Figure fudge and crisis within
Legal hurdles to takeover of oil pumps
Talaulicar waits for Sebi word
Regulators in a huddle
ITC pie holds key to Unit Trust health
Infotech-on-wheels plan of RailTel firmly on track
Diesel Esteem to fuel mid-size sedan rivalry
Banks in talks to set IPO floor price
ONGC strikes gas in Daman
Foreign Exchange, Bullion, Stock Indices

Aug. 9: 
India’s accountants are in denial: no one is ready to accept that the spate of accounting shenanigans that have rocked the country over the past two months have undermined the credibility of the profession.

When the accounting scams rocked America early this year, the Indian accountants were pretty sure that there would be no scandals that would shake the foundations of faith in the Indian system.

But after Xerox Modicorp’s bribes-for-contracts scandal with allegations of fictitious payments to front companies, Rolta’s padding of income by counting intra-division sales, Crisil’s report on the accounting derring-dos at over a 150 blue-chip companies, and the latest brouhaha over A.F. Ferguson’s withdrawal of its special report on the goings-on at Tata Finance, corporate India has been roiled by charges of figure fudging, rule bending and good old-fashioned sleight of hand.

Whether they like it or not, the accountants are being forced to take the rap for abandoning ethical principles at the altar of Mammon. “The track-record of corporate governance in Indian firms is not very high and the audit profession has to share the blame even if it performed its function with due care,” says Asish Bhattacharya, professor, finance and control, at IIM Calcutta.

The accountants themselves are unwilling to acknowledge that there is a crisis of credibility in their accounting statements.

“There is no crisis in accountancy. There is no loss of credibility of the profession, which has been carefully established over years,” says Ashok Chandak, president of the Institute of Chartered Accountants of India (ICAI).

“Auditors cannot change the balance-sheet. What has come to light in recent instances relates to corporate governance as a whole and is not a failure of the accounting profession,” he said.

N.D. Gupta, past president of ICAI and a practising chartered accountant, also believes there is no crisis within. Gupta has an interesting insight into why companies and accountants have been suddenly sand-bagged by a raft of revelations over accounting legerdemain.

“The economy is sluggish world-wide and that is partly to blame for the outbreak of accountancy scams,” said Gupta. “Even in India, industry has hit a downside. In such a scenario, firms are forced to resort to window dressing. And if there is a tussle within the management, then the auditors become convenient scapegoats.”

One aspect that most agree on is that the auditor should have greater independence and liberty to call a spade a spade.

Says S. Gangopadhyay, president of the Institute of Company Secretaries of India (ICSI): “Auditors should have an independent status so that they are as loyal to the public shareholders as to the promoters/ management. But the auditors appear to be more loyal to the promoters/ management than the public shareholder.


New Delhi, Aug. 9: 
The government is caught in a self-created quandary over the Prime Minister’s fiat cancelling licences of all petrol pumps and cooking gas agencies issued after January 2000 as legal complications have cropped up over the appointment of contractors who would run them after the licences are scrapped.

Petrol pump owners plan to challenge this bid by the government to take over what they describe as their property, despite the huge number of caveats that the government has filed in various high courts against any possible legal challenge to the implementation of the Prime Minister’s decision.

Legal experts say that even though the Constitution no longer enshrines the right to property, it would be “tough” for the government to take over privately-owned petrol pumps and hand them over to contractors who have to run them till they are auctioned.

The government plans to pay a “reasonable compensation” to the allottees out of the money they will earn from auctioning petrol pumps.

In fact, state-run oil companies fear that if the government does not succeed in taking over the petrol pumps and yet cancels licences, these petrol pumps could well then tie up with newly-started private petrol marketing companies which could instead use them to further their businesses.

The only petrol pumps government can safely take over, ministry officials admit, are those which are company-owned but operated by private licensees. Even in such cases, compensation will have to be paid but the legal wrangles will be easier to sort out.

In all the government has cancelled the licences of 3,718 petrol pumps, gas agencies and kerosene dealerships. The termination notices which are expected to be issued through this month, will carry a month’s eviction notice along with them.

About half of these pumps and agencies were already functional while another quarter are in various stages of being commissioned. In all some 1,740 petrol pumps, 1,764 cooking gas agencies and 214 kerosene dealerships are being cancelled.


