Big Bull, top corporate in faceoff
Mutuals feel the heat as ICE stocks melt
Budge Budge cost capped at Rs 2295 cr
NTPC to take over SAIL power plants
McKinsey recipe for Bengal upturn
Petronet chief to quit in July
HCL Insys net profit up 15%
Chambers clash over Air-India foreign stake
Airlines fly into rage on fuel rate disparity
Foreign Exchange, Bullion, Stock Indices

Mumbai, April 19 
The market is abuzz with talk of a bruising battle being fought on the Street between the Big Bull and a leading corporate house.

Technology stocks which have been ramped up in the recent past have melted in the heat of the skirmish between the two big players. “What is worrying is the impact in second-rung stocks which are known to be illiquid “, a dealer said.

On Wednesday, the Bombay Stock Exchange (BSE) sensex extended its losses into the fifth straight session, tumbling 79.66 points in a selloff that dealers said was the fallout of the clash between the corporate titan and the prominent broker who wields a tremendous influence on the market.

Tuesday’s record surge on the Nasdaq — 254.41 points to 3793.57 — did little to cheer investors as skittish operators started squaring off their open positions ahead of what they perceive is a looming bear market. “We are in for a miserable few months on the stock exchanges,” an NSE dealer moaned.

The covert skirmishes between the Big Bull and a leading corporate house could not have been timed worse. Market grapevine has it that the company is determined to teach upstart speculators a harsh lesson for short-selling its shares. Part of the old-economy brigade, it is peeved that brokers have mauled its shares while ramping up technology stocks.

However, this may not spell the end of the Big Bull. He had bought stocks at a very low price. Even now, he can rake in a profit, said a dealer who is an ardent admirer of the Big Bull.

In the battle of bears and bulls, the former had an upper hand as they chose to strike in a handful of volatile scrips where a leading bull operator has a high exposure. This led to a situation in which shares across the board were hammered in spite of the favourable factors, market sources said.

The sensex hit its intra-day high of 4901.50 in the early stages but later slipped to an intra-day low of 4571.12. It recovered a little before ending the session at 4665.81 as against yesterday’s close of 4745.47, recording a fall of 79.66 points. In the five sessions since April 12, the 30-scrip benchmark index has fallen by over 875 points — breaking its previous record of consistent falls in five sessions on the trot.

The market capitalisation of BSE-500 stocks slipped below the Rs 7-crore mark to Rs 6.83 crore as against Rs 7.02 crore recorded on Tuesday. The BSE-100 index also slipped by 65.38 points to 2500.81 compared with its previous close of 2566.19. The Reliance scrip shot into the spotlight by gaining a handsome Rs 315.20 in a falling market. Operators who were critical of the buyback price saw the tables turned on them as a result of the excellent results announced on Tuesday.

In the specified group, nine scrips, including four index heavyweights, hit their lower-end of circuit filters. Aptech was conspicuous among tech stocks, hitting its upper band at the close.

Satyam Computer was the most active share, clocking the highest turnover of Rs 511.84 crore on a total volume of business of Rs 2615.54 crore. Other top traded scrips were Reliance (Rs 346.55 crore), Infosys Technologies (Rs 248.87 crore), Himachal Futuristic (Rs 203.53 crore) and Zee Telefilms (Rs 123.27 crore).    

Mumbai, April 19 
The mutual funds are feeling the heat. A year after they built up solid cash chests, the funds are inundated with redemption requests as investors scramble to avoid being scalded by the market’s sudden disenchantment with infotech stocks, triggered by the tumultuous phase on the Nasdaq.

The mutual funds, which had funnelled investors’ funds into infotech stocks last year, have been blind sided by the recent carnage in the markets that has sent high-fliers like HFCL, Global TeleSystems, Satyam Computers, the Pentafour duo and a host of other stocks spinning to the lower end of their trading bands.

It’s been a double whammy for the mutuals: their net asset values (NAVs) have started plunging by virtue of the steep fall in values of technology stocks; and that has sent investors scurrying with redemption requests.

The buzz on the street is that the funds are stalling for time to honour the requests for redemptions.

“Mutual funds are facing substantial redemption pressure. Most of the funds are open-ended funds and sectoral funds having considerable exposure in technology stocks,” said a dealer affiliated to a FII broking house.

The impact is felt more in tech-specific funds and funds with a large exposure in knowledge-based stocks that are open ended.

Unconfirmed reports floating in the marketplace say the mutual funds under pressure are Alliance, Kothari Pioneer and Birla mutual fund as they have considerable exposure in infotech stocks.

