Wipro first-quarter net dips 24% to Rs 163 cr
Spectramind in the fold
VSNL faces payment woes
Power reforms recharged
Qualis shows way for Toyota
Air-India hints at truce with Virgin Atlantic
Concern over air safety norms
New norms for route charges soon
Bata unveils 4-pronged strategy to move ahead
Foreign Exchange, Bullion, Stock Indices

 
 
WIPRO FIRST-QUARTER NET DIPS 24% TO RS 163 CR 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 19: 
Wipro today gave investors the goose-pimples when it reported a 24 per cent decline in first-quarter net profit at Rs 162.7 crore, but it offered them a reassurance by announcing better-than-expected sales.

The profit slide was blamed on a Rs 38.9-crore write-off in its internet access business, discontinued last month. “The discontinuance cost of Rs 38.9 crore has been provided for as an extraordinary loss on discontinuance of business,” it explained. Without the write-offs, which caught several analysts off guard, the bottomline would have been healthier at about Rs 202 crore.

Revenue from operations was Rs 930.2 crore, a rise of 19 per cent year on year. Analysts applauded this, given the tough market for the software services industry.

What stood out clearly in the first quarter was a volume-driven growth amid a squeeze on margins. This was reflected in price realisations, which were down by about 4.5 per cent sequentially for offshore projects and by 5.6 per cent in the case of onsite projects.

Predictably, the Wipro share shed 3.20 per cent or Rs 41.95 to close at Rs 1261.85 on the Bombay Stock Exchange.

Operating margin to revenue was 31 per cent, a fall of 5 per cent year on year and 1 per cent sequentially. A 6 per cent rise in IT professional utilisation to 66 per cent was offset by a fall in price realisations of 2.3 per cent for offshore projects and 4.4 per cent for onsite projects.

“This quarter, we saw our strategic plan translate into business initiatives,” company chairman Azim Premji said. Revenues from IT services are forecast at $ 135 million, including $ 3 million in revenues from healthcare and life science.

Vivek Paul, vice-chief and CEO of Wipro Technologies said: “Our performance was in line with expectation of strong volume growth, pricing environment and margin pressure.”

   

 
 
SPECTRAMIND IN THE FOLD 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 19: 
The price pinch did strain the bottomline, but that could not keep an upbeat Wipro from announcing the second acquisition in as many days.

Spectramind e-Services Pvt Ltd is what it is betting on, having acquired an additional 66 per cent stake for a consideration of Rs 406.9 crore in an all-cash deal today.

The buyout comes less than a day after Wipro reached an agreement to acquire the Hyderabad-based GE Medical Systems Information Technologies for Rs 28.1 crore, also in cash. It will hold 100 per cent of the company’s equity once the transaction is consummated.

Today’s deal to pick up 66 per cent in Spectramind would take Wipro’s stake in the firm to 90 per cent. That includes all outstanding shares, including convertible preference shares.

Spectramind is the country’s largest third-party provider of BPO services with a wide range of processes in production (both voice and non-voice based). It offers end-to-end solutions to a host of industries.

Its revenues for the quarter ended June 30 stood at Rs 30.9 crore and net profit at Rs 1.3 crore. It logged revenues of Rs 50 crore but suffered a loss of Rs 11.5 crore for the year ended March 2002. Revenues are expected to be $ 45 million in the current financial year, and $ 8 million in the quarter ending September. On June 30, it had seven customers and over 2700 employees.

Wipro watchers say that the two acquisitions — Spectramind and GE Medical Systems — are part of its strategy to utilise its cash reserves of around Rs 1,600 crore.

The company also announced it had bagged a $ 20-million five-year remote management contract from a British utility. Vivek Paul, vice-chairman and president of Wipro Technologies, said under the contract, Wipro would remote manage 350 heterogeneous servers, 3,200 network elements and 44 databases spread over 118 locations in the UK and Ireland. The company has named Steve Zucker, who has over two decades of experience in sales management and operations, as chief executive of infrastructure. Zucker will lead the team that bids for and executes large, multi-year complex IT infrastructure outsourcing contracts.

Wipro also acquired Healthcare Information Systems Intellectual Properties owned by GE Medical as part of the deal sealed on Thursday. It will be renamed Wipro Healthcare IT Ltd once the transaction is closed.

GE Medical Systems Information Technologies is a leading provider of healthcare IT services in India and West Asia.

   

 
 
VSNL FACES PAYMENT WOES 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 19: 
The Tata-managed Videsh Sanchar Nigam (VSNL) is likely to be in trouble if WorldCom files for bankruptcy early next week. VSNL has had close ties with WorldCom, which is one of three telecom giants that carries overseas calls from the US to India.

