UTI to give in to Sebi control
Damodaran backs equity tilt in US-64
Bata shines on hope of stake hike by parent
Restructuring process going on in full swing
CII�s new window to world
Sebi chief admits to chink in monitoring
Bharti move to clear its name
SAIL job-cut plan for Kulti Works of IISCO
SSI suffers loss in fourth quarter
Foreign Exchange, Bullion, Stock Indices

Calcutta, Aug. 27: 
The Big Daddy of mutual funds is finally coming under the control of the country�s capital market watchdog.

M. Damodaran, chairman of Unit Trust of India (UTI), today announced that the Act of 1964, governing the country�s largest mutual fund, will be amended within six months to bring it under the regulatory supervision of the Securities and Exchange Board of India (Sebi).

This has been one of the key recommendations of the Joint Parliamentary Committee that probed the securities scam of 1992. However, successive governments at the Centre have done little about it.

At present, all except four UTI schemes are compliant with Sebi regulations. These four schemes include US-64, the flagship scheme of the Trust with a unit capital of Rs 12,800 crore.

The other three are small schemes and will be phased out by the end of this year.

Though UTI�s schemes have been voluntarily made compliant with Sebi guidelines, the market regulator does not have any real authority over UTI. The Trust is governed by the UTI Act which has to be amended to bring it under the regulatory supervision of Sebi.

Damodaran said the UTI board will recommend the amendment of the UTI Act to bring the Trust under the regulatory control of Sebi. The amendment to the Act may take about six months, Damodaran said.

However, US-64 will be made compliant with Sebi norms even before the Trust is brought under Sebi�s regulatory purview. UTI hopes to achieve this by the end of the calendar year, Damodaran said.

This will mean that UTI will have to trim US-64�s holdings in a number of scrips. According to Sebi, mutual funds cannot invest more than five per cent of a scheme�s assets in one scrip. In US-64, two to three scrips account for about 30 per cent of the funds total assets.

It will also mean that from now on UTI will have to maintain detailed records of all its investment decisions. These records will have to be produced by the investment managers to UTI�s board of trustees for periodic review. UTI will also switch over to net asset value (NAV) based pricing of US-64 by early November and disclose its full portfolio, something it has not done as yet. In order to move to NAV-based pricing, UTI will jettison the real estate assets in US-64�s portfolio. Damodaran said: �The value of these assets is estimated to be between Rs 800 and 850 crore, even in the current depressed market.�

All real estate under UTI�s ownership is held by the US-64 scheme. Damodaran said: �We will not sell everything, or resort to distress selling, but inessential assets may be disposed. The balance will be churned out of US-64, and held through a separate fund.�


Calcutta, Aug. 27: 
UTI chairman M. Damodaran is in favour of allocating over 50 per cent of US-64�s assets in equities, though over-exposure to equities has attracted criticism from various quarters.

At present, 70 per cent of US-64�s assets is invested in equities. Admitting that this was too high for the profile of the scheme, Damodaran said: �Ideally the debt-equity mix should be slightly inclined towards equity, given the kind of return that UTI wants to offer investors.�

�A 55:45 ratio of equity and debt will be ideal. I will be quite uncomfortable if equity fell below 50 per cent in US-64�s total assets,� Damodaran added. This is at variance with the recommendations of the Deepak Parekh Committee that had reviewed US-64 during the 1998 crisis. The panel said investments in equity should be capped at 40 per cent.

To reduce US-64�s equity holdings, UTI will sell those scrips in which it is �heavily overweight� and those in which it has a �marginal holding�, Damodaran said. The shares may be sold to institutions like the Life Insurance Corporation or strategic investors. �UTI has begun negotiations with the financial institutions so that large holdings can be sold en bloc by UTI and the financial institutions to strategic investors,� Damodaran added. This was among the measures recommended by the Parekh committee for the revival of US-64.

UTI profited from Cyberspace

Damodaran said: �The first tranche of UTI�s investment in Cyberspace yielded a profit of Rs 8 crore.� UTI had acquired 2.44 lakh shares of Cyberspace at an average cost of Rs 500 per share, and sold 1.67 lakh shares at an average price of Rs 1,050, the UTI chief said and added that this resulted in a profit of Rs 8 crore. Subsequent to these transactions, shares of Cyberspace were placed with UTI at Rs 930 apiece. �Following this Rs 32 crore private placement deal, the market started tumbling, and we ended up with a loss in the stock,� Damodaran said.

