Banks asked to raise profit share for capital adequacy
Linkup with Aventis likely to boost Hoechst bottomline
Indal to double Hirakud plant output
Gujarat Heavy Chem to merge group company
Global Electronic ties up with BT for eight gateways
Lined up for a charm offensive

Calcutta, Dec 3: 
The Reserve Bank of India (RBI) has directed commercial banks to transfer 25 per cent of their disclosed profits to the reserve fund, up from 20 per cent earlier, to maintain a minimum capital adequacy ratio (CAR) of 9 per cent.

�In a situation where the capital adequacy requirements have been brought in line with international norms, strengthening core capital through retained earnings has assumed greater importance,� a senior Reserve Bank official said.

The Reserve Bank of India has decided that all scheduled commercial banks operating in the country (including those which are foreign owned) should transfer not less than 25 per cent of their net profits to the reserve fund, starting from the current financial year.

The move is seen as a part of a larger effort to tighten prudential norms. Banks have already been asked to achieve in two years a capital adequacy ratio of 11 per cent � the international benchmark.

The directive says cash transfer from the profit to the reserves can be made after adjusting or providing for the bonus paid to employees. Earlier, it had to made before the adjustment or provision for bonus.

According to the Reserve Bank official, commercial banks were supposed to transfer more than 20 per cent in the reserve fund earlier, but they have failed to do so.

�With that in mind, we have now issued fresh instructions to them so that they take the matter seriously,� the official added.

Senior bankers say the Reserve Bank of India has asked banks to set aside a larger portion of their profits to meet the capital adequacy ratio standard because they cannot float a public issue to shore up their Tier -I capital. �The redeployment of profit is a standard practice to maintain the capital adequacy ratio,� they added.

Banks� capital base is be divided into two categories � Tier I and Tier II. Tier-I, as the core capital, provides a permanent and ready support against unexpected losses; Tier-II is not permanent in nature and is, therefore, not readily available.

Tier -I capital consists of paid-up equity capital, free reserves, balance in the share premium account and capital reserves representing surplus arising out of the sale proceeds of assets, but not reserves created by revaluation of assets.

Tier-II comprises preference shares, revaluation reserves, hybrid debt capital instruments and subordinated debt instruments.

�However, the entire Tier-II capital is not taken into consideration while computing the capital adequacy ratio of a bank.

It is the tier-I capital, or the core capital, which remains with the bank and is, therefore, accounted for fully while making the calculation to arrive at the capital adequacy ratio,� the bankers said.    

Mumbai, Dec 3: 
The decision of the pharmaceutical multinational, Aventis Pharma, to operate in India through Hoechst Marion Roussel, brings good tidings for the latter.

The move is expected to significantly strengthen Hoechst Marion Roussel�s therapeutic product line, where it already has a strong presence in anti-infectives, cardiology, respiratory and central nervous system drugs.

However, pharma analysts aver that despite the key additions to Hoechst�s portfolio through Aventis Pharma in India, the company�s practice of growth through regular product introductions � with new products introduced in the past three years contributing to over 25 per cent of Hoechst�s sales � will continue to boost the company�s sales and bottomline in the coming years.

At present, Hoechst is well entrenched in segments like anti-diabetes, with its blockbuster product Daonil, where it has a 21 per cent market share.

It also has a good presence in the anti-allergy segment through Avil and in the vaccine category with Rabipur.

Further, Hoechst�s recent introductions in the cardio-vascular category, Cardace, and Tarivid in the anti-infective segment, are expected to be the key products which would show good growth in the years to come.

On the other hand, Aventis Pharma has five major products driving its global strategic focus.

These include Lovenox for the prevention of thrombosis, which generated sales of over $ 500 million in 1998, Allegra, to treat seasonal allergic rhinitis, Taxotere for the treatment of advanced breast cancer, Arava for the treatment of active rheumatoid arthritis and the diabetes drug Amaryl.

�If we take these five products itself, it can be seen how Hoechst�s product portfolio will be bolstered. Therefore, the focus on Hoechst by Aventis is a huge positive for the company,� averred C Srihari, senior pharmaceutical analyst at Khandwala Securities.

Stock market circles pointed out that expectations of a boost to Hoechst�s product portfolio, following Aventis� decision, has seen interest returning to the counter.

The scrip is witnessing heightened activity, rising from Rs 476.90 to Rs 491.20 in the past couple of days at the stock market.

