 28 per cent in IFCI, but both institutions have been resisting attempts to fold them into one. Last year, there were indications that the Centre was keen on a merger even though none of the partners were ready for it.

The government invested Rs 600 crore in IFCI. This was done by subscribing to preference shares worth Rs 400 crore for a period of 20 years. An additional Rs 190 crore was given as grant. Later, IDBI subscribed to IFCI’s rights issue in an investment pegged at Rs 101 crore.

IFCI has been looking at ways to improve its financial health. There were suggestions that the institution rope in a strategic partner, and that it should turn into a bank. Its board has already given its approval for a proposal to set up an asset reconstruction company (ARC) with a paid-up capital of Rs 20 crore.

IDBI, grappling with a mountain of non-performing assets, has been keen to turn into a bank, particularly after P. P. Vora became the chairman. The makeover, which Vora says could require a merger with a large PSU bank, is expected to take 9 to 12 months.

   

 
 
RANBAXY TO LICENSE DRUG TO GERMAN FIRM 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 12: 
Ranbaxy Laboratories Ltd is believed to be in advanced stages of negotiations with German firm Schwartz Pharma for co-licensing its benign prostatic hyperplasia (BPH) molecule. The molecule code-named Rbx 2258 is currently undergoing Phase II of clinical trials.

Industry circles expect an announcement to be made shortly. If Ranbaxy emerges successful, it will reap rich dividends as the molecule is a potential blockbuster and could well be a $ 1 billion brand.

However, when contacted, a senior Ranbaxy official refused to comment. The company would make an announcement at an appropriate time, he said.

For the anti-prostate BPH molecule, the company was engaged in negotiations with a couple of global pharma companies. The drug, primarily targeted at senior citizens, would be a remedy for their difficulty in passing urine. “There are very few players in this segment. Therefore, the drug is likely to be immensely successful,” C Srihari, pharma analyst with Khandwala Securities said.

The deal would be Ranbaxy’s second major accomplishment after the out-licensing of Cipro-OD in novel drug delivery systems to Bayer AG. The company had received over $ 1.5 million as milestone payments in two installments in this deal.

Meanwhile, the company is planning to file an application with the US Food and Drugs Administration (FDA) to market a syrup form of Bristol-Myers Squibb’s anti-diabetes drug and a OD form of Johnson & Johnson’s antibiotic, Ofloxacin. According to a report from a leading FII, Ranbaxy is likely to obtain a three-year exclusivity if it emerges successful in this effort.

   

 
 
DIGITAL TO SEEK NOD FOR BUYBACK, FII CAP HIKE 
 
 
BY ANIEK PAUL
 
Calcutta, June 12: 
Digital GlobalSoft—a 51 per cent subsidiary of Compaq Computer Corporation—will seek shareholders’ approval to increase the limit on foreign institutional holding in the company to 49 per cent.

The company will also seek shareholders’ approval to include in its constitution an article enabling the management to buy back shares from the market. The company claims the move to increase the FII holding limit is aimed at improving its weightage on the Morgan Stanley Capital International (MSCI) index. Infosys recently increased the limit on FII holding to 100 per cent with the same objective.

“The weightage is directly proportional to the free-float available to foreign investors and the market capitalisation of a stock. Any increase in the foreign investment limit would directly lead to increased weightage in the MSCI index,” the company said in its notice for the forthcoming annual general meeting.

Foreign institutional holding in Digital is capped at 24 per cent now. Actual FII holding in the company was pegged at 11.56 per cent as of March 31, 2002. Total foreign holding—including the 51 per cent held by Compaq—stood at 62.79 per cent as of that date.

Digital’s decision to seek shareholders’ approval to an “enabling resolution” for buy back closely follows the merger of its erstwhile parent Compaq with Hewlett Packard (HP).

According to the company’s annual report, “Business from Compaq may slowdown in the short term as the parent company has put new initiatives on the hold till the integration (with HP) is over,” Sales to Compaq account for 85 per cent of Digital’s revenues.

   

 
 
PLACID WATERS AWAIT SHIPPERS 
 
 
FROM VIVEK NAIR
 
Mumbai, June 12: 
As India and Pakistan take their fingers off the trigger, underwriters who take on insurance risks could consider a possible cut in war premium for ships cruising to the western coast.

