Sensex in 369-gun salute to millennium Monday
Frequent loan audit under study
HDFC pays 100 per cent special dividend
Fresh move to reopen Dunlop
Hudco drops rating clause for Bengal loan
Imported cars in Ambassador backyard
Bharti, VSNL weigh joint overseas foray

Mumbai, Jan 3 
Dalal Street roared into the new year with record trading figures after a bug-free computer switchover sent investors on a share-chase that took the Bombay Stock Exchange (BSE) sensex to its highest-ever close of 5375.11 in a 369.29-point gain over its previous finish.

It was a bull charge not seen in recent times. Everybody � profit-hunters, foreign investors, local institutions and legions of small investors � took part in the pyrotechnics that set the trading ring alight and pushed up the market capitalisation of all stocks listed on the BSE to Rs 9,86,865 crore from Rs 9,50,840 crore on December 30. This meant a gain of Rs 36,025 crore for the 7,781 scrips listed on the bourse in the space of a single session.

The 30-share index opened at a historic 5209.54 points and peaked at 5384.66 before closing a shade lower at 5375.11 as against Thursday�s finish of 5005.82. The BSE-100 index flared up by 197.04 points to 2821.53 from its previous close of 2624.49. Today�s sensex gain was the second-highest since March 24, 1992 when it had flared up by a phenomenal 426.05 points.

The National Stock Exchange�s S&P CNX Nifty also raced to a record close of 1592.20 on the back of heavy buying by foreign institutional investors (FIIs), domestic funds in a 111.75-point spurt over its previous finish.

The day was marked by an unprecedented volatile activity on the stock market in the wake of frenzied buying by speculators and heavy purchases by FIIs.

Buoyed by reports of strong gains in the Hong Kong and Singapore markets earlier in the day, investors, emboldened by the smooth rollover to the new millennium and the absence of Y2K problems in all key sectors of the economy, scooped up shares across the board. The buying binge sent market favourite Infosys Technologies to a new record at Rs 15,677.50. It was locked in the upper-circuit filter from the beginning of the session.

Punters went on a rampage and were seen enlarging their holdings in anticipation of increased investment flows from abroad. No one seemed to be bothered about a possible technical correction now that the market had zoomed into stratosphere.

�We cannot be bearish during these times. Majority of the shares have been hitting the mandatory eight per cent ceiling from the first hour of trading,� Ramesh Damani, a prominent BSE stock broker, said.

Since the demand for shares locked in price-bands remains largely unsatiated, he predicted another spurt in their values when trading opens on Tuesday. Technically, the markets appear to be on a strong footing. �The market has crossed its previous peak with a huge gap.�

However, a handful of Cassandras felt today�s gains are unlikely to be sustained, more so because the rally was fuelled by local operators � speculators on the lookout for quick cash.

They pointed out that FIIs had only made token purchases today and are yet to make their presence felt in the market. �It is highly unlikely that foreign funds will continue to buy at these high levels,� a fund manager said.

Asked whether this rally was expected, a dealer at Skindia said: � Many youngsters were whispering in the market about the big bang in the new millennium. We don�t believe them.�

FIIs were buyers in shares of infotech, multinational and pharmaceutical firms while domestic institutions purchased cyclical stocks in anticipation of strong third-quarter performance by Indian companies.

In specified group, 84 scrips, including heavyweights like ACC, ITC, M&M, L&T, Reliance, SBI, Telco and Tisco were locked in upper-end circuit filters. In the B1 and B2 segments, a number of software and pharmaceutical shares hit the filters.

However, the volume of business was relatively thin at Rs 2228.03 crore compared with Thursday�s turnover of Rs 3262.61 crore. Zee Telefilms was the most active scrip with a turnover of Rs 194.08 crore followed by Reliance at Rs 143.13 crore.

Market leader Zee shot up by Rs 87.40 to Rs 1180.20, Reliance shot up by Rs 18.65 to Rs 252.35, Himachal Futuristic by Rs 54.15 to Rs 731.65 and Ranbaxy by Rs 73.80 to Rs 996.80.

FMCG major and index heavyweight Hindustan Lever gained a massive Rs 141.20 to close at Rs 2391.20, Hindalco jumped by Rs 62 to Rs 867, Infosys by Rs 1161.25 to Rs 15,677.50, ITC by Rs 53.15 to Rs 718.15, Larsen & Toubro by Rs 44.45 to Rs 600.35 and Telco by Rs 16 to Rs 217.

Calls tight, gold up

Demand for funds to meet the reserve requirements at the start of the new fortnightly trading cycle put some pressure on overnight money rates but there was adequate liquidity in the system to meet the needs of borrowing banks. Calls opened around 7.95-8.00 per cent but moved up to close around 8.00-8.05 per cent with stray deals wrapped up even at 8.10 per cent towards the fag end of the session. The bulk of the the transactions were, however, concluded in the region of 7.95-8.00 per cent, dealers said.

Bullion prices increased in the local market on heavy buying. Standard gold, after a good start at Rs 4540, rose closed higher at Rs 4550 in a gain of Rs 20 over its previous close of Rs 4530.

