Govt vows to make selloff painless
Four consortiums vie for Air-India selloff mandate
British Telecom to acquire ISPs via joint venture
Rossell resolution to shift HQ put to vote
DSQ Software forms five strategic business units
IA sees flight of customers in home skies
Foreign Exchange, Bullion, Stock Indices

New Delhi, June 28 
In a bid to soften the disinvestment blow for public sector employees, the government has said it will try to safeguard jobs even as it pushes for divestment.

At a seminar on �Disinvestment Strategies and Restructuring Options,� organised by the Associated Chambers of Commerce (Assocham), disinvestment minister Arun Jaitley said, �Various incentives, like an employee stock option scheme, are being worked out, so that employees can get a share of the company�s wealth.�

This would also help in broadening the shareholding base of companies.

�While the government wants professional management to come into the PSUs, we are equally committed to protect workers� interests,� he said.

Last week, the Cabinet committee on disinvestment announced disinvestment of government equity in 33 state-owned companies, including privatisation or outright sale of 26 PSUs during the current financial year.

Jaitley said the government will also ensure that an attractive voluntary retirement scheme (VRS) package is offered to employees in cases where retrenchment of labour is found necessary.

Ruling out the possibility of massive job losses after privatisation, he said experience in other countries showed that in the long-term, privatisation generated more employment and this would be the case in India too.

However, Jaitley also said that time is the most crucial factor in the disinvestment process. �If the process takes time, the market may defeat it.�

He added that the government was committed that the disinvestment proceeds should not be used for bridging the fiscal deficit but for restructuring PSUs wherever needed, social sector expenditure and pre-payment of public debt.

�In the Budget, the finance minister has made a commitment that the disinvestment proceeds will not be used for bridging fiscal deficit,� he said.

Regarding disinvestment in big ticket PSUs like Maruti Udyog, Mahanagar Telephone Nigam Ltd (MTNL) and Videsh Sanchar Nigam Ltd (VSNL), which were not taken up during the last meeting, Jaitley said, �Nobody should expect the fate of all 240 PSUs to be decided in one meeting. We feel that at a suitable time, big ticket privatisation would be required. But till such time, that is, in the initial phases, we feel medium-ticket disinvestment is most suitable.�

The minister said that the value locked in the PSUs must be released, which would only make the units more accountable and competitive. He added that some of these units have the potential to become Indian MNCs and we should not lose out on this, he said.

Jaitley said that the government was also against replacing public monopoly with private monopoly. �If privatisation creates private monopoly, then it is not in the public interest. It is competition which is the best protector of consumer interest,� he said.

The government will make sure that it gets the best value during disinvestment, he said, adding that there would be complete transparency in the disinvestment process. �We are committed to complete transparency during privatisation,� he said.

Jaitley added that the government will ensure that the first few cases of disinvestment turn out to be success stories, which will be the best marketing for the entire process.

�If the last six months have generated a strong debate on privatisation, the first few success stories will be the best marketing exercise for the entire process.�

Jaitley said that there is now a consensus emerging on disinvestment across the country, which was explained by the steps taken by state governments in Haryana, Assam, Karnataka and even the Left-ruled West Bengal towards disinvestment or privatisation in state PSUs.

�In the last six months a strong debate has been generated on the issue of disinvestment and in the next few years, we should see successful privatisation effectively taking place.�    

Mumbai, June 28 
Four consortiums put together by internationally renowned investment banking outfits are vying for the mandate to act as the global advisor for the selloff of the government�s 74 per cent stake in Air India.

While Morgan Stanley Dean Witter is partnering its local partner JM Morgan Stanley, the second consortium comprises Saloman Smith Barney, Saloman Brothers and the leading US bank major Citigroup.

The third consortium is led by the UK-based Lazard Brothers with renowned valuers and auditors A F Ferguson and SBI Capital Markets, the country�s largest merchant banker.

The fourth consortium is the most intriguing and comprises leading Japanese bank Sumitomo Bank, IDBI along with its capital markets division and its credit rating division CARE, and N-ew York-based First Equity.

Sources in the department of disinvestment said that till the last moment IDBI was undecided on whether to tie up with Dresdner Bank, a leading German bank, or with the Japanese bank.

According to a source in the Indian outfit, �We cannot do it alone since we don�t possess the required experience�. The two foreign investment banks are expected to bring in the skills they have acquired in striking similar deals in the global aviation industry, sources added.

