Probe ordered into Xerox payoffs
Modis rush to control damage
Open house for FIIs in Infy
Tata Engineering to quit eight bourses
GIC ready to usher in new chief
Bharti focus on basic services
Stake boost for Dunlop promoters
Indian Oil puts off Paradeep refinery
Doles for pvt power distributors mooted
Foreign Exchange, Bullion, Stock Indices

 
 
PROBE ORDERED INTO XEROX PAYOFFS 
 
 
FROM JAYANTA ROY CHOWDHURY AND ANIEK PAUL
 
New Delhi/Calcutta, July 3: 
The government today ordered a probe into the Xerox bribery scandal even as the beleaguered office equipment giant said the amount involved could be much higher than the $ 7,00,000 (Rs 3 crore) it had indicated to the US regulators in its mandatory filing.

The department of company affairs has already decided that it will be investigating the issue and inspecting books of accounts maintained by the Indian arm under a little-used provision in Company Law. “We have ordered inspection of accounts to ascertain the facts as reported by the company itself,” company affairs secretary Vinod Dhall said.

The BJP party, which itself may be hit by the scandal, also tried to firefight by fielding its party spokesman and former law minister Arun Jaitley who told newsmen, “If what has been stated by Xerox is true, it is a serious violation of Indian laws — anti-graft and Company — and requires an investigation.”

Top government officials said once definitive information is received either from inspections carried out in India or from Xerox, individual cases would be handed over to the Central Vigilance Commission wherever it involved any central government employee.

The Xerox scandal is likely to hit not only central government departments which purchased office equipment, but also state governments and state-run companies.

The Central Bureau of Investigation also said it may take up a probe suo motu. Both the Central Vigilance Commission (CVC) and CBI have powers to suo-motu take up charges of corruption against civil servants, which is punishable by rigorous imprisonment and tough fines under Indian penal laws. Finance ministry officials said the investigating agency would in any case be formally requested after CVC decided it needed to proceed under criminal law.

Xerox has reported to US’ Securities and Exchange Commission, that its Indian subsidiary Modi Xerox paid bribes totalling at least $ 7,00,000 (or about Rs 3.5 crore) in 2000 itself. Meanwhile, Xerox Corp’s spokesman Paul Arrowsmith told The Telegraph over the phone from London that bribery was a “long standing practice” at its Indian outfit until Xerox Corp put a stop to it two years ago when it took control of Xerox Modicorp. He added that Xerox Corp did not have “a complete understanding of the amount that its subsidiary in India spent” to push sales to government offices.

The “detailed investigation” that was concluded in May, could not ascertain when the practice of bribing government officials started or the amount spent on such “improper payments” over the years.

Xerox reported to the SEC that its Indian subsidiary had made “improper payments” of $ 6,00,000-$ 7,00,000 to government officials in 2000. It also told the Indian government about the practice.

Asked whether Xerox held the Modis responsible for the payments, Arrowsmith said: “We gained management control in August 1999. The officers responsible for the payments are no longer with the company.” He refused comment on whether Xerox’s sales to government offices suffered after it stopped bribing government officials.

In Delhi, officials said if Xerox was able to give year-wise details for over a decade it could well open a Pandora’s Box that could spark investigations against a generation of civil servants and almost all state and central governments and leaders of most political parties who were running these governments during this period.

   

 
 
MODIS RUSH TO CONTROL DAMAGE 
 
 
FROM RAJA GHOSHAL
 
New Delhi, July 3: 
The Modis have embarked on a damage-limitation exercise to deal with the crisis arising from the embarassing admission by Xerox Corp of the US that its local subsidiary—Xerox Modicorp—had paid bribes of up to $ 700,000 (Rs 3 crore) to secure government contracts but that the practice had been stopped two years ago.

The Modis stonewalled all queries today regarding the startling admission made by Xerox Corp in its annual filing with the Securities and Exchange Commission (SEC) last week. Top officials of the company went into huddles right through the day to study the ramifications of the damaging admissions made by Xerox of the US and its fallout on the company as well as the Modi group.

The Xerox admission has driven a further wedge between Xerox Corp and SpiceCorp (formerly Modicorp), B.K. Modi’s holding company. “They are trying to lay the blame at our door in order to come clean,” the SpiceCorp spokesperson said here today.

By saying that they stopped the practice two years ago, Xerox Corp was insinuating that Xerox India’s operations were riddled by shenanigans when B.K. Modi was running the show. B.K. Modi is away in the US and was unavailable for comment.

Xerox Corp raised its stake to 68 per cent in Xerox Modicorp—which was formed after a merger of Modi Xerox, Modi Xerox Financial Services and MX Software—in 1999. The relations between Xerox Corp, which posted Pierre Northard as managing director of Xerox India in 1999, and the Modis have been fractious ever since.