Twenty two-carat gold was also quoted higher at Rs 4210, up from its previous close of Rs 4190. Ready silver closed higher at Rs 8280.    

New Delhi, Jan 3 
The Reserve Bank is considering a proposal under which banks and financial institutions (FIs) will be required to audit the end-use of funds lent to companies on a half-yearly or quarterly basis.

At present, loan audits are carried out by individual branches of banks and financial institutions but there is no way to monitor the use of funds at the borrowers� end. Hence, it has been suggested that institutional lenders employ auditors to verify the manner in which funds are used. Sources in the banking industry say the proposal � made by the Institute of Chartered Accountants of India (ICAI) to the Reserve Bank of India � is aimed at reducing non-performing assets (NPAs).

�Since funds given to companies are audited at the end of a financial year (March), it takes several months to initiate action against defaulters,� sources said. There is, therefore, a need to check if the money is being used properly at an early stage.

Sources say keeping tabs on the way loans are used will help check the insidious practice of funds diversion by promoters � something that is responsible for the bulk of NPAs in the banking system today. This will, however, call for a new accounting format to ensure a greater degree of accountability.

Earlier, the Reserve Bank, the ICAI and representatives of Indian Banks Association (IBA) had decided to set up a task force which favoured a stronger role for auditors in tackling the problem of mounting bad loans. The task force has been set up to help the RBI to tighten prudential norms to discipline both banks and borrowers. The total NPAs this year are pegged close to Rs 45,653 crore, up 4.7 per cent over the previous year.

�Auditors are the best professionals to advise banks and FIs. There is a customer-confidentiality clause which has to be observed. Therefore, information given out must be handled very carefully,� sources said.

The auditors, sources said, would play an important role in creating a credit-monitoring system to ensure that loans are given to genuine companies. �The auditors will assist lenders in ensuring that there is no diversion of funds, one of the key reasons for high NPAs,� sources said.

A recent RBI study had indicated that diversion of funds by promoters for expansion, modernisation and setting up new projects was a key factor behind the spurt in NPAs.

The ICAI is also expected to frame guidelines on debt provisioning and disclosures that must be made in the balance-sheets of banks and institutions. Banks will have make a provision of 0.25 per cent even against standard advances from the current financial year.    

Mumbai, Jan 3 
The Housing Development Finance Corporation Ltd (HDFC) today declared a one-time special millennium dividend of 100 per cent (Rs 10 per equity share).

HDFC said the �continuing good performance of the corporation, satisfactory accretion to reserves and a comfortable position on capital adequacy has led to exploring new avenues for rewarding shareholders and enhancing shareholder value�. The housing finance major�s capital adequacy ratio as on March 31, 1999, was 16.2 per cent as against a current minimum statutory requirement of 8 per cent.

The decision to announce a millennium dividend was taken at a board meeting today. The dividend will be payable to HDFC�s shareholders as on the record date to be fixed in consultation with the stock exchanges.

During the current year the nominal value of the equity shares of the corporation was subdivided from Rs 100 per share to Rs 10 per share.

Approvals and disbursements of HDFC during the nine-month period ended December 31 grew by 27 per cent and 30 per cent respectively over the corresponding period in the previous year.    

Calcutta, Jan 3 
The president of Dunlop India Ltd, M.D. Shukla, is meeting the employees of Sahagunj and Ambattur units on Thursday to discuss plans to reopen these two plants.

While the Dunlop management is trying to reopen the two units, the Industrial Development Bank of India (IDBI) is carrying out an inspection of the Sahagunj factory and the company�s head-office in the city.

Another team from the Tata Consultancy Services, which has been asked by the IDBI to make a techno-economic study of the factory, will visit Sahagunj tomorrow.

However, the employees are not upbeat about the management�s attempts to resume operations. The employees today agitated in front of the head-office, alleging the proposed meeting is just an eye-wash.

�The Board for Industrial and Financial Reconstruction (BIFR) may ask for a change of promoter. The meeting has been called to let the BIFR know that the management is taking steps to reopen the factory,� Dipankar Roy, general secretary of Citu-led Dunlop Workers� Union (DWU), said. The DWU may abstain from the meeting.

Though the management has called all the unions of Sahagunj and Ambattur, the head-office union�Dunlop Employees Federation (DEF)�has not been called.

Criticising the management for keeping the DEF away from the discussions, Roy said �the management should have called the federation keeping in view the totality of operations involved after lifting of suspension, with head office and sales offices having definite roles to play.��

Aniruddha Sengupta of the head office union said, �We are open to discussions with the management. But the management should be transparent.�

Bibek Sen Sarma, assistant vice-president (industrial relations) of the company said: �BIFR and IDBI will take their own actions. But in the meantime we would like to reopen both the units.

We have not called the head office union since they are not directly concerned with the reopening of the factory,� he said.

However, Sen Sarma could not say who will provide the funds to reopen the factory.

The DWU had abstained from discussions with Shukla when he visited Sahagunj for the first time after he took charge on October 19 last year.

Shukla met the Intuc leaders and had promised the union that the work suspension order at Sahagunj will be lifted within a month.    

