Sensex sinks below 3200
Lever sees billions in sourcing
Fresh pact to bring Moody’s, Icra closer
India to be global hub for Santro
British help for power sector
Ad agencies seeing pink
FIs key to StanChart’s future business plan
Ranbaxy acquires Procter brand
Nasdaq firm eyes local base
Foreign Exchange, Bullion, Stock Indices

 
 
SENSEX SINKS BELOW 3200 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 26: 
Demolished by a double-whammy. That’s what happened when markets cringed in the wake of revelations of another billion-dollar corporate chicanery, and investors agonised over whether life would give Dhirubhai Ambani a chance.

Dalal Street could not have had a more desolate day as scandals and grim tidings shattered fragile hopes of a rebound. The Bombay Stock Exchange (BSE) sensex ended the fourth straight day of losses at 3180.89 — hurtling below the key psychological threshold of 3,200 points.

The weakness on bourses at home coincided with a slide in global markets on disclosures of improper accounting practices at US telecom giant WorldCom Inc.

The slide in Reliance group firms RIL and RPL continued. Reliance Industries shed Rs 6.55 at Rs 267.10. Everyone in the trading ring had their eyes and ears glued to driblets filtering out of Breach Candy Hospital, where the Reliance founder-father and the man known for making equity a buzzword with the middle-class was admitted after a cerebral stroke on Monday.

Among the gainers in a somnolent session were fast-moving consumer stocks like Godrej Consumer, Marico, Pidilite, Nestle, Smithkline Consumer and Hindustan Lever.

The party went on for shares of plantation and media firms. On Tuesday, the government cleared 26 per cent foreign direct investment (FDI) in news-related print media and 74 per cent in other kinds non-news outfits. Toasting that decision were the scrips of companies such as Navneet, Sandesh, Mid-Day Multi Media and Tata Infomedia. Among the other batch of shares, Kotak Mahindra was also a big draw with investors.

Marketmen say while the publishing industry does have impressive fundamentals and likes of Macillan, Navneet and Tata Infomedia are on a strong footing, allowing FDI is unlikely to be benefit them in the short run.

The 30-share sensex closed with a 33.45-point loss at 3180.89, partly because of the sharp falls in Nasdaq on Tuesday, and the plunge in Hang Seng and Nikkei indices today.

Across the globe, markets were rattled by the declaration from WorldCom’s leadership that it improperly booked expenses of around $ 4 billion. This is probably one of largest cases of accounting fraud ever. The firm’s chief financial officer and controller David Myers have been fired. For Andersen, which audited the telecom major until May, it was another blemish.

Back home, in BSE’s specified group, 135 scrips, including 25 from the index, registered sharp to moderate losses, while 28 stocks ended in positive territory. The volume of business was thinner at Rs 1026.96 crore compared with Rs 1167.85 crore on Tuesday. FIIs jabbed the sell-button as they tried to scamper into safer options available.

   

 
 
LEVER SEES BILLIONS IN SOURCING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 26: 
Its growth tempo slowed by flat sales over the past year, Hindustan Lever (HLL) is betting on a strategy aimed at building a billion-dollar sourcing — exports in other words — hub in the country.

Addressing shareholders at the annual general meeting (AGM), company chairman M. S. Banga said: “HLL, one of India’s largest exporters, has decided to make sourcing an integral part of the business strategy. The business already accounts for about half of our total exports of Rs 1500 crore. Hindustan Lever’s vision is to build a billion-dollar sourcing base in India.”

To help the company’s get closer to achieving its goal, Banga said the country must move quickly to outpace other nations vying for a slice of the global sourcing pie. Doing so would help overcome India’s disadvantages in the areas of cost, image and process competitiveness against other cost-spurred nations — like China, Korea, Thailand or Mexico — vying to become global sourcing centres in manufactured exports, Banga said.

