Tatas plan to club infotech outfits
4:5 swap ratio for TEC firms� merger
Rediff roars on Nasdaq debut
Norms for overseas loans relaxed
ICEman to rule telecom, media & Net worlds
ICICI weighs infotech fund
Bitter price cut pill for pharma majors
Sebi shot in arm for dotcom issues
Hind Motors puts brakes on salaries yet again

Mumbai, June 14 
The Tatas have embarked on a major restructuring exercise that will see their infotech companies regrouping under one umbrella outfit.

The restructuring exercise of the Tata group�s will be more complicated than the recent reorganisation of the group�s power and distribution ventures under Tata Power. Confirming this, group chairman Ratan Tata told The Telegraph, �An exercise is under way to restructure our infotech ventures. However, it is a complicated exercise and will take time to crystallise.�

Tata, however, ruled out the possibility of completing the restructuring in the current fiscal. According to him, the final picture will emerge in a couple of years. �We have to sort out several factors�, Tata said. Among them was the fact that some of the companies were still privately held, while others were listed companies.

The other hurdle to a quick merger, Tata revealed, was the fact that several Tata infotech ventures have foreign collaborators and partners. �We have to find a way where the merger of the infotech ventures do not become a impediment for the smooth functioning of the proposed company.�

Tata also talked about the overlap in products and services of the infotech companies. �The overlap of products and services of these companies have also to be ironed out,� he added.

Already, the group has made some headway by turning Tata Infotech � its flagship company among the listed companies in the infotech arena � into a stand-alone company. Earlier, US major Unisys Corporation was the joint venture partner of the outfit. The other listed companies in the infotech sphere for the Tatas are Tata Elxsi, Tata Honeywell and Nelco.

In addition, steel major Tata Steel and automobile giant Tata Engineering (Telco) have infotech arms. In fact, both the companies have achieved success in the area. Incidentally, the divisions were primarily created to aid their in-house requirements. However, at present these outfits are considered as separate profit centres for the two companies.

In fact, Tata Steel is currently discussing the possibility of spinning it off to Tata Consultancy Services, the flagbearer of the country in the infotech arena.

If the exercise is completed to its logical end, analysts aver it will mean that the Tata pattern of restructuring which saw Tata Steel�s captive power plant being acquired by Tata Power a group company.    

Mumbai, June 14 
The board of directors of the three Tata Electric Companies today approved a plan to merge Tata Hydro-Electric and Andhra Valley into Tata Power at a swap ratio of four shares in Tata Power for every five shares in each of Tata Hydro and Andhra Valley.

The merger of the three companies into one entity will give it greater leverage to participate in large power projects, TEC chairman Ratan Tata told reporters after the board meeting here today. �The swap ratio is based on an independent valuation by S B Billimoria and company and merger will be effective April 1, 2000,� TEC director CR Vevaina said.

The board of Tata Power also approved plans to come out with a Rs 300 crore cumulative redeemable preference shares to part finance the company� capital investment plans of Rs 3580 crore in one or more tranches. The merger will entail a stamp duty of only Rs 60 crore.

Asked whether the consolidation was spurred by hostile takeover threat, Tata said: �We want to ensure that our companies are not undervalued and they reflect the full value so that shareholders also see the growth prospects.� Asked to comment on the impending competition from BSES-Reliance consortium, Tata turned conciliatory: �This is an era of alliances and not enmities. BSES is already on the ground and we will have to live together.� After the merger, the promoters stake would stand at over 26 per cent, Vevaina said.

The board has recommended a final dividend of five per cent, in addition to the interim dividend of 37 per cent declared earlier, making a total of 42 per cent against 37 per cent the previous year.    

Mumbai/New York, June 14 
Rediff.com blazed a scorching trail when it debuted on the Nasdaq today.

The company�s ADRs opened at a price of $ 12 each, a stirring success considering that it represented the higher-end of the $10-$12 range estimated by lead underwriter Goldman Sachs.

The company sold 4.6 million ADRs �representing 2.3 million equity shares� and scooped up $ 55.2 million, giving other internet start-ups in India enough confidence to unspool similar offerings in future. Around 9:30 pm (IST) the ADR was trading at $ 19, up 58 per cent from its listing price.

The company had said in its filings before the US Securities and Exchange Commission (SEC) that 53 per cent of its equity will be held by foreign investors after the offering. However, if foreign holding is capped at 49 per cent, it will limit additional equity investments. Though the Centre recently allowed 100 per cent foreign holding in e-commerce, the immediate impact of the move on the company is not clear. The success of Rediff, launched four years ago as a portal which provides news and chats on topics ranging from cricket to finance, indicated that US investors are keen to put their money and trust in the hi-technology names from India.

