Tatas pick up 51% in Hughes
Parke Davis, Pfizer fix swap at 9:4
Pfizer net up 19%
Repo slash holds out hope of bank rate cut
Nusli Wadia, Raheja check in at EIH
HPL wants more time to service debt
Govt carves up top slot in Telecom Consultants
UTI prunes equity portfolio in off-market deals
Indian Oil, Essar may share facilities
Foreign Exchange, Bullion, Stock Indices

 
 
TATAS PICK UP 51% IN HUGHES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 27: 
Tata Teleservices (TTL) today said it had picked up 50.83 per cent in Hughes Telecom in a uniquely structured deferred-payment deal worth Rs 1,300 crore spread over six years. The cost will be Rs 1,100 crore if the sellers exercise their right after 51 months.

An open offer for an additional 20 per cent will be made at a price of Rs 7.20 to shareholders in four days. The Tatas have pegged the net present value for each Hughes Tele.com share at Rs 5.10. According to a Tata official, Hughes’ floating stock is around 5 to 6 per cent of its equity.

“We have signed a definitive agreement to acquire 50.83 per cent in Hughes Telecom. This provides us an entry into Mumbai and the rest of Maharashtra, besides Andhra Pradesh,” Ishaat Hussian, director (finance), Tata Sons, said. Company chairman Ratan Tata said the deal would help the group achieve its objective to provide world class telecom services.

The acquisition pitchforks the Tatas to a position where they can rival Mahanagar Telephone Nigam, Mumbai’s undisputed basic telephony leader. The deal will be closed by October, the Tatas said.

Tata Teleservices will pay for the 71.43 crore shares by issuing redeemable non-cumulative convertible preference shares in favour of Hughes Telecom’s sponsors — Hughes Network Systems, Ispat Industries and AllTel Corporation. The Rs 10 share, carrying an interest coupon of 0.1 per cent, can be redeemed either at the end of 51 months at a price of Rs 8, or after 75 months at a price of Rs 10 each.

Hughes Telecom India will restructure the $ 75-million loan it has taken from Hughes Network Systems. Of this, $ 50 million will be rescheduled as long-term debt.

“Hughes Network will partially transfer the receivables of Hughes Telecom India to Tata Teleservices in exchange for the preference shares and warrants of the Tata firm,” Deepak Dutt, vice-president and treasurer of Hughes Network Systems said.

Hughes Network Systems, Ispat group and AllTell own 55 per cent of Hughes Tele’s Rs 1,405-crore equity capital. The remaining stake is held by a variety of financial investors and the general public. TTL officials said Ispat would retain 4 per cent.

“As we go ahead, Tata Teleservices intends to realign and restructure the debt profile of Hughes Telecom to provide funds required for the Maharashtra circle at more favourable rates of interest,” TTL managing director S. Ramakrishnan said.

Underlining the importance of Hughes’ acquisition, Ramachandran said his company aims to enlarge its presence with an investment of Rs 9,000 crore over the next four years, and take the number of subscribers to three million over the period.

“Hughes’ 1.7 lakh subscribers, including the 1.2 lakh in Mumbai, gives us an immediate presence in Maharashtra. Otherwise, we would have entered as a rival,” Ramakrishnan said.

Tata Teleservices will now straddle six telecom circles across Andhra Pradesh, Karnataka, Tamil Nadu, Gujarat, Delhi and Maharashtra, including Mumbai. “The circles account for 56 per cent of subscribers and 65 per cent of revenue,” Ramachandran added.

Hussain said the Tatas are looking at Punjab, Haryana and Kerala, revenue-rich circles that could help the group sew up inter-connection agreements.

   

 
 
PARKE DAVIS, PFIZER FIX SWAP AT 9:4 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 27: 
The boards of Parke Davis (India) and Pfizer India Ltd today arrived at a swap ratio of 9:4 for the merger of the two. This means the shareholders of Parke Davis (India) Ltd will receive four shares in Pfizer Ltd for every nine shares held by them in the company.

