State Bank prunes deposit rates
Imported goods under MRTPC purview
Committee to review fiscal woes of states
Tisco Q1 net leaps 221%
Tyre unit stays with Kesoram
Maruti 800 gets lighter on the wallet
HDFC Bank scrip springs to life on surprise deal
Bajoria holds 6.4% in Bombay Dyeing
Dr Reddy’s setback casts shadow on R&D hopes
Foreign Exchange, Bullion, Stock Indices

Mumbai, July 23: 
State Bank of India (SBI) today slashed interest rates on domestic term deposits by 25-50 basis points across maturities with effect from July 29 in a decision likely to be followed by other banks soon.

The country’s largest bank last cut interest rates in April. The fresh reduction is a manifestation of the ample liquidity in the system, which has weighed down rates.

This move was anticipated over the past few days, but the first indication of lower deposit rates lay in the fact that large companies were raising funds from the market by issuing commercial paper (CP) at 6.5 per cent. In contrast, banks that subscribed to these instruments were paying around 7 per cent on their deposits.

In bond markets too, triple A-rated companies are now in a position to raise five-year money at 7.95-8.20 per cent — much lower than the prime lending rates (PLR) of banks. This has been attributed to the liquidity-induced slide in yields on government securities.

SBI chairman Janki Ballabh was quoted in recent weeks as saying that cost of deposits has been coming down, and that it was lower in the first quarter of the current year than it was at this time last year. He had hinted at a ‘balancing act’ — a euphemism for lower deposit rates.

Today’s revision will cover fresh domestic term deposits and renewals. The interest rate will be 25 basis points lower at 7.25 per cent on deposits of two years to less than three years; deposits of three years and above will fetch 50 basis points less at 7.50 per cent.

Interest rates on term deposits of 7 to 14 days have been brought down by 25 basis points. These deposits fetch 4.50 per cent if the amount is less than Rs one crore, and 5 per cent if the deposit is more than a crore.

However, the interest rates on term deposits of 15-45 days, 46-179 days, 180 days to less than a year and one year to less than two years will remain unchanged.

At present, the rate is 5 per cent on deposits kept for 15-45 days, 6 per cent for 46-179 days and 6.25 per cent in case of money locked for 180 days to less than a year. Bank analysts say these yields could also go down if interest rates continue to decline at the current pace.

In the case of NRE deposits, SBI said the rates would be the same as those paid on domestic term deposits. Senior citizens would get 75 basis points more on deposits that are kept with the bank for one year or more.


New Delhi, July 23: 
The Supreme Court has ruled that the Monopolies and Restrictive Trade Practices Commission (MRTPC) “can take action whenever a restrictive trade practice is carried out in India in respect of imported goods”.

A three-judge bench of Chief Justice B.N. Kirpal and Justices Y.K. Sabharwal and K.G. Balakrishnan in a judgment with far-reaching consequences also concluded that “anti-dumping provisions do not oust the jurisdiction of MRTPC”.

The apex court’s verdict has given some teeth to the MRTPC which the government wants to abolish and replace it with Competition Commission of India. Arun Jaitley, in his avatar as law minister, had stated that a new law would “soon” replace the MRTPC keeping in view the “global economic scenario”. However, Jaitley has since been replaced by Jana Krishnamurthy.

In its 50-page verdict, the judges “concluded”:

Anti dumping provisions do not per se oust the jurisdiction of MRTPC.

MRTPC can take action whenever a restrictive trade practice is carried out in India in respect of imported goods or otherwise.

MRTPC can pass an order only in respect of the Indian leg of the restrictive trade practice.

MRTPC has jurisdiction even on an agreement entered into outside India but results in a restrictive trade practice in India. This comes under the “effects doctrine”.

The judgment came on an appeal filed by Haridas Exports which challenged an injunction by MRTPC on Indonesian manufacturers of float glass for alleged predatory prices. The Supreme Court lifted the injunction on the ground that a case of restrictive trade practice was not made out.

The apex court said, “The era of protectionism is now coming to an end. The Indian industry has to gear up so as to meet the challenges from abroad. If a cartel is selling goods to India and still making a profit, then it will not be in the interest of the general body of the consumers in India to prevent the import of such goods. The remedy of the Indian industry, in such an event, is to take recourse to the provisions under the Customs Act in relation to the levy of anti-dumping duties”.

But the judges declined to go into the question “whether anti-dumping provisions in the Customs Act can be an effective remedy against such cartelisation”.