He suggested five immediate initiatives that the government and industry should launch for the purpose. These are identifying, nurturing and promoting two or three star “sourcing” sectors, creating “virtual” special economic zones, privatising Mumbai and Chennai ports, boosting productivity, attaining process excellence through Total Process management (TPM), and the right fiscal/regulatory regime.

Banga, making a pitch for the sectors that are well placed to tap the huge potential, said pharmaceuticals, FMCG and processed marine products have it in them to become “star” sourcing sectors in the immediate term.

Explaining his choice, the HLL chief said drug firms have to comply with stiff guidelines laid down by the US Food and Drug Administration. “Consumer involvement in food items is high. FMCG items are items of mass consumption. If we are able to successfully create a niche for ourseleves in these sectors, it will give the Made in India brand for manufactured exports a big boost. We can then extend that to other sectors.”

To nurture what he described “star” sourcing sectors, he called for a quasi-government apex sourcing body with strong links to the commerce and finance ministries, and managed independently by professionals picked up from the industry. “A good role model is Nasscom, which has played a crucial role in positioning India as a global IT services sourcing base.”

The sourcing of manufactured goods will pick up if an organisation dedicated to building the India Inc. brand does a few critical things. These would be efforts to attract lighthouse global firms to establish manufacturing bases in India, highlighting legal and regulatory changes required by the sector, and, finally, being a knowledge repository for information and research on the sourcing potential of India, Banga said.

   

 
 
FRESH PACT TO BRING MOODY’S, ICRA CLOSER 
 
 
FROM OUR CORRESPONDENT
 
New Delhi June 26: 
Icra is likely enter into a new licensing agreement with global credit rating agency Moody’s Investors Service, to jointly venture into new and growing areas in the Indian market. Moody’s is the single largest shareholder in Icra, with an equity holding of a little over 21 per cent in the company. An earlier agreement between Icra and Moody’s was signed in 1999.

Once the agreement is signed and regulatory approvals are obtained, Icra will be identified as an associate of Moody’s Investors Service.

The provisions of the earlier agreement called for technical assistance in credit analysis, credit research and credit training in India, which has a tremendous demand for such services.

John Rutherfurd, president and CEO of Moody’s Corporation, joined the Icra board of directors in October 2001. The two rating agencies have been moving beyond their technical services agreement to jointly venture into new and growing areas of the Indian market. They have recently published a co-branded report on the Indian mutual fund industry. Further collaborative initiatives in the areas of research and evaluation, particularly relating to the mutual fund industry are scheduled over the near term. Another important dimension in the continuing relationship with Moody’s relates to the deputation of Icra analysts to various Moody’s offices around the world, for on-the-job training in advanced rating techniques.

Last year, Icra has ventured into areas such as corporate governance ratings, grading of construction and real estate entities, grading of healthcare institutions, and rating of mutual funds. Icra also recently started offering technical services to overseas institutions seeking to set up rating agencies in their respective home countries and will pick up stake in one or two such firms. Thus, its footprints are now visible in Nepal, Kuwait and some other countries in West Asia.

The Delhi-based rating agency has already signed a pact with Oman and an arrangement with the UAE is in the pipeline, adds PTI. Icra managing director P. K. Choudhary said the agency will provide training and transfer knowledge for establishing rating outfits in these countries.

Icra has assigned its first corporate governance (CG) rating to ITC Ltd. It assigned a ‘CGR2’ implying the rated company has adopted and follows such practices, conventions and codes as would provide its financial stakeholders a high level of assurance on the quality of corporate governance.

   

 
 
INDIA TO BE GLOBAL HUB FOR SANTRO 
 
 
FROM SUTANUKA GHOSAL
 
Irrungattukottai (Chennai), June 26: 
South Korean carmaker Hyundai Motor Company plans to make India a hub for its Santro cars by 2005, to meet global demand.

Announcing this here today, Jae Il Kim, managing director of Hyundai Motor India Ltd (HMIL) said: “As part of our future initiatives, we will broaden our basket of offerings in India and also work on transforming HMIL into a global hub for small cars.” HMIL is a wholly-owned subsidiary of the Korean car major.

