Sensex claws back to 3011
Sterlite Optical goes back on payout pledge
Sebi ready to go on the offensive
Prabhu pushes for zero duty on naphtha import
Automatic route to prepay ECBs
Santro spike stretches Hyundai shifts
E-money sole domain of banks: Panel
BoR plans to tap capital market
IOC plans naphtha unit in Tamil Nadu
Foreign Exchange, Bullion, Stock Indices

 
 
SENSEX CLAWS BACK TO 3011 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 5: 
As Mumbai mellowed in a welcome downpour, markets soaked up reports about a monsoon revival in an upsurge that saw the BSE sensex gain 26 points to claw back above the 3,000-threshold.

The 30-share index opened at 2996.89 and moved up to its intra-day high at 3018.71 before ending at 3011.35 compared with Friday’s close of 2,985.01 in a rise of 26.34 points or 0.88 per cent. The BSE-100 index also gained 12.50 points at 1514.08 — a sign that mid-cap stocks are bouncing.

Fears of the worst drought in 14 years were pushed back as the receding lakes and dams around the commercial capital welled up from heavy rains over the weekend. Weathermen predicted wetter days ahead.

There are reports of good rains in parts of Rajasthan and Maharashtra, even Uttar Pradesh and Madhya Pradesh, stirring hopes of monsoons being redeemed, officials in the weather bureau said. It is not clear how much that reassurance is worth given that twelve states have already declared a partial or full drought.

Apart from good rains, another booster was the news that the Prime Minister had cancelled all controversial petrol pump allotments and Parliamentarians were settling down to pass key Bills, dealers said.

However, market watchers said the next few days will see the indices move in a narrow range, and only a decisive thrust upwards would loosen the bear grip. “There is nothing to cheer about,” a dealer affiliated to Geojit Securities said.

Adding to the lack of confidence is speculation that Unit Trust of India (UTI) will continue to sell at higher levels, reducing the chances of a quick long-term rally. There were unconfirmed reports that it offloaded shares today.

On the other hand, fund-flushed LIC was active on bourses, showing an appetite for commodity stocks. The insurance major has bought stocks worth Rs 1,800 crore from the market since April, sources said. This has helped cushion, in part, the impact of UTI’s selling.

Today’s enthusiasm took the markets to a position where it could defy the sharp plunge on Wall Street last Friday, when the Dow Jones Industrial Average suffered a three-figure loss, and Nasdaq shed over 32 points.

FIIs also dabbled in the market, picking up shares that presented good bargains. What was more heartening was the fact that the broader indices traced the path shown by the sensex — a break from the recent trend.

The BSE-200 index closed at 364.23 against last weekend’s finish of 362.08. The BSE-500 index moved up 7.88 points to 1091.12 from its previous close of 1083.24.

However, the volume of business was sparse at Rs 981.97 crore, touching off concern over whether the rebound will hold.

Mastek was the surprise BSE chart-topper with a turnover tally of Rs 106.97 crore.

   

 
 
STERLITE OPTICAL GOES BACK ON PAYOUT PLEDGE 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 5: 
Sterlite Optical Technologies today informed stock exchanges that it was revoking a planned 80 per cent dividend because poor conditions in the optical fibre industry have made it difficult to keep the pledge.

The company said domestic and international markets for optical fibre cables continue to be ‘severely depressed’. “Sustainable recovery seems highly unlikely in the near future,” the company informed the Bombay Stock Exchange in a letter sent today.

A dividend of Rs 4 for shares with a face value of Rs 5, amounting to 80 per cent, had been announced earlier.

Explaining the reasons that forced the management to go back on its decision, the company said the prices of optical fibre and optical fibre cables have remained weak.

In the domestic market, the dramatic reduction in orders from Bharat Sanchar Nigam (BSNL) has compounded woes.

“For jelly-filled telephone cables, BSNL has pruned its tender quantity by 50 per cent. This has resulted in reduced market-share for Sterlite Optical and its subsidiaries. Also, the prices are much lower than in the previous years,” the company said.

“Considering the adverse set of factors and the need to conserve resources, the board meeting held on Monday revoked the recommendation for a dividend of Rs 4 per share (80%) for the financial year ended March 2002,” the company’s letter to exchanges said.

