Murdoch lobbies for DTH prop
Grim tidings slam stocks
Danish firm sours Dr Reddy’s plan
Lever profit edges up 8.5%
Maruti back in black, net at Rs 104 cr
Fresh loan breather for steel companies
Dhaka team coming to Calcutta for demat tips
OCBs partially blamed for stock scam
JPC nails Subramanyam
Foreign Exchange, Bullion, Stock Indices

New Delhi, July 22: 
Star TV chief Rupert Murdoch has sent his son James Murdoch to India to persuade the BJP government to relax foreign direct investment norms in the crucial direct-to-home television (DTH) segment, agree to lower licence fees and allow proprietery set-top boxes that will exclusively beam Star programmes. And it looks like the son may succeed, at least in part, where the father failed.

James Murdoch met disinvestment minister Arun Shourie today to hardsell his argument that India can garner multi-million dollar investments in the broadcast industry, including that from his father’s News Corporation if it agreed to relax the foreign direct investment cap of 20 per cent in DTH. Murdoch Jr. has already managed to win over several key allies in his campaign for Star to have direct access to Indian homes on its own terms.

Shourie, who is informally acting as Prime Minister Atal Bihari Vajpayee’s consultant and arbiter on the issue which has seen the Cabinet bitterly divided in the past, is believed to have been responsive through the 45-minute-long meeting. The meeting was deliberately kept low key, said sources.

Two ministers — Sushma Swaraj and Pramod Mahajan — are already at loggerheads over the DTH policy and Swaraj plans to introduce a different kind of set-top boxes that will monitor viewing by cable-connected homes through the Cable TV Act. If Murdoch wins the day, cable TVs and the Cable TV Act pending in Parliament may well become history.

The divestment minister on whom Vajpayee has started depending a lot while taking many key economic decisions is not the only stop which James Murdoch will make. He is also believed to be keen to meet the new finance minister, Jaswant Singh, who too will eventually play an important part in any decision taken.

Planning Commission advisors and the finance ministry top brass, privy to presentations made by Star on the issue, have come out in support of the move.

A Planning Commission note prepared after a Star TV presentation clearly states the commission favours reviewing the current policy of allowing only 20 per cent FDI out of a total of 49 per cent foreign investment, where the rest would have to be accounted for by NRIs and FIIs.

“The government should review and relax the current equity pattern for investments in DTH services,” the note states, responding to Star’s contention that DTH players should be given a level playing field with cable TV networks where 49 per cent FDI is clearly allowed.

The Planning Commission has also tacitly agreed with Star that the licence fee of 10 per cent of gross revenues is too high to charge from the nascent DTH sector. It instead plans to ask the ministry of information and broadcasting to “consider on a realistic basis and take a decision keeping in that state run Prasar Bharati should also be treated equally for operating for operating DTH service giving a level playing field to all.”

Star has pleaded that the government either allow a 5-year moratorium on licence fee payouts or accept a 10 per cent licence fee on revenues net of all statutory levies, discounts, transponder costs and programming charges.


Mumbai, July 22: 
Dalal Street, weary of the slowdown at home and accounting blow-ups abroad, could not take another wave of grim tidings today as the BSE sensex slithered below the 3,200-mark to close at 3153.34.

The selloff came on a day when nothing seemed to be going right for investors — Dr Reddy’s was dealt a drug research blow, US markets were in the throes of another plunge and scam-tarred WorldCom tanked.

The big blow was the report that Novo Nordisk was suspending clinical trials of Dr Reddy’s block-buster anti-diabetes drug. Another damper was the poor second-quarter numbers announced by Lever. And finally, it was the jitters over just how much VSNL would be scalded by WorldCom’s bankruptcy.

Analysts fear a double-whammy for VSNL — the fallout of the WorldCom disaster and the decision to slash call rates by almost 40 per cent. They feel its profit could take a 25 per cent beating.

