BSES board takes stock, unfazed by Reliance offer
Modicorp buys Telstra take in joint venture
L&T net profit drops 27%
Railways to be asked to buy more steel
Assocham�s exit: Good riddance, says Ficci
Cheminor to merge with Dr Reddy�s
Move to facilitate insurance on Net

Mumbai, May 20 
The board of BSES Ltd met today in an emergency stock-taking session after Friday�s surprise move by Reliance Industries Ltd to make an open offer to acquire 20 per cent of the country�s largest power distribution company at Rs 234 per share.

The man in the hot seat � chairman cum managing director R.V. Shahi � appeared non-plussed by the turn of events and told The Telegraph; �It (the Reliance open offer) has not created any panic in the company.� The board would comply with all the rules stipulated by Sebi, he added.

Senior BSES officials also revealed that the meeting will help the BSES management gauge the mood of the FI nominees to determine whether they will be swayed by the RIL�s open offer.

Incidentally, the meeting, which was convened at a short notice was primarily held to �take note of the open offer made by RIL.� Shahi said.

The meeting which commenced in the afternoon ended round 5 p.m.

The BSES board inspected the documents pertaining to the open offer presented by J P Morgan, the merchant bankers to the offer.

However, he clarified that the board did not go into the details of the pricing. It is best left to the financial institutions and retail shareholders (who have stakes of 35 per cent and 13 per cent respectively � to decide on the Reliance offer. Earlier in the day, a leading foreign wire agency put out a flash saying that the Reliance management would continue with the professional management of the company.

Shahi also believes likewise. �Going by their track record, I feel they (RIL) will support a management which is professional.�

Citing an instance, he said D.V. Kapur is the chairman of the power generation business of the Reliance group, who is a leading light in the industry.

Shahi said the board of the company would play no role in trying to influence the response of the financial institutions to the open offer.

�They have to take a decision. On our part we will ensure that the offer goes to every BSES shareholder,� he said.

He ruled out any panic in the company and felt that the open offer may basically be in order to comply with Sebi regulations which stipulate an open offer the moment its stake in the acquirer touches 15 per cent.

On being asked whether Reliance will be given representation on the board, Shahi said the issue will be relevant only after the completion of the open offer. While it could be an unlikely event to acquire an additional 20 per cent of BSES equity, analysts expect Reliance to increase their stake from the existing level of 14.98 per cent. Sooner or later, BSES will be forced to give representation to Reliance nominees, an analyst tracking the industry said.

�It is not relevant now,� he said. According to him, if Reliance had asked for a representation on the BSES board it would have been a �legitimate demand.� However, they have not requested for a seat and it has not been discussed at the meeting.    

Chandigarh, May 20 
Modicorp, the cellular services provider in Calcutta, today bought the entire 49 per cent stake of Telstra, its foreign partner, and plans to come out with an initial public offering (IPO) of 10 per cent.

Dilip Modi, CEO of the Modi Telstra cellular venture, said: �We have bought the entire 49 per cent stake of Telstra. The board of directors which met today also decided to offer the cellular service under a common brand name � Spice Telecom. The deal was decided without any third party mediation.�

Modicorp of the BK Modi group and its associates had a 51 per cent stake in the cellular venture. Earlier this year, the company had signed a memorandum of understanding with Telstra for the acquisition of the latter�s stake.

�Now we will be able to draw on the synergies with Punjab and Karnataka cellular operations of Modicorp and its associates.,� Dilip Modi said.

Spice Communications, another BK Modi group company, operates two cellular circles in Karnataka and Punjab.

�The proposed acquisition was on the cards for sometime,� said Modi. �Telstra wanted to focus on providing global services to corporate customers throughout Asia.�

Modi Telstra claims it has a market share of 55 per cent in Calcutta and 54.6 per cent in Karnataka; Spice in Punjab has one lakh registered subscribers. The combined subscriber base of Spice will now go up to 2.5 lakh. With 14 of the 15 districts networked, Spice Punjab has achieved 90 per cent coverage in the state while Spice Karnataka covers 85 per cent of the state districts. The Spice networks in Punjab and Karnataka cover over 1300 villages.

