Sensex leaps 218 on Sinha charge
Gillette ink may dry up for Paper Mate, Parker
Britannia loses taste for plain milk
Maran allays import surge fears, vows safety steps
Hughes Soft splitsstock into two
Cloud over Shell retail foray

Mumbai, May 4 
The Bombay Stock Exchange (BSE) sensex raced 218.63 points to 4553.92 on the back of a buying binge that saw investors pile into the shares of pharmaceutical and infotech companies after finance minister Yashwant Sinha’s announced a salad of sops for the two high-growth sectors in Wednesday’s budget bonanza.

Share prices of most big technology names vaulted through the roof, pushing the sensex to its intra-day high of 4568.54. Today’s stellar gains recouped a part of the losses suffered in the last few sessions.

The 30-scrip index opened firm at 4384.53 and closed the day at 4553.92 as against Wednesday’s finish of 4335.59, netting a humongous gain of 218.76 points or 5.04 per cent.

Much of the credit for today’s gains went to the finance minister for making a series of industry and market-friendly amendments in direct and indirect tax proposals.

Operators and institutional investors were heavy buyers in the pharmaceutical and software sectors — the major beneficiaries of tax sops, market sources said.

At the same time, the fresh incentives given to the industry in the Finance Bill has injected confidence in the market.

The moot question is: Will the rally will be sustained ? According to an analyst at SSKI, the dangers come from mutual funds and institutions, which had bought infotech scrips at high prices in the past. They will now look for opportunities to book profits at higher prices, triggering a wider selling spree.

Also, the recent bearish phase has resulted in a severe loss of confidence among retail investors and operators, who will tend to think only of short-term gains, the analyst said.

Stock markets are abuzz with speculation on whether the Big Bull has been hurt in the recent string of selloffs. While a section believes he could have been hit, another band of operators believes that he may have manoeuvered his way to safety by picking up his favourite scrips at low rates. Circles close to him say he is in Australia, and will be away for a month.

In the specified group, eight scrips were locked in the upper end of their 12 per cent circuit filters while 10 shares hit the eight per cent price limit.

However, the volume of business was low at Rs 2501.09 crore. Satyam Computer remained the most active share with a turnover of Rs 316.32 crore followed by Himachal Futuristic (Rs 268.81 crore), Reliance (Rs 262.43 crore), Zee Telefilms (Rs 233.25 crore) and Infosys Technologies (Rs 232.57 crore).

Market leader Satyam Computer flared up by Rs 313.40 to 2923.50, HFCL by Rs 91.20 at Rs 884, Reliance by Rs 7.10 at Rs 337.10, Zee Telefilms by Rs 64.15 at Rs 666.15, Infosys Tech by Rs 472 at Rs 8172, Bhel by Rs 3.40 at Rs 107, Dr Reddy’s Labs by Rs 51.85 at Rs 1283 and Glaxo by Rs 6.75 at Rs 390.

Other gainers included Hindustan Lever which jumped by Rs 226.50 at Rs 2419, HPCL by Rs 12.50 at Rs 123, Hindalco by Rs 21.55 at Rs 739.50, ITC by Rs 19 at Rs 548, Larsen and Toubro by Rs 5.05 at Rs 222.50, M&M by Rs 3.40 at Rs 270.20, Mahanagar Telephone Nigam Ltd by Rs 6.10 at Rs 206.20, NIIT by Rs 76 at Rs 1840, State Bank by Rs 6.55 at Rs 203.70, Telco by Rs 4 at Rs 131.50 and Tisco by Rs 1.50 at Rs 105.    

Calcutta, May 4 
Shaving products major Gillette may sell off the Parker, Paper Mate and Waterman — its three popular writing instrument brands — as part of a drive aimed at culling out the non-performing businesses from its portfolio.

Sources close to the Boston-based multinational say the company is scouting for a buyer for its stationery division, which has suffered a steady decline in sales and profits over the last two years. Talks with leading firms as potential buyers are under way.

Gillette runs its stationery business — which holds the three popular brands — in India through Luxor Writing Instruments, a joint venture in which it has a 49 per cent stake. Sources said the worldwide pullout will change the ownership pattern of the Indian outfit, but they gave away no details, saying the ‘matter is now at an early stage’.

