SBI net leaps to Rs 2051 crore
Home Trust, Gruh Finance on HDFC buy list
Panel to chart road map for staggered VAT
MTNL cellular service starts next week
MRTPC probe into British Airways
Citi launches e-card for internet transactions
Kumar Birla, directors bunk AGMs
Foreign Exchange, Bullion, Stock Indices

Calcutta, June 22 
State Bank of India (SBI), the country’s foremost bank and a financial powerhouse, has hit pay dirt by racking up the highest-ever net profit of Rs 2051.55 crore in 1999-2000 compared with Rs 1027.80 crore a year ago.

Celebrations over the gains are likely to be muffled by the fact that the pile of bad loans — or non-performing assets as bankers would like to call them — has risen to a level where it can undo much of the good achieved in future. For the moment though, the results gave the bank enough resources and reason to reward its shareholders with a 50 per cent dividend compared with 40 per cent last year.

SBI chairman G.G. Vaidya said the profit kitty was boosted by the write-back of excess provisions made against investment depreciation (net of tax). In precise terms, it contributed Rs 322.40 crore to the growth in profit. If it were excluded, the increase in net profit would be 69.64 per cent, down by almost 30 per cent.

Operating profits jumped 21.77 per cent from Rs 3451.16 crore to Rs 4202.50 crore. However, if wage-hike provisions of Rs 315.31 crore and Rs 121 crore made in 1998-99 and 1999-2000 were kept out, the rate of growth will be sharper at 30.17 per cent at Rs 4082 crore as against Rs 3136 crore in 1998-99 to.

Net interest income increased 14.27 per cent to Rs 6928.35 crore from Rs 6063.10 crore. Total income went up 15.09 per cent at Rs 25,770.25 crore from Rs 22,392.23 crore while expenses (excluding provisions) grew 13.87 per cent at Rs 21,567.75 crore from Rs 18,941 crore.

The only dark speck on the bank’s bright canvas was the 8.4 per cent increase in its gross NPAs, which stood at Rs 15246.28 crore as against Rs 14064.75 crore in 1998-99. Net NPAs stood at Rs 6283 crore, up from Rs 5905 crore. The bank aims to bring bad loans down to 5 per cent of its total advances compared with the present level of 6.41 per cent.

However, provisions against NPAs were lower at Rs 1286.95 crore as against Rs 1422.67 crore. This included an additional Rs 32.59 crore made on standard assets in its global loan portfolio, taking the total to Rs 229.32 crore. Income tax provisions at Rs 974 crore were higher than Rs 383 crore in 1998-99.

Advances increased to Rs 98,101 crore from 82,359 crore. Global deposits (excluding Resurgent India Bond deposits) rose from Rs 1,51,007 crore to Rs 1,78,802 crore while domestic deposits grew by Rs 27,400 crore to Rs 1,69,620 crore.

The SBI board today decided to set up an information technology subsidiary which will provide infotech-enabled services to corporates, other banks and financial institutions.

A securities clearing corporation will be set up along with other banks and FIs. “We will hold 26-50 per cent stake in the company. The partners are yet to be decided,” Vaidya said. An MoU has been signed with HDFC, Dun & Bradstreet and Transunion to set up a credit information bureau.

Insurance is high on SBI’s agenda. It is keen to enter the life insurance and pension management businesses by setting up a subsidiary in which it will hold 74 per cent. The New York-based Morgan Guaranty Trust Co, which had been asked to find a foreign partner, has shortlisted 19 companies. The final choice will be made soon. At the same time, 500 branches have been identified to sell insurance products.

The capital adequacy ratio of the bank stands at 11.49 per cent. To achieve a CAR of 12 per cent the bank has decided to raise the tier -II capital through a subordinate debt of Rs 3,000 crore.

The bank which has appointed KPMG Consulting to draw up its IT plan will submit its report within four months. The bank has set a target of setting up 800-1000 ATMs and introduce internet banking at all NRI, overseas, specialised, personal segment branches with e-commerce, e-banking and e-trading.    

Calcutta, June 22 
Housing Development Finance Corporation (HDFC), the largest housing finance company in the private sector, is on the prowl.

The company is set to acquire two housing finance companies — Home Trust Finance Ltd, a wholly-owned subsidiary of Gujarat Ambuja Cement Ltd in the eastern region and Gruh Finance Company in the west.

This is the first time the housing finance major is making an acquisition bid. Earlier HDFC Bank has been amalgamated with Times Bank.

The HDFC board is meeting on June 27 to take the final decision on the matter.

Confirming the move, a senior Ambuja group official said, HDFC would take-over the entire stake of the cement major in the housing finance subsidiary.