Wall Street was felled yet again on Friday. There were no signs that things would get any better. The Dow Jones Industrial average was down 189 points, or 2.37 per cent, to 7,829 early Monday, after falling at the open and then zooming up 1 per cent.

The Nasdaq Composite Index fell 31 points, or 2.40 per cent, to 1,287, after opening lower and then stretching higher.

By 1400 GMT, the FTSE Eurotop 300 index was down 1.95 per cent at 917 points, about 9 points up from the day’s low but still within reach of the 880.63 points trough of October 1998. Asian bourses also wobbled.

The sensex opened sharply lower at 3212.83 and drifted down to its intra-day low of 3147.31 before ending at 3153.34, a loss of 76.93 points, or 2.38 per cent.

The broad-based BSE-100 index also tumbled by 39.88 points to 1591.20 from its previous close of 1631.08. The scene was no different on the National Stock Exchange, where 50-share Nifty closed at 1012, down 2.31 points. New-economy firms bore the brunt of the selloff. DRL fell by a whopping 13.8 per cent and Lever by 1.3 per cent.


Mumbai, July 22: 
In a rude setback to the dream run of the Indian pharmaceutical industry, Novo Nordisk of Denmark today announced that it was suspending trials of Ragaglitazar, the anti-diabetes drug of Dr Reddy’s Laboratories Ltd (DRL), billed by many as the test case of the India’s R&D story. The news led to the DRL scrip plummeting close to 14 per cent on the bourses.

The dual-acting insulin sensitiser Ragaglitazar (DRF 2725) was out-licensed by DRL to Novo Nordisk, for which the former received milestone payments.

According to DRL, all current clinical trials on the drug have now been stopped and all planned new clinical trials postponed, as preclinical studies by Novo Nordisk on the drug showed some adverse reaction on rats and mice. Filings for approval for this drug are likely to be delayed by close to two years as a result.

Novo Nordisk had observed “urine bladder tumours in one mouse and a number of rats treated with Ragaglitazar,” DRL told stock exchanges today.

The Hyderabad-based company however added that Novo Nordisk will continue other activities in the Ragaglitazar project “until it has completed a renewed benefit/risk assessment of Ragaglitazar. This assessment is expected to be ready by the first quarter of 2003.”

It said that carcinogenicity studies revealed tumours in rats and mice. It added that if no such mechanism is found among humans, new trials may be initiated.


Mumbai, July 22: 
Hindustan Lever (HLL) today reported a 4.13 per cent fall in its second quarter net profit at Rs 447.34 crore compared with Rs 466.59 crore in the same period last year, but the bottomline swelled 8.5 per cent to Rs 876 crore in the first-half tally.

A harder knock was the 8.91 per cent drop in sales — the second successive quarter — to Rs 2,753.27 crore from Rs 3,022.45 crore between April and June last year.

The lower profit was the result of a 61 per cent slide in exceptional income to Rs 46.87 crore, while a slimmer topline was blamed on divestments of a handful of businesses and the curtailment of traded exports.

However, analysts, expecting weaker numbers, were happy, saying the ‘profits had actually grown’. “Sales growth was actually better than what it was in the first quarter. In a declining market, it is encouraging that HLL can boast of a rise in share in select sectors,” Nihar Shah, investment analyst at ASK RJ Investment Services, said.

Chairman M. S. Banga was upbeat, telling reporters that operating profits grew 24 per cent in the second quarter. This is due to good sales growth of 5.1 per cent in power brands, led by Lifebuoy, Lux and Fair & Lovely, apart from cost management. “We have delivered strong growth and outpaced the market in personal products.”

Other fast moving consumer goods such as Colgate and Nirma are also struggling to cope with slack demand and a shift in rural markets toward cheaper products.

In the first half (January-June) however, net profit was Rs 876 crore, up 8.5 per cent from the first half of the previous year; sales fell 9.4 per cent to Rs 5052 crore.

