Sebi propagates new stock cult
Reliance propels sensex 27 points
Meet on EPF likely to keep rate same
Cellular calls to be easy on the pocket
Govt reads the Riot Act to Panna-Mukta allies
New man at Daewoo India helm
SBI Life to offer health risk policy
Suspense over sale of Bata units
Sebi to launch advisory services in two months
Foreign Exchange, Bullion, Stock Indices

 
 
SEBI PROPAGATES NEW STOCK CULT 
 
 
BY ANIEK PAUL
 
Calcutta, July 8: 
A day after India bid adieu to Dhirubhai Ambani—the torchbearer in spreading the equity cult in India—the regulator of the capital markets promised to disseminate basic training in investing, in schools and colleges.

G.N. Bajpai, the chairman of the Securities and Exchange Board of India (Sebi), says he will seek to introduce a course on capital markets in high schools. “We will soon suggest the idea to the Union ministry of human resource development and the National Council of Education Research and Training (NCERT).

“The propensity to save is high among Indians, but we need to teach people the basics of investing in the capital markets. We need to educate people about the risks and returns of investing in stock markets, and such education can be best imparted in schools and colleges,” he said.

Bajpai has laid down four strategic aims for Sebi, which include building investor confidence. “The move to teach children the basics of the capital market is part of our grand investor education programme, aimed at enabling people to make an informed choice,” the Sebi chief added.

Sebi has lined up a nation-wide investor education programme to be rolled out in August. “Investments in the stock market are not risk-free. One must learn to appreciate the trade-off between risks and returns on investments. Investors should also know their rights and obligations, and act responsibly” Bajpai said.

The other strategic aims of the stock market regulator are instilling better standards of corporate governance in India Inc, reform of the markets and the regulatory framework. Bajpai said he would invite a management consultancy firm to evaluate Sebi’s performance in achieving these targets.

He exhorted Indian companies to improve their standard of accounting and corporate governance. “The regulator, on the other hand, must remedy the systemic deficiencies of the markets. Investments will flow only if investors have faith in corporate governance and integrity of the markets,” he said.

“Companies should improve their accounting standards by following the true spirit of the law. Mere compliance with the print of the law is not enough.”

Bajpai wants the credit rating agencies to evaluate companies on a set of new yardsticks. He said he had asked them to examine whether they could evaluate companies for “wealth-creation, wealth-management and wealth-sharing”.

   

 
 
RELIANCE PROPELS SENSEX 27 POINTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 8: 
The Reliance twins — Reliance Industries and Reliance Petroleum — today led the markets to a rally, squelching fears of how the company would cope with the absence of its famous founder.

A day after millions milled around Dhirubhai Ambani’s cortege and corporate India was stunned by the veneration for the patriarch, Dalal Street wound up the day with a 27-point point gain in the Bombay Stock Exchange (BSE) sensex, which finished at 3357.66.

“We expected the shares to remain weak due to gloomy sentiment after the death of Dhirubhai Ambani,” brokers, who were taken off guard by the rise, said.

The resilience of Reliance shares is being seen as an indication of investors having accepted that life after Dhirubhai will be business as usual. More important, there are no jitters over who will get the baton. “The succession plan also appears to be a smooth affair,” said an analyst at a leading mutual fund.

Reliance Industries was up Rs 8.10, or 3.07 per cent, at Rs 271.40 on a volume of 19.68 lakh shares. Its intra-day high was Rs 279, while its intra-day low was Rs 260.55. Reliance Petroleum, which has the biggest oil refinery in the private sector, advanced 3.39 per cent to end at Rs 24.40. Other pivotals also gained in a session that saw the BSE notch up the highest volume of this year.

The surge in Reliance shares was a reversal of the trend from the losses they had been suffering — almost 6 per cent daily — since the day Dhirubhai was felled by a stroke.

Close to 18.4 lakh shares changed hands on the BSE, where the gainers outnumbered losers by three is to one. In the specified group, 106 stocks, including 23 from the index, put on gains; 61 finished lower.

Brokers expect the rebound in old-economy stocks to hold over the next few days. Steel and auto companies, the key market movers now, will stay strong.