According to Modi, the total investment in Modi Telstra is Rs 158 crore of which Rs 133 crore is shareholders� contribution while the remaining Rs 25 crore is in the form of long-term borrowings.

The company also announced a major expansion initiative to enhance its presence in the cellular market in India.

�Mergers and acquisition of available cellular operations in India will be at the forefront of Modicorp�s strategy for expansion. A unique highlight of this M&A strategy would be �flexibility� and �customisation� in the ownership pattern to suit the interests of the merging operators,� said Dr Abid Hussain, director on Modicorp board.

BK Modi, chairman and CEO of Modicorp, said: �Acquisition of Telstra�s equity is in line with our strategy to become a formidable player in the Indian cellular market. Today Spice is a high performing and successful company and it makes business sense to capitalise on our human and technical resources and brand equity nurtured over the years. Given the opportune time, when the Indian cellular industry is going through a phase of consolidation, we will continue to explore all possible opportunities that come our way. We are bullish about Spice becoming a lead player in the Indian telecom and wireless internet arena.�

Modicorp will now focus on telecommunications, information technology and the internet as strategic thrust areas for developing a synergistic business portfolio.    

Mumbai, May 20 
Larsen & Toubro (L&T) has suffered a 27 per cent drop in net profits for the year ended March 2000 thanks to rising interest cost and falling realisations from the capital goods and cement sector. Net profits dipped to Rs 341.63 crore from Rs 470.74 crore in the previous year.

The drop would have been worse, had it not been for the 59 per cent rise in other income. This component during the year rose to Rs 175.30 crore compared with Rs 110.06 crore in the previous year.

Net sales for the year rose by a meagre 1.81 per cent to Rs 7423.81 crore compared with Rs 7291.49 crore in the previous year.

Commenting on the reasons for the drop in its bottomline, L&T said the capital goods sector saw a lacklustre growth due to excess capacities in steel, paper and cement industries. Secondly, realisation from cement sale also suffered despite a considerable growth in volume.

Another factor contributing to the decline, apart from the flat topline growth, was the massive rise in interest costs which spiralled to Rs 332 crore from Rs 161 crore in the previous year.

L&T attributed this rise to the commencement of commercial production of cement at its plant in Andhra Pradesh and the captive power plant at Awarpur in Maharashtra and also due to the increased levels of investment and working capital.

For the current year, the company said order backlog of Rs 6819 crore along with significant order booking in the beginning of the year would provide a platform for stable performance for the current fiscal year. It added that in the previous year, despite the unfavourable business environment, it booked orders worth Rs 8146 crore against Rs 7688 crore, an increase of 6 per cent. The order backlog at the year end at Rs 6819 crore, it added, was substantially higher than Rs 5870 crore in the previous year, a rise of 16 per cent.

On cement, it said sale of cement and clinker at 10.5 million tonnes was higher by 15 per cent over 9.2 million tonnes in the previous year. As the price of cement in all the markets in which it sold the commodity were depressed, sales realisation in almost all the markets were lower, it added.    

Calcutta, May 20 
Union steel minister Dilip Ray will hold a meeting with the railway minister Mamata Banerjee to persuade the railways to increase its steel intake for construction purposes. The meeting will take place next month. The meeting will also be attended by the leaders of the steel industry.

Southern Railway has already decided it will use stainless steel for six flyovers in Tamil Nadu. �Southern Railway has planned to reconstruct 203 railway bridges. Work on the first 15 bridges will start soon. Keeping that in mind, the steel ministry has decided to make a presentation to the railway ministry to convince them to use more steel while reconstructing these bridges,� a steel ministry official said.

Last year 9.27 million tonnes of steel was used in construction as against a total production of 25 million tonnes.    

New Delhi, May 20 
The chamber fight is on unabated. In the second round today, the slugfest continued with Ficci responding to Assocham�s exit from the joint business councils by retorting that it can do a better job now and accusing the latter of not paying up its dues.

In a three-page rebuttal, Ficci has accused Assocham of not paying up outstanding dues of Rs 53.59 lakh.

�Over the last six years, from 1994 to date, Assocham has reneged on its financial obligations. The audited accounts of JBC for the last six years reveal, year by year, non-payment by Assocham which was being carried forward as outstanding dues to Ficci amounting to Rs 53,59,114. This staggering figure of non-payment indicates Assocham�s unwillingness to meet its partnership obligations,� the release says.

