VSNL stares at valuation blow
Centre not to wade into Dabhol mess
Dunlop, IDBI differ on blueprint for recovery
IA to lease four new Airbuses from Orix
Promoters of Zee Tele in Rs 30cr deal with FII
Fast-track revival for ailing firms
School infotech plan falters
EIH puts off proposal to issue equity
NSE invasion of Lyons Range
Foreign Exchange, Bullion, Stock Indices

Mumbai, Aug. 17: 
With the much-awaited disinvestment of the government�s stake in Videsh Sanchar Nigam Ltd (VSNL) dragging on longer than expected and many players pulling out of the race, the valuation of the telecommunications giant is expected to take a beating.

As against a valuation of over Rs 350 per share expected some time ago, following recent developments, private players would be keen on picking up the government�s stake at prevailing market prices with some even fearing that it could even drop to below Rs 250 per share.

The government had earlier set an August deadline for divesting its stake, but the Centre has clearly indicated that this is unlikely to be achieved.

While the VSNL scrip today closed lower at Rs 263.20, after opening at Rs 274.40, reflecting the apprehension among marketmen, industry circles worry that the privatisation could turn out be a long-drawn out affair, with the government being unable to find a solution to the stalemate over the valuation of its 25 per cent stake.

Industry sources here felt that the government would expect a price of at least Rs 400 per share, which is difficult to find favour with the bidders.

�The disinvestment of VSNL would run into further difficulties due to its perceived value by the strategic investor. While the government would expect a much higher price, particularly after the controversy regarding the disinvestment of Balco, such a price may not be acceptable to the private player. In such a scenario, the whole process may even not go ahead,� an apprehensive analyst with a European brokerage said.

Some of the concerns among analysts relate to the fall in the company�s tariffs. This had cast its shadow on VSNL�s topline in the first quarter of the current fiscal year.

Analysts here said the total accounting rates (TAR) for the quarter were lower by more than 25 per cent than the previous corresponding quarter.

Yet another area of concern relates to its intention of doling out a liberal 500 per cent dividend, which, broking circles felt, would lead to a reduction of its cash reserve position, thus affecting any further expansion plans. The company had a cash reserve position of close to Rs 5,000 crore prior to the payment of the dividend.

Therefore, analysts feel the government should immediately expedite the disinvestment process, before the monopoly enjoyed by the company in the matter of international telephony expires on March 31, 2002.

While around six players had initially expressed interest in bagging the government�s stake, the lone twosome left in the race are now the Tata group and Reliance. While Bharti has already withdrawn from the race, reports now suggest that BPL too is weighing such a move.

VSNL had earlier indicated plans to invest over Rs 4,000 crore in the next couple of years for its foray into new sectors. One such area is the direct-to-home services (DTH) segment, where the company intends to create a platform from where it would invite participation from various channels, including free-to-air ones.


Mumbai, Aug. 17: 
The Centre today categorically made it clear that it will not take over US energy major Enron�s troubled Dabhol Power Company�s (DPC) $ 3 billion power project, nor will the National Thermal Power Corporation buy power from the multinational.

�We are not going to buy the plant, nor its power,� Union power secretary A K Basu said after his keynote address at the inauguration of an internationl conference on �Global participation in Indian national grid, energy management and convergence� here.

�The Indian government has made it very clear that this is a dispute between the DPC and the Maharashtra government and a solution has to be found by them,� he said, adding �we are willing to provide any help needed.�

Meanwhile, another power ministry official confirmed that conciliation proceedings between the US energy major and the Centre would commence tomorrow and could spill over till Monday.

�The conciliation is for three days and restricted only to the non-payment of the December bill,� he said.

The Attorney-General of India and senior counsel Soli Sorabjee and former Supreme Court judge Jeevan Reddy would represent the Centre, the official said, adding the government will accept the conciliation verdict.

The two-day conference, organised jointly by the PowerGrid Corporation of India Ltd and Ficci, along with the Union power ministry, will address issues related to formation of an Indian national grid, energy management and convergence, for meaningful deliberations in the sector.

Union power minister Suresh Prabhu could not make it for the inauguration of the conference and his speech was read out by joint secretary for power P I Suvarathan, in which he reiterated the Centre�s resolve to add generating capacity of about 1,00,000 mw with an investment of $ 200 billion.

Referring to PowerGrid�s role in the transmission sector, Prabhu said an estimated $ 15 billion would be required for creation of transmission facilities at the national level for meeting inter-state power transfer requirements either through formation of joint ventures or through independent power transmission companies.

�It is estimated that about $ 6 billion will be needed for the private sector to establish transmission systems for mega IPPs and transmission super highways,� he said in his speech.

Basu said till date 27 private power sector projects, including those with foreign participation and a capacity of around 5,500 mw had been commissioned in the country and a total of 19 projects with a capacity of about 5,850 mw were under construction.