Mumbai, Aug. 9: 
The Tatas have left J. E. Talaulicar’s fate in the hands of Securities and Exchange board of India (Sebi), which is investigating several insider trading cases in shares of Tata Finance (TFL).

Talaulicar resigned as a director of the embattled finance firm but remains on the board of Tata Sons, the group’s main holding outfit.

“The fact is you have to give the man the benefit of doubt. There is some doubt (insider trading) and what we have expressed in the report is doubt,” a source familiar with the events said.

His employers, loath to let him go by taking the hard decision themselves, are waiting for the market regulator to come to its conclusion on the charges against him.

Talaulicar has had a long stint with the Tatas in various capacities. “Here is a man who has worked with the group for over 45 years. We have asked Sebi to investigate further since we cannot clear the person.”

The report submitted to Sebi, said the source, admits the possibility of insider trading.

“The report has not cleared him. We submitted it almost eight months ago. We have asked the watchdog to investigate the matter because they have the wherewithal to do it. On our part, we have done our job.”

The source said Sebi has been informed about a host of people who were reportedly embroiled in insider trading with Tata Finance’s stock in the market. “Sebi, we understand, is doing a lot of investigation.”

Talaulicar had resigned from the board of TFL for the inquiry to proceed in an impartial manner. He had also left Niskalp Investment and Trading Company — a TFL subsidiary — as its chairman and managing director.


Mumbai, Aug. 9: 
The Department of Company Affairs (DCA) is working with Reserve Bank of India (RBI) and Sebi to get to the bottom of the row over A. F. Ferguson’s report — now withdrawn — on alleged suppression of information by the Tata Finance top-brass.

“We are holding discussions with the other regulators, and the department will finalise its action plan on TFL, including the issue of the withdrawal of the report, in a few days,” DCA secretary Vinod Dhal said.

Dhal, in Mumbai to attend a Sebi board meeting, said several aspects would have to be taken into account before deciding whether the matter merits a joint probe.

On Thursday, DCA officials indicated that they may scour TFL’s books for possible financial irregularities. This was prompted by complaints against the withdrawal of Ferguson’s damning report on the firm.


Mumbai, Aug. 9: 
Unit Trust of India’s (UTI) flagging fortunes will get a boost if it can sell the strategic stake it holds in 30-35 companies to aspiring acquirers.

Among the key companies from which it can cash out are tobacco major ITC and Larsen & Toubro — both companies hold out promise of big gains for UTI’s coffers if their shares can be sold to those who prize them most.

Merchant bankers feel the mutual fund has missed an opportunity in L&T since the A. V. Birla group already has a toehold in the company. “Why should the Birlas buy UTI’s 10 per cent stake?” they ask. Doing so would bind the Birlas to an open offer to buy an extra 20 per cent — not a good proposition at this point.

The group that has set its sights on Nalco, when it is put on the block this year, would not want to fritter away resources than can be used to snap up the state-owned firm.

Grasim officials have also denied reports about buying UTI’s stake in L&T. Even, foreign cement majors may find buying L&T, which has spread itself thin over engineering, construction and tractors, a bad idea.

“Why should they pay a premium for a company which has exposures in other sectors and which does not interest them. The presence of the Birlas will also act as a deterrent for prospective suitors,” analysts said.

Of the 1.46 crore shares in US-64’s kitty, ITC accounts for 1.2 crore. Merchant bankers say while there may be few takers for L&T, there would be many willing to fork out a fat premium for UTI’s stake in ITC.

Reports suggesting the government will finally permit UTI to sell its stake to BAT has excited the market, lighting up the share over the past few months. “The government has to allow this to happen. How does it matter, if a Indian shareholder or a foreign company keeps shares of a tobacco company,” say the merchant bankers who are smell a business opportunity.

According to others, if UTI has to sell its stake in ITC to BAT, it will entail major policy changes given that the government has denied permission to foreign tobacco companies to set up India operations in the past.

Also, the government will have to consider the political ramifications of letting financial institutions sell stakes to multinationals. However, there are some analysts who are of the view that it will be unrealistic to expect a 50 per cent premium in the current scenario.

“Cigarettes are no longer an attractive industry because of declining sales and cheap imports. So why should BAT pay a premium for acquiring a controlling stake?” they ask.

