UTI monthly plans headache to govt
Ballarpur gameplanfor Sinar Mas integration
Bajaj Auto net inches up to Rs 121 crore
Sebi takes stock of on-going probes

New Delhi, July 28: 
The UTI imbroglio gets more complicated by the day: after the crisis at its flagship fund US-64, there is a genuine fear that the government will have to cobble a bailout package for 10 of the Trust’s monthly income plans which have run up a cumulative shortfall of over Rs 2,000 crore.

The schemes, which were floated between 1997 and 1998, will mature between next year and 2004.

UTI has a small development reserve fund of about Rs 1,070 crore for these MIPs, which would still leave an uncovered gap of about Rs 1,000 crore.

If the stock market sinks further between now and the time for redemption, officials fear that the shortfall could be higher.

The problem, ministry officials said, is that these are all assured income schemes promising fixed rates of return varying between 10.5 and 14 per cent, whereas the real value of these schemes have been falling.

As a result, UTI has been paying the assured returns by dipping into the capital base of these schemes.

About a quarter of the MIP money is invested in stocks while the rest is invested in debt market.

Repeated market crashes has resulted in the unit’s base value going down; the problem has been compounded by the repeated cuts in interest rates (currently hovering at about 9.5-10 per cent) which have also undermined the debt-based component of the scheme.

In some cases, even the debt investments have come unstuck as they were used to buy debt instruments floated by companies which are doing badly and have been unable to pay interest. These include steel makers and north India-based engineering companies.

The bottomline of all this is the mutual fund is likely to face a mega-cash crunch once these MIPs come up for redemption.

Already the difference in current net asset value and expected NAV has risen considerably. With nearly Rs 35,000 crore invested in UTI’s MIP schemes, the gap between promised returns and the actual money in the kitty could well increase in the future as markets show little signs of reviving.

For instance, the NAVs for the five MIPs launched in 1997, slated for redemption next year, vary between Rs 7.50 and 8.70, even as they carry a coupon of 12-14 per cent interest.

Similarly, NAVs for the five 1998 MIP schemes vary between Rs 8.00 and Rs 8.50 while carrying interest rates of 12.5 per cent.

Probably the best performing MIP today is the 1999 scheme which has an NAV of about Rs 9.20 and carries an interest rate of 10.75 per cent.

Ministry officials are worried that the problems with UTI’s MIPs could create another political headache for them as most investors in these schemes are from India’s large politically conscious middle class.

The July 2 announcement by UTI freezing sales and repurchase of units issued by US 64 triggered off a chain of events that led to the eventual arrest of former chairman P.S. Subramanyam and two executive directors and a host of revelations about shady investment decisions taken by the giant mutual.

Finance minister Yashwant Sinha is already in the dock both over UTI’s bad showing as well as allegations that investment decisions were made at his behest.


New Delhi, July 28: 
Ballarpur Industries (Bilt) is planning to acquire the stake in the erstwhile Sinar Mas Pulp & Paper India Ltd which was bought in May by BILT Paper Holding, the flagship of the LM Thapar group, in a deal valued at Rs 520 crore.

After the acquisition of the company (since renamed as Bilt Graphic Papers Ltd), the Thapars had declared their intention of integrating the company with Bilt.

“The Bilt board has decided that it should be an acquisition of shares from BILT Paper Holdings and not a merger at the original valuation. It has still not been decided whether Bilt will acquire the entire stake or only a part of it,” he said.

Bilt intends to raise capital from the market to fund the acquisition. The details of the capital raising plan have not been decided.

“It can range from 100 per cent debt finance to 100 per cent equity finance; we could also settle for something in between,” Gautam Thapar said.

Bilt has formed a three-member committee comprising Sanjay Labroo, managing director of Asahi India Safety Glass Ltd, Shardul Shroff, corporate lawyer, and ICICI nominee M.V. Subbiah to decide on the quantum of shares to be bought and the form of the capital acquisition.

The acquisition of the shares will be completed in the current fiscal (July 2001 to June 2002) Thapar said.

If it is equity finance it can be a public issue, a rights issue, rights cum public issue, preferential allotment or a combination of rights issue and preferential allotment. After the acquisition, the next goal for Bilt will be to raise the production capacity from 115 tonnes to 150 tonnes. This will entail an investment of Rs 40-45 crore, Thapar said.

BILT Paper Holding Company was earlier known as APR. It used to handle pulp before its restructuring. Bilt had a 50 per cent stake in APR.


July 28: 
Bajaj Auto Ltd has reported a marginal increase in its net profit at Rs 120.77 crore for the quarter ended June 30 this year as against Rs 116.32 crore in the same period last fiscal.

While the company’s total income rose marginally to Rs 1,022.32 crore from Rs 1,018.49 crore a year ago, its sales and income from operations actually declined to Rs 914.88 crore as against Rs 927.52 crore in the first quarter of 2000, a company statement said.