Modi insiders wondered why Xerox Corp was making the admission now when it could have done this two years ago.

The spokesperson for Xerox Modicorp said that only Paul Arrowsmith, Xerox’s spokesman for Middle East, India, Eurasia, Russia and Africa was entitled to make any comment. “Paul, who had come to India for a while, has since gone back to the UK,” the spokesperson said.

She refused to give any figures pertaining to the government departments with which the company had been doing business over the last four to five years. “We have been doing business with both central and state governments for years,” she added. No data was forthcoming from the company on whether these businesses had dipped after the alleged bribing was stopped at the instance of Xerox.

Last week, Stamford, Connecticut-based Xerox Corp revealed a $ 2-billion revenue gap in its books because of improperly recorded revenues over a five-year period from 1997 to 2001. Xerox Corp has been under investigation by the SEC for improper accounting estimated at $ 1.5 billion over a four-year period from 1997. It was fined by SEC at that time and now faces penalties once again.

Crisil watch

In the wake of Xerox Corp’s admission of having made improper payments to government officials in India, credit rating agency Crisil has put Xerox Modicorp Ltd’s Rs 100-crore commercial paper programme, Rs 13.5-crore and Rs 20-crore non-convertible debenture programmes under ‘rating watch with developing implications’.

Crisil is closely watching the developments between the parent and its Indian subsidiary and would take a final view on the ratings in due course, a Crisil release said.

   

 
 
OPEN HOUSE FOR FIIS IN INFY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 3: 
The Reserve Bank of India (RBI) today permitted foreign institutional investors (FIIs) to buy up to 100 per cent of Infosys Technologies’ equity.

However, a foreign fund cannot hold more than 10 per cent. The increase in overseas holding was cleared by shareholders of the Bangalore-based company recently.

The announcement came after the close of session on Bombay Stock Exchange (BSE), where the stock racked up handsome gains on the back of buying by foreign institutions and speculators.

The scrip closed Rs 113.20 higher at Rs 3382.05. That gain spilled over to second-rung infotech service companies, including Digital Global, SSI, Polaris Software and Mastek Computers.

The buying in software stocks, coupled with other old-economy companies, led to the benchmark BSE index finishing with a gain of over 25 points at 3310.19 compared with its previous close of 3285.04.

The 30-share index had opened marginally lower at 3283.03 and had oscillated in a narrow range of 3314.23 and 3279.83.

Market watchers said the buying on bourses comes weeks before Corporate India take the wraps off first-quarter numbers.

Notwithstanding the tough conditions in which the software industry finds itself, their first set of figures are expected to be better than the prognosis.

“Developments in recent times, such as tensions on the border and the recession that has gripped the industry, have brought down valuations of this sector. Therefore, most infotech stocks are showing good improvement since they have extremely attractive valuations,” said Tejas Barfiwala, an analyst at Khandwala Securities.

Announcing its annual results for the year ended March 31, Infosys had said income from software development services and products for the current financial year would be between Rs 3,085-3,170 crore.

It added that income for the first quarter ended June 30, 2002 of the current financial year is likely to be in the region of Rs 684 crore to Rs 694 crore.

Wipro, on the other hand, has forecast a 2.2 per cent increase in revenues at $ 123 million from $ 120.3 million last quarter.

   

 
 
TATA ENGINEERING TO QUIT EIGHT BOURSES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 3: 
Tata Engineering has drawn up plans to delist its shares from eight regional stock bourses, saying benefits to the company and its investors fall far short of the listing fees paid every year.

Bourses from where the company’s shares will be “voluntary delisted” are the Ahmedabad, Bangalore, Chennai, Kochi, Hyderabad, Indore, Kanpur and Pune exchanges.

Telco’s decision is in line with the trend of firms — especially those with smaller equity capital — pulling out of small bourses. Some, like Sun Pharmaceuticals, have even offered to buy back shares from investors in cities and towns where it does not want to have its shares traded. What sets Telco apart is that it is the only firm of its size to have opted for delisting.

There are several analysts who feel that the wave of delisting sounds the death-knell for several bourses across the country, and prompts bigger exchanges to scramble for business by offering carrots to companies.

In addition to the National Stock Exchange, Telco’s stock will continue to be traded on BSE, CSE and DSE.

The company has said it believes the proposed delisting of shares from eight small exchanges will not affect investors, including those who live in areas close to bourses where its stock will not be traded. This is because of the wide and extensive network of Bombay and National stock exchanges, the access to online trading in the company’s securities across the country.

Stock exchanges fix the listing fees unilaterally — except for permission from Sebi — and some levy very high charges on companies that wish to have their shares traded. In spite of this, the trading volumes of the company’s securities on eight stock exchanges have shrunk.