Meanwhile, UTI sources the recent divestments and the de-listing of Indian subsidiaries by foreign companies have helped the mutual fund major make money. Many of them who have bought shares owned by UTI were multinationals keen on tightening their control.


New Delhi, Aug. 9: 
Picture this a year from now—you buy your train tickets on the Net and clamber on to the train and once you are bored with the desultory talk with your travelling companions and have riffled through inane magazines, you surf the Net or call your friends in New York. And if you want your friends to see that enchanting scene out of your train, just snap away on your digital camera, download it on to the laptop and mail it to your friends.

Is that a dream or a joke? Am I having you on? If RailTel and Nitish Kumar have their way, it could change the way you and I travel in this country.

RailTel is planning a major bandwidth rollout and is applying for licences for international long distance (ILD) and national long distance (NLD) licences.

Uninterrupted mobile calls and browsing on the Net will be technically available on Indian Railways within a year at least on the four major metro routes.

RailTel Corporation of India will apply for a licence to offer national long distance (STD) and international long distance (ISD) services, that will allow Railways to offer these services and enhance its revenues and the market share it fears it could lose to airlines, which are now offering massive fare discounts.

RailTel is also aggressively pushing its bandwidth building exercise to cover the four major metros of Delhi, Calcutta, Chennai and the four mini metros —Ahmedabad, Pune, Secundrabad and Mangalore —covering 11,000 route kilometres.

The Railways is also in negotiations with cellular operators across the country to set up microwave towers and stations enroute for wider and good quality coverage.

It is setting up STM 16 equipment that can offer a bandwidth capacity of more than 2.4 gigabits per second, through a 24-strand fibre optic cable along the route. This will be spruced at every station with the installation of STM1 and STM4 equipment that can offer a bandwidth of 144 mbps and about 250 mbps respectively.

According to RailTel managing director Ashok Kumar Chopra, “We use only 2.5 mbps of bandwidth for our network; the rest is surplus. It is huge and commercial exploitation will bring in more revenue. If the demand is not there, we can always use it to provide enhanced services.”

“We will offer internet kiosks at 50-100 stations. A pilot project will be soon launched in Ludhiana-Amritsar, Baroda-Ahmedabad, Chennai-Chengalpattu sections. These kiosks will be set up on platforms where the connection will be available 24 hours at very high speeds,” said Chopra.

While he refused to divulge the details of the other enhanced services, sources in the railway ministry said, “There are a slew of value-added services that can be offered once the NLD/ILD licences are in place. We may also seek an internet service provider’s licence. Once we get that, we can offer all the value added services that the telecom operators are offering now.”

RailTel plans to earn revenue of more than Rs 1,500 crore revenue from sale of bandwidth to telecom companies. It has already made a modest beginning by earning Rs 60 lakh from the sale of bandwidth to Bharti, Hughes, Global Telesystems and Dishnet.

RailTel will award orders worth Rs 150 crore during the current financial year and expects to earn a revenue of Rs 70 crore from the sale of bandwidth to the private telecom operators.

On Friday, the company awarded its first order of Rs 26 crore for procurement of communications equipment to a consortium of electronics Corporation of India Ltd, Tejas Networks and Supreme Telecommunication Ltd.


New Delhi, Aug. 9: 
The launch of the diesel version of the Maruti Esteem—the first diesel vehicle in the C segment —is expected to spark off a slew of diesel launches in the mid-size sedan category.

After the carmakers slugged it out in the compact segment with diesel versions of the Tata Indica, Maruti Zen and Palio, it is the time for low-end mid-size sedans to provide a diesel engine option. The diesel variants have never been big hits in the country except perhaps the Indica. There were several reasons for this: the cars were costlier, they had a low resale value, and most felt that they went better with expensive cars like the Mercedes-Benz, or the upscale models like Ford Mondeo, Fiat Weekend ELX, Mitsubishi Lancer Dxi, Honda Accord VTiL and GM Astra 1.7.

This is the first time that the duel of diesel versions will hit the segment for cars that sport price tags of around Rs 5 lakh.

Yesterday, the Tatas announced the name of their new mid-size sedan —the Indigo —but gave no indication about the price tag or when it would hit the roads. The Indigo will have a 62-bhp turbo-diesel engine.

