Indica, Santro head for photo finish
JK Ind extends financial year
Banks warm up for power sector funding
Better steel prices fuel Ispat turnaround hopes
Oscar aims to be first local flat TV in market
Radico eyes UDV assets

New Delhi, Aug. 17: 
Indica has regained its perch: for two months at the start of this fiscal, it had looked as though India’s home-grown compact had run into a chicane of uncertainty allowing Hyundai’s tall-boy, the Santro, to overtake it.

Telco officials were quick to point out that the Indica—which had shot into pole position in September 2001—had hit a downbeat at the start of this fiscal because of a long maintenance shutdown in April and crippling power cuts in May. But it roared ahead of the Santro in June and has consolidated its position in July.

Was the blip at the start of this fiscal just a minor hiccup, and will the Indica pull clear ahead of the Santro?

It’s a fascinating question for two reasons: first, the compact segment is the most competitive in the auto industry and the Indica-Santro slugfest is its most captivating story. Second, the compact segment is set to grow rapidly and is already beginning to cannibalise sales in the entry level car segment represented by Maruti 800—the largest selling model in the auto business—which has seen sales splutter with an average 20 per cent year-on-year fall in every single month of this fiscal.

It’s been a ding-dong battle since last September: Santro had briefly surged ahead in February this year and had two good months in April and May when Telco took a maintenance pitstop to retool their facilities to prepare for the rollout of the Indigo—the mid-sized sedan—and then got whacked by power outages.

So, is this the track where both companies will floor the gas pedal and make the tyres burn?

“We are not offering any deals on Indica. The customer has made its own choice and we will try to satisfy them as the market develops,” says the Telco spokesman.

But Hyundai isn’t throwing in the towel. “Indica’s sales are happening only because of their diesel version and fleet sales to tour operators. It is not a refined model; after the launch of Zip Plus 1.1L, Santro sales have been climbing,” ripostes the Hyundai spokesman.

Santro has tried hard to win back the customers: it came up with a slew of discounts and attractive finance packages; it also came up with a low-end non-AC Santro, but still failed to regain the lost ground in July when Indica outsold Santro by 1205 units.

In the financial year 2001-02 completed in April 2002, Indica sold 64,091 cars whereas Santro sold 72,427 cars.

There are no other players to challenge these two in the compact car segment. Fiat’s Palio has been able to notch up sales of around 3,000 a month while Maruti’s Zen has clocked average sales of almost 4,900 a month this fiscal. Maruti has two other models in this segment—the Alto (average sales of 1800 a month) and Wagon R (2000 a month).

The three Maruti models taken together just pipped Telco’s sales in the compact segment.

According to figures published by Society of Automobile Manufacturers Association, Maruti sold 8,698 cars in July against Indica’s sales of 8,528 units.

The next three months should clarify the situation in this segment. So, belt up for some real hard-nosed driving in the days ahead.


New Delhi, Aug. 17: 
JK Industries has extended its financial year by another six months, saying that the company wants its financial period to be in sync with the business cycles of its sugar and agri-genetics businesses. The financial year will now change from April-March to October-September.

JK Industries, which made a profit of Rs 31 lakh at the end of the 12-month period ended March 31 this year compared with Rs 16.95 crore in the previous year, is principally involved in the tyre business.

The company claims that it is more convenient to bring it in line with the farming calendar. JK Tyre is the flagship brand of the company. The other divisions, on which the farm calendar is said to be having a bearing, are JK Sugar and JK Agri-genetics. However, the tyre division accounts for around 80 per cent of JK Industries’ turnover.

“We have extended the financial year, because of two of our seasonal businesses—JK Sugar and JK Agri-genetics,” A.K. Kinra, finance director of JK Industries, told The Telegraph.

The April-June quarter was treated as the fifth quarter in the extended financial period. Net profit in the quarter amounted to Rs 5.69 crore as against Rs 3.25 for the quarter ended last June. For the 15-month period ended June, the profit was Rs 6.01 crore.

