VSNL besieged on bourses
Picture to be clearer by mid-July
I-flex falters on BSE debut
Hughes Tele hammered
Bata gets go-ahead for share buyback
Khaitans to sell half of WPIL stake to Agarwals
Tea estates valued at Rs 816 crore
Farm sector helps to push up growth
DCA books 10 phantom companies in north
Foreign Exchange, Bullion, Stock Indices

 
 
VSNL BESIEGED ON BOURSES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 28: 
The Videsh Sanchar Nigam (VSNL) share was savaged by investors spooked by the prospect of the company being stung by WorldCom’s can of worms.

One of the top five losers in an otherwise positive session on Dalal Street, the stock closed at Rs 147.40, down Rs 11.80 or 7.4 per cent, from Thursday’s Rs 159.20.

Reassurances from the company that it was in touch with its US-based lawyers and WorldCom, the second largest American long distance service telephone operator facing a federal investigation, to ascertain the outstanding amount to be settled between the two sides were not enough to calm jangled nerves.

“We are collating information on how much traffic WorldCom carries from VSNL,” the company wrote to the BSE. The company said it was possible the troubled US telecom giant owed it money, but said things would become clear over the next couple of days.

“We do not deny the possibility of the US-based telecom company, which is likely to file for bankruptcy, owing money to a Tata group company,” the sources said.

WorldCom faces financial ruin and federal probes that could lead to a criminal indictment for overstating profits of almost $ 4 billion in the past few years. “The WorldCom vice-president has assured us of cordial and professional relationship and he believes that the firm will come out of its current crisis,” VSNL said.

VSNL, a state-owned international telecom carrier until it was snapped up by the Tatas months back, faces a payment default, possibly Rs 500 crore, from WorldCom, which confessed on Tuesday it padded profits. Analysts, however, are of the opinion that while VSNL will take it on its chin, the impact of a default by WorldCom would probably be limited. The outstanding bills would be far less than otherwise imagined.

“We have never liked the VSNL story and thus never recommended it to our clients,” Hrishi Modi, senior investment analyst, ASKRJ Investment Management, told The Telegraph. “The impending competition from other players in ILD will see an erosion in the topline and bottomline of the company,” he added.

MCI-Worldcom is the second largest originator of calls and there are concerns that others around the world would be affected by its possible bankruptcy.

There is also talk that VSNL recently received Rs 150 crore from WorldCom. As things stand now, the company will continue to allow incoming calls made from the network of WorldCom. This means, however, that the outstanding amount could swell further.

Sensex gains

Even as VSNL faced the heat, cement stocks led a smart rally in cyclicals to lift the BSE sensex by 28 points. Punters and foreign institutional investors (FIIs) stepped into to pick up shares at attractive valuations.

The 30-share index opened at 3231.24, gradually moved up in range-bound trading to its intra-day high of 3252.65 before ending at 3244.70 against Thursday’s close of 3217.15.

   

 
 
PICTURE TO BE CLEARER BY MID-JULY 
 
 
FROM M RAJENDRAN
 
New Delhi, June 28: 
Videsh Sanchar Nigam Ltd could find itself trapped in a financial bind in the middle of next month when Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd, the two state-owned telephony giants, press for settlement of their dues arising from overseas calls routed over the Worldcom network.

On Wednesday, WorldCom of the US admitted a $ 3.8 billion accounting fraud, the largest in US corporate history, which could precipitate a bankruptcy filing under Chapter 11 to shield itself from harried creditors.

VSNL officials said Worldcom owed VSNL about Rs 200-250 crore, and there could be problems with immediate recovery of the dues if it files for bankruptcy. “I cannot comment. We are still in negotiations and we are discussing with officials of WorldCom,” said VSNL managing director S.K. Gupta.

VSNL’s overseas call revenue hinges on the back-to-back arrangements it has with WorldCom and the others in the US and BSNL and MTNL in India.