Most auto stocks ended higher on expectations of strong quarterly earnings, while a few technology stocks inched up in response to Wall Street’s firm close on Friday. The gainers included Hero Honda and Tata Engineering, which have delivered encouraging performances. In the new-economy shares, Satyam Computer and NIIT closed with significant gains.

   

 
 
MEET ON EPF LIKELY TO KEEP RATE SAME 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, July 8: 
The board of trustees of the Employees Provident Fund (EPF) is unlikely to slash the 9.5 per cent rate of return on provident fund deposits.

The board, which meets here tomorrow, will still be formally urged by the finance ministry to cut the interest rate by half a percentage point, but sources said a political understanding has already been reached at the top that the rate will be allowed to continue for some more time.

The reason being cited is the next round of elections to about 10 state assemblies spread over the next 12 months, including Madhya Pradesh, Chattisgarh, Delhi, Gujarat, Andhra Pradesh and Nagaland.

The finance ministry has been pressing to cut back the interest rate on EPF, citing current bank interest rates which are at a decadal low of 8.5-9 per cent.

However, the EPFO has resisted the move till now, arguing that the organisation has enough surpluses to be able to afford a higher payout. In fact, former labour minister Sharad Yadav has indirectly attributed his shifting to another ministry to his quarrel with former finance minister Yashwant Sinha over the rate cut move.

The EPFO may, however, be informally sounded out on measures the Group of Ministers on pensions and provident funds wish to introduce. That includes a proposal to make withdrawals from Employees Provident Fund more restrictive and a relaxation of the norms governing the investment of EPF money in securities.

The new rules, which have been drawn up by the finance ministry, insists that premature withdrawals should only be allowed in the event of permanent disability or death. Any withdrawal other than for these reasons will be made difficult to access and, if allowed, would have to be replaced by annual repayments.

Currently, employees can withdraw up to 90 per cent of their accumulated contribution to pay for medical emergencies, education, marriage and house construction, without any need to return the money once withdrawn.

The ministry note (F.No 11/13/2001-Ins-VI ) also mulls taking away the regulatory functions.“Regulatory functions should be de-linked from EPFO and vested in the pension regulator,” the note states.

The finance ministry has stated that the EPFO’s role as both fund manager and regulator results in “either in dilution of regulatory functions or over-statement (of it).” EPFO covers about 2.15 crore employees in three lakh establishments. Funds at its disposal are nearly Rs 1,00,000 crore.

   

 
 
CELLULAR CALLS TO BE EASY ON THE POCKET 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 8: 
Cellphone users can now wait expectantly for cheaper airtime and rental rates.

The Telecom Regulatory Authority of India (Trai) today initiated a public consultation on the tariff structure for cellular telephone services.

Trai has released a consultation paper that looks at the need to bring tariffs in line with the changes in costs to ensure a larger subscriber base and increased use of the service.

The paper examines the possibility of positioning cellular mobile service not as a premium service, but as a means to increase teledensity in the country.

The consultation paper will also seek measures to make cellular tariffs consumer-friendly and expand cellular service coverage in the country.

In 1999, the telecom watchdog specified its first standard tariff for cellular mobile services. Since then, the cellular industry has expanded considerably as a result of diverse tariffs and service options made available by the service providers.

Consumers today have a bewildering array of tariff options due to technological and market developments.

The paper presents a framework of analysis and proposals with respect to tariff regulation policy. Inputs have been invited from the stakeholders (the service providers) in the light of trends witnessed in the past and likely to arise in the future.

Based on detailed information on costs, roll-out, sources of revenues and subscriber base obtained by the authority, the paper gives cost-based estimates of monthly rental and airtime charge, and analyses them in the background of the tariffs prevailing in the market.

Different questions have been raised, including whether the present mode of tariff regulation in the cellular mobile sector should continue. These questions are posed within the framework that takes into account both the likely developments in the market as well as a formatted cost-based estimate for monthly rentals. The authority has invited written responses by July 22, preferably accompanied by a floppy diskette/e-mail to Trai.