“Housing finance, it is felt, is not our core area. So we have decided to hand-over Home Trust, which can be best managed if goes to HDFC,” the official said.

While the takeover price, could not be ascertained, sources said both the companies have arrived at an agreement last week.

HomeTrust Finance has a strong customer base in the eastern region where HDFC is trying to make an inroad.

The take-over will give HDFC a cutting edge in this region compared with other housing finance companies.

The acquisition of Ahmedabad-based Gruh Finance would help the company build a strong customer base in the western region.    

New Delhi, June 22 
The high-powered group of state finance ministers will draw up a road map for staggered implementation of the value added tax (VAT) since it is now evident not all will be able to meet the April 1, 2001 deadline.

This was decided at today’s chief ministers’ conference. The panel will ensure that the road map has the concurrence of all states.

Finance minister Yashwant Sinha, who spoke earlier in the day, urged the chief ministers to reduce their states’ deficit by raising capital expenditure and containing non-plan expenditure.

He asked all the states to meet the deadline for implementing VAT by passing legislations and framing appropriate rules and regulations.

While some of the major large states have started preparations for implementing VAT, a roadmap would be prepared by the empowered committee. The standing committee of finance ministers appointed earlier has been converted into an empowered committee.

Revenue minister V. Dhananjay Kumar told reporters after the meeting that the standing committee would examine the manner in which possible revenue loss to states arising from the abolition of central sales tax (CST) or introduction of VAT should be compensated. “Any loss of revenue as a result of reduction in rate of CST would be fully compensated by the centre,” he added.

On profession tax, there was a general consensus that the power to fix limit should be given to the states by amending the constitution. The relevant guidelines would be prepared by the empowered committee. In case of service tax too, the empowered committee would interact with an expert committee — which was set earlier — and give its recommendations.

All states and union territories have agreed to comply with the directive to enforce uniform floor rates. However, the floor rates for automobiles and information technology products would not be altered.

In their earlier meetings, the states had resolved to end the war over competitive sales tax incentives.

A couple of states which have not yet complied have promised to do so.

Kumar said that there has to be 100 per cent compliance with respect to sales tax related incentive scheme, except for north-eastern and special category states like Jammu & Kashmir, Himachal Pradesh. States lose 20-25 per cent of the total sales tax collections due to the incentive scheme.

Kumar said if there is non-compliance with respect to floor rates and sales tax-related incentive scheme, the centre would withhold 25 per cent of the central plan assistance to the concerned state or union territory.

Another meeting of the empowered committee is scheduled for July 10. It will look into pending issues relating to the introduction of VAT, computerisation, and training of staff.    

New Delhi, June 22 
There are growing indications that Mahanagar Telephone Nigam Ltd (MTNL) chief S. Rajagopalan’s dream of making the first GSM — global system for mobile communications —call from the state-run telecom major’s network may be fulfiled before he hangs up his boots.

GSM is the internationally-accepted standard for mobile telephony and is adopted by all private telecom service providers in the country. It is an improvement on the Wire in Local Loop (WiLL) telephony service that MTNL provides currently in Delhi.

The company is working overtime with Tata Lucent, its equipment provider, to set up the system which will provide cellular services based on the GSM technology from next week.

This introduction will be a soft launch and the commercial start-up is expected to take about two months. The service is already being provided by private operators.

The equipment could have been installed earlier but it was delayed because private cellular providers had raised objections to MTNL’s entry into cellular services on the ground that it did not possess a valid licence.

The matter was taken up with Telecom Regulatory Authority of India (Trai) and later at the high court, which ruled in favour of MTNL.

“We did not have much of a choice. Both private operators and MTNL are our customers. We had to wait and watch. Now that we have the green signal, we will try to complete the network in Delhi this year,” sources in Tata Lucent said.

MTNL had floated a global tender to procure GSM-based cellular mobile equipment in April 1998. The bids were supposed to be opened in July 1998, and they would have been valid till January 1999. As a result of writ petitions and appeals filed in the Delhi high court in August-September 1998, the opening of bids was deferred to November 1998. Things turned worse when a few equipment suppliers objected to the bids and alleged that there were discrepancies in tender process. The tenders were then allowed to lapse.

Once the case against MTNL was dismissed in August 1999, the company floated a new tender and the bids were opened in November. The evaluation report was submitted in December and the financial evaluation was completed in January.

The letter of intent was also issued in January, the purchase orders were placed in March and the project is expected to be completed by September. MTNL is expected to invest Rs 1,000 crore in the project, which will cover Delhi and Mumbai.

The company intends to set up four to five lakh lines over three years.    

