Air-India heads for another air pocket over valuation
Markets reel under UTI blow
Sinha quells US-64 jitters
Subramany amhints at early end to freeze
Deveshwar gets 5-year extension
Jalan, Sinha discuss rate cut
Rallis board okays real estate sale to Tata Sons
GM Swings to Siena, Altura tunes
Modi Rubber offer to remain open till July 16
Foreign Exchange, Bullion, Stock Indices

New Delhi, July 3: 
The Maharaja is getting the jitters�with disinvestment upon him, his net worth is now a far cry from what was estimated earlier, and his crown is in danger of going for a lark. The government has set an amazingly low notional value for Air-India�s paid-up equity at just Rs 27 a share. This would imply a mere Rs 415.5 crore for the airline�s 15.39 crore paid-up shares.

A Cabinet note, seeking to permit A-I employees to pick up a 10 per cent stake at a face value of Rs 10 each, ahead of a sell-off bid, has placed the value of the shares at Rs 27 a share. �It�s just too low. It will create a storm,� was the immediate reaction of S. Lazar, chief of Air-India Cabin Crew union.

Given the surcharged atmosphere over allegations that Balco was undersold by the government, the pricing of Air-India at Rs 27 a share is sure to turn into a major embarrassment for the government.

Disinvestment ministry officials however defended the valuation, claiming it was only for the �limited purpose of selling a stake to employees.�

They also hinted that part of Air-India�s debt of Rs 3,500 crore could be turned into equity before the airline was sold to prospective bidders.

However, even if this piece of financial jugglery is finally achieved, Air-India�s notional share capitalisation would stand at between Rs 2,500 crore and Rs 4,000 crore. The figure would be far lower than the Rs 20,000 crore airline officials had calculated as the Maharaja�s net worth, some two years back.

A-I planners had, at that time, placed a value of Rs 12,000 on its assets and Rs 8,000 crore as the value of landing rights it owns under various bilateral pacts.

At a price of Rs 4,000 crore for the entire restructured equity base of the airline, a 40 per cent stake should be priced at around Rs 1600 crore. By adding a 25 per cent premium for the right of managing the airline, the price tag for the shareholding could work out to just about Rs 2,000 crore. Tomorrow�s Cabinet meeting will not decide who out of the two bidders for the national flagship carrier will get to buy it. The meet will simply finalise a draft shareholders� pact and decide on offloading a 10 per cent stake to the airline�s employees.

The outcome of the battle for the Air-India stake between the Hinduja group and the Tata-Singapore Airlines combine will be only partly determined at a meeting of the Cabinet Committee on Security also slated for tomorrow, where ministers will decide whether the Hindujas can be allowed to bid at all considering the fact that they stand accused in the Bofors pay-off scam.

It is at another meeting of the Cabinet Committee on Disinvestment to be held later this month, that the fate of the Maharaja will actually be sealed.

But if the valuation arrived at for the airline is any indication of things to come, the Monsoon session of Parliament is poised to be a stormy one.


Mumbai, July 3: 
Stock markets, already struggling to adapt themselves to the rigours of a new trading regime, plunged today in reaction to a decision by the Unit Trust of India (UTI) to suspend the sale and repurchase of US-64 units � its flagship investment product � for six months to December.

The Bombay Stock Exchange (BSE) sensitive index was pummelled 113.74 points to 3312.29 as investor dismay over the bombshell from UTI, one of the largest investors on bourses, spread to more quarters of the financial fraternity.

The result was a clobbering for stocks which are seen as favourites with the mutual fund major. These included Reliance Industries, Infosys, Tisco, BHEL, Telco, Satyam and L&T. �Heavy selling was noticed in old and new economy shares,� a dealer said, adding it was the slide in key index scrips such as Reliance and Infosys Technologies that turned out to be the biggest drag on the 30-share barometer.

The market was reeling under the impact of uncertainty over the ban on carry-forward trading, and UTI�s announcement exacerbated the disappointment, sparking -panic among operators racked by low volumes, a dealer said.

The mood was rather upbeat when the sensex opened with a positive gap of 21 points at 3,452.11. However, it soon started dipping and could never recover. �Heavy selling was witnessed in old and new economy shares, especially those which make up a big chunk of the US-64 kitty,� a dealer said.

The index opened firm at 3452.11, which was also the day�s high, and gradually moved downwards to touch an intra-day low of 3300.15; the BSE-100 index also dipped by 48.71 points to 1566.35 compared with its previous close of 1615.06.

