Twin props to spur economy
Century Tex counter bustles with activity
Rate-cut heat on CESC scheme
Wipro plans to expand IT services business
Enter Hutch, not for Calcutta
External reviewer to stay: CARE

New Delhi, June 15: 
Finance minister Yashwant Sinha today said the government would pursue the policy of melding a soft interest rate regime with low inflation to ratchet up economic growth to the projected level of 6-6.5 per cent this year.

“Despite all the uncertainties in the economy, we have consciously followed a policy of low inflation rate. It will continue to be our policy to have a low inflation rate and a low interest rate regime,” Sinha told reporters on the sidelines of a conference organised by United Bank of India.

Pointing towards the 1.6 per cent inflation rate in 2001-02 and the bank rate of 6.5 per cent, Sinha said, “This is a paradigm shift from the earlier days of high inflation and high interest rates. Now you can compare our economy with the best economies in the world”.

Referring to the criticism of adverse effects of lower interest rate regime on small depositors, he said there was a need to align interest rates with the inflation rate so that the real lending rates come down in the economy.

While speaking about the chronic problem of balance of payments and inadequate foreign exchange reserves, he said the country has a “comfortable” balance of payments situation which had undergone problems in the early 1990s. “Nobody understands the BOP crisis worse than I do. I know what it is to handle one debt after another.”

Sinha also said, “Our debt profile is very comfortable. According to IMF we are amongst low debt profile countries”.

Refering to the travails of the financial sector, Sinha said, “The problems of FIs have been created by their own schemes. One can’t carry on with such schemes and hope they will not be hit.” He said mutual funds had pursued a disastrous step of persisting with their assured returns scheme in a falling rate regime as their managers had been unable to read the signals.

Speaking on UBI’s performance, Sinha said “I note with great satisfaction the improvement in the bank’s results. The bank should be called weak and sick only as a mere talk in the history.” He congratulated the bank on exceeding the target of Kisan Credit Card.

Speaking on the issue of the non-performing assets (NPAs), he said, “I find banks have improved in their NPAs. Although the net NPAs and gross NPAs are down across the board, the existing level has to be well-tackled”. Sinha also went on to say that the government had made progress in the process of setting up an Asset Reconstruction Company (ARC). “We will have first pilot ARC by the end of this month.”

The government is all set to introduce in Parliament the much-awaited Banking Reforms Bill, which would grant banks more powers to recover their dues from defaulters and reduce NPAs of banks and FIs, now at over Rs 1,00,000 crore.

MIP payment

Sinha today sought to allay fears over UTI’s default in its Monthly Income Plan scheme. “UTI will meet its payment obligations in its MIP scheme coming up for redemption in July, as it has done with previous schemes,” he said.


Calcutta, June 15: 
B.K. Birla promoted Century Textiles is buzzing on the bourses. Over the last 10 trading sessions, around 40 per cent of the company’s 9.3 crore shares have changed hands on the BSE and NSE.

The promoters control 45.36 per cent. Only 54.64 per cent of the shares are traded on the bourses, and the volume of transaction in respect of the free float is 73.2 per cent. The spurt in volume was accompanied by a 68 per cent gain in price. From June 3—the day the rally started—the price of the stock has moved up by over Rs 27 to around Rs 66.50.

There are diverse explanations to this. Some brokers feel the interest in the stock is purely speculative. “The Birla group companies, including Kesoram Industries and Hindustan Motors, flare up once in a while on the back of speculative buying. Century looks like no exception,” a leading stockbroker in Calcutta said.

It is obvious that part of the transacted volume over the last 10 trading sessions was on account of speculative buying. The total volume traded on the two bourses exceeds the 37.17 per cent public holding in the firm. Institutions—including mutual funds—hold 17.47 per cent.

In February 2001, a similar flare up was noticed in the Kesoram Industries stock when a Dubai-based investment banker Shiv Kumar had reportedly cornered over 10 per cent of the firm’s stock through various friends and associates. This forced the promoters to rake up their stake and Shiv Kumar exited after making a profit. Soon after the promoters launched a buyback programme.

Also buzzing on Lyons’ Range and Dalal Street is the rumour that the promoters and their associates were buying the stock from the market. “It looks like a promoter-driven rally,” said a broker. No confirmation for creeping acquisition could be obtained from the management.

Another speculation is that the firm was planning to undertake steps towards restructuring its operations, which could include selling off two ships. No confirmation could be obtained from the management on this.


Calcutta, June 15: 
CESC is planning to bring down the 11.5 per cent interest rate on its voluntary advance payment scheme closer to the bank rate. The company has realised that it will become difficult to maintain the high rate. The scheme is popularly called CRES (convenience returns security).

Managing director Sumantra Banerjee said, “In this falling interest rate regime 11.5 per cent is a little bit high. We are considering bringing it down near the bank rate of 7 to 7.5 per cent. We will be offering a little bit higher than the bank rate. It will come down within the current fiscal,” he said. However, those who will deposit the money before the reduction will get interest at the old rate of 11.5 per cent.

Under the scheme, the net monthly electricity bill amount will be adjusted from the amount advanced under CRES. Interest rate at 11.5 per cent will be credited on the first day of the month to the CRES account and will be available for adjustment against the electricity bills falling due during the month. This adjustment process continues every month till the CRES account balance gets fully adjusted or the balance falls below Rs 100.

