Bankers do not expect rate rise
RBI steps stun market, sensex sheds 112 pts
States decide to put off VAT by a year
More meetings to decide on telecom pension
British Airways to fly thrice a week to city
Bharti to lay undersea cable for extra bandwidth
GVK, Timex foreign funding plans cleared
L&T net profit drops 76% to Rs 18.9 crore

Mumbai, July 21 
Bankers do not anticipate a surge in interest as a fallout of the Reserve Bank�s decision today to raise the Bank Rate by one percentage point to 8 per cent and the cash reserve ratio (CRR) by half a percentage point to 8.5 per cent.

A large cross-section of bankers saw little likelihood of an increase in either the prime lending rate or the deposit rate because the RBI had announced that these measures were �temporary in nature.�

State Bank of India chairman G.G. Vaidya said the changes �do not signal a higher interest rate regime as they are temporary.�� Sources from the bank, however, added that its asset-liability committee is likely to meet either tomorrow or on Monday to assess impact of the hike and take a final view.

Sources from financial institutions concurred with the bankers.

�Although short-term interest rates may rise, I do not believe that it will lead to a sustainable rise in interest rates as the measures are temporary. I do not forecast any hikes in either PLR or deposit rates��, Kalpana Morparia, the senior official from ICICI Ltd said.

Even as banks are not ruling out any change in their interest rate structure, the government securities market today crashed across the board in response to the RBI�s moves.

Dealers said the crash was so severe that prices of government securities in the medium to long-end declined by a whopping Rs 2.50.

�Even yields on long-term paper went up between 25 to 40 basis points,� said M R Madhavan, senior vice president of I-Sec.

For instance, today, one of the most actively traded security, the 11.90 per cent 2007 paper fell by over Rs 2 from a level of Rs 106.75 after reports of the hikes in Bank Rate and CRR came in.

Referring to the fall in the government securities market following the hike in the Bank Rate to 8 per cent, R Sreesankar, CIO at DSP Merrill Lynch said �it was a kneejerk reaction which pulled down the prices.�

Meanwhile, the RBI today decided to cancel the auction of the 11.75 per cent 2004 stock for a notified amount of Rs 4,000 crore for which bids were received prior to the announcement.

In a statement, the RBI said that in order to enable the market participants to make fresh bids, the Government of India will be offering the paper for the same amount on July 25.

Chambers worried

CII and Ficci expressed concern at the increase in the Bank Rate and CRR, saying it would have an adverse impact on the economy.

CII president Arun Bharat Ram said while the measures would reduce volatility in the foreign exchange market and help a battered rupee, the rise in the cost of working capital would hit industry.

�If it is a short-term correction, the industry will not be affected much. But if it is a long-term one, the industry will be in a tight spot.�

�A hike in the PLR and the pressure on banks to maintain a high CRR will jolt the industry. Funds will become dearer at a time when the industrial production is set to begin after a lull monsoon,� said Nazib Arif, secretary general of the Calcutta-based Indian Chamber of Commerce.    

Mumbai, July 21 
Frenzied selling of index heavyweight scrips like Infosys and Zee Telefilms in the last 30 minutes at the Bombay Stock Exchange today pulled the sensex down by 112 points to 4,463.66 points. These scrips, however, had started the day on a promising note. The sudden fall in the values of these two stocks led to an overall depression in other technology stocks as well.

Along with this, the Reserve Bank of India�s announcements on increasing the bank rate and the cash reserve ratio hit the market like a tonne of bricks.

�The move caught everyone by surprise,� said a broker at the Bombay Stock Exchange (BSE). According to the brokers, the decline of the rupee and the question mark on the apex bank�s �short term measures� have shaken the confidence of the market players.

Most of the banking and finance stocks were under selling pressure today. Major losers were Bank of Baroda, Corporation Bank, Industrial Development Bank of India and Oriental Bank of Commerce.

Market sentiments are concerned whether the equities market will be back in favour of the foreign institutional investors and investors alike. �A recovery can only be led by the ICE stocks,� said a dealer. He expected the market to stabilise after shedding another 100 points or so. Bargain hunting will be the order the day in the coming weeks, he added.

Market started on a positive note with Infosys notching a Rs 147 gain. It lost all its gains by returning to negative territory with a loss of Rs 71. Zee was similarly down by Rs 36 at the end of the day.

However, old economy stocks like Tisco and Reliance were listless throughout the day. Reliance was down by Rs 16, while Tisco was down by Rs 11.50.

Cement stocks like Larsen & Toubro, Associated Cement Companies and India Cements showed significant losses.

The market was in over-bought position. Punters were not willing to carry forward their long positions as they feared possibility of some negative developments, pointed out sources in the market.

In the specified group, 109 counters including index heavyweights like Tisco, Zee, Dr Reddy�s, Telco and Reliance showed sharp to moderate losses while 29 scrips registered moderate gains.

Himachal Futuristic remained the most active scrip with a turnover of Rs 536.30 crore on the total Rs 3,718.27 crore volume of business.    

