BK Birla to raise Kesoram stake
HCL Perot Systems to tap market next year
Knoll surges on talk of Eli Lilly stake buyout
Tata Power to buy Petrodyne
RPG group reshuffles business heads
Raiders must offer to pick up 100%: Barons
Scooters India revs up for global bids
Telecom operators plan to form own watchdog
4:3 swap for Eveready, Bishnauth merger
Foreign Exchange, Bullion, Stock Indices

Calcutta, Dec 14: 
Basant Kumar Birla has decided to raise his stake in the Rs 672 crore Kesoram Industries by around 15 per cent over a period of three years through market operations.

Sources close to Birla said he would invest around Rs 8 crore during the current financial year to raise his stake in the company by another 5 per cent.

“Birla along with his friends and associates controls 30 per cent of the equity capital in Kesoram. He has decided to raise his stake to well over 40 per cent in order to avoid any hostile takeover bid,” they added.

Under the creeping acquisition route, Sebi permits promoters to raise their stake in their companies by 5 per cent every year without having to make an open offer to the public.

On Thursday, 11.72 lakh Kesoram shares were traded on the bourses — 7.71 lakh on the Bombay stock exchange, 3.83 lakh on the National Stock Exchange and 18,000 shares on the Calcutta Stock Exchange. The scrip surged to Rs 31.45 from the previous day’s close of Rs 29.50, a gain of almost Rs 2.

Birla decided to buy up shares in the diversified company after jute baron turned corporate raider Arun Bajoria unleashed a hostile bid to takeover Bombay Dyeing recently.

The move was also prompted by a ‘hoax’ letter that Cemindia Investment of Deoghar, a virtually unknown firm, wrote to the Calcutta and Bombay stock exchanges in October claiming that it had picked up 6.5 per cent stake in Kesoram.

“We made a thorough investigation to ascertain the veracity of the letter. But it was found to be fake as no such company was located at the address, printed on the letterhead,” a senior Kesoram official confirmed.

The official, however, was quick to mention that the two incidents had prompted Birla to raise his stake in the company which is now performing well.

During the three months ended September 30 (the latest quarter for which figures available), Kesoram notched up net sales of Rs 327.86 crore and earned a net profit of Rs 9.07 crore, a 300 per cent increase over the level of Rs 2.36 crore earned in the corresponding quarter in the previous year.

For the full year ended March 31 this year, it had net sales of Rs 672.14 crore and a net profit of Rs 41.49 crore.

Sources ruled out any proposal for private placement. Neither had the financial institutions, which hold 20 per cent in the company, been approached for dilution.

“The financial institutions have strong faith in Birla and they are not going to succumb to any blandishments from any hostile raider just for short-term gains. But our concern is that such an exercise can be perpetrated by mopping up shares through market operations as around 50 per cent of the total stock is held by the public,” they said.

Birla however does not have any plan to raise his stake in Century Textiles.

“Century Textiles has been promoted by Pilani Investment in which all the Birla brothers have a shareholding. It is, therefore, difficult for him to raise his stake, which is also unnecessary,” sources added.

They pointed out that both Century and Kesoram were expected to good results this fiscal with the profitability of cement divisions set to improve.”

At the same time they ruled out any merger plan for the cement divisions of the two companies because of the diverse shareholding pattern.

Century is stressing the need for expanding the sales of its textiles in the domestic market.

“The company used to export more than 60 per cent of its production because of the premium quality of its textiles. But now the price realisation in the domestic market is also good. We hope to raise our domestic sales to 50 per cent by the end of next financial year,” they said.


New Delhi, Dec 14: 
HCL Perot Systems (HPS), a 50:50 joint venture between Perot Systems Corporation and HCL Technologies Ltd will make a domestic initial public offering (IPO) by end 2001 to generate funds for its merger and acquisition plans.

HPS, which focuses on three key business segments — finance and banking, telecommunication, travel and airlines and provides end-to-end business solution, is targeting software companies in the US, Europe and Latin America.

The Netherlands-registered company has set a turnover target of Rs 600 crore by the end of 2001, as against a target of Rs 360 crore for the year ending December 2000. The company expects to have net profit of more than Rs 50 crore for the current year.

According to Vineet Nayyar, CEO, HPS, “We have already acquired one company as part of our future strategy called Kay Software in Silicon Valley. Currently, 45 per cent of our revenue comes from North America, 50 per cent from Europe and rest five per cent from the Far East and Europe.”