+out of all these, only two foreign have had problems, i will not take names, but we are trying to help them as well+, he added.

Referring to the recently signed memorandum of understanding between six ipps in andhra pradesh and financial institutions, basu said these were achieved without insistence on an immediate escrow account, but on the basis of an alternative security mechanism linked to achievement of reform milestones.

+goi is also actively pursuing the mega power projects. To overcome the problems encountered for such large projects, we are also considering a revised payment security mechanism+, he added.

After the ap experiment, other states like madhya pradesh and punjab were also planning a similar approach towards the ipps in their state, basu said. Pti hv vrg npr va 08171552 k


Calcutta, Aug. 17: 
Differences have cropped up between the M. R. Chhabria-controlled Dunlop India Ltd and its operating agency, the Industrial Development Bank of India (IDBI) over the payment of dues to banks, financial institutions and fixed deposit holders under the revival scheme. While IDBI has emphasised that the company should pay Rs 52.32 crore towards settling its dues, the company is willing to come up with only Rs 13.44 crore.

The company has also raised certain questions about the Sahagunj factory which has spread panic among the employees. Quoting a report submitted by Tata Consultancy Services (TCS), which observed that the number of employees in the non-production line should be reduced by 20 to 25 per cent, the company has said the percentage of employees in the production and non-production lines is almost the same now. The consultancy firm also suggested letting out the canteen, hospital and the security system on contract.

Further, Dunlop said the layout of the Sahagunj factory does not allow mechanisation of material handling. �We are afraid that the company may prune down the functions of Sahagunj factory,� the employees said.

The two also differ on other aspects of the revival scheme, which spans a period of three years between September 30 2001, to September 30, 2003. While IDBI has pegged the cost of the scheme at Rs 203.80 crore, the company has pegged it at Rs 174.05 crore.

Moreover, the company puts the start-up expenses at Rs 5 crore, while IDBI pegs it half the amount, or Rs 2.5 crore. Similarly, the company has said that additional working capital requirement should be Rs 55.48 crore while IDBI said it should be Rs 47.99 crore. IDBI has also said recovery of loans and advances to the tune of Rs 22.35 crore should be one of the major sources of funding the revival scheme, but the company has remained silent on the issue.

Dunlop has also remained silent on opening cash balance while the operating agency has said the opening cash balance should be to the tune of Rs 18.79 crore.

Differences have also cropped up between DIL and IDBI over internal accruals.

While IDBI has said that the internal accruals will be to the tune of Rs 26.6 crore the company said it should be to the tune of Rs 12.05 crore.

The company has said that they want to garner Rs 29 crore from sale of charged assets and Rs 87 crore from sale of uncharged assets.

Even though the company has raised certain question on Sahagunj factory it has however sought a host of concessions from the West Bengal government. The company has asked the government to allow them to avail short term loan of Rs 15 crore before September 30.

, 2001 for continuing holding operations. The loan shall be repayable by September 30, 2003 and shall carry an interest of 18 per cent per annum.

It has also asked the state government allow the company to avail a soft loan of Rs 10 crore with an interest of 7.5 per cent with a moratorium of three years and will be paid over a period of seven years.


New Delhi, Aug. 17: 
The Indian Airlines board today cleared leasing of four new Airbus A320s from a leasing firm called Orix.

The new planes, to be inducted between October and April, will add capacity to IA�s global operations as well as replace an ageing Airbus 300 aircraft, which was being used for domestic flights. IA currently has about 59 planes.

IA has long been planning a major expansion of international operations. Among others, the airline plans on new flights to Hong Kong and Riyadh as well as adding flights to existing frequencies in South East Asia and the Gulf.

Officials also plan to directly connect domestic hinterland cities like Hyderabad, Amritsar, Cochin with foreign destinations.

IA ran up a loss of Rs 177 crore last fiscal after a profitable run during the last few years.

High maintenance expenditure on an ageing fleet coupled with flights on loss making routes in the north east, besides increased fuel prices helped drive the airline into the red.

The airline also plans to lease six turbo-props to add to its 59-strong fleet. The six turbo-props will be diverted to loss making north east routes releasing planes which would along with the newly rented Airbuses be used to add muscle to IA�s global ambitions.


Mumbai, Aug. 17: 
The promoters of Zee Telefilms (ZTL) today placed around 25 lakh shares from their personal kitty with a foreign institutional investor (FII) to raise Rs 30 crore.

The funds will be paid back to ZTL once the deal is squared up. Though Zee officials did not divulge the price, sources said it could be in the region of Rs 120 per share.

Zee Telefilms has a liability of Rs 220 crore, which was incurred when the promoters committed funds to big bull Ketan Parekh and his associate companies to purchase shares in media majors such as television channel B4U and the Amitabh Bachchan-promoted AB Corp.

