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Analysts tracking the disinvestment process say the two-way bidding is an attempt by IOC to hedge its bets and play safe before a government that faces pressure from some quarters to keep oil PSUs out of the fray.
There is a feeling that while an alignment with ONGC is possible after the stake sale, but there is also a chance that the two petro majors � which own 10% of each other�s equity � will be cleared as joint bidders before. If that happens, a joint bid would spare both companies the trouble of forging a joint venture later.
On the other hand, IOC�s own bid is being construed as a ploy to make sure that it has an option to fall back on in case it is disqualified as a suitor with ONGC. At the same time, the company has already indicated that it will rope in ONGC as a partner at a later stage if it succeeds in wresting control of IPCL alone.
Where the new twist in the long-delayed IPCL selloff ends will be known only when the hats are in the ring on April 29. Sources say a dual bid is one of the alternatives on the table, but did not disclose what the final choice would be. An IOC official in Mumbai confirmed that it would be making a solo bid, but chose to keep his cards close to the chest when asked about the joint plan. �It will all be known on April 29,� he said.
Earlier, reports about the IOC and ONGC joining hands for IPCL set the cat among the pigeons of other contenders. Reliance Industries (RIL), one of those which have been leading the list, was so upset that it was considering the possibility of withdrawing from the race. However, subsequently, both the Ambanis and Nirma sent in an expression of interest for acquiring the government�s 26 per cent stake in the PSU.
Though many believe IOC and ONGC cannot make a joint bid formally on April 29 since they could not adhere to the April 17 deadline set by the government�s advisor for forming a consortium, sources say they could still complete that formality at the end of this month. This follows regulations that allow a joint venture to be forged, or a strategic partner inducted, till the day the final bid is submitted.
Merchant bankers are of the opinion that submitting two bids will ensure a high success rate as the failure of one could be made up by the other going through. �The issue of a difference in valuations could also addressed by making two bids,� said a senior merchant banker.
If ONGC and Indian Oil end up filing separate bids, it would mean a tough battle for market leader Reliance, which would tighten its stranglehold over the country�s petrochemical market if it manages to bag IPCL.
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Sources said following the two-hour meeting with finance minister Yashwant Sinha and his team, the government will roll back its earlier decision to slash the 20 per cent rebate on savings parked in National Savings Certificates (NSC) and other tax-saving instruments by half for those earning between Rs 1.5 lakh and Rs 5 lakh.
Key party MPs, especially from Delhi, had demanded the concession blaming the party�s debacle in the Delhi municipal polls on Sinha�s lacklustre budget.
The move by the finance minister to halve the tax savings allowed on investments made in long-term deferred annuity schemes, superannuation funds, 15