Market route to divestment
Xerox probe zeroes in on key areas
Five more ITDC hotels sold
LIC roots for American pie
Bajoria set for insurance debut
Underdogs claw back on stock exchanges
Exide, Malaysian firm in tieup
Tug of war over Haldia Petro naphtha deal
Cracks in computer sales screen
Foreign Exchange, Bullion, Stock Indices

 
 
MARKET ROUTE TO DIVESTMENT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 5: 
The government is considering the possibility of selling its stake in the existing public sector units (PSU) equity through the open market and has suggested that the financial institutions which were forced to buy the government stock can now enter the secondary market and sell them profitably.

Disinvestment minister Arun Shourie said today, “The market has responded positively to the disinvestment process as the market cap of stocks has gone up from Rs 96,000 crore to Rs 1,66,000 crore during last six months. If all the ministries work together, we can even exceed the disinvestment target of Rs 12,000 crore for 2002-03.”

Shourie said, “My ministry have submitted a series of proposal to the new finance minister Jaswant Singh on how disinvestment target can be exceeded in three or four ways. Although we have achieved success, the momentum has to be kept up and that can only happen if everybody works together.”

Shourie disclosed that the ministry is preparing for a formal presentation regarding the few steps that can enhance the earnings of the government, at the next CCD meeting, if the Prime Minister approves of the move.

“In the next meeting of CCD if Prime Minister agrees we would make a presentation on how targets can be exceeded”, he said adding that the target can be exceeded if certain steps are taken immediately.

He said, “The financial institutions were forced to buy these stocks and institutions like Unit Trust of India have also suffered losses on these investments. Now that the market has become favourable, the banks should look into the secondary markets to offload their holdings in public secor units.”

In recent months UTI have been facing huge cash problem and they have offloaded stakes in Reliance, ITC, Hindustan Lever Limited (HLL), Tisco, Hindalco, Infosys and and SBI to tide over the problem.

The stock markets, however, remained steady throughout the sales and has been able to absorb the sudden tide of government stocks. However, not all the companies were agreeable to the selloffs and ITC proposed other financial institutions to buy out the 13.59 per cent stock that UTI is holding.

Since the start of this year, Shourie has sold more government-run firms than it did in the previous decade. No fewer than 17 companies have handed over to private players.

Asked about reported delays in the disinvestment of Shipping Corporation of India (SCI), he said the disinvestment process was on track but added that one international consortium headed by Malaysia Shipping had opted out of the race. “The shipping industry goes through a cycle involving buying and selling of ships. To hold on to stock can become unprofitable,” he added.

   

 
 
XEROX PROBE ZEROES IN ON KEY AREAS 
 
 
FROM RAJA GHOSHAL
 
New Delhi, July 5: 
Officials of the department of company affairs (DCA) have started focusing on a few key areas where they suspect fraudulent transactions were made by Xerox Modicorp to mask the bribes that were paid to government officers to swing contracts.

Officials from the directorate of inspection and investigation in the DCA have put a pile of Modicorp papers under the scanner. Xerox Modicorp executives will be questioned closely on these suspicious transactions.

The DCA officials suspect that the troubled office equipment giant was resorting to under- and over-invoicing of sale and purchase vouchers and doling out hefty commissions to dealers which were being routed back to create a slush fund from which the bribes were paid out.

DCA sources said they also suspect that expenditure on entertainment and sundry expenses were padded to siphon out cash for the slush fund.

However, sales in the government departments are often routed through procuring agencies like Kendriya Bhandar and National Consumer Cooperative Federation and the supporting evidence from these organisations could provide a cash trail that could identify the real beneficiaries of the bribes.

Officials say Xerox Modicop may have also sold office equipment at DGS&D (directorate general of supplies and disposal) rates, or even at lower prices but these might not have been up-to-the-mark products. These areas may also need investigation, sources said.

Meanwhile, Xerox Corp of the US has appointed Genesis, the Indian public relations firm, to handle its corporate communications.

