Carmakers to jack up prices
Sales pick up speed
Clamour for TDS limit hike
FII stake in ACC rises to 13% in nine months
Rupee closes at new low of 48.31
Kinetic Nova to take on Honda Activa
All eyes on Infy result
Cash-strapped SBI Home Finance to downsize
UTI rapped for CSE rescue deal
Foreign Exchange, Bullion, Stock Indices

New Delhi, Jan. 9: 
Carmakers are planning to raise prices citing a surge in input costs. The move comes at a time when the industry has been reporting a steady revival in demand after it went into a deep slump sometime last April.

Maruti Udyog, the country�s largest car-maker, is set to raise its sticker prices later this week. Hyundai, Hindustan Motors-Mitsubishi, and General Motors are planning to follow suit.

The price hike will be the first this year and comes on the top of two increases in 2001 with the last one being in mid-2001. Maruti Udyog announced its intention of raising the prices at its latest board meeting in December. �The price hike will cover all models as input costs have nearly doubled,� sources in the industry said.

The buzz in the industry is that the Maruti price hikes will be in the range of 3-4 per cent in order to cover the cost increases. �It is long overdue. Even if it crimps demand just when we were beginning to see the first shoots of a resurgence, we really have no choice. The input cost cannot be fully absorbed but it will also not be passed on to the customers,� sources said.

Hyundai Motor India is also contemplating a 3 per cent increase in price across all the models. �The price rise is due. Although we are yet to work out the details of the hike for all models, it is definitely on the agenda and we will finalise it in January itself,� sources in HMIL said.

Hindustan Motors-Mitsubishi is raising the prices of all Lancer variants, which are priced in the range Rs 7-9.5 lakh, by Rs 10,000. �For the few cars we have sold in the new year, we have already charged the higher price. An announcement always creates a negative sentiment, so we have kept a low profile. But the rise in prices of inputs forced the decision last year,� said Debashis Mitra, senior manager of the automobile division.

Honda Siel has also increased the prices of its City models by Rs 10,000 from this week onwards. Even as the general manager, P. Balendran, denied any such plans to increase prices of its models � Opel Astra, Corsa and Swing � there is a strong expectation of a 2.5 to 3 per cent hike in the price of the Astra, which means the sticker price will go up by Rs 12,000-15,000. However, Corsa and Swing is expected to come with higher frills.


New Delhi, Jan. 9: 
Car sales surged 18.6 per cent in December, the first signal of a revival of the demand for four-wheelers which moved in the slow lane since March.

For the third successive month, the Society of Indian Automobile Manufacturers (Siam) reported a rise in sales with the total number of cars sold in December touching 36,627 compared with 30,864 cars in the year-ago period. Even more encouraging was the fact that all the major auto makers, except Hindustan Motors, reported an increase in their sales.

Cumulative sales (April-December 2001) increased 2.4 per cent to 3.94 lakh cars from 4.04 lakh cars sold in the same period the year before. Maruti Udyog Limited�the country�s largest auto maker�sold 24,313 cars in December last year compared with 22,791 cars in December 2000, thus posting a 6.6 per cent rise in sales.

Hyundai Motor India Ltd sold 2,645 units of cars in December 2001 against 1,234 cars in December 2000. The sales are only till the December 18 when the company traditionally closes its sales accounts for 2001 models.

Fiat India Automobiles sold 2,690 cars�up from the 474 cars sold in December 2000.


New Delhi, Jan. 9: 
Financial sector mandarins have asked the government to raise the limit on tax deduction at source (TDS) to Rs 25,000 to be effected at renewal/maturity, introduction of floating rates of interest as a hedge against inflation, tax concession to retail investors to encourage investment in initial public offerings (IPOs) and permitting public participation in the divestment process.

At their four-hour pre-budget meeting with finance minister Yashwant Sinha here today, banks raised the issue of tax sops with insurers seeking tax exemptions to set up a national catastrophic reserve fund and capital market experts urging more tax breaks and better investment avenues for common investors.

Addressing the participants who included experts from the field of banking, financial institutions, insurance and capital markets, Sinha said the need of the hour for the banks and FIs is to pull up their socks in the face of declining profits and low loan sanctions.

�The decline in the sanctions and disbursements of FIs is a cause for serious concern particularly in the context of great needs for funds in infrastructure development,� Sinha told experts in the pre-budget exercise while expressing concern over the decline in profits of some banks and the �excessive bailout� being resorted by some.

The discussion ranged on issues ranging from the revival of the primary market to setting up asset reconstruction companies (ARCs) to help weak banks. The meeting also focussed on measures required to boost investor morale and improve infrastructure with help from financial intermediaries.