Sources said it was not surprising that there were only four bids for AI mandate. This is because a majority of the investment bankers will be keen to represent interests of clients vying to acquire a stake in Air-India, which will be a more lucrative proposition for them.

Air-India is a 100 per cent government owned company with an annual turnover of over Rs 4000 crore. It is designated as the national carrier of India under various bilateral agreements for traffic rights negotiated by the government of India.

The top-level committee on Air-India disinvestment will meet on June 29 and 30 to appoint a global advisor to advise and assist the government on its proposed scheme of disinvestment.

The six-member inter-ministerial panel will comprise disinvestment secretary Pradip Baijal, civil aviation secretary Sanat Kaul, joint secretary in the department of public enterprises S. Talwar, joint secretary in the department of economic affairs S Behura, Air India managing director Michael Mascarenhas, and AI finance director S. Ranganathan.    

New Delhi, June 28 
British Telecom plans to enhance its presence in India by acquiring a few internet service providers over the next two years through its joint venture Bharti BT Internet Ltd.

However, BT plans to go slow on any fresh investment in India until the government clearly spells out its terms and conditions for private telecom operators.

Bharti Enterprises has a 51 per cent stake in Bharti BT Internet Limited while BT holds 49 per cent. It uses the brand name Mantraonline. BBIL launched Mantraonline in May 1999 and has since achieved a subscription base of over 80,000.

Speaking to The Telegraph, Arun Seth, managing director of BT (Worldwide) Ltd for India and Saarc countries, said,�The Indian government needs to understand that the governments all over the world are moving at a faster pace in spelling out terms and conditions for participation of private companies. We would not be able to make fresh investment until there is clarity in the terms and conditions.�

According to Seth, the government needs to immediately spell out the terms for the revenue sharing agreement, fix the number of telecom operators in a circle, and decide on how the telecom dispute tribunal will function.

BT operates in India through local joint ventures and strategic alliances in the Indian telecommunications market.

According to Seth, the internet market is growing and the company would like to acquire ISPs in India as part of its expansion. �Currently, we are in a phase where consolidation has begun; in the next two years, we will be able to draw up our strategy to acquire ISPs,� said Seth.

In mobile cellular communications, BT is the foreign operator in Bharti Cellular Limited, a joint venture where BT recently increased its stake from 22.5 per cent to 44 per cent. The company, which has a license for the Delhi circle and uses the brand name AirTel, is one of the leading operator in Indian cellular telephony with more than 130,000 subscribers.

BT also has a 40 per cent stake in Mahindra BT which develops software applications for customer care and billing; network management; database engineering and millennium related software projects. Mahindra BT is a part of the Mahindra & Mahindra group.    

Calcutta, June 28 
Minority shareholders of Rossell Industries today forced a vote on three key resolutions, including the prickly proposal of shifting the company�s registered office from Calcutta to Mumbai. The other two resolutions sought approval for the profit and loss account for the year ended December 1999 and the appointment of auditors.

At the annual general meeting of the board held here today � the first after the company was taken over by Unilever � the three resolutions were initially defeated by a show of hands, but were later cleared when they were put to vote.

The newly constituted board comprises P. Asirvatham representing Lipton India exports and R. Karunanithi and H.S. Sidhu.

Rossell chairman S.K. Dhall said his company has been asked by the state government to reconsider the decision to move its head-office to Mumbai. He said the shift offers the prospects of better management of the company. An investor-service desk will be set up here to service Calcutta-based shareholders, he said in an attempt to allay fears that the move will make things difficult for investors.

Dhall said negotiations are under way with unions to arrive at an agreement on ways to redeploy and rationalise staff.

Unilever has already acquired 89.62 per cent of Rossell�s one crore shares. Of this, 37 lakh equity shares picked up by Unilever Overseas Holdings BV Netherland and 15.81 lakh shares purchased by Lipton India Exports (a Hind Lever arm) have been registered. The lots which have not been registered include the 28.80 lakh shares acquired from former Rossell promoter Y.K. Modi and 9.07 lakh shares purchased from the public.

However, the acquisition of these shares by Unliever has not been cleared by the Foreign Investment Promotion Board (FIPB).

�We are waiting for the FIPB approval. If we do not get it, the shares will be acquired by Hindustan Lever or other Unilever subsidiaries,� said Dhall, who is Unilever Overseas Holding�s representative on the board of Rossell Industries.

Talking about business plans, he said Unilever will raise the tea output in Rossell�s tea gardens by introducing the technical know-how from Kenya, a country where gardens produce 10,000 kgs per hectare.    

