Coca-Cola uncorks selloff plan
Wipro review stuns all
PSU divestment gets a boost
ITC, ConAgra bury hatchet
Ordinance on NPAs get a new lease of life
Indian Oil to resume HPL talks
HM revs up for MUV launch
Hyundai offers Accent Viva at Rs 6.79 lakh
Panel wants freedom for strong rural banks
Foreign Exchange, Bullion, Stock Indices

 
 
COCA-COLA UNCORKS SELLOFF PLAN 
 
 
OUR CORRESPONDENT
 
New Delhi, Aug. 16: 
Coca-Cola India Ltd today announced plans to divest a 49 per cent stake in its wholly-owned subsidiary Hindustan Coca Cola Beverages Private Limited (HCCB) to business associates, including former and existing bottlers, and employees at a price of Rs 10 per share.

The selloff announcement came a day before a government-set deadline to indicate the cola giant’s compliance with a promise that it made five years back when it secured permission to float the bottling subsidiary.

The company set no date for the selloff which will be made on a private placement basis.

“We will be selling the shares at the face value of Rs 10; the total amount will be equal to 49 per cent of the issued and paid up equity capital of HCCB,” said Joel Peres, director, Hindustan Coca-Cola Holdings Private Limited. “The shares will be given at the same price to all the recipients for the entire 49 per cent that is being divested.”

Of the 49 per cent, Hindustan Coca-Cola Holdings will sell up to 39 per cent to private investors and business partners. These business partners will include licensed bottlers of Coca-Cola, suppliers as well as former bottlers. The remaining 10 per cent will be divested in favour of local resident Indian employee welfare and stock option trusts.

Peres said the private investors “will include high net worth Indian individuals, Indian companies and Indian investment and finance companies.”

Not all the former bottlers will receive the shares. Peres said the shares would be offered to “certain bottlers who sold their business to us and had evinced interest in purchasing shares as and when we issued shares in our bottling operation. These bottlers will be offered shares now.”

Peres said people like Ramesh Chauhan and Ramesh More, estranged bottlers with whom Coca-Cola India has had fought court battles, had not evinced interest in a stake and would not be offered shares. Chauhan was a Coke bottler until the cola giant was forced to leave the country in 1977. He went on to create Parle Drinks and Thums Up, the famous cola brand, which was bought by Coke when it returned to India in 1993.

More was a Pune-based bottler with whom the cola major had fought several court battles.

Hindustan Coca-Cola Holdings expects to complete the divestment process in as short a span of time as practically possible, said an official statement.

Alex von Behr, President, Coca-Cola India, said “We are happy to bring in significant Indian ownership and broad-base the stakeholders in our beverage business like we have done elsewhere around the world.

“It certainly will fuel further integration of our business into the Indian environment and into local Indian communities. We are also delighted to include employees as beneficiaries of this action. We continue to see a bright future for our company in India.”

   

 
 
WIPRO REVIEW STUNS ALL 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 16: 
Corporate India today witnessed its first earnings modification when Wipro Ltd revised downwards its first quarter net profit by Rs 18.6 crore following higher than earlier reported losses in its minority affiliate, Wipro GE Medical Systems Ltd.

On July 19, the Azim Premji-controlled company had stated a profit after tax of Rs 200 crore on revenues of Rs 930 crore from continuing operations for the quarter ended June 30, 2002. This profit after tax excluded an extraordinary loss (net of tax) of Rs 38.9 crore related to the discontinuation of its ISP access business unit. The extraordinary loss comprises a loss from operations (net of tax) of Rs 8.4 crore and a loss on write-off of assets of Rs 30.5 crore.

Net profit for the quarter ended June 30 was lower by 24 per cent at Rs 162.7 crore over the corresponding quarter of the previous year.

However, the software services major today notified the revision in its financial statement submission for the quarter ended June 30, 2002 on Form 6-K with the United States Securities and Exchange Commission (SEC).

The revision by Wipro has come at a time when corporate America has been scandalised by a host of earnings’ restatements, though for altogether different reasons.

