SBI to offer insurance equity at hefty premium
Dunlop India defers Sahagunj startup
First batch of insurance licences likely by Diwali
Trucking sector to get industry status
PentaMedia plans proprietary
Floor price for shellac under way
Shanta Biotech pact with Pfizer for cancer drug
Tax noose tightens on co-op banks

New Delhi, April 21 
State Bank of India (SBI) plans to charge a premium of Rs 350-400 per share on the 26 per cent stake it plans to offer to a foreign partner in its planned insurance company.

“There are several reasons for charging a high premium. SBI is a premier bank, has a wide customer reach, a wide network and a brand-name well-known across the country. If the foreign partner wishes to leverage these factors, it will have to pay a premium,” sources in the bank said. They would not name the foreign companies which were engaged in talks with the country’s largest public sector bank.

SBI has appointed consultants to draw up the strategy for its insurance foray. Sources say the bank wants to enter the sector with a capital base higher than the minimum Rs 100 crore required for eligibility.

“To get a good start in the insurance sector, SBI will definitely need a paid-up capital of more than Rs 100 crore,” the sources said. The bank is now awaiting a clearance from the finance ministry to enter the sector — something that will require legislative amendments in the SBI Act.

Sources said the bank may convert one of its shell firms, SBI Securities, into an insurance company. Floated to take care of the bank’s brokerage business, the operations of the outfit were recently transferred to SBI Caps, the bank’s merchant banking arm. That the securities arm has a paid-up capital of Rs 50 crore makes it easier to double it to the Rs 100-crore threshold needed for an insurance startup.

“We have a ready-made outfit which can easily be turned into an insurance company. There is no need to set up a separate company. This is the thinking among senior officials of SBI,” sources said. However, a final decision will be taken later after the consultants complete their study.

Meanwhile, SBI is gearing up to tap the overseas market to shore up its capital adequacy ratio to finance future expansion plans. It plans a global depository receipts (GDR) issue before hitting the US capital markets with an American Depository Receipts (ADRs) by September this year.

The bank’s capital adequacy ratio is pegged around 12.51 per cent as against the stipulated 12 per cent.

“If we have to meet our growth target, we need additional equity, which can come from the dilution of RBI’s stake in the bank,” sources said.    

Calcutta, April 21 
Dunlop India Limited (DIL), supposed to start operations at its Sahagunj factory on April 15, is putting off the resumption of work repeatedly, raising doubts about its much-vaunted plan to post a turnover of Rs 33 crore in the first month and break even immediately after.

When the factory was reopened on March 11, the company said it would start production in a month, but a new production schedule circulated to employees recently says work will only resume on April 24. The dilly-dallying has led to apprehensions among employees about the management’s commitment to stick to its schedule for starting operations. Ashok Pal, vice-president of the Citu-affiliated Dunlop Workers’ Union, said: “We have come to know that the management might defer the start of production again, this time to May 4. The maintenance work is tardy. We feel that the company will not be able to start the production on April 24.”

Earlier, the management had assured the 4,500-odd workers at Sahagunj that work would start by April 15. According to the production schedule, workers would get sent-out wages for three weeks, and full wages for the fourth. The sent-out wage is equivalent to 75 per cent of the daily wage.

Pal said the company has now given them a new production schedule under which full wages have been offered only for three days, and sent-out wages for the rest 27 days in a month. He also claimed that no consignment of raw material has reached the factory so far, even though inputs worth Rs 10.5 crore are necessary to get the wheels of production rolling.

Earlier, the Dunlop India management said it expected to post a turnover of Rs 33 crore in the first month and break even. Of this, Sahagunj would account for Rs 19 crore while the company’s Ambattur unit in Tamil Nadu would contribute Rs 14 crore. The product-mix would comprise a range of aerotyres, OTR tyres and industrial products.

Meanwhile, the management has sent its reply to a Board for Industrial and Financial Reconstruction (BIFR) showcause which asked it to explain its failure to provide details about the company to the Industrial Development Bank of India (IDBI). The financial institution, Dunlop India’s operating agency, has been asked to submit a fresh revival plan to BIFR soon. A copy of the reply has also been sent to IDBI.

The management has told BIFR that its dues with the West Bengal State Electricity Board have already been settled. Also, instead of entering into a memorandum of understanding with unions, it has worked out minutes with them to restart the factory. There is also an affirmation that further disputes with unions will be resolved through negotiations.

Copies of the reply have been sent the Citu and Intuc unions, which will soon send their feedback to the operating agency.    

New Delhi, April 21 
The first batch of licences in the insurance sector are likely to be issued by Diwali, senior officials in the finance ministry said a day after the government notified the Insurance Regulatory Development Authority (IRDA).