The Lever chief said power brands generated 83 per cent of revenues from 110 products in 2001. That figure has risen to 95 percent in the second quarter, an indication that the focus on the top 30 brands is paying off.

Second quarter operating profit was up 23.7 per cent. Net profit of Rs. 447.34 crore includes exceptional income of Rs 46.87 crore (Rs 119.86 crore) arising from the profits made on sale of the company’s Diversey Lever business. Earnings Per Share (annualised) of Re.1 for the quarter amounted to Rs 8.13 (JQ 2001: Rs 8.48).

Other income declined 10.4 per cent, essentially due to the sharp fall in interest rates. The results include business restructuring cost of Rs 14.24 crore incurred and charged in the quarter (JQ 2001 charge : Rs.16.25 crore).

Soaps and detergents, Lever’s largest business, grew at the rate of 5.6 per cent. In the personal wash category, sales were up 11.6 per cent, powered largely by strong growth in Lifebuoy, Breeze, Lux and Pears brands.

Fabric wash sales grew 2.7 per cent. Surf and Wheel recorded good growth rates, but there was a decline in the case of Rin; skin care grew ate the rate of 19 per cent, helped by Fair & Lovely. Toothpaste sales looked up as Close-Up and Pepsodent recorded modest growth.

Gross margins in Beverages continued to improve and the segment registered a growth of 13.3 per cent in profit. Coffee sales were up 7.6 per cent, led by power brand Bru. In foods, gross margins improved 65 basis points. In a revelation that will warm many cockles, Lever said spending on advertising and promotions was stepped up significantly.

Modern looks up

Modern Foods, the bread maker Lever acquired from the government, reported a smart turnaround, as did the ice cream business. Calling the rebound a heartening milestone, Banga said Modern Foods was losing money equivalent to 30 per cent of its sales of until 1999.


New Delhi, July 22: 
It’s official: Maruti Udyog Ltd, the country’s largest carmaker, has clawed its way out of the red. The company has posted a net profit of Rs 104.5 crore for the year ended March 31, 2002.

Last year, it had stunned the automobile world when it reported a net loss of Rs 269 crore for the first time. In 2001-02, the company’s turnover rose by 1.7 per cent to Rs 9410.3 crore from Rs 9253.3 crore in 2000-01.

The audited results were taken on record by the company’s board on July 19. The company announced a dividend of 30 per cent to mark a turnaround in a year that saw flat car sales.

Maruti’s car sales in the period grew marginally by 1.4 per cent to 3.4 lakh units in 2001-02 from 3.35 lakh units in the year before. Car sales in the country had remained flat during 2001-02 at 5.70 lakh units over 5.67 lakh cars in the previous year.

A company spokesperson said, “Due to improved product quality across brands, the company returned to profit despite a higher depreciation provision compared with the previous year. The depreciation in 2001-02 was Rs 342.9 crore against Rs 322.3 crore in 2000-01.”

In early April, the company had announced an unaudited net profit of Rs 55 crore for 2001-02. At that time, substantial provision was made for certain excise claims against Maruti. The company had filed appeals against these claims and in the first half of April certain cases were decided in favour of Maruti Udyog.

The company attributed the turnaround to the success of its special editions of Maruti 800, Zen and Esteem.


Calcutta, July 22: 
Banks and financial institutions led by Industrial Development of Bank of India (IDBI) are working out a mechanism to offer steel companies respite from their staggering debt burden of Rs 35,000 crore.

“We are drawing up debt restructuring proposals on a case-to-case-basis. But for the industry at large, we are working out an instrument that will help when the industry goes through a downtrend,” IDBI sources said.

According to sources, the new instrument being planned will allow companies to pay a lower rate of interest in the initial years of operation and a higher rate as their products fetch better prices in the market later. “There will be a moratorium on loan repayment in the initial years. The instrument will be a combination of many things,” the sources said, adding the system is being devised to give lenders a share of prosperity.