Analysts had remarked in their pre-listing comments that Rediff�s decision to test the choppy US equity markets in spite of a slump in investor sentiment towards technology stocks was an indication that Internet companies are increasingly prepared to accept relatively lower valuations.

�Internet firms will have to cope with the market reality as technology investors increasingly become more and more choosy,� said R. Ravimohan, managing director at Credit Rating Information Services of India Ltd.

Though Rediff has set the balling for other firms waiting to tap overseas markets to raise money, analysts feel there will be a time-lag of at least six months before any Indian portal launches a foreign portal. The company has been able to benefit in a several ways from the Net�s rapid growth. Most notably, it has registered astronomical results in the number of page views on its 17 channels, or sections of its web site.

The issue has passed the muster with US investors despite worries that its business model is unproven in India and the company can�t even assure that it will achieve or sustain profitability.    

New Delhi, June 14 
The government today further liberalised the rules for overseas loans by empowering the Reserve Bank of India (RBI) to sanction external commercial borrowings (ECBs) up to $ 100 million and raising the limit under the automatic route for fresh ECBs to $ 50 million.

At present, the RBI is empowered to give ECB approvals under $ 5 million and up to $ 10 million under all other windows except the automatic route. Companies and institutions will now have to submit their ECB applications to the exchange control department of the RBI.

The government said all refinancing of existing ECBs would be placed under the automatic route. Until now pre-payment approvals were given by the finance ministry or the RBI depending on who had given the initial ECB approval.

Consequent to the relaxation of the ECB norms, the RBI will give all such approvals, even in cases where ECBs have been approved earlier by the finance ministry. Necessary software and institutional arrangements are being developed to operationalise the automatic route. RBI will work out the modalities for its implementation, it said.

The government has also decided to enhance ECB exposure for all infrastructure projects like power, telecom, roads, railways, ports, industrial parks and urban infrastructure to 50 per cent of the project cost as appraised by a recognised financial institution or bank. It has also decided to allow exposure beyond 50 per cent of the project cost in case of power projects and other infrastructure projects on merits of each case.

Earlier this year, the government had enhanced the maximum limit for financing equity investment in a subsidiary/joint venture company and infrastructure projects from $ 50 million to $ 200 million.

In the last revision of ECB guidelines the government had cut down the stages of ECB clearance to two steps. The regional offices of RBI were allowed to take the loan agreement and documents on record of all approvals once the government had given its nod.

Government officials said the recent 50 basis points increase in interest rate by the US Federal Reserve has made ECBs an expensive proposition. Hence there would be less demand by corporates. This is seen as a good opportunity to give more powers to the central bank as it is expected to tackle a rush later.

The government has clarified that the all-in-cost ceilings for normal projects, infrastructure projects and for long term ECBs are 300, 400 and 450 basis points over six months LIBOR, for the respective currency in which the loan is being raised.    

New Delhi, June 14 
The government is toying with the idea of an Information, Communication and Entertainment (ICE) Authority which will act as an omnibus regulator.

According to the plan, the Telecom Regulatory Authority of India (Trai) that regulates the telecom sector and a Content Bureau�to be set up to police the internet and broadcast mediums�will be the two arms of the proposed watchdog.

A draft ICE Act 2000, which has been circulated to key ministers ahead of a Cabinet meet to be held on the issue later this month, makes it clear that the ICE Authority of India �will be a super regulator�.

It will incorporate Trai, which is to be renamed as the �Carriage Bureau� and a new model agency �Content Bureau�.

However, the ICE Act�s passage through the Cabinet may not be smooth as telecom and department of infotech officials have already objected to the immense overriding powers assigned to the new Authority over telecom and internet services.

Obviously both the ministries fear erosion of their powers with the setting up of the authority.

Among other things, the ICE Authority will be responsible for licensing, policy, promotion of competition, enforcement of all telecom, broadcast and internet companies and for international communications. These functions are currently performed by these ministries.

The authority will license companies for one or more areas�telecom, broadcasting and internet. It will �ensure the licensee does not engage in the business of other services� without a change in his license.

This significant point in the ICE Act hints at bringing in some form of selective anti-monopoly controls on cross-media holdings, which might prove unpalatable for those allies of the BJP who control broadcasting companies and have been eyeing internet forays.