That pivotals took it on their chin was apparent from the fact 24 of 30 shares in the index ended with sharp to moderate losses. A silver lining was the small, but significant, rise in traded volumes, which had shrunk to all-time lows. Index heavyweight Infosys declined by 11.98 per cent at Rs 3277.10 and Satyam Computer 8.61 per cent at Rs 165; DSQ was down 10.62 per cent, Silverline 11.30 per cent, L&T 5.97 per cent, Telco 4.54 per cent and Tata Steel 6.80 per cent. Other frontline software stocks closed with losses of 4 to 5 per cent.

Among the few gainers were NIIT, Hindustan Lever, BSES and State Bank. Lever staged a smart rally from an intra-day low of Rs 296 on renewed buying to close with a 2.01 gain.

Price bands

Sebi today said it would review problems caused by the replacement of stock circuit filters with those linked to market indices. The trigger was an incident on the NSE, where Zee Telefilms was quoted at 50 paise and the fact that the computer error could not be rectified before 500 shares were traded. On the BSE too, there was an unusual spike in the ICICI share until it was found to have been caused by a systems snag. A section of dealers saw it as an attempt at rigging.

�We are scrutinising deals to check whether there is a deliberate attempt behind such quotations. If we feel that there is a problem, we may take corrective measures,� Sebi chief D R Mehta said.


New Delhi, July 3: 
Finance minister Yashwant Sinha today sought to quell panic in the market over UTI�s decision to freeze sale and repurchase of its popular US-64 scheme by saying the interests of small investors would be protected.

While many read this as an early reversal of the mutual fund giant�s move, the minister was not as categorical when he faced posers from reporters on the issue. �Let us not jump the gun. We will now have to scrutinise what is what. Our policy is that financial institutions function independently, without any interference from us. All the same, the results announced by UTI on Monday are distressing,� he added.

He promised that all aspects of UTI�s decision would be examined. The reassurances came on a day the stock markets slumped in reaction to the suspension by the mutual fund. which has been stalked by controversies over the way it handles funds.

This has touched off expectations that the government would step in to stem the rot in UTI. Among steps contemplated is a structured bail-out accompanied a shakeup of the top brass.

The halt in re-purchase will not stop US-64 units from being traded in the market, but most small investors are unhappy with the move as they are unlikely to get a good price for their holdings in the absence of a redemption scheme.


Mumbai, July 3: 
UTI chief P S Subramanyam today said the six-month moratorium on the sale and repurchase of US-64 units could be lifted earlier if the stock market looks up.

�The operative word is up to six months,� he told The Telegraph. He attributed much of the losses in the US-64 pool to the market meltdown that followed the presentation of the budget on February 28, and continued for the best part of March. He promised investors UTI would be ready to buy back their units if the 20 per cent slump suffered in March is offset by a rally equally strong over the next few months.

He scoffed at suggestions that today�s market slump, especially the 114-point plunge in the BSE sensex, was the result of the poor performance of US-64, UTI�s flagship scheme.

NSE exit option

A UTI reassurance that investors could continue to sell or buy US-64 units from the whole sale debt market segment of NSE has proved to a red herring. The last time US-64 was traded on the exchange was March 30, 1999, when close to 500 units had changed hands at Rs 14.95 each. �It is not realistic to expect US-64 units to be traded on the NSE,� an official of a leading stock broking outfit said.


Calcutta, July 3: 
ITC Ltd chairman Y.C. Deveshwar has got a five-year extension at the top job. His current three-year term as chairman and chief executive officer is to end on July 19, 2002.

The extension of Deveshwar�s tenure as executive chairman of ITC is significant, as it shows that the company�s London-based parent BAT Industries has decided not to seek the appointment of a non-executive chairman.

BAT, in a policy decision, had earlier sought to appoint a non-executive chairman as recommended by the Cadbury Committee on corporate governance. In fact, prior to Deveshwar�s appointment as chairman and chief executive officer in January 1996, the BAT representatives on the ITC board had even insisted on the appointment of a non-executive chairman. But finally, the views of the majority of the non-executive directors from the domestic financial institutions prevailed and Deveshwar came to head ITC.

This time around, it was the ITC nomination committee, comprising non-executive directors, including two BAT representatives, which recommended Deveshwar�s extension. The ITC board has already recommended a resolution to be put up for the shareholders� nod during the annual general meeting to be held on August 3, a full year ahead.

The confirmation of the extension of the top job at the tobacco-paper-hotel major, with a substantial raise, will certainly be a morale booster for Deveshwar.

With a consolidated monthly salary of Rs 6 lakh, plus enhanced perquisites, his take-home pay for the extended period is expected to be close to between Rs 1.5-2 crore annually, against the Rs 1.37 crore he took home last fiscal.