HCL overseas issue

Shiv Nadar, president and CEO, HCL Technologies said, the company will launch an ADR issue worth $ 500 million by April 2001. The issue of HCL Technologies would be open only to non-resident and resident permanent employees of the company, or its subsidiary incorporated in India or out of it.

Funds raised through the ADR route will be used to acquire companies worldwide and set up software development centres in India and abroad.


Mumbai, Dec 14: 
Knoll Pharmaceuticals Ltd, the prescription drugs company, saw its stock flare up on the markets today on the back of strong buying interest that was piqued by reports that its parent, Bayer AG, could sell its stake in the company to the US multinational Eli Lilly.

Brokers took a shine to the stock, buoyed by hopes that Eli Lilly would beef up Knoll’s product pipeline. Result: the stock rose by 7 per cent today with 90,950 shares traded with the total turnover at the counter reported at Rs 3.26 crore.

The Knoll scrip itself opened strong at Rs 336 against the previous close of Rs 331.95. It later flared up to the day’s high of Rs 368, before dipping marginally to close at Rs 354.20.

Bayer AG holds around 51 per cent in the company through Lupharma GmbH, which is a wholly-owned subsidiary of the multinational. Its main business is to make and hold investments on behalf of the BASF group.

Brokers said the group has initiated a restructuring drive with the aim of reducing its dependence on pharmaceuticals. Senior officials of Knoll Pharma Ltd were, however, unavailable for comments.

“The induction of Eli Lilly will spur the fortunes of Knoll Pharma. With Lilly’s strong research and product portfolio, the Knoll counter is bound to see some more buying interest,” an analyst tracking the counter said.

Knoll has been steadily trying to reduce its dependence on over-the-counter (OTC) and bulk drugs and has been laying stress on formulations. Knoll had sold off its rights in respect of well-known brands such as Burnol and Coldarin during 1997-98. At present, Knoll’s major products include Brufen, insulin, Digene and Cremaffin among others. The company also launched a drug called Clivarine for deep vein thrombosis and it also acquired an anti-epilepsy brand called Epilex from Reckitt & Colman for a consideration of around Rs 10 crore.

The company, which was earlier called Boots Pharmaceuticals (then a subsidiary of Boots, UK) was taken over by BASF AG in April 1995. Subsequently, its name was changed to Knoll Pharmaceuticals Ltd. In 1995-96, Knoll’s bulk drug and formulations facility at Sion in Mumbai was sold to Neo Pharma for a consideration of over Rs 65 crore.


Mumbai, Dec 14: 
Close on the heels of its decision to merge Jamshedpur Power Company, Tata Power today unveiled plans to buy out Tata Petrodyne Ltd, the 100 per cent subsidiary of Tata Industries Ltd. Tata Petrodyne is into the business of oil and gas exploration.

Tata Power today informed the stock exchanges that its board will be meeting on December 20 to consider the proposal.

Though senior Tata Power officials were not available for comments, sources close to the company said the move would make synergistic sense in line with its activities.

According to them, Tata Industries’ move to transfer the oil and gas exploration arm to a group company signified the reshuffling efforts on in the company over the past year.

Tata Petrodyne, which is into the exploration business, had earlier this year, sold 30 per cent of its equity in Cambay Basin Oil Exploratory Block off the Gujarat coastline, to British upstream player Cairn Energy. The sales followed a similar one in another Cambay basin field to the US company Enron Oil and Gas.

Earlier this year, Tata group had indicated that Tata Industries, which will focus increasingly on new economy sectors, would identify expertise areas that can be marketed independently to both Tata and non-Tata group companies with a view to generating profits.

Jamshedpur Power

The board of Tata Power today approved the scheme of amalgamation of Jamshedpur Power Company Ltd., its wholly-owned subsidiary with effect from the appointed date (April 1, 2000).

The Tata Power scrip finished higher on the Bombay Stock Exchange (BSE) at Rs 90.30 after opening at Rs 87.50 and rising to an intra-day high of Rs 92.80. The counter witnessed a turnover of Rs 8.30 crore.


Calcutta, Dec 14: 
The RPG group today announced major organisational changes, which includes reshuffling portfolios of senior officials and appointing heads for each business.

