Deal gives birth to Rs 830cr giant
RBI may get full control of co-op banks
Banks told to consider stock option
Fresh fixed-line disturbances in cellular network
Court boost for Sterlite
Air Sahara to expand fleet, cash in on cricket craze
IOC seeks ally to make speciality wax at Digboi
Jute Corp support plan ready
Ispat Ind to go full throttle
Foreign Exchange, Bullion, Stock Indices

 
 
DEAL GIVES BIRTH TO RS 830CR GIANT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 15: 
Pfizer’s acquisition of Pharmacia Corp will engender a Rs 830-crore pharmaceutical giant in India.

The deal will give Pfizer, recently bolstered by the merger of Parke Davis, a grip on blockbuster brands such as Corex, Benadryl, Surbex T, Dalacin and Xalatan.

Pharmacia India Pvt Ltd, Pharmacia Corp’s 100 per cent subsidiary set up in 1997, had acquired 51.5 per cent in Abbott India from US’ Abbott US for $ 13.5 million earlier this year. The company is based in Gurgaon.

Abbott was later renamed as Pharmacia Healthcare Ltd. Key brands that were added to Pharmacia portfolio included Claribid and Erythrocin (anti-infective), Vidaylin (Vitamin B complex), Selsun (anti-dandruff), Surbex T (Vitamin B complex), Cecon (Vitamin C and Pentothal (anaesthetic).

Pharmacia India, with sales close to Rs 49 crore, largely makes medicines that are used in critical care, women’s health, ophthalmology, oncology and infectious diseases. It also has strong products like Medrol (inflammation) and Dalacin (anti-infective) in its stable.

Analysts say the acquisition of Pharmacia will give Pfizer a field force of about 1,500. “Looking at the business profile of Pharmacia and Pfizer in India, the acquisition would certainly create lot of synergy. For instance, Abbott’s, vitamin brand Surbex T would complement Pfizer’s Becosules,” said C. Srihari, a pharmaceutical analyst at Mumbai’s Khandwala Securities.

According to him, Abbott has a good presence in the macrolide (anti-infective) segment, a segment that has seen single digit growth rates but limited competition.

The stock markets greeted the Pfizer’s latest buyout with a 2.36 per cent rise in its share price, which finished at Rs 449.40 against its previous close of Rs 439. The Pharmacia scrip also zoomed 10 per cent to finish at Rs 171.85 on a volume of over 19,000 on BSE and NSE.

Last month, the boards of Pfizer India and Parke Davis cleared a merger that took place earlier. That marriage spawned the fourth largest pharmaceutical company in India with a combined turnover of Rs.701.5 crore based on November 2001 audited results. The market share of both companies added up to 3.74 per cent. In contrast, Pharmacia Healthcare and Pharmacia India would command only 0.80 per cent of the market.

Pfizer India’s major drugs are largely anti-tussives, anti-infectives, vitamins, cardio-vascular and vaccines.

The roots of Pharmacia Corp date back to 1853. It was in 1995 that Pharmacia & Upjohn was formed through the merger of Pharmacia AB and The Upjohn Company. Later, Monsanto Company and Pharmacia & Upjohn merged to create Pharmacia Corp. In India, prior to November 1995, both Pharmacia AB and Upjohn marketed their products through various agents. It was in late 1996 that the merger of Pharmacia & Upjohn was legally completed and in 1997 that Pharmacia & Upjohn Pvt Ltd was established.

   

 
 
RBI MAY GET FULL CONTROL OF CO-OP BANKS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, July 15: 
The finance ministry is planning to make the Reserve Bank of India solely responsible for overseeing and inspecting urban co-operative banks, over which the central banker currently exercises joint control with state registrars of co-operatives.

The decision follows a series of scams involving urban co-operative banks that saw some of them go bust. Investigations by various agencies have established that many of these banks took advantage of the loopholes present in the current system of dual control and simply did not follow the prudential norms. They also did not report their activities to either the RBI or the registrar of co-operatives.

Top finance ministry sources said the decision, which comes after the appointment of the new finance minister, is part of the BJP’s bid to repair an image tarnished by a series of scams including the Madhavpura Co-operative Bank in Ahmedabad, Krushi Co-operative Bank in Hyderabad and Nagpur District Central Co-operative Bank.