The crazy returns offered by mutual funds in the fiscal year ended March 31, 2000 may be a thing of the past. Last year, Birla Advantage fund dished out a return of 174 per cent.

“If investors even get 20-30 per cent returns in the current year, they should consider themselves lucky,” said an official affiliated to a leading investment house that sells units of leading mutual funds.    

Calcutta, April 19 
The Central Electricity Authority (CEA) —- the arbiter in a long-standing dispute between CESC and the West Bengal government — has capped the cost of the 500 MW Budge Budge thermal power plant at Rs 2295 crore.

CESC had been demanding that the project cost be revised to over Rs 2500 crore while the West Bengal State Electricity Board wanted it pegged at Rs 1853 crore.

The arbitration by CEA was held at the behest of CESC which has been charged by the state government with inflating costs in order to be in a position to demand a higher revision in power tariff.

Upset over the verdict, the state government filed an appeal against the CEA order in the Calcutta High Court last week, sources said. CEA’s final verdict, which has been communicated to both CESC and WBSEB, has been kept strictly under wraps till now.

If the government loses its appeal, CESC customers will have to be prepared to pay higher power bills since CESC will be able to factor in the project cost of Rs 2295 crore for its tariff hike which is to be considered by the West Bengal State Electricity Regulatory Commission.

For the 1998 tariff hike, the state power department had reduced the cost of the Budge Budge project by Rs 455 crore. CESC had agreed then to obtain a revision in power tariff, but filed for a CEA arbitration soon after.

A utility is allowed a reasonable return (profit allowed to a utility as per the Electricity Act) on its investment. The recovery is allowed as a fixed portion of the power tariff it charges. The result will ensure an adequate return on its investments though not equal to what it had asked for (as its claim has now been allowed by CEA). In 1998, the tariff-setting exercise had factored in a project cost of only Rs 1853 crore.

WBSEB’s calculations were based on cost data for Budge Budge as of December 1996 and provided to WBSEB in January 1997 which put the final cost of Budge Budge project at Rs 2308 crore. Since then, the Budge Budge project cost has escalated to over Rs 2500 crore. The second unit was synchronised last year. In 1992, CEA had approved a cost of Rs 1638 crore for the Budge Budge power project.

The controversy over Budge Budge project’s cost came into focus during the Assembly session in late 1998 when the opposition party circulated photocopies of the state power department’s notes on which power minister Sankar Sen had made caustic observations about the inflated cost of Budge Budge. Shortly thereafter, the Trinamool Congress launched its political campaign against the RPG group flagship’s inflated electricity bills in June.

The CEA’s verdict is a defeat for the state government. The WBSEB, fighting on the government’s behalf, had earlier tried to discredit CEA’s arbitration proceedings by questioning whether they were “at all admissible” under the section 44 of the Electricity Supply Act.

It had argued that since it had not held back permission to the project, the CEA ought not to arbitrate on the dispute (refusing permission is the only grounds on which a licensee can resort to arbitration under this section of the Act).    

Calcutta, April 19 
Steel Authority of India Limited (SAIL) has decided to transfer its three captive power plants at Bokaro, Rourkela and Durgapur to National Thermal Power Corporation (NTPC).

The handover will not affect the job security because the steel major will absorb the excess employees who might not be retained by the central power generator. The three plants, with a combined capacity of 542 MW, have around 1,100 workers.

“NTPC might not like to absorb the entire workforce. Therefore, the SAIL board has taken a decision to absorb them,” a senior company official said.

Earlier, SAIL had decided to spin off these plants into a subsidiary called SAIL Power Supply Company Limited (SPC) as part of its recast plan that seeks to shift the focus back on core activities.

SAIL had been on the lookout for a strategic partner to operate and maintain the proposed company for an initial period of 15 years. The debt-equity ratio of SPC is pegged at 2:1.

The deal is expected to give SAIL Rs 900 crore. More important, it will no longer have to bear the cost of renovating the power plants. “The transfer will also lead to an improvement in operational efficiency, upgradation of technology and clear the way for higher power generation in future. With a modest investment, the capacity of the 60 MW units can be increased to 66 MW,” a senior SAIL official told the Telegraph.

Asked why NTPC was chosen as a partner, the official said the power generator being another public limited company, was considered more compatible. “NTPC is a public limited company. Our people can get along well with them,” the official said.    