Aventis Pharma, formed globally by the merger of Hoechst and Rhone Poulenc, recently indicated that it will sell its 40 per cent stake in Rhone Poulenc India.    

Calcutta, Dec 3: 
Indian Aluminium & Co (Indal) is planning to double the smelting capacity in its Hirakud plant from the existing 30,000 tonnes per annum. Sources said that the board of directors have already discussed the several aspects of this brown field expansion.

Indian Aluminium plans to consolidate the smelting capacities mostly in the Hirakud plant due to availability of captive power and coal.

�Power is a major component in smelting operations. Hence, the cost of production escalates if it is not obtained from cheaper sources,� said a senior Indian Aluminium official. Also, there is a rich storehouse of raw materials in Orissa.

Other smelters of Indal are located in two plants in Alupuram and Belgaum.

While the Belgaum smelter has been shut down for over a year because of power problem, the company is also not very keen to continue production in Alupuram plant, which has a capacity of 13,000 tonnes, the official said.

The company is in talks with the Karnataka State Electricity Board for power requirements of the Belgaum smelter. If the Belgaum smelter is re-opened, Indian Aluminium may close down the smelter in Alupuram.

�We have to go by the economics of scale, especially in a market which is poised for fierce competition globally,� he added.

The official, however, did not divulge what could be the possible investment for the expansion project in Hirakud. He is bullish about the prospects of the Hirakud plant with the industrial slowdown beginning to die down.

�We are planning to expand the capacity in Hirakud plant with a long term approach since it needs heavy investment particularly for setting up the captive power unit,� he added.    

New Delhi, Dec 3: 
Gujarat Heavy Chemicals plans to merge the ailing Sree Meenakshi Mills (SMML) with itself, but has sought time until March 2002 from Board for Industrial and Financial Reconstruction to complete the process.

Gujarat Heavy Chemical, part of the Sanjay Dalmia group, has convened an extraordinary general meeting (EGM) to pass the resolution proposing the amalgamation under conditions set by Board for Industrial and Financial Reconstruction.

�The decision to merge the two group firms was taken some time back. We are asking our shareholders to accept it,� Gujarat Heavy Chemicals managing director Bobby Mukherjee said.

Three Gujarat Heavy Chemicals shares will be swapped by for 10 of Sree Meenakshi Mills.

A senior company official said they need more time for �commercial reasons�, but the BIFR is expected to pass a final and binding order in two to three months. The company has informed shareholders about the delay in the merger.

Gujarat Heavy Chemicals company secretary P. Sampat attributed the time-lag between the decision and the actual amalgamation to legal formalities, and requests made to BIFR for date extensions.

Primarily a producer of soda ash and salt, Gujarat Heavy Chemicals reported a turnover of Rs 383 crore in the last financial year.

Its merger with the Rs 48-crore Sri Meenakshi Mills, a cotton yarn maker, is described as diversification, value addition and an opportunity to exploring an array of new opportunities, said Sampat, who is also the executive director (finance). Gujarat Heavy Chemicals� after-tax profit last fiscal was Rs 22.28 crore while its earnings per share (EPS) was Rs 2.39.

Apart from chemicals, the Sanjay Dalmia group has interests in cigarettes and advertising. It tried buying out a sick east German company in the early 1990s, but fell foul of labour laws and had to pull out after much embarrassment.

Sree Meenakshi Mills, also part of the Sanjay Dalmia group, was a loss-making company referred to the Board for Industrial and Financial Reconstruction. There were attempts at merging it two years back because of its property, and the tax benefits that would have accrued on the basis of its accumulated losses.

The company suffered a loss of Rs 15.61 crore on a turnover of Rs 45.57 crore in 1998-99. It piled accumulated losses worth Rs 58.79 crore on a net worth of Rs 23.36 crore in 1998-99.

Sri Meenakshi Mills has a unit in Madurai while Gujarat Heavy Chemicals� soda ash facility is located at Veraval in Sutrapada district of Gujarat.    

Calcutta, Dec 3: 
Global Electronic Commerce Services Ltd (GECS), the services division of the $ 135 million Global Group, plans to set up eight international gateways for which it has entered into a tieup with British Telecom (BT). It will initially set up gateways at five locations � Mumbai, Delhi, Pune, Calcutta and Bangalore.

The first three are already operational and the fourth at Calcutta is expected to be commissioned within the next ten days. Work on the next two gateways have recently commenced at Bangalore and Hyderabad.