Under Deveshwar�s stewardship, the company saw an over three-fold growth in its market capitalisation from Rs 5,571 crore in 1996 to as high as Rs 19,987 crore in 2001 and the book value of its shares soared from Rs 45.69 to Rs 144.02. The net assets employed by the group increased from Rs 1,886 crore to Rs 4,394 crore, while net worth went up from Rs 1,121 crore to Rs 3,535 crore.

The gross income of ITC during the period increased from Rs 5,188 crore to Rs 8,816 crore and profit after tax surpassed the Rs 1,000-crore mark to touch Rs 1,006 crore in the year ended March 2001, from Rs 261 crore in 1996.

Although, the extension is technically a five-year one, running till July 2007, Deveshwar, 54 now as per the balance sheet for the year ending 2001, will actually enjoy the extension for a mere three years, superannuating in 2004-05 when he attains the company�s retirement age of 58.

The board has also recommended a resolution to formalise the appointment of K. Vaidyanathan as whole-time director of ITC.


New Delhi, July 3: 
Desperate to work out strategies to reverse the slowdown, finance minister Yashwant Sinha today held separate meetings with Reserve Bank governor Bimal Jalan and financial advisors of various ministries to consider measures to step up investment and curb government expenditure.

The two-hour long meeting between finance ministry officials and Jalan discussed possible moves to revive growth and spur demand, including the possibility of further lowering of interest rates.

Coming out of the meeting, Jalan said, �We are concerned about growth.�

Last Friday, the government released data which showed that the GDP growth in 2000-01 had slowed down to just 5.2 per cent as against 6 per cent in the previous year.

Even before today�s meeting, Sinha had apparently been advised by the RBI officials to step up capital expenditure of the government as they felt this was was the surest way to push up growth.

Earlier in the day, the finance minister had another two-hour long meeting with financial advisors of various ministries to bring about a turnaround in the economy. He passed on the RBI prescription and asked ministries to ensure that capital and productive expenditure were encouraged even as revenue expenditure was �restricted and controlled�.

Taking serious note of the shortfall in non-tax revenue from dividends and interest receipts from public sector units, the finance minister asked ministries to ask these companies to pay up as such defaults could create immense difficulties for the government.

He also wanted ministries to quickly resolve the issue of closing or restructuring loss-making PSUs. This, he felt, would, cut down on the drain on central resources.

The finance minister warned the ministries that as the government was borrowing money at a high cost, it was necessary to ensure that it was utilised in a constructive manner. He also wanted the ministries to ensure proper spacing of expenditure. This was important for more systematic management of expenditure and to avoid a situation wherein bulk of the expenditure took place in the last quarter of the year.

Asking financial advisors to carefully scrutinise non-plan expenditure, Sinha said they should evolve a definite system of a quarterly review of expenditure projections for proper management. He pointed out that many organisations had huge unspent balances of plan funds and this should be monitored on a monthly basis. �It is very distressing if the money supposed to reach the people of the country goes from Centre and just gets deposited with these agencies,�� he said.

Emphasising the importance of zero-based budgeting, Sinha urged the financial advisors to ensure that this becomes a reality in the Tenth Plan. He felt it was very crucial to optimise and contain growth of government expenditure and utilise scarce resources in a more productive manner.

No project of the Ninth Plan would automatically be allowed to graduate into the Tenth Plan without being subjected to a rigorous and thorough scrutiny, he said.


Mumbai, July 3: 
The board of Rallis India Ltd, an agro-chemicals major from the Tata group, today approved a proposal to dispose of its real estate in Andheri in the north-western part of the metropolis to Tata Sons and its associates, for a consideration of Rs 133 crore.

The sale is part of the restructuring that saw the Tata company exit the pharma business last year.

The company had sold its pharmaceutical business to Shreya Impex Pvt Ltd for a consideration of Rs 49 crore.

The exit from the pharmaceutical business last year and now the disposal of real estate will strengthen its balance sheet and enable it to focus on its core strengths in the areas of agrochemicals, seeds and agri-business, analysts said.

The Rallis board recently approved the merger of five wholly owned subsidiaries with it, subject to the necessary approvals.

The subsidiaries which were merged effective from April 1, 2001, are Ralchem Ltd, Rallis Finance & Investments Company Ltd, Rallis Hybrid Seeds Ltd, Rallis Farm Management Services Ltd and Sankhya Garments Ltd.

Analysts say the sale of Rallis� real estate to its holding company could mean that the company was unable to attract a good rate from external agencies.

It also could mean that the group is keen to develop the property as it is close to the technology park set up by the Tatas.


New Delhi, July 3: 
General Motors India today launched its station-wagon model �Opel Swing� to take on rivals Fiat�s Siena Weekend and Maruti�s Baleno Altura.