Speaking about the move, B. V. R. Subbu, president of HMIL said, “Currently, the Santro cars are made in India and Korea, but plans are afoot to gradually phase out production of the Santro in Korea and concentrate on its production in India. However, the Korean plant will continue to produce some components for Santro.”

At present, HMIL produces 8,000 Santro cars per month, and exports 7,000 Santros to countries like Indonesia, Algeria, Morocco, Bangladesh, Nepal and Sri Lanka.

HMIL, which rolled out the third lakh car from its factory today, has taken up a capacity expansion programme to meet the global demand for the Santro by 2005. The expansion will cover all categories where it has a presence.

The company is currently in talks with the Tamil Nadu government to execute its expansion programme. Initially the company will go in for extension of its assembly lines, which will be followed by a capacity expansion. Its current capacity stands at 120,000 cars per annum, which will be increased to 150,000 cars in the first phase and to 200,000 cars in the second phase. The entire capacity expansion programme will cost $ 200-$ 250 million, which will be met through internal accruals.

The company has, however, put its plans of coming up with an IPO on the backburner for the time being.

“We talked about an IPO for six months, but the markets did not show any signs of recovery. So we have dropped the idea of an IPO this fiscal,” Subbu said.

   

 
 
BRITISH HELP FOR POWER SECTOR 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 26: 
India has decided to call in British experts to push power sector reforms which have been stalled because of mutinous unions at the power utilities and state governments’ reluctance to walk a perilous course that would require them to ramp up electricity charges across the board.

The two countries will soon set up a joint power working group to promote and facilitate reforms in the power sector.

Under a memorandum of understanding (MoU) signed between the two countries, various measures would be taken to facilitate the development of the power sector that would involve the exchange of experts and sharing of information, experiences and best practices.

The MoU seeks to attract foreign investment in the power sector needed to generate 41,000 MW of power over the next five years. Power minister Suresh Prabhu signed the MoU with British secretary of state for trade and industry Patricia Hewitt in London on Tuesday. The ministers of the two countries will be the patrons of the group, which will meet every year, alternatively in each country to review progress of the implementation of the MoU.

Hewitt is expected to lead a high-power delegation in January next year to explore possibilities of investment and also attend the first formal meeting of the working group established under the MoU.

Meanwhile, National Thermal Power Corporation of India, the leading power producer in the country, also conducted road shows in London to suss out the receptivity of investors there to a possible flotation.

   

 
 
AD AGENCIES SEEING PINK 
 
 
FROM RAJA GHOSHAL
 
New Delhi, June 26: 
Advertising agencies have started reducing their payroll, though they are loath to admit it. Most agencies deny that they are “pink slipping” staff, but admit that the headcount is going down, which they attribute to two reasons: the shift in accounts as part of the churning process that the industry has to live with and the routine job-hopping.

In the last two months, about 13 people have left the Delhi branch of McCann Erickson, and about 7 per cent of Leo Burnett’s Delhi staff has been ‘rationalised’. The news in the grapevine is that RK Swamy BBDO, Grey Worldwide, and HTA are also reducing staff though the agencies deny it.

HTA Delhi said its staff reduction happened much earlier when it offered a VRS to its employees and the process was complete by February.

Anisha Motwani, vice-president of Leo Burnett Delhi, said, “In the last couple of months, we have reduced about 7 per cent of our staff base of 83. These have been need based as the Coke account had shifted to Mumbai and we had surplus capacity here.” On the overall advertising scenario she says, “There have been some signs of revival in the industry but we have a long way to go before happy days are here again”.

Sanjay Naik, general manager McCann Erickson said, “In April-May, 13 people resigned from the Delhi branch of the agency, but these were normal ‘resignations’ which has happened across all departments and levels.” There were six additions to the staff strength during this time, he said. McCann Delhi had a staff base of 150. The Reckitt Benckiser account is moving out of the agency in July and the Adidas account by the end of September.

