MTNL wades into mobile joust
UTI stake sale buzz sets ITC share aflame
Loan recovery decree brings lenders closer
Nestle to hike stake in Indian unit by 10%
Merger of PSU mutuals into Unit Trust in air
Eveready in talks to buy Gillette’s Geep
Telco aims at 10% growth in sales
Oberoi chain plans to borrow Rs 200 crore
Diageo to sell Indian brands
Foreign Exchange, Bullion, Stock Indices

New Delhi, Aug. 14: 
Mahanagar Telephone Nigam Ltd today entered the cellular telephony rate war, announcing new tariffs for its Dolphin services in Delhi and Mumbai and offering a fixed monthly rental of Rs 1,900 with free incoming and outgoing calls.

The company’s new tariffs will be effective from Friday. Only land line charges would be added to an outgoing call.

The government-owned telecom major has taken the fight right into the camps of its competitors in the two cities—AirTel and Hutch. But there are chinks in MTNL’s strategy because of its small customer base that stems from the fact that it has very few base stations which affects the quality of its coverage.

Currently, there are about 13 lakh mobile customers in Delhi as on July 2002. AirTel has about 1.8 million subscribers in its 16 circles of operation while Hutch has about 1.6 million subscribers in six circles. In Delhi, AirTel has seven lakh subscribers while its nearest competitor Hutch has about five lakh; MTNL has a little over 91,000.

While AirTel and Hutch have more than 300 base stations, MTNL has only about 200. There are also serious problems associated with its tardy customer care. For instance, if you lose a phone with the SIM card, you have to write a letter to MTNL asking them to block the SIM. The billing system is also nowhere as efficient as its competitors.

Along with the private operators, MTNL was also affected when the government issued a directive requiring all cellphone users to be identified and to file income tax returns.

Narinder Sharma, MTNL’s chairman and managing director, said, “We are matching the competition better to take care of our valued customers.”

MTNL’s general manager marketing N. K. Jain said, “We will make all the effort to improve services. Every service provider has its strategy and we will adopt a strategy to compete with the private operators. The number of base stations will certainly be increased and we already have a provision to increase them.”

Private cellular service provider AirTel has already announced free AirTel-to-AirTel incoming calls and new tariff plans offering free incoming and outgoing calls but with a fixed monthly subscription of Rs 1,900, besides a rental of Rs 295.

In Mumbai, MTNL is offering a plan where the monthly rental has been fixed at Rs 700 with free incoming calls and outgoing calls costing 65 paise per 30 seconds. The talk time for different denominations of pre-paid cards has also been increased in the city.

MTNL has also announced a bonanza for the pre-paid card offered under the brand name ‘Trump’ by reducing the cost of outgoing calls (including STD and ISD calls) to Rs 1.25 per 30 seconds during 8 am to 10 pm and incoming calls at 90 paise for 30 seconds.

During off-peak hours, from 10 pm to 8 am, the outgoing call would cost 63 paise for 30 seconds and incoming calls would be 45 paise. MTNL has also offered new schemes like monthly bonus and free airtime with new the ‘Trump’ card.


Mumbai, Aug. 14: 
Rumours swirled today that Unit Trust of India (UTI) was close to a deal on selling its 13 per cent stake in ITC to BAT for an undisclosed amount.

The speculation is that the buyer is ready to pay between Rs 950 and Rs 975 for each share — a considerable premium on the current quote on bourses — but sources close to the mutual fund major said they would insist on a figure of Rs 1,050 to Rs 1,150.

The scrip, which has a weightage of almost 7 per cent in the Bombay Stock Exchange sensex, bucked the downtrend and racked up gains on a day blue chips wobbled.

As the rumour mills went into an overdrive, the ITC share surged Rs 11.70 to Rs 688.35 from Rs 676.65, a gain of 1.73 per cent over Tuesday’s close. The scrip touched an intra-day high of Rs 694.70 and clocked 1,2722 deals, accounting for 6.77 lakh shares on Dalal Street.

The buzz was that the mutual fund major has been able to wrest major concessions from the finance ministry, the government’s approval for selling its 13 per cent strategic stake in ITC to BAT being one of them.

UTI has been lobbying the government to allow it to sell its large pile of ITC shares, preferably at a hefty premium on the ruling market price. Such a move, it contends, would help it recover some of the recent losses suffered as a result of the prolonged slump on bourses.

There is a section in the market that is not as gung-ho about the deal. It argues that BAT, which already owns 31 per cent of ITC’s equity, will be prevented by a government legislation from boosting its stake substantially. Several brokerages are sceptical that a deal between UTI and BAT is imminent. “It would be a time consuming affair and the two would need a lot of patience.”