Though the magnitude of the additional war-risk premium has not been indicated, industry watchers are of the opinion that it is likely to be 0.1 per cent of a ship’s insured value. This will be valid for a period of seven days.

“Following de-escalation of tensions between India and Pakistan, we now feel the war risk premium would either get diluted or will be completely lifted. We expect an announcement shortly,” a senior official from one of the leading shipping companies pointed out.

Sources here said in view of the diminishing tension, shipping companies will now be in a better position to negotiate the additional premium, which could be even be brought down in few cases. The hike is effective from June 18.

“In the changing environment, the underwriters are unlikely to seek a fixed additional premium. Indian shipping lines that form part of a consortium is in a position to negotiate and bring down the premium.”

In fact, recent reports now suggest that global underwriters are likely to charge the additional premium on a case-to-case basis. Industry analysts interpret the development as a sign of the improving times.

Earlier this month, members of International Underwriting Association of London and Lloyds Underwriters Association, the leading provider of insurance globally put some leading Indian ports on its list of risky destinations following the growing level of tensions in the continent.

The list included major West Coast ports of Kandla, the country’s second busiest, and those around Mumbai, that includes the Jawaharlal Nehru Port Trust and the Mumbai Port Trust.

The action led to a thinking that underwriters would announce a sharp premium, which could push up freight rates as shippers pass on the rise to their clients.

Some leading container lines had even indicated they would have no other option but to step up tariffs.

Lloyds had said shipping lines insured through them, which accounts for 90 per cent of global war-risk coverage, must get their underwriters’ permission before sending ships to any port on this list, which is regularly updated by the London-based corporation’s war committee.

However, vessels that are Indian flagged and are now underwritten by state-owned general insurance companies are unlikely to have to fork out more in premium.

At present, they pay 0.05 per cent of hull and machinery value as premium.

   

 
 
TARIFF TIFF STALLS CESC RECAST 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 12: 
The financial restructuring package of power utility CESC is in a limbo following the state electricity regulatory commission’s (SERC’s) decision to move the Supreme Court against the Calcutta High Court’s order on upward revision of tariff.

Talking to The Telegraph, CESC managing director Sumantra Banerjee said, “We do not know how to go about it. If the Supreme Court upholds Calcutta High Court’s order then the financial restructuring package will be a different one. But if it quashes the high court’s order and upholds the SERC order, then a totally different package will have to be worked out.”

The R.P. Goenka-controlled utility, staggering under a mountain of debts worth Rs 2,986.86 crore, has been bleeding since 1998.

Multilateral agencies like the International Finance Corporation, Asian Development Bank, Commonwealth Development Corporation and investment banker Kleinwort Benson have lent the company Rs 606.36 crore in secured loans, while banks and financial institutions have an exposure of Rs 1,300 crore.

CESC owes its creditors Rs 2,237.23 crore in secured loans and Rs 749.63 crore in unsecured loans. The company appointed J. P. Morgan to work out a financial restructuring package based on which it will give a presentation before all the lenders.

The lenders have formed an eight-member steering committee that will take a decision on the financial restructuring package.

The company, which suffers a loss of Rs 1 crore each day, has to immediately service some of the loans. “We are negotiating with our lenders to reschedule our loans. But it depends on the Supreme Court order. Once it gives its judgement it will be easier for the lenders to take a final decision on the financial restructuring package. We are hoping that it will happen in the current financial year, Banerjee said.

The company has, however, got some respite from FIs like IDBI, ICICI and IFCI, who has brought down the interest rate from 14.5 per cent to nearly 11.5 per cent on a portion of the loan amounting to Rs 800 crore.

Talking about the role of the electricity regulatory commissions in the country Banerjee said, “Guidelines should be laid down on the basis of which tariff should be worked out by the commissions. The predictive zone is nil. The rules are to be realistic. Moreover, the recommendations should come in time and there should be no delays. If that is not done power on demand will become a distant reality. No future investments will come to this sector. The problem is in implementation and not in the conception.”

CESC has been able to bring down the transmission and distribution losses by 1 per cent in 2001-02. The company’s T&D losses were in the region of 22 per cent, out of which 12 per cent account for technical losses. “Once the law on power theft becomes effective from July, it will be easier for us to bring down T&D losses,” he said.

