FI proposal faces big hurdle
Ownership knot holds up HPL debt recast
Cos Bill lacunae to the fore
OTCEI eyes corporate debt
Tisco picks South Africa to set up ferro chrome plant
Switchover to VAT makes industry apprehensive
Heroes to root for Hero Honda
Logitech bullish on investments in India
Coke in talks to buy bulk tea
Bengal lists items for local thrust

New Delhi, Nov. 24: 
The department of company affairs (DCA) is opposing a proposal by the financial institutions (FIs) � which has the backing of the finance ministry � that their nominees on company boards should be granted immunity from prosecution for any decision taken by them at board meetings.

The department feels that FI directors should be treated at par with other directors and, if they are party to any illegal decision, they should be made to pay for it as well. The financial institutions and bankers have long been lobbying for this measure as they feel threatened by various investigations being taken up by government agencies against erring companies.

Bankers say even in the US-64 fiasco, there were fears that the Central Bureau of Investigation sleuths investigating the affair might probe the roles played by nominee directors.

The department, on its part, argues that nominee directors should not be mere bystanders and points out that the role of nominee directors should be to protect the interests of both their principals and that of the company. The DCA added that bankers in any case have a degree of protection under various existing banking laws.

A similar conflict has also developed over the Negotiable Instruments (Amendment) Act 2001, with members of the Parliamentary Standing Committee, which is vetting the bill, split over a demand to allow non-executive directors of a company to go scot-free, even if the firm reneges on loan commitments.

The majority members of the committee want to bring in a clause that specifically shields non-executive directors from any legal action. At least one member has argued against the proposal saying that it should be left to the courts to decide whether a director was at fault or not.

The majority in a report have stated the amendments are �a little harsh and has at times caused harassment to those innocent who are not directly associated with the day-to-day affairs of the company.� But others argued that �if any offence is of a compoundable nature, then all members of the board should be responsible for this neglect or offence. It is for the court to see whether any board director is genuinely guilty of the offence or not.�

The amendments being introduced now provide for a jail term of up to two years in the case of directors and officers of a company whose credit instrument bounces. It also makes cases on these counts instantly cognisable as well as compoundable.


Calcutta, Nov. 24: 
Banks and financial institutions, led by Industrial Development Bank of India (IDBI), today expressed their inability to reschedule the debt of petrochemicals major Haldia Petrochemicals Ltd (HPL) unless the promoters decide who will hold a majority stake in the company.

�We understand the company is facing a financial crisis and needs immediate rescheduling to tide over the situation and have asked the West Bengal government for a proper restructuring proposal so that we can take immediate steps. We would like to know how the promoters would like to restructure the Rs 969 crore gap in equity met through bridge loans and debentures,� top-level IDBI sources said.

The banks and FIs held a meeting today to discuss ways to restructure HPL�s debt which was also attended by representatives of State Bank of India, ICICI, IFCI, IIBI, Unit Trust of India and others.

When contacted, officials of HPL said that they are not aware of any such meeting. �This sort of meeting is taking place everyday. We expect that they will soon come out with a financial restructuring programme.�

In fact, the three promoters � the state government, Purnendu Chatterjee of The Chatterjee Group and the Tatas � met in Delhi in the second week of this month to thrash out problems that are delaying the company�s debt restructuring. At the end of the meeting, state commerce and industry minister Nirupam Sen had said a financial restructuring package will soon be forwarded to the FIs and banks and things will settle down by December.

The government is yet to take a decision whether it will be Indian Oil Corporation or Purnendu Chatterjee who will walk away with a majority stake in the company.

The cost of the state�s showcase project has already crossed Rs 5,600 crore mark and the interest burden is eating into its profitability. Interest rates on the company�s loans continue to be very high, mainly because these loans were contracted in a scenario of high interest rates. The debt burden of the company is around Rs 3,500 crore.

With sales having plummeted in the third quarter the financial crisis before the company has taken an acute turn. The company will not be able to pay the interest accrued in this quarter.

Moreover, cheques issued by the company, such as those issued in favour of IOC, HPL�s major feed stock supplier, have bounced.