The market for cellular subscribers is segmented between pre-paid and post-paid subscribers. As on March this year, out of a total of 6.0 million subscribers about 59 per cent (2.4 million subscribers) were post-paid subscribers.

Pre-paid customers were about 3.5 million. There were about 2260 subscribers on the prevailing standard tariff package. The number of post-paid and pre-paid subscribers from September 2001 to March 2002 compared to the previous two quarters show there existed only a small subscriber base for those on the standard tariff package in the same period.

Cellular operators are already up in arms against the absence of either a floor or a ceiling while fixing the rental for limited mobility to be offered by fixed line operators, a move announced by Trai.

   

 
 
GOVT READS THE RIOT ACT TO PANNA-MUKTA ALLIES 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 8: 
The petroleum ministry has served an ultimatum on both state-run oil exploration major Oil and Natural Gas Corporation (ONGC) and UK-based petroleum giant British Gas to sort out their differences over control of the Panna-Mukta and Tapti oil and gas fields by September or face government intervention.

“We have been told to amicably settle our dispute over operatorship of the fields by September or else the government will intervene,” ONGC chairman and managing director Subir Raha said. “Talks are still on between the various partners.”

ONGC, British Gas and Reliance Industries, the other partner in the Panna-Mukta and Tapti fields, have till now not been able to resolve differences in the model for a joint management of the fields. Earlier, BG wanted sole operator rights over the fields, something which ONGC was unwilling to give up. In a patch-up bid, the companies agreed on a joint management model, but could not agree on the fine print.

RIL and ONGC want the chief executive and chief financial officer’s post to be given to them as they together have about 70 per cent stake in all (ONGC 40 per cent and RIL 30 per cent); BG was to be given just the chief operating officer’s post.

ONGC wants this model to be accepted for a five-year period, something which BG is unwilling to accept. The UK major instead wants a CEO appointed by rotation from the three entities.

If talks fail, ONGC wants to exercise its rights as the single largest partner for cancellation of joint operatorship and instead seek single operator status. ONGC is still willing to renew its bid to buy out BG if it so wants.

Sources said British Gas had earlier tried to cobble a deal with ONGC, offering it about $ 11.5 million or Rs 550 crore for giving up the right to claim the status of ‘operator’ of the fields, when it was bidding for Enron’s stake. But the Indian exploration giant had spurned the offer.

Operatorship is a crucial status that gives the partner leadership rights as well as extra revenues.

   

 
 
NEW MAN AT DAEWOO INDIA HELM 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, July 8: 
Daewoo Motors India Ltd (DMIL) has a new chief executive—D.W.Kim, who until recently was deputy managing director.

Kim replaces Y.T. Cho as the new managing director and CEO. Cho has already flown back home.

The big question that is being asked is whether the change at the helm of Daewoo Motors India will lead to a turnaround in the beleaguered company’s fortunes?

Sources within the company said, “The top management in India has taken the decision. Although no direction came from Korea, Kim has been appointed to shore up the feel-good factor within the company. Even now the Korean management has not been able to despatch an order for the Indian arm. Under the new leadership, we have decided to concentrate more on after-sales service and spare parts to keep the customers satisfied.”

Despite the brave fight to keep it afloat, the company is haunted by dealers who are shutting shop as the sales curve dips sharply.

Daewoo Motors India has once again closed its factory and production has been stopped indefinitely. The company has an inventory of about 800 cars.

“Although we do not have too much stocks, sales have fallen so drastically that we will have trouble selling even these cars. At present, we are only concentrating on spares and services and want to restore consumer confidence. If we can get that back, reviving the sales will not be a hard task,” sources said.

The company is also worried about those vehicles that have been sold in the past as most of the servicing points are selling original parts at marked-up prices.

“We have started new advertising and offers like ‘monsoon check up of cars’ at specific dealerships. The campaign has started off in Lucknow, Agra and Uttar Pradesh where sales are still going on,” he said.

In June, the ailing automaker admitted that it was offering bargain-basement discounts to whittle its inventory. Company officials said for the first time that the company had been selling Matiz cars at a discount of Rs 50,000 on a marked price of Rs 3.25 lakh. They claim to have managed to reduce their inventory to just 300-350 cars.