The merger will create the fourth largest pharmaceutical company in the country with a combined turnover of Rs 701.5 crore based on November 2001 audited results, with an estimated market share of 3.74 per cent. The merger will be effective from December 1 2001, subject to statutory requirements.

“The legal merger is the culmination of the operational integration which began in 2001. The new Pfizer will capture the combined strengths of the two companies that have very similar values. The combined entity will also provide us with the critical mass to build on our success of recent years and deliver on aggressive sales and earnings going forward,” said Hocine Sidi Said, managing director, Pfizer & Parke-Davis Ltd.

He added that savings from the combined entity for the current financial year will be around Rs 5 crore.

The companies appointed valuers S.B. Billimoria & Co (represented by Y. H. Malegam and his team) and N. M. Raiji &Co (represented by Arun Gandhi and his team) to recommend a swap ratio and merchant banker Ambit Corporate Finance Pte Ltd to provide strategic advice.

The world-wide merger of Pfizer Inc and Warner Lambert in the year 2000 resulted in the creation of the largest global pharmaceutical company. Pfizer Inc develops, manufactures and markets leading prescription medicines for humans and animals, besides making many of the world’s best-known consumer products. In the merged entity, Pfizer Inc through its subsidiaries will continue to hold 40 per cent.

The merger is largely expected to bring in wide synergies. It is believed that Pfizer India with its superior distribution reach will now be in a position to better market some of the key products of Parke Davis India.

Of the two, Pfizer has a presence in pharmaceuticals and animal health. While pharma accounted for revenues of Rs 336.74 crore for the year ended November 30, 2001, the contribution of animal health was Rs 61 crore. Inclusive of clinical development operations, the total turnover of the company during the previous year was to the tune of Rs 410.32 crore.

   

 
 
PFIZER NET UP 19% 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 27: 
Pfizer India Ltd has posted a rise of 18.60 per cent rise in net profit for the quarter ended May. Net profits rose to Rs 14.98 crore compared with Rs 12.63 crore a year ago. Total income (net of excise) increased to Rs 93.47 crore from Rs 92.14 crore in the previous comparable quarter.

For the six-month period, the company posted a net profit of Rs 27.02 crore, as against Rs 21.40 crore a year ago. Similarly, net sales rose to Rs 174.18 crore against Rs 168.32 crore in the previous year.

On the other hand, Parke Davis India Ltd posted a net profit of Rs 1.85 crore for the quarter ended May compared with Rs 50.28 crore for the same quarter last fiscal. Net sales increased from Rs 51.92 crore in May 2001, to Rs 53.26 crore in May 2002.

   

 
 
REPO SLASH HOLDS OUT HOPE OF BANK RATE CUT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 27: 
In a move signalling easier liquidity conditions, the Reserve Bank of India (RBI) today lowered the repo rate by 25 basis points to 5.75 per cent. The reduction is unlikely to lead to a fall in banks’ deposit rates, but expectations of a cut in the bank rate by the central bank have reached a new pitch.

The repo (repurchase agreement) and reverse-repos are instruments used by the RBI under its liquidity adjustment facility (LAF) to regulate the volume of cash.

Repo absorbs, while reverse repos, inject liquidity into the system. Repo rate is widely seen as the benchmark for short-term interest rates, and its reduction leads to lower rates in the inter-bank call money market.

Today, when the RBI announced the results of its daily repo auction, the rate was slashed from 6 per cent. On March 5 this year, the central bank had bought down the repo rate by 50 basis points from 6.5 per cent. In all, 16 bids for Rs 23,250 crore were received. All bids were partially accepted for Rs 11,626 crore. There were no bids sent for the reverse repo auction.

The repo cut drove down overnight money rates to 5.25-5.50 per cent. They were moving between 5.8 and 6 per cent in the morning compared with of 5.5-5.75 per cent on Wednesday.

