Insurance watchdog sets stiff rural coverage targe
Sensex plunges 275 pts
Rupee rallies on RBI booster
IA plane purchase to be hastened
Asian Paints Q1 net at Rs 18.6cr
Tabs on copywriters
Global Teleto acquire two firms
GIC plans separate health subsidiary
Foreign Exchange, Bullion, Stock Indices

New Delhi, July 24: 
he Insurance Regulatory and Development Authority (IRDA) has stipulated that companies entering the field of life insurance will have to sell 5 per cent of their policies in the rural areas in the first year of business, which gradually must go up to 15 per cent by the fifth year. 

In the case of a general insurer, the rural obligation has been fixed at 2 per cent of the gross premium income in the first year, 3 per cent by the second year and 5 per cent thereafter. 

The authority has set tough rural targets for new insurance companies, which even the existing insurance companies do not fulfil. In the case of existing insurers, the authority will decide their rural obligation in accordance with their quantum of business recorded for the accounting year March 2000. 

The regulations notified by the IRDA today said investments by foreign institutional investors (FIIs) would not come within the ambit of the 26 per cent cap on foreign equity in insurance companies. The guidelines also set the minimum equity capital for an insurance venture at Rs 100 crore and at Rs 200 crore for reinsurance ventures. 

The other benchmarks for rural coverage by life insurers have been pegged at 7 per cent of the total policies in the second year, 10 per cent in the third year, and 12 per cent in the fourth year. 

All insurers must insure the low income social sector. They must insure at least 5,000 lives in the first financial year, 7,000 in the second year, 10,000 in the third year building up to 20,000 lives in the fifth year of operations. 

The regulator has also allowed insurers to place their reinsurance business outside India with only those reinsurers who have for the previous five years enjoyed a rating of BBB (with Standard & Poor’s) or equivalent rating from any other international rating agency. However, only 10 per cent of the total insurance premium ceded outside India should be placed with one re-insurer. 

The insurance regulator said the reinsurance programme would be guided by such objectives as to maximise retention within the country and develop adequate capacity. 

The solvency margins have also been fixed at 0.5 per cent of total sum insured in case of fire, 0.85 per cent in the case of motor vehicles, 0.5 per cent in the case of rural insurance and 0.85 per cent in case of the health.

It has also fixed stiff guidelines for brokers as well as actuaries. The regulator has prescribed that every insurer must appoint an actuary. He should be a resident of India, a Fellow of the Actuarial Society of India, an employee of the life insurer in case of a life insurance company, an employee of the insurer or consulting actuary in case of general insurance, not an appointed actuary of another insurer and not over the age of 70 years. 

For insurance agents, it has prescribed that the person should have passed 12th standard or equivalent from any recognised board/institution, should have completed at least 100 hours of practical training in life or general insurance business from an approved institution. 

Mumbai, July 24: 
The Bombay Stock Exchange (BSE) sensex today plunged 275.32 points as investors, rattled by last week’s rate rise and growing political strains sparked by the possible arrest of Shiv Sena chief, dumped shares amid concerns that the selloff would continue over the next few days.

Shares, especially those which have a high weightage in the 30-scrip index, tumbled across the board as the market woke up to its eighth straight day of losses. Today’s fall prompted warnings from analysts of more losses given that there was very little that could keep investors from selling their way out.

BSE’s market capitalisation — the value of all shares combined — shrivelled by a staggering Rs 41,480 crore to Rs 7,08,109 crore. “There is nothing for the markets to cheer about. There is a general sense of drift which dominates the economic outlook,” lamented Anand Tandon, an executive director at Ask Raymond, a foreign broking house at Dalal Street.

The sensex opened weak at 4347.52 and closed its intra-day’s low of 4188.34 as against last Friday’s finish of 4463.66; the BSE-100 index slid 140.65 points from 2243.63 to 2102.98.

