Oil pump auction puzzles Naik
Banks’ cash hoard with RBI swells
NBFC plea
Crisil deals rating blow to Tata Power bonds
Tatas point to flaws in Ferguson report
DCA to set sweat equity rules for unlisted firms
LML aims to ride high on motorcycles
Nitish goes full steam on fibre optic network
Cheaper WBIDC loans for sponge iron units
Foreign Exchange, Bullion, Stock Indices

New Delhi, Aug. 7: 
Petroleum minister Ram Naik feels the Prime Minister’s decision to cancel all petrol pump allotments is a ‘bold and correct’ one, but points out there will be a host of problems in implementing it and he wants Atal Bihari Vajpayee to resolve the tangle.

“Many of the allotments were made to people whose incomes were lower than Rs 2 lakh under a category which was supposed to promote self-employment; what do we do with these petrol pumps... how will people with such low incomes participate in an auction?” Naik asked.

In a conversation today, the petroleum minister pointed out the problems he would face in sorting out the tangle created by cancelling all petroleum pump allocations made since June 2000, after allegations that the BJP-led government had favoured its party functionaries and their kith and kin with petrol pump and cooking gas sales agencies of state run oil companies.

“Most of the allotments, about 50 per cent, were against various quotas — sportsmen, physically handicapped, freedom fighters, scheduled castes and tribes. How do we handle these? Do we auction them openly or only amongst people within that category? If we do that, will there be other kinds of problems or questions,” Naik asked.

“In fact, do we auction at all or do we go in for closed envelope bids? These are questions which we will have to sort out before fully implementing the PM’s decision,” the minister said. He made it clear that this would mean involving the law ministry. Even then, because of the ‘complex nature of the problems’, it might still land up on Vajpayee’s desk for a final resolution.

The minister, who made it clear that he was not considering resigning as he felt he had done no wrong or earned any graft in the alleged petrol pump scam, said these problems had been made clear to even the Prime Minister and would have to be resolved.

Naik is obviously unhappy with the decision rescinding all allotments, though both on and off record, he maintained a stoic loyalist tone towards the Prime Minister, terming his decision as both correct and ‘shirodharya’ (to be accepted gratefully).

Many other BJP ministers and MPs are smarting from Vajpayee’s abrupt decision, which they feel has indicted them as the guilty party in most people’s eyes. In fact, nearly a hundred BJP MPs will be submitting a memorandum to Vajpayee, asking him to cancel all allotments made since 1983 when the then Congress government set up oil selection boards and to probe these allotments too.

“We feel that these should also be probed as there are lots of cases of political largesse. In the interim, these allotments should be cancelled,” said Kharavela Swain, BJP MP from Orissa.

Naik, on his part, maintained such a demand by party MPs would be decided by the PM, but on a personal note, said he would be in favour of considering this demand.

Many within the BJP also see this as a battle between premier Vajpayee and others in the party leadership, including Deputy Prime Minister L. K. Advani as it was the party leadership which had all along been pressuring Naik to bend a bit and reward party loyalists by giving them or their relatives various petrol pumps and gas agencies.


Mumbai, Aug. 7: 
The surge in deposits of commercial banks over the past few months has led to sharp rise in their cash balances with the Reserve Bank of India (RBI). On a cumulative basis, the amount is now nudging close to a whopping Rs 10 lakh crore.

Figures made available by the central bank so far in this financial year have shown cash balances of scheduled commercial banks with the RBI growing leaps and bounds. The central bank’s recent statistical supplement puts them at Rs 9,17,131 crore; they hovered between Rs 70,000 crore and Rs 2 lakh crore in December.

More money kept with the RBI has meant higher interest for banks, which have used this stream of earnings to maintain modest bottomline growth — despite a decline in interest income from their own loans.

All commercial banks (except regional rural banks) are paid interest on cash balances maintained with the central bank under the cash reserve ratio (CRR) requirement.

During the first quarter of this year, State Bank of India (SBI) and ICICI Bank — the country’s two largest banks — have been boosted by a sharp increase in interest on balances with the central bank. This contributed significantly to a stronger topline. In the case of SBI, interest on balances with the apex bank shot up to Rs 840.56 from Rs 679.22 crore, a rise of 24 per cent.

For ICICI Bank, the interest income on its cash hoard with the central bank zoomed to Rs 113.76 crore from Rs 32.81 crore. However, an official from the bank said this spurt was largely due to the reverse merger of ICICI — something that pushed up reserve obligation.

Analysts have linked the strong rise in cash balances with the RBI to the burgeoning deposits of banks. At a time when much of this money has not been channelled into loans, banks have found themselves sitting on a massive pile of unused, idle money.

“With advances not showing any appreciable improvement, banks may be finding it better to park funds with the RBI and earn a reasonable interest,” an analyst said.


Mumbai, Aug. 7: 
Faced with a bleak scenario vis-à-vis the liberal funding by banks, non-banking finance companies (NBFCs) have approached the Reserve Bank of India (RBI), seeking a reduction in risk weightage to 50 from 100 for loans disbursed by banks to NBFCs engaged in financing of physical assets.