The company, part of the Anil Agarwal-promoted Sterlite group, had announced a net loss of Rs 14.09 crore for the quarter ended June 30, 2002 against a net profit of Rs 67.68 crore in the same period of 2001.

Total income (net of excise) dwindled from Rs 173.9 crore in the quarter ended June 30 to Rs 23.84 crore in April-June this year.

This was in sharp contrast to last quarter of 2001-2002, when it had showed no signs of weakness. It had posted a net profit of Rs 12.19 crore for quarter ended March 31, 2002 compared with Rs 79.03 crore in the corresponding period of previous year.

Total income (net of excise) stood at Rs 204.69 crore in last quarter of financial year 20001-02 compared with Rs 231.97 crore in corresponding quarter of 2000-01. Net profit was pegged at Rs 100.17 crore on a total income (net of excise) of Rs 687.58 crore for the last fiscal.

Market watchers reacted differently. While some called it a hard-nosed decision prompted by business imperatives, others said the dividend was meant for the good performance in the previous year. They dubbed it as a move that was against the interest of investors.

Curiously, the Sterlite Optical share closed a tad higher at Rs 82.15 compared with its previous close of Rs 81.60.

   

 
 
SEBI READY TO GO ON THE OFFENSIVE 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 5: 
The Securities and Exchange Board of India (Sebi) and the department of company affairs (DCA) are weighing their options on filing an appeal against the Mumbai High Court’s verdict in favour of the much denounced buy-back plan of copper maker Sterlite Industries. Sources said a decision on the issue will be taken in the next few days. The capital market regulator is going through the voluminous court order along with its legal advisors to zero in on the possible points that can be contested in the higher court.

While Sebi officials said a decision on whether to appeal or not will be taken shortly, sources in the know said the market regulator has more or less decided to appeal against the high court order.

Sterlite’s buyback envisaged purchasing up to 50 per cent of the equity capital of the company from its existing shareholders.

The twin bench of Justice A. P. Shah and Justice Mhatre ruled that Section 391 of the Companies Act 1956 which governs the company’s buyback scheme, was distinctly independent of Section 77A of the same Act. 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 was upheld by the court. However, Sebi is of the opinion that a buyback scheme comes under its preview and therefore only Section 77A of the Companies Act can deal with it.

Sebi is also likely to raise the issue of negative consent where failure to inform the company otherwise would be considered as an affirmation to the buyback plan. This, the market regulator felt, was unfair to investors.

   

 
 
PRABHU PUSHES FOR ZERO DUTY ON NAPHTHA IMPORT 
 
 
OUR SPECIAL CORRESPONDENT
 
New Delhi, Aug. 5: 
The power ministry will shortly approach the Union Cabinet with a request to extend a zero-duty regime to the import of naphtha for use as feedstock by power plants.

The move is designed to ratchet up thermal power generation to make up for the anticipated power shortfall of 24 million units during the year as a result of the slump in hydroelectric generation, following the poor monsoon in many parts of the country.

Union power minister Suresh Prabhu has already asked Prime Minister Atal Bihari Vajpayee and petroleum minister Ram Naik to make the necessary changes since naphtha pricing is still regulated.

In addition to seeking the imposition of zero duty on naphtha imports, the ministry will urge the Cabinet to allow captive power plants to commercially sell the surplus power, clear bottlenecks at various ministries that have stalled independent power projects (IPPs) and offer financial support to power plants for renovation and modernisation.

Inaugurating a conference of state power ministers here today to discuss ways to meet the growing power demand at a time when the prospect of one of the worst droughts looms large over the country, Prabhu said, “I have asked the petroleum minister and the Prime Minister to intervene and to bring down the import duty on naphtha to zero. Already, seven power generating companies that use gas to generate power have been granted an excise waiver.”

“Naphtha prices have gone up to Rs 15,000 per tonne from Rs 7,000-8,000 per tonne when the projects were cleared. So we have asked the petroleum ministry to delink naphtha prices from international crude oil prices. If the state governments also exempt it from sales tax, it will bring down the per unit power price by 20-70 paise,” a senior ministry official said.

Most states have accepted, in-principle, Prabhu’s suggestion that they allow the IPPs to sell power outside their respective states. If they have reservations because of the high costs or any other issue, power could be sold outside the state through the Power Trading Corporation.