Commenting on the allegation of UTI�s investments being influenced by politicians, Damodaran said: �During my brief tenure as the chairman, I have seen no evidence of politicians coming in the way of the chairman�s work.�


Aug. 27: 
Bata India today put its best foot forward when the shoe major�s scrip flared up on the stock market on speculation that the Canadian parent is planning to raise its stake in the Indian subsidiary.

Though a typically dormant counter, the Bata scrip today saw intense activity and trading interest perked up to new highs as the day progressed.

The scrip opened firm on the Bombay Stock Exchange (BSE) today and shot up to an intra-day high of Rs 41.90 before closing at Rs 39.90. On the National Stock Exchange (NSE), the share hit a high of Rs 41.60.

Trades clocked at the Bata counter were almost 10 times more than the usual figures, said a dealer affiliated to a prominent stock brokerage said.

Though company officials refused comment, the rumour that is doing the round is that Bata Shoe Organisation, is actively pursuing the plan to raise its stake in the Indian outfit. Company secretary A.S. Anand, however, said: �I cannot comment on the matter. I have no idea.�

According to stock market observers, the multinationals are now going in for open offers in a big way. So its quite natural that the Bata parent may declare its intention to raise stake in the Indian company. Philips India has recently seen its promoter announce a series of open offers.

The trend might gather pace if the foreign promoters decide to use the present dismal conditions of the market to rustle up shares at low prices.

Another reason for the interest in the Bata counter is its financial performance. In the second quarter, Bata has registered a net profit of Rs 5.56 crore compared with a loss suffered in the first quarter.

The company had suffered a loss of Rs 3 crore in the first quarter of the current financial year. For the quarter ended June 30 this year, the company reported net sales of Rs 230 crore, marginally higher than previous year�s Rs 218.10 crore.

However, in the same period of the previous year, net profit was higher at Rs 6.21 crore.

The board of company approved the results at a meeting held here on Friday.

During the last financial year, the net profit of Bata dipped by almost 100 per cent to Rs 15 crore from Rs 30 crore due to poor demand conditions.

Top-level reshuffle

The board of Bata India Ltd today informed the Bombay Stock Exchange that Fernando Garcia Restrepo has joined as the joint managing director of the company from August 24.

Restrepo will assist Chandu Morzaria who joined Bata India as managing director and regional executive of south Asia in January.

G.V. Middleton, who is the deputy managing director, will take another assignment in Bata Shoe Organisation towards the end of September 2001.

Unveiling a string of top level changes, the company said P.K. Nag has been appointed Finance Director and will join Bata India Ltd shortly.


Calcutta, Aug. 27: 
UTI chairman M. Damodaran today said he had initiated a restructuring drive to turn the country�s largest mutual fund into a �twenty-first century organisation�. Part of the restructuring drive is aimed at bringing UTI under the governance of Sebi.

The recast plan includes redeployment of human resources, and thrust on technology for better fund management and improvement of service to unit-holders. In addition to these, structural reforms will be undertaken to comply with Sebi regulations.

The proposals relating to the structural reforms will be placed before the UTI board next month, he said and added that UTI may be turned into a holding company with its various operations running independently, but from within the UTI umbrella.

Under Sebi regulations, all mutual funds are required to separate the fund, the asset management company and the sponsor, which under the UTI Act is not possible. He said, the UTI Act would be amended to create asset management companies and separate the fund from the sponsor.

For better management of assets, separate fund managers have been appointed by the Trust to manage funds independently, and inter-scheme borrowings are fast being squared off. Later, separate asset management companies may be formed to manage funds independently. �We will build Chinese walls around individual schemes for more focussed management in keeping with stated investment objectives,� Damodaran said. This will mean that fund managers will not be able to act in collusion, and for inter-scheme transactions, fund managers will have to route their orders through a middle entity separating the trading rooms from the fund managers.

Damodaran also said UTI would be forming an investment advisory panel comprising two executive directors (EDs), and the chairman, to monitor investment decisions closely. �We have asked IDBI to scout for an ED for us,� he added.

Speaking on the UTI�s technology thrust, Damodaran said: �In three months we will centralise our back-office at the data-processing and data collection hub outside Mumbai, and issue identity numbers to unit holders.�

Commenting on the redemption pressure on US-64, Damodaran said: �So far in August, 80240 unit-holders have made repurchase requests for a total of 10.15 crore units. This is slightly higher than the Rs 50-60 crore redemption that takes place every year around this time.�


New Delhi, Aug. 27: 
The Confederation of Indian Industry (CII) today launched a new product � the CII International (CIII) � with an annual budget of Rs 50 crore, which is 50 per cent of the present budget of CII.