New Delhi, Nov. 24: 
Corporate lawyers have expressed their reservations on some of the provisions of the Companies (Amendment) Bill and find little merit in enacting a competition law without first creating a climate conducive to spur competition in the corporate world.

They were also sceptical of the move to scrap the Company Law Board and the Board for Industrial and Financial Reconstruction (BIFR) and set up a National Company Law Tribunal. Both the Companies Bill and the Competition Bill are before the Standing Committee of Parliament.

Speaking at a conference on taxation and corporate law reforms organised by the Associated Chambers of Commerce and Industry (Assocham), Abhijit Mukhopadhyay, vice-president (legal) of the Hinduja group, said a conducive competition climate is a pre-requisite to the enactment of a competition law. This includes reforms in policies pertaining to trade, industrial issues and labour reforms. He also questioned the need to repeal the MRTP Act.


Mumbai, Nov. 24: 
Over the Counter Exchange of India (OTCEI), the fledgling bourse struggling to find patrons and instruments that can keep it afloat, is betting on trading in corporate debt to remain in business.

The change in tack will take it into an area which has been unexplored, and stood out as one of the uncharted territories in the growth of the country�s capital markets.

OTCEI managing director Praveen Mohnot said his organisation has sought regulatory approvals to list corporate debt instruments, and that there were enough indications that it will come through in the next few days.

�They appear to be favourably disposed,� he said. He declined to reveal the blue-print of the plan, or the details, saying the strategies are still at a nascent stage, and there is much that will evolve in the months and weeks ahead. However, he did hold out the hope that the new segment will be up and running in two months.

�Starting a new segment for corporate debt is in line with our mission to provide liquidity to unlisted instruments and to increase the depth of the market,� he added.

He dismissed concerns that it would undermine or affect the business of the National Stock Exchange, which, he argued, is largely a market where equity and government securities are traded. �They will leave corporate debt paper to OTCEI,� said an official of Unit Trust of India (UTI), one of the exchange�s 13 promoters.

UTI, which is worried over the flagging fortunes of OTCEI, had sent Mohnot on deputation to the exchange and asked him to prepare a new charter for its revival.

OTCEI is of the opinion that the corporate debt market has tremendous potential by virtue of its sheer size. However, it is still an evolving market, which facilitates deals on the telephone by dealers unfettered by regulation. Trades last year were estimated at Rs 15,000-20,000 crore.

In the last financial year, an eye-popping amount of Rs 75,000 crore was raised through private placement of corporate debt. This market is not policed by either the Reserve Bank of India (RBI) or the Securities and Exchange Board of India, although there is a growing realisation that it cannot be left unattended for a long time.

OTCEI�s proposal, therefore, has come at the right time for regulators because all deals in corporate debt would be official and registered. More important, it will help a bourse, which has been pushed to the edge by the introduction of rolling and uniform settlement, bounce back.

Globally, the trend among bourses is of consolidation as the Big Daddies gobble up smaller rivals. The winds of change have now started to sweep India, where the Delhi and Madras stock exchanges have been keen to fold into the Bombay Stock Exchange.

OTCEI, incorporated in 1990, was set up to help enterprising promoters raise funds for new projects in a cost-effective manner and to provide investors a forum which offers a transparent and efficient mode of trading.

Last year, it had introduced the concept of late-evening trading that allowed operators to arbitrage in shares.

Modelled along the lines of the US� Nasdaq, OTCEI introduced many novel concepts to the Indian capital market, such as screen-based nation-wide trading, sponsorship of companies, market making and scripless trading. The Dave Committee suggested in 1996 that the exchange start trading in equity shares of unlisted firms.


New Delhi, Nov. 24: 
Tata Steel plans to set up a Rs 300-crore ferro chrome plant in South Africa, which will be a maiden overseas venture for the steel giant.

�We plan to set up the plant within 30 months,� Tisco managing director B. Muthuraman said here today. The Tata Steel chief executive, who was here to hardsell Jharkhand as an investment destination, said, �It makes sense to make steel in Jharkhand and it makes sense to make ferro-chrome in South Africa as power which accounts for about half the cost is as cheap as just 60 paisa a unit and chromite, the principal raw material is also available.�

Tata executives said their planned 120,000-tonne a year plant should break even within five to six years. Tatas already make ferro-chrome at two domestic plants at Banipal and Joda. But these are smaller compared with the one being planned now. The Banipal plant has a capacity of 50,000 tonnes only.