Small investors who had kept their money in popular co-operative banks in Maharashtra, Gujarat and Andhra Pradesh have been feeling let down by the series of scams which has seen much of their money locked up in accounts which have been frozen on orders from the central bank.

The current system allows the RBI jurisdiction only over banking operations of the co-operative society while the registrars oversees managerial and administrative functions.

The RBI itself has in several reports pleaded it was essential that it be the sole regulator of the business carried on by the urban co-operative banks and that dual control should end.

The state governments which exercise power over these banks through the registrars had been opposing the move and had even ignored the RBI’s attempts to get them to accept a code of model bye-laws for the UCBs.

The Centre will nevertheless have to gain concurrence from state governments for this measure as it represents an erosion of their authority.

However, it seems the latest spate of scams has left state governments with little stomach to oppose the move. The RBI’s original proposal which the ministry was working on was setting up an ‘apex supervisory body’ to take over the entire regulatory and inspection functions relating to UCBs. It has submitted a draft Bill based on this proposal.

However, the new thinking seems to be in favour of a separate wing of the RBI itself performing this function and not the creation of yet another authority. Sources said among other allies, the Shiv Sena, which has a lot at stake in the matter of UCBs, is opposed to a separate body exercising control over these banks.

What has prompted the latest move they say has been revelations of the Home Trade scam where a broking house conducted fraudulent deals in government securities on behalf of a number of co-operative banks.

   

 
 
BANKS TOLD TO CONSIDER STOCK OPTION 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 15: 
In a fresh move to divest the government’s stake in public sector banks, the finance ministry has asked banks to consider employee stock options (Esop) — an idea that was floated two years back.

In a recent communication to the chiefs of public sector banks, the ministry has asked them to explore the possibility of Esop and submit a report by August 31. Banks need to expand capital if they want to be globally competitive. Since the government is not in a position to bring in additional capital as the main owner, divestment is inevitable. However, employees, one of the main stake holders, are opposed to private ownership.

“It may be necessary to explore the feasibility of employees subscribing to the capital of their banks. This can prevent vested interest groups in the private sector from cornering the bank’s shares. So, we have asked them to examine the Esop proposal and come up with specific suggestions,” finance ministry officials said.

The government is ready to bring down its stake to 33 per cent in PSU banks, which had a paid-up capital of around Rs 14,547 crore on March 2001. This includes the small chunk of capital the public holds in seven banks.

Ministry officials said bank employees earn around Rs 21,000 crore collectively. “If they pour in at least 10 per cent of that amount in the shares of their own bank, the total investment would be Rs 2,100 crore. This can fulfil banks’ initial capital requirement,” they said. The head-count in banks has come down to 7.5 lakh after a string of voluntary retirement schemes in the past few years.

The Esop proposal for banks was mooted by the Indian Banks Association (IBA) in 2000. The former chairman of the association and the current chief of Punjab National Bank, S.S. Kohli, had floated the idea along with a raft of suggestions to streamline human resource practices.

Big banks, such as State Bank of India and Bank of India, have shown strong interest in Esop. “The bank is scrutinising the proposal. A committee has also been set up to look into the issue,” senior SBI officials said.

An official of Bank of India, which is weighing the option of launching the second VRS round, said, “May be, the bank will consider an Esop after reducing its workforce.”

Along with its suggestions on staff rationalisation, IBA recommended reorienting transfer and placement policies, changing performance appraisal norms, improving the job profile of employees and modifications in the norms on work allocation among staff.

   

 
 
FRESH FIXED-LINE DISTURBANCES IN CELLULAR NETWORK 
 
 
FROM M RAJENDRAN
 
New Delhi, July 15: 
Fixed-line operators are putting the squeeze on cellular operators with a radical proposal to the Telecom Regulatory Authority of India (Trai), suggesting that there should be a level tariff structure between wireless in local loop (WLL) and cellular operators.

Trai has discussed the papers submitted by Bharat Sanchar Nigam Ltd (BSNL) and private fixed line operators separately, which suggest that tariffs for outgoing calls in the short distance charging area (the 50-km range within which WLL can now be offered) should be fixed at Rs 1.20 per 3 minutes for both WLL and cellular operators. It also wants the cellular operators to offer free incoming calls as in the case of WLL mobiles.