VSNL’s call traffic may not be affected much by the development as Worldcom will still be able to carry out its business, but its revenue stream could come under strain if the US giant stops paying its dues. Last month, the US-based international telecom carrier Worldcom admitted a $ 3.8-billion accounting fraud, the largest in US corporate history, that sparked speculation about a bankruptcy filing under Chapter 11 to shield itself from harried creditors.

While VSNL managing director S. K. Gupta was not available for comment, a senior executive in VSNL said: “ Worldcom owes VSNL only about Rs 100-150 crore for the past two months. There would not be any problems in immediate recovery of the dues if it files for bankruptcy. We cannot say anything more. Let them file for bankruptcy. We are in day-to-day negotiations with the company.”

When news of WorldCom’s travails first broke in June, VSNL officials maintained a calm profile and said they expected no trouble in securing their payments. They had expected a delay but claimed there was no danger that it would not be paid. WorldCom officials had also said they would be paying up and did in fact pay their dues.

A bankruptcy filing could, however, change all that though no one is willing to hazard a guess. VSNL faced similar troubles — though not on the same scale — when Iridium, the Motorola-managed satellite communications company, went belly up in August 2000. VSNL was one of the agencies in the combine that funded Iridium and it is still not known how much of that investment has been recovered.

However, WorldCom is associated with VSNL’s bread-and-butter business — overseas call traffic. It is the second-largest long distance telephone service provider in the US and has been one of VSNL’s partners along with Sprint and AT&T in the US.

VSNL’s overseas call revenue hinges on the back-to-back arrangements it has with Worldcom and the others in the US and BSNL and MTNL in India. VSNL has a tie-up with three carriers in US — WorldCom, AT&T and Sprint.

“On an average, all three carry the same amount of traffic. WorldCom used to be higher at 50 per cent but now it is down to about 35-40 per cent as the other two have come up with attractive packages for their customers,” said a senior VSNL executive.

   

 
 
POWER REFORMS RECHARGED 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 19: 
Banks and financial institutions have agreed to fund commercially viable power projects in the country, an assurance that will provide a spur to the power sectors reforms in the country.

Power minister Suresh Prabhu today held talks in Mumbai with Reserve Bank Governor Bimal Jalan on this issue. Jalan gave the categorical assurance that “the banking and financial sector is capable and have enough resources to fund any power project considered commercially viable”.

Prabhu, who was accompanied at the talks by power secretary R.V Shahi and special secretary power Sisodiya, has been eager to push ahead with power sector reforms that have been stalled after a few dramatic exits by leading US energy giants, notably Enron.

The ministry has already started setting certain ground rules for state funding of power sector reforms. For starters, power distribution companies (distcoms) that seek loans/grants under the Accelerated Power Development Reform Programme (APRDP) will have to pass on the benefit to consumers in the form of lower tariffs.

The private power distribution companies and the government-owned distcoms can draw funds the APRDP corpus. To strengthen this scheme, a proposal has been made to the finance ministry to make the APDRP fund non-lapsable as recommended by the Deepak Parekh committee report.

A senior power ministry official said an incentive scheme has been approved for SEBs to reduce cash losses. The financial year 2000-01 has been identified as the base year for reviewing performance of SEBs and improvements thereon will be incentivised.

The reduction in cash losses will be determined net of tariff increases,additional generation/import of power and additional cost of inputs. This scheme is expected to motivate not only utilities but also state governments to sustain and accelerate the reform process and turn around the SEBs in the next 3-5 years.

The incentive will be on a one-to-one matching basis. The SEBs can utilise this incentive to meet their liabilities, establish pension funds, voluntary retirement scheme (VRS), interest liability and supplement internal resources for undertaking capital expenditure in strengthening of sub-transmission and distribution networks

Earlier this week, while reviewing the performance of APDRP monitoring committee, power minister Suresh Prabhu approved sub-transmission and distribution project proposals worth Rs 1,196 crore covering 105 towns all over the country. The APDRP fund component in this would be about Rs 654 crore.

The Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) would provide matching funds as loans if the state government or the utilities are unable to raise funds on their own or through their internal resources.

   

 
 
QUALIS SHOWS WAY FOR TOYOTA 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, July 19: 
With more and more takers for the Qualis way of life, Toyota is all set to ramp up capacity at its Bidadi plant—from the existing 25,000 cars a day to 50,000 cars by September—to accommodate the all new mid-size sedan it plans to start manufacturing early next year.