CIII has been formed with the merger of CII�s existing divisions � CII International & Trade Fairs divisions. CIII will be headed by Piyush Bahl from the CII secretariat. He was earlier the head of both the divisions. The chairman of CIII will be the industry forum�s present chairman Arun Bharat Ram.

Ram said that both inward and outward investment promotion will be a priority in CIII, which will act as a facilitator for internationalisation of Indian business. He said that the division will be encouraging track II diplomacy to enhance India�s share in global trade. CIII will have link with all the divisions of CII, including, trade policy, quality, technology, environment, energy, corporate advisory, industry sectors, small business and social division.

At present, the hitherto international chapter of CII had 191 partners in 92 countries. He said CII is preparing to open six new offices overseas in Belgium, Brazil, China, Russia, Malaysia and Sri Lanka. CII has 10 overseas offices including those in Washington, London, Paris, Singapore, Koln, Johannesburg, Jerusalem and Bremen.

CII will aim to see the emergence of more Indian MNCs and to get listed in international stock exchanges, he said. The delivery mechanism for the implementation of the various programmes will be through special bilateral forums, joint economic councils, CEOs forum, national committees and the overseas offices. CIII will work in tandem with the foreign missions in India and Indian missions overseas, the overseas companies, economic ministries of the government, industry federations and chambers of commerce.

Narrating an Indian MNC experience, Ranbaxy CEO & managing director D.S. Brar said that though there is no single recipe for internationalisation, it is not by dependence on the government and other agencies.

but companies themselves who have to set the pace. India can gain from leveraging its strength in the knowledge-based industries, he said.


New Delhi, Aug. 27: 
The Securities and Exchange Board of India (Sebi) today admitted before the Joint Parliamentary Committee (JPC) that the lacunae in the early warning system in the capital markets contributed to the recent stock scam even as it categorically stated that its job was to regulate the market and not monitor it on a routine basis, thus opening yet another debate on the role of Sebi in the capital market.

Sebi chairman D.R. Mehta, who deposed before the JPC earlier in the day, also sought more powers for the market regulator in order to pre-empt the possibility of a recurrence of a market scam.

Briefing reporters here today, JPC chairman Shriprakash Mani Tripathi said Mehta was also of the view that surveillance system, though insulated now, was largely dependent on a single individual who is the executive director of the stock exchange.

This aspect needed to be looked into to improve the surveillance over the stock exchanges, Mehta reportedly told the JPC members. Tripathi said Mehta had admitted that imperfections abound in the system.

The Sebi chief was asked to depose before the JPC on the action taken by the market regulator on the recommendations of the previous JPC that went into the 1992 securities scam in a bid to find ways to prevent a recurrence of such scams.

Tripathi said Mehta was of the view that the stock markets were better regulated now following the action taken on the recommendations of the 1992 JPC report.


New Delhi, Aug. 27: 
The Bharti Group is likely to accept an out-of-court settlement to clear its name from the list of defaulters and pay up the outstanding Rs 550 crore due to the department of telecommunications (DoT).

The dues arise on account of JT Mobile, the Punjab cellular service provider that the Group acquired in December 1996. The Bharti Group has been contesting the extent of JT Mobile�s dues and the issue has been taken to the court.

The Group has been trying to work out a programme to settle the dues through a combination of cash and bank guarantees. The last date for signing the agreements for the fourth cellular licences is September 14. Bharti bagged eight circles in the bids which were held last month.

The government has said no one will be granted licences until it clears all its previous dues. One of the conditions stipulate, �The telecom companies will have to clear their outstanding dues before being allowed to sign the licence agreements.�

The migration policy offered to these companies also stipulates that a company can migrate to a revenue-sharing arrangement only after all disputes and outstanding dues are settled. It is believed that the Bharti Group will resort to an out-of-court settlement as a last resort if its plans to reach an agreement on payment plan fail.

Sources in the company said: �We had made a proposal to the government to pay up the outstanding dues which the court had asked them to examine. Meanwhile, the opinion of Attorney General is also awaited and we are hopeful that a solution will be found before the September 14 deadline.�

A senior company executive said, �We will have to pay and we will pay, there should be no doubt about that. We have tried to explain to DoT that legally our liability is much less and that is the reason why the issue is still being argued in courts.�

The Bharti Group had proposed to pay up Rs 258 crore in cash to clear the outstanding dues of JT Mobile and provide a corporate or bank guarantee for the Rs 257 crore interest.