The argument, if accepted by the regulator, will benefit cellular subscribers in a major way. A senior Trai official said, “We will examine anything that is within the legal framework of the authority and will scrutinise any proposal in a transparent manner. When the final order is passed, it will have the reasons and objectives behind our conclusion.”

“Moreover, we have released the consultation paper on tariffs for the cellular mobile service and we have one more week before we close receipt of the proposals and suggestion on this matter,” he added.

Cellular operators, who have lost the first round in the battle to stop WLL, are outraged by the basic operators’ argument that they use myriad supplementary charges to inflate call costs. “It is a strange and illogical demand. We do not have the details of the proposal. But we will certainly state our views through the association,” said a cellular service operator in the north.

T. V. Ramachandran, director general of the Cellular Operators Association of India (COAI), said, “Since we do not have any details about the proposal, it will not be possible to respond now but we will react if the issue comes up at the consultation level.”

Sources in the Union communications ministry said, “If you take into account the investment made by an operator to offer WLL mobile service and by a cellular operator to offer their mobile service, it would clarify the rationale and need for such a demand.”

A senior official in the communications ministry said the data available from Trai shows that the per line cost on a subscriber is Rs 25,000 for a fixed line service operator, Rs 8,250 for a WLL mobile operator and Rs 6,500 for a cellular service provider.

It may be noted that Trai depends to a large extent on the data provided by the operators and has little means of collecting data on its own. The WLL operators also claim that since the revenue sharing, access charges and their identity as an access provider as per the National Telecom policy 1999 are the same, there should not be any difference in rentals and airtime.

They also claim that once these charges are removed, the subscriber will be able to choose the service that best suits his budget.

“As early as 1999, cellular operators were allowed to charge STD rates for calls emanating from one SDCA to another in addition to the airtime charges. They should now come forward on their own to make the service more affordable,” said a senior executive with a company offering WLL services in the south which has launched operations in other parts of the country.

   

 
 
COURT BOOST FOR STERLITE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 15: 
Mumbai High Court today delivered a verdict in favour of the much denounced buy-back plan of copper maker Sterlite Industries (India) Ltd, which envisaged purchasing up to 50 per cent of the company’s equity capital from its shareholders.

Delivering the judgement today, the twin bench of Justice A P Shah and Justice Ms Mhatre ruled that Section 391 of the Companies Act, 1956 which governs the company’s buyback scheme is distinctly independent of Section 77A of the Companies Act, 1956.

While Section 391 involves a “scheme of arrangement” with shareholders, Section 77A deals with buyback of shares. Sterlite had introduced this proposal under the scheme of arrangement where Sebi had no “locus standi” in the matter. Sterlite’s contention in this regard has been upheld by the court.

On the contentious question of shareholders who have not responded in any way, the court has accepted the company’s proposal of providing a safety net.

Speaking to The Telegraph, Tarun Jain, director, Sterlite, said: “We are an investor-friendly company and we will do whatever possible to help small investors”.

According to Jain, the proposal to provide a safety net was placed before the DCA and was again brought forward when the Securities and Exchange Board of Inda (Sebi) had filed an appeal before the court.

Essentially, the safety net proposal envisages holding in trust for such shareholders the purchase consideration due to them against the sale of their shares.

Those who have so far not responded to the company’s offer will have to communicate within three months their desire to continue as shareholders.

The company will then make available to such shareholders an equivalent number of shares as the shares which have been purchased from him against surrender by the shareholder of the consideration held in trust for him.

The Anil Agarwal-promoted company had earlier been directed by Mumbai High Court to maintain status quo with respect to the “scheme of arrangement” under its controversial buyback programme.

The court had directed the company not to cancel shares, after hearing the petition filed by Sebi.

Sebi responded to the buyback scheme by filing a case before the high court after investors created a furore. It finally decided to challenge Sterlite’s “scheme of arrangement” which enabled it to cancel the shares of a shareholder who did not file option form with the company by June 21.

Sterlite, Sebi claimed, had violated certain provisions of the Companies Act such as sections 391, 394 and 77A.

The market regulator said the copper maker’s buyback scheme and the scheme of arrangement for purchase of Sterlite shares was in contravention of depository regulations of Sebi under which the shares of a shareholder could not be cancelled without his consent.