Senior Wipro officials who spoke to The Telegraph took pains to explain that today’s change is only a revision and not a restatement. According to Suresh Senapathy, chief financial officer, Wipro Ltd, the need for revision came after Wipro subsequently received revised information (after July 19) about the affiliate whose losses were higher than the results previously reported.

“Normally, it has been observed that the preliminary numbers of Wipro GE as incorporated in the first quarter results are not different from the final numbers. But in this case, Wipro GE came back to us and therefore we are correcting the results accordingly,” he said.

Senapathy added that it has set up a task force to prepare an action plan for the affiliate and that there were various issues including a hike in import duties that affected its performance.

The issue has raised an obvious question as to why the disclosure is being made now, close to a month after the company announced its first quarter results. Wipro officials here divulged that as per the SEC rules, companies have a time frame of 45 days after announcing the results to make their first filing with the regulator.

   

 
 
PSU DIVESTMENT GETS A BOOST 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 16: 
The Reserve Bank of India today allowed banks to finance successful bidders for the acquisition of shares of disinvested public sector units (PSUs), including the secondary stage of mandatory open offer. The central bank also said it would consider on a case by case basis relaxing the 5 per cent ceiling on banks’ exposure to capital market to enable them to finance the programme.

The relaxation will be made so as to keep the exposure of banks to the capital market in all forms, net of its advances for financing of acquisition of PSU shares within the regulatory ceiling of 5 per cent, the RBI said in a circular to all scheduled commercial banks.

This would be subject to adequate safeguards regarding margin, bank’s exposure to capital market, internal control and risk management systems.

RBI also said that it will consider relaxation, on specific requests from banks, in the individual/group credit exposure norms on a case by case basis provided the bank’s total exposure to the borrower, net of its exposure due to acquisition of PSU shares under the disinvestment programme, is within the prudential individual/group borrower exposure ceiling prescribed by it.

These clarifications came in response to a circular issued in August 1998, wherein the RBI had stated that the promoters’ contribution towards the equity capital of a company should come from their own resources and a bank should not normally grant advances to take up shares of other companies.

Banks were to ensure that advances against shares were not used to enable the borrower to acquire or retain a controlling interest in the company/companies or to facilitate or retain inter-corporate investment.

Banks in turn asked the RBI whether they could finance the successful bidders for acquisition of shares of PSUs under the government’s disinvestment programme.

“It is clarified that the aforesaid instructions of the 1998 circular would not apply in the case of bank finance to the successful bidders under the PSU divestment programme of the government. The banks’ proposals for financing the successful bidders should be approved by their directors, bank finance should be for acquisition of shares of PSU under a disinvestment programme approved by the government, including the secondary stage mandatory open offer, wherever applicable and not for subsequent acquisition of the PSU shares,” the RBI said today.

   

 
 
ITC, CONAGRA BURY HATCHET 
 
 
A STAFF REPORTER
 
Calcutta, Aug. 16: 
ITC and Agro Tech Foods, a 51 per cent subsidiary of ConAgra Foods, USA, have settled their dispute over the edible oil manufacturing facility at Mantralayam in Andhra Pradesh.

The plant at Mantralayam is owned by ITC. It was leased out to Agro Tech when ConAgra acquired controlling stake in what used to be ITC Agro Tech from the tobacco major. After the change in management control in 1996, the company was renamed Agro Tech Foods.

After using the plant for five years, Agro Tech decided to discontinue the lease arrangement in September last year. ITC was upset with the decision and pressed Agro Tech for extension of the arrangement.

ITC said Agro Tech was bound to continue the arrangement, whereas Agro Tech said the plant was unviable due to logistical problems. The matter was finally referred to the London Court of International Arbitration for settlement.

While the matter was sub judice, officials of ITC and Agro Tech continued to negotiate and reached a settlement recently, which the London Court of International Arbitration ratified.

Under the agreement, Agro Tech will pay ITC Rs 43 crore over the next five years as compensation for terminating the arrangement.

Both ITC and Agro Tech informed the stock exchanges today that they had buried the hatchet.