Genesis PR, which was appointed after Xerox Corp made the damaging admission about bribe payouts in India, has started issuing press statements even as the multinational’s London-based spokesman Paul Arrowsmith stopped fielding questions from reporters in India.

When contacted Arrowsmith said, “The official investigation is now under way and we are confident to let it run its course. Consequently we will not comment further at this stage.”

The US giant has already welcomed the Indian government’s investigations and offered to fully cooperate with the enquiry.

The account executives of Genesis, however, refused to say what brief Xerox Corp had given them.

The spokesperson for Xerox Modicorp, the Indian arm, has said the firm has not appointed any PR firm to handle its affairs.

Meanwhile, ICRA has put a rating watch with negative implications on Xerox Modicorp’s Rs 65 crore medium-term debenture programme which had been assigned a rating of MA+.

   

 
 
FIVE MORE ITDC HOTELS SOLD 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 5: 
The Cabinet Committee on Disinvestment (CCD) today approved the sale of five ITDC hotels, including the Delhi-based Kanishka and Indraprastha Yatri Niwas for over Rs 169 crore.

Kanishka Hotel was bagged by Nehru Place Hotels—the owner of Park Royal in Delhi, promoted by the Eros Group for Rs 95.95 crore against a reserve price of Rs 70.9 crore.

The Indraprastha property went to Moral Trading and Investment Ltd, a Mittal group firm for Rs 45.03 crore against a reserve price of Rs 18.3 crore.

Disinvestment minister Arun Shourie said, “None of the five properties, which were cleared for sale have proper lease-deed documents and in some cases even the gratuity funds to the tune of Rs 5.91 crore has not been deposited. These, together with Rs 24.56 crore VRS compensation, will also have to be deducted from sale proceeds.”

The incomplete Chandigarh project was sold off to the Taj GVK group for Rs 17.27 crore against a reserve price of Rs 14.01 crore. The other two properties which were sold today were Hotel Khajuraho Ashok and Hotel Varanasi Ashok while the bids for Hotel Ranjit were not opened.

Khajuraho Ashok went to Lalit Suri-promoted Bharat Hotels for Rs 2.21 crore against a reserve price of Rs 2 crore. Varanasi Ashok was sold to Ramnath Hotels for a sum of Rs 9.11 crore which is above the reserve price of Rs 5.5 crore.

In the case of Ranjit, the bids were not opened owing to some issues relating to ground rent, and an inter-ministerial group has been formed to resolve the problem.

The committee also approved the transaction document for newsprint company Nepa Ltd, based in Madhya Pradesh, after resolving the issues relating to transfer of forest land, and the stage is now set for invitation of price bids. Nepa was allotted about 1500 acres of forest land by the state government.

   

 
 
LIC ROOTS FOR AMERICAN PIE 
 
 
FROM SATISH JOHN
 
Mumbai, July 5: 
Life Insurance Corporation (LIC) is planning to step into the United States with two policies targeted at the non-resident Indians there. “We are awaiting a nod from the Indian authorities before venturing into US,” managing director and current in-charge, A Ramamurthy, told The Telegraph. Once it comes through, a memorandum of understanding will be signed with Nationwide.

The insurance monolith will initially look at setting up operations in New York and California. “After we establish ourselves in the two cities, which have a significant NRI population, we will look at expanding to New Jersey and Texas,” Ramamurthy said.

There are 1.8 million Indians in the US, most of whom live in the four states where LIC wants to go first. A study has shown the per capita income of the Indians to be the highest in America’s migrant population. LIC will have to canvass for business for a year as a corporate agent for Nationwide before it can enter into a co-branding arrangement with a US insurance major.

LIC will devise two custom-made policies for the NRIs. The first will be a term insurance product that will provide life cover in dollars, in addition to a pension plan for the policy-holder’s dependants in India, in rupees. The scheme has been devised with an eye on the large number of Indian software professionals in US.

The second plan will be a Children’s policy. Ramamurthy said NRIs prefer to educate their children in top Indian institutes like IIMs and IITs. To facilitate this, the corporation is working on a scheme that would provide successive annual installments after a stipulated period to the policy-holder’s child in rupees.