According to some analysts, selling UTI’s stake in ITC to BAT would mark a major policy shift on the part of a government that has denied permission in the past to foreign tobacco companies to set up operations here.


Mumbai, Aug. 14: 
Banks and financial institutions have stressed the need for a harmonious approach towards implementing the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance amid optimism that the Centre would re-promulgate the legislation by August 25.

This view was expressed by a cross section of senior bankers and FI heads at a seminar on “Lending in India — Towards a New Paradigm” here today.

Since the proposed legislation has assumed huge significance in view of the massive non-performing assets (NPAs) of the financial sector, now put at over Rs 80,000 crore, the immediate concern among the financial community is whether the Ordinance would be repromulgated by the Centre.

M.R. Umarji, consultant, Indian Banks Association, said that the provision would remain in force for a period of six weeks from the date of its commissioning. “The government has time till August 25 to repromulgate the ordinance, otherwise the Bill will lapse,” sources said.

A senior official from Bank of India (BoI), which too has issued notices to several companies in wake of this Ordinance, told The Telegraph, that they would now wait for the government to repromulgate the Ordinance, before acting on it.

Meanwhile, the Industrial Development Bank of India (IDBI) today held an “informal meeting” with banks on adopting a co-ordinated approach towards the Ordinance. While this follows the issue of notices to errant companies, J.N. Godbole, executive director, IDBI, told newspersons that at the meeting, banks and FIs would try to evolve a common approach in those cases where loans disbursed in consortium basis have turned non-performing.

“Its been observed that there is different perception among lenders. Thus one will view the asset as standard and the other as sub-standard. The aim of this meeting is to bring about a better co-ordination,” he pointed out.

As per the Ordinance, after the issue of notices to errant companies, banks have 60 days to decide to either sell the assets of an errant company or change its management. However, this decision has to be endorsed by around 75 per cent of the lenders in terms of value. However, bankers are confused whether this decision can be taken by the entire consortium or has to come from those having first charge.


New Delhi, Aug. 14: 
Swiss food major Nestle SA is planning to raise its stake in its Indian subsidiary by 10 per cent over the next 10 months, Nestle India managing director Carlo S. Donati said.

The stake hike, which will be done through a creeping acquisition route, will raise Nestle’s holding to 64 per cent. Unlike a number of foreign companies, Nestle has no plans to delist from the Indian bourses, Donati said.

As on June 30, 2002, the foreign promoters held a 53.96 per cent stake in Nestle India.

According to the company’s annual report, foreign institutional investors held a 7.81 per cent stake as on December 31, 2001, while financial institutions held another 12.77 per cent. ‘Others,’ which includes overseas corporate bodies, held 23.24 per cent of the company’s equity.

At present, Nestle has decided not to begin operations in Excelsia, the ailing biscuit manufacturing company it acquired from Dabur. Donati said, “Nestle SA has decided not to begin operations at Excelsia for the moment but it is looking for opportunities.”

The Nestle group is the largest food company in the world and a global leader in the bottled water segment.

Some of its popular brands in the country include Nescafe and Maggi noodles. Besides, the company is also present in the areas of chocolates, confectioneries and dairy whiteners. Last year, Nestle had entered the milk and milk product market with Nestle milk, dahi and butter and Donati said the success of these products has prompted the company to consider further extensions, which could be in the market this year. In February last, Nestle India launched its Pure Life mineral water brand in the Indian market.


Mumbai, Aug. 14: 
Is a grand alliance between the mutual fund subsidiaries of leading financial institutions and Unit Trust of India (UTI) in the works? That question could be answered soon if an idea the finance ministry is now exploring comes to fruition.

Among the proposals to turn around the beleaguered mutual fund is the merger of four public sector mutual funds into it, say sources. There are reports the idea has come from the Unit Trust top brass itself.

Senior officials of UTI were not available for a confirmation. State Bank of India, Life Insurance Corporation of India, General Insurance Corporation and Bank of Baroda are among the entities whose mutual fund subsidiaries could be spun off into Unit Trust.

All four institutions have fledgling mutual fund arms that have been unable to assume the size and scale envisaged at the time they were established. While the Unit Trust of India still commands a investible corpus of over Rs 49,000 crore, the four arms together account for an approximate portfolio size of Rs 4000 crore.

In recent times, the mutual fund industry has seen a wave of consolidation. As part of it, ITI Pioneer folded into Templeton, while Sun F&C acquired Jardine Fleming Mutual fund.