A director of Agro Tech said: “About 50 per cent of the edible oil consumed in the country now, is imported and processed here.

“The plant at Mantralayam was extensively used in the past to crush seeds and produce edible oil domestically.

“But such facilities are not required anymore. What is more, the plant being located in the interiors of Andhra Pradesh, logistic costs of operating it are very high.”

It is not clear what ITC intends to do with the plant now and the ITC spokesperson was not available for his comment on the matter.

   

 
 
ORDINANCE ON NPAS GET A NEW LEASE OF LIFE 
 
 
OUR CORRESPONDENT
 
New Delhi, Aug. 16: 
The Union Cabinet has approved the re-promulgation of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance 2002.

The Ordinance will enable banks and financial institutions to take possession of securities of defaulters and sell them, in order to deal with non-performing assets, estimated at over Rs 100,000 crore.

Announcing the Cabinet decision here today, an official spokesperson said the decision would also permit banks and financial institutions to create a market for the securitised assets and help improve their asset-liability management.

“This step is necessary to tackle the problem of non-performing assets with the bank and will mark major reforms in the financial sector,” the official spokesperson said.

The Ordinance would enable banks and financial institutions to set up asset reconstruction companies that would buy non performing assets from banks and securitise them in exchange for debenture units. The re-promulgation was necessitated as the Ordinance could not be discussed in this session of Parliament, the spokesperson said. Agricultural loans and small loans will be exempted from the ambit of this Ordinance, an official statement said.

The Union Cabinet today also approved the proposal of the department of biotechnology (DBT) for continuation and enhancement of host country contribution to International Centre for Genetic Engineering and Biotechnology (ICGEB) for five years from 2002-2003 to 2006-2007, at the rate of Rs 7.50 crore a year.

It has also approved making of one time contribution of Rs 2.50 crore during fiscal 2002-03 towards replacement of equipment at ICGEB, New Delhi.

   

 
 
INDIAN OIL TO RESUME HPL TALKS 
 
 
SUTANUKA GHOSAL
 
Calcutta, Aug. 16: 
The beleaguered Haldia Petrochemicals Ltd (HPL) is back on the negotiation table. Come next week, Indian Oil Corporation will put a fresh proposal before HPL chairman Tarun Das, setting its terms and conditions for investing in the showcase Bengal industrial project.

Though nobody is willing to divulge the details, it is learnt that the fresh proposal of Indian Oil envisages higher equity infusion in the petrochem project. Earlier, the navratna PSU had proposed to invest Rs 468 crore in HPL for picking up a 50 per cent stake and management control in the company.

Next week’s meeting, to be held in Delhi, will be attended by representatives of the Bengal government, Purnendu Chatterjee of The Chatterjee Group and the HPL management.

When contacted, the official spokesperson of IOC said, “There is a meeting between the IOC chairman and Tarun Das next week, where Indian Oil will submit a revised proposal before Das.” The spokesperson, however, refused to talk about the new proposal. “It is extremely confidential and cannot be discussed at this moment.” However, he confirmed that IOC was likely to stick to its earlier demand for management control in the new proposal as well.

Corporate watchers feel that IOC’s decision to start negotiations afresh with HPL has been prompted by Tarun Das’ decision of not procuring naphtha from the oil major. HPL had been a captive customer of IOC’s Haldia refinery which produced 35,000 tonnes of naphtha per month.

Sources said under the new plan, IOC has proposed that Rs 725 crore in capitalised losses should be written off either by the promoters and lenders upfront or through a fresh issue of redeemable preference shares. The shares, carrying a dividend at the rate of 1 per cent, should be redeemed after 20 years, sources said. It has suggested that lenders should write off at least a part of their accumulated interest with only the balance being converted into long-term preference shares.

The IOC proposal calls for converting part of the principal on loans extended by FIs into equity. This is necessary to improve the debt-equity mix and bring down the interest burden in future, sources said.

HPL’s short-term and overdue liability, according to IOC sources, can be tackled through IOC’s equity purchase and more financial instruments in a manner that eases cash constraints.