Among the suggestions made by bankers was review of the 5 per cent ceiling in regard to provisioning for NPAs, introduction of market-driven interest rate structures on contractual savings, widening of priority sector lending by including socially-oriented lending and encouraging corporates to acquire equity in banks for facilitating recapitalisation.

While private banks asked the government to allow private participation in the proposed ARCs, there was also a demand for reviewing the 5 per cent ceiling for exposure of banks to capital market besides allowing bank to fund margin-trading.

Capital market intermediaries on their part asked government to divest its stake in PSUs through the IPO-route while allowing common investors to participate in the disinvestment process.

The experts also said the repo should not be treated as sell and repurchase in all cases.


Calcutta, Jan. 9: 
The consolidation in the cement industry has led to a remarkable spurt in institutional investments in Associated Cement Companies (ACC). In the last nine months, foreign institutional investors (FIIs) have nearly doubled their holding in the country�s leading cement company, while banks and financial institutions have increased their stakes significantly.

FIIs held 2.23 crore shares, representing 13.11 per cent of ACC�s equity at the end of the last quarter (October-December) against 6.63 per cent at the beginning of the financial year.

Between October and December, FIIs raised their stake by 3.73 per cent; mutual funds by 4 per cent to 10.19 per cent in the last nine months, while banks and financial institutions now control 2 per cent more at 18.04 per cent.

Analysts say institutional buying in ACC has been triggered by the polarisation in the industry and the government�s plans to invest heavily in infrastructure.

Says John Band, chief executive of ASK Raymond James: �FIIs have traditionally invested heavily in the top-rung cement and bank stocks in the emerging markets.�

As an example, he points to Thailand, where Siam Cement and top banks drew large FII investments till 1997. The same was true for many other Asian and Latin American countries as well. In the emerging markets, much of the investments are channelled into infrastructure. When that happens, cement companies outperform the rest of the economy initially. Later, it is banks which start emerging as the leading performers.

In India, only the lazy FIIs followed the thumb-rule and parked their funds in cement companies as the industry here was rather fragmented and had a lot of excess capacity. Now that a consolidation is taking place, FIIs have started taking interest in stocks like ACC.

�State Bank of India (SBI) could also have been a big draw with FIIs, but it now has limits on foreign investments,� Band said.


Mumbai, Jan. 9: 
Sustained buying of the greenback by nationalised banks and corporate houses today drove the rupee to close at yet another low of 48.30/31 per dollar.

State-run banks started bidding the dollar in early trade and pushed the rupee down to 48.2950/3050, leading other banks to cover short-dollar positions, dragging the rupee down to new record low at the close, dealers said. However, the rupee�s decline was gentle and orderly, devoid of any excessive speculation, they added.

A section of the market felt that public sector banks were buying dollars at the behest of the Reserve Bank of India to give the rupee the competitive edge for exporters, as the currency was currently over-valued vis-a-vis other units in the region. Others said it was genuine corporate demand for the dollar that was weakening the rupee.

Continuing cross-border tensions is keeping the rupee under pressure but there is no cause for concern as the central bank will intervene at the right time.


New Delhi, Jan 9: 
Kinetic Engineering today launched 115 cc auto-geared four-stroke Nova which is pitted against Honda�s Activa.

�Nova has been designed in collaboration with UEN to address the need of value-oriented customers who care for design and performance,� said Sulajja Firodia Motwani, joint managing director of Kinetic Engineering.

It will not be projected as a woman�s dream but as a product for young men who are looking for style. �We hope to stop customers switching over from motorcycles to scooters. We will project the product as an export item. The company has already invested Rs 20 crore in Nova � complete with a new engine and modern design,� said Ajay Kapila, senior vice-president (sales and marketing).

The company has earmarked another Rs 10 crore for the product. Nova will be marketed from March and Kinetic has set a target of 50,000 units in 2002-03. The company expects to export 7,000 scooters annually.

�It can deliver a mileage of 60 km per litre in right conditions. There is a good storage space and purse hooks to help the college goers,� said Motwani.

Kinetic will be looking at the high-end scooters market in future. The next product in the pipeline is a 125cc scooter, Motwani added. The company is yet to put a price tag on Nova. However, sources from the company said it will be at par with Activa.

Activa is the first and so far only model launched by Honda Motorcycles and Scooters India Limited.


Mumbai, Jan. 9: 
The earnings season of the new year is set to get under way tomorrow with Infosys Technologies announcing its third-quarter results. The Bangalore-based software services major is expected to beat its own estimates weathering the shock of the Manhattan massacre late last year.