Market sources, however, claimed that the company had offered higher discounts of up to Rs 80,000.

Meanwhile, the credit institutions are not too happy with the developments. They want to put pressure on the company so that the management takes strong steps to revive the company.

Sources from IDBI said, “We know about the change in management, but still don’t see it as a constructive development. We want then to work harder to regain their lost position. Till now, we have not decided on what steps we need to take to protect our investment. We are not unduly worried as the company has huge assets worth Rs 3,000 crore against our loans worth Rs 900 crore.”

Daewoo Motor India has been through a roller-coaster over the past year; the first signs of trouble surfaced in April last year when it stopped reporting its sales and production figures to the Society for Indian Automobile Manufacturers (SIAM). By August, trouble broke out at its South Korean parent Daewoo Motor Corp where the creditors decided to press for their money.

   

 
 
SBI LIFE TO OFFER HEALTH RISK POLICY 
 
 
FROM GARIMA SINGH
 
New Delhi, July 8: 
SBI Life Insurance Company is all set to introduce its first stand-alone health policy and the ‘Term-Life’ policy soon.

The policy will be termed as ‘critical illness policy’. It will cover six kinds of health risks. These include cancer, heart attack, renal failure, organ transplant and coronary artery surgery.

The life insurance company is likely to file its product with the insurance watchdog—Insurance Regulatory Development Authority (IRDA)—within the next 10 days.

Although the premium on the product has not been fixed yet, R. Kanan, actuary and CFO-SBI Life Insurance, said “Our premiums definitely will be very competitive and affordable.” Sources say “a 60-year-old person will pay a premium three times that paid by a 20-year-old.”

The product is likely to be introduced within a month of receiving the approval from the IRDA. The product, which will cover the age group of 18-60 years, will be introduced in Calcutta, Delhi, Mumbai, Chennai, Bangalore, Hyderabad, Pune and Chandigarh. The company hopes to sell at least 10,000 policies in the first year of its launch.

Sources in the company said that SBI Life Insurance is not likely to engage the services of any Third Party Administrator (TPA) for its new health product. “We already have 150 doctors across the country; we might just utilise their services rather than engage a TPA,” sources said.

SBI Life Insurance is also planning to shortly introduce a ‘Term-Life’ policy. The product is in the “incubation stage” and will be filed with the IRDA in the next 20-25 days, said sources.

SBI Life Insurance Company, is a joint-venture between State Bank Of India and Cardif S.A. of France. The company started its commercial operations in July 2001. It has sold approximately 2,500 policies earning a premium of about Rs 15 crore.

At present, the company has approximately 2000 ‘tied-agents’ working under its umbrella. Sources in the company say that once an amendment is brought about in the Insurance Amendment Bill (IAB), SBI Life Insurance is likely to involve its 9,000 bank branches and seven associate banks into selling its products.

The insurance company currently sells its group insurance schemes for individuals through the insurance administrators in its various bank branches and also through SBI card.

   

 
 
SUSPENSE OVER SALE OF BATA UNITS 
 
 
BY A STAFF REPORTER
 
Calcutta, July 8: 
Bata India Limited (BIL) today failed to clear the confusion over the ownership of BDCL Enterprises and Fashion Shoe Private Limited (FSPL)—two companies to which its Mokamehghat tannery and Faridabad unit are being transferred respectively.

P.K. Nag, director (finance) of Bata India Limited, said they are two independent private limited companies, and that BIL has no relationship with them at present. However, the board of directors of these firms have representatives of Bata BBNV and Bata India.

The board of BDCL comprises D.B. Turner, representative of Bata BBNV, K. Chatterjee, senior vice-president of BIL, S.K. Sachdeva, factory manager of Mokamehghat, and Rajesh Poddar, an independent director. The paid-up capital of the company is Rs 3,000.

On the FSPL’s board are BBNV nominee Turner, G.S. Vazir, senior vice-president of BIL and two independent directors, Rajesh Poddar and Manoj Mohanka. The paid-up capital of the company is Rs 10 lakh.