The profits of JK Industries has been steadily declining. Last year, at the end of the financial year in March, it was Rs 16.59 crore as against Rs 32.75 crore in the year before that. This reduction of about 50 per cent in the net profit was accounted by the company by stating that the slowdown in the economy has affected demand, resulting in lower tyre prices. This coupled with increased input costs had impacted profits, the company had stated then.


Calcutta, Aug. 17: 
Following representations from the Union power ministry to fund the power sector, banks are considering providing credit to the sector at floating interest rates.

Top level officials of the State Bank of India said, “Union power secretary R.V. Shahi had met the chiefs of the nationalised banks recently asking them to provide funds to the power sector. He had specifically asked for five-year funds at a fixed 10 per cent interest.”

Following the Enron fiasco cash flow to the power sector has almost dried up. Banks and FIs stopped funding this sector. And if they did it was on a selective basis. Moreover, banks and FIs are also unsure of generation and distribution.

Power ministry sources said that bankers found the idea sensible though they seemed to prefer floating interest rates. “The bankers have told us that they will look into the matter and get back to us shortly,” they added.

Banks currently provide finance to the power sector at a rate of 14–15 per cent. “In the falling interest rate regime the rates offered are pretty high. So the ministry has asked for loans at an interest rate of 10 per cent,” ministry sources added.

“Apparently, investment interest in power could see some revival with the government putting in place a one-time settlement of state electricity board dues with the National Thermal Power Corporation and other power utilities,” the SBI officials added.

They said that financial weakness of the SEBs is a major stumbling block in achieving financial closure of independent power producers (IPPs).

The scheme is effective from October 1, 2001. The securitisation of dues will be as on September 30, 2001 including 40 per cent surcharge for delayed payment. The total dues of SEBs to NTPC and other utilities is Rs 41,473 crore with interest amounting to Rs 15,746 crore.

The state governments will issue to NTPC 15-year, 8.5 per cent tax-free bonds with terms such that the entire principal is repaid between the 6th and 15th year and with lock-in restrictions allowing release of only 10 per cent bonds each year in the secondary market.

Bankers said that with the new power sector reforms undertaken by the SEBs there would be a substantial improvement in the financials of the SEBs.

Funds will be required to achieve an ambitious target of doubling the power generation from 1,00,000 MW to 2,00,000 MW by 2012.

For enhancing the capacity about Rs 8,00,000 crore will be required. PowerGrid is expected to mobilise Rs 41,000 crore and the rest has to be mobilised from different sources.


Calcutta, Aug. 17: 
Ispat Industries Ltd (IIL), the flagship of the Mittals group, hopes to stage a turnaround during the current financial year on the back of rising steel prices and a healthy increase in demand for its products.

The company, which made a loss of over Rs 442 crore last year, is in the final stages of completing the second phase of expansion at its Dolvi plant by December. Post expansion the the capacity at the Dolvi plant will go up form 1.5 million tonnes to 2.4 million tonnes.

“If the current price level continues, we will be able to turn the corner by the end of the third quarter in the current financial year. However, steel prices are yet to make full corrections and if that takes place, we will be able to end this year with very strong financials,” a senior IIL executive said.

In order to translate the target into reality, the company has embarked on a three-pronged strategy that entails optimising plant capacity, reducing production cost and better yield management.

Sources said the company aims to reduce cost by at least $ 40 per tonne from the existing cost of $ 210. The cost of production will further come down once the second phase of expansion is completed.

“If our cost reduction drive goes well, it will enable us to save a lot of money which can be used in our expansion programme,” they added.

IIL, which was almost written off as a perpetual loss-making company, has already reduced losses drastically in the first quarter of the current financial year.

“For steel industry, the second half is usually better. If the current price level continues for the rest of the year, we expect a 23 per cent growth in sales over last year’s turnover. Since the price realisation is now much better, the cash flow situation has improved a lot,” they said.