Shovon Chowdhury, executive vice president and general manager of Bates feels that the trend of trimming staff has set in over the past one year, with international partners of most ad agencies increasingly keeping a tight watch on the head counts in tune with global trends. “Last year the Rs 8,000-crore advertising industry saw a flat growth. At present, there is no sign of revival and it is business as usual. However, there are no major cut backs in the budgets of clients,” he adds.

Vibha Desai, executive editor of O&M, Delhi is more optimistic. “There has been a little bit of turnaround. The industry will grow by a few percentage points.”

She said this was based on client feedback and the general economic situation. O&M recently bagged three awards in the Cannes advertising festival while Contract got one.

Industry sources point out that staff reduction in agencies is carefully spread over a span of time so that sudden pink slips at one go do not create a negative impression about the agency in the market.

   

 
 
FIS KEY TO STANCHART’S FUTURE BUSINESS PLAN 
 
 
FROM VIVEK NAIR
 
Mumbai, June 26: 
Faced with a challenging environment in custodial services business, Standard Chartered Bank is adopting a cross-selling approach by focussing on domestic institutions and offering cash management services.

In cash management, a segment which has witnessed cut-throat competition, leading to shrinking margins, it is banking on channel financing, through which it expects to lure the large corporate.

Senior bank officials told The Telegraph that in the custody market where other banks are largely looking at grabbing a slice of the foreign institutional market, the focal point of the bank will be local institutions. “Here too, we will simply not offer custody services. The plan is to bring in a more value added service and even dole cash management services to the institution,” the source added.

Deutsche Bank is one of the leading players in this segment, has the largest share of FII transaction volumes and is the second largest foreign custodian in terms of assets under custody.

Standard Chartered Bank, which is now increasingly looking towards consumer banking, has also put a new strategy in place for its cash management division. The market, laden with the presence of several foreign and domestic private sector banks, has off late seen margins shrink following the downtrend in interest rates.

Sources said in such a scenario, the bank is looking at combining its new-found emphasis on channel financing (financing of suppliers and distributors of large companies), through which it also plans to offer cash management services to such companies that would also include custom-made solutions.

Meanwhile, the bank declared its annual results for the fiscal year ended March 31, 2002 today. It posted an after-tax profit of Rs 384.6 crore, a growth of 107 per cent over the previous year.

The bank said this was driven by business growth, with income at Rs 1,228.1 crore, an increase of 61 per cent. This was partly offset by an increase of 20 per cent in operating costs which stood at Rs 449.7 crore.

Outlining the bank’s strategy for the current year, Jaspal Bindra, CEO, Standard Chartered group, said the bank would look at expanding its presence in an organic fashion through the brick-and-mortar route and in other ways that includes alliances, ATMs and co-branding. Apart from expanding its presence in second-tier cities, the bank will also consolidate its presence in large cities.

Bindra said during the year, its parent infused a capital of Rs 373 crore into the bank. However, SCB is likely to function in the country as a branch of its parent. This comes despite the relaxation in the Union Budget earlier this year, when finance minister Yashwant Sinha gave banks the choice to function as a branch or as a subsidiary.

Though the bank has not taken a final decision in this regard, sources said that it has zeroed in on operating as a branch as conversion into a subsidiary, would subject it to restrictions that include priority sector lending.

   

 
 
RANBAXY ACQUIRES PROCTER BRAND 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 26: 
Ranbaxy has acquired the anti-hypertensive brand Veratide in Germany from Procter and Gamble. However, the company refused to disclose the acquisition cost.

Basics GmbH, a wholly owned subsidiary of Ranbaxy in Germany, is expected to start marketing Veratide from July 1. Ranbaxy will now have ownership, usage and patent rights for the brand.

The deal reinforces Ranbaxy’s strong commitment to the German market, a statement said.

“Veratide commands good brand equity with a 37 per cent market share in the category,” said Ranbaxy.

