UTI gets another Rs 500-crore prop
Sen quits IIBI, Samal takes charge for now
Sardas offer for BSL at Rs 80 apiece
Govt mulls auction route for oil pump sale
IBM prefers to give secrets away
PNB Capital Services to be wound up
Bangla duty on yarn sours south Asian trade meet
Banks told to hedge farm credit pitfalls
Padamsee to help Rupa go global
Foreign Exchange, Bullion, Stock Indices

 
 
UTI GETS ANOTHER RS 500-CRORE PROP 
 
 
OUR SPECIAL CORRESPONDENT
 
New Delhi, Aug. 12: 
The government today decided to hand out another Rs 500 crore to Unit Trust of India (UTI), the troubled mutual fund institution which has been pressing for bailout funds either from the government or from its sponsors, that include financial institutions like IDBI and LIC.

This will come on top of the Rs 500 crore that the government promised to give the institution when the Lok Sabha last week passed the supplementary grants. There is no indication that the total quantum of assistance will be limited to Rs 1,000 crore. With the other FIs reluctant to shovel funds into UTI because of their own problems, the government has had to step in.

While the finance ministry believes a total bailout package ranging between Rs 1,000-1,500 crore should suffice, UTI has been demanding up to Rs 5,000 crore. UTI chairman M. Damodaran held a four-hour-long meeting here today with finance ministry officials to work out details of the package.

Government officials, however, point out that they have also secured for UTI a cheap government-guaranteed line of credit worth Rs 4,000 crore from a consortium of banks, which could also be used to prop up the mutual fund major.

However, UTI does not wish to borrow at 9 per cent — the rate at which banks want to lend — to it, but at 8 per cent.

Damodaran refused to comment on the package, but said the fund would launch two schemes — a regular income scheme and another variable investment scheme — by this month-end.

“We have received Sebi approval for the two schemes. The offer documents are under print and we will launch them by the end of August,” he said.

Today’s meeting followed a group of ministers’ (GoM) meeting last week to decide on the fate of UTI, IDBI and IFCI. The GoM, headed by finance minister Jaswant Singh, has already endorsed the proposal to assist struggling development financial institutions, especially UTI.

The proposals of the GoM will now be considered by the Cabinet Committee on Economic Affairs (CCEA) for approval.

UTI has negative reserves of Rs 3,700 crore besides obligations to pay out about Rs 900 crore for two of its monthly income plan schemes maturing this year.

The government had earlier tried to avoid a fresh fund infusion into UTI by simply trying to rope in more sponsors who would infuse money by buying fresh equity. Besides IDBI and LIC, who are UTI’s promoters, the government had been pressuring certain state-run banks to come up with monetary support.

But the problem for the government is that it has to also plan bailout for two other financial institutions — IFCI and IDBI — which are in trouble after running up huge non-performing assets by lending to mega projects that have yet to be completed as well as to the steel sector.

   

 
 
SEN QUITS IIBI, SAMAL TAKES CHARGE FOR NOW 
 
 
A STAFF REPORTER
 
Calcutta, Aug. 12: 
Basudeb Sen, chairman and managing director of the Calcutta-based Industrial Investment Bank of India (IIBI), has resigned.

The Union finance ministry has asked Allahabad Bank chairman B. Samal to take additional charge as chairman and managing director of IIBI with effect from today till a new chairman is appointed or till further orders.

When contacted, Samal confirmed the news and said, “I have been appointed as the acting chairman of IIBI and will have to handle dual responsibilities now. However, the executive directors of Allahabad Bank will help me in carrying out the day-to-day operations.”

Efforts were made to reach Basudeb Sen but he could not be contacted.

Sen joined IIBI in 2000, after working for 30 years in various executive capacities in different institutions. He had been with the United Bank of India for over six years, Coal India for five years, IDBI for 10 years and Unit Trust of India (UTI) for more than eight years. In UTI he held the executive director’s position for three years.

After Sen took charge at IIBI, the financial institution became focussed on extracting the best value from the poor quality assets inherited from the erstwhile Industrial Reconstruction Bank of India (IRBI). In fact, the inheritance of sticky assets, had made IIBI financially weak since its inception. On different occasions, Sen had said that over the next two years, capital infusion and change in capital structure would have to be pursued.

Insiders say considerable progress has been made in changing the internal dynamics threatening IIBI’s sustainability.

   

 
 
SARDAS OFFER FOR BSL AT RS 80 APIECE 
 
 
A STAFF REPORTER
 
Calcutta, Aug. 12: 
The Sardas, who have been stalking BSL for close to five months, today played their hand by unveiling an open offer to acquire a 30 per cent stake in the company at a price of Rs 80 per share.

