Ferguson fracas tars Tata totem
Pall over probity
Telco revs up with Indigo
VSNL hints at change in Tata Tele funding plan
Bailout of FIs in CCEA court
A-I back in black with Rs 15.4 cr profit
Avery set to wind up Calcutta factory
Union Bank to haul up defaulters
Tech stocks fall from fund managers’ grace
Foreign Exchange, Bullion, Stock Indices

 
 
FERGUSON FRACAS TARS TATA TOTEM 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 8: 

Group shares take a beating

Tata group shares took a pounding today as the markets were unnerved by the fast unfolding events in Tata Finance (TFL) controversy, which has raised key questions of corporate governance.

Leading companies from the Tata stable — Tata Steel, Tata Engineering, Tata Chemicals and Tata Tea — buckled under selling pressure from operators and a few funds, which sent the shares of these firms into a tailspin.

Tata Steel fell by a whopping 6.71 per cent to Rs 115.40 from its previous close of Rs 123.70; automobile major Tata Engineering tumbled 5.67 per cent. The unveiling of Indigo did little to stem the slide. The company, which recently made a smart turnaround, saw its scrip sliding to Rs 126.40 from its previous close of Rs 134.

It was the same story for Tata Chemicals, whose share was scraping the bottom at Rs 55.20, having descended from its previous close of 56.40. Tata Tea closed at Rs 163.45 compared with Wednesday’s finish of Rs 168.15.

The fall in Tata heavyweights occurred in a market that turned jittery over the standards of corporate governance in one of the biggest bastions of Corporate India.

“The markets have punished the stocks on issues of corporate governance,” a broker said. However, he expected the scrips to bounce back as the controversies fade into the background over the next few days.

The hammering for Tata shares came on a day the Bombay Stock Exchange (BSE) sensex plummeted 59.39 points to close below the 3000 psychological barrier at a 10-month low of 2950.09. The plunge was fuelled by selloff in old-economy stocks.

   

 
 
PALL OVER PROBITY 
 
 
OUR SPECIAL CORRESPONDENT
 
Mumbai, Aug. 8: 
Bombay House, the old stone building that houses the headquarters of several Tata companies, has always been seen as the epitome of corporate probity.

The Tatas may deny it, but that carefully crafted image looks a little battered after the controversial withdrawal of the special report that was prepared by AF Ferguson on the goings-on at Tata Finance. The controversy has raised serious questions about the levels of probity at one of the largest corporate houses in India.

Ishaat Hussain, chairman of Tata Finance and a member on the board of Tata Sons, is unperturbed by the bewildering chain of events that put the Tatas and its auditors, A.F. Ferguson, under the scanner.

“We do things the correct way, even if it hurts and is painful. In the current milieu where things are given a slant, we are concerned with only what is best and in the interest of all our stakeholders,” said Hussain.

Questions about the state of ethics at Bombay House were first raised by Union communications minister Pramod Mahajan who said there was something unethical about the Tatas’ proposal to withdraw Rs 1,200 crore from Videsh Sanchar Nigam Ltd and invest it in group company Tata Teleservices just one month after it came on board as a strategic investor in VSNL by buying a 25 per cent stake from the government.

The group’s image took a further battering when Global Data Services, a Crisil subsidiary, came out with a report that blew the whistle on some nifty accounting practices at several top companies, including Tata Steel, which had dipped into its share premium reserve to defray expenses on the redemption of its non-convertible debentures and special promissory notes.

The sheen dimmed a little more when shareholders recently questioned Tata Engineering’s write-off of over Rs 1,000 crore against its securities premium account.

With the changing times, the Tatas have turned aggressive and beat formidable rivals like Reliance Industries in the race to bag Videsh Sanchar Nigam Ltd and state-owned infotech major CMC. The aggressiveness has become even more marked when it made telecom one of the new drivers for future growth. The group also saw the old captains stepping down one-by-one and in their place new chieftains like N. Srinath and Kishore Chaukar came in.

Observers say the group became too aggressive for its own good over too short a period.

The Tatas claim that the latest row over Tata Finance had nothing to do with them. They have blamed Dilip Pendse, the former managing director of Tata Finance, for all the troubles.

   

 
 
TELCO REVS UP WITH INDIGO 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 8: 
Tata Engineering and Locomotive Company (Telco) today christened the mid-sized sedan it intends to launch between October and December, Indigo.

Priced in the range of Rs 5 lakh to Rs 7 lakh, Indigo will be the company’s vehicle to the C segment. Senior Telco officials told newspersons here today that the Indigo — touted as the most spacious and comfortable sedan in its class — will trigger renewed interest in the segment.