Zee did not name the buyer, except indicating that the FII which picked up the shares is a well-known international investor with an appetite for media and entertainment stocks.

Zee promoters, led by Subhash Chandra, have returned about Rs 110 crore, and the remaining Rs 80 crore is expected to be repaid within the next couple of months.

The promoters had, in the previous month, placed close to 50 lakh shares and reports now point out that Oppenheimer was the buyer. The fund purchased the shares at an average price of Rs 100 per share.

Commenting on the deal, A C Saha, president, corporate finance, Essel group of companies, said the placement of these shares reinforces the promoters� commitment to fulfil their obligation even if it means that they have to dispose personal assets at a time when share price of Zee Telefilms has taken a beating on bourses.

Zee is looking for a foreign strategic partner to whom it is ready to give a role in the management of the company.

The scrip witnessed heavy buying today, closing Rs 6.25 higher at Rs 104.05 on the BSE.


New Delhi, Aug. 17: 
The Union Cabinet has approved two Bills designed to speed up the revival of sick companies and accelerate power sector reforms to attract private investment.

At a meeting late last night, the Cabinet cleared a proposal to levy a cess on all companies based on turnover to create an �insolvency fund� to help sick units and their employees. The amendments to the Companies Act 1956 relating to insolvency and repeal of Sick Industrial Companies (Special Provisions) Act, 1985, also seeks to simplify the process and the downtime for winding up unviable companies.

Proposing a maximum cess at the rate of 0.10 per cent of turnover for the �insolvency fund,� sources said the government would begin with a minuscule 0.005 per cent cess (or Rs 5 per lakh of the turnover) which alone is expected to garner Rs 75 crore annually.

The government also proposes to simplify the winding up of sick companies, to help complete the process in two years as against 20-25 years now. A National Company Law Tribunal will be set up to replace the Company Law Board (on matters relating to winding-up proceedings) and the Board for Industrial and Financial Reconstruction and cut the lengthy legal process for rehabilitation or winding up of the company.

The Cabinet also approved the Electricity Bill 2001, which removes the need for each state to enact separate laws on the issue.

Bill on property sale

Meanwhile, in a move aimed at reducing benami transactions and the consequent loss to the exchequer, the Cabinet has approved a Bill which makes it compulsory for all properties sold through power of attorney to be registered so that the state government does not lose on the money legally due.

The amendment of the Registration and Other Related Laws (Amendment) Bill 2000, follows recommendations of the 79th Parliamentary Standing Committee on Home Affairs.

Existing properties which have already been sold through power of attorney will also have to be registered once this becomes an Act with 90 per cent of the stamp duty applicable to be paid at the time of registration.


New Delhi, Aug. 17: 
Computer manufacturers have forced the government to soft-pedal the implementation of Prime Minister Atal Behari Vajpayee�s grand announcement to provide low-cost personal computers to teachers and students in schools.

In July 1998, the government had planned bulk imports of second-hand personal computers to be sold at lower prices to high schools, teachers and students in a bid to expand computer penetration. Last year, this was modified by the Working Group on IT for the Masses. One of the main reasons for the strong resistance from PC manufacturers to the scheme has been the slump in PC sales growth. Growth in PC sales slowed to 34 per cent in March against 37 per cent in the same period last year.

The sluggish PC sales had forced Manufacturers Association of Information Technology, the apex body representing PC manufacturers, to revise its projection from 1.9 million PC sales to 1.7 million for the last fiscal. The share of the Indian brands has also significantly decreased in the past two years � from 25 per cent in 1998-1999 to current 20 per cent.

Sources in the ministry for information technology said, �The government has failed to convince the NRIs and hardware dealers and manufacturers, both Indian and foreign, to implement the plan. A few of them were even part of the IT Task Force.�

�Existing computer penetration in India is very low. Even if the companies donate their computers, the target cannot be met. Before the companies donate their computers, they should first have the ability to purchase new ones.

There is no study to determine the computer availability with companies which could be donated,� said an IT manager with a leading corporate.

Under the IT Action Plan (1998), computers were to be made available for less than Rs 20,000 each to students and teachers under Vidhyarti, Shikshak and School computer scheme based on recommendations of Information Technology Task Force (ITTF).

The revised IT for Masses programme aimed to provide 6 lakh personal computers in schools across the country to cover 60,000 schools in 6,000 blocks over a period of five years. The project was to take off last year at an expected cost of Rs 3,000 crore (spread over five years) with 10 per cent central assistance.

The state governments, non-resident Indians and schools were expected to fund the rest. The government had also made a proposal to offer a tax rebate of 150 per cent on the depreciated value of computers to the companies if they donated their computers under the programme.