These equipment leasing and hire purchase finance companies have appealed that this relaxation be considered for their exposure to commercial transport vehicles, subject to the usual safeguards and such other standards the central bank may prescribe.

In a representation to the RBI, the Association of Leasing & Financial Services (ALFS) has said that the charge (hypothecation) on vehicles financed by hire purchase leasing companies (HPLCs) is clearly registered with the concerned RTOs, thereby ensuring security.


Mumbai, Aug. 7: 
Tata Power Company Limited received a jolt today when Crisil Ltd downgraded three of its debt programmes citing the private sector energy major’s increasing exposure to the Tata group’s telecom ventures which have a long gestation period.

“The Tata Power Company’s debenture ratings have been lowered because of the company’s increasing exposure to the Tata group’s telecom ventures, particularly Tata Teleservices Limited, where returns are only expected in the long term,” the Crisil statement said.

The Crisil downgrade means that the company will have to fork out almost 25-30 basis points more for any new bond issue, from the current 7.9 per cent for an AAA debt paper to 8.1 to 8.2 per cent. As of now, Tata Power’s exposure to the telecom sector, through Tata Teleservices and Panatone Finvest, is Rs 2,500 crore, Crisil revealed.

These investments, which have now resulted in a considerable increase in Tata Power’s net debt levels, will impact its credit protection measures because of lower accruals and due to the drying up of ample liquidity that the company enjoyed in the past.

Tata Power is committed to funding an additional Rs 500 crore of Tata Teleservices’ capital expenditure plans this fiscal. The rating change also reflects the company’s diversification plans in the power sector, which would expose it to significantly higher credit risks, either in its Mumbai licensee area or in its captive power business.

Indicating that its main concerns revolve around the company’s foray into the telecom arena, Crisil said: “Outside the power business, the company has been ramping up its exposure to group companies. Tata Power increased its fund based exposure to the Tata group by Rs 700 crore in 2001-02 besides giving guarantees of Rs 1,000 crore to Panatone Finvest and Tata Teleservices Limited”.

The revised ratings, however, find support from the stable cash flows of the license business where the regulatory regime allows Tata Power to earn clear profits on the assets invested. The company has a favourable thermal-hydel generation mix, high plant availability factors and low transmission and distribution losses, which favourably impact the company’s credit profile.


Mumbai, Aug. 7: 
The Tatas today went on a damage-control drive, telling a small band of journalists their side of the story on the Tata Finance (TFL) brouhaha.

Doing the talking was TFL chairman Ishaat Hussain, who is also a member on the Tata Sons board. “Some of the findings in the audit firm’s report on TFL was not based on facts,” the Tatas said. According to the group, the chinks in the report were noticed and pointed out to A. F. Ferguson as early as April 2002 — the time when the document was tabled before the TFL board.

After this, the audit firm decided to withdraw the report, which is believed to have criticised certain business decisions that led to huge losses at the finance company.

Ferguson, admitting on Tuesday there was some merit in the Tatas’ claim, said the report was being withdrawn.

According to Tata sources, the company disagreed with some of the facts that led Ferguson to its conclusions. The group said there was no pressure on the company, which audits many Tata group firms, to spike the draft.

The Tatas pointed to a statement made an official of Nishkalp implicating former TFL managing director D. R. Pendse. Strangely enough, this found no mention in the report.

Meanwhile, there were rumours that the entire team responsible for the Ferguson report resigned today. That included Y. M. Kale, the firm’s senior partner.


New Delhi, Aug 7: 
The department of company affairs (DCA) has formed a committee that will set guidelines for preferential allotments and the issue of sweat equity and stock options by unlisted companies.

The 12-member committee is likely to submit its report to DCA by the first or second week of September.

Market watchdog Securities Exchange Board of India (Sebi) formulates the guidelines for these in the case of the unlisted companies.

DCA intends to notify the guidelines once these are approved under Section 79 (a) of the Companies Act that deals with the conditions associated with the issuance of sweat equity shares.

The committee, headed by J.M. Verma of the Indian Institute of Management, also has a nominee of the Securities and Exchange Board of India (Sebi), official sources said here. The capital market watchdog already regulates these issues for all listed companies and its input would be vital in the case of unlisted ones.

Other members of the committee include a nominee of the Reserve Bank of India, two each from the Institute of Chartered Accountants of India and the ministry of commerce, besides DCA officials.

DCA has already been consulting Sebi for amending the pricing and other norms governing preferential allotment of shares by managements of listed companies after several irregularities were found in such allotments.

Preferential allotments were allowed to enable promoters to induct any new shareholder without the major expense of a public issue.


Calcutta, Aug. 7: 
LML Ltd, striving to take that great leap from being a staid scooter firm to a bold bike maker, wants to raise motorcycle sales to 1,50,000 units from a modest 36,000 units in the last financial year.

Having been thrown off course by a trend in which buyers are increasingly ditching scooters for motorcycles, the leading two-wheeler maker suffered a loss of Rs 80 crore in the previous financial year. Now, bikes are at the heart of an ambitious turnaround strategy that will see it setting up two assembly lines in Egypt and Colombia through joint ventures. The company has made deep inroads into the two countries.