Ghanshyamdas Sarda, another jute baron-turned-corporate raider, has roped in Kailash Agarwal, a Dubai-based textile trader of Indian origin to back his bid. Agarwal’s role isn’t clear, nor is it known how much he will hold if the Sardas pull off their hostile takeover bid, which is the first in this part of the country for a long time.

Arun Bajoria had acquired a 6 per cent stake in Bombay Dyeing, sending a frission of excitement through the market last year, but then he backed off from making an open offer, leaving the Wadias unscathed.

The Sardas already hold a 11.86 per cent stake in BSL—the textile major formerly known as Bhilwara Synthetics Ltd—through market purchases. The Sardas are now seeking management control of the firm.

The promoters of the company — the Churiwals and Jhunjhunwalas — did not respond to queries from the media. They hold 36.78 per cent of BSL’s shares, but sources close to the families say their actual control exceeds their declared stake.

The Calcutta-based Rs 1,000-crore Sarda group controls at least seven jute mills, but most of them indirectly.

The offer is being made through the group’s flagship, Kolmak Chemicals. On Monday, the BSL stock closed at Rs 58.25 on the Calcutta Stock Exchange.

“We are offering a handsome premium on the market price. We expect the offer to be fully subscribed,” Ghanshyam Sarda said. SBI Caps is managing the offer.

The Sardas filed the offer with the Securities and Exchange Board of India (Sebi) today. The decision to make the offer was formally taken by Kolmak Chemicals’ board on Friday.

“If we gain control of BSL, we intend to make substantial investments—up to Rs 100 crore—in the company to revive it and expand its reach. Agarwal was roped in to help us gain access to the textile market in West Asia,” Sarda added.

If the Sardas succeed in gaining management control of BSL, it would be their ninth straight takeover. They gained prominence by acquiring Kolmak Chemicals from Indian Oxygen and a jute mill from the R. P. Goenka group in the late 80s.

“Since then their business has grown in leaps and bounds — but mostly through acquisitions, in which they have never been directly involved. The Sardas would, hence, refuse to name the mills they control,” seniors in the jute industry said.

Asked what Agarwal’s stake would be if the combine gained control of the company, Sarda said: “It’s not clear yet. We are partners in the deal, but we haven’t decided yet how much he will hold.”

   

 
 
GOVT MULLS AUCTION ROUTE FOR OIL PUMP SALE 
 
 
JAYANTA ROY CHOWDHURY
 
New Delhi, Aug. 12: 
Stung by the controversy, the BJP government is now planning to change the way petrol pumps are awarded or sold. It now wants state-run oil companies to auction all petrol pumps in future while retaining reservations meant for weaker sections like scheduled castes and tribes.

“Auctions will be held within a specified group and, if necessary, even within an income group,” top petroleum ministry officials said.

This would mean there would be separate auctions from among scheduled castes and tribes for certain earmarked pumps and another lot of auction for the physically handicapped.

The latest decision is obviously because of the bad press that the BJP government got after newspapers highlighted stories of party functionaries cornering most petrol pump allotments in key states.

Top sources said the new plan has been given shape after consultations with the Prime Minister’s Office which has been taking a pro-active role in ”scotching the entire controversy.”

Another reason for taking this decision is the spate of queries that the government is getting from oil companies that were forming their own selection boards to replace the dealer selection boards which had been dissolved by a government fiat.

Oil company top brass had, in fact, met and finalised a set of guidelines for their internal dealer selection boards. The oil companies had decided that local boards will have four members. While the chairman will be from the leading oil company in that area, the other three members will be drawn from the other state-run petroleum firms.

However, the petroleum ministry officials f3eel that it would be easier for local politicians to manipulate such boards and therefore should not be set up.

   

 
 
IBM PREFERS TO GIVE SECRETS AWAY 
 
 
OUR CORRESPONDENT
 
New Delhi, Aug 12: 
Big Blue — IBM — is throwing its weight behind software suites like Linux, which freely give out their software source codes to computer programmers.

New York-based IBM’s decision to back open source standards is a big blow for Microsoft that has been trying to rally the world behind proprietary systems and software where the source codes are jealously guarded.

“Linux is an integral part of IBM’s strategy,” said Michael Lawrie, senior vice-president and group executive (sales and distribution) of IBM Corporation. “We have worked with various governments world-wide, and are seeing a shift towards Linux around the world.”

IBM is giving a thrust to its Linux-initiative in India by setting up a world-class high-performance computing laboratory in association with Centre for Development of Advanced Computing (C-Dac).

It will use Linux-ready platforms from IBM and develop applications and research in e-governance solutions, life sciences, seismic analysis and weather forecasting. The laboratory will be established at C-Dac’s Knowledge Park in Bangalore by the end of the year.

“This is a very significant step forward in IBM’s e-governance initiatives in India and our continued commitment to open source with Linux,” Lawrie said. A senior IBM executive said about 90 per cent of IT companies will concentrate on open source software since that is what companies and governments are demanding.