Paras K. Chowdhury, president and CEO of the communication sector, is being shifted as president and CEO of the tyre sector comprising Ceat (including its Sri Lanka division) and Philips Carbon Black.

Pradipto K. Mohapatra, currently president and CEO of the retail sector, is being appointed president and CEO for the infotech and telecom sector.

Raghu Pillai, currently managing director of Foodworld Supermarkets Ltd, is being shifted as head of the retail sector which will consist of FoodWorld, MusicWorld, Health & Glow, Cash and Carry, as also the tyre, batteries and accessories project.

Meanwhile, Abhik Mitra, will take over as the head of the entertainment sector comprising Saregama India, Saregama Plc, RPG Global Music and Hamara Inc.


Mumbai, Dec 14: 
The domestic corporate world, rocked by takeover threats, today asked the Justice P N Bhagwati panel to modify the takeover code in such a manner that acquirers seeking control of a target company through an open offer, must be mandated to acquire its entire equity rather than only 20 per cent through the offer.

In a date with the panel constituted by the Securities and Exchange Board of India (Sebi), corporates on both sides of the fence, which included potential targets and budding acquirers, today put forth their respective views before the market regulator seeking certain amendments to the takeover policy.

Prominent among them was Nusli Wadia, chairman of the besieged textiles and petrochemicals major, Bombay Dyeing & Manufacturing Company. Bombay Dyeing has been in the news recently following jute baron’s Arun Bajoria’s significant stake in the company, raising a takeover threat.

In a presentation made to the panel, Wadia demanded acquirers must come out with an open offer for the entire equity of a company (100 per cent). He justified the demand saying it would provide an exit route to all shareholders in the target company. The Bombay Dyeing chief contended that shareholders invest in a company on the basis of its existing management and they should be given an exit option if the management changes.

Under the present regulations, an acquirer is required to make an open offer for at least 20 per cent of the target company.

He added that if an offer for the entire 100 per cent is not acceptable, then the acquirer should make an open offer of such a size that his post offer stake in the company should be at 51 per cent, if the offer is fully taken up. For instance, if an acquirer holds 15 per cent stake in a company, he should make an open offer for an additional 36 per cent.

Wadia also asked the regulator to make certain amendments in the creeping acquisition rules and suggested that no limit should be set on the stake that a founder can acquire via the creeping acquisition route, with the condition that such shares have to be locked in, or cannot be sold, for a certain period of time. Currently, a promoter can acquire up to 5 per cent of the company’s equity each year under the creeping acquisition route.

The meeting with corporate chiefs was called by the Sebi panel today for seeking suggestions on changes to the existing takeover code.


New Delhi, Dec 14: 
The state-run Scooters India Ltd will soon be put on the block for global bidding.

The government wants Piaggio, the Italian two-wheeler giant which has been negotiating to buy the Lucknow-based scooter-maker for the last two years, to put in a financial and technical bid which will be used as a benchmark price for the global bidding round.

Top disinvestment ministry officials said, “Till now, Piaggio has been the only manufacturer interested but in all fairness we can’t sell it off without a round of financial bidding.”

Consequently, the Cabinet is being approached with this plan which promises to complete the sale by January-February 2001.

Whether Piaggio will play ball with this plan or not is however yet to be ascertained. When SIL was initially put up for sale, several Indian majors including Greaves and Hero Honda had evinced interest in the company but eventually dropped out, leaving Piaggio alone in the race. But the government has taken long and a meandering route in reaching a decision.

Apparently, a section of the government including the Prime Minister’s Office favoured selling it off directly to the Italian company but the law ministry over-ruled this stating this would be legally and financially improper. And a global bidding was the only way out.

Piaggio has been trying to gain an entry into the Indian two-wheeler market for some time, but there seem to be too many road blocks in its path.

Piaggio and the Deepak Singhania Group which runs LML Ltd, a joint venture between the two, fought a series of legal battles against each other for control of the Rs 900 crore company before settling out of court. But this does not seem to have stemmed Piaggio’s appetite for a bigger slice of the 12.5 lakh Indian scooter market where it has a minor presence through a recently set up Indian affiliate.

The company has been eyeing the Rs 136 crore state-run scooter maker not merely because it is sitting over prime real estate and has a team of trained automotive workers, but because SIL owns global rights to well known Italian scooter brand names like Lambretta, Lambro and Lambrittini.


New Delhi, Dec 14: 
There’s more to the mobile cellular operators-versus-fixed line service providers story.