According to Telco, the combined trading volume of its stock on the eight exchanges from where it plans to pull out accounted for a measly 3.16 per cent and 0.01 per cent for the financial years 2000-01 and 2001-02 respectively. In sharp contrast, it paid them 56 per cent and 51 per cent respectively of the listing fee to 13 bourses.

Telco intends to seek shareholders’ approval by moving a special resolution for delisting of shares from the eight exchanges. In the past, Telco had won approval for voluntary delisting of its shares from five bourses — these were Kochi, Hyderabad, Indore, Kanpur and Ludhiana.

Its rights warrants and the non-convertible debentures will continue to be listed in all 13 stock exchanges.

   

 
 
GIC READY TO USHER IN NEW CHIEF 
 
 
FROM GARIMA SINGH
 
New Delhi, July 3: 
General Insurance Corporation (GIC), the national re-insurer, is all set to get a new chairman.

P.C Ghosh, who is currently managing director of GIC, is the front-runner for the post. Ghosh and V. Jagannathan, chairman-cum-managing director of United India Insurance, are the two who have been shortlisted for the top slot. Although V. Ramanujam is also a managing director of GIC, he is not being considered for the job.

A search for the chairman’s post had to be conducted as the last incumbent, D. Sengupta, retired a week back.

Sources said the file for the appointment of the chairman has been sent to the home ministry for vetting. It will then be sent to the Prime Minister’s Office and move on to the Appointment Committee of Cabinet for final approval.

The selection panel included Purakayastha, additional secretary, banking and insurance division-ministry of finance and C.M Vasudev, secretary-economic affairs.

   

 
 
BHARTI FOCUS ON BASIC SERVICES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 3: 
Bharti Telenet Ltd, the private fixed-line telephone service provider, has decided to invest Rs 1,500 crore in the current financial year to expand its operations in the six circles where it offers basic services.

The company offers its services under the brand name “TouchTel”. It will invest Rs 580 crore in Madhya Pradesh and Rs 1,000 crore in Haryana, Delhi, Tamil Nadu and Karnataka. It is also evaluating new technologies to offer mobility to its customers, but its executives declined to comment on the use of code division multiple access (CDMA) technology for limited mobility.

It registered 200,000 subscribers across six states, covering 35 cities with 7,000 kms of optical fibre and 4,300 kms of copper network.

Bharti Tele-Ventures Ltd launched its commercial operations in four of its six circles, namely, Haryana, Delhi, Tamil Nadu and Karnataka in the last six months only, apart from Madhya Pradesh and Chattisgarh, where its fixed-line services have been on since June 1998. About 35,000 subscribers were added from the new circles during the last six months — 15,000 in Haryana, 10,000 in Delhi, and 9,000 in Tamil Nadu and the rest from Karnataka.

TouchTel has put together a bouquet of value-added services and phone-plus services — all of which have been incorporated through strategic tie-ups with some of the leading vendors and can be availed by dialling short four-digit codes.

   

 
 
STAKE BOOST FOR DUNLOP PROMOTERS 
 
 
BY A STAFF REPORTER
 
Calcutta, July 3: 
Dunlop India (DIL) will issue 2.60 crore equity shares to its promoters, in tune with a March 7 directive issued by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). The allotment will raise the promoters holding to 74 per cent. DIL has informed the Bombay Stock Exchange (BSE) that a meeting of the board will be held on July 13 to allot fully paid-up equity shares of Rs 10 each at par, aggregating Rs 26 crore.

The promoters had brought in Rs 26 crore to start holding operations at the company’s factories at Sahagunj in West Bengal and Ambattur in Tamil Nadu in early 2000. On March 7, AAIFR had directed the management of the ailing tyre-maker to issue shares on a par to the promoters. It had also said an equal number of shares should be allotted to the firm’s lenders—converting Rs 26 crore worth of their debt into equity on a pro-rata basis.

“Dunlop is doing this in conformity with the AAIFR order. This will substantially increase the stake of the promoters in the company,” a spokesperson of India Infomedia, DIL’s media consultant, said.

The Chhabrias held a 39 per cent stake in the company’s Rs 18.90 crore paid-up equity. Officials said shares worth Rs 26 crore will be issued to bankers and debenture holders later. The appellate authority ordered that the amount advanced by the promoters be converted into shares. However, there was a debate on the valuation as two valuers arrived at conflicting figures.

   

 
 
INDIAN OIL PUTS OFF PARADEEP REFINERY 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, July 3: 
Indian Oil Corporation (IOC) has decided to put on hold its 9-million tonne Paradeep refinery project, which entailed an investment of over Rs 8,300 crore.