Calcutta, Jan 3 
The Housing and Urban Development Corporation (Hudco) has scaled down its demand for a state credit rating as a pre-condition to disburse a Rs 820-crore loan for its infrastructure projects.

Instead, the state has been asked to submit a scheme-wise detailed proposal on the basis of which Hudco will release funds.

Bengal has applied for an operational finance of Rs 150 crore as an interim advance to kickstart some of the projects.

The detailed schemes are being prepared, said top officials in the state finance department. They will be submitted to Hudco shortly.

Sources said Hudco has already released Rs 50 crore for house-building purposes. However, the government has not yet withdrawn any money.

The finance department has indicated that it wants to spend Rs 50 crore on housing, Rs 350 crore on roads and bridges and the rest on projects relating to flood protection and irrigation.

Officials said according to Hudco�s internal financing guidelines, a borrower is entitled to ask for an interim advance if scheme details are not finalised or if the project has already been started with internal fund generation. Bengal has taken that route.

The rate of interest on the Hudco loan is likely to be a little over 10 per cent and this is what the government has applied for. The final rate will be fixed later.

Hudco officials said the credit rating suggestion was made as an option but if the state government has a problem then the funding agency is willing to officially withdraw it. �It�s not a problem for us. We are willing to change our stance,� said an official.

Sources in the state finance department said the state government has offered other options like automatic repayment through the Reserve Bank of India.

This is the route which has been taken for repayment of all loans taken by the state government from the West Bengal Infrastructure Development Finance Corporation (WBIDFC). Over the past couple of years, the corporation has raised huge loans through bond issues from the market. The latest of its offering which opened a couple of days back is Rs 200 crore bond issue with a Rs 200-crore greenshoe option at a 13.25 per cent rate of interest.    

Calcutta, Jan 3 
The Hindustan Motors management is weighing plans to convert a portion of its Uttarpara factory into a workshop for reconditioning second-hand imported cars.

The strategic move is aimed at making better use of the massive idle capacity� both machines and men � at its plant. Also, the company feels it can use its surplus land to set up a separate unit for tuning up used cars. The factory managers are believed to have told union leaders the company was ready to venture into new areas.

The top brass at the plant refused to speak on the issue, but a few senior officials said it was possible.

�While we are prepared to venture into new businesses, we will not rush into it. We will watch how other car companies tackle the problem,� a top HM official said.

Interestingly, the plans follow the management�s recent discussions on the competition�even threat�posed by second-hand imports with plant-level trade union leaders.

They also come at a time when domestic and foreign auto firms are also assessing the implications of the December 27 India-US pact on the phase-out of import curbs by April 2001.

Fears that the GP-CK Birla group�s automobile company would be the worst hit in the new regime of easy imports prompted Hindustan Motors to seek suggestions from the management, unionised workers and leaders on the issue in mid-1999.

HM officials feel many five-year-old mid-size Japanese and American cars will cost less than a new Ambassador car. The company is likely to face stiffer competition from the used-car trade in Japan, a country where vehicles are allowed to be amortised in six years. The average price of these cars are around $ 500; they would be cheaper for Indian customers even after steep import duties.

The management and the Citu-led union at Uttarpara realise this could spell doom for the Uttarpara factory.

For the Hindustan Motors management, the move would help improve the average productivity of workers. Average cars manufactured per head at the Uttarpara plant is below three, the lowest in the industry. Shifting a sizeable number of its over 10,000 workers to the reconditioning plant could help improve the poor productivity levels.    

New Delhi, Jan 3 
The Bharti Group and Videsh Sanchar Nigam Limited (VSNL) are planning to jointly explore telecom business opportunities in Nepal and other countries.

The two companies may either form a joint venture or be part of a consortium for this purpose. The proposed collaboration will be the first of its kind in India where private and public sector telecom companies will join hands to expand their area of service outside India.

�Nepal is a virgin market for telecom. We had recently visited Nepal, along with officials from VSNL, to get an idea on the scope of telecom operations in the country. Both of us would be reporting back to our board,�� said sources in Bharti group.

Both the companies are planning to offer fixed, cellular and other value-added services in Nepal.

The two companies are yet to hold a meeting to discuss whether their collaborations will be a joint venture company or a consortium.

�The talks with VSNL are at a preliminary stage. We have not yet decided about the nature of co-operation we may provide to each other,�� sources said.

They said the two companies �will have to get approval from our board for any venture in India or outside the country. To join hands with a government telecom company, and that too with a competitor, will certainly need board approval.��

Both VSNL and the Bharti group offers Internet service in India; the companies also have plans to enter domestic long distance services.

In 1996, the Nepalese government had short listed Information Technologies (India Limited), the software division of Usha Group, for providing cellular mobile services in Nepal using wireless in local loop (WiLL) technology.

The three other companies beside ITIL, which had qualified for financial bids, include Jasmine International (Thailand), Telia Overseas AB (Sweden) and the Japanese consortium of NTT, KDD, Mitsui and Mitsubishi.

However, financial bidding for the project could not be called because the government owned telecom company filed a case against privatisation.    


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