The decision will re-assure the 36 insurance companies that have filed applications with the government to enter the sector. A number of giants such as Prudential, Allianz, Standard Life Insurance have already signed the memoranda of understanding with Indian companies.

Initially, the government will appoint three full-time members — instead of naming a full-time chairman, five full-time members and four part-time members. The authority will be chaired by N. Rangachary, whose has been given a three-year term ending June 2003. It will include LIC executive directors H. Ansari and H. O. Sonig as members.

The re-appointment of Rangachary puts an end to the speculation about a new IRDA chairman.

The government had notified the IRDA Bill immediately after it was cleared by Parliament but had delayed its formation and notification.

The Confederation of Indian Industry (CII) welcomed Rangachary’s fresh term, saying it will ensure continuity in authority for formulating regulations and giving licenses.

The regulatory body could not be constituted earlier because the Centre could not find a suitable actuary.

Sources said the finance ministry was examining the list of professionals from management and finance who could be appointed as members.

The IRDA Bill specifies that all regulations framed by the authority will have to be vetted by an advisory committee comprising not more than 25 members. The government is in the process of setting up this panel. Since the operational norms have almost been finalised, the government hopes to notify them by the end of next month.

The IRDA will frame the entry norms for insurance companies entering the life and non-life segments, and for intermediaries.

“After this, it will take another three months to process the applications. We feel that the licences will be issued by October-November,” the sources said.

Several top banks, financial institutions and leading corporates have announced plans to enter the insurance sector and identified their foreign allies. For instance, ICICI has tied up with Prudential while HDFC has teamed up with Standard Life. SBI and IDBI are among the ones who have announced plans to enter but are yet to find partners.

Among corporates, the Tatas will join hands with AIG, AV Birla group with Sun Life and Max India with New York International Inc. Reliance is also keen but has not found a partner.    

New Delhi, April 21 
The trucking sector is likely to be granted industry status, providing a cornucopia of benefits to a sector that serves as the lifeblood of the economy. Union minister of surface transport Rajnath Singh said: “Our ministry is making full efforts to grant industry status to the trucking industry.”

Addressing the national convention of All India Motor Transport Congress (AIMTC) here today, Singh said the ministry of surface transport would soon introduce an amendment to the Carriers Act 1865 so that the legislation stays in step with the changes in the transport industry. The ministry will also soon introduce simplified registration and vehicle transfer forms. Singh said the road transport sector needs organisation and structuring like all other industries because it is next to the agriculture in employment generation and the involvement of five crore people as well as their well-being cannot be ignored.

“Our truck operators are not educated and they encounter a lot of difficulty in filling up of mandatory forms for various operational functions like registration and transfer of their vehicles. The ministry will assist in simplifying theses forms provided under Central Motor Vehicles Rules,” the minister said.

The government would also soon take up issues like toll charges, rationalisation on patterns of sales tax. Referring to the Prime Minister’s ambitious golden quadrilateral project, Singh said, the cabinet approval for creating a dedicated central road fund (CRF) would ensure a steady flow of funds to finance the development and maintenance of national highways. Singh said, “Suitable legislative measure would follow and a Bill specifically for the purpose of revamping the existing CRF would be brought forward to bring it under the control of surface transport ministry.” Singh emphasised the need to set up transport nagars at the outskirts of cities . He said the transport nagars would serve the twin objective of facilitating smooth operations by the truckers and also reduce congestion and pollution in the cities.    

Mumbai, April 21 
PentaMedia Graphics Ltd (formerly Pentafour Software & Exports) is planning to develop its own content to serve the small screen segment.

While Pentamedia has, so far, largely remained focussed on executing projects both for the big screen and small screen for others, top company officials revealed that as a large potential existed for the development of contents for the latter.

“We are now in the process of developing such a content for the home video market,” K. Srinivasan, chief operating officer, PentaMedia Graphics Ltd told The Telegraph.

In this segment, Pentamedia has decided to concentrate on animated films that will have a mythological focus.

“A huge market exists for mythological films like the Panchatantra and the Biblical stories among others as compared to the conventional films such as Donald Duck and many others,” Srinivsan said.

PentaMedia is also planning to dub these films in other languages and for international markets, thereby creating a separate revenue stream for the company.

For the current year, PentaMedia, he said, was expecting its topline and bottomline to grow by more than 30 per cent. So far in this fiscal, the company had bagged various contracts for executing animation and special effects films.