Adding a fresh twist to the bitter feud between the two over the introduction of mobile services in a limited area by basic service providers, telecom associations have now come up with the idea of a self-regulatory body, the ‘Intra-Industry Regulatory Authority,’ on the lines of the ‘Telecom Association of America.’

The IIRA is likely to be set up by March and its members will be elected from various telecom associations like the Cellular Operators Association of India (COAI), Association of Basic Telecom Operators (ABTO), Internet Service Providers Association of India (ISPAI) and Indian Paging Service Providers Association (IPSA).

However, chances of an organisation like the IIRA meeting with success in the absence of a single communications licence, seems to be only a distant dream.

The battlelines are already being drawn.

The ABTO, on its part, has vowed to continue its struggle to offer limited mobility till a single licence is issued. “The issue of limited mobility is still alive and we will take it forward,” said S. C. Khanna, chairman ABTO.

Amitabh Singhal, secretary general of Internet Service Providers Association of India (ISPAI), while welcoming the move to set up the IIRA, said, “It is a good suggestion. But such efforts undertaken earlier failed to develop as a proper organisation. The industry group on telecom which had brought together all industry chambers to put forward their views while drafting the National Telecom Policy 1999 just withered away. Such a regulatory body is feasible only when there is one single licence.”

The Associated Chambers of Commerce and Industry (Assocham) also wants to have a single licence under the convergent communications regime, but wants to set up the IIRA before that.

In a letter to Prime Minister Atal Behari Vajpayee, P. K. Sandell, chairman of the Assocham expert committee on telecommunications, has sought speeding up the process of convergence, stating that only a composite licence in the Convergence Bill will resolve the conflict between various telecom operators.


Calcutta, Dec 14: 
The boards of Eveready Industries India Ltd (EIIL) and Bishnauth Tea Company Ltd (BTCL) today agreed on a swap ratio of four paid-up shares of EIIL for three shares of BTCL for the proposed merger of the two companies.

The company said the swap ratio has been decided on the basis of a comparative valuation made by the two chartered accountant firms—PricewaterhouseCoopers and Lovelock and Lewes. Steps are being taken to obtain sanction of the Calcutta High Court for the amalgamation scheme which will be effective from April 1 this year.

A press release issued by the company says the amalgamation, when effective, will consolidate and strengthen the entire tea operations of the two companies under one umbrella.

The paid-up capital of EIIL is Rs 36.16 crore while BTCL’s is Rs 14.69 crore. According to a senior official of EIIL, the post merger paid-up capital of the company will be Rs 55.7 crore.

However, the merger will not affect the sale of gardens that has already been undertaken by both the companies.

A BTCL source said it has already been decided that Bishnauth will sell five of its 15 Assam gardens. “Two would be sold to George Williamson and talks are on with interested parties to sell the other three gardens.”

EIIL has already sold six gardens out of its 12 gardens in West Bengal, spread over Darjeeling and Dooars. EIIL has 25 gardens within its fold. “The company’s plan is to sell one of the Assam gardens,” sources said.

The B.M. Khaitan group plans to bring down tea production from 45 million kg to 25 million kg.

The press release said the merger will not only allow the tea business of the merged company to derive significant benefit from the synergy of operations but will also enable the company to expand into the value-added packet tea segment where EIIL has already carved out niche for itself.

Once the merger of BTCL with EIIL is complete, the Khaitans will demerge the tea business from battery business and two separate companies will be formed. EIIL has already taken the approval of its shareholders approval for the demerger of tea business.

ICICI has worked out the entire restructuring exercise of the group.

The group’s top brass feels that the entire exercise will help EIIL to come out of the huge debt burden of Rs 644.91 crore. “When the entire exercise will be over EIIL will become a low debt company,” officials said.

Corporate mavens say that after the Khaitans failed to seal a deal with Gillette Company of US on the sale of its battery division it had taken recourse to the sale of tea gardens as a possible measure to come out from debt trap.

The Khaitans had acquired 1,65,84,750 shares in September 1994 at a premium of Rs 175 per share through McLeod Russel. In 1995 McLeod Russel made a rights-cum-public issue of Rs 302.85 crore.

The issue failed to evoke expected response from the investors and put a heavy debt burden on the company. In the following year, McLeod Russel, which handled the group’s tea operations, was merged into EIIL.



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