The power ministry will also approach the agriculture ministry both at the Centre and the states to seek their co-operation for a major extension programme designed to reduce areas under water-intensive crops like paddy and sugarcane and to take up irrigated dry crops that require much less water.

“All the state power ministers who attended the conference have agreed to approach their respective agriculture ministers to co-ordinate and discuss the modalities for the proposed extension programme,” said a senior power ministry official.

   

 
 
AUTOMATIC ROUTE TO PREPAY ECBS 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 5: 
In a bid to make prepayment of outstanding external commercial borrowings (ECBs) simpler, the Reserve Bank of India (RBI) today decided to introduce an automatic route, provided two conditions are met.

This facility, which has been introduced on an experimental basis, will be available up to March 31 next year. The central bank said this move is part of its move to simplify procedures and to extend facilities under the automatic route.

Under the scheme, relaxations will be allowed only in applications where the amount of the ECB being prepaid is fully matched by a foreign exchange inflow in the company. It will also be allowed in those applications where the prepayment of ECBs is being made out of the balance held in the Export Earner’s Foreign Currency (EEFC) account of the borrower.

AT present, while the RBI considers these applications for prepayment of ECBs if these two conditions are met, it said today that this can be done without any limit.

The bank also opened the automatic route for prepayment of loans up to an amount not exceeding $ 50 million in other categories, without its prior permission.

“The Reserve Bank would, however, also expeditiously consider applications for prepayment of amounts exceeding $ 50 million, particularly in cases where such loans were contracted at interest rates significantly higher than the present rates,” it added.

In these cases, the central bank had earlier allowed prepayment of ECBs to the extent of 10 per cent of the outstanding loan, once during the entire currency of the loan and where the residual maturity of the loan does not exceed one year.

The RBI said that designated branches of authorised dealers may, accordingly, allow such remittances for prepayment after obtaining a certificate from auditors indicating that the applicant is eligible for prepayment under the automatic route, and it has availed of the ECB in accordance with all relevant Acts, regulations and guidelines.

The authorised dealers have also been asked to report all details of the prepayment to the Exchange Control Department of the RBI, within seven days of the remittance.

A new circular may be issued on or before March 31, 2003, in case the scheme needs to be extended, the RBI indicated.

Forex circles said that this relaxation has come at a time when the country’s forex reserves are scaling new highs and it now virtually close to $ 60 billion mark. “With such a huge forex position, the central bank does not mind some repatriation by corporates prepaying their ECBs,” an analyst said.

However, there are doubts on whether the central bank would extend the scheme beyond March 2003. Sources here said that RBI is unlikely to extend the facility beyond the deadline, if there were excess prepayments.

Yet, there were others who opined that at times when corporate holdings in EEFC accounts are a bare minimum following the depleting value of the dollar, today’s relaxations would not have much of an impact.

   

 
 
SANTRO SPIKE STRETCHES HYUNDAI SHIFTS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Aug. 5: 
Hyundai Motors India (HMIL) has added an hour to shifts at its Chennai factory to roll out an additional 50 cars every day in a production ramp-up that has been fuelled by a spike in demand for Santros.

Between 330 and 350 cars are manufactured daily in two-eight hour shifts. “The demand for Santros has gone up. So, we have decided to increase working hours to produce 50 more cars, mostly Santros. However, we do not plan a third shift now,” a senior company official said.

The move is seen as a precursor to turn the Indian unit into a hub from where Korea’s Hyundai Motor Company will source Santros to be sold in the global market.

Santro had 25.5 per cent of the market in the first six months of this year, up from 23.4 per cent same time last year, the official said. “People are shifting from A segment to B segment cars and the growth in Santro is mainly the result of that trend. Our growth is tied to this shift in purchase patterns,” he added.

To boost sales further, the company will provide 100 per cent financing to customers of Santro. As part of the arrangement, three-year loans will be offered by an alliance of Hyundai Finance with HDFC and ICICI. There will be no up-front payment. The financing will include registration fee, insurance and road tax, which will amount to nearly Rs 16,000-17,000. Earlier, the company financed 85 per cent of the cost of a new car.

The ex-factory price of Santro cars is Rs 3.43 lakh in Calcutta and Rs 3.53 lakh in Delhi. “We expect to see a quantum jump in sales as a result of the offer, which will be announced some time this week,” the official said.