HPL sources said that something “positive” is happening regarding the induction of a fourth equity partner. “Purnendu Chatterjee had held a meeting at HPL’s office last Sunday. At the meeting he indicated that HPL’s problem will be sorted out within September. He also said that the capacity of the polypropylene plant will be increased to 240 kilo tonne per annum from 210 kilo tonne per annum this year. He also reviewed the performance of the company,” sources said.

Executive V-P quits

Swapan Chakroborty, executive vice-president (projects and operations) has resigned from HPL. It was under Chakroborty that the plant came up within the shortest possible time. HPL however, refused to give an official confirmation on his resignation. He has been asked to continue in the company till December.

   

 
 
HM REVS UP FOR MUV LAUNCH 
 
 
PALLAB BHATTACHARYA
 
Calcutta, Aug. 16: 
Hindustan Motors, the Calcutta based C.K. Birla flagship, is planning to launch a multi-utility vehicle and a pick-up van in December this year.

Company vice-president (marketing) G. Lakshmma Reddy said work on the two projects are in advanced stages and the products will be ready by the year-end.

The multi-utility vehicle will have a 2000 cc engine and a metal top unlike the company’s popular trekker, Pushpak, which has a soft roof.

Reddy said the multi-utility vehicle (MUV) would be within reach of both urban and rural consumers.

“Unlike the existing offerings in the MUV segment from several companies, our product will be slightly low end. But this is certainly going to attract customers for commercial use,” he said.

The company, however, is yet to take a decision on the name of the product, which is being designed by an internal group.

The pick-up van, which will also be launched in December this year, will be known as Porter Plus.

“This van will be very handy for the distribution of products like milk, poultry and fast moving consumer goods,” he said. The design and engineering aspects have already been finalised for the product, he added.

Hindustan Motors, the country’s oldest car maker, has been in the red for quite some time and it is probably the first time in several years that it is coming out with some new products.

“We are also in the process of bringing a lot of change in our flagship brand Ambassador, both in its look and technology,” Reddy said.

The new look Ambassador will be launched in October this year. “Currently we are focussing on alternate fuel that can be used in Ambassador. We are going to launch LPG driven Ambassador soon for the first time in the country,” he said.

The company has already obtained approvals required to introduce LPG car in the domestic market. To jack up the market share for Ambassadors, it plans to add 75 to 100 new dealers in the next 12 to 18 months.

“We are expanding our markets in states like Gujarat, Madhya Pradesh, Uttar Pradesh, Punjab and Haryana,” Reddy said.

The company, which has registered a 20 per cent growth in Ambassador sales during the first quarter of this fiscal, has set a target of manufacturing 18,000 cars this year against only 14,000 cars produced last year.

Out of its total sales, the taxi segment contributes 65 per cent while the government purchase remains at 18-20 per cent, he said.

The company sees a booming market in the taxi segment especially after several governments have made it mandatory that taxis more than 15 years old have to be withdrawn from the roads.

We have introduced a very attractive exchange programme for the taxi operators in order to enable them to go for our new Euro-II version and the response is very positive, he said.

   

 
 
HYUNDAI OFFERS ACCENT VIVA AT RS 6.79 LAKH 
 
 
OUR CORRESPONDENT
 
New Delhi, Aug. 16: 
Hyundai Motor India Limited (HMIL) today launched the Accent Viva—its first offering this fiscal. The Viva is a sporty semi-notchback version of its mid-size car. Priced at Rs 6.79 lakh (ex-showroom Delhi), it is lower than the Tornado (its other sporty offering) at Rs 7.28 lakh.

While the present car is powered with an in-line 4-cylinder 16-valve DOHC petrol engine, Hyundai promises to pack in a diesel engine option within the next 10 weeks. The car will be fitted with the common rail diesel injection engine that it is supposed to source from Mercedes Benz and make in India under a technical alliance with Bosch.

The 1599cc five-door Viva will be followed by its long-awaited sports utility vehicle, the Terracan. Hyundai plans to initially import the Terracan as a completely built unit (CBU). Three months after launch, it will be assembled here from CKD (completely knocked down) kits and will be priced in the range of Rs 7-8 lakh.