”But if the cartel carries out restrictive trade practice in India or its actions have the effect of a restrictive trade practice being carried out in India, then the MRTPC will get jurisdiction under section 37(1) of the MRTP Act,” the judges said.

They said they were not expressing any opinion on the question of “predatory prices for the reason that we are satisfied that here (in the Indonesian company’s case) no case had been made out for the grant of injunction”.


New Delhi, July 23: 
Union finance minister Jaswant Singh today accepted the proposal by the empowered committee of the state finance ministers to form a second panel that will review the precarious finances of states.

West Bengal finance minister Asim Dasgupta, who was in the capital for the meeting, said: “The finance ministers from Maharashtra, Delhi and Assam today met Singh in Parliament to apprise him of the grim financial conditions that the states face.”

Dasgupta attributed the problem to three reasons: first, the state expenditure bill on account of salaries and pension had doubled in the last five years. This was largely due to the recommendations of the Fifth Pay Commission. Second, the Central policy of passing on loans to the state at an interest rate of 12 per cent, which they themselves are raising from the market at 7 per cent, was increasing the debt burden of the states.

The third reason was the massive shortfall in the collection of taxes according to the statutory rules. “For all the states combined, the shortfall is Rs 1,00,000 crore; for West Bengal alone, the gap is Rs 766 crore,” he added.

The state empowered committee and the Union finance minister also discussed the issues relating to the introduction of a VAT (value added tax) regime from April next year.

Twenty two of the 28 states have already agreed to implement VAT. However, the states are demanding that they should be allowed to tax services and that the Central government should compensate them for any loss of revenue arising because of the introduction of VAT.

“VAT by itself is revenue augmenting, but the transitions may lead to a passing shortfall. States would like to have an assurance from the Centre in this regard,” Dasgupta said.


Mumbai, July 23: 
Tata Iron and Steel Company Ltd (Tata Steel) today announced a 221.09 percent rise in net profit to Rs 65.92 crore for the first quarter ended June 30 this year as against Rs 20.53 crore last year.

The largest private sector steel maker, which contributes almost fifth of the country’s steel requirements, attributed the rise in profits to a better product mix and said higher volume contributed to higher operating margin in the current quarter compared with the previous corresponding quarter.

Net sales increased 13.4 per cent to Rs 1,827 crore from Rs 1,611 crore in the same period last year.

Sales of cold rolled products increased to 2,67,533 MT in the current quarter as against 1,39,324 MT a year ago, increasing the market share to 27 per cent by the end of June from 21 per cent during 2001-02, the company said.

While being enthused by the growth in profits, analysts were disappointed by the slack growth in sales. Tisco said it produced 823,033 tonnes in April-June, just a wee bit higher at 0.4 per cent from the 819,939 tonnes produced a year earlier.

However, the Tisco share price floundered on the bourses as investors resorted to profit-booking, with the shares surrendering Rs 3.90 to close the day at Rs 130.20.

Analysts say the profits were a result of the company increasing prices very month since the month of April this year. There are reports of the company planning a fresh bout of price increases in the month of August. However, this could not be verified with company officials.


Calcutta, July 23: 
Kesoram Industries’ (KIL) chairman B.K. Birla has said there is no plan to spin off Birla Tyres into a separate company to lure a strategic partner.

Speaking to The Telegraph, Birla said a foreign partner not acquainted with the Indian road conditions can hardly add value to the existing technology. “Our tyre division is doing well and is a major contributor to the company’s turnover. We hope the division will see good growth in the coming quarters,” he said.

The tyre division, Birla said, had grown at a fast clip in April-June this year on the back of good demand, though its gross turnover fell to Rs 610.86 crore in 2001-02 from Rs 614.49 crore in the previous year.

However, the Birla group patriarch said he was concerned over the recession in cement. Kesoram’s cement division suffered a loss last year. “It is a major concern because cement contributed about 40 per cent to the total turnover in the previous financial year. I think the market will look up after the monsoon,” he said.

Addressing the company’s 83rd annual general meeting here today, Birla said Kesoram’s future depended considerably on the performance of the cement division.

Birla said a merger or amalgamation of three Kesoram subsidiaries—KICM Investment, Grant Properties and Softshree Estates—was being considered.

“Though nothing concrete has emerged, we think it will take two to three months to come out with a foolproof plan on amalgamation.” He indicated the arms would not be merged with the parent, but folded into each other.