Thanks to the strong showing by the Qualis, a multi-utility vehicle, Toyota is also drawing up plans to set up a second plant exclusively for sedans by 2005, with a capacity of 100,000 units. Investment in the new plant is expected to be in the region of $ 400-$ 500 million.

Highly placed company officials said, “The mid-size model to be manufactured in India will be based on the Corolla or the Corona, both of which are well established sedans in the international market. But it will not be an exact replica of the overseas models. We will have to alter the models and make it unique to the Indian market.”

The sedan will also boast a brand new name chosen specially for the Indian market. “We chose the name Qualis a day before the car was launched; for this new model, the brainstorming session is still on,” said the officials. The Corolla is Toyota’s best-selling model across the globe.

“The amount to be invested was decided at the time that Toyota entered India. It was a part of the MoU we signed with the Government of India. But we were not sure where we would invest the amount. As the Indian car market has matured, the demand for multi-utility vehicles has soared. To meet this demand, the Bidadi plant will be used to only manufacture MPVs and MUVs. We will set up a separate sedan-making unit by 2005. The plant will have a capacity of 100,000 cars a year.

   

 
 
AIR-INDIA HINTS AT TRUCE WITH VIRGIN ATLANTIC 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 19: 
Civil aviation minister Syed Shahnawaz Hussain today said Air-India could give the Richard Branson-owned Virgin Atlantic a third flight every week out of its allotted quota of flights to the UK to resolve the row between the two airlines, but would not succumb to any “blackmail.”

Speaking at an international aviation conference organised by the Confederation of Indian Industry (CII), Hussain said Virgin had sent him a letter on Thursday asking for three flights a week, a climb down from their earlier demand for seven flights a week.

“One day Virgin says they are pulling out and another day they change their mind. We don’t want Virgin Atlantic to go... But we will not give in to blackmail,” the minister said.

Virgin had given notice to Air-India several months back of its intention to terminate its deal with the Indian carrier under which it flies twice a week to India using Air-India’s quota of bilateral flight rights. But on Thursday the airline also said it would stay on in India and try to get more flights out of any increase in flights that the UK manages to wrest in bilateral talks with India next month.

But Shahnawaz made it very clear that Britain’s demands for an increase in its flight entitlements under the bilateral agreement would depend entirely on Indian carriers getting more slots at Heathrow airport at the right time.

“Bilaterals cannot be one-sided. When we ask for Heathrow slots, the British say it is a separate issue handled by an independent company. We can also say the same and claim that the Airports Authority is an independent body, since, after all, it is so,” the minister pointed out.

Besides Virgin, British Airways currently flies some 18 flights a week to India, including seven each to Delhi and Mumbai and two each to Calcutta and Chennai. The airline has demanded a doubling of this number but is likely to settle for another four to five flights with landing rights at Bangalore thrown in.

Air-India, on its part, wants to increase its number of flights to about 14 a week from the current 11 by this winter, when it would have taken on board new leased planes. It hopes to increase this number to 21 in a couple of years, which is why it is not keen that Virgin be given any more entitlements out of its quota.

While A-I does not need to get more flights through the bilateral route for this winter’s schedule as it has still to fully use up its allotment of 16 flights a week, it will need to get them for its planned increase within a period of two years. It also wants to fly directly to London from hinterland cities like Ahmedabad, Cochin and Chennai.

Hussain, who also announced that the long-awaited Civil Aviation Policy would be sent to the Cabinet soon, ruled out an Open Sky Policy, but added his ministry, in conjunction with the external affairs and tourism ministries, would come out with a “very broad-minded policy” to address region-wise air traffic requirements. “Open skies are all right for countries with one airport, not for India where there are so many airports.”

   

 
 
CONCERN OVER AIR SAFETY NORMS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 19: 
The Planning Commission today expressed the importance of setting up a legal group to study international practices in order to improve the country’s safety and regulatory records in the field of civil aviation.

Addressing an international conference on aviation conducted by CII, N. K. Singh, member, Planning Commission, said: “I would like the CII to take the initiative of setting up a legal team to study international practices. This would assess the requirement of a regulatory framework and the changes needed in the field of aviation, which would be a great help to the Director General of Civil Aviation.”

Speaking on the issue of reforms in the aviation sector, Singh admitted, “I think the reform process in civil aviation was halting, stalled and disappointing. Of course, some reforms were stalled due to various reasons.”

Addressing the conference, Singh said no clear time-frame had been set to bring about legislative amendments. He added that a Cabinet note would be put up after the Airports Authority Act is amended. Singh said issues need to be defined and obligations laid down before handing over airports to private operators.