Sales of Bajaj Auto’s popular two and three-wheelers dipped to 313,347 units in the first quarter of the current fiscal as against 325,360 units sold in the corresponding period last year.

During the quarter, 317,874 two- and three-wheelers were produced compared with 327,075 two- and three-wheelers manufactured in the same period last year.

The company’s non-operating income rose to Rs 101.57 crore in the first quarter of the current fiscal as against Rs 90.44 crore in the corresponding quarter of the previous year. The non-operating income for the current quarter includes premium of Rs 45 crore received from Allianz AG, the overseas partner for the non-life insurance business.

Britannia net up

The net profit of Britannia Industries Ltd has risen marginally to Rs 16.2 crore in the first quarter of the current financial year compared with Rs 13.5 crore during the same period last year. Net sales of the company increased by 6 per cent at Rs 395 crore in the reporting period, over Rs 331.2 crore last year, according to a company statement.

Godrej net at Rs 11.2 cr

Godrej Industries Ltd (GIL) has recorded a lower net profit at Rs 11.18 crore for the first quarter ended June 30 compared with Rs 14.40 crore in the corresponding period of the previous fiscal.

Income from operations was Rs 105.09 crore as against Rs 199.41 crore in the same period of last year, which included Rs 103.87 crore of income from consumer products business.

Meanwhile, Godrej Foods Ltd (GFL) has decided to demerge its manufacturing business into GIL with effect from June 30 this year. The trading business would continue to be carried out by GFL.

Nirma net down

Nirma Ltd has posted a 13.27 per cent drop in net profit at Rs 58.63 crore for the first quarter ended June 30 compared with Rs 67.6 crore in the same period last fiscal.The total income declined marginally to Rs 540.56 crore as against Rs 554.93 crore in April-June, 2000-01.

Unichem net spurts

Unichem Laboratories Ltd has posted a 63.08 per cent rise in net profit at Rs 8.66 crore for the first quarter ended June 30 compared with Rs 5.31 crore in the corresponding period of the previous fiscal. The board has recommended a dividend of 50 per cent (Rs 5 per equity share) for the financial year 2000-01. Sales turnover increased by 16.92 per cent at Rs 75.67 crore as against Rs 64.72 crore last year, it added.

Canara Bank

The operating profit of Canara Bank for the quarter ended June 30 increased to Rs 324 crore as against Rs 185 crore for the corresponding previous quarter, showing a rise of 75 per cent. Total income from local operations grew Rs 1,405 crore to Rs 1785 crore, recording a 27 per cent growth.


July 28: 
The Securities and Exchange Board of India (Sebi) today reviewed the market developments, status of its on-going investigations and that related to the Joint Parliamentary Committee (JPC) probing the multi-crore scam.

“The board meeting was a routine one and no major decision was arrived at,” Sebi sources said.

The current market scenario, issues relating to JPC came up for discussion at the board meeting, they said, adding, Sebi accounts for 2000-01 were also placed for consideration, deliberations on which remained inconclusive.

Union disinvestment secretary Pradip Baijal made a presentation before the board, seeking a different treatment for listed public sector companies, in which the Centre was planning to divest its stake to strategic investors, they said.

The government has clarified that it would adhere to the provisions of Sebi takeover code, including a minimum open offer for 20 per cent equity of the concerned public sector unit and that “it is not against the condition, making it necessary for strategic investor to make an open offer,” sources said.

The capital market regulator had referred the issue of treating PSUs separately to the Bhagwati Committee but the panel had recommended against any such special treatment, they added.

Those who attended the meeting were government nominee Rakesh Mohan, RBI deputy governor G.P. Muniappan. However, the public nominee, AV Birla group chairman Kumar Mangalam Birla did not attend today’s meeting.

Sources in merchant banking institutions handling mandates for the divestment of Hindustan Zinc and IBP said Sebi was of the opinion that open offers should be made in the case of divestment in public sector undertakings.

“Since it entails change of management, Sebi gave us the impression that the small investors and financial institutions should have an exit option,” a merchant banker said and added that its clients will factor in the cost when bidding for the PSUs.

“It is possible that Sebi may now seek the opinion of R.H. Patil, the newly-appointed chairman of the Disinvestment Commission, on his return from abroad,” a top-level merchant banking source said.

However, any exemption from making an open offer will predictably be welcomed by the bidders as it will mean lower cost of acquisition for them and may help the government garner better valuation for its stake.

Sebi’s ambivalent stand on the issue sis being seen by the merchant banking fraternity as indicative of the pressure on the market regulator to change its stance.

The PSUs for which the government has already invited bids from strategic investors are Videsh Sanchar Nigam Ltd, IBP, Indian Petrochemicals Corporation Ltd, Computers Maintenance Corporation and Shipping Corporation.

The management of some of the PSUs are of the opinion that the process of making open offers will deter the divestment process. This is understood to have forced Sebi and the government to rethink the matter.


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