For LIC, picking Nationwide as its partner for the US venture was not difficult because it gave an undertaking that it will not enter India for business.

Nationwide Mutual Insurance Company, along with its subsidiaries and affiliates (collectively referred to as Nationwide), is one of the largest insurance and financial services company in the world, with more than $ 113 billion in statutory assets.

   

 
 
BAJORIA SET FOR INSURANCE DEBUT 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 5: 
The Calcutta-based S. K. Bajoria group plans to launch a joint venture with French insurance service company Coris that will offer health and motor assistance services on an Asia-wide scale.

Coris already sells these products in the rest of the world to insurance, banking and credit card companies who can then on-sell this service as insurance policies or as value-added benefits to their existing clients.

The 50:50 joint venture may also sell these products to other groups like motoring clubs directly. These services form the core of the health and motor insurance policies sold by most insurance companies.

Fernando Echevarria, president of Coris International, said: “The plan has just been drawn up and finer details of how much equity will be put in will be worked out.” The new office will be based in Calcutta, he said.

Bajoria explained that the move to tie up with Coris stemmed from his group’s plans to expand further into the insurance services sector. Coris and Bajoria have also tied up to take over the business of providing medical assistance on a global basis to all foreign travel medical policy holders of the four nationalised insurance companies.

This business, which is worth about $ 25 million currently, was earlier being handled by Mercury, a London-based company. Echevarria estimates this could easily go up to $ 200 million in a few year’s time.

While assistance to travellers to Europe and Africa will be arranged out of Coris’s offices in Paris, in the UK it will be handled by Coris offices near London and assistance in Asia by Bajoria-run Hertitage Health Sertvices’ offices in India.

In case of language problems of the Indian policy holders, calls seeking assistance will be switched over to the Indian office which will handle them and then explain the situation to the Coris office on the spot. Echevarria said Coris had about 40 offices globally, which could be contacted to handle any medical crisis faced by any foreign travel insurance policy holder.

   

 
 
UNDERDOGS CLAW BACK ON STOCK EXCHANGES 
 
 
FROM SATISH JOHN
 
Mumbai, July 5: 
This is as good as it gets for stock market underdogs. The mid-cap rally is spilling over to ‘penny stocks’, especially steel and polyester companies. Many are miles away from a recovery, but operators and funds that have taken a shine to these shares feel these are companies with a promising future.

Even as frontline scrips take it on their chin, mid-cap and small cap stocks have doubled in value; some have gained more than 200 to 300 per cent in recent weeks.

There are some who think the exuberance in these shares is placed. “Any gains from the current levels is scary. In most cases, operators have driven these stocks to dizzy heights, while institutions have not participated, except for selling in stray deals,” says Avinash Gorakshakar of Emkay Share and Stock Brokers.

A fund manager affiliated to a PSU mutual fund is of the opinion that the rally in mid-cap and small stocks has peaked.

Several steel companies have seen their share prices rocket, though they carry loses that will take years to be wiped out even at the best of times for the industry.

Companies like Uttam Galva, Ispat Industries, Essar Steel, Sail, Llyods have appreciated by more than 200 to 300 per cent, or more. The 52-week high/low for Ispat Industries’ share is Rs 9 and Re 1 respectively; it is now quoted in the region Rs 8. In the case of Lloyd Metal, the trend in recent times has been similar.

Uttam Galva, now traded around Rs 12, has plumbed a 52-week low at Rs 2. Essar Steel is being quoted in the region of Rs 14, its 52-week high, while its low is Rs 2.

SAIL has also zoomed on the turnaround story in the steel sector, with the share quoting close to its 52 week high at around Rs 12 levels while its low was around Rs 4.

The big question is whether these counters merit such valuations. Most of these companies are awash with red ink.

   

 
 
EXIDE, MALAYSIAN FIRM IN TIEUP 
 
 
BY A STAFF REPORTER
 
Calcutta, July 5: 
Exide Industries will be setting up a smelter for recycling of battery scrap, in partnership with Malaysian Reclamation Industries, a leader in the business. Exide will hold 26 per cent in the joint venture.