Bharti�s proposal was rejected outright when it was first made. It was sent for review by the telecom commission after the second submission but no solution was reached.

DoT officials said, �We have told the company earlier and we have repeated to them at many meetings that a bank guarantee would be an easier solution since such guarantees have been given earlier to various companies. But since they have decided to go to court, the matter will have to be cleared by the Cabinet even if the AG gives his approval.�

As per the bidding norms prescribed by the government for the fourth round of cellular, basic and other telecom services, the bidding companies will have to clear all the outstanding dues against them. If they fail to do that, they will not be granted the licences even if they win the right to provide cellular services as the fourth operator in eight circles.

The Bharti Group had acquired the Punjab cellular circle from Evergrowth Telecom Ltd (EGTL) in December 1996. The licence of EGTL was cancelled due to non-payment of licence fee dues. The liability for payment of dues were automatically transferred to Bharti which had bought over JT Mobiles.


Calcutta, Aug. 27: 
The Steel Authority of India Ltd (SAIL) has drawn up a turnaround proposal for the Kulti Works of Indian Iron and Steel Company (IISCO) that includes drastic reduction of (around 50 per cent) of the workforce.

Kulti Works, the oldest iron and steel plant in the country, has 3200 workers.

The proposal is to rationalise the workforce to 1,700 by offering a voluntary retirement scheme (VRS). The company needs around Rs 90 to fund the VRS. This money is proposed to be raised as loans backed by government guarantees.

Sources said the proposal is part of a turnaround package prepared by the SAIL�s growth division for the loss-making Kulti Works.

The package has also recommended setting up of a mini blast furnace and converting one of Kulti�s cast iron pipe plants to ductile iron spun pipe plant at a cost of around Rs 50 crore.

�The demand for ductile pipes is higher than its installed capacity. Therefore there would be no problem in marketing ductile iron pipes,� they added.

The competition in ductile pipe is also limited as there is only one more company-Electrosteel Castings, in India which manufactures ductile pipes.

Sources said there is now an acute need for ductile pipes particularly in the Bhuj district of Gujarat which was recently devasted by an earthquake.

Meanwhile, Subrata Mukherjee, who is the president of West Bengal Pradesh National Trade Union Congress, has demanded that Kulti Works should be taken over by the growth division of SAIL.

Mukherjee, who has written a letter to Prime Minister Atal Bihari Vajpayee, has also emphasised that the Kulti Works can be turned around with an investment of only Rs 60 crore.

�Though it is a century old plant, it has got inherent strength and potentiality. The unit is now facing challenges of liberalisation,� Mukherjee said and added that it has become now imperative to improve upon human resources to face the challenges in the emerging market scenario.

Scotching rumours that the loss making unit may eventually be closed down because of unabated losses, sources said the SAIL management is looking into the proposals �sympathetically�.

The trade unions, however, have become restive on the sensitive issue of closing down of Kulti Works. A section of them feel that it is being sacrificed for the survival of Burnpur Works.


Calcutta, Aug. 27: 
SSI Ltd has suffered a net loss of Rs 14.47 crore for the quarter ended June 30 this year compared with a net profit of Rs 30.93 crore in the corresponding period of the last fiscal.

Total income has, however, increased from Rs 82.96 crore to Rs 104.07 crore.

The company has posted a net profit of Rs 55.8 crore for the year ended June 30, 2001 as against Rs 56.93 crore in the previous fiscal. Total income has increased from Rs 214.35 crore in 2000-01 to Rs 446.62 crore in the year ended June 30, 2001.

Other income includes Rs 1.19 crore for the quarter ended and Rs 10.32 crore for the year ended June 30, 2001 on account of exchange rate difference.

During the year, the company has set up wholly-owned subsidiaries in Australia and Singapore.

Consequent to the restructuring of the line of business within the organisation, the management has discontinued the operations of the enterprise support division.

During the quarter, a sum of Rs 20 crore has been provided for diminution in investment value of Netfinex.com India Ltd.

The board has recommended a dividend of 40 per cent for the year 2001 and a special dividend of 20 per cent to commemorate 10 years of operations, subject to the approval of the shareholders at the ensuing annual general meeting to be held on October 18.



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