Maruti today returned fire with the launch of the Esteem diesel, which will be powered by Peugeot’s TUD5 1527 cc, 57hp diesel engine.

One market analyst said, “The diesel versions are economical but only in the long run. Very few models have the smooth, noiseless operation that is associated with a sedan. It will raise the prices of the model immediately to attain it. It is best with the models where money is not a factor, or in a segment where a little noise will not be noticed. But diesel engines in the low end-sedan category has yet to prove that is attractive.”

Honda sources confirmed that the company is looking into diesel options in the 1.3 litre City category.

General Motors sources also said, “With diesel options becoming more popular, we will also look into the diesel variants in Corsa and Swing. Astra 1.7 has a diesel engine, but we did not consider diesel engines in 1.4 litre cars previously.”

Hyundai has already announced a possibility of providing a diesel engine option in the five-door Accent that it plans to launch in September. The engine will be sourced from Mercedes Benz.


Calcutta, Aug. 9: 
Bank of Maharashtra and Central Bank of India are in talks with SBI Capital Markets and DSP Merrill Lynch to decide whether their initial public offers (IPO) should be floated on a par or at a premium.

The Calcutta-based bank Allahabad Bank is also talking to SBI Caps for managing its Rs 100-crore IPO, expected to be launched by the end of this calendar year.

Central Bank of India plans a Rs 300-crore issue, while Bank of Maharashtra intends to mop up Rs 250 crore.

Industry sources said the focus of discussions between banks and their merchant bankers have now shifted to giving the fund-mobilisation plans a final shape. “Both banks may come up with their issues by the end of the current financial year,” merchant bankers said.

However, there is a perception in the market that some of the bank IPOs in the pipeline will command a modest premium. Union Bank of India, for instance, has set a premium of Rs 6 on its share flotation this month.

“The bank’s capital adequacy ratio will increase from 9.58 per cent in March 2002 to 12 per cent after the public offer. The aim is to generate 1,00,000 crore in business by 2005-06. Risk-weighted assets are also expected to swell. The IPO is aimed at augmenting long-term resources and to meet future capital adequacy requirements,” Central Bank of India officials said.

Central Bank of India has written off its entire accumulated loss of Rs 681 crore in the last financial year, bringing down the capital base to Rs 1,124 crore. “Selling bank issues is not a problem in most cases. Nationalised banks have certain inherent strengths. One of them is huge assets, which is never reflected in their balance-sheets. The bank, therefore, can withstand any fluctuation in the market. Moreover, bank issues do not command huge premium. So, it is easily lapped up by retail investors,” merchant bankers said.

The Pune-based Bank of Maharshtra is targeting a 25 per cent growth in business, and doubling it within a span of three years. With a capital adequacy ratio of 11.16 per cent, it plans to add 25 branches to its present network of 1,222. “The bank needs fresh funds to expand business. So, it is talking to the merchant bankers on its planned flotation,” banking sources said.


Calcutta, Aug. 9: 
The Oil and Natural Gas Corporation (ONGC) has struck a huge gas reserve in the Daman offshore field, which is expected to bridge the domestic demand and supply gap to a large extent.

Sources said the gas reserve in the Daman offshore field might be in the region of around 50 billion cubic metres, one of the largest finds in the country so far. ONGC has already drilled four wells and collected substantial volumes of 3D seismic data.

“The gas reserves are likely to be bigger than whatever we had anticipated, if the data we have received is anything to go by,” they said.

India currently has a net deficit of 50 million cubic metres of gas per day. Against the total demand of 115 million cubic metres of gas per day, domestic availability currently is only 65 million cubic metres. “The Daman discovery is very encouraging and it will definitely help plug the demand-supply gap in the gas sector over a period of next five years,” they said.

ONGC will drill three more wells during the current financial year in order to get more details about the extent of gas reserves in the field. However, the amount the company will invest in its exploration programme and later in the production stage could not be ascertained. It expects the fields would yield around four million cubic metres of gas per day when production starts in another two years.

Apart from the Daman field, the company is optimistic of getting a steady flow of gas from the Vasai east field where it struck 98.5 million tonnes of oil and oil-equivalent amount of gas last year.



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