Hyundai Motors India sold 9171 cars in July this year, fuelled largely by the growing sales of Santro. The company manufactures Accent and Sonata cars as well.

The July sales figure marked a rise of 49.2 per cent over 6,146 in July 2001. Sales of flagship Santro raced 52.05 per cent from 5041 units in July 2001. The tally for June was 2.9 per cent higher than 7449 in June 2001.

The company exported 352 units in July, up from 30 in the same month last year. For the year ended March 31, 2002, it rolled out 94,000 cars. Of this, 67,909 Santros, 17,700 Accents and 2213 Sonatas were sold in the country.

   

 
 
E-MONEY SOLE DOMAIN OF BANKS: PANEL 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 5: 
A working group on electronic money constituted by the Reserve Bank of India has recommended that multi-purpose e-money may be issued against payment of full value of central bank money or against credit only by banks. The issue of e-money on credit basis should, however, be strictly regulated and closely monitored, the group chaired by HSBC chief executive officer Zarir Cama has stated in its report submitted to the RBI.

Broadly, e-money is an electronic store of monetary value on a technical device and could be classified as pre-paid stored value card and pre-paid software based product that uses computer networks such as the internet.

The stored value card could be of three types—single-purpose card, closed-system or limited-purpose card and general-purpose or multi-purpose card.

The single-purpose card generally with a magnetic chip recording the amount of fund therein is designed to facilitate only one type of transaction that include, telephone calls, public transportation, laundry, parking facilities. Here, the distinguishing point is that the issuer and the service provider (acceptor) are identical for such cards.

The closed-system or the limited-purpose cards are generally used in a small number of well-identified points of sale within well-identified locations, such as corporate/university campuses. The multi-purpose card on the other can perform a variety of functions with several vendors, such as credit card, debit card, stored value card, identification card, repository of personal medical information among others.

Pointing out that while e-money could be used to substitute central bank notes and coins at least partially, the group recommended that multi-purpose e-money may be permitted to be issued only against payment of full value of central bank money or against credit only by the banks. The issuance of e-money on credit basis should, however, be strictly regulated and closely monitored.

The group outlined five reasons as to why only banks should be issuers of e-money, which include attributes of e-money being closure to demand liabilities of the bank and implications on velocity of circulation of money and corresponding impact on monetary statistics.

However, it added that single and limited-purpose e-money could be issued by any entity, including banks. If e-money was issued on credit, there was a possibility that issuers may assume a leveraged position and it is necessary to continuously monitor the behaviour of issuing authorities for growth of their assets and liabilities. The RBI should regulate and closely monitor the practice of issuing e-money on credit, the group said.

Entities other than banks should not be permitted to issue multi-purpose e-money and if allowed, they should conform to the seven minimum prudential requirements laid down by the European Central Bank in 1998. These are prudential supervision of issuers of e-money by the central bank, transparent legal arrangements codifying the rights and obligations of issuers, merchants, consumers and the regulators, adequate technical, organisational and procedural safeguards to prevent and detect threats to the security of e-money, protection against criminal abuse, supplying of all relevant information to the central bank for the purpose of monetary policy and the right of the central bank to impose reserve requirement on issuers of e-money.

The group said that unlike innovations in other retail payments which facilitate more efficient access to the traditional form of central bank money, e-money could have the potential to become an independent medium of exchange.

In that eventuality, two extreme views are being offered. On the one hand, one group perceives a highly technologically advanced networked world in future, where private entities may not require central bank money for settlement and, therefore, there may not be any central bank in future.

On the other hand, there is another group of academicians and practitioners who strongly believe that central banks would continue to be as effective as ever though they may be required to respond differently in the changed environment.

Keeping these developments, it was felt that it is appropriate to prepare a policy paper on e-money so that the challenges it might place in future both on the balance sheet of the central bank as also on the transmission mechanism of monetary policy are appropriately met.

   

 
 
BOR PLANS TO TAP CAPITAL MARKET 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Aug. 5: 
Bank of Rajasthan (BoR) may tap the capital markets in the next financial year.

