Unit Trust sells illiquid debt to banks
Liquidity locked up in ITC stock pile
Jay Shree Tea plans IT foray
Cell rivals to share infrastructure
India Inc seeks closer Nepal ties
SSIs want govt cover

 
 
UNIT TRUST SELLS ILLIQUID DEBT TO BANKS 
 
 
BY ANIEK PAUL
 
Calcutta, June 23: 
The Unit Trust of India (UTI) has been selling illiquid debt instruments to private banks through off-market negotiated deals, offloading securities worth hundreds of crores in the process, bankers say.

Senior Unit Trust officials confirmed that the mutual fund has been selling thinly traded securities to banks, but refused to quantify the amount of securities sold so far through such deals. They, however, said Unit Trust would be selling assets worth Rs 50-60 crore through negotiated off-market deals over the next few months, to meet redemption needs. Unit Trust’s executive director B. S. Pandit said: “These assets should not be considered sub-standard. We had to sell them off-market because they were either not listed on the National Stock Exchange’s debt segment or were thinly traded. We could have also transferred them to other UTI schemes, but we believe we found a better price delivering them to banks. A large number of banks are flushed with funds and are fishing for good assets.”

Assets sold to private banks were mostly taken out of schemes that are maturing. “The schemes maturing June-end have Rs 25-30 crore of illiquid assets. We should be able to sell them next week,” he added. Experts say this betrays a mismatch between UTI’s assets and liabilities. “Even if we accept, for argument’s sake, that the quality of these assets were above board, they would have matured well after the schemes, through which they were held, had closed. The maturity of assets should have been matched with the duration of the schemes,” a leading analyst pointed out.

Besides selling securities off-market, UTI has been offloading its investments in the secondary markets too. Analysts feel its rampant selling is largely responsible for the pressure on the bourses.

   

 
 
LIQUIDITY LOCKED UP IN ITC STOCK PILE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 23: 
Beleaguered mutual fund major Unit Trust of India (UTI) is keen to unload the pile of ITC shares it is sitting on.

UTI holds almost 1.46 crore shares in its equity schemes excluding US-64. The latter, however, holds a huge chunk of the shares, exact details of which are yet to be made public.

The mutual fund has been holding on to the ITC shares by parking it in various equity schemes, probably in the hope of unlocking value from them at an appropriate time.

So much so that even UTI’s sector-specific GSF Software fund holds 61,358 shares which is 2.04 per cent of the total value of the scheme’s portfolio. UTI sources say there is nothing wrong in a software sector fund holding shares of a cigarette maker, as mutual fund rules permit them to invest up to a maximum limit in other sectors.

The fund has been holding to its ITC shares on the fervent hope that the government would finally agree to let British-American Tobacco (BAT) acquire its stake and thus take over control. If the government gives the nod to such a move, UTI can palm off the shares to an eager buyer who is ready to part with a substantial premium to the current market price of Rs 622.55. In fact, expectations fuelled by reports suggesting that the government will finally permit UTI to sell the ITC stake to BAT, pushed up the ITC scrip on Friday.

However, allowing UTI to sell its stake in ITC to BAT will entail major policy changes, as the government has in the past denied permission to foreign tobacco companies to set up operations in India. Also, the government will have to consider the political ramifications of letting financial institutions selling their stakes to multinationals.

However, there are analysts who believe to the contrary. Cigarettes are no longer an attractive market because of declining sales and cheap imports into the country. So, why should BAT pay a premium for acquiring a controlling stake, they ask.

Further, if the government allows BAT to raise its stake, leading American cigarette major Phillip Morris is likely to demand a similar gesture from the government, seeking a similar hike in its equity holding in Godfrey Phillips, makers of Four Square cigarettes.

The issue then, would be whether the government will have the spunk to change policies to suit its convenience. Reports suggest that the government may allow the mutual fund to do its will by allowing it to sell its bulk holdings in several companies, including ITC. Sometime back, UTI had identified 30-35 companies in which it might sell its strategic stake.

   

 
 
JAY SHREE TEA PLANS IT FORAY 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 23: 
Jay Shree Tea & Industries Limited, a B. K. Birla group company, will foray into the information technology business shortly.

“The company will provide specialised application software and consultancy services to different sectors like tea, education and healthcare. An international outsourcing call centre will be set up in Calcutta,” senior officials said. B. K. Birla’s younger daughter Manjushree Khaitan has already floated a software firm called Manjushree Infotech. It is now elder daughter Jayshree Mohta’s turn to enter the IT realm.

Tea, the traditional business of the company has done fairly well. The company’s estates in south India have managed to cut costs, improve labour productivity and quality even in these tough conditions. Some of the tea estates in Darjeeling and Assam have produced very high-quality tea which have been readily absorbed even in the depressed market, officials said. The company has set up a tea-processing factory at Ledo, Assam, with an annual production capacity of around 6 lakh kgs.