Powered by a 85 bhp petrol and a 62 bhp turbo-diesel engine, the car will be launched with 14-inch wheels and a first-in-class independent three link-and-strut type rear suspension with anti-roll bar — a hallmark of high-end premium cars. The car will have 500-litre trunk space and a fuel tank that can hold up to 42 litres.

According to V. Sumantran, executive director (passenger car business unit & engineering research centre) of Telco, the new engines for Indigo have been made in-house, and will be gradually fitted into other offerings as well.

Rajiv Dube, vice-president (sales & marketing) of the company’s passenger car business unit, said almost Rs 350 crore will be invested in various projects, including Indigo. Ready to make forays into the mid-size segment, Telco plans to beef up its 100-dealer network.

Initially though, the firm will try to carve a large domestic market for Indigo before selling the car overseas. Initial prototypes of the sedan are already under batch production and advanced testing at Telco’s Pune facility. The target, early on, is to roll out 1000 units every month.

Officials, confident of Indigo’s success as the country’s first indigenously developed world-class sedan, said its name had been derived from the words India and Go — symbolising a nation on the move. “It is aimed at Indians on the go, keen to make a purposeful statement and will be meant for people who exude energy, enthusiasm, ambition and the desire to succeed.”

Dube predicted Indigo’s petrol version to be a bigger draw, and said the Sport Indica will hit the road by the year-end.

   

 
 
VSNL HINTS AT CHANGE IN TATA TELE FUNDING PLAN 
 
 
OUR SPECIAL CORRESPONDENT
 
New Delhi, Aug. 8: 
The board sub-committee of Videsh Sanchar Nigam Ltd (VSNL), set up to review its plans to invest Rs 1,200 crore in Tata Teleservices (TTL), is mulling a proposal to pare the investment and spread it over a period of five years instead of four.

The original proposal had suggested that VSNL could pick up to 26 per cent in the Andhra Pradesh-based telecom company, which ran into trouble after the Union government, which holds a 25 per cent stake in VSNL, objected.

Today’s meeting of the sub-committee was attended by all four members — chairman Subodh Bhargava, Tata nominee N. Srinath, VSNL nominee S. K. Gupta and the government representative, Y.S. Bhave.

The committee is likely to draft the final proposal by Monday and then seek the approval of the Union communications minister Pramod Mahajan, who was most miffed by the Tata plan to dip into the reserves of the company within a month of coming on board as a strategic investor with a 26 per cent stake bought from the government. The Tatas raised their stake in VSNL to 45 per cent after coming out with an open offer in April.

“We may or may not meet another time. There have been many proposals from both sides; we will soon decide on them,” a member of the sub-committee said. It must complete all its deliberations by August 15.

“The final decision is scheduled to be drafted next Thursday. It has been pointed out at various meetings that the Rs 1,200 crore that the VSNL board proposes to invest in Tata Teleservices for a 20-26 per cent stake is far too high. We want it to be brought down in the absence of any valuation of TTL,” sources in the communications ministry said.

“According to our independent estimate, TTL cannot be valued at more than Rs 1,500-2000 crore; so, the investment ought not to be more than Rs 600-800 crore. We have also made it clear that the value of the company (TTL) will have to be made public as we had done for VSNL when it was disinvested,” sources added. Officials of Tata and VSNL were tight-lipped about the nature of discussions and refused to comment on the government’s demand at the sub-committee meeting.

   

 
 
BAILOUT OF FIS IN CCEA COURT 
 
 
OUR SPECIAL CORRESPONDENT
 
New Delhi, Aug 8: 
The Group of Ministers (GoM) on restructuring financial institutions, including Unit Trust of India, today decided to leave the contentious issue of a bailout package for them to a larger body—the Cabinet Committee on Economic Affairs (CCEA).

Finance minister Jaswant Singh told newspersons after a meeting of the GoM, of which Planning Commission deputy chairman K.C. Pant and disinvestment minister Arun Shourie are also members, that the group had decided to leave the issue to the CCEA.

The three institutions which need bailout packages include UTI, IFCI and Industrial Development Bank of India (IDBI) and finance ministry officials envisage that together these three would need about Rs 2,500 crore to be revived fully.

Singh said he stood by his assurance made in Parliament to make efforts to rejuvenate the Unit Trust of India, IDBI and IFCI.

“We discussed what had to be done in regard to UTI, IDBI and IFCI. We will refer this issue to the CCEA shortly,” he said.

The government has already given UTI a bailout of Rs 500 crore through a supplementary demand presented a few days back to meet the shortfall between assured repurchase price and net asset value of its flagship scheme US-64.

This, however, did not take into account the estimated Rs 1,000-1,500 crore needed to bridge the gap between its reserves and earnings and the fund need to service other schemes coming up for redemption between now and 2004.