Speaking to The Telegraph, BoR managing director K. M. Bhattacharya said, “We would like to give some dividends to our shareholders in the current financial year. We are making efforts to strengthen the financial position of the bank so that we can enter the capital market in the next year.”

The bank is controlled by the Tayals of the Sree Krishna Group who hold 38.5 per cent in it. The Jaipurias hold 14 per cent in the bank, Keshav Bangur holds 2-2.5 per cent and the rest is spread over four lakh shareholders. The Tayals have plans to increase their stake in the bank to 40 per cent. “They can do it at any moment,” Bhattacharya said.

The bank, which was taken over by the Tayals in 1998, has been able to wipe out its accumulated losses amounting to Rs 157 crore in the last financial year ending March 31, 2002. It registered a net profit of Rs 40.31 crore last year and has a capital adequacy ratio of 12.07 per cent.

It is now adopting a cautious approach to advancing loans to corporates.

“When the Tayals had taken over the non-performing assets of the bank was Rs 342 crore. We have been able to bring down it substantially. So we are a bit cautious while lending to the corporates,” Bhattacharya said. “This year we have decided to give short-term loan to blue-chip companies. If the project is fundamentally strong we will then give long-term loans,” he said.

The bank has firmed up plans to invoke the new NPA ordinance to recover bad debts. “We have identified certain units in Maharashtra and Gujarat where we will invoke the Ordinance,” he said.

The bank also plans to introduce smart cards this fiscal. “Plans have been firmed up to launch smart cards this fiscal,” he said. Retail is another area where the bank is giving more emphasis. Besides, it will take 50 of its branches online. BoR already has 50 ATMs and will add another 50 in the current financial year.

   

 
 
IOC PLANS NAPHTHA UNIT IN TAMIL NADU 
 
 
PALLAB BHATTACHARYA
 
Calcutta, Aug. 5: 
Indian Oil Corporation (IOC) plans to set up a naphtha cracker complex in Tamil Nadu. The country’s largest public sector refiner has proposed to invest around Rs 6,000 crore in the project, which includes a foreign exchange component of Rs 600 crore.

Sources said the move has been prompted by the failure to bag Indian Petrochemicals Ltd (IPCL) in the disinvestment programme. IOC had earlier planned to set up a new cracker unit along with downstream polymer plant at IPCL’s Vadodara unit.

“Moreover, the strategic investment in Haldia Petrochemicals (HPL) is also a shrouded in uncertainty even after prolonged talks. A greenfield project therefore has been considered in the southern region where there is a great demand,” they added.

IOC may rope in the Tamil Nadu Industrial Development Corporation (Tidco) as a joint venture partner for the project and has already submitted a letter of intent to Tidco. The project is expected to be complete in 48 months from the date of final investment approval, sources said.

The acquisition of IPCL would have facilitated IOC’s entry into petrochemicals, ahead of the commissioning of its Panipat refinery.

Further, IOC also plans to set up a Rs 2,000-crore para-xylene/PTA complex at either its Gujarat or Haldia refineries. The oil major, which is eyeing the lucrative petrochemical business with a Rs 4,228-crore PTA complex at Panipat, is also considering the naphtha cracker complex as a line entry, they said.

“The country is deficit in the products to be sourced from the naphtha cracker complex particularly LLDPE, HDPE and poly-propylene. Hence, the proposed project will lead to value addition and import substitution,” they said.

IOC, which has seven refineries in the country, has a huge naphtha surplus which it wants to put to good use. “Moreover, the petrochemicals business has several synergies with the company’s mainline business,” they added.

The company, however, is yet in the dark about the fate of its offer to HPL for acquiring a 26 per cent stake in it.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.64	HK $1	NA*
UK £1	Rs. 75.98	SW Fr 1	NA*
Euro	Rs. 47.94	Sing $1	NA*
Yen 100	Rs. 40.90	Aus $1	NA*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	NA	Gold Std(10 gm)	Rs. 5090
Gold 22 carat	NA	Gold 22 carat	NA
Silver bar (Kg)	NA	Silver (Kg)	Rs. 7955
Silver portion	NA	Silver portion	NA

Stock Indices

Sensex		3011.35		+ 26.34
BSE-100		1514.08		+ 12.50
S&P CNX Nifty	 963.25		+  8.50
Calcutta	  NA		  —
Skindia GDR	  NA		  —
   
 

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