The minimum advance amount according to CRES is Rs 5,000 per connection, including new connections. Further amounts will be accepted in multiples of Rs 1,000 only. The maximum advance amount can be 60 times the last monthly bill or Rs 5,000, whichever is higher. A minimum amount of Rs 3,000 and further multiples Rs 1,000 only can be added to the advance.

CESC has garnered nearly Rs 10 crore through this scheme. The company has a consumer base of 17 lakh and collects revenue of Rs 150 crore per month.

The electricity bill of the consumers will state the unadjusted balance under CRES as on the first day of the month in which the bill is generated, before the adjustment of the bill of that month. The bill itself will be a credit bill and the consumer will not have to pay for it as long as the unadjusted balance is more than the bill amount.


Calcutta, June 15: 
Infotech major Wipro plans to expand its IT services and products business to raise the division’s contribution to the company’s earnings.

The company has outlined a four-pronged strategy to achieve this objective.

Wipro will focus on identifying and developing services for emerging areas, aggressively strengthening developmental activities, leveraging past experience in providing IT infrastructure management services and expanding its market presence globally.

In its annual report, Wipro states “Our goal is to make every new client account earn over $ 1 million in annual revenues within 12 months”.

The company plans to focus on Europe and Asia for acquisition of new clients.

These new clients may be serviced through expanded developmental activities mainly in the potentially viable regions of south east Asia and Europe.

Currently, Wipro has 28 development centres spread across India, Europe, and the US.

The company’s US interests contribute 57 per cent of the total revenue flow. Its expansion will result in reduced dependence on the US market.

However, the company has not yet entered any talks or agreements.


New Delhi, June 15: 
The Hutchison-Essar combine today launched a new brand—Hutch —for its cellular service in Delhi, Andhra Pradesh, Karnataka and Chennai. It also scrapped 35 tariff plans available to its Delhi subscribers replacing them with a single tariff plan.

However, in Calcutta the Command brand will continue. The company will also retain its brands Orange in Mumbai and Cellforce in Gujarat.

The company today wound up more than 35 tariff plans and instead launched a single tariff plan—Talkflexi. All its current subscribers in Delhi will have to compulsorily move to the new plan from the next billing cycle.

The new plan for its Delhi subscribers has a monthly rental of Rs 295 and a per-minute rate based on the total airtime used in a month. Loaded heavily in favour of the large volume users, the plan starts with a flat rate of Rs 2 per minute up to 200 minutes of usage and brings down the per minute airtime as the number of minutes usage goes up. The subscriber making a 650 minutes of call in a month will be charged Rs 1.40 per minute both for incoming and outgoing calls.

However, there are no changes in the pre-paid rates and services offered to them through Speed, the pre-paid card of Hutch.

The company executives refused to comment on the clubbing of all three brands—Orange, Command and Cellforce as Hutch. “It is difficult to comment, we have launched it in four cities. Will it be the same brand in all service areas cannot be commented,” said a company spokesperson.

The other major operator in Delhi, Bharti Group’s AirTel said its tariff plans are based on responses from its subscribers and would continue to offer choice.

Sarvjit S Dhillon, chief executive officer, AirTel Delhi and UP (West) said, “We will review the situation but ensure that our customers have a choice, since we believe that customers should have the preference of tariffs they want. We will not like to decide for them.”

Avneesh Khosla, group product manager contract of Hutch said, “Our feedback from the subscribers was that they were confused with the plethora of plans and would like to have one plan. We are confident that this will be successful since it is based on an extensive customer research.”

BSNL’s mobile service

The long pending national roll-out of BSNL’s GSN-based cellular services is expected within the next three months, Prithipal Singh, chairman and managing director of BSNL, said today.

“The main equipment for the service which would cover at least 100 cities including Chennai is currently undergoing trials and evaluation while the process of procuring equipment for various zones is progressing as per schedule,” Singh said.


Mumbai, June 15: 
Leading credit rating agency Credit Analysis & Research Ltd (CARE), has, unlike its peers, decided to continue with an external committee to review its ratings recommendations. This is in contrast to the method followed by its rivals, namely Crisil, Icra and Fitch, who use an internal committee to finalise rating recommendations made by their in-house analysts.

Industry circles say that the global practice is to have an internal committee instead of an external one to affix a rating. In fact, both Crisil and Icra had external committees before they finally decided to do away with the concept and set up an internal panel.

Incidentally, both Crisil and Icra have tieups with leading global rating majors. While Crisil has a tieup with S&P, Icra has one with Moody’s. CARE, however, has no such affiliation.

CARE officials admit that external rating committees have their limitations in certain aspects like getting committee members to meet at a short notice in view of their various commitments, which is not the case with internal committees. Another reason why rating agencies prefer internal committees is that business is not lost by virtue of the committee members being affiliated to the organisations that are being reviewed.

The new rules framed by the Securities and Exchange Board of India stipulates that rating agencies cannot rate debt instruments of companies with which a committee member is associated.

CARE’s committee includes former IDBI chairman S. H. Khan, former HLL chairman S. M. Datta, former revenue secretary Nitish Sengupta, S. Doraiswamy, former Dena Bank and Central Bank of India chairman, M. R. Mayya, former executive director of the Bombay Stock Exchange, Y. H. Malegam, a chartered accountant and audit expert, along with A. Lahiri, managing director of CARE.

It would be tough to get dates from these prominent personalities to review ratings. And it is the time factor which is most crucial for ratings, an analyst tracking the industry said. With their affiliations to several corporates, the issue of “conflict of interest” also crops up. The rating agency as a result cannot rate instruments from these corporates, and as a consequence, loses substantial business.


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