Replying to shareholders at the extra-ordinary general meeting (EGM) here today, Bata India said the valuation of Fashion Shoes is around Rs 41 core. The meeting was called to secure shareholders’ approval for transferring the Bata units to BDCL and FSPL. The scheme of arrangement for both the companies was put to vote.

Under the scheme of arrangement, one share of BDCL will be given for every four shares of Bata; 15 shares of Bata will be swapped for two of Fashion Shoes’.

Nag said the scheme is designed to enhance the net-worth of Bata India’s shareholders. The directors of BDCL and FSPL will take a decision on listing as outlined in the scheme of arrangement. Once the scrips of the two firms have been listed, they will become subsidiaries of Bata BBNV. Nag said Bata India would provide management support to BDCL and FSPL. In addition, it will source goods from these companies at viable rates.

BDCL will be a manufacturer, buyer, seller, importer of chemicals, tea, coffee, leather goods and all allied things related to leather, hides, skin, polyester, fibre, furs yarn. At the same time, FSPL will be engaged in the production and sale of footwear products. Bata India will transfer both units as a going concern to the two firms.

   

 
 
SEBI TO LAUNCH ADVISORY SERVICES IN TWO MONTHS 
 
 
BY A STAFF REPORTER
 
Calcutta, July 8: 
The Securities and Exchange Board of India (Sebi) will introduce within the next two months an advisory service aimed at enabling market participants—companies, intermediaries and investors—to obtain the regulator’s opinion on complex legal matters.

“Even law-abiding people get into legal wrangles for ignorance or wrong advice. Called ‘advance ruling’, this service will enable market participants to seek Sebi’s clarification on legal issues in advance and avoid legal hassles, Sebi chairman G.N. Bajpai said.

The service would lead to reduction in litigation, which, in turn, will help the market. The department of Income Tax also offers ‘advance ruling’. Those availing of the service would have to pay a fee, which would be fixed on a case-to-case basis, Bajpai said.

On the implementation of the revised takeover code, Bajpai said he hoped the new set of regulations would be ready within a month. He said another committee had been set up to look into the spate of delisting that had taken place in the recent past.

Headed by Sebi’s executive director Pratip Kar, the committee will submit its recommendations by the end of this month. “We will try to remedy the problems faced by investors, but cannot stop a company from delisting,” Bajpai said.

Regional bourses

The stock market regulator feels the 19 regional stock exchanges are redundant in their present form. They would have to find for themselves a new role to survive, G.N. Bajpai, chairman of the Securities and Exchange Board of India (Sebi), said.

Sebi had asked the committee headed by justice Kania—which was dealing with demutualisation of the exchanges—to also consider possible roles that the regional bourses could play in the present scenario, Bajpai said, blaming technology for the woes of the regional exchanges.

Bajpai’s statement on the regional exchanges comes a day before the Sebi top brass meets the directors of the Calcutta Stock Exchange. The bourse’s turnover has fallen sharply and is reeling under a huge operating loss. Officials are concerned that the exchange may have to be closed down.

Bajpai said one of the options available to the regional bourses was merger with the Bombay or the National Stock Exchange. “Sebi is not averse to the idea of merger, and whoever wants to merge with a larger exchange is free to do so,” Bajpai said.

“Though they have lost their importance, we cannot let the regional stock exchanges die. It will be a colossal loss of infrastructure. We must find an alternative use for them. Possibilities are they introduce trading in fixed-income instruments and derivatives,” the Sebi chairman added.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.81	HK $1	Rs.  6.20*
UK £1	Rs. 74.76	SW Fr 1	Rs. 32.20*
Euro	Rs. 48.10	Sing $1	Rs. 27.30*
Yen 100	Rs. 41.12	Aus $1	Rs. 27.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5295	Gold Std (10 gm)Rs. 5160
Gold 22 carat	Rs. 5000	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8400	Silver (Kg)	Rs. 8335
Silver portion	Rs. 8500	Silver portion	   NA

Stock Indices

Sensex		3357.66		+27.05
BSE-100		1689.34		+ 9.53
S&P CNX Nifty	1082.05		+ 8.25
Calcutta	 119.95		+ 1.07
Skindia GDR	 520.77		+ 4.76
   
 

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