Sources say the four mutual fund arms have failed to notch up a business of the size that can sustain them in the long term. In contrast, private sector mutual funds such as ICICI Prudential, Templeton, Alliance and Zurich have performed well. Furthermore, a few like the BoB Mutual Fund are currently scouting for a partner.

The argument for such a merger lies in the fact that there is a lot of synergy between the funds. It is further argued that the four mutual funds together account for a little above Rs 4500 crore which is not financially viable in the long run. Instead, SBI, GIC, BOB and LIC can invest in UTI as a sponsor. This will aleviate UTI’s problems on the liquidity front.


Calcutta, Aug. 14: 
Eveready Industries Ltd (EIIL), the B.M. Khaitan-controlled tea-and-battery major, is eyeing the prospect of buying out Gillette India’s Geep brand.

Top company sources said informal talks had been held but nothing concrete has yet emerged.

Sources said EIIL is interested in the Geep brand for batteries and flashlights and not the manufacturing facility in Mysore.

Deepak Khaitan, executive vice-chairman and managing director of EIIL, told The Telegraph over the phone from Chicago, “There is a rumour in the market that Gillette might sell its Geep brand. I have heard of it. It is on my agenda. I will return to Calcutta in the third week of August and review the matter then.”

The main sticking point in the talks has been the asking price for the Geep brand which is a popular one in northern India, both in the flashlight and the dry cell battery segments.

Khaitan said, “If the price is affordable, we will consider the proposal.” He refused to comment on the valuation of the Geep brand.

Gillette India officials refused to say whether they were putting the Geep brand up for sale.

If Eveready buys out the Geep brand, it will become the market leader in the flashlight segment, particularly in the brass torches segment. The company currently enjoys a 70 per cent marketshare and the acquisition of the Geep brand will raise that level to 90 per cent. Geep has a good penetration in the rural markets in north India.

The Khaitans had earlier considered buying out Geep when it was controlled by the Sherwanis of Allahabad. Gillette had acquired the Geep brand name, distribution network and the dry cell manufacturing facility at Mysore at a price of more than Rs 100 crore.

Last year, Gillette India closed down its Duracell alkaline battery making plant at Manesar near Gurgaon as the market for alkaline batteries came under pressure. Gillette India is now importing these batteries.

Apart from batteries and flashlights, Gillette India manufactures and markets a range of shaving products and has a dominant position in the higher end disposable shaving preparations, shaving brushes and other men’s toiletries such as after shaves. It also sells double-edged blades and twin blade shaving systems.

EIIL enjoys a 43 per cent market-share in the battery segment. It manufactures rechargeables, alkalines (pencil, triple AAA) and carbon zinc batteries.

Eveready is the market leader in flashlight production in the organised sector. It manufactures brass torches, aluminium and plastic torches. The company also imports top-end model of plastic torches from time to time for discerning urban customers. Other competitors in the market are Nippo and Salora.

EIIL also exports batteries to Latin American countries and UK under the brand name Lava. The company is also test-marketing exports of flashlights under the Lava brand name.


Calcutta, Aug. 14: 
Tata Engineering and Locomotive Company (Telco) has set a target of achieving a 9-10 per cent growth in its commercial vehicle segment during the current financial year.

The company has also decided to rebuild and relaunch all its models in the commercial vehicle segment over a period of next three months in order to jack up its market share.

Speaking to The Telegraph, Telco executive director Ravi Kant said the company had registered a very strong growth, much above the industry average during the first four months.

“Even if there has been some pressure on sales due to monsoon failure, we are confident of achieving our growth target at the end of the current fiscal,” he said.

The company also plans to manufacture close to one lakh commercial vehicles in all categories compared with the last year’s production of 85,000 vehicles. “Last year was very bad for commercial vehicle manufacturers. But this year we hope things will look much better,” he said, adding “the company should be able to raise its market share by 2 to 3 per cent on an average at the end of this fiscal.”

Ravi Kant has also noted that the vehicles that will come out from the Telco stable over the next three months will sport an altogether new look.

“Today’s customers not only look at the power of a vehicle, but they also demand riding comfort. We are relaunching all our vehicles keeping in mind that they should comply with popular demands,” he said.

The company has also stressed the need for drastic cost saving measures in order to offset, at least to a considerable extent, the rising input costs. The company had saved around Rs 600 crore in the last two financial years through stringent cost savings.

Telco is also drawing up plans for strengthening its brands in the bus segment with new look and technology.