New Delhi, July 21 
State governments today decided to push back the introduction of value added tax (VAT) across the country by a year. Value added tax will now be introduced by all states only by April 1, 2002. Earlier, th e states had agreed to introduce value added tax from April 2001.

West Bengal finance minister Asim Dasgupta, who heads the empowered committee of state finance ministers, told newspersons that the states decided at a meeting today to postpone the implementation of value added tax as they realised there were a large number of problems that would have to be sorted out.

However, Maharashtra and Madhya Pradesh might introduce partial value added tax in their states long before the deadline, Dasgupta said.

�We will have to phase out central sales tax before VAT can be introduced,� he said and added that his committee would be studying how to go about it.

A separate committee of state finance secretaries, experts in public finance and information technology would be set up to work out a management information system for inter-state trading and transfers as part of that exercise, Dasgupta said.

According to him, a formula was being worked out to compensate states for the losses they would suffer by introducing VAT and forgoing their share of central sales tax.

Some Rs 10,000 crore is collected as central sales tax and many states naturally resent losing out on this in the future.

During the meeting, both Bihar and Pondicherry reported that they had already implemented uniform sales tax regime. A meeting of state finance ministers had earlier warned these two recalcitrant states with punitive action if they did not adhere to the uniform tax regime decided upon earlier to end tax wars between states.

Arunachal and Mizoram which earlier had no sales tax regime have also agreed to adopt the uniform floor rates, he said.

Dasgupta said except in the case of special category states like Jammu and Kashmir and north-eastern states, other states and Union Territories have agreed to discontinue with the sales tax incentive scheme.    

New Delhi, July 21 
The group of ministers on communications today decided to hold a few more meetings regarding the employees� provident fund and pension-related issues of the department of telecommunication services (DTS) before August 15 for smooth transition of 5 lakh employees to a corporatised DTS by October 1.

The group, headed by Union communication minister Ram Vilas Paswan, today met here for the first time to discuss corporatisation of the telecom services. It has been decided that all the major issues concerning the employees like their future status in a corporatised entity, pay structure and service condition would be sorted out by August 15.

The panel also discussed issues which require concurrence of various ministries and sort it out to the satisfaction of all parties.

�Earlier some of the issues concerning corporatisation were pending with the finance ministry and the labour ministry. But with the setting up of the group of ministers these issues would be solved soon,� Paswan said.

�A decision cannot be taken in one meeting. It would need a series of meetings. The second meeting is scheduled for next week.�    

New Delhi, July 21 
Calcutta is back on the British Airways radar. The airline, which had threatened to close down its bi-weekly service to the city, will now fly three times a week, enroute to Dhaka.

Also, hopes that the city would have more direct flights to London appear bright. Air-India, or any airline which has a code-sharing agreement with the national carrier � Virgin for instance � can operate flights on the sector thrice a week.

The decision comes after weeks of haggling between British and Indian negotiators over flight rights. The three flights will be in addition to the 16 that BA and Air-India are allowed to operate once a week under a bilateral air pact signed a few months back. This, in effect, means the number of flights between the two countries will go up to 19.

Another factor was that British Airways did not want to concede the additional stop-over rights, which it feared could be snapped up either by Air-India or rival, Virgin Atlantic.

The British team made it clear to the government that it could service Calcutta only if its thrice-a-week London-Dhaka flights were given halting rights in the city. In the initial stages up to October 28, BA will operate its Calcutta flights twice a week, but later increase the frequency to three times a week.

British Airways had said earlier that it would stop flying to Calcutta from October 30. The airline decided to terminate London-Calcutta flights at Delhi. It had also said its five-times-a-week service to Dhaka (via Delhi) would be truncated at Delhi, and a new service for the Bangladesh capital announced later.

British Airways is believed to have got the support of West Bengal government and the Calcutta-based Indian Chamber of Commerce (ICC) in presenting its case to the Centre. ICC president K K Bangur today welcomed BA�s move, saying it would help enhance the trade and investment potential of the eastern region.

Amongst those who protested the withdrawal of BA�s service was West Bengal chief minister Jyoti Basu, who even raised the issue with Prime Minister Atal Behari Vajpayee.

BA had earlier too stopped flying to Calcutta in 1986, complaining it was commercially less viable, but resumed its flights in 1993.    

New Delhi, July 21 
The Bharti group is planning to lay submarine cable for higher bandwidth and is expected to finalise the proposal by next week. The company also proposes to offer free internet access provided the department of telecom services and Mahanagar Telephone Nigam Ltd agree to share a part of their telephone call revenues with it.

Bharti has set up a group to examine the proposal for its submarine cable venture. It is likely to join hands with a company which is already in undersea cable business. Sunil Bharti Mittal, chairman and group managing director of Bharti Enterprises, said, �We have decided to provide maximum speed and more bandwidth to our customers and we will enter in to submarine cable business too.

�Inaugurating the gateway, communications minister Ram vilas Paswan said competition would help consumers.�

Mittal said for internet to become free ISPs should have some source of revenue. �It is important that both MTNL and DTS should agree to share telephone revenue with the ISPs.�    

New Delhi, July 21 
The government today cleared 35 cases of foreign direct investment (FDI) aggregating about Rs 727 crore. It includes proposals by GVK Power Co, Wartsila Corporation, Planetasia and Timex among others.

