Bonanza for infotech firms
Draft Bill on civil aviation hits air pocket
Poor demand forces M&M to shut 2 units on Saturday
JK capacity hike to cost Rs 165 cr
Tea firms look for new converts
Parrys pulls out 8 brands, eyes Rs 140cr turnover
Report on non-tariff trade curbs planned
Foreign Exchange, Bullion, Stock Indices

New Delhi, June 16: 
The government today decided to allow infotech software and infotech services companies to issue ADR/GDR-linked stock options to employees of its subsidiaries incorporated abroad. It has also permitted parent companies to offer an employee stock option plan to its subsidiaries in India.

So far companies were allowed to issue stock options to employees of parent companies and not to subsidiaries. By expanding the scope of the �Scheme for issue of Foreign Currency convertible bonds and ordinary shares�, companies will be able to give stock options to employees of subsidiaries both in India and abroad.

While employees of foreign subsidiaries are permitted to hold ADR/GDR-linked options, employees in India will hold rupee-denominated securities. The government does not allow Indians to hold dollar-denominated or other foreign-currency denominated securities.

This expansion is being done in view of the essential features of the relationship between the parent company and subsidiaries such as interchangeability of employees between parent and subsidiary, interlinkage of the parent and subsidiary companies, and complementarity of functions between the two.

The government has been considering expansion in the coverage of employees who will be entitled to stock options in line with the Sebi guidelines which covers employees of a subsidiary company for the purposes of ESOP.

Sameer Kochhar, head of Skoch Consultancy said, �This is a welcome move especially for IT professionals working in Indian companies abroad.� Several multinational companies offer stock option schemes to their employees. This move will create a level playing field and keep Indian companies competitively at par with foreign infotech companies, Kochhar said. �It will definitely help in retaining talent working in Indian companies abroad,� he added.

The government has been giving special incentives to provide a fillip to the IT industry. Earlier, it had allowed Indian companies to make acquisitions overseas through ADR/GDR stock swap and also raised the ceiling under the automatic route for overseas investment from $15 million to $50 million.

It also raised the overseas acquisition cap through a stock swap to $100 million for software and others sectors like pharmaceuticals.    

New Delhi, June 16 
A tussle has broken out over the draft civil aviation Bill with several ministries objecting to certain provisions that threaten to rob the civil aviation regulatory body of its independence.

The regulatory body is expected to combine the functions of the current Directorate General Civil Aviation (DGCA) with that of a market regulator with the responsibility of fixing pricing, arbitrating between the government and private entrepreneurs running airports and airlines.

However, top officials evaluating the Bill point out the regulator has been carved out by simply converting the current Directorate General Civil Aviation into a CAA with the DGCA heading it as chairman and three senior-most additional or joint director generals as members with a few more bureaucrats and experts thrown in as part-time members.

�The clauses of this proposed bill make it clear the CAA does not have any fixed term of authority nor any true statutory independence. The chairman and members can be hired or fired at will. Even the salaries and conditions of office are not fixed,� officials said.

�In effect this is being set up just as an appendage of the civil aviation ministry.�

That obviously was never the intention of the government when it asked the ministry to draft the Bill. �We wanted to set up a truly independent market regulator not a carbon copy of a bureaucratic setup,� officials said.

To make matters worse, the Bill states that the Authority �shall be guided� by policy directions from the Union government. The draft Bill itself makes it clear that that the authority is expected to regulate the airlines of India, which it defines as those airlines registered in India where the chairman and two thirds of directors are Indian and substantive ownership and control remain in Indian hands, and other air transport services.

It is expected to ensure that operators of these air services earn economic returns on investment while providing satisfactory services.

The CAA also has to licence aerodomes, regulate air seats and cargo capacity, register aircraft, airworthiness of planes, certify air crew, traffic controllers and engineers. It will also have to take steps to check noise, vibration and atmospheric pollution and acquire land for building of airports.    

Mumbai, June 16 
Clobbered by the weak demand for utility vehicles, Mahindra & Mahindra Ltd (M&M) has decided to shut down its automotive units at Mumbai and Igatpuri every Saturday.

In a notice sent to the stock exchanges today, M&M said the decision had been taken to bring its production in sync with market demand. It added that the issue had been discussed with the workmen unions at both these units.

M&M officials were not available to comment on the possible impact that the plant shutdown would have on the company�s overall production. However, sources said it would be marginal as its Nashik unit was the main hub for utility vehicles.

The M&M stock yo-yoed on the stock markets: after opening at Rs 222.10, the scrip rose to a high of Rs 229 and then plumbed a low of Rs 221.05, before closing at Rs 228.80.

Analysts said even though M&M has a market share of over 58 per cent in the utility vehicle segment, it has been going through a rough ride because of tough competition from rivals such as Telco and Toyota Qualis.

Industry mavens expect competition in the rural segment to intensify following Telco�s plan to launch six variants of the popular Sumo in these markets. �These models could exacerbate the pressure on M&M�s products such as Commander and Marshall,� a source said.

Industry sources said the rationalisation of sales tax was another factor that led to the tapering off of demand for utility vehicles this year.    

New Delhi, June 16 
JK Industries plans to invest about Rs 165 crore this year to expand its tyre and sugar mill capacity.

Managing director of JK Tyres Raghupati Singhania, told newspersons that he planned to hike the combined capacity of JK and Vikrant�s tyre plants by �half a million from the current 4 million pieces a year, on an outlay of about Rs 140 crore.�

Another Rs 25 crore would be spent on increasing the company�s sugar mill capacity to 5,000 tonnes crushed per day, from the current 3,500 tcd and on adding a 10 megawatt capacity to the mill�s captive power plant.