Exide’s chairman S.B. Ganguly said: “We are trying to identify a place to set up the unit. It should be commissioned by the end of this year. We intend to start with an annual capacity of 10,000 tonne, and scale it up to 20,000 tonne in future.” The project cost is estimated at Rs 75 crore.

But the problem facing the joint venture is procuring enough scrap for the smelter. Exide pays its vendors Rs 200 for used lead-acid batteries, whereas small-scale manufacturers pay up to Rs 350. The unorganised sector accounts for about 35 per cent of the lead-acid battery market in India.

Ganguly said: “We cannot better our offer for used batteries without increasing the price of the new ones we produce out of the scrap. Small-scale operators can afford to pay more than us for used batteries because their other costs of production—say technology and inputs—are much lower. We are concerned that we may not manage to gather enough scrap to run the smelter to capacity.”

Buyback shelved

Exide has abandoned its buy back programme, the stock price having shot up to Rs 95. Exide had set Rs 70 as the maximum price for the buy back. The company managed to mop up only 3.9 lakh shares—which represents just one per cent of its paid-up equity—before the price went past the threshold.

The price of the stock is unlikely to fall below that level again with the Exide management projecting a sales growth of 75 to 80 per cent this year. The company’s net profit is expected to double this year. In 2001-02, Exide posted a net profit of Rs 31.41 crore on sales of Rs 984.84 crore.

In line with the projections, Exide unveiled a 124 per cent growth in its net profit in the first quarter. Exide posted a net profit of Rs 8.16 crore on sales of Rs 249.43 crore, which was 14 per cent higher than the corresponding period of the last financial year.

Exports could be one of the key drivers of Exide’s growth this year. Ganguly said exports should grow by over 100 per cent. The company is also planning to launch a slew of new brands during the year.

Last year, the company reduced its high cost borrowings by Rs 90 crore, the effect of which would be felt this year. During the current year, Exide intends to pare borrowings by another Rs 40 crore.

   

 
 
TUG OF WAR OVER HALDIA PETRO NAPHTHA DEAL 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 5: 
The West Bengal government says Indian Oil Corporation (IOC) should talk to Haldia Petrochemicals’ (HPL) chairman, Tarun Das, if it wants to supply naphtha or pick up an equity stake in the project.

The decision has been taken after media reports suggested IOC is willing to pursue its investment proposal on terms and conditions laid down in its December 2001 blueprint.

“Tarun Das is only half a kilometre away from IOC and if they have to say anything, they can communicate to him,” senior officials of the state government said.

The state government has also written a letter to saying,” “In view of IOC not deviating from their earlier stand, we are willing to explore long-term naphtha supply agreement without linking strategic investment to it.”

“The government has not committed itself to buy naphtha from IOC. It will only explore the possibility of doing it. HPL has already opened a letter of credit with MSTC for naphtha supply. It will go for Indian Oil only if they find the prices to be competitive,” sources said.

HPL sources accuse IOC of selling naphtha to companies in Uttar Pradesh at a discounted price in April, when non-availability of the feedstock over unpaid bills had forced the company to shut down its plant.

IOC’s Haldia refinery churns out 4 lakh tonnes of naphtha, almost all of which is sold to HPL. There is a feeling that IOC will find it difficult to find a buyer immediately. “We have to find a new buyer now. There are fertiliser plants to which we can sell naphtha,” they said.

HPL officials say IOC was not ready to negotiate any term and condition at the June 5 meeting, which was attended by state commerce and industry secretary Jawhar Sircar, government’s advisor to HPL, Dipankar Chatterjee and representatives of The Chatterjee Group.

According to HPL officials, IOC did not agree to the proposal under which TCG would pledge the shares it wants to acquire from the state for Rs 450 crore. These shares would be pledged with the West Bengal Industrial Development Corporation for a period of ten years.

Based on this agreement, the effective voting right of TCG would be reduced from 49 per cent to 21 per cent. IOC found pledging of shares ‘not tenable’, sources said.