Ravi Kant however rules out any major expansion plan in the current financial year. “We already have a huge capacity which we need to use optimally. After that we can think of any addition to our capacity,” he said. The commercial vehicle segment is currently working as a separate profit centre. The division is expected to contribute substantially to the company’s overall turnover this year.

Telco today launched its new Tata 207 D1—a pick up vehicle designed for both urban and rural markets. The company claims that the model is the country’s first 1.13-tonne payload pick up with power steering. The vehicle will be useful for distribution of milk, vegetables, poultry and fast moving consumer goods.


Calcutta, Aug. 14: 
EIH Ltd—the company that manages the Oberoi chain of hotels—is planning to borrow up to Rs 200 crore for working capital and expenditure on its properties under construction.

The company has received an overwhelming response from banks.

“A number of banks have offered EIH the line of credit at very competitive rates. The quotations are being examined now,” company officials said.

EIH managing director S. S. Mukherji said: “We are also re-assessing our fund requirements for the year in the light of the downturn in the industry. We have yet to decide how much to borrow this year. Part of our planned capital expenditure this year may have to be shifted to the next financial year.”

He admitted that EIH was facing cash flow problems, and that a part of the borrowed funds would be used to meet its working capital needs.

“But most of it would be spent on the properties that are being constructed or expanded,” Mukherji added.

EIH is setting up a hotel in Marrakech in Morocco in partnership with ONA group of companies, a local conglomerate. Going forward, EIH plans to set up yet another property in Morocco—in Casablanca.

Though construction of the property in Marrakech has yet to begin, the plot has been identified and the architects appointed.

In India, EIH is planning to set up a number of budget hotels under its Trident brand. While a property in the Bandra-Kurla complex in Mumbai is already under construction, a couple of Trident properties in Pune and Delhi are in the planning stages. Yet another property in Gurgaon is opening this year.

Besides setting up new properties, EIH recently increased its stake in Amarvilas, Agra—a property jointly held with one Bharat Bhusan Goyal. EIH now holds 60 per cent in the property, having raised its stake by about 26 per cent last year.

Mukherji said: “EIH has increased its stake in the property by infusing fresh capital. The Goyals said they were not interested in investing more on it. So we chipped in with the funds and consequently acquired majority control in the property.”

Mumtaz Hotels Ltd—the holding company of Amarvilas—has become a subsidiary of EIH and Vikram and Arjun Oberoi have since been appointed as directors on the Mumtaz Hotels board.

The EIH management is optimistic of a revival in the industry by this winter.

“The travel advisories have been withdrawn, and there are some signs of recovery. We expect tourism in the country to pick up by this winter,” Mukherji said.


New Delhi, Aug. 14: 
Diageo, the world’s largest premium drinks business, hopes to sell off its home-grown brands in India by October and then focus on beefing up sales of its international brands in the country.

UDV India, where Diageo plc owns 95 per cent, has appointed Merrill Lynch to evaluate the bids received to buyout its three local brands: Gilbey’s Green Label, Gold Club and Old Gold whiskeys.

“The successful bidder will be identified by September-end and the deal will be closed by October,” said Amar Raj Singh who has just been appointed as managing director of UDV India in which the Kilachands have a 5 per cent stake.

Singh said, “The successful bidder will be given the licence to use the Gilbey’s green label for five years, after which it will have to drop the Gilbey’s brand prefix.”

Interestingly while Gilbey’s green label is a whisky brand in India, it is marketed as a gin in Diageo’s international portfolio of brands that include Johnnie Walker, Guinness, Smirnoff, J&B, Archers Peach Schnapps, Baileys, Cuervo, Tanqueray and Captain Morgan.

Singh said, “Once we sell off our domestic brands, we will focus on the international brands.”

The bidders, who include Deepak Roy, former president for South Asia, Russia and Baltics, are making a composite offer for all the brands which sell two and a half million cases a year.

Singh said no reserve price had been fixed for the brands, adding that the company did not know about the number of bids or the names of the bidders.

Industry sources say those interested in the acquisition include United Breweries and Shaw Wallace. However, Singh said that if Deepak Roy is successful in winning the bid for these brands he will run his separate business with these brands.

UDV India said today that Singh would take over from Deepak Roy as managing director-India hub. He was working with the company as director, corporate affairs.

UDV India has a bottled-in-India Scotch range that includes Black and White, Vat 69 and White Horse. Further it imports brands from its international portfolio like Johnnie Walker, J&B, Bailey’s Irish cream, and Gordon’s gin.

The company wants to increase imports of these brands (they are already doing in the duty-free shops) so that they can stock retail off-licence shops across the country as soon as the states change their policies to permit the sale of foreign liquor.



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