As part of efforts to keep a lid on cost, Kesoram Industries is looking at various options to bring down external borrowings and interest expenses. “We are examining everything, including disposing of non-performing assets to bring down interest charges,” Birla said

Measures have been taken to reduce the interest burden, which amounted to over Rs 68.87 crore in 2001-02. The average interest paid on loans is about 12 per cent. “We are in talks with banks and financial institutions to slash interest rates on long-term debt,” Birla said.

The company is also trying to win concessions by reducing the tenure of buyers’ credit and FCNR savings to increase inflow and outflow of cash. Kesoram’s secured debts came down to Rs 436.62 crore in March, 2002 from Rs 545.06 crore in March, 2001.


New Delhi, July 23: 
Maruti Udyog today slashed the prices of the Maruti 800 — its high-selling brand — by Rs 15,000-Rs 18,000 despite rising cost of steel and raw materials.

The move comes less than a week after sales figures released by the Society for Indian Automobile Manufacturers (SIAM) showed that the runabout that changed the shape and style of driving in India had started to shift into a lower gear.

Maruti Udyog sources, however, said the price cut that will come into effect from today is ‘a leadership step to end the prolonged slowdown in the domestic car industry’.

The auto major saw a fall of 28.2 per cent to 24,982 units in the first quarter of the current fiscal compared with 34,797 units in the same period of the last one.

The new ex-showroom Delhi price of Maruti 800 standard (Euro-I) model has been reduced by Rs 18,000 (or 8.7 per cent ) to Rs 1,88,619 from Rs 2,06,619 previously. Maruti-800 (standard Euro-II) will cost Rs 15,000, or 6.7 per cent, less at Rs 2,06,419 from Rs 2,214,19 earlier. Maruti dealers in Calcutta said it will take a few days to work out new prices.

The Maruti 800 deluxe (Euro-II) model will now sport a sticker price of Rs 2,55,534 compared with Rs 2,73,534, which again implies a reduction of Rs 18,000 (6.6 per cent). In January, the company had raised prices marginally because of rising costs. At that time, the price of ‘Maruti 800 standard variant was increased Rs 3,753 (or 1.7 per cent) to Rs 2.21 lakh (ex-showroom Delhi).

The EX version witnessed a hike of Rs 8,677 that increased the price to Rs 2.52 lakh. The Maruti-800 DLX price was hiked by Rs 8,835, taking the figure to Rs 2.73 lakh.

The latest round of price cuts will see the Maruti 800 models sport lower price tags than those before the January hikes.

Officials did not say whether price cuts were being planned for the other models. In the first quarter of this fiscal, the company has seen its car sales fall by 20.2 per cent year-on-year to 54,016 cars from 67,727 cars.

In the compact segment where models like Zen, Wagon-R and Alto compete with likes of Santro, Palio and Indica, sales fell 10.52 per cent at 26,581 cars in the first quarter of 2002-03 from 29,707 cars in April-June 2001.


Mumbai, July 23: 
The fairly sleepy HDFC Bank counter today reported a block deal that saw 84 lakh shares change hands on the Bombay Stock Exchange.

Dealers tracking the HDFC Bank counter, which usually posts fairly low volumes, said eyebrows were raised as the counter saw hectic activity right from the start of trading. A record 84 lakh shares reflecting almost 3 per cent of the bank’s equity was traded on the BSE which otherwise clocks an average daily trade of 80,000-90,000 shares.

Market circles said the shares traded at an average price of Rs 217-219 per share. While hectic activity was seen on the BSE in the five minutes from the commencement of trading, the scene was completely different at the National Stock Exchange, where the HDFC Bank counter saw trades to the tune of around 90,000 shares.

Though the identity of the buyer and the seller was not known, several theories did the rounds in the market place. Dealers averred that the block deal could be a leading mutual fund exchanging the shares between its various schemes.

There was also speculation that the Chase group, which holds close to 12 per cent stake in the bank (around 3.5 crore shares) could have divested part of the equity. They pointed out that it must have been a negotiated deal, otherwise the share price would have been affected negatively if it was unloaded in the market.

Last week, the company reported better than expected first quarter results. Net profit rose 33 per cent to Rs 82.4 crore from Rs 62 crore a year ago. The bank also recorded a healthy growth in income. Immediately after the first quarter results, analysts began rerating the scrip, as it had exceeded their expectations.