Explaining the rationale behind setting up a processing factory, the officials said production from bought leaf factories in north India constitutes around 15 per cent of the north Indian crop.

As these units operate on cost conversion ratios, margins are safeguarded. The cost of raw material, that is the green leaf, is directly related to the selling price of manufactured tea. The lower the end-price, the greater the fall in green leaf rates.

“Since this is the fastest growing segment the company has decided to take advantage of the situation by setting up the processing factory,” officials added.

The company is centralising the purchase and distribution of stores/materials to have proper control on pricing and effective inventory management. In 2001-02 the company produced 150.52 lakh kgs of tea.

The chemicals and fertiliser business of the company is not doing well. Poor demand situation has forced the company to reduce the production of single super phosphate (SSP) to minimise inventory levels. The company has two units located at Khardah in Bengal and one at Gurgaon in Haryana.

   

 
 
CELL RIVALS TO SHARE INFRASTRUCTURE 
 
 
BY ALOKANANDA GHOSH
 
Calcutta, June 23: 
In line with global trends, cellular operators in the country are joining hands to share their network infrastructure. Telecom operators share their towers and sites to save on operational costs and also help in maintaining the aesthetics of the skyline.

Most cellular service providers have arrived at an agreement to share their ‘passive infrastructure’ with competitors. In Calcutta, AirTel and Command, which claim to have 142 and 150 cell sites respectively, have been sharing infrastructure for the past four to five months. Both operators expect the number to go up to 200 sites by the year-end. “As the number of base stations increase to keep pace with the growing subscribers, it would be economically viable to enter into sharing agreements,” a Bharti official said.

Sources at Bharti-AirTel said that the trend is comparatively new in the country and has been initiated by the company in most places where they provide services. In Punjab, the telecom major has a tieup with Escotel and Spice and is also sharing infrastructure with service providers in Karnataka, Andhra Pradesh and Delhi.

In Chennai and the Tamil Nadu circle, AirTel is contemplating an arrangement with RPG Cellular and new entrant Hutchison. “With more operators entering the cellular market, sharing of base stations would save costs and avoid marring the skyline with an array of not so pleasant looking towers,” said P H Rao, managing director of Bharti Mobinet.

Most operators feel that the cost saving of 40 per cent is the main impetus. Also a robust infrastructure is required to support the services that telecom companies are promising users with 2.5G and 3G networks. Sharing base stations makes the network more efficient and effective.

“We may compete in the market, but when it comes to saving cost, it is always better to join hands,” a senior Idea official said.

   

 
 
INDIA INC SEEKS CLOSER NEPAL TIES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 23: 
India Inc wants greater trade and investment in the Himalayan kingdom of Nepal in the areas of infotech, drugs and pharmaceuticals, housing and construction, tourism, hydel power, banking and textiles.

The Federation of Indian Chambers of Commerce and Industry (Ficci) feels the visit of King Gyanendra Bir Bikram Shah Dev of Nepal along with a high-level team of businessmen from his country will help Indian industry build up business-to-business linkages which could facilitate Indian investments and trade with Nepal.

Trade between the two neighbours has been fluctuating since the year 1996-97. Trade stood at Rs 814.9 crore in 1996-97 but decreased to Rs 945.6 crore in the year 1997-98.

However, this crashed to Rs 1,225.5 crore during 1998-99. But in 1999-2000, this suddenly jumped almost four times to touch Rs 4,653.3 crore. Last fiscal this went up by a more milder 8 per cent to Rs 5,022.7 crore

India’s major exports to Nepal include transport equipment, drugs, pharmaceuticals and fine chemicals. Exports of transport equipment stood at Rs 702. 63 crore during 2000-01, while it earned Rs 132.55 crore from export of drugs, pharma and fine chemical products.

Other major exports were metal manufactures, tobacco, spices, man-made yarn, coal and rice. Major imports from Nepal include essential oil and cosmetic preparations, which resulted in an outflow of Rs 145.84 crore during 2000-01.

   

 
 
SSIS WANT GOVT COVER 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 23: 
A study conducted by the Confederation of Indian Industry (CII) covering over 200 small industries, shows small businesses feel the government needs to create a hassle-free environment to enable them to improve their product quality and reduce costs to meet the challenge of cheaper imports.

Though the government has enacted measures to protect the sector such as an agri-economy zone, market access initiative, special economic zones and peak customs duties, the CII feels it is necessary to create awareness about these policies amongst the industrial units to help them gain from these measures.

The survey also revealed that most SSIs felt a need for increased involvement of industry representatives in the process of policy formulation by the government.

   
 

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