The Jamshedpur-based company holds a 2.5 per cent share of the global ferro chrome market and a 28 per cent slice of the domestic market. Obviously, it now wishes to whet its appetite with more. The Tata chief executive, however, did not divulge the debt-equity breakup of the plant.

Muthuraman said the Tatas planned to market produce from the South African plant globally as major destinations in Europe were within easy reach. Tata Steel, which has a turnover of Rs 7,759 crore, has been going through a relatively bad patch with the global steel market in recession. However, in recent times, it has decided to venture out leveraging its huge Rs 4,380 crore reserves into new areas.

Tata Steel is planning a titanium project in Tamil Nadu. There have also been unconfirmed reports of Tata Steel entering the telecom sector, using Tata Teleservices as a vehicle. Former Tisco managing director J.J. Irani has recently been appointed chairman of the telecom company and it has been speculated that he will be leveraging Tata Steel funds for telecom projects as a way of protecting profits from the cyclical nature of the steel industry.


New Delhi, Nov. 24: 
There is a sense of disquiet within industry over the Centre�s move to allow state governments to decide on existing sales tax exemptions when 12 of them switch over to the value-added tax (VAT) regime next April.

There are fears that this could open up the prospect of a breach of contract if state governments � which promised sales tax exemptions to attract investment � suddenly decide to convert the exemptions granted to existing units into deferments.

Expressing its apprehensions, the Federation of Indian Chambers of Industry (Ficci) says such a step could have wider repercussions as mandatory deferment would seriously affect the viability of investments made in the states by large businesses. It reckons that such a step would tantamount to a breach of contract and hurt India�s image as an FDI destination.

Ficci feels that the best way is the remission model now being practised in West Bengal. This involves one common invoicing system for both deferment and exemption cases. In one case, the amount collected would be paid after a period of time, and in the second, the amount would be adjusted against the incentive due.

Even under the VAT regime, the states can levy a special additional tax on certain specified commodities of their choice, which defeats the very objective of reducing the number of tax slabs.

The chamber expressed concern that Delhi and West Bengal have given themselves the power to re-classify items within the schedules to raise tax levels beyond the prescribed rates of 20 per cent.

Ficci said it is essential that the general rate is fixed as one national rate, based on fair taxation levels to be established for the majority of items not considered as essentials or necessities. This general rate must be fixed keeping in mind the overall impact on cost of the product arising out of value addition up to the retail stage. Further, to improve the quality of administration in the transitional phase, it recommended first-point recovery on all packaged goods carrying MRP that are covered statutorily under the Packaged Commodities Rules Order.

The chamber also urged that the report of the empowered committee be made public and discussions on the same take place before the VAT is put in place.


New Delhi, Nov. 24: 
Hero Honda has signed up two of the biggest heartthrobs of the country � Hrithik Roshan and Sourav Ganguly � as brand ambassadors.

�The earlier commercials � with the tag line Desh ki Dhadkan � have done quite well. To build on it, we had to find some personalities whom the masses identify with. Hrithik and Sourav � who come from two different walks of life � are natural choices. They are both performers whom the Indian people recognise,� a Hero Honda official said.

The commercial, for which shooting is slated to start by November end, will have the two men talking about their respective occupations.


Calcutta, Nov. 24: 
Logitech, the human interface device company, plans to increase its presence in the Indian market.

Gavin Wu, vice president sales and marketing for the Asia Pacific region says: �We will have a growth of 50 per cent for the entire region and China is expected to account for a major part of it. In India, we expect to earn between $ 8-10 million by March next year.� The Asia-Pacific region contributed $ 42.5 million in terms of revenue in the last financial year.

Responding to questions regarding investments in setting up research and development or manufacturing units, Wu said that local demand and the need for customisation of products would be the main factors in deciding how much the company would pump in into the country. Wu added that the present demand was mainly for traditional products.

High-end optical and cordless products contributed to leas than 5 per cent of sales. The company will consider investments only if the market for future products expands.