The turnover target for the current fiscal is Rs 900 crore, up 95 per cent from last year’s sales of Rs 460 crore. “We aim to sell 1.10 lakh scooters and 1.50 lakh motor cycles during the current financial year,” LML managing director Deepak Singhania told reporters here today. It sold 1.10 lakh scooters and 36,000 motorcycles in 2001-02.

Singhania, who was in Calcutta to announce the launch of the four-stroke Freedom bike in the deluxe segment, said his company was trying to expand out of the niche segment (with Adrenal FX and Energy FX), which accounts for a measly 7 per cent of the bike market.

With the deluxe segment making up 53 per cent of the overall market, LML has been trying to ramp up sales of these motorcycles substantially over the past few months. The company has pitted Freedom against the likes of TVS Splendour, Victor, Passion and Calibre.

At the same time, LML plans to come out with a four-stroke gearless scooter some time next year. “We will launch three more models in 2003 in motorcycles and gearless scooter,” Singhania said.

The company, he said, has cornered 20 per cent of the motorcycle market in niche segment with its two models, while the share in scooters was 26 per cent. “We expect to capture 15 per cent of the market in the deluxe segment with our new bike in six to nine months.”

Singhania said LML, which was so far seen in the market as a scooter company that also manufactured motorcycles, will now be moulding itself primarily into a motorcycle maker that also manufactures scooters.

The managing director was optimistic the company’s motor-cycle gamble will pay off, saying he expected ‘exotic’ and ‘high-tech’ offerings to steal the show.


New Delhi, Aug. 7: 
Railway minister Nitish Kumar is all set to counter the threat from the Golden Quadrilateral which is fast nearing completion with its own quadrilateral. He has asked the railway board to help RailTel expedite laying of fibre optic cables to develop an efficient communications system that it plans to lease out for commercial use.

The minister seems to have put the whole issue of railway reorganisation behind him and left the administrative mechanism to take care of it. Currently, he has marshalled all his administrative forces to push forward the RailTel project and speed up the Golden Quadrilateral to meet the roadways’ challenge.

“The railway zone re-organisation is a thing of the past as far as I am concerned. I am now focussing more on development of railways and issues like RailTel and hastening the Golden Quadrilateral which will receive top priority,” Nitish Kumar said.

He, however, refused to be drawn into an argument over the recent demands by civil aviation minister Shahnawaz Hussain for a new zone in North Bengal through a reorganisation of the North East Frontier Railway and by Jharkhand Mukti Morcha leader Sibu Soren for a new Railway zone in Dhanbad. “They have not written to me and, if they do, I will reply. The issue of reorganisation of railways was not undertaken on political demands but was an administrative decision,” he said.

“The North East Frontier Railway was deliberately kept out of the preview of the reorganisation due to strategic reasons. There cannot be any review on that,” Kumar added.

The Railways is planning its Golden Quadrilateral which will mirror what the Prime Minister’s highways project plans to do — provide a high-speed transport corridor between the four metros. It has sought a multilateral funding of Rs 12,000 crore to beef up its infrastructure to ensure that it doesn’t start losing freight traffic to the roadways sector when the highways project is ready by December 2003.

At a meeting held recently, Kumar had asked the rail board to provide necessary support since RailTel will still be a 51 per cent government-owned company after it sells 49 per cent equity to its joint venture partners.


Calcutta, Aug. 7: 
(From left) Ashish Jhunjhunwala, chairman, industry sub-committee, WBIDC, Gopal Krishna, managing Impressed with the state’s buoyant iron and steel industry (sponge iron), West Bengal Industrial Development Corporation (WBIDC) has decided to cut rate on its loans to the sector by 100 basis points.

Addressing members of the Merchants Chamber of Commerce (MCC) today, WBIDC managing director Gopal Krishna said: “Last year, Rs 321 crore was invested in the state’s secondary steel companies. Suddenly, we are witnessing a lot of investment in the sector.”

Officials of the state industry department attending the meeting said there had been a 250 per cent increase in the sponge iron units between January and March this year over the corresponding period of previous year. WBIDC provides long-term loans at 13.5 per cent. “It has been decided that if the entrepreneur in the iron and steel sector repays regularly, we will reduce the interest on loans by 100 basis points within a period of six years,” the WBIDC managing director said.

In the first four months of the current financial year, the corporation received 70 loan applications for Rs 200 crore. The requests have come mainly from the iron and steel sector, edible oil, distillery and IT enabled services. The corporation is also planning to cut interest rates on its bridge loan from 15.5 per cent to 13.5 per cent. “The board will take a decision at its next meeting,” corporation officials present at the meeting said.

WBIDC has decided to disburse Rs 60 crore in 2002-03 . “In the first four months of the current fiscal, the corporation disbursed Rs 20 crore, up from Rs 11 crore for the whole of last year. WBIDC aims to lend Rs 100 annually in the next two to three years,” Gopal Krishna said.

Though much higher than its own tally in previous years, WBIDC’s disbursals fall short of the Rs 910 crore lent by Maharashtra and Rs 151 crore by Karnataka last year. The corporation is taking steps to recover non-performing assets, reported to be around Rs 38-40 crore.



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