New Delhi, June 22 
The Monopoly and Restrictive Trade Practices Commission (MRTPC) has ordered an unfair trade practice enquiry against British Airways on the basis of a complaint filed by the Raymond’s Industries chairman Vijaypat Singhania.

Singhania claimed he had been offloaded and downgraded on a number of British Airways’ London-Mumbai flights while British citizens who checked in after him got their seats.

Singhania in his complaint before the MRTPC, said he had been offloaded from the aircraft despite holding confirmed first class tickets for the London-Mumbai sector.

The Raymond chief claimed that to his “shock and surprise” he found British passport holders who checked in after him were accommodated in the first class.

The order passed by the acting chairman Sardar Ali on June 16, says that “It is a fit case to be enquired into” and that British Airways should respond by August 8. A spokesperson for the British Airways said “We are yet to get a copy of the MRTPC notice. And we are not aware of the dates when Singhania was offloaded. So we can’t comment at this stage.”

Singhania, however, claims to have written several letters in 1995 and 1998 to the airline complaining of the treatment meted out to him.

He received stock replies that it was normal for all airlines to overbook their flights.    

Mumbai, June 22 
Citibank today announced the expansion of its CitiDirect internet banking offering, with the launch of the Citibank e-card, the country’s first virtual card, in association with MasterCard.

The card, which can be used only on the internet, allows its customers to shop on any website. Citibank officials said the card had several features such as the lowest price, extended warranty for certain categories of purchases and purchase protection in case of loss of goods due to theft or damage.

Speaking to newspersons after the launch, Nanoo Pamnani, CEO, Citibank N.A., said that the bank planned to empower CitiDirect to perform several banking activities apart from adding other solutions, including e-shopping and e-brokerage.

“We want to make CitiDirect the most comprehensive banking platform in India,” he added.

The unique feature of CitiDirect, according to officials, is that it offers both resident and NRI customers a “single glance statement” that enables them to get full information on all the banking relationships and thereby view the assets and liabilities with the bank.

P S Jaykumar, director, sales and distribution said that the bank expects around 30 to 35 per cent of its existing customer base to embrace the e-card after two years.    

Mumbai, June 22 
As companies cope with the demands of transparency required in good corporate governance, they sometimes have to lift the veil on some unsavoury nuggets of information which would not have spilled out into the public domain even a few years ago.

A case in point is Kumar Mangalam Birla, the man who headed the Sebi panel on corporate governance, but could not make it to the annual general meeting of his three frontline companies — Grasim Industries, Indian Rayon and Indo Gulf Corporation.

Birla may not have found time, but his group has shown a rare display of transparency and candour in releasing the attendance record of Birla and other directors at the AGMs.

A look at the attendance register reveals that Birla is not the only mover and shaker in his sprawling empire who chose to remain conspicuous by his absence.

Even Rajashree Birla, the wife of late Aditya Birla and Kumar Mangalam’s mother, gave the AGMs of the three group companies a miss.

That the three companies have their registered offices in small towns — Nagda in Madhya Pradesh, Veraval in Gujarat and Jagdishpur in Uttar Pradesh respectively — is hardly reason enough for the jet-setting and globe-trotting directors to skip such events.

At the Grasim AGM, for instance, none of the 13 directors showed up on September 11 last year. Things were better at the Indian Rayon AGM, but only just: only one board member, B L Shah, trudged his way to Veraval. Indo-Gulf, a fertiliser and copper manufacturer., was more fortunate — three out of its 11 board members could complete the daunting task of reaching far-away Jagdishpur in Uttar Pradesh.

Officials know these things can be embarrassing, especially when you have a chairman who is one of India’s loudest voices on corporate governance. The problem, they try to convince sceptical shareholders and reporters, is being fixed.

As part of the tone-up process, Birla has been meeting a section of the shareholders regularly, though they have little to say about ways to improve abysmal attendance. The A V Birla group chief was appointed by the Securities and Exchange Board of India to recommend a code for corporate governance.

His record at board meetings has been exemplary though. He attended all the eight Grasim board meetings, all the 11 at Indian Rayon and five at Indo-Gulf. Among Grasim directors, P K Mohta and R K Kaul, have the dubious record of not attending any of the eight board meetings in 1999-2000.

D S Dahanukar, a director at Indian Rayon, attended only two of the 11 board meetings, but pocketed Rs 16,000 as sitting fees. However, Murari, with a better record of attending five of the 11 board meetings, was given only Rs 10,000.

Corporate observers and shareholders have applauded the efforts at transparency shown by the Aditya Birla group.

The openness has been attributed to the recommendations made by the Sebi appointed committee headed by Kumar Mangalam Birla. The group has since decided to benchmark its practices in tune with committee’s proposals.    

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