“The instrument will benefit new plants like those of Essar Steel, Jindal Vijaynagar Steel, Ispat Industries and units which will be coming up in future,” sources said.

The industry, they said, is amenable to the idea of paying a rate that is sustainable and linked to current earnings. IDBI alone has an exposure of Rs 7,468.54 crore to the steel sector, while ICICI has lent Rs 7,080.35 crore. FIs are also considering a reduction in interest rates to 12.5-13 per cent on loans compared with the original rate of 18-19 per cent.

FI officials say the interest rates will have to be pegged at least two percentage points above the prime lending rate (PLR). With the State Bank of India’s PLR at 11 per cent — perceived as the industry benchmark — steel companies will have to pay a minimum of 12.5-13 per cent. Officials insist the rate will be sustainable, something that takes into account the industry’s cyclical nature.

However, the FI sources said there would be no loan write-offs. At most, the lenders might forego a part of interest, but the principle will be recovered with concessions.

The institutions last year approved a debt restructuring proposal, which called for cutting down the equity base of steel companies by 50 per cent, issuing cumulative redeemable preference shares, converting debt into equity and pruning the interest rates to 14 per cent. The proposal was not implemented fully.


Calcutta, July 22: 
The Calcutta Stock Exchange may be in dire straits, but it is still held in high esteem by its neighbours. The Dhaka Stock Exchange has asked the bourse to help it introduce paperless share trading in Bangladesh.

A 30-member delegation led by chairman Ahmed Iqbal Hassan will come to Calcutta next month for training on the dematerialised— or paperless—mode of trading in securities.

The Calcutta Stock Exchange received a formal request to this effect from Dhaka last week, executive director P. K. Sarkar said. CSE is preparing a training programme for the Dhaka bourse authorities.

The Calcutta Stock Exchange has contacted the two depositories in India—National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL)—for help in training members of the neighbouring country’s bourse.

Early days yet, but this could just be the break that CDSL was looking for. CDSL, which trails NSDL in the domestic turf, is fishing for opportunities of entering the neighbouring countries, except Pakistan.

This is not the first time that the capital market authorities of Bangladesh have approached the Calcutta Stock Exchange for help.

The chairman of the Securities Exchange Commission, Bangladesh, had once visited Calcutta in the past for a similar crash course.

But that was during the heydays of the country’s third largest bourse, which is now fighting for its very survival.

In its formal request sent last week, the Dhaka Stock Exchange has indicated in details what its officials and members wish to learn during their trip to Calcutta. “Not only do they want to know how the depository system works they also want us to give them some idea of the technology required to introduce it in Bangladesh,” a Calcutta Stock Exchange official said.

Under the depository system, shares can be held electronically, like money in bank accounts. Trading in the paperless mode enables companies to do away with share certificates, and also accelerates the settlement process.

Introduction of the depository system reduces the chances of graft, as investors do not have to deal in physical certificates, which can be easily forged. What is more, securities can be transferred faster through the electronic mode, and hence settlement cycles can be shortened. These benefit investors and improve the health of the market.

Trading in the dematerialised mode started in India in the end of 1996 following the enactment of the Depositories Act in August that year.

Today, more than five-and-a-half years after its launch, nearly all trades across all exchanges in the country are settled in the dematerialised mode.


New Delhi, July 22: 
The Joint Parliamentary Committee, which is investigating the multi-crore stock market scam that precipitated the equity meltdown last year, has held overseas corporate bodies—which siphoned funds out of the market—partly responsible for the scam. The report also blamed the withdrawal of about Rs 1,900 crore from the system by certain corporate groups including Reliance for the collapse of the market.

The JPC feels that the Securities and Exchange Board of India (Sebi) needs to be reformed and has pulled up the then finance secretary Ajit Kumar for his casual attitude towards the entire gamut of issues involved.