   

 
 
DCA HIKES FILING FEES FOR FOREIGN FIRMS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 12: 
The Department of Company Affairs (DCA) has raised five-fold the filing fees payable by foreign companies under Section 601 of the Companies Act from Rs 1,000 to Rs 5,000 per document.

The revised rates have been made effective from May 15 this year.

Section 601 of the Companies Act deals with the fees for registration of documents that companies incorporated outside India have to pay to the registrar of companies.

For the aforesaid rules, Section 601 has to be read with Rule 20 of the Companies (Central government) General Rules and Forms, 1956.

Besides, the department has also decided to condone the delay in filing statutory documents by the foreign companies, by imposing cost that ranges from one time of normal filing fees for delay up to one month to as much as nine times for delay of more than two years.

For a delay between one and three months, the fine will be two times of normal filing fees.

Under the new rules, for any delay in paying the filing fees beyond three months and up to six months, the fine will be four times the normal filing fees.

For delays beyond six months and up to a year, the penalty will be six times of normal filing fees.

For a delay beyond one year and up to two years, the fine is eight times of normal filing fees.

Further, the registrar of companies (Delhi) has been asked to ensure that revised rates of the payable and additional fees are collected from foreign companies with effect from May 15.

   

 
 
PAPER INDUSTRY TURNS NEW LEAF 
 
 
BY AMIT CHAKRABORTY
 
Calcutta, June 12: 
The Indian paper industry is getting back on its feet. Most companies engaged in the manufacture of printing and writing paper have hiked prices by Rs 500 to Rs 1,000 per tonne in the past few weeks.

Moreover, most of these firms have also threatened to effect another increase by the end of the month, sources said. Average prices of printing and writing paper now average upward of Rs 40,000 per tonne, against around Rs 38,000 per tonne earlier this year.

Paper prices in the country had taken a beating over the past few years. Prices came down steadily to around Rs 38,500 per tonne over the past three years from a peak of Rs 43,000 per tonne in 1999. Considering the current rate of increase, trade circles say paper prices might soon attain the earlier peak level by the end of the year.

The latest to increase prices is Hindustan Paper Ltd. The city-based public sector company has raised prices of the cultural variety paper which are used for printing books and making exercise books for school and college students from today by Rs 800 per tonne. HPL had increased prices by Rs 600 in April. Trade sources in the city said the latest increase of around Rs 800 per tonne from Hindustan Paper within a couple of months was unexpected, especially since the company raised prices by as much as Rs 600 per tonne just about a couple of months ago. However, Raji Philip, chairman and managing director of Hindustan Paper, refused to comment on the company’s perception of the paper market.

The other major paper makers which increased prices are the Thapar group’s BILT Industries, Andhra Pradesh Paper, the city-based Bangur group’s West Coast Paper and J.K. Paper. While BILT increased prices last week by Rs 1,000 per tonne for its creamwove variety, the group has threatened another hike from July. Andhra Pradesh Paper has increased prices of different varieties by Rs 500, Rs 750 and Rs 1,000 per tonne. JK Paper also increased prices by Rs 1,000 per tonne. Smaller city-based firms such as Super Paper and Gulmohur Paper belonging to the Emami group, too have increased prices by Rs 1,000 per tonne to around Rs 32,000 per tonne.

Market sources said that the manufacturers are expecting an increase in demand for paper. “We, in the paper trade, however, don’t see much of an increase in demand,’’ said Balaram Kundu, ex-president of the Paper Traders Association.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.98	HK $1	Rs.  6.20*
UK £1	Rs. 72.12	SW Fr 1	Rs. 31.05*
Euro	Rs. 46.45	Sing $1	Rs. 26.95*
Yen 100	Rs. 38.98	Aus $1	Rs. 27.55*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5335	Gold Std(10 gm)	Rs. 5260
Gold 22 carat	Rs. 5035	Gold 22 carat	NA
Silver bar (Kg)	Rs. 8350	Silver (Kg)	Rs. 8295
Silver portion	Rs. 8450	Silver portion	NA

Stock Indices

Sensex		3344.41		- 18.01
BSE-100		1699.42		-  3.96
S&P CNX Nifty	1092.80		-  4.25
Calcutta	 118.82		+  0.85
Skindia GDR	  NA		    —
   
 

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