Union minister for industry, Murasoli Maran today approved GVK Power Co and Wartsila Corporation to set up 100 per cent subsidiaries in India with investments of Rs 200 crore each in their respective power projects. The government allowed Planetasia to increase its stake from 36 per cent to 46 per cent in its internet venture.

Timex Watch Ltd has received the green signal to allot preferential shares worth Rs 22 crore to its US parent.

Dow Chemical (India) Ltd�s proposal to establish a 100 per cent holding company for Dow Group�s investment in India has been cleared. The company will pump in Rs 6.6 crore for this purpose.

Japanese multinational Mitsui O S K Lines Ltd has received the permission to increase its stake to 100 per cent in their recruitment, training and maintaining a pool of seamen business. The company will have to invest Rs 0.025 crore for this.

Among the other proposals cleared today include Asia World Online Inc British Virgin Islands for investing Rs 1.8 crore in their e-commerce, advertisement, designing and hosting web sites.

Maran gave nod to the world�s largest automobile component manufacturer Delphi Automotive Systems to test market its products in India. No foreign exchange inflow is involved in this case.

In media, the government has allowed both Al Hind TV and Falak TV Ltd to have 20 per cent foreign equity/non-resident Indians� equity with foreign direct investment of Rs 20 crore each. This would be used for production of TV serials with latest technology.

The government has also cleared Essar Commvision�s proposal to expand its basic telephony business. The US-based Portman Holdings has been allowed to bring in Rs 215 crore to set up �mixed use complexes� for downstream activities.    

Mumbai, July 21 
Larsen & Toubro suffered a drop of 76 per cent in its net profit to Rs 18.88 crore in the first quarter of the current financial year from Rs 79.25 crore in the corresponding period of last year.

Net sales increased marginally by 4 per cent to Rs 1,663.36 crore from last year�s Rs 1,591.85 crore. The company attributed the decline in profits to poor realisations in the cement business.

The company however secured good orders despite the difficult business environment. The order backlog at Rs 7,652 crore is 17 per cent compared with the same period in the last year.

Engineering and construction business continues to be the largest segment of the company�s operations accounting for 53 per cent of the turnover. Cement accounted for 33 per cent of the turnover. Larsen and Toubro sold 3.12 million tonnes of cement and clinker during the period under review compared with 2.64 million tonnes during the corresponding period of the previous year.

The company expects a significant improvement in engineering and construction business during the remaining period of the current year.

Ballarpur Industries has recorded net profit of Rs 68 crore for the financial year ended June 2000 compared with Rs 21 crore registered last year.

The operating profits grew by 73 per cent to touch Rs 239 crore as against Rs 137 crore last year. The turnover for the year touched Rs 1446 crore as against Rs 1154 crore recorded last year.

The board has recommended a 25 per cent dividend as against 12 per cent last year. Its earnings per share has also increased to Rs 9.51 as against Rs 2.70 for the previous year. The financial performance has improved due to all round operational efficiencies at the paper units post restructuring s

Bilt is in the process of expanding capacities by 1,05,000 MT in the next 12 to 18 months to take advantage of the demand upsurge in the paper sector. The expansion is being financed through internal accruals and placement of long term debt which would be primarily guaranteed by IFC Washington up to $25 million.

Escorts Ltd today announced a 189 per cent jump in net profits during the first quarter ended June 30 at Rs 88.90 crore compared with Rs 30.80 crore in the corresponding period last year. Net sales of the company, however, dipped by about 17 per cent at Rs 268.91 crore during April-June 2000 as against Rs 323.88 crore in 1999. Total income increased by 13.6 per cent in the same period mainly due to increase in other income.

ITC Bhadrachalam Paperboards Ltd, a subsidiary of ITC Ltd, has registered a profit of Rs 9.88 crore for the first quarter ended June 30, 2000 as against a loss of Rs 13 crore in the corresponding period of the previous year.

This is the first time the company has recorded a profit after its Rs 675-crore expansion programme started in April 1998. The execution of this expansion programme, that concluded last year, has enhanced the company�s capacity to manufacture international quality coated packaging boards from 85,000 tonnes per annum to 200,000 tonnes per annum. This expansion and modernisation project reflected the itc group�s identification of paperboards as a core competency and a thrust area.

During this first quarter, total sales increased to Rs 143 crore from Rs 81 crore during the same period in the previous financial year. Exports quadrupled to Rs 24.62 crore from Rs 6.11 crore. The improving demand for premium coated boards in foreign markets will enable the company to consolidate export volumes.

Morepen Laboratories first quarter profit before tax registered a 137 per cent growth to Rs 22.1 crore compared with Rs 9.3 crore in the corresponding period of the previous fiscal. The company�s gross turnover increased by 50 per cent to Rs 1,06.7 crore from Rs 71 crore in the corresponding period during 1999-2000.    


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