Sources said the narrowing of gap between the demand and supply of petro products in the country has prompted the company not to pursue the project until the situation looks up.

“The country’s refining capacity stands at 114 million tonnes, while total consumption of petroleum products was barely 100 million tonnes. In this situation, there is hardly room for a new refinery,” sources said.

At the same time, refining margins have plunged in the wake of rising international prices of crude oil. “Now the more we produce, the more we lose,” they said.

Paradeep refinery was one of the most ambitious projects that the country’s largest oil company ever embarked on. Until last year, former IOC chairman M. A. Pathan sounded optimistic about it, saying the company would go alone with the project even if it did not get a partner. IOC had a long discussion with Aramco of Saudi Arabia, which had initially shown interest.

Sources said the current growth pattern in the oil industry could hardly provide an impetus to new projects.

However, IOC is weighing options on laying a crude oil pipeline that will link Paradeep to Haldia in West Bengal. Sources said the move seems to have been taken to transport crude from Paradeep port to Haldia.

Indian Oil is also considering a floating storage terminal at the Sandheads near Haldia to import crude and feed its refinery there.

At present, IOC owns seven of the country’s 17 refineries, which have an annual capacity of 38 million tonnes.

Sources said Indian Oil’s refineries produced only 80 per cent of its capacity last year. This year too, they said, the processing quantity would remain around that level.

Paradeep is not the only project to have been put off. The company is dithering on making investments in the brownfield expansion of Koyeli and Panipat refineries too.

The Fortune 500 company planned to double the capacity of its Panipat refinery and carry out an expansion-cum-upgradation of Koyeli. Panipat would require over Rs 3,370 crore, while retooling Koyeli would cost Rs 3,000 crore.

“It is not difficult to embark on an expansion project, but the decision has to match the current demand-supply scenario. We don’t want to create fresh capacity when there is no growth in demand,” a senior official of the public sector oil major said.

   

 
 
DOLES FOR PVT POWER DISTRIBUTORS MOOTED 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 3: 
The Deepak Parekh committee set up by the power ministry to look into distribution reforms has suggested that private distribution companies should be provided financial assistance under Accelerated Power Development Reform Programme (APDRP).

The report, which echoes many provisions of the Electricity Bill, 2001 introduced in the Lok Sabha, favours privatisation as a way to push forward reforms.

According to the panel, funds from APDRP should go to companies in tune with rules laid down for government support to private entities. The money can be routed via the state government through a tripartite agreement between the Centre, the respective state government and the private distributor.

Prominent members on the panel, apart from Parekh himself, are K. V. Kamath, CMD of ICICI, R. Gopalkrishnan, director and CEO of Tata Sons, Harish Salve, solicitor general of India and G. D. Gautama, chairman of West Bengal State Electricity Board and others.

The committee, suggesting ways in which funds under the programme can be better used, says the government should first commit the amount of money to be provided in future, and transfer it into a non-lapsable APDRP fund, which should be managed by an independent entity.

This year’s budget rechristened APDP as ARDRP and enhanced the allocation to Rs 3,500 crore, provided states getting the money promise to carry out reforms. The main aim of these changes should be to remove over a period of time the gap between unit cost of supply and revenue realisation.

Transmission and distribution losses — the villain of the piece in the country’s bleak power sector — for state power boards have been pegged at a whopping Rs 26,000 crore every year. “The success of power reforms rests on reduction of transmission and distribution losses,” Gautama said.

The committee has suggested that there should be two streams of support under the APDRP — one for investment and the other in the form of an incentive, which will be tied to narrowing the gap between cost and revenue.

It has been proposed that 50 per cent of the first year’s allocation under APDRP — close to Rs 1,750 crore — should be made available as investment support. An equal sum under the incentive category should be disbursed as one-for-one matching grant, based on reduction of the gap between unit cost of supply and revenue realisation of an enterprise — defined as a corporate body, an electricity board or a department.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.80		HK $1	Rs.  6.20*
UK £1	Rs. 74.57		SW Fr 1	Rs. 32.35*
Euro	Rs. 47.96		Sing $1	Rs. 27.20*
Yen 100	Rs. 40.67		Aus $1	Rs. 27.10*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 5310		Gold Std(10 gm)	Rs. 5185
Gold 22 carat	Rs. 5015		Gold 22 carat	NA
Silver bar (Kg)	Rs. 8325		Silver (Kg)	Rs. 8305
Silver portion	Rs. 8425		Silver portion	NA

Stock Indices

Sensex		3310.19		+ 25.15
BSE-100		1672.41		+  4.46
S&P CNX Nifty	1069.90		+  1.85
Calcutta		 118.16		-  0.45
Skindia GDR	 501.41		-  1.76
   
 

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