The move comes after Gillette chairman Michael C. Hawley’s redefined the company’s primary businesses to include only shaving products and related toiletries, alkaline and speciality batteries and the oral care division. “The three businesses generate well over three-quarters of our sales and contribute an even higher share to our operating profits,” Hawley said.

The three areas that the company now identifies as its core business are doing well the world over, giving enough space for the launch of new products at regular intervals.

In contrast, its writing instruments business has been faltering. Sales in the stationery division recorded a 13 per cent negative growth last year at $ 743 million compared with $ 856 million in 1998 and $ 924 million in 1997. Profits from operations in this division have fallen by a worrying 83 per cent from $ 108 million in 1998 to $ 18 million last year.

The decline reflects the weak demand for its products in all regions, except Asia-Pacific, and the unfavourable variations in factory outputs across different parts of the world. Driven by a resolve to prune, divest or close product lines that do not show the potential to achieve acceptable rates of growth, the company feels it is prudent to wash its hands off the less-profitable stationery business, which has failed to live up to the expectation of the $ 9.9-billion FMCG major.    

Mumbai, May 4 
Food and bakery major Britannia Industries Ltd has dropped its plans to enter the plain milk segment.

The company, which planned to market milk packed in tetra packs, called off the idea, as it felt that such a venture might not generate enough volumes.

Britannia, in a bid to transform itself from a pure bakery company into a foods one, was considering such a foray in the previous year, as it had felt that it could capitalise on the nascent ultra heat-treated (UTH) milk market and capture a 30 per cent share through its distribution network.

However, the plan has now been shelved as the company is of the view that the UTH foray would only serve the top-end of the market and not cater to the mass segment.

Confirming this decision, Sunil K Alagh, managing director & CEO told The Telegraph that “at a price of Rs 23, the milk sold in tetrapacks would only find buyers at the top-end. It will not generate sufficient volumes.”

Pointing out that Britannia was following a strategy of pushing up both the topline and bottomline through sheer volumes, Alagh was optimistic that the company would achieve a 20 per cent sales growth in all its product categories this year. This is expected to be achieved not only through aggressive pricing and distribution reach, but also various promotional campaigns.

Alagh added that while Britannia has identified the dairy business as a significant area of growth (which includes products such as cheese and dairy whiteners), it expected contribution from this segment to touch 25 per cent of its turnover in the next couple of years. This, according to analysts, could mean the division bringing over Rs 700 crore to the topline of the company.

In the dairy segment, Britannia has a pact with Dynamix Dairy Industries, in which it is understood to be considering picking up an equity stake. Britannia also has a flavoured milk product called Zip Sip, positioned as the “funky drink.”

As far as the biscuit division is concerned, Alagh said that Britannia stood to gain from the finance minister’s announcement to reduce excise duties on mass products from 16 per cent to 8 per cent.

FMCG analysts aver that this could result in the company bagging good volumes in its popular product, Tiger. However, he added that Britannia will pass on the excise hike on biscuits over Rs 5 (in which excise duties have been hiked to 16 per cent) to the consumer. This segment consists of brands like Good Day and other cream biscuits.

Meanwhile, Britannia today launched another consumer promotion campaign, “Britannia Khao, Cricketer Ban Jao,” in the country.    

New Delhi, May 4 
Commerce and industry minister Murasoli Maran today assured Rajya Sabha members that there was no surge in imports following the removal of quantitative restrictions on 714 items and said the government was determined to use all available mechanisms to ensure imports do not cause any serious injury to the domestic producers.

He said in the wake of the removal of quantitative restrictions on the items, some of which are reserved for small scale industries, the government can use the mechanism of raising tariffs within the bound rates and employ other tactics such as anti-dumping action, imposition of countervailing duties and safeguard actions which are permissible under WTO.

Maran said under the General Agreement on Tariffs and Trade (Gatt) 1947, all members are obliged to remove all quantitative restrictions maintained on imports. India, being a founder member, was also obliged to remove quantitative restrictions on imports but took recourse to the exception provided in GATT for maintaining such quantitative restrictions owing to the balance of payments difficulties.

However, with a substantial improvement in India’s balance of payments position, India now has to phase out all kinds of quantitative restrictions on goods by April 1 2001.

Indo-African trade

The commerce ministry has finalised a five-pronged strategy to actualise the trade potential existing between India and Africa and arrest any negative fallout of alleged supply of poor quality goods by errant exporters.

The minister of state for commerce Omar Abdullah will be spearheading the Africa Trade drive from mid-June to create an environment to double the present volume of business.    