It is largely expected that Infosys will post net profit in the region of Rs 205-220 crore, which translates into a growth of more than 30 per cent. On a sequential basis, estimates are for a maximum growth of 3 per cent and 7 per cent in topline and bottomline respectively.

Infosys had reported a net profit of Rs 190 crore in the first quarter and Rs 202 crore in the second quarter of the current year.

At the time of announcing its second quarter results, Infosys had said that its topline would be between Rs 640-656 crore for the third quarter. The company had also revised the revenue projections for this fiscal between Rs 2,540-2,590 crore as against the earlier forecast of Rs 2,500-2,560 crore.


Calcutta, Jan. 9: 
SBI Home Finance has decided to scale down the operations because institutional shareholders have not infused much-needed fresh capital required to put the company on the road to revival. The board�s January 8 meeting in the city decided to suspend new loans, stop accepting fresh deposits and halt renewals. It also resolved to consolidate the business activities, rationalise the branch network and focus on loan recovery. The company has 24 branches, including the head-office, which has around 80 officers.

A company release was silent on the fate of employees. Managing director C. Narasimhan was not available for comment.

SBI Home Finance was promoted by State Bank of India and HDFC in 1987. They hold 26 per cent and 14 per cent respectively. Other major institutional shareholders are the UTI, LIC, GIC and its subsidiaries. UTI controls 7.87 per cent while other FIs together have 9.9 per cent; 42.21 per cent is with the public.

SBI, the largest public sector bank in the country, had assisted the company by sanctioning term-loan limits of over Rs 400 crore. However, that did not help as the Calcutta-based firm piled up losses of Rs 82.35 crore on March 31, 2001. Accumulated losses have shot up by Rs 21.7 crore in 2000-01 from Rs 60.65 crore in 1999-2000.

In an effort to turn its net-worth positive and to carry on its operations in an uninterrupted manner, the company had asked for a capital infusion of Rs 110 crore from the promoters and institutional shareholders.

Though SBI was willing to chip in with the additional capital, other shareholders have not sent a positive response to the plea for more funds. The company has said it is the lack of additional capital that has forced the decision to downsize operations. It has already sent a notice about it to the Bombay Stock Exchange.


Mumbai, Jan. 9: 
The Tarapore committee has slammed Unit Trust of India for playing a white knight in Calcutta Stock Exchange�s (CSE) payments crisis last March.

�Who brought the UTI into the picture? Who is most likely to have brought about the deal, and for what,� the committee says in a report that shows why and how the country�s largest mutual fund plunged into a quagmire.

UTI, in a bid to rescue CSE from a crippling payments crisis in February-March last year, decided to acquire 13.30 lakh shares of DSQ Software for US-64 at Rs 189 each � a 10 per cent premium on the BSE�s closing price.

�The transaction, obviously, cannot be justified on commercial considerations. In a sharply falling market, the discount was not sufficient to protect the unit-holders� interests. The scrip had virtually lost liquidity.�

The panel has referred to a note by B. G. Daga, the erstwhile executive director of UTI to his colleague D. S. R. Murthy, where he has insisted that the deal was a direct one between the Trust and the Lyons Range. �The deal was between CSE and UTI, not with a broker. In the past too, there have been several occasions when UTI had bought shares directly from the stock exchanges to help them complete settlements,� Daga is reported to have said in his letter.

The committee has countered the argument on the ground there was no written assessment, either before or, after the deal. �This would seem to indicate that it was a mere formalisation of a decision already taken earlier, for which there are no records available so far.�

When Tarapore panel asked UTI to substantiate Daga�s claim that shares have been purchased directly from bourses in the past, it failed to marshal the facts. �We have not been able to trace any such cases in the past.�

UTI held 18.07 lakh DSQ Software shares on March 9, 2001, and 16.70 lakh on June 30. On the other hand, the shares were sold at prices ranging from Rs 84.93 to Rs 133.79.

The July 24 UTI note penned by Daga does not refer to the sale of shares purchased from CSE on March 9, 2001. The implicit assertion on sales at relatively favourable prices in December 2000-February 2001 gives a distorted picture of the UTI�s transactions in DSQ Software.

The committee recommended that UTI�s transactions should be aimed at promoting the interests of its unit-holders. Between April 23 and August 23, the mutual fund major sold 4.54 lakh shares of DSQ Software at prices between Rs 28.71 and Rs 133.79 � the weighted average being Rs 55.78 per share.

UTI had already committed to sell DSQ Software at prices as low as Rs 49.38 each on July 18 before Daga wrote out his note on July 24 � but he does not mention it.

The DSQ scrip, the committee says, had declined sharply. The fall was steeper than the average decline in prices in general, and infotech stocks in particular. �This would suggest that DSQ Software was a �problem scrip.�



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