The state-owned oil major said it came to know in talks with Writer’s authorities that TCG would raise its holding in HPL through a transfer of government’s shares worth Rs 360 crore on a 10-year interest-free payment.

IOC claimed it tried to find out if part of shares with TCG and the state government could be transferred to it on the same terms and conditions. If this had happened, IOC would have acquired about 50 per cent.

“This was not expected from Indian Oil. For the last two years, they had assured us about their investment. HPL, which did not look for other investors, became financially frail during this time,” HPL officials said.

   

 
 
CRACKS IN COMPUTER SALES SCREEN 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 5: 
The IT hardware industry today called for a war against the three major impediments—lack of local language software, the inability to ensure low energy consumption by computers, and high prices—to enhance computer penetration in the country where desktop PC sales have fallen by 11 per cent during 2001-02.

MAIT president S. Devarajan said today, “China has managed to achieve higher PC penetration due to the availability of local language software and this has to be replicated in India. The unavailability of constant and quality power is also another problem that needs to be urgently addressed. Affordability will improve once prices come down.”

“The government needs to facilitate and encourage this process by creating simple mechanisms for quick access to low-cost finance for product development and pilot production, with only the technology, materials, and components as security, regardless of whether product development is in the public or private sector. Our government could think of awarding R&D grants for productively developing new products. It is innovation that must be encouraged and nurtured,” he added.

MAIT, the apex body representing the hardware, training and services sectors of the IT industry in the country, today called for a separate technology park for hardware industry over and above the EHTP scheme.

PC sales clocked a growth of 34 per cent in 2000-01 over that in 1999-2000 but fell by 11 per cent in 2001-02. However, with the imminent recovery in the Indian market, the IT market is expected to grow at 12 per cent in 2002-03 with PC sales projected at 19 lakh units, said MAIT.

MAIT attributed the fall in sales and the slow growth in the second half of the current financial year to severe recessionary trends in the Indian economy. MAIT’s Industry Performance Review, conducted by the Indian Market Research Bureau, is a bi-annual affair.

One of the most notable findings of the study this year has been the increased consumption of IT products in smaller towns and cities. Out of the total PC sales 30 per cent was accounted for by Class B and C class cities—a phenomenal growth of 106 per cent.

In the last fiscal, smaller towns had accounted for only 13 per cent of the overall PC sales. Likewise notebooks sales grew by 200 per cent in small towns whereas sales to top 4 cities declined by 28 per cent. Smaller towns accounted for 9 per cent of the total server sales, growing 4 per cent.

Releasing the findings of the study, Vinnie Mehta, executive director, MAIT said, “The slowdown in IT market is of immense concern to the industry but increased sales in smaller towns and cities brings a ray of hope. There is an increased need to support this market and grow it further.”

“However, it can only happen if applications, tools and content are made available in local language to create a pull effect. To this effect, the MAIT Consortium on Innovation and Language Technology (COILTech) is doing a credible job of establishing computing standards in local language. Our long-term agenda in this space would be to support and incubate virtual R&D centres for development of language computing tools,” he added.

The MAIT-IMRB study said assembled PCs— the smaller or lesser known regional brands and unbranded systems—accounted for 46 per cent of the PC sales in 2001-02.

The poor performance reflects the fact that price sensitive market segments deferred their IT purchase plans in 2001-02.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.84	HK $1	Rs.  6.25*
UK £1	Rs. 74.09	SW Fr 1	Rs. 32.05*
Euro	Rs. 47.55	Sing $1	Rs. 27.20*
Yen 100	Rs. 40.50	Aus $1	Rs. 26.80*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5280	Gold Std (10 gm)Rs. 5160
Gold 22 carat	Rs. 4985	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8350	Silver (Kg)	Rs. 8310
Silver portion	Rs. 8450	Silver portion	   NA

Stock Indices

Sensex		3330.61		+13.84
BSE-100		1679.81		+ 6.40
S&P CNX Nifty	1073.80		+ 3.25
Calcutta	 118.88		+ 0.09
Skindia GDR	 516.01		+ 7.08
   
 

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