BSNL and MTNL together account for more than 85 per cent of the total international call traffic routed through VSNL. “We pay revenues and get our payments from VSNL under the revenue-sharing arrangement. VSNL is responsible for making the payments to us for the calls that we carry over our networks and not WorldCom or AT&T.”

Now that VSNL has gone out of the state umbrella after the government sold its strategic stake in the telephony giant to the Tatas, it is unlikely that BSNL or MTNL will make any special allowances for VSNL that would have enabled it to defer payments.

VSNL under the Tatas recently reached an uneasy truce with the government, and most importantly communications minister Pramod Mahajan, over its controversial proposal to invest Rs 1,200 crore in Tata Teleservices, the basic telephony operator that has expansionist designs.

At the height of the raging controversy in May, Mahajan had ordered that the VSNL board rescind its investment proposal which the Tatas had resisted.

Mahajan, who has been upset over the whole issue, could now refuse to agree on deferred payments to BSNL and VSNL. In fact, VSNL has already run up dues of Rs 700 crore to BSNL and Mahajan has been pressing for payment.

“We have been told that the payments due to us would be made as per schedule and we will pay whatever is due from us to them,” said a senior official in the financial department of BSNL.

Under the revenue-sharing agreement, VSNL pays the two state-owned telephony giants a charge per minute which is equivalent to the incoming settlement rate—roughly Rs 20 per minute at present—minus Rs 10 on all incoming international calls. A similar charge is payable by MTNL or BSNL to VSNL when its subscriber makes an overseas call, which is calculated on the basis of the weighted average outgoing settlement rate.

   

 
 
I-FLEX FALTERS ON BSE DEBUT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 28: 
It roared in the IPO, but ended with a whimper on debut. I-flex Solutions, the Citigroup-affiliated information technology firm that drew swarms of investors when it floated shares weeks back, was left squirming as its stock closed at a discount of 6 per cent to its strike price on the BSE today.

Amid volatility of the kind not seen in a scrip in recent months, I-flex see-sawed from Rs 549 to Rs 560 to Rs 490.05 — its intra-day trough. It did claw back, however, closing at Rs 499.45, but was still a far cry from its strike price of Rs 530, fixed earlier this month. The stock, number three on the list of most briskly traded shares in B1 group of the BSE, saw 8,768 deals with 4.13 lakh shares, yielding a turnover of Rs 21.23 crore. Citigroup has an equity stake of more than 40 per cent in the company, which churns out software meant for the financial services sector. Its initial public offering was the largest by a domestic technology company in two years. It had revenues of Rs 415 crore and a profit of Rs 127 crore during 2001-02. Of the total turnover, products contributed a larger fraction.

The IPO, which many saw as a gauge to measure a primary market revival in bleak times, got more than 2.72 times the money it targeted. The offer size reserved for institutions was over-subscribed 2.69 times as the total demand for shares stood at 64.01 lakh.

In the retail category, the response was 2.68 times the amount that was expected to be raised. In all, 11,000 applications, for 26.59 lakh shares, were received; for non-institutions, the over-subscription was 2.92 times. Given that it was a book-building issue, 60 per cent of the shares on offer went to institutions on a discretionary basis, 15 per cent meant for proportionate allotment was given to high net-worth individuals, while 25 per cent was slotted for retail investors.

   

 
 
HUGHES TELE HAMMERED 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June, 28: 
The Hughes Tele.com (HTIL) scrip was pounded on disappointment over the open offer price of Rs 7.20 announced by the Tatas on Thursday.

The scrip ended sharply lower at Rs 6.70 after opening at Rs 7. Market players said the stock slid into the negative territory minutes after trading began, and it did not have a chance to recover during the session. The close marks a decline of over 7.50 per cent from its previous finish of Rs 7.25.