Sales growth, which was at 112 per cent last year, slowed down to around 50 per cent, mainly due to the slowdown in the PC segment.


New Delhi, Nov. 24: 
Coca-Cola India is in talks with various tea companies to buy bulk tea for its planned foray into the ready-to-drink tea segment by the end of next year.

�We are in talks with both branded tea companies as well as companies in the tea plantation business for the supply of bulk tea,� said Sanjiv Gupta, senior vice president of Coca Cola India. However, he refused to give the names of the companies.

Coke may spice up the ready-to-drink segment with various beverages such as masala tea and cappuccino coffee. �We are targeting a presence in the ready-to-drink hot tea and coffee segment. There are several ways of entering this segment and one of the prime means will be through vending machines,� Gupta said.

The company has a tieup with Nestle for marketing cold tea and coffee world-wide. Gupta did not sound too keen the on iced teas and cold coffee market for India, though he did not rule it out.

Internationally, Coca Cola has several brands for hot coffee and tea including the �Georgia� coffee brand in Japan and �Koo� tea brand in China.

Coke is eyeing the entire non-alcoholic beverages market, estimated to be 11.4 billion cases, to underpin its growth. Gupta said 69 per cent of this market is for non ready-to-drink (NRD) tea and 5 per cent for NRD coffee. Only 2 per cent of this market belongs to carbonated soft drinks, he said.

�With our foray, the primary aim will be to convert NRD consumers into the ready-to-drink (RTD) category,� he added.

Regarding the launch of powdered orange drink Sunfill, Gupta said the sales target is Rs 200 crore in the next two years.

�With Sunfill, we are not competing only in this category, but the entire Rs 2 per serve drink segment,� said Gupta. Launched in Hyderabad, the product is aimed at the middle class and will be taken to eastern and northern India by March.

In tune with its plans to foray into regional drinks, the company is planning to launch �Portal,� a black currant flavour drink in the South.

This brand is already popular in Sri Lanka. The soda brand Rim Zim, which was acquired from Parle long ago, was recently introduced in Maharashtra and Gujarat, where masala soda is very popular.


Calcutta, Nov. 24: 
Desperate to attract investment in the manufacturing sector, the West Bengal government has drawn up a list of products imported from other states, which, it hopes, will inspire entrepreneurs to manufacture them here.

The state commerce and industry department has sent a huge list to the West Bengal Industrial Development Corporation and the directorate of industries, featuring several commodities and manufactured items that make their way from other states to Bengal, which, the government says, can be produced within the state as well.

The list has also been sent to individual members of various chambers of commerce and other trade bodies outlining the manufacturing prospects for various items in the state.

The list of �major manufacturing possibilities� fed by the state directorate of commercial taxes, notes iron and steel items, including scrap generation, drugs and medicines and chemicals, as the most attractive items for establishing manufacturing units in the state.

Iron and steel items brought into the state are to the tune of Rs 2646.7 crore, about Rs 2,202 crore of drugs and medicines and Rs 2,190 crore of chemical items, showing tremendous possibilities for manufacturing in these areas.

Imports of various forms of aluminium excluding foils worth Rs 1,036 crore also provide lucrative manufacturing possibilities in the state.

Imports of central processing units (CPUs), peripherals and other parts, cost the state coffers Rs 917 crore and the sector has been identified as highly prospective for setting up manufacturing units.

Non-ferrous metal items imports account for Rs 814 crore, paper, processed paper, including carbon paper excluding newsprint, are Rs 767 crore, plastic granules and powder Rs 729 crore, milk, both powdered and condensed, Rs 617 crore, cement Rs 597 crore.

The government said setting up of television manufacturing units could also be lucrative as imports last year were around Rs 402 crore.

Other sectors which held investment prospects were automobile accessories, accounting for imports worth Rs 330 crore, lubricants including engine and brake oil and grease oil at Rs 312 crore.

The state had hardly any units making bicycles, cycle rickshaws and spares, which account for imports of nearly Rs 300 crore.

The commercial tax directorate is of the view that setting up manufacturing units in these areas could benefit entrepreneurs, who would also be granted concessions by the government.


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