The company plans to invest around Rs 400 crore in its ongoing expansion plan and the entire fund is being generated from internal accruals.

The company is also planning to expand capacities at its cold-roll mill, galvanising unit and at the division of colour-coated steel. While the cold-roll capacity is now three lakh tonnes, the galvanising unit and colour-coated steel division have capacities of 2.25 lakh tonnes and 50,000 tonnes respectively. Sources said the galvanised and colour-coated steel have a huge demand in international markets, including the US.

“Since galvanised steel does not attract the US prohibitory law, we are getting good orders from that country. Our existing capacity at this unit may not enable us to meet the entire demand,” sources said.


New Delhi, Aug 17: 
Kevin Infotech, the manufacturers of the Oscar brand of consumer durable goods, is gearing up to launch flat-screened colour televisions.

Oscar, which will be first Indian brand in the flat TV market, plans to play the price warrior with the 21-inch model priced below Rs 10,000 and the 29-inch model below Rs 15,000.

Oscar chief operating officer Kishan Kalani said, “From a maker of 14-inch black and white television sets, we have come a long way in technology and established market leadership in Uttar Pradesh, Uttaranchal, Himachal Pradesh and West Bengal. We are extending our launches to the southern and western states very soon.”

“Technology-wise we are as sound as any other company. Recently we launched a complete home theatre system with additional features like telephone directory, calendar, clock, message pad attached to the remote and video games and priced at only Rs 8,990. Price points matter to customers. And the bulk of our customers are those who come back for a second television set,” Kalani added.

Oscar is waiting for the Indian picture tube makers like LG Hotline and Samtel to start production of flat picture tubes within a couple of weeks.

The pricing of its flat televisions will depend a lot on the local sourcing of all the parts and manufacturing them at regional manufacturing plants rather than producing at one big factory and then transporting them.

“Our biggest factory is in Noida, but we have local plants both in central India and Calcutta. This helps us to cut transport cost. We invest a good deal in research and development. We want to launch a mix of strategies like penetration into new markets and also add exciting products to the portfolio to attend a 100 per cent growth this fiscal,” Kalani said.

Oscar reported a Rs 156-crore turnover in the year 2001-02 and plans to have a turnover of Rs 300 crore at the end of this fiscal due to its foray into southern and western India. It has kept aside an advertisement budget of Rs 10 crore in order to capitalise the football season and the oncoming mini-cricket series.


Calcutta, Aug. 17: 
Radico Khaitan, in partnership with Bacardi India, has submitted three separate bids for UDV’s assets in India, including the celebrated Green Label brand of whisky.

UDV is selling off all its Indian brands. DSP Merrill Lynch is scouting for buyers on behalf of the company. The Radico-Bacardi combine joins a few other top-rung spirit companies in the pursuit for UDV’s Indian brands and facilities. A winner is likely to emerge by September-end.

Vijay Arora, Radico’s chief operating officer, said: “We appointed Rabo Bank to evaluate the assets. We have submitted three separate bids for UDV’s assets.

“One for the brands alone, another for the brands and the production capacity and yet another for the assets plus the manpower — a little under 100 people.”

Bacardi and Radico have a joint venture, in which the foreign spirit major holds 51 per cent stake.

“Radico’s bids for UDV’s brands are in partnership with Bacardi, but it hasn’t been decided yet how much the two entities will contribute to the acquisition kitty,” Arora added.

Besides Green Label, UDV’s domestic brands include Old Gold, Gold Club and White Label. UDV’s move to sell its Indian brands stems from its parent’s decision to focus on premium international brands alone.

Arora revealed that Radico was trying to acquire a few other brands as well, but refused to name them. According to merchant bankers, UDV’s brands and facilities could cost Rs 75 crore.

Radico earned over Rs 615 crore in revenues last fiscal. Its net profit stood at Rs 15.40 crore. Its key brands are 8 PM and Contessa.

The company recently launched a new brand of whisky, Special Appointment.


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