The Tatas had announced during the acquisition of Hughes Tele.com on Thursday that the open offer price was based on the 26-week average on the BSE and NSE. Close to 55 per cent of Hughes Tele’s Rs 1,405-crore equity capital is owned by Hughes Network Systems, Ispat group and AllTell Corp. The rest is held by a variety of financial investors and the general public.

On the other hand, Tata Teleservices, the Tata firm that acquired 51 per cent in Hughes, has been in basic telecom services in Andhra Pradesh for three years. It signed a licence and inter-connect agreement with the government in November 1997, the year the government opened up basic phone services to private firms.

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

   

 
 
BATA GETS GO-AHEAD FOR SHARE BUYBACK 
 
 
BY A STAFF REPORTER
 
Calcutta, June 28: 
Bata India won shareholders’ approval to buy back its own shares from the market and incorporate an enabling clause in its articles of association. This coincided with a resolve to control costs and boost returns through a panoply of measures.

Addressing the shareholders at the 69th annual general meeting (AGM) here today, chairman A. L. Mudaliar moved an enabling resolution that authorises the board to go ahead with the buyback, though there is no word on the timing.

The chairman said Bata is focusing on product innovation to attract customers. At the same time, several initiatives have been launched to keep a tight lid on costs. These include centralisation of purchasing functions, closer co-ordination of merchandising, product development, planning, manufacturing and distribution.

Optimum utilisation of distribution and transport systems and re-negotiation of terms of carriage, disposal of obsolete machines and introduction of new series of moulds based on market requirement are other steps being taken to achieve significant cost savings.

The company is substituting cash drain stores with new large format ones. “We are adhering to credit terms with a greater emphasis on collections,” Mudaliar said.

A programme to refurbish existing stores and constantly explore new openings has also been put into effect. The company is also re-classifying its retail stores to be able to meet a wide range of customer requirements. To penetrate the market deeper, Bata has adopted a focused advertising strategy and refurbished existing stores. At the top of that table would be international stores and city outlets in key cities stocking the company’s top-of-the-line products and imported brands to cater to the fashion-savvy middle and high-income groups.

Family stores would concentrate on high-volume markets in major towns. On the other hand, bazaar stores in densely populated areas would offer basic and volume brands to price-sensitive customers and feature promotional pricing, the Bata India chairman said.

Industrial relations at the Batanagar factory, Mudaliar said, were conducive to productivity and flexibility.

Units to be hived off

Bata said it would hive off its canvas factory in Faridabad and tannery unit in Mokamehghat, near Patna, to Fashion Shoes and BDCL Enterprises respectively.

“The decision was made purely on a commercial basis. The two units suffered substantial losses and transferring them to other companies will make them viable,” Mudaliar said. A scheme of arrangement, already been approved by the board and the Calcutta High Court, will be placed for approval of shareholders at an extra-ordinary general meeting, in tune with a court order, next week.

   

 
 
KHAITANS TO SELL HALF OF WPIL STAKE TO AGARWALS 
 
 
BY A STAFF REPORTER
 
Calcutta, June 28: 
The Khaitans are divesting half of their stake in WPIL Ltd—formerly known as Worthington Pumps India Ltd—to one Agarwal family, which has interests in casting and foundry businesses.

WPIL, a company founded in 1952, manufacturers, designs and services pumps. Along with the stake, the Khaitans will divest management control of the company. One Prakash Agarwal has already been taken on the board of WPIL as the chief executive officer. The deal with the Agarwals will be finalised within a month.

Chairman of Eveready Industries, Deepak Khaitan, said: “We hold over 90 per cent of WPIL’s equity, part of it through investment companies belonging to the Williamson Magor group, and the rest through associates.

“We will divest half of our holding in WPIL to the Agarwals to make it an equal stake joint venture.” The Khaitans may sell part of their stake, or the Agarwals may infuse fresh capital into the company so that the resultant equity stakes of the two families are equal.