Foreign institutional investors (FIIs), who had given the market enough of a scare by selling shares worth Rs 923.6 crore in the four days to July 20, swarmed the counters, especially those of infotech companies, with sell orders. The skittishness spread to the small operators and retail investors. Bank shares were also clobbered. While SBI lost Rs 16.90 to close at Rs 199.70, BoB and Corporation Bank were down 8 per cent. However, analysts said the fall in prices of technology shares presents bargain-hunters a good opportunity. 

“Infotech majors look attractive at the current prices. A weak rupee should help many of them which have high export revenues,” Tandon said.

Dealers said the markets were also fretting about the recent crop of annual and first quarter results, which were being seen as signs that the growth momentum of companies was faltering. 

Mumbai, July 24: 
Bolstered by the Reserve Bank of India’s (RBI) liquidity tightening measures taken last Friday, the rupee today staged a handsome recovery of around 28 paise. It closed sharply higher at 44.74/75 per dollar, against the previous close of Rs 45.025/03 to a dollar.

The improvement in rupee’s value was witnessed as banks unloaded long dollar positions from the commencement of the day’s trading. Nationalised banks were reported to be at the forefront of the dollar sales, apparently at the behest of RBI.

Dealers said though persistent dollar supply was observed today, demand for the greenback from importers was also keeping pace with the increased supply.

The dollar buying was largely due to the apprehension that the Indian unit may turn weak in the near future after some amount of stability, they added. “Today it was observed that importers were bidding for the dollars at every stage. This was due to the fear that the rupee may again turn weak,” said N Subramanian, senior analyst at e-Mecklai, a city-based currency firm.

According to the analysts, RBI’s steps will contain the rupee in the 44.70-80 territory. The apex bank itself will try to protect this level indirectly through the banks.

Last Friday, RBI announced last Friday a series of measures to curb the rupee’s fall against the dollar after it had plunged to an intraday historic low of Rs 45.07/09. These included a hike in the Bank Rate to 8 per cent from 7 per cent, a 50-basis point hike in the cash reserve ratio and a reduction of 50-per cent all banks’ refinance from the central bank. However, a large section of the forex market fear that the continual sales by the foreign institutional investors (FIIs) in the equity market is likely to put pressure on the Indian currency as they may turn dollar buyers for repatriation purpose. “A major factor that may pull down the rupee from its current level is that the FIIs are remitting outside,” averred a local dealer.

In today’s trading, the rupee opened sharply higher at Rs 44.70/75. Dealers said that consequent to increased dollar supply, the Indian unit was seen hovering around the Rs 44.70-75 range throughout the day. It finally closed at Rs 44.74/75 per dollar, around 28 paise cheaper than the previous finish of Rs 45.02/03 per dollar. 

New Delhi, July 24: 
Union civil aviation minister Sharad Yadav today informed the Rajya Sabha that Indian Airlines would dry lease four to five aircraft within the next three months and speed up its pending plans to purchase 30-40 aircraft to replace some 23 aged Boeing 737-200s and Airbus 300s. 

According to Indian Airlines officials, they would be looking at 737 series planes and at Airbus 320s for the four to five planes categorised for dry lease. “These would, however, not be replacements but additions to the fleet,” the officials clarified.

Yadav told Parliament that the government would not wait for divestment in the airline to go ahead with these decisions. The addition of new fleet would, however, take at least 12-18 months.

The minister was responding to a deluge of criticism from the opposition MPs who felt Indian Airlines and its wholly owned subsidiary Alliance Air is flying obsolete aircraft. Many members felt that the government should ground the aged aircraft. They spoke on the issue after the minister made a suo moto statement on the July 17 crash of an Alliance Air Boeing 737-200 near Patna airport which claimed more than 50 lives.

However, the minister ruled out any such action of grounding aircraft. 

Yadav also added that grounding are inadvisable as this would lead to huge cash losses for the airline. 