“We had earlier looked only at petrol as the option for the Accent as we thought the dismantling of the administered price mechanism (APM) would bring down the difference between petrol and diesel. But the raised duties on petrol have ensured the original pricing remains,” said Hyundai president B. V. R. Subbu.

He ruled out any immediate rise in vehicle prices due to the surge in global steel prices, as it had supply contracts that run till November.

The Accent Viva is the fifth variant of Accent after GLS, GLX, GVS and Tornado. HMIL managing director J. I. Kim said, “We were not sure of the acceptance of this model in India. So it took us a little time to introduce it here after the launches in European and US markets.”

The Viva, which will sport a unique Passion Red colour, has an anti-lock braking system, 14-inch alloy wheels, rear defogger, audio with remote as standard features. It will be available in Prime Beige, Noble White, Bright Silver, Modern Grey, Ebony Black, Suave Blue and Frost Dew colours.

“The car will increase Hyundai’s marketshare in the mid-size segment from the present 22 per cent during January-July, compared with 16 per cent in 2001,” Subbu said, adding that new launches will not mean slackening in the old models like Santro, Accent and Sonata.

While the Sonata is set to get a new stronger engine, HMIL announced its intention to launch a new-look Santro by May 2004, which will replace the existing car.

Kim said, “The small car segment will remain the focus of the company. Our Santro customers will want to graduate to better cars in a few years’ time. We are looking into the segment between compact and mid-size sedan for some vehicle that can fulfil this need.”

   

 
 
PANEL WANTS FREEDOM FOR STRONG RURAL BANKS 
 
 
OUR CORRESPONDENT
 
Mumbai, Aug. 16: 
A working group on regional rural banks (RRBs) appointed by the Centre has recommended the dilution of the government’s holdings in such profit-making banks to 33 per cent and give such RRBs access to capital markets.

The group, headed by M. V. S. Chalapathi Rao, managing director, Nabard, which presented its report to the Centre early this month, made this recommendation while mooting a differentiated ownership structure on the basis of the RRBs’ health categories with reference to the audited working results of March 31, 2002. The group has also called for a structured consolidation/mergers through which the number of RRBs in the country is brought down.

It categorised RRBs into four groups. Category A comprises those that have no accumulated losses and have reported profits for the past three consecutive years; Category B has those that made profits consistently in the last three years and their accumulated losses have not eroded public deposits. Category C includes those that reported losses in one or more of the last three years and accumulated losses that cause erosion in the value of their assets not exceeding 10 per cent of total deposits as of March 31, 2002. Category D would have those RRBs that reported losses in one or more of the last three years and accumulated losses to an extent that the erosion has exceeded 10 per cent of total deposits.

The group was of the view that with the emphasis laid by the government on the entire range of financial services to be provided by RRBs, it was necessary to widen the scope of their activities. Some of the group’s recommendations have however, met with opposition from RRB bodies. Speaking to The Telegraph, S. K. Bhattacharjee, general secretary, All India RRB Officers’ Federation, said the government should give majority control to sponsor banks instead of offloading its stake to an NGO or a private participant. He added while the federation was not against consolidation of RRBs, the sponsor banks should “own RRBs as their subsidiary,” which he said would result in these banks showing more interest in operations of RRBs.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.57	HK $1	Rs.  6.15*
UK £1	Rs. 74.55	SW Fr 1	Rs. 32.15*
Euro	Rs. 47.67	Sing $1	Rs. 27.40*
Yen 100	Rs. 41.36	Aus $1	Rs. 26.10*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5270	Gold Std (10 gm)Rs. 5190
Gold 22 carat	Rs. 4975	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 7750	Silver (Kg)	Rs. 7860
Silver portion	Rs. 7850	Silver portion	   NA

Stock Indices

Sensex		3065.90		+45.20
BSE-100		1540.61		+13.46
S&P CNX Nifty	 979.25		+ 9.60
Calcutta	 113.59		+ 2.15
Skindia GDR	 462.70		+ 0.61
   
 

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