Government security prices increased — and yields fell — by close to Rs 2. For instance, the price of the 9.81 per cent 2013 security jumped to Rs 117 from Rs 115.05 on Wednesday. Alternatively, the yield declined to 7.50 per cent.

Rates at the RBI’s repo and reverse repo auctions, a part of its daily liquidity adjustment facility, have been kept at 6 per cent and 8 per cent respectively since March.

The repo rate was last cut to 6 per cent from 6.5 per cent on March 5.

Market watchers said the cut in repo rate is in line with RBI governor Bimal Jalan’s stated position of maintaining a softer interest rate bias.

Though there are differences about whether this should mean a lower bank rate, many in the market feel a 50 basis point cut cannot be ruled out over the next couple of months.

   

 
 
NUSLI WADIA, RAHEJA CHECK IN AT EIH 
 
 
BY A STAFF REPORTER
 
Calcutta, June 27: 
Bombay Dyeing chairman Nusli Wadia has joined the board of EIH Ltd—the company that manages the Oberoi chain of hotels.

Rajan Raheja, chairman of Prism Cement, and Christopher Reeves, former chairman of Merill Lynch (UK), also joined the board of the country’s second largest hotel company.

P.R.S. Oberoi, who was hitherto the vice-chairman and managing director of EIH, was appointed the chairman following the demise of his father, Rai Bahadur M.S. Oberoi. The deputy managing director, S.S. Mukherji, has been re-designated in the same position.

“We wanted to strengthen our board by inducting leading industrialists. Who better than Nusli Wadia could we choose? He is a friend for the last 30 years,” Oberoi said.

The industry, however, sees the induction of Wadia and others as a move to reinforce the company’s defence against the ominous stake build-up by rival ITC Ltd.

The tobacco major has amassed close to 14 per cent stake in EIH by buying shares from the market. Though ITC maintains that it has no intention to destabilise the existing EIH management, the Oberois are disturbed.

“The coming of Wadia and Raheja into the picture will change the complexion of the chequered game being played between Virginia House and the Oberois. To say the least, it reveals the support enjoyed by the Oberois among the leading industrialists of the country,” an analyst said.

Besides expanding the board, EIH finalised its 2001-02 numbers today. It reported a 62.5 per cent drop in its net profit, and an 18 per cent fall in income. On a turnover of Rs 427.33 crore, the net profit stands at Rs 35.57 crore. Despite the disappointing performance, the company will pay a dividend of Rs 6 per share — well above earning per share (EPS) of Rs 4.87.

Oberoi said: “The year was bad for the entire industry, and I do not see our performance improving much unless the travel advisories issued by the western countries are withdrawn.”

   

 
 
HPL WANTS MORE TIME TO SERVICE DEBT 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 27: 
The management of Haldia Petrochemicals Limited (HPL) has decided to seek more time to pay interest to banks and financial institutions (FIs) meeting on Friday for a quarterly review.

Loans to Haldia Petro, which has to fork out Rs 120 crore in interest every quarter, will turn substandard if they are not serviced by June 30. Banks and FIs have lent Rs 4,200 crore to the company, which has an equity base of Rs 5,170-crore.

Senior officials said HPL is not in a position to cough up such a huge amount at this stage. “If the interest is paid, it will become difficult for the company to continue operations next month,” they added.

HPL’s official spokesperson said more time has been sought to pay the interest, and hoped FIs led by Industrial Development Bank of India would offer a breather.

“We want to restructure the debt. But the promoters have not made up their minds on the company’s shareholding pattern and infusion of equity,” officials of IDBI told The Telegraph from Mumbai. They refused to say whether HPL’s plea for more time to pay interest will be accepted at Friday’s meeting, saying the outcome will be known after the quarterly review.