The battle between open source and proprietary software has been raging for quite sometime, championed by Linus Torvald, the software evangelist behind Linux, and Bill Gates, the founder of Microsoft.

Microsoft is the world’s biggest software maker and has been a strong votary of proprietary software, which makes sure that computer users stay with it and pay for the regular upgrades.

Open source, on the other hand, is like a Napster on a huge scale — where computer programmers can swap codes and ideas to develop software programmes.

One of the biggest early champions of open source was Sun Microsystems, which gave out its Java software for free in the early nineties.

   

 
 
PNB CAPITAL SERVICES TO BE WOUND UP 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 12: 
Punjab National Bank (PNB) has decided to close down PNB Capital Services, its wholly owned subsidiary. Formalities required for closure will be completed in a ‘time-bound manner’, the bank said in a notice sent to the Bombay Stock Exchange today.

The decision comes after the bank made futile attempts to rope in a partner who could nurture the subsidiary, and help it shake off the ‘laggard’ label quickly.

The Delhi-based Punjab National Bank indicated earlier that it would offer a majority stake in two of its subsidiaries — PNB Capital Services Ltd and PNB Asset Management Company Ltd — to a strategic partner. The search for an ally who can join the asset management arm is still under way, industry watchers said.

The partner-hunt for both companies, which have not performed well over the past couple of years, began early this year. That perception has now given way to a realisation that the two firms have tremendous potential waiting to be harnessed by partners. They should, preferably, be ones with enough expertise and experience in the areas the two specialise in.

The size of the stake to be offered has not been fixed, though a deal is likely to be clinched in by mid-January. Banks are on the lookout for a partner for subsidiaries that have struggled to cope with the twin challenges of stiff competition and tough market conditions.

That has prompted them to look for a strategic partner who has a long and rich experience in areas that were hot businesses in the high noon of 90s’ stock boom but have lost their charm now. “Most banks did not have the expertise for such businesses then. It is only in the past few years that they have been stressing on expertise such as a good research base and a separate cadre among other things,” analysts said.

PNB Caps, in particular, offers various services that range from merchant banking, syndication of loans and project appraisals, but has been hobbled by mounting losses — something that drew an RBI advice for closure. At that point, PNB had urged the apex bank to reconsider the suggestion and instead give its approval for the induction of a strategic partner. The decision to accept RBI’s prescription now comes after the bank failed to find a company ready to buy PNB Caps.

   

 
 
BANGLA DUTY ON YARN SOURS SOUTH ASIAN TRADE MEET 
 
 
OUR CORRESPONDENT
 
New Delhi, Aug. 12: 
The South Asian Business Forum launched today was supposed to pave the way for good business relations between sub-continental neighbours, but instead saw Bangladesh declare that it would slap an anti-dumping duty on Indian yarn.

Bangladesh commerce secretary Suhel Ahmed Choudhury said, “We have received formal complaints against imports from India and will have to look into the matter. The alleged dumping will be examined before taking any step. The final decision on the issue would be taken after the report into the investigation was submitted to the government.”

At the same time, Choudhury also complained about the anti-dumping duties imposed on its batteries by the Indian government, almost making his dumping duty threat seem like a tit-for-tat quick-fix solution.

“We are thinking of raising the duty issue with the WTO dispute settlement body. However, if the situation permits, we are in favour of sorting out the issue through bilateral consultation,” he said.

Choudhury justified the duties on Indian yarn, saying they have been imposed by customs authorities due to avoidance of duty by Indian companies.

“The bilateral trade agreement with India has not helped us to improved trade relations,” he complained.

Indian commerce secretary Dipak Chatterjee, who was present at the same venue, however remained serene stating, “We are firmly committed towards the establishment of a free-trade area in South Asia where we will be able to utilise a large potential common market and a large skilled low-wage workforce. But before that the members will have to sort out their priorities and see if any tariff and non-tariff barriers are hampering trade.”

Chatterjee pointed out areas like bio-diversity, forest resources, oil, natural gas, coal and hydro power as possible sectors for building up synergies and asked for greater sub-regional co-operation.

ADB growth target

The Asian Development Bank (ADB) is likely to revise the 6 per cent growth estimate for India for the current fiscal on account of the drought situation in some parts of the country.

The declaration of drought will affect the growth of the largely agrarian country. “We are reviewing the growth estimate. It is likely to be revised downwards on account of the widespread drought situation,” Sudipto Mundle, India chief economist ADB, said on the sidelines of the first annual meeting of the South Asia Business forum here.

Last week the government revised its estimate and declared most of the drought-hit, instead of the 12 states that were initially supposed to have been affected by the drought. Further, it said the drought was worse than what was experienced in 1987. The government has also come up with aid for the farmers to enable them to tide over the situation.