He said it would cost the airline some Rs 6, 000 crore to buy the aircraft. The finance ministry has agreed to provide some Rs 325 crore as seed capital for the purchase.

Court of inquiry

Yadav also announced that the government has ordered a court of inquiry by a sitting judge of the Patna High Court into the crash of an Air Alliance Boeing 737 near Patna airport on July 17 in which 58 people including crew members were killed.

The Judge would be nominated by the Chief Justice of the Patna High Court as he reiterated that there was “no reported snag in the aircraft when it was released for flight from Calcutta.” 

July 24: 
Asian Paints Ltd has posted a rise of 18.5 per cent in net profit for the first quarter of the current fiscal ending June 30. Net profit rose to Rs 18.55 crore against Rs 15.65 crore in the corresponding period of the previous year.

During this period, gross sales registered a growth of 11 per cent at Rs 322.46 crore compared with Rs 290.34 crore for the previous year. Asian Paints said decorative business performed well and the growth was driven by good volume achieved by new products.

Nicholas Piramal net up

Nicholas Piramal India Ltd has registered a 33 per cent rise in net profit for the first quarter of the current fiscal year ending June 30. The company made Rs 15.20 core profit.

It showed a 18 per cent rise in sales at Rs 133 crore for the quarter. Nicholas said that the company’s strategy of focusing on new product launches in chronic diseases continued to show strong growth in the first quarter. In the current quarter, too, it will launch new products, including a new generation of anti-malarial product called Aablaquin. 

Exide net up marginally

Exide Industries Ltd today announced marginal increase in the gross sales to Rs 196.32 crore in the first quarter.

Net profit increased by about 8 per cent to Rs 7.03 crore against Rs 6.50 crore for the corresponding period last year. Profit before tax increased by 11 per cent to close at Rs 8.43 crore for the period.

The automotive battery division recorded a gross turnover of Rs 104.58 crore, an increase of 10.4 per cent over the first quarter of the previous year. Replacement sales have grown by a robust 16.6 per cent, according to a press release. The industrial batteries segment has registered growth of about 29 per cent over the corresponding period last year. 

Britannia net vaults 27%

Biscuit major, Britannia Industries Ltd, has achieved a robust 27 per cent growth in its net profit to Rs 13.50 crore during the first quarter of 2000-2001 compared to Rs 10.60 crore in the corresponding previous quarter, a company release said.

The growth in the net profit was achieved on a total turnover of Rs 332 crore during the period which is a 16 per cent rise over the corresponding figure of Rs 286.60 crore in the previous year. 

Indian Shaving net up 9%

Indian Shaving Products Ltd, a subsidiary of the US-based Gillette Co, has recorded a 9 per cent increase in net profit in the second quarter of this fiscal at Rs 5.12 crore as against Rs 4.69 crore a year ago. Net sales increased by 43 per cent to Rs 82.84 crore from Rs 58.04 crore in the corresponding period last year.

HFCL net rockets 640%

Himachal Futuristic Communications Ltd (HFCL) has recorded a 640 per cent surge in net profit for the first quarter of 2000-01 at Rs 61.71 crore compared with Rs 8.33 crore a year ago. The company’s net turnover for the quarter stood at Rs 253.86 crore, up 228 per cent from Rs 77.34 crore in the corresponding previous quarter. 

sIts earnings per share for the quarter was Rs 7.83, up from Rs 1.29 in the same period last year. Other income for the period was Rs 20.91 crore as against a mere Rs 1.75 crore in the same quarter last year. 

New Delhi, July 24: 
Copywriters beware. Don’t play with words in an insurance ad copy — any use of words or phrases which hides or minimises the costs of hazard insured or the risks in the insurance policy will attract IRDA’s ire. Nor can the copy gloss over the limitations and conditions in the insurance policy contract. And if the benefits promised are not guaranteed then it has to be said so clearly. 

Incomplete comparisons with competing products, which is quite a well-worn weapon in marketing wars here, will also be a total no-no.