Veratide would augment Basic’s growing cardiovascular product portfolio. Veratide, the second largest brand in the calcium channel blocker plus diuretics category, is a unique combination of Verapamil, Hydrochlorothiazide and Triamterene. It is extensively used for management of hypertension.

The transfer of Veratide to Ranbaxy will not affect the availability of the product.

“Depending on the effective supply chain management of both companies, physicians can continue to prescribe Veratide,” Ranbaxy said.

Ranbaxy contended that although Veratide is a successful and well recognised local brand, it is no longer a strategic fit for P and G, which is focusing on brands that have global growth potential.

Procter and Gamble Pharmaceuticals is a part of Procter and Gamble Health Care, a division of The Procter and Gamble Company, a $40 billion global major in the development, manufacturing and marketing of a broad range of consumer goods.

In prescription drugs, Procter and Gamble Pharmaceuticals is focusing on endocrinology, cardiovascular and musculoskeletal diseases, as well as anti-infective therapies.

   

 
 
NASDAQ FIRM EYES LOCAL BASE 
 
 
BY AMIT CHAKRABORTY
 
Calcutta, June 26: 
The Nasdaq listed $ 180-million information technology company IONA, which developed the integration process amongst various platforms is set to float an Indian subsidiary by the end of the year to capture the ‘highly lucrative’ market for the ‘End to Anywhere,’ or E2A concept.

The E2A concept, as explained by Prasenjit Roy, country manager of IONA, ensures multi-dimensional connectivity, or, in other words, connectivity of the user with business partners apart from internal operations. IONA claimed the E2A technology was much superior to E2E, or ‘end-to-end,’ and would have good prospects in the country.

“We go much beyond the ‘end-to-end’ concept which denotes finite start and finish, two dimensional and limited. Our offering goes beyond the enterprise and integrates the partner application as well,” Roy noted.

Operating out of a liaison office in Mumbai, the company has already forged a partnership with three leading companies, Tata Infotech, Sonata and UshaComm and eQ technologic, for marketing its E2A brand.

While Tata Infotech is already working as IONA’s world-wide system integrator, Sonata has been appointed as distributor of the software, UshaComm as integrated service vendor and eQ technologic as training partner, which will look after building up human resources. This apart, IONA has already created a base of customers who were using its Orbix products.

The IONA Orbix E2A platform consists of a web services integration platform, the first web services based integration solution for critical business process. It will provide the complete set of tools and management services for reliable, scalable and secure dynamic data exchange, business process automation and composite applications. Roy claimed that “the IONA technology differed from the competitors in having built-in web services interfaces rather than having them bolted-on’’.

Essentially, the IONA technology would integrate different platforms used by a company which do not talk to each other. The company will target especially those companies, which due to lack of a coherent IT policy and had made ad-hoc purchase of platforms. “With business-to-business (B2B) a virtual reality, integration of all the technologi4es within the organisation have become a must. Our product would go much beyond and integrate even with partners applications,’’ Roy told The Telegraph.

The Dublin-based IONA, which adopted its name from a small island between Ireland and Scotland, is very upbeat on the Indian markets. It aims to streamline the IT infrastructure of a company thereby reducing the cost of operations. Worldwide, IONA has an edge over its competitors in telecom, finance and manufacturing verticals.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.87	HK $1	Rs.  6.20*
UK Ł1	Rs. 74.52	SW Fr 1	Rs. 32.45*
Euro	Rs. 48.51	Sing $1	Rs. 27.35*
Yen 100	Rs. 40.71	Aus $1	Rs. 27.80*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5455	Gold Std(10 gm)	Rs. 5330
Gold 22 carat	Rs. 5150	Gold 22 carat	NA
Silver bar (Kg)	Rs. 8300	Silver (Kg)	Rs. 8300
Silver portion	Rs. 8400	Silver portion	NA

Stock Indices

Sensex		3180.89		- 33.45
BSE-100		1624.97		- 18.38
S&P CNX Nifty	1044.20		- 11.20
Calcutta	 115.78		-  0.41
Skindia GDR	 507.55		+  5.01
   
 

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