Calcutta, April 19 
West Bengal Industrial Development Corporation (WBIDC) will soon appoint McKinsey & Co for a two-year period to advise it on three key areas of industrial growth.

How to improve the operations of Silpabandhu, the single-window clearance facility and expedite project clearances

Identifying key areas like infotech, infrastructure and agriculture where the state can register better growth rates

How to negotiate with investors, both in India and abroad.

McKinsey will also review the industrial progress that has been achieved Destination West Bengal, the high-profile investment meet held on January 17 1999. It will also highlight shortcomings.

WBIDC managing director D.P. Patra said the appointment of McKinsey follows the deputy chief minister Buddhadeb Bhattacharya’s initiative to allow WBIDC to negotiate with the global consultant for a two-year period. “We are currently talking to McKinsey and expect to appoint them within a month’s time,” the WBIDC MD told The Telegraph.

However, industry circles feel the state government has taken long enough to appoint McKinsey, which will be asked to outline the roadmap for the state’s industrial’s growth.

Patra was speaking at a meeting organised by the Young Leaders Forum (YLF) of the Indian Chamber of Commerce to apprise its members about the recent developments in West Bengal.    

New Delhi, April 19 
Petroleum and natural gas secretary S. Narayanan will step down as chairman of Petronet LNG Ltd by June-July this year.

Official sources say Narayanan has no intention to continue beyond that period as the measures he has initiated at Petronet after assuming charge two months ago will get concrete shape by that time.

The chief executives of the public sector units that promoted Petronet—Oil and Natural Gas Corporation (ONGC), Gas Authority of India Ltd (Gail), Bharat Petroleum Corporation Ltd (BPCL) and Indian Oil Corporation (IOC)—want Narayanan to continue for a few months more.

They want Narayanan to take the initiative in restructuring Petronet LNG in such a way that people with proven track record in project implementation are put in key positions to ensure that the terminals come up on time. The ministry is in favour of ‘build own, operate, transfer’ (BOOT) concept for the terminal at Cochin.

It was at their instance that Narayanan intervened to bail out the company. These PSUs had almost given up hope on Petronet LNG and began negotiating deals individually with prospective foreign partners for liquefied natural gas ventures.

However, some executives within Petronet LNG were not all enthusiastic about Narayanan becoming the chairman of the company and lobbied the Prime Minister’s Office (PMO) and senior bureaucrats to scuttle it.

Although the sale-purchase agreement with Ras Gas was concluded within a remarkably short time, the financial closure was posing a serious problem.

Narayanan had asked international banks to provide a bridge loan which would go a long way in breaking the stalemate over the financial closure. So far offers for about Rs 10,000 crore had been received.

The technical parts of the EPC bids for LNG terminal at Dahej are being opened. Narayanan is trying to evolve a transparent system of evaluating the price bids.

There is also a proposal to shift the headquarters of Petronet LNG to Dahej.    

New Delhi, April 19 
HCL Infosystems Ltd has recorded a a 15 per cent jump in net profit at Rs 16.2 crore in the third quarter ended March 31 compared with Rs 13.98 crore in the same period last year. Its profit before tax and extraordinary charges grew by 30 per cent to Rs 22.3 crore as against 17.2 crore during the corresponding quarter last year.

The company also recorded a 27 per cent increase in turnover at Rs 318.2 crore during the third quarter ending March 31, 2000 as against Rs 251.4 crore in the previous corresponding period.

Total revenue in the nine-month period ended March 31, 2000, has grown by 17 per cent. The company recorded a revenue of Rs 803.6 crore in the period under review, as against Rs 687.5 crore during the same period last year.

Ajai Chowdhry, chairman and CEO, HCL Insys said, “This has been an excellent quarter for us with all lines of business showing significant growth and profitability. Our services export business has not only shown volume growth but is also a remarkable notch up on the value chain. However the highlight of this quarter is our hardware solutions business that has broken all previous records.”

Recently, HCL Insys had initiated a voluntary retirement scheme (VRS) which had more than 260 employees opting for it, in two phases, out of about 3,500 employees in the company. Sources said this had also helped the company to save about Rs 5 crore per year.

Sources in the company said, “A special thrust has been initiated to increase sales of two software products — speech recognition software Dragon and HCL Accountant. The company expects to improve its sales of these two products in the next quarter. It is a major cause of concern for the company.”

However, the company is bullish on its future prospects.

“HCL Infinet is scheduled to go live soon and our overseas acquisition plans are also proceeding on schedule, with a few major announcements likely,” sources in the company said.

HCL Insys has bagged major orders in various sectors like finance and banking, telecom and information technology, manufacturing, besides those from the government.    

New Delhi, April 19 
Differences of opinion between the country’s two top chambers have spilled over into another area: how much should a foreign partner control in Air-India, the national carrier in which the government plans to divest its stake.

The Federation of Indian Chambers of Commerce and Industry (Ficci) has supported civil aviation minister Sharad Yadav’s stand that only 25 per cent should be offloaded to a foreign partner while domestic investors and NRIs can control 26 per cent. This will ensure that management control remains with the Indian shareholders.

The Confederation of Indian Industry (CII) also favours management control in the hands of Indian partners but wants 49 per cent of the stake in the airline to go to a foreign partner.

The Associated Chambers of Commerce and Industry (Assocham) is also in favour of equity participation from foreign airlines but has not put a cap on the amount of overseas equity they can be offered.

Explaining Ficci’s stand at a seminar on civil aviation here today, senior vice-president of the chamber, A C Muthiah, cited the case of US, Australia, South Africa and Thailand, which have given only a 25 per cent stake in their airlines to a foreign partner.

Earlier, civil aviation minister Sharad Yadav had told The Telegraph that his ministry was in favour of selling only 25 per cent in A-I to ‘any foreign bidder’ to prevent the overseas partner from dominating the board of the airline.

Airport regulator

The government will soon set up an Airport Approval Commission and a regulatory authority to attract private investment. The civil aviation minister told an Assocham conference that the proposed commission will function as an appellate body to look into the grievances related to tariff fixation, traffic movement and allotment of space at airports.    

New Delhi, April 19 
A high pressure lobbying war has broken out between Jet Airways on the one hand and Indian Airlines, Blue Dart and other passenger and cargo airlines on the other over the government’s policy of selling aviation fuel at cheaper global rates only to turbo-prop aircraft.

Airlines are now putting pressure on the government, saying that this move favours Jet as it is the only major airline to own turbo-prop planes. They want the benefit of cheaper fuel to be given to all aircraft flying on the loss making north-eastern routes.

Says Tushar Jani, chairman of Blue Dart, “We want the government not to discriminate between aircraft. All planes flying the north-eastern run should get cheaper fuel.”

A confidential note sent by Indian Airlines to the civil aviation ministry this month pointed out that the fuel discount was given to turbo props because the government wanted to compensate airlines flying to the north-east, but with most airlines having jet fleets this defeated its very purpose.

The cheap fuel for turbo-props policy announced in mid-January, has suddenly become the bone of contention now because aviation turbine fuel prices have recently gone up by nearly Rs 3,000 a kilolitre. While domestic airlines now have to buy fuel at an average price of Rs 18,000 a kilolitre compared with Rs 15,000 a month back, Jet’s turbo props can buy fuel at jut a little over the global price of Rs 13,000 a kilolitre. Normal domestic prices are higher owing to higher taxation levels here.

Naturally most airlines would like to buy it cheap by seeking a change in the policy .If this is not conceded, they would like to hike fares by 15-20 per cent.

Stalling them from going in for the fare hike is the stand taken by big brother Indian Airlines. IA has very categorically ruled out any price hike for now.

Sahara Airlines has already worked out a whole new fare structure based on a 20 per cent hike. However, with IA putting its foot down on any price increase, it is forced to fret and fume. This, instead of forcing all airlines to gang up against IA, has seen non-Jet airlines lobbying even harder to get the government to change its policy on discounted aviation fuel.

But the government hasn’t budged from its stand as yet. Civil aviation secretary Ravidra Gupta says, “We can’t give it to the jets as they are bigger and need larger runways and in an environmentally fragile north-east you don’t want to do that. It is better to have smaller strips and small planes flying there.”

The original move to let only turbo-props buy fuel at cheaper prices was devised by a section of the government, led by the Prime Minister’s Office itself which wanted the decision to act as a lever forcing the national carrier Indian Airlines into buying a controversial French made turbo-prop aircraft.

For long Indian Airlines had been resisting political pressure to buy ATRs, a French-made 52-seater turbo prop, which it feels will be a costly white elephant in its fleet. The airline’s previous managing director P.C. Sen had reportedly been sacked by former civil aviation minister Ananth Kumar for his opposition to this very purchase.

If IA and other airlines manage to win this lobbying battle, then ATRs may have to wait some more time. If they lose, then ATRs and others of a similar ilk may be what is in store for airlines operating in India.    

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