Every ad selling an insurance product will also have to compulsorily state that unadvertised, informal rebates offered on insurance premia or commission are illegal and anyone offering this can be punished. 

Internet insurance ads will have to make full disclosures outlining the insurer’s policies as well as the degree of privacy of the personal information that netizens insuring themselves provide to insurance companies. This too has become increasingly important as hackers can easily access personal information sent through the net.

The new ad guidelines also ban recommendations by third parties to its members to buy a specific insurance policy. 

Mumbai, July 24: 
Global TeleSystems (GTL) intends to acquire Thermax Systems & Software (TSSL), part of the Pune-based Thermax group, and the city-based Fine Infotech in all-stock deals. The company told stock exchanges today that it is calling a board meeting on Tuesday to ‘consider’ the buyouts, and to take stock of first-quarter results. 

As part of the deal, One lakh Global Telesystems shares will be issued to shareholders of Thermax Systems in lieu of their holdings, while 50,000 GTL shares will be given to Fine Infotech shareholders. 

The company said the acquisitions, its first, will enhance its presence in the banking and pharmaceutical software sectors. 

Thermax Systems offers infotech solutions across the manufacturing, engineering, healthcare and banking sectors. According to a Global Telesystems release, Thermax will give it a ready-to-use software development delivery system, central to its e-commerce and software development initiatives. 

Calcutta, July, 24: 
General Insurance Corporation is planning to set up a separate subsidiary for health-linked insurance schemes including Mediclaim.

Speaking to The Telegraph, GIC managing director B D Banerjee said the move was attempted at tapping the vast potential in the health insurance sector.

The GIC board has discussed the proposal threadbare. It will be implemented as soon as the insurance sector opens up, he added.

The size of the Indian health insurance market, according to Banerjee, is over Rs 5,000 crore and it is expanding at a phenomenal rate.

“But not even 10 per cent of this market has been tapped so far,” he said.

The four GIC subsidiaries, The Oriental Insurance, National Insurance, New India Assurance and United India Insurance, have notched up health insurance premium of Rs 370 crore in 1999-2000 from Rs 125 crore three years back when health insurance was introduced.

Banerjee said the Mediclaim experienced 75 per cent policy claims. It had been able to break even last year, he said.

The existing General Insurance Act did not allow the corporation to set up a subsidiary. So the business has been carried out through four subsidiaries.

“But when the Act is amended to pave way for restructuring, the new subsidiary will be in place to handle exclusively all health-linked insurance schemes,” Banerjee said.

The new company, when in place, will get the relevant assets from all the four subsidiaries.

GIC is also in the advanced stage of introducing a savings-cum-insurance product. A national agency is working on it.

Meanwhile, Oriental Insurance has offered insurance services to the city-based UCO Bank. Banerjee is chairman of Oriental Insurance. “We are in talks with the UCO Bank management to provide insurance to the assets. We are looking for a definite synergy between a bank and an insurance company, which is important in a competitive market,” he said. 


Foreign Exchange

US $1   Rs. 44.74       HK $1   Rs. 5.65*
UK £1   Rs. 68.05       SW Fr 1 Rs. 26.56*
Euro    Rs. 41.81       Sing $1 Rs. 25.25*
Yen 100 Rs. 41.05       Aus $1  Rs. 25.90*
*SBI TC buying rates; others are forex market closing rates


Calcutta                        Bombay
Gold Std (10gm) Rs. 4525        Gold Std (10 gm NA
Gold 22 carat   Rs. 4275        Gold 22 carat   NA
Silver bar (Kg) Rs. 7825        Silver (Kg)     NA
Silver portion  Rs. 7925        Silver portion  NA

Stock Indices

Sensex         4188.34 -275.32
BSE-100        2102.98 -140.65
S&P CNX Nifty  1317.75 -79.50  
Calcutta        119.30 -7.27
Skindia GDR     775.68 -48.84  

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