Singhania, who was speaking after a board meet to finalise JK Industries� annual results, said about 30 per cent of this amount would be raised through internal resources while the rest would be borrowed from banks and financial institutions. �We have already tied up these loans,� he said.

JK Industries has reported an increased turnover for the financial year 1999-2000 at Rs 1,346.3 crore compared with Rs 1,296.6 crore and a 48 per cent increase in profit after tax from Rs 22.08 crore last year to Rs 32.75 crore this fiscal.

Though the higher profit was in part due to a drastic reduction in interest cost by about Rs 10 crore, Singhania pointed out, �With falling tyre prices and higher unit sales, much of the benefit from lower interest costs gets wiped out. We have managed to get higher profits mainly by strict cost control.�

To achieve this, the company has integrated the marketing and distribution networks of JK Industries and Vikrant Tyres, a public sector unit which it bought out. Shutting down some 40-50 marketing offices and giving a golden handshake to a large number of employees formed part of its cost cutting measures.

Following the improved results, the company�s EPS has gone up from 6.3 to 9.38. The dividend for the year has however, been maintained at the interim dividend level of 25 per cent.

The tyre division, which accounts for 90 per cent of the company�s turnover, reported an increase in its production from 2.61 million tyres to 3.03 million. In the commercial vehicles segment, JK Industries� output grew by about 19 per cent compared to an industry average of 11 per cent. �We have managed to achieve a 22 per cent market share in the commercial vehicles tyres segment,� Singhania added.    

Calcutta, June 16 
The tea industry is brewing a high-octane campaign to encourage higher consumption after realising that people are not drinking enough of the beverage and that there are many youngsters who abstain for health reasons.

The three-year promotion blitz, due for launch in September, will try to win over the younger generation and drill home the message that tea, far from being a harmful addiction, is a health drink. The focus will be on people less than 24 years, a segment which forms 60 per cent of the population.

Three advertising agencies, Ulka, Saatchi & Saatchi and Rediffusion, have already made presentations to the tea industry but sources say Ulka looks set to pip others to the post.

�One of the reasons is that Ulka conceived the highly successful Doodh campaign for the National Dairy Development Board, which tried to lure people into drinking more milk. Since the generic promotion for tea is similar in nature, the agency is likely to win the deal,� the sources said.

The industry is not sure how it will generate, and spend the Rs 16 crore that will be required to get the campaign rolling. �We will soon decide whether we will contribute 10 paise per kilogram or 20 paise for generic promotion,� industry officials said. There are expectations that the Union commerce ministry will chip in with some funds to start the campaign.

�To promote tea as a health drink, the industry will organise chat shows on television, get celebrities to recommend tea and scientists to endorse it as a health drink. We will also come out with advertorials,� the sources said.

Plans for a blitz come at a time when efforts to increase domestic tea consumption have not paid off in the way the industry expected. �Last year, prices in the domestic market did not go up despite to a fall in output. This is because domestic consumption has remained sluggish, growing at the rate of only 2 per cent instead of the targeted 3 per cent,� the sources said.

At the same time, steps are being taken to improve exports this year. The target has been fixed at 225 million kgs compared with 190 million kgs in the previous one. To make higher exports possible, the production target has been set at 840 million kgs, up from 805 million kgs last year. The increase of 35 million kgs in the output is expected to come largely from gains in the orthodox tea segment.

The industry is aiming to export orthodox teas to West Asia and North Africa (Wana) countries. A 16-member delegation comprising major tea producers and merchant exporters like Hindustan Lever, Magors, Tata Tea, Goodricke, Warren Tea, AFT, New Tea, Parry Agro, Saraf Trading, Global Exports, A.V. Thomas and Havukul Tea is leaving for Dubai, Syria, Tehran and Jordan on June 24. The representatives will hold talks with the State Trading Organisation of Iran.    

Calcutta, June 16: 
Parrys Confectionery Ltd (PCL), a Murugappa group company, has withdrawn eight loss making brands from the market. PCL vice-president, S. K. Ghatak said the company had identified 50 per cent of its 17 brands that were responsible for the company�s loss of Rs 16 crore on a plummeted turnover of Rs 95 crore in 1999-2000.

�We are determined to turn the corner in the current financial year for which we have withdrawn all the loss making brands,� he said. The company has set an ambitious turnover target of Rs 140 crore to make a turnaround during the 2000-2001.

�We are currently repositioning our premier brands and beefing up the retail network to achieve the target,� Ghatak said adding the company was planning to invest around Rs 9 crore on advertisement this year.

The company, which has a production capacity of 20,000 tonnes per annum in its two factories, is currently operating at 60 per cent capacity. �Our plan is to raise the production level to utilise the idle capacity,� he said.

PCL, which is the largest sugar boiled confectionery in the country, also has plans to diversify into fun-food segment.    

New Delhi, June 16 
The ministry of commerce and industry is planning a report on the non-tariff barriers faced by Indian exporters in global markets along the lines prepared by the European Union on textiles and the one prepared by the US Trade Representative.

Speaking at a CII meeting today, additional commerce secretary Nripendra Mishra said the report will be based on feedback from industry and the government. Bilateral negotiations with major partners can provide good results as a complimentary process to multilateral negotiations, he added.

Speaking on the possibility of an Indo-EU Free Trade Area (FTA) Mishra said the time is right to strengthen Indo-EU relationships.

However, an FTA will require a move towards zero tariff eventually. There is a considerable concern in India about the recent removal of quantitative restrictions on 741 product lines which can lead to as much as a 10 per cent increase in imports, he added.

According to him, a move towards zero tariff will have to be carefully calibrated as applied duties in India are 28 per cent and in EU they are four to five per cent.    

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