The debt restructuring of HPL, which wants its debts rescheduled and interest waived by at least two to three per cent, has been hanging fire for some time now. The company needs fresh equity infusion for its survival, but officials say it is not clear when money will come in.

The Haldia Petro brass is hoping that since it is the first quarter of the current financial year, banks and FIs might agree to give the company more time to pay interest.

“After all, no FI or bank would want to downgrade its assets to non-performing ones,” the officials said.

Lenders are also keen to convert their loans into equity, an issue expected to be discussed at Friday’s meeting.

Even as the financial crisis deepens, the Chatterjee Group and the West Bengal government have not spelt out what they will do to resuscitate Bengal’s showpiece venture.

“Negotiations with Indian Oil Corporation are on. Chatterjee is also working on ways to improve HPL’s finances. Something will emerge soon,” officials of the state commerce and industry department said.

   

 
 
GOVT CARVES UP TOP SLOT IN TELECOM CONSULTANTS 
 
 
FROM M RAJENDRAN
 
New Delhi, June 27: 
The government has decided to split the post of chairman and managing director of the Rs 350-crore Telecommunications Consultants of India Ltd (TCIL), the second PSU under the telecom ministry where such a step has been taken.

Earlier, the post of CMD in Bharat Sanchar Nigam Ltd (BSNL) was also split. BSNL is one of the largest public sector telecom companies with a net worth of Rs 60,000 crore. The decision to split the responsibilities and offer the chairman’s posts, possibly to a political appointee, is being viewed within the state-owned company with concern.

TCIL’s current CMD A. S Bansal is retiring tomorrow and will be retained as vice-chairman (for which a new post is being created). Govind Das Gahia is likely to be the new managing director, while the post of chairman will be filled up at a later stage, sources in communications ministry said. Gahia, currently director (technical) at Mahanagar Telephone Nigam Ltd, was also in the race for the post of CMD of the company, which is now headed by Narender Sharma.

“The bifurcation of the post is aimed at decentralising the powers and improving administrative operations. The MD will have the power to take decision on day-to-day affairs, while the chairman will look after the overall functioning of the company. We have not yet decided on the post of vice-chairman but if we decide to have one, it will be more of a advisory in nature without any powers,” said a senior communications ministry official.

TCIL was set up in 1978 and undertakes projects in all fields of telecommunications in India and abroad. The company has its core competence in network projects, software support, switching and transmission systems, cellular services, rural telecommunications and optical fibre based backbone network.

   

 
 
UTI PRUNES EQUITY PORTFOLIO IN OFF-MARKET DEALS 
 
 
BY ANIEK PAUL
 
Calcutta, June 27: 
Promoters beware. Mutual fund giant Unit Trust of India has started selling investments in shares through negotiated deals to “strategic investors”. And, having tasted blood, it now intends to do so on a grand scale.

Unit Trust’s effort to sell its 11.5 per cent stake in ITC is not a one-off case, but just a case in point. Unit Trust may soon invite bids—formally or through informal feelers—for significant holdings in a host of other firms. The move may well lead to change in management of a large number of companies.

Unit Trust’s executive director B. S. Pandit said: “We have sold some shares from the schemes maturing over the next couple of months through negotiated deals, but in small volumes. It appears we got a better deal this way than selling in the market. We are now trying to work out deals to sell shares in much bigger volumes. When selling shares through off-market deals, we will not consider the intention of the buyer. Whoever pays the best price, takes all.”

The market being depressed and valuations of most stocks looking attractive, Unit Trust is inundated with offers from strategic investors, other mutual funds and financial institutions for shares of different companies.

Though the mutual fund major has so far restricted its sales to schemes maturing in the near future, later, it plans to sell its entire holding in a company en bloc, drawing shares from all schemes that hold them.

The biggest beneficiary of such deals is likely to be US-64, Unit Trust’s flagship scheme, which is overweight on equities.

Though Unit Trust officials refuse to name the investors or the stocks sold through negotiated deals so far, brokers say the buyers were primarily state-owned insurance companies and mutual funds.