The government had earlier tried to avoid giving UTI fresh fund infusion by simply trying to rope in more sponsors for the mutual who would instead infuse money by buying fresh equity. Besides IDBI and LIC who are UTI’s promoters, the government has managed to convince certain state-run banks to also come in with monetary support.

Besides UTI, the two other financial institutions have been in trouble after running up huge non-performing assets by lending to mega projects which have yet to be completed, as well as to the steel sector.

Much of the funds lent by it to various corporate houses have been siphoned out of projects for which they were earmarked and have been misused by promoters leading to a huge unpaid debt overhang which had pushed these two major long-term lenders into the red.

   

 
 
A-I BACK IN BLACK WITH RS 15.4 CR PROFIT 
 
 
OUR SPECIAL CORRESPONDENT
 
New Delhi, Aug 8: 
The Maharaja has finally given up his red sash for black and white livery. Air-India today announced a net profit of Rs 15.44 crore, after a string of losses over the past five years. In the last fiscal, it had announced a Rs 44.44 crore loss.

The airline’s board, which met here today, finalised the accounts and plans to dry-lease two more aircraft—a Boeing 747-400 and an Airbus A-310 to be used to fly to new thrice a week New York via Paris and to Frankfurt.

Air-India turned in an overall turnover of Rs 5,032.94 crore and an operating revenue of Rs 4,751.36 crore. The improvement in the results comes after the airline underwent a phase of business restructuring that included the offer of a voluntary separation package to its bloated staff. It drafted in fresh leased planes to fly to Europe and the Gulf.

The plan to restructure the more than Rs 5,000-crore airline was put in motion following a decision by the civil aviation ministry that it should try to improve its financials before it is once again put on the block.

An earlier bid to sell Air-India flopped as the sole bidder for the airline—the Tatas—pulled out after its partner Singapore Airlines showed reluctance in entering the Indian market in the aftermath of the September 11 attacks which hit airlines worldwide. Besides the dry leasing of planes, Air-India wants to replace some of its oldest aircraft—about another three over the next year with other leased planes.

   

 
 
AVERY SET TO WIND UP CALCUTTA FACTORY 
 
 
SUTANUKA GHOSAL
 
Calcutta, Aug. 8: 
Avery India has decided to close down its idle Hide Road factory in Calcutta, but the move has run into a wall of resistance from labour unions.

“The mechanical weighing system manufactured at the unit has become redundant. There is no point in running the factory any more. So, we have decided to close it down,” company managing director Jairaj Singh said.

The focus will now be on the Ballabgarh factory in Haryana, where the weighing-equipment company manufactures modern electronic weighing systems, 40-45 weigh-bridges and 125 petrol dispensers every month.

The Calcutta factory with 400 employees was set up in 1954. “We had given voluntary retirement to more than 300 employees. But the 60 to 70 who are left behind are refusing either to relocate or accept a VRS.”

Singh said he could not understand why the Citu union that co-operated with the management earlier is digging in now.

Chittabrata Majumdar, general secretary of Citu, said there could never be support for the closure of a factory. “We have never given any support to anybody for closing down any unit. The employees and workers of the Calcutta unit have been forced to accept VRS. Avery India also has an all-India federation, which is continuously protesting against the management’s move.”

Singh said 30 of the 70 hands that now remain at the Hyde Road unit were given the option of relocating. The rest had been offered a separation package to 40 others, but they have rejected that outright.

“They refused to accept anything. If they do not accept the VRS, we will offer them a much lower compensation package three months later. Moreover, there is a law that allows the closure of a factory with less than 100 employees within a year if it has not been in operation,” Singh added.

Avery India was a 51 per cent arm of Avery Berkel UK, snapped up recently by Weigh Tronix of the US. That has made Avery India a subsidiary of Weigh Tronix.

“Avery has grown continuously during its 90 years in India, building up a wide network of 84 sales and service branches across the country. In 2000-2001, the company recorded a turnover of more than Rs 81 crore, but suffered its first-ever loss of Rs 11 crore. This forced the decision to close the Calcutta unit, which had not been adding anything to the turnover,” Singh said.

Talking about future plans, Singh said the aim is to achieve a Rs 100-crore turnover crore in a couple of years.

   

 
 
UNION BANK TO HAUL UP DEFAULTERS 
 
 
A STAFF REPORTER
 
Calcutta, Aug. 8: 
Union Bank of India will issue notices to 30 defaulters next week for taking over their assets under the new NPA Ordinance. The total amount involved in these 30 accounts is to the tune of Rs 300 crore.

Addressing a press conference here today, M. Venugopalan, executive director of the bank said, “We will be issuing notices to 30 defaulters against whom we have not yet filed any suit. Following this, we will have to take charge of the assets within 60 days.”