Mumbai, June 28 
DSQ Software has formed five strategic business units (SBUs) which will function as independent profit centres in a recast drive that comes close on the heels of a management shake-up.

The units will be devoted to e-commerce, telecom & networking, CAD/CAM, ERP/SCM/CRM, and application systems. Officials say under the new structure, the business units would be under the charge of the five heads, but there will also be a separate set of chiefs who will look after the affairs in different regions.

�Under our new structure, each SBU will function as a profit centre. Earlier, too, we had SBUs, but they were loosely knit and their tasks were not well defined,� the official said.

DSQ Software has envisaged a turnover of $ 100 million in the current financial year, provided there is a 25 per cent increase in margins. E-Commerce is expected to contribute around 30 per cent of the revenues. The rest will come from telecom/networking; CAD/CAM, ERP/CRM and application development.

Officials say the company has decided to shift its focus to direct business from end-users instead of relying on third-party contracts, which now account for a large portion of revenues.

This is expected to improve the degree and quality of interaction with customers, and bring it to closer to large companies which can be serviced across the globe.

�As part of our plan to increase our presence in the markets of developed countries, we have decided to concentrate on large companies which have global operations, and on technology-based sales to end-users. This will be done through improved marketing. To achieve the objective, we will raise the strength of our sales team to 50 by the end of this financial year,� the official said.

The Chennai-based software company effected a sweeping reshuffle in its top management early this year. As part of it, Dinesh Dalmia stepped down, and was succeeded by Pawan Kumar who joined the company from IBM. However, Dalmia still continues to be the vice-chairman of the company.

Established in 1992, DSQ Software, earlier known as Square D, recently entered into a joint venture with NeuVis of the US to develop and implement tools world wide. The company is also developing two e-commerce portals    

Mumbai, June 28 
Indian Airlines (IA) has hit a trough as private players like Jet Airways and Sahara Airlines have captured significant chunks of the market in the domestic air travel segment, challenging its supremacy over the local skies.

Aviation circles say the airline�s market share in the domestic segment has dropped to a record low of 48 per cent from last year�s 52 per cent.

Even including its wholly-owned subsidiary Alliance Air�s capacity, the market share of the airline major has slumped by over three per cent to 57 per cent from its 1998-99 market share of 60.5 per cent. During the period, Alliance Air carried 1.1 million passengers, IA sources said.

While IA officials privately admit that private players have gained significant ground at its expense, it attributes the decline to the airline�s decision not to add capacity over the years. The goliath has clearly been caught napping as its rivals have been ramping up their fleet strength.

�Market shares are a function of the capacity deployed,� they argued.

�The domestic market is not growing exponentially, but the capacity (of IA�s rivals) in the domestic air travel segment is growing exponentially,� said an IA spokesperson.

According to the industry, the domestic air travel segment is growing at four per cent a year.

In 1998-99, Indian Airlines flew 6.07 million passengers. As against this, the provisional figures for the year 1999-2000, reveal that IA could manage only 5.83 million passengers.

However, while IA officials maintain that the decline was due to a static fleet strength, aviation circles think otherwise.

According to them, the decline has got more to do with the fact that the airline is deploying more aircraft to overseas destinations. Over the years, they say, the airline has been concentrating its energies to tap overseas markets.

Citing figures, they said that in 1993-94 the airline flew 7.2 million passengers, which included 6.55 lakh passengers who flew to overseas destinations.

Four years later in 1998-99, IA saw a vast change in the composition of passenger traffic. Out of the 6.07 million passengers, the number of overseas passengers amounted to 1.16 million, leaving the airline catering to only 4.9 million passengers travelling within the country.

The daily seating capacity offered by domestic airlines in the country is around 52,000 seats, according to the IA spokesperson. The total market size thus adds up to around 19 million seats annually.

Aviation experts, however, say that the utilisation on an average is roughly around 62 per cent, which means that only 11.75 million seats were utilised in the domestic segment.

�Indian Airlines has been chasing the foreign travel segment at the cost of local business,� said experts. This strategy, according to them, may boomerang as the private players get stronger while competition from international airlines will be difficult for IA to handle in the overseas markets.

Indian Airlines has been steadily adding overseas destinations to its itinerary and presently flies to cities such as Sharjah, Ras-al-khaimah, Fujairah, Muscat, Kuwait, Singapore, Bangkok, Colombo and Karachi.    

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