The Swing, which will be available in two versions, 1.4 litres priced at Rs 6.21 lakh and 1.6 litres at Rs 6.66 lakh (ex-showroom Delhi prices), is expected to provide stiff competition to the Baleno Altura priced at Rs 8.01 lakh and the Sienna Weekend 1.6 at Rs 7.14 lakh (ex-showroom Delhi).

The all-purpose five-door vehicle from General Motors has a sales target of about 1000 units for July-September 2001. The company has invested about $ 1.5 million for modifying the Swing to make it suitable for Indian roads. The 1.6 litres model has an engine displacement of 1598 and a horsepower of 92 bhp@5600 rpm, while the 1.4 litres has an engine displacement of 1389 and a horsepower of 88 bhp@6000 rpm.

Launching the car here today, Aditya Vij, president and managing director GMI said, �The Opel Swing is carved out of the Corsa platform and passenger comfort and convenience has been accorded highest priority. A number of value-added features have also been incorporated to give it a stylish look.�

Rajeev Chaba, vice-president marketing, GMI said, �The Opel Swing is targeted at hatch-back owners and those upgrading to regular notch-back vehicles. The Swing is focused on addressing the needs of the large and growing segment of successful and upwardly mobile individuals.�

�We expect this to be bought by those who believe in working hard and playing hard and taking life as it comes. We call it the �bindaas� car for �bindaas� people,� he added.

GMI executives were optimistic that the market for this segment of cars is bound to go up. As a senior executive with the Society of Indian Automobiles Manufacturers Association (SIAM) said, �It is a growing market and a total of 10,000-15,000 units are expected to be sold annually.�

The company has 42 dealers and 25 authorised service outlets across the country, which it plans to raise to 45 dealers and 40 authorised service outlets.

�India has been identified as one of the key growth markets in the region by our corporation. We are studying the possibility of introducing more models in the near future and widening our reach and network,� said Vij.

GMI, a wholly owned subsidiary of General Motors Corporation, USA, manufactures the German-engineered Opel Models � Astra, Corsa and now the Opel Swing � from its state-of-the art facility at Halol in Gujarat.


New Delhi, July 3: 
The Mumbai high court has extended the open offer of the Modi brothers to acquire up to 35 per cent stake in Modi Rubber Ltd till July 16. The extension was granted in response to a writ petition filed by ModiPon promoter M.K. Modi. The offer was slated to close today.

M.K. Modi had filed the writ challenging the Securities and Exchange Board of India�s decision that debarred him from selling his 4.52 per cent stake in MRL on grounds that he was an associate of the promoters� group. M.K. Modi had argued that the Modi family had split more than 10 years ago and the brothers had separate businesses.

The extension of the open offer by the court was confirmed by HSBC, the merchant bankers to the Modi brothers�B.K. and V.K.

However, when asked whether the court had taken any decision on allowing M.K. Modi to participate in the offer, the merchant bankers said they were not aware about it. It is learnt that the Mumbai high court had earlier asked Sebi to reconsider its decision to debar M.K. Modi. Though Sebi did hold a meeting in Mumbai today on this issue, it remained tight-lipped on the its outcome.

Not that MK Modi�s participation will make much of a difference to the fate of the open offer floated by B.K. and V.K. Modi to buy up to 35 per cent equity at a revised price of Rs 90.

A high-level meeting of the financial institutions, which collectively hold a 44 per cent stake in the company, have already taken a decision not to sell their portion to the promoters. It is understood that Purnendu Chatterjee who, too, owns a substantive stake in the company is not interested in selling out. The financial institutions are believed to be trying to coordinate their strategy with Chatterjee. Whether they have been successful or not is not known.

The institutions have also alleged mismanagement by B.K. Modi and directors loyal to him.

Meanwhile, three directors serving on the MRL Board and close to B.K. Modi, have been suspended and the latter stripped of his powers to oversee the company�s daily functions.



Foreign Exchange

US $1	Rs. 47.13	HK $1	Rs. 5.95*
UK �1	Rs. 66.52	SW Fr 1	Rs.25.95*
Euro	Rs. 39.89	Sing $1	Rs.25.55*
Yen 100	Rs. 38.02	Aus $1	Rs.23.85*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4475	Gold Std(10 gm)	Closed
Gold 22 carat	Rs. 4225	Gold 22 carat	Closed
Silver bar (Kg)	Rs. 7250	Silver (Kg)	Closed
Silver portion	Rs. 7350	Silver portion	Closed

Stock Indices

Sensex		3312.29		- 113.74
BSE-100		1566.35		-  48.71
S&P CNX Nifty	1069.80		-   4.25
Calcutta	 115.64		-   2.79
Skindia GDR	 593.72		-  17.20

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