The bank expects to mop up 75 per cent of the Rs 300 crore locked up in these accounts through the sale of the assets. The gross NPAs of the bank are at Rs 2,421 crore and it made a recovery of Rs 386 crore last year.

Venugopalan was in the city to talk about the bank’s initial public offer of Rs 288 crore, which will open on August 20 and close on August 28. The bank will offer 18 lakh shares of Rs 10 each at a premium of Rs 6. The issue proceeds will help the bank to augment the long-term resources and meet the future capital adequacy requirements. The CAR of the bank at present is 11.07 per cent.

Following the IPO, the government’s holding in the bank will come down by 39.2 per cent. The bank has appointed KPMG to work out a business plan. It has also tied up with Wipro and Infosys for working out a technology upgradation programme. The bank is implementing a centralised core banking solution. These branches, which will cover 60 per cent of its business, will provide anywhere and anytime banking, internet banking, mobile banking and tele-banking.

The bank is also looking into new areas of business like gold import. “We will be importing gold on a consignment basis and sell it in the domestic market. Initially we will start the business at Mumbai, Ahmedabad and Jaipur,” Venugopalan said.

The bank has launched depository services in Mumbai under a tieup with Central Depository Services Ltd and plans to extend the services to all major cities in the near future by utilising its existing wide area network facility that interconnects 54 centres across the country.

   

 
 
TECH STOCKS FALL FROM FUND MANAGERS’ GRACE 
 
 
ANIEK PAUL
 
Aug. 8: 
Samir Arora, the head of Asian emerging markets of Alliance Capital Management, manages $ 500 million in Indian and overseas funds, but admitted to having lost 40 per cent of his investments in the US in the tech melt down last year.

In a free-wheeling interview with Aniek Paul, he said he was not bothered by the loss. “What is more important is the performance of my funds. I can earn many times the amount lost in bonus and incentives if my funds perform well.”

On Indian markets…

Why can’t we stop being bearish? Indian markets are not bleeding. The foreigners are not as concerned as the Indians. Even after the MSCI downgrade, money has been consistently flowing into the Indian markets from overseas, but we Indians can’t stop being bearish.

I get some 150 telephone calls everyday from different brokers and institutions in India, but I’ve still not managed to convince them that they should stop being bearish.

On tech stocks…

There isn’t a case any more to be over-aggressive on the sector. Companies like Hero Honda are doing better than most of the leading IT firms.

Nevertheless, the Indian IT companies are still growing—albeit at a slower pace. But the ones in the US are all falling. We are still better off.

On managing investments…

I have never been fleet-footed in managing investments. In the long run, it doesn’t help. You do that at times to prove that your calls were right. But that does not add considerably to the overall returns.

All you need to do is pick the right sectors, and the right stocks within them. You don’t always get them right. I make new mistakes every day, but there are always two correct calls compensating for the one mistake I commit.

And don’t expect all the stocks in your portfolio to rally together. It would be pretty scary if that happened. When they fall, there will be none to subsidise the loss. It should be a like a relay race, where one takes off as the other cools off.

On accounting subterfuges…

In India, promoters make pocket money by manipulating the books. In the US the managers make the companies bankrupt.

Jokes apart, neither are the Indian companies as leveraged as the likes of Enron, nor are the promoters/ managers in India selling the shares they hold in the company. In the US, the managers were on a selling spree, and they had to conceal the figures to prevent the share prices from falling.

On his own investments…

My funds in India are parked in the schemes I manage. I don’t look after my investments in the US—despite the tech meltdown I did not sell a single share of Intel, which I had bought when I lived in the US.

Fund managers should never be worried about their own investments. They can always earn much more than they lose if they do their work well.

On future plans…

A friend of mine called me today to say, “The rumour about Alliance sacking you has bottomed out.” The latest rumour is I am quitting Alliance to start my own hedge fund. That’s better than being sacked…” It’s all rubbish.

People evaluate the investment manager and his team before investing. If you desert your investors, you cannot go back to them and ask for money again. I know there are no entry and exit loads these days, but investors’ money won’t follow Samir Arora wherever he goes.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.66	HK $1	Rs.  6.15*
UK £1	Rs. 74.38	SW Fr 1	Rs. 32.10*
Euro	Rs. 48.12	Sing $1	Rs. 27.20*
Yen 100	Rs. 40.24	Aus $1	Rs. 25.70*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5210	Gold Std (10 gm)Rs. 5170
Gold 22 carat	Rs. 4920	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7975	Silver (Kg)	Rs. 8035
Silver portion	Rs. 8075	Silver portion	   NA

Stock Indices

Sensex		2950.09		-59.39
BSE-100		1493.59		-27.83
S&P CNX Nifty	 953.55		-15.55
Calcutta	 108.75		- 1.81
Skindia GDR	 457.23		- 4.78
   
 

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