HDFC Bank had said that during the quarter, it focussed on balance sheet consolidation and on increasing the proportion of retail loans in overall asset growth. As on June 30, total deposits were Rs 17,602 crore, an increase of 33 per cent over the previous comparable quarter. The bank added it has been driving retail deposit growth by providing customers a wide product range.

The success of this strategy was reflected in the savings account deposits which touched Rs 359 crore, a 61 per cent year-on-year growth.


Calcutta, July 23: 
Bombay Dyeing’s buyback programme closed on Monday with the company mopping up 18.26 lakh shares from the market, but without any success in reducing jute baron Arun Bajoria’s stake.

Bajoria, who delivered a rude shock to the promoters—Nusli Wadia and associates—in early 2000 by unveiling a 14 per cent stake in the company, continues to hold close to 25 lakh shares. This represents about 6.4 per cent of the company’s present equity capital of Rs 39.17 crore.

The promoters’ stake in the company has increased by 1.9 per cent to 42.75 per cent over the last one year. The rise in promoters’ control was due to the reduction of the company’s equity base by the number of shares bought back and extinguished.

Bajoria’s stake increased as well—albeit marginally—due to the buyback and the consequent reduction of equity capital. Most of Bajoria’s shares are held through two companies—Gyan Traders and Mega Stocks.

Gyan Traders holds 17.8 lakh shares whereas Mega Stocks holds 4.77 lakh shares. The two investment companies together hold a shade under 6 per cent. The rest of the shares are believed to be in the possession of Bajoria’s associates.

Bajoria refused to sell the shares under the buyback as he was unhappy with the offer price. Bombay Dyeing bought the shares at an average price of Rs 40.70 per share, spending Rs 7.44 crore. The company had earmarked Rs 61.5 crore as the maximum expenditure on the buyback, and Rs 60 as the maximum price it would pay per share.

Bajoria’s stake build-up in Bombay Dyeing led to a major spat between the Calcutta-based jute baron and Wadia. The promoters moved the Company Law Board and the Securities and Exchange Board of India (Sebi) alleging that Bajoria had violated the “takeover code” by not informing the company when his stake went passed the 5 per cent mark.


Mumbai, July 23: 
The suspension of clinical trials of Dr Reddy’s anti-diabetes molecule by Novo Nordisk has brought into focus the issue of whether investors have placed too much expectations on the R&D successes of domestic pharma majors while overlooking the risk aspect involved in new drug research.

Though the Dr Reddy’s counter partially recovered its losses today indicating that the markets have taken the Ragaglitazar setback in its stride, analysts now say that investors should henceforth be more careful when companies tout their new discoveries. “The discounting of Indian pharma majors will no longer factor in royalty income from molecules licensed out to multinationals like in the case of Dr Reddy’s drug. It will now be a wait and watch approach,” says an analyst.

Not very many months ago, investors were bullish on the research and other capabilities of leading domestic pharma firms and conferred them with valuations exceeding that of MNCs.

However, the reversal of fortunes vis-à-vis DRF 2725 (DRL’s anti-diabetes molecule), seems to have dented the optimism, at least partially, that research in pharma can always produce positive results. This comes even as Novo Nordisk has indicated that it will continue other activities in the Ragaglitazar project until it has completed a renewed benefit/risk assessment.

Large expectations were built around this drug with sales estimated in the region of $ 500 million in the first year of its launch. This would have added at least $ 50 million to the topline of DRL in royalty payments.

Says C. Srihari, analyst at Khandwala Securities, “The Ragaglitazar episode brings home the fact that research is an unpredictable business that has a lot of risk. Investors should therefore incorporate this element in their valuations that pharma research also involves risk of the drug not hitting the pharmacist’s shelf.”

This is not to say that confidence in the research abilities of Indian pharma companies has suffered.. Dr Reddy’s now has nine molecules in its research pipeline. Apart from two anti-diabetes drugs that were licensed to Novo Nordisk, DRF 4158 (for curing metabolic disorders), which has completed pre-clinical trials, has been licensed to Novartis. Apart from one more anti-diabetes molecule, DRL has three anti-cancer molecules which are in the clinical and late pre-clinical trial stage.

Ranbaxy Laboratories, another research powerhouse, has around five new chemical entities in the urology, respiratory and anti-bacterial segments. These companies, sources said, have already demonstrated their strength in the generic area with companies like Ranbaxy filing close to 15 abbreviated new drug applications with the US FDA with a sizeable number of these in the “first to file” generic category. DRL too recorded hefty sales from Fluoxetine, where it had obtained a six-month exclusivity last year.



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