Ficci seems to consider this snap up as a blessing in disguise. �In the new situation, Ficci will be able to strengthen the JBC further through the appointment of many major industrialists who have expressed their keen interest to chair or co-chair the JBCs,� the release says.

However, Assocham is unwilling to relent and its secretary general Jayant Bhuyan denied any knowledge of such dues. �There is no accepted liability by Assocham from Ficci,� he said.

Whatever be the claims and counter-claims, industry sources say this breakup could eventually lead to a merger of Assocham with the Confederation of Indian Industry (CII).

According to Ficci, �Assocham�s incapability to host any event with President Bill Clinton may have precipitated this current crisis.�

This is not being denied by Assocham altogether. �The visit actually highlighted how decision-making in the JBC was not being done in unison,� admitted Bhuyan.

The underlying current of bitter rivalry has been there for quite sometime. During Clinton�s visit, the memorandum of understanding with USIBC (United States Business Council) was signed by Ficci. �USIBC�s counterpart is the JBC and not Ficci. So the MoU should have been with the former,� Bhuyan said.

For Ficci, however, Assocham�s participation in the JBC has �always been of a minor nature.� �Out of a paid membership of businesses and companies of 247, Assocham�s contribution of companies was only eight during last year which is only 3 per cent,� Ficci alleges.

However, Assocham is quick to dismiss the figure.    

May 20 
Putting an end to speculation over the last one year, Dr Reddy�s Laboratories Ltd (DRL) today announced that Cheminor Drugs Ltd, a group firm, is being merged with itself.

DRL has informed the stock exchanges that its board will meet on May 31 to consider the merger proposal and swap ratio.

Pharmaceutical analysts, who were not surprised by the merger announcement, said the move made immense sense, particularly at a time when DRL is planning an American Depository Shares (ADS) offering this year. Though Cheminor is largely into bulk drugs and formulations, around 74 per cent of it�s turnover is accounted for by exports. The company is also known to be strong in the generic market (off-patent products that are not sold under any brand name) and the company has filed six Abbreviated New Drug Applications for which exports are expected to commence from the next fiscal year.

�With Cheminor�s strong export focus and other advantages, the merger would make a lot of sense as DRL can now get a much better valuation in the US markets,� a leading pharmaceutical analyst said.

In April last year, group chairman Anji Reddy indicated that the two firms would be merged in two years� time. While DRL posted sales of over Rs 603 crore for the year ending March 2000, the sales of Cheminor for the same period stood at Rs 215 crore. The net profit for DRL was Rs 60 crore, while that of Cheminor stood at Rs 27.8 crore. Both the companies declared a 30 percent dividend.

Cheminor, which is a supplier of intermediates, generics and bulk drugs to several countries, manufactures drugs like Ibuprofen, Ranitidine among others. The company, which was incorporated in December 1981 as a private limited company, has an alliance with Schein Pharmaceuticals of the US. Schein is one of the largest generic manufacturers in the US.    

New Delhi, May 20 
The Insurance Regulatory and Development Act (IRDA) would be amended to ensure that insurance products could be sold on the internet without having to be supplemented by paper transactions.

Speaking at a seminar on �IT for Insurance� organised by the Confederation of Indian Industry (CII), B.K Chaturvedi, special secretary, insurance, said, �there are some minor amendments that needed to be made in order to allow the distribution of products on the internet.�

He hoped that these amendments will be in place before the first insurance company starts operating in November this year.

Chaturvedi said the passage of the information technology Bill ensured that documents on the internet could be recognised as secure and digital signatures were acceptable. But the insurance Act still contained a provision that all documents would have to contain stamps. This provision would have to be amended.

Another provision which needed to be amended was Section 64BB which said that payment for insurance products must be received in advance by the company. Payment by credit card would result in delay, and, in the meantime, the need for insurance cover might come up. So the Act would have to be amended to make way for payment through credit cards. Earlier it had been proposed that credit card payments would be worked out by notifying such payments as deemed payments, but this was not the clear solution, Chaturvedi added.

IRDA chairman N. Rangachary, said the regulator may demand solvency position on a current basis from new insurance companies.    


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