The Trai will function in accordance with the Trai Act and its amendments will be incorporated in the ICE Act. But it will be subservient to the new authority and its chairman and members will be redesignated Carriage Commissioner and deputy commissioners.

The yet to be set up Content Bureau, on the other hand, will formulate a programme content regulation code and an advertising content regulation code applicable to all broadcasters, both private and government-owned. All broadcasters will be covered by these codes whether they are based in India or abroad as long as they beam their signals into the Indian territory.

However, officials say the very broad mandate of this code may have to be restricted later as they expect public and parliamentary criticism of �such sweeping codes which could be misused by any authority at a later date to keep off air almost any programme which is inconvenient to the powers that be.�

Separate content codes for the internet on similar lines will also be formulated under the Act.

The Act, however, admits that this might not be foolproof.    

New Delhi, June 14 
Bullish on the new economy sectors of infotech, biotechnology and retailing, ICICI Venture Fund is planning to set up a new Rs 100 crore fund which will focus on the information technology sector.

Speaking to The Telegraph, ICICI senior general manager, Kalpana Morparia said, �We expect our venture capital company to grow by at least 60-100 per cent this fiscal and hope to have an aggregate corpus of Rs 1200-1500 crore.�

It has begun the year by setting up a Rs 100 crore fund. The company had a total corpus of about Rs 900 crore for 1999-2000 with an investment focus in both Indian and foreign companies.

Currently, the company manages about 11 funds like the Software Fund, ICICI Life Sciences and ICICI Retail Services Fund, ICICI Incubator Fund, which invest in information technology products and services, retailing and healthcare.

The infotech portfolio spread across the funds is expected to provide annual returns of over 50 per cent, feels the company.

ICICI Venture recorded a gross revenue of Rs 185 crore in 1999-2000 and profit after tax of about Rs 38.34 crore. Earnings per share grew from Rs 21.20 in 1998-99 to Rs 127.82 in 1999-2000.

ICICI Venture also expects a number of companies to get listed with successful initial public offerings this year. Last year about two companies were listed on the Nasdaq, besides others which were listed on the Indian bourses.

ICICI trading symbol

The American Depository Shares (ADS) of ICICI Ltd currently being traded under the symbols �IC� and �IC.D� on the New York Stock Exchange (NYSE) will trade under the common symbol �IC� beginning June 19.

ICICI, which has announced June 19 as the record date for payment of final dividend for the year 1999-2000, said the ADS would rank at par on the NYSE.    

New Delhi, June 14 
Leading drug manufacturers will have to swallow a bitter pill as the National Pharmaceutical Pricing Authority (NPPA) today slashed the prices of 34 formulations. The price cut ranges between ranging from 1.9 per cent to 77 per cent.

The cut is likely to hurt the revenue flows of E Merck, Glenmark, Nicholas Piramal, Cipla, Sun Pharma, Cadila, Wockhardt, Knoll Pharma and Ipca Labs.

The NPPA also fixed the prices for two other formulations.

While the prices for two formulations have been fixed for the first time, 34 drugs prices have been slashed by 1.89 per cent to 77 per cent, an official release said. Non-ceiling prices have been fixed for 36 packs in accordance with the provisions of the Drugs and Price Control Order, 1995.

The formulations for which prices have been revised are multi-vitamin injections, anti-tussives and anti-allergic formulations based on bulk drug Psuedoephedrine Hydrochloride in combination with other drugs.

The revision in prices has been necessitated due to a decrease in the bulk drug prices, the release said. The new prices would come into effect within 15 days.

Formulations which will cost less include Paracetamol, Ibuprofen, Pseudophedrine, Bromohexine, Acetaminphen, Menthol, Citrazine, Cynacobalomin, Thia mine Hydrochloride, Nocotinamide, Pyridoxine Hydrochloride, Benzyl Alcohol, Tripolidine and Solvin.

A strip of Paracetamol manufactured by Plethico Pharma consisting of 10 tablets of 500 mg each will now cost Rs 8.99, while a similar strip of Solvin tablets made by Ipca Labs will cost Rs 3.98.    

Mumbai, June 14 
The Securities and Exchange Board of India (Sebi) today allowed companies without a track record of profitability and net-worth to raise money from the capital market through the book building route as part of an effort to revamp the initial public offering (IPO) norms.

However, it said these companies should allocate 60 per cent of the issue to qualified institutional buyers (QIBs), failing which the issue will be deemed a failure. The decision is expected to help dotcom firms which have no track record to float an IPO under the terms and conditions set today.