   

 
 
AIR SAHARA TO EXPAND FLEET, CASH IN ON CRICKET CRAZE 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 15: 
Air Sahara today unveiled plans to expand its fleet by 24 from its current strength of a dozen planes, even as it announced a Rs 25-crore promotion scheme involving on-board lucky draws and rewards which would build up to the Cricket World Cup next year.

The promo dubbed “Crickcitement” is designed to draw more casual walk-in customers to give the airline higher seat load factors. The airline sponsors the national cricket team and is naturally looking to take advantage of the cricket fever building up in the country prior to the World Cup.

The airline plans to lease a dozen 50-75 seater Bombardier regional jets to use on the feeder network and another dozen Boeing 747-700s and 800s within the next year.

Air Sahara chief executive Uttam Kumar Bose said the airline planned to raise the number of flights from 53 to 155 by the yearend.

“But the big news is really about Crickcitement —it’s the biggest promo scheme the market has seen,” Bose claimed. All Air Sahara fliers between July 21 and January 31 next year will be entitled to a fly-and-play scheme where they will earn 10 points for every flight taken.

The points can be exchanged for gifts —while 20, 50 and 100 points will get them cricket memorabilia and prizes such as VCD players and Discmans, the first 200 fliers who complete 150 points or “runs” (as Air Sahara has chosen to call them) will get tickets to Sri Lanka to watch India in the Champions Trophy. All others who score 150 ‘runs’ will get two tickets to any destination on Air Sahara’s network.

The first 100 fliers to notch up 300 ‘runs’ will be with the Indian cricket team at New Zealand on a full expenses-paid trip and the rest will get a 3 night/4 days package at Goa.

The first 100 to score 500 ‘runs’ will get to watch India versus Pakistan at the World Cup in South Africa as part of an all expenses-paid trip. The rest will get two return tickets to London.

A shorter promo from July 21 to October 31, called the fortune cookie, will give five passengers on every flight gifts ranging from Discmans to TVs and from mobile phones to microwave ovens. One passenger every day on the network will get a Pentium-4 personal computer; one lucky winner every week will get a plasma TV and one every fortnight will get a Hyundai Sonata.

   

 
 
IOC SEEKS ALLY TO MAKE SPECIALITY WAX AT DIGBOI 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, July 15: 
Indian Oil Corporation is looking for a strategic partner to set up a joint venture speciality wax formulation plant at the century-old Digboi refinery.

The project will add value to paraffin wax, the refinery’s most profitable product, and cater to the pharmaceuticals and cosmetics businesses in the country and abroad.

Confirming the move, company sources said they were in talks with global major Honeywell to become a partner in the project.

“It is too early to speak on the potential partners for the project, but given the demand pattern, we are hopeful to get a strong partner shortly,” they said. “We are not looking for a financial partner. Our first priority is to get technology so that our product can be a good alternative to the imports,” the sources added.

Digboi refinery, which is facing a marketing crisis especially after the dismantling of Administered Pricing Mechanism (APM), produces quality wax and sells it in bulk in the domestic market.

“Selling raw wax does not have any strong earning potential. But speciality wax has a much higher price realisation,” sources said. Assam crude, sourced by the company, has a high quality wax content.

The Digboi refinery has been in a crisis because of its locational disadvantage. “The refinery is totally unviable due to uneconomic size of operation, obsolete machinery, geographical isolation and poor infrastructure in the region. So, we have decided to go for value-added products. The speciality wax formulations will help us gain a huge market share,” sources said.

IOC has recently invested close to Rs 1000 crore for overhauling the refinery.

“We are doubling our wax producing capacity from 30,000 tonnes per annum to 60,000 tonnes by setting up a solvent de-oiling unit with an investment of Rs 419 crore. A hydro-treatment project is also being implemented at an investment of Rs 334 crore,” they said.

The hydro-treatment plant will replace the age-old acid clay treatment and help produce quality wax at lower cost.

The company has also asked for a 100 per cent excise duty cut and a transport subsidy for the Digboi refinery. “All North-East refineries enjoy a 50 per cent concession on excise duty. But in an open-market environment, it is far from encouraging,” a senior IOC executive said.

   

 
 
JUTE CORP SUPPORT PLAN READY 
 
 
BY AMIT CHAKRABORTY
 
Calcutta, July 15: 
The Jute Corporation of India (JCI) has geared up for the support price programme this year.