On being questioned about the issue of privatisation of both Indian Airlines and Air-India, Singh said. “I consciously do not know whether the issue of privatisation of both these airlines remains in the forefront or on the backburner”. He indicated that the exercise had not moved fast enough.

The need to replace obsolete aircraft was also one of the key concerns expressed at the conference. “It is the right time for the government to re-trigger the process,” Singh said.

The exercise will require adequate analytical data and the government will have to decide whether to undertake the task or not. Also, the amount of investment needed has to be well-calculated.

Stressing on the existing fiscal framework, Singh said, “The existing framework is overtaxed and overburdened. Also, the logic and rationale is not very clear about aviation and taxation of aviation turbine fuel”.

   

 
 
NEW NORMS FOR ROUTE CHARGES SOON 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 19: 
Airlines stand to benefit from a new formula to calculate Route Navigation Flying Charges (RNFC), based on the weight of the plane and the distance travelled. The civil aviation ministry has decided to introduce the new formula from October 1.

At present, the RNFC, which is charged by the Airports Authority of India (AAI), takes into account only the weight of the planes and charges it on the basis of the number of landings on its routes.

“Overall, navigational charges for domestic flights will go down by about 20-25 per cent, but rise in the case of planes that fly long distances,” said V. Subramanian, joint secretary and financial advisor in the ministry of civil aviation.

The new formula will be applicable to all aircraft and all airlines. He added that world-wide, weight and distance are both considered for navigation charges, though some countries still consider only the weight of the plane.

Subramanian said it was entirely up to the airline to decide whether to pass on the benefit of reduced navigational charges to the passengers. The government will not stipulate anything in this matter. Industry sources said RNFC was a very small component of airline costs.

Subramanian said major gainers of the new formula would be the hopping flights of domestic airlines as well as flights of neighbouring countries.

However, he clarified that the money that AAI was earning through this charge would remain the same, as the increase in some cases would be offset by the decrease in others.

   

 
 
BATA UNVEILS 4-PRONGED STRATEGY TO MOVE AHEAD 
 
 
FROM SUTANUKA GHOSAL
 
Batanagar, July 19: 
Having suffered a net loss of Rs 4.22 crore in the first quarter and with regional brands breathing down its neck, Bata India Limited (BIL) has chalked out a four-pronged strategy to boost its bottomline.

Addressing a press conference here today, managing director Fernando Garcia said, “We have adopted up some new initiatives for the second season. These are store profile classification, branded programmes, new product development and introducing new products every week.”

But the company declined to give an estimate of the sales volumes that the new initiatives were likely to generate.

Garcia said with the world shrinking into a global village, Indian consumers now aspire for international tastes and styles. “Hence we have tried to create a convergence of sorts in order to meet the demands of various consumers,” Garcia added.

The company will introduce three new models—’Wind’ and ‘Flexible’ shoes for men and ‘Comfort’ for women—from Bata’s Weinbrenner range of products.

Bata Wind, which has an in-built air circulation technology, has been priced at Rs 1,199. Flexible, the other model has been priced at Rs 1,399. “Both these shoes will hit the market before the Pujas,” said Subrata Chakraborty, vice-president of Bata India.

Frances Ferraris, general manager product research and development said, “In the next few months, we will be coming up with many such new models. We might also export these products.”

Bata India has also come up with new products for kids under its Bubble Gummers range of products. All these products will hit the market this year.

“Understanding local needs has been one of the most challenging tasks. And to make things easier for consumers, we have introduced the concept of store classification and sub-divided stores into flagship, city, family and bazaar stores,” Garcia said.

Flagship outlets, or those located in the heart of leading metros, will host a wide array of products that include premium and imported brands. On the other hand, city stores are located in metros/semi-metros and cater to fashion-oriented middle and high-income consumers.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.73	HK $1	Rs.  6.20*
UK £1	Rs. 76.93	SW Fr 1	Rs. 33.35*
Euro	Rs. 49.46	Sing $1	Rs. 27.75*
Yen 100	Rs. 41.99	Aus $1	Rs. 26.75*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5320	Gold Std (10 gm)NA
Gold 22 carat	Rs. 5025	Gold 22 carat	NA
Silver bar (Kg)	Rs. 8475	Silver (Kg)	NA
Silver portion	Rs. 8575	Silver portion	NA

Stock Indices

Sensex		3230.27		-15.47
BSE-100		1631.08		- 8.57
S&P CNX Nifty	1035.90		- 5.40
Calcutta	 118.00		+ 0.39
Skindia GDR	 508.43		- 2.26
   
 

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