When the gateways will be operational, GECS will provide around 30-40 mbps of bandwidth nationally. Of this 4mbps has been taken from Videsh Sanchar Nigam Limited (VSNL) and the rest will be acquired from BT through V-sats and undersea cables from Cable & Wireless.

A cumulative 15 mbps of bandwidth will be made available at Calcutta. �It does not matter how much bandwidth we have at a particular location. If more bandwidth is required, we can source it from our other locations,� says Nawed Zafar, head, business operations, GECS.

The category A licence for internet service caters singularly to the corporate and small and medium industry (SME) segment.

�We are not catering to the retail segment. Hence, there is almost no competition from other ISPs. Also, though many ISPs have entered the market, only those able to provide quality service will be able to survive,� adds Zafar.

GECS also plans to set up 13 data centres all over the country. The first one is at Mahape, Navi Mumbai, while the second one will be functional soon at Pune. The third data centre at Calcutta will be set up over 15,000 sq ft at Infinity in Saltlec.

Zafar adds, �The data centre is being built to conform to international standards. We have already reached the optimum capacity at our Mahape data centre. The company is building another unit over more than one lakh sq ft in Mumbai.�

The company presently has two offices in the eastern region � in Calcutta and Jamshedpur. Depending on how the market evolves, the company plans to expand to Bhubaneswar and Guwahati.

GECS will be an important player in the internet services market with its merger with Global Tele-Systems Limited (GTL), another group company, expected to be formalised in February next year. The company has already initiated the process and is awaiting clearances from Securities and Exchange Board of India and the high court.    

New Delhi, Dec 3: 
If you have it flaunt it, goes the adage. And adhering to it religiously are most companies, which are making a beeline for exhibitions to display their products and actually succeeding in gaining the consumer�s attention.

The concept of event management has caught on in a big way, with exhibitions as a prime component. Other popular segments in event marketing include seminars, product launches, theme parties and musical extravaganzas.

Industry sources say that big time exhibition organisers like ITPO, CII, ACMA and NASSCOM, collectively generate around Rs 50 crore through exhibitions.

As far as ad agencies are concerned, some of them have event management divisions specialising in exhibitions like Trikaya Grey�s �Exhibit� or Enterprise Nexus� �Exhibitions,� even as others like Mudra�s Showcase have closed shop.

Exhibit, the exhibitions division of Trikaya Gray, has been focusing on the niche segment of exhibitions for 10 years now. Says Lalit Shukla, director client services, �Over the years exhibitions have moved on from being add-ons to an integral part of the communication package.�

In fact, landing a client requires a pitching similar to ad campaigns, Shukla said. For the agency, an exhibition is rather like yet another campaign. �15-20 per cent of the cost of production of the exhibition is the agency�s fee for organising the event,� says Shukla.

In fact, a lot of deals are sealed at exhibitions.

Shukla adds that the primary job of exhibition organisers is to keep their prospective clientele updated about forthcoming exhibitions where they can participate.

Like media buying, exhibition space has to bought from the organiser, after which comes the creative task of conceptualising and then implementing it with the help of fabricators, which is usually outsourced.

Beyond the realm of agencies exist the independent organisers like Exponnaire, Pavillion and Interior, Willy & Datta and Swift. According to Sandeep Roy of Merx Exponnaire, independent organisers usually charge less than the agencies.

And the displays certainly don�t come cheap. In terms of production values, exhibitions have become more hi-tech and expensive.

A good laser show costs about Rs 1-and-a-half lakh a day, he said. Both Roy and Shukla contend that the cost of exhibitions depends on the area of the exhibit and its grandeur. While the small or regular �stall� kind of exhibitions cost around Rs 20-30 lakh, the bigger and better ones cost up to Rs 60-65 lakh.

The high-tech ones with laser shows and sound effects all thrown in for good measure, easily go up to a crore, contented the duo. Roy added that use of polycarbonate materials, digital printing and signages are presently the �in things� in exhibitions.

�An exhibition is an interactive medium, cuts media clutter and is ideal for B2B communications. Feed back is tangible and instant. However, the fact remains that not all exhibitions are lively. Often they end up distributing inane company profiles and brochures,� Shukla says. Exhibition work is more seasonal, peaking during the winter, he added.

The lean summers are usually put to use for sourcing work, planning and organising seminars, product launches and other events.

Exhibit, which recently designed the Punjab pavillion in the India International Trade Fair (IITF), contends that though B2C exhibits like this draw more eyeballs, it is the B2B trade shows which are more effective in terms of business communication and as marketing tools.    


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