The move to sell large holdings through negotiated deals is in line with the recommendations of the committee headed by HDFC chairman Deepak Parekh which had been formed in 1998 to consider measures for reviving US-64.

The committee had said Unit Trust should try to involve even the state-owned insurance companies and banks in such deals. Top-level Unit Trust officials had discussed the idea with the insurance companies and banks in the past, but nothing concrete emerged out of the meetings.

Asked whether fresh talks with the insurance companies and banks had taken place, Pandit said: “We would prefer not to reveal our strategy now and answer the question through action.”

Though the sale of large holdings through off-market negotiations can potentially destabilise the existing management of a large number of companies, brokers feel it would benefit the market.

“Unit Trust’s unabated selling in the open market is a drag on stock prices. It has a lot more to sell, and unless it manages to find buyers for its holdings at negotiated prices, the markets will tank. An arrangement to sell at a pre-determined price not only benefits Unit Trust, it also helps investors eyeing big stakes. Buying it from the market could be more expensive than paying a small premium to Unit Trust for the shares,” an analyst said.

Unit Trust adopted the same route to offload investments in illiquid debt instruments. In the recent past, it has sold unlisted or thinly traded corporate bonds and debentures worth hundreds of crores to banks and financial institutions to meet the redemption needs of schemes that are maturing shortly.

   

 
 
INDIAN OIL, ESSAR MAY SHARE FACILITIES 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, June 27: 
Essar Oil Ltd (EOL) is in talks with the public sector Indian Oil Corporation to share storage capacities in order to cater to its own retail outlets. The company is also exploring the potential of taking storage capacities from other public sector oil companies. The company, which is setting up a retail network in the country to market petro products, had earlier decided not to invest, at least in the short and medium term, in putting up storage capacities which need heavy investment.

“We are in discussions with a number of companies for sharing their existing infrastructure. Since the storage capacity in the country is already very high, there is no need to invest in further facility creation,” they added.

The Ruia group company, however, is drawing up a detailed investment plan to set up 1,700 retail outlets in the country over a period of next four years.

“But we are certainly investing in setting up our own refinery and retail network in order to take on the domestic competition,” they said adding, “we are setting up retail outlets across the country for our products and 250 such outlets should be ready this year itself.”

Essar Oil is currently implementing a 10.5-million tonne refinery project at Vadinar in Gujarat. The refinery has achieved full financial closure, and, based on the commitment the company has obtained from its contractors, the refinery is expected to be commissioned by mid-2003, they said. However, EOL is also in talks with other public sector refineries as well as Reliance, for sourcing refined products.

“The refineries have surplus capacities so far as high speed diesel is concerned. We are hopeful of getting the product at a right price and in required quantity,” sources added.

Essar Oil submitted a detailed marketing plan to the government in April and plans to market a little over five million tonnes of petroleum products over the next two years.

Besides talking to domestic refineries, EOL also plans imports to bridge the gap, if any, between demand and supply, sources said. They however refused to divulge the names of companies EOL is talking to.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.85	HK $1	Rs.  6.20*
UK Ł1	Rs. 74.13	SW Fr 1	Rs. 32.35*
Euro	Rs. 48.00	Sing $1	Rs. 27.30*
Yen 100	Rs. 40.73	Aus $1	Rs. 27.25*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5430	Gold Std (10 gm)Rs. 5300
Gold 22 carat	Rs. 5125	Gold 22 carat	  NA
Silver bar (Kg)	Rs. 8250	Silver (Kg)	Rs. 8265
Silver portion	Rs. 8350	Silver portion	  NA

Stock Indices

Sensex		3217.15		+36.26
BSE-100		1638.81		+13.84
S&P CNX Nifty	1048.55		+ 4.35
Calcutta	 116.29		+ 0.51
Skindia GDR	 496.55		-11.00
   
 

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