The commission also wants an investigative task force to be set up to probe Calcutta Stock Exchange’s sale of DSQ Software shares to UTI.

“A separate task force consisting of officials of the CBI, Sebi, DCA, ED and the income tax department should be constituted to go into all allegations and findings in the case of the DSQ group as well as the role and culpability of promoters, brokers and auditors, and concerned officials of UTI, SHCIL, CSE and IndusInd Bank,” the report says, adding the probe should be completed within three months.

The JPC feels that OCBs, many of which are registered in Mauritius, played an ingenious role in siphoning money out of the system and the country. It asked the RBI to ascertain exactly how much money had actually flowed out of the country’s stock markets into tax havens and estimate how much was brought in, in the first place.

The report has pointed out that the net outflow from a sample of 13 little known firms over a three-year period is a mind-boggling Rs 3,850 crore against a nominal investment.

The committee also said in its draft report that Reliance withdrew Rs 1,900 crore between February 28 and March 7 from the ALBM (automated lending and borrowing mechanism) used by the NSE and BLESS used by the Bombay Stock Exchange, besides CSE’s vyaj badla system for settling stock market accounts.

The report also criticised Sebi for its inability to realise the settlement system’s role in the market crash and its failure to fix any limit on financing of ALBM, which enabled a “single player to influence the market.”

It also held Sebi guilty of not having used its powers to curb stock market manipulations. “The track record of Sebi in punishing wrong doers on the bourses has been dismal in as much as that during its 10 years of existence, Sebi could initiate prosecution proceedings on insider trading in only one case and on fraudulent and unfair trade practices in just seven cases,” the report said. A mere seven out of 181 cases saw Sebi cancel a firm’s registration.

Consequently, the JPC has called for a 19-point reform agenda to be implemented to overhaul Sebi. It has also suggested imprisonment of up to 10 years on conviction for violation of the Sebi Act of 1992.


New Delhi, July 22: 
The JPC has stated that the then UTI chairman P.S. Subramanyam and head of UTI Bank P. J. Nayak were “substantially” responsible for the “lack of transparency” in the planned merger of UTI Bank and Global Trust Bank. The panel has demanded an independent enquiry into the aborted merger bid.

The commission also said that Nayak stood to gain personally from the merger.

“The then UTI chairman P. S. Subramanyam and chairman and managing director of UTI Bank P. J. Nayak (who stood to gain personally from the merger) are substantially responsible for the lack of transparency in UTI and UTI Bank’s decision making process and the failure to conduct a due diligence exercise,” the JPC report said.

The report has also asked the Reserve Bank of India to lay down procedures to be compulsorily followed by all banks going in for mergers.

The merger had to be aborted on increasing accusations that GTB ratcheted up prices of its shares so that the swap ratio in the planned merger would favour its promoters.

The JPC report has pointed out that the UTI board was informed of the merger decision even before the UTI Bank board took such a decision.



Foreign Exchange

US $1	Rs. 48.70		HK $1	Rs.  6.15*
UK £1	Rs. 76.72		SW Fr 1	Rs. 33.30*
Euro	Rs. 49.23		Sing $1	Rs. 27.75*
Yen 100	Rs. 41.92		Aus $1	Rs. 26.65*
*SBI TC buying rates; others are forex market closing rates


Calcutta				Bombay

Gold Std (10gm)	Rs. 5390		Gold Std(10 gm)	Rs. 5310
Gold 22 carat	Rs. 5090		Gold 22 carat	NA
Silver bar (Kg)	Rs. 8550		Silver (Kg)	Rs. 8580
Silver portion	Rs. 8650		Silver portion	NA

Stock Indices

Sensex		3153.34		- 76.93
BSE-100		1591.20		- 39.88
S&P CNX Nifty	1012.00		- 23.90
Calcutta	 116.25		-  1.75
Skindia GDR	 505.65		-  2.78

Maintained by Web Development Company