Apart from its own procurement network in rural areas, the corporation has tied up with state level apex co-operative marketing societies to function as its agents in supporting jute farmers across the eastern region and Andhra Pradesh.

According to JCI chairman M. Khastagir, market intervention through support prices is under way in certain pockets of north Bengal. However, the total amount purchased was only 100 quintals because market prices rose above the minimum rates offered by JCI.

Unlike earlier, JCI has had no financial problems in the past few years. The government provided it a bank guarantee of Rs 99 crore and allowed it to procure as much as possible if prices went below the support level.

The Centre has fixed the support price for the benchmark TD-4 grade jute at Rs 875 per quintal for the current jute year started July 1 against Rs 435 last year. The Jute Advisory Board, which met on Monday, estimated a crop of 115 lakh bales, 10 lakh bales more than last year.

Jute industry and traders fear the higher crop, a decline in purchases by jute mills and the progressive dilution of the mandatory Jute Packaging Order this year for food grains and sugar will drive down fibre prices.

The Indian Jute Mills Association (IJMA) has said in a memorandum to the jute commissioner that it would produce less and reduce crop purchases by over 10 lakh bales.

IJMA fears market intervention by JCI — with its inadequate infrastructure — through the price support mechanism will not be enough to prevent distress sale of raw jute on a large scale by edgy growers. However, jute commissioner S. Majumdar does not think the concern of a lower mill output is well founded.

The JCI chairman, on the other hand, is confident of developing procurement infrastructure through state-level agencies. He says the corporation has tied up with Benfed, the apex co-operative marketing agency in Bengal with 65 procurement centres in rural areas.

In Bihar, it has teamed up with BISCMF, which has nine centres. In Meghalaya, the state co-operative agency with two procurement centres will offer price support on its behalf. Negotiations for similar arrangements with agencies in Assam, Orissa and Andhra Pradesh are under way.

Majumdar, who represents the Union textile ministry through his office, allayed the jute industry’s misgivings that a dilution in the packaging order would lead to a fall in mill production and, therefore, lower procurement. He pointed out that when urea and cement were exempted from the order, mills did not produce less — on the contrary, it went up over the years — nor did procurement of raw jute suffer.

Officials of Jute Balers’ Association say the arrival of raw jute in rural markets has been delayed in the current year because of uneven growth of jute plants and erratic rains in much of north Bengal and lower Assam. These are two areas that sent their new crop to the markets before south Bengal and other jute-growing areas.

   

 
 
ISPAT IND TO GO FULL THROTTLE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, July 15: 
The turnaround in the steel sector augers well for Ispat Industries Ltd (IIL), a Mittal group flagship, which is planning to sweat its full capacity in the galvanised steel production.

Confirming the development, a company spokesperson said IIL has fared exceeding well on the export front with more than 30,000 tonnes of galvanised steel being exported to the US in the first quarter of the current financial year.

The company had exported merely 95,000 tonnes last fiscal year.

“We have orders for over 50,000 tonnes of galvanised steel as of July 1. As things stand, we should be able to surpass all previous records during the current financial year so far as the sale of galvanised steel is concerned,” he said.

The company is likely to increase its cold-roll capacity from 3 lakh tonnes to 3.8 lakh tonnes this year mostly through de-bottlenecking exercise.

IIL also plans to increase its hot-roll coil capacity from 1.5 lakh tonne per annum to 2.5 lakh tonne. IIL’s export of hot-rolled coil stood at 30,000 tonnes in the first quarter.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.84	HK $1	Rs.  6.20*
UK £1	Rs. 76.11	SW Fr 1	Rs. 32.60*
Euro	Rs. 48.73	Sing $1	Rs. 27.65*
Yen 100	Rs. 42.11	Aus $1	Rs. 27.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5315	Gold Std (10 gm)Rs. 5230
Gold 22 carat	Rs. 5020	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8525	Silver (Kg)	Rs. 8570
Silver portion	Rs. 8625	Silver portion	   NA

Stock Indices

Sensex		3278.71		-27.12
BSE-100		1648.97		-11.55
S&P CNX Nifty	1048.00		-10.25
Calcutta	 118.79		- 1.16
Skindia GDR	 513.25		+ 0.07
   
 

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