Though Deepak Khaitan said the Williamson Magor group’s holding in WPIL was over 90 per cent, the company’s disclosures to the stock exchanges peg the promoter’s control at 75 per cent. Asked to explain the disparity, Deepak Khaitan said: “We hold 75 per cent of WPIL’s shares directly. The balance is held by our associates.”

The Khaitans have also decided to sell off their holding in Kilburn Engineering. The company is sick and has been referred to the Board for Industrial and Financial Restructuring (BIFR).

The Khaitans, along with Industrial Development Bank of India—the BIFR-appointed operating agency—were scouting for buyers for the engineering firm, but there were no takers, Deepak Khaitan said.

The Khaitans’ are consolidating their diversified operations into two major segments—tea and battery—by selling off or reducing their investments in non-core businesses.

Macneill Bharat Engineering, however, is not being put on the block. Khaitan says it is doing well. The company is a joint venture between the Khaitans and the G.P. Birla group.

The Khaitans have sold off their investments in erstwhile group companies like George Williamson (Assam), which is now controlled by the Magors of Assam, and India Foils.

   

 
 
TEA ESTATES VALUED AT RS 816 CRORE 
 
 
BY A STAFF REPORTER
 
Calcutta, June 28: 
Eveready Industries has evaluated its 28 tea estates at close to Rs 816 crore. The company conducted a re-evaluation of all its tea estates recently, which resulted in an increase of their valuation by Rs 301.32 crore. The company’s tea estates are located in Assam and Dooars. It has already sold off its estates in Darjeeling. Going forward, it is going to sell off the four to five estates in Dooars as well. The company produces 35 million kgs of tea annually.

About 55 per cent of its produce is sold in domestic auctions and 25 per cent exported to around 10 countries. The rest is consumed by Eveready itself for its packet tea business and by a set of traders based in western India.

According to analysts, the valuation of Eveready’s tea estates look “a bit optimistic”, particularly as tea prices are somewhat depressed. Eveready chairman Deepak Khaitan, however, said prices were recovering.

Eveready unveiled its annual results for 2001-02 today. It has posted a net loss of Rs 53.32 crore on a turnover of Rs 883.5 crore. Its turnover in 2001-02 was 7 per cent lower than the previous year, in which it had posted a net profit of Rs 11.86 crore.

Khaitan said the company’s performance is improving, and the results of the first quarter of the current fiscal would be impressive.

   

 
 
FARM SECTOR HELPS TO PUSH UP GROWTH 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 28: 
India has posted a modest growth of 5.4 per cent during 2001-02 against 4 per cent recorded in the previous fiscal, mainly on back of a strong showing by the agriculture, financial and construction sectors.

According to the quick estimates of gross domestic product (GDP) declared by the Central Statistical Organisation (CSO), GDP at constant prices has been calculated at Rs 12,58231 crore over the quick GDP estimates for 2000-01 of Rs 11,93922 crore.

The agriculture sector rose from a negative 0.2 per cent growth in 2000-01 to end 2002 with a 5.7 per cent growth rate.

However, the real jump came in financial and insurance sectors where the growth rate climbed steeply from 2.9 per cent to 7.8 per cent in 2001-02. The construction sector recorded a 3.6 per cent growth in 2001-02 as against 2.9 per cent the previous fiscal.

Even though the September 11 terrorist attacks in the US slowed down trade, hotel, transport and communication, the sector ended with a growth of 6.2 per cent compared with 5.3 per cent growth registered in 2000-01.

However, it is the manufacturing sector that saw the growth rate plunge from a high 6.7 per cent in 2000-01 to mere 2.8 per cent in 2001-02. Growth rates fell in mining and the electricity sectors to 1.8 per cent and 4.6 per cent respectively from against 3.3 per cent and 6.2 per cent in the previous year.

National income, also known as Net National Product (NNP), posted a decent 5.7 per cent growth rate in 2001-02 as against a 3.7 per cent growth rate last fiscal. Per capita income during 2001-02 attained a level of Rs 10,653 crore compared with Rs 10,254 crore in 2000-01.