Ambitious promoters who wish to launch an IPO around five times of the pre-issue net-worth can do so only if the company has a track record of profitability and net worth as specified in its existing guidelines.

The amount against promoters� contribution brought in the form of cash, either before or along with the issue, shall be kept in a separate escrow account and released to the company with public issue proceeds.

In another significant move, Sebi said the issuer and the lead merchant banker will have to justify the issue price in the offer document. �In the case of book building, the issuer/merchant banker shall also specify that the final price has been determined on the basis of investors� demand. If that does not happen, he cannot proceed with the issue,� Sebi said.

At its board meeting held today, the market regulator also decided that IPOs five times the size of pre-issue net-worth, and public issues by listed companies more than five times the pre-issue net worth, would be allowed only through book-building route. In such cases, 60 per cent of the issue size must be allocated to QIBs.

The regulator also rationalised the IPO lock-in provisions. The minimum promoters� contribution of 20 per cent shall be locked in for three years, as is the case now, but the balance of the pre-IPO capital held by them shall be locked in for a year from the date of allotment of shares in the offer.

In another significant decision, SEBI approved the introduction of carryforward trading in the rolling settlement mode. It also doubled the Rs 20-crore badla limit per broker and removed the present limit of 75 days for badla deals.

The Sebi board also approved both daily and weekly carryforward systems with maturities of one to five days in rolling settlement, in line with the proposals of the J R Verma panel, Sebi chief D R Mehta told reporters here today.

Specific eligibility criteria has been framed for badla scrips in the accounting period and rolling settlement mode. The same has been done in the case of continuous net settlements (CNS) � which was also cleared by Sebi today.

Penalties planned

The Sebi is planning to approach the Centre to amend the Sebi and Securities Contracts (Regulation) Act to empower it to �impound and disgorge� ill-gotten profits of companies and individuals and make monetary penalties commensurate with the gravity of the violation of the norms.

�Regulators in many countries, including the US, Hong Kong, Singapore and Korea, have powers to impose three times the quantum of contravention, besides recovering the amount gained. While we can impose a maximum penalty of only Rs 5 lakh,� the Sebi chief said.

Sebi will also seek enhancement of penalties under the SCR Act to Rs 5 lakh or three times the profit/loss made illegally or imprisonment for two years.

The regulator will also seek a mandate to impose monetary penalties for violation of regulations relating to unfair trade practices and collective investment schemes. It also wants the power to impose a penalty of up to Rs 25 lakh for non-compliance and non-disclosure, for which no specific penalty is provided by the current regulations.

The board has decided to seek conversion of the securities appellate tribunal into a multi-member body.    

Calcutta, June 14 
The Hindustan Motors (HM) management has started deferring wage payments to 10,500 employees of the Uttarpara factory after an interval of four months.

It has also framed a unilateral wage-revision formula which provides for smaller increases in salaries compared with the previous agreement reached between the two sides in 1995.

The company traditionally pays wages on the third and seventh of every month. But this month, the company has declared that the payments will be made on the 15th and the 18th.

�The company has, time and again, informed us that the sale of Ambassador cars has been increasing. But we do not have any clue why they keep deferring the payment of wages,� said Ajit Chakraborty of the Intuc-affiliated Hindustan Motors and Hyderabad Industries Employees Union. The Intuc union today staged demonstration before the factory gate, which was also attended by the Trinamool MP Akbar Ali Khondkar. Even as the wages are delayed, the company has put forward its wage-revision formula but the unions are not ready to accept it. In the last wage-revision agreement, which expired in July 1998, the basic pay had been increased by Rs 200 for those who worked for 1 to 10 years, by Rs 250 for those who had served for 10 to 20 years and by Rs 300 for those who have been around for 20 years and more.

This time, the management has said the revision will be Rs 130 for one to 10 years, Rs 140 for 10 to 20 years and Rs 160 for 20 years and above. The unions have demanded a raise of Rs 500 in the basic wages. �We do not want a hike of Rs 500 . But there should be some increase over the last agreement,� the unions say. The annual increment has also been brought down from Rs 15 to Rs 10 in the new agreement. The company has agreed to give an educational allowance of Rs 15 to each employees.

The unions had also demanded that the leave travel allowance be increased from Rs 700 to Rs 4,000 but the company has agreed to Rs 850. Earlier, both Citu and Intuc unions had submitted their charter of demands which would have cost the company Rs 32 crore. But later, the unions revised their charter and submitted a plan which would cost the company Rs 20 crore.    


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