ADB undertakes a review of the Asian region’s growth parameters every six months in its Asian development outlook. The outlook had earlier predicted a 6 per cent GDP growth rate for India in the current fiscal and 6.8 per cent growth in 2003-04.

   

 
 
BANKS TOLD TO HEDGE FARM CREDIT PITFALLS 
 
 
SUTANUKA GHOSAL
 
Calcutta, Aug. 12: 
The Reserve Bank of India (RBI) has asked scheduled commercial banks, which face the bleak prospect of agriculture credit turning into bad assets because of the drought and floods in a large swathe of the country, to restructure these loans immediately.

A detailed report on the manner in which these loans have been reworked has been sought by the end of this month. Senior RBI officials said the exercise is aimed at providing relief to borrowers affected by nature’s wrath, and to help banks avert a spike in NPAs.

“Banks will have to make half-yearly provisioning against their assets on September 30. So, we want them to draw up a detailed report on the status of agricultural loans by August 31 so that they can take steps to avoid NPAs,” officials in the central bank said.

The industry is bedevilled by Rs 66,000 crore in bad loans.

To end the scope for delays in relief measures, banks have been advised to sketch a policy framework with the approval of their boards. A copy of the policy note can be sent to the Reserve Bank of India for record.

The 2002-03 Budget raised agricultural credit to be provided from institutional sources to Rs 75,000 crore from Rs 64,000 crore. Banks have been given the freedom to decide how much they want to lend to farmers, taking into account factors such as the extent of crop loss, scale of finance and their capacity to repay.

The central bank has sent public sector banks guidelines on how to restructure agricultural loans.

The RBI officials said the principal and interest on short-term loans due this year can be converted into term loans, or the repayment period rescheduled suitably.

The length of the conversion/rescheduling will depend on the calamity’s intensity, the size of crop losses and distress caused to farmers. “The amounts not collected in the current year should be converted into three-year term loans; it can be five years for small and marginal farmers in normal circumstances,” bankers said.

In cases where the damage to crops arising out of the calamity is severe and has caused acute distress to the farmers or if the calamity is for two successive years, banks may, at their discretion and in consultation with task force/steering committee of state level bankers committee, grant extensions for converted loans for periods ranging from five to seven years.

Until the conversion of short-term credit, banks can grant fresh crop loans to affected farmers. Where advances are converted/rescheduled, banks have been told not to compound interest on post-conversion arrears.

   

 
 
PADAMSEE TO HELP RUPA GO GLOBAL 
 
 
A STAFF REPORTER
 
Calcutta, Aug. 12: 
Rupa and Co Ltd has decided to shift its focus from the mass market to the class market.

The leader in the undergarment business, which has a 15 per cent share of the Rs 1,500-crore domestic branded segment, is also looking to acquire international brands. To achieve this, the R. P. Agarwal owned company has roped in ad-guru Alyque Padamsee as advisor.

At a press conference here today, Rupa chairman Agarwal and Padamsee said talks were on to market a couple of European brands both in the home market as well as in Europe and America. Depending upon the terms of the agreement with overseas firms, Rupa would float a joint venture company for marketing those brands, Padamsee noted.

Padamsee added that Rupa would like to collaborate for two international undergarment brands, for men and women.

Rupa, which manufactures 3.5 lakh pieces of underwear and innerwear for men and women would also like to outsource its products to international players, Agarwal noted. Padamsee said Rupa was also looking for a new brand ambassador for its range of products. Apart from Rupa, the company has eight brief and vest brands for men—Frontline, Macroman, Kaiser, Bruno, Ribline, Kidline and Euro. Agarwal hinted that the company was planning to go global with its Euro brand.

For women, the company has Softline and ‘Bruno for Her’ ranges. Its unisex category products include the Bumchums brand of casual wear, Footline range of socks and Thermocot brand of winter wear.

Rupa has recently established a global size five-tonne per day capacity state-of-the-art plant at Domjur, Howrah, to enhance configuration of dyeing, processing, and finishing of knitted fabric.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.61	HK $1	Rs.  6.15*
UK £1	Rs. 74.18	SW Fr 1	Rs. 32.00*
Euro	Rs. 47.38	Sing $1	Rs. 27.20*
Yen 100	Rs. 40.73	Aus $1	Rs. 25.80*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5245	Gold Std (10 gm)Rs. 5220
Gold 22 carat	Rs. 4950	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8050	Silver (Kg)	Rs. 8055
Silver portion	Rs. 8150	Silver portion	   NA

Stock Indices

Sensex		3007.85		+31.51
BSE-100		1522.44		+13.51
S&P CNX Nifty	 969.85		+ 7.90
Calcutta	 109.53		+ 0.70
Skindia GDR	   NA		   —
   
 

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