GDP at current prices grew by 9.1 per cent in 2001-02 compared with 7.9 per cent growth rate in the previous fiscal. At current prices too, agriculture was the main driver ending the year with a handsome growth rate of 9.6 per cent as against a 2.5 per cent growth in 2000-01.

However, growth in the trade and financial sectors at current prices was not substantial as the two sectors ended 2001-02 with a growth rate of 9.4 per cent and 11.6 per cent respectively as against a 9.3 per cent and 7.3 per cent growth recorded in 2000-01.

Growth in the manufacturing sector skidded to 4.7 per cent in 2001-02 over a 12.3 per cent growth rate of last fiscal, while the electricity sector gained 17.6 per cent as against a 10.4 per cent growth in 2000-01.

Mining fell to 7.1 per cent from 10.2 per cent and construction to 7.4 per cent from 10.4 per cent. Community, social and personal services sector remained flat at a 10 per cent growth rate.

Fiscal deficit

The Centre’s fiscal deficit stood at Rs 29,983 crore during the first two months of this fiscal, which is over 22 per cent of the Rs 1,35,524 crore targeted for the entire fiscal.

The fiscal deficit during April-May works out to 1.17 per cent of the GDP as against the targeted 5.3 per cent for the entire 2002-03.

   

 
 
DCA BOOKS 10 PHANTOM COMPANIES IN NORTH 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 28: 
The Department of Company Affairs (DCA) has filed chargesheets against ten fly-by-night (vanishing) companies and their directors and promoters based in Uttar Pradesh and Uttaranchal.

These vanishing companies had mopped up hundreds of crores from the capital market after the Indian economy opened up in the early 90s, a government statement said. Thereafter, they vanished leaving investors in serious trouble.

The first chargesheet was filed on May 29, 2002 in the court of Special Chief Judicial Magistrate (CJM), Agra against Vidiani Agro-tech Industries Ltd of Mathura in Uttar Pradesh, followed by a chargesheet against Rizvi Exports Ltd of Kanpur, on May 2, 2002 in the court of Special CJM.

Chargesheets were filed against Rich Capital and Financial Services Ltd, Swarnima Oil Industries Ltd of Gautam Budh Nagar, Danin Leathers Ltd of Agra, Sidharatha Pharchem Ltd of Moradabad, Shefali Papers Ltd of Saharanpur, Raymed Labs Ltd of Saharanpur, SRP Industries Ltd of Varanasi and Vijayshree Chemicals (India) Ltd of Mathura.

This follows intensive investigations into the affairs of 229 vanishing companies out of which 225 such companies are on the high list of prosecutions.

The DCA has been functioning in close co-ordination with the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) in this regard.

A co-ordination committee with the DCA secretary and the Sebi chairman has been functioning since the securities scam surfaced in the early 90s.

The chargesheets against other vanishing companies and their promoters and directors will be filed as soon as the ongoing investigations are over.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.88	HK $1	Rs.  6.20*
UK £1	Rs. 75.04	SW Fr 1	Rs. 32.35*
Euro	Rs. 48.80	Sing $1	Rs. 27.30*
Yen 100	Rs. 41.25	Aus $1	Rs. 27.25*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5415	Gold Std(10 gm)	Rs. 5300
Gold 22 carat	Rs. 5115	Gold 22 carat	NA
Silver bar (Kg)	Rs. 8250	Silver (Kg)	Rs. 8295
Silver portion	Rs. 8350	Silver portion	NA

Stock Indices

Sensex		3244.70		+ 27.55
BSE-100		1650.34		+ 11.53
S&P CNX Nifty	1057.80		+  9.25
Calcutta	 117.06		+  0.77
Skindia GDR	  NA		    —
   
 

FRONT PAGE / NATIONAL / EDITORIAL / BUSINESS / THE EAST / SPORTS
ABOUT US /FEEDBACK / ARCHIVE 
 
Maintained by Web Development Company