New Delhi, May 4 
Hughes Software today decided to split its Rs 10 share into two shares of Rs 5 each.

The 2:1 stock split was taken at a meeting of board of directors, the company said in a statement here. The decision is, however, subject to the approval of the shareholders.

The stock market could not react to the decision as the company decided on the stock split after the trading hours. At present, the Hughes scrip is hovering between Rs 2800 and Rs 2900.

Arun Kumar, chief executive officer of Hughes Software, said “The shares have been split to bring about more liquidity in the market and make it more attractive to the investors, particularly, the small players.”

This would also lead to compulsory dematerialistion of the scrip and it would be easy for the company to handle the shares, he added.

Kumar, however, did not give any time frame as to when the approval of the shareholders would be sought. “The annual general meeting is to be held soon. Once it is cleared by the shareholders at the AGM, we will implement the stock split,” he said.

Hughes Software had tapped the market through an initial public offer at Rs 630. The scrip was listed at around Rs 1700-1800 on various stock exchanges.

The company had offered a total of 43,75,000 equity shares with 10 per cent of it being offered at a fixed price of Rs 630 per share in October last year.

The company had decided to raise capital primarily to fund its capital expenditure. It has however not lined up acquisitions.

Prior to this, Hughes Software had raised Rs 6000 crore in application money when it had decided to ascertain the share price through a book building process. In September last year, it offered about 39,37,500 shares through the book building process and suggested a price band of Rs 480-630 per share.

During 1998-99, the company recorded a turnover of Rs 87.26 crore with net profits of just Rs 22.4 crore.

For the fiscal year 1999-2000, the company has forecast a total income of Rs 105.4 crore and net profits of Rs 26.2 crore.    

New Delhi, May 4 
International oil major Shell is unlikely to make an entry into India’s lucrative petroleum retail market in the immediate future. Though the government is prepared to dilute the Cabinet-approved entry criteria, Shell may still find the going difficult. Shell is not prepared to invest the mandatory Rs 2,000 crore in a refinery.

Nor is it ready to invest in the upstream sector to produce the mandatory 3 million tonnes of crude per annum. Without fulfilling these two criteria, Shell cannot be permitted to enter the domestic retail market.

Shell, however, has been pleading that investment in petroleum-related infrastructure to the extent of Rs 2000 crore be considered as a qualifying criteria.

The government has begun to see merit in this argument. Accordingly, the committee headed by Naresh Narad, additional secretary in the ministry of petroleum and natural gas, may recommend such a modification to the already approved policy.

Shell has not made any significant investment in infrastructure so far except an LPG storage facility on the west coast. Being a foreign company, it may not be involved in building strategic tanks required to maintain petroleum stocks for a minimum of 30 days.

The only significant investment could be made in LNG terminals or port development. Shell has already been selected by the Gujarat government to develop the Hazira port for bringing liquefied natural gas. Investment either in port or LNG terminals takes at least four years to fructify. Till then, Shell cannot hope to enter the domestic retail market.

Naresh Narad is an extremely cautious bureaucrat, who shies away from controversial issues. He would not like to create an impression that this dilution has been made to accommodate Shell. Any deliberate move to bring in a multinational without regard to the additonality concept laid down by the Cabinet can trigger a controversy.

Be it Shell or any other foreign company, it should invest in creating fresh capacity in petroleum-related areas.

Shell’s move to take over one of the junior marketing companies, such as BPCL or HPCL, will meet with stiff resistance from domestic players, such as Indian Oil Corporation (IOC) and Reliance whose combined lobbying power is unmatched.

Their argument is that the takeover of an existing marketing company is only a trading activity without any additionality, either in terms of investment or capacity creation. Even the high-level committee’s report, Hydrocarbon Vision-2025, has endorsed this argument.

Both BPCL and HPCL will be short of refining capacity in a deregulated market. MRPL, the joint venture between HPCL and the Aditya Birla group, wants to enter marketing directly.

Therefore, anyone who takes over either of the PSUs will have to import products to sustain their marketing network. This is an irresistibly attractive opportunity for a trading company like Shell.

Shell had Saudi Aramco as a partner in its attempt to takeover either of the PSUs. The first offer came about two years ago. Aramco later withdrew from the race when the oil prices began to slide. It is now cash-rich and is expected to re-join Shell in the renewed effort.    


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