Under the earlier plan, the government aimed to provide at least one computer to each of the more than 90,000 recognised senior secondary schools in the country.

All second-hand computers in the country under this scheme were to be cannibalised by distributors and stored as spares for these computers.

�Currently, in India we have a refurbishing market of 2 million personal computers. But if they are made available, the already slowing PC sales will hit rock bottom. We cannot allow this. Why should the teachers and students be given second-hand PCs when they can buy new ones by paying 5 per cent more,� said a leading Indian PC manufacturer.

A number of leading computer manufacturers and even small companies in India were approached to take the dealerships and distribute the computers. A few hardware manufacturers had even agreed in principle to undertake the project, but had been demanding bigger margins for this service.


Calcutta, Aug. 17: 
EIH, the country�s leading hotel company that manages the Oberoi chain, will not put to vote the resolution on issuing equity at its annual general meeting in Calcutta on August 21.

The EIH counsel informed Bombay High Court today that the company had decided to drop the resolution in response to apprehensions of a few shareholders. Two shareholders had filed petitions in Bombay High Court, disputing EIH�s plan to issue equity and a number of other proposals. However, a release issued by the company said it could bring an appropriate resolution for issuing capital in future.

Other resolutions, such as those on increasing the company�s authorised capital, threshold limit on FII holding and borrowing powers of the board, will be considered at the AGM next week. The two shareholders had raised an objection to these resolutions as well.

If approved by shareholders, the company�s authorised capital will be increased to Rs 300 crore, the threshold on FII holding will be raised to 49 per cent, and the board will be able to borrow up to Rs 700 crore.

The company had proposed to raise capital to finance its ongoing and future projects, an EIH release said.

EIH deputy managing director SS Mukherji said: �The company believes in upholding the interest of minority shareholders and does not wish to cause any dissatisfaction. EIH believes that its submission to the court should dispel any doubts in the minds of the shareholders.�

EIH had issued a statement to its shareholders recently, clarifying that it did not intend to issue shares to any of the promoters. EIH company secretary S. Gangopadhyay said: �We will have to rework the financing plans, but will ensure that our projects are not affected.�


Calcutta, Aug. 17: 
Suresh Kumar Goenka is a small-time stock-broker servicing retail investors and a handful of high net-worth individuals.

For years, he has been a loyal member of the Calcutta Stock Exchange (CSE), but now makes much of his money from a National Stock Exchange (NSE) terminal he hired from a member of the country�s largest bourse who works next door.

He is among the growing tribe of brokers who have found solace in NSE�s arms at a time when other exchanges have been pushed to the edge. The CSE management, still struggling with a repair job to keep the crisis-prone exchange going, has NSE sniping at its heels � its turf under siege.

NSE had broken into rural Bengal with brokers installing terminals in upcountry centres, but it has now snared even traditional brokers of Lyons Range.

�There is hardly any depth on CSE these days. Besides, only a handful of the actively traded stocks are listed on the exchange,� Goenka said.

While the number of active CSE members has halved to 487, NSE members in Calcutta have grown to over 100.

There are over 1,000 NSE terminals operating in the state, while the number of active CSE terminals is a shade higher at about 1,100.

�Even in the present market slump, we are getting many applications to set up new terminals, most of them from CSE brokers,� a city-based NSE official said. It is hard to find optimists among CSE members, many of whom say Calcutta has lost its status as a stock trading hub forever.

Trading on the CSE has declined to 3 per cent of its peak a year ago. With daily turnover having shrunk to a paltry Rs 55 crore, there is little scope for day trading � the mainstay of most brokers.

On the other hand, NSE members, eager to boost business, are letting out terminals on easy terms. Each NSE member can let out five terminals through leased lines, and an equal number through V-Sat connections. While some are charging a fee of Rs 15,000 upfront for the connections, others are offering it free.

NSE members charge a fee on transactions through their terminals. It is normally about Rs 3,000 on a non-delivery based transaction of Rs 1 crore, and Rs 10,000 per on a delivery-based deal valued at Rs 1 crore. In addition, the users have to pay the cost of connecting terminals through V-Sat or leased line.

Since the stock market scam, retail investors have left the market. There are still, however, some compulsive speculators, who treat the market like a casino. �There is nothing that can keep these people away from the market, and of late, many brokers are using their NSE terminals to encourage speculative trading,� said marketmen.

In order to increase liquidity and make more stocks available to the members, the CSE management has, of late, been speaking of spreading terminals to places where NSE terminals have not reached yet adding more scrips to the permitted category.

But if past experience is any indicator, there is unlikely to be any depth in these stocks. �CSE had mooted the idea of bringing the regional bourses under its fold, but ironically, NSE has stolen a march over CSE on its own turf � the state of Bengal,� a former CSE president said.



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