Meanwhile, PentaMedia has struck an alliance with 3dMaxMedia Inc to create a high-end digital entertainment content. The new company, will be a 50: 50 joint venture between both the companies. The first project of the new venture will be to bring two of the greatest movie stars in the country, MGR and Raj Kapoor alive through digital animation and photo-realistic 3D graphics. The path-breaking digital technology to be created by the venture, will enable viewers to watch the movies in theatres, as well as over the broadband internet.

PentaMedia has also floated Num TV, which is being touted as the world’s first internet live broadcasting television targeting the NRIs in Asia, Europe and the US.

Sources said that around 50 channels are under test runs at Num TV which expects to go commercial soon.    

Calcutta, April 21 
The Shellac Export Promotion Council plans to introduce a minimum price, albeit informally, to ensure better realisation and also to combat undercutting by a section of low value item exporters.

However, the council failed to reach a decision at a meeting on Thursday. It will now seek the assistance of the Indian Lac Research Institute, Ranchi, to work out long-term crop and pricing projections to ensure a reasonable price for value-added shellac in the international markets.

Price realisation from the export of shellac increased in the last fiscal to Rs 1,60,336 per tonne against Rs 91,738 in the previous year. However, India has the opportunity to rake in more profits, considering the global shortage of the commodity and India being its major supplier. Thailand is the other major player in the international market but the crop size in the country in the current year has been projected even lower.

Shellac exports in 1999-2000 fetched Rs 80 crore against Rs 70 crore in the previous year. The quantity exported last year was lower at 6862 tonne against 7625 tonne in the previous year.

The crop forecast for the current Baisakhi season, estimated at around 10,000 tonnes, is about 30 per cent lower than last year’s crop. Hence, the urgency for fixing a price below which no exporter should enter into a contract, said a council spokesman.

Lured by the prospects of obtaining business many exporters often fail to make the right pricing judgment during the forward contract, a system prevalent in the international shellac trade. There are instances when many established shellac trading organisations had to close shop as they went bankrupt following huge losses incurred in such deals. There were recorded deals when an exporter sold a large consignment to Pakistan at a price 40 per cent lower than the prevailing market price.

“The tendency is killing the trade and especially the value-added products exporters,’’ said Vishal Jaiswal, vice-chairman of the council.    

Hyderabad, April 21 
Shanta Biotechnics Ltd has entered into a strategic alliance with multinational pharma giant Pfizer to market its cancer vaccine — Interferon- Sha-Feron in the US and Europe. Inaugurating the Rs 25 crore R&D centre of Shanta Biotechnics, about 35 kms from the city, A. P. J. Abdul Kalam Azad, defence advisor to the prime minister, said, “The country is poised for research in chromosome decoding technology.”

Varaprasad Reddy, managing director of Shanta Biotechnics’ said today that the company was poised to enter the marine biotechnics arena. Shanta had 45 per cent of the Hepatitis-B vaccine market in the country worth about $ 15 million. “Our cancer product — Interferon — will be launched in 2001 as its clinical testing on monkeys was disrupted by animal activists in 1999. Shanta is also poised to take up contract research for MNCs. Other products in the pipeline are a vaccine for Hepatitis-B and DTP and Vitamin C in collaboration with AIIMS,” he added.    

New Delhi, April 21 
Income Tax authorities have cracked down on several cooperative banks, accusing them of squeezing tax concessions under Section 80 (P) of the Income Tax Act on the interest earned from investment of surplus funds.

Urban co-operative banks and credit societies do not agree with the income tax department’s contention. They have cited a Supreme Court judgment which says income from investment of surplus funds should not be taxed. They have asked the Central Board of Direct Taxes (CBDT) to study the apex court order and issue necessary clarifications to the income tax department.

The Court had said the Cooperatives Act prohibits the use of reserve funds for working capital needs with or without the permission of the registrar. That being the case, any interest earned from investment of these funds should not be considered as income derived from banking operations.

Minister of state for finance, Vikhe Patil, assured members of the urban cooperative banks that steps would be taken to sort out the matter. “I will try my best to get a dialogue started between the income tax authorities and these banks so that an amicable solution can be found to these tax problems,” he told the representatives of cooperative banks.

The banks are also miffed over the way income tax authorities treat them as a source of information to broaden the tax net.

“We have a strong view that the insensitive approach of the income tax department to the bank-customer relationship and code of secrecy has an adverse impact on the trust of depositors and our credibility. Therefore, this practice should be discontinued immediately,” they said.

Patil lauded the performance of urban cooperative banks, which have 8 per cent of the total deposits of the entire banking sector.

Meanwhile, the Federation of Indian Chambers of Commerce and Industry (Ficci) today urged the government to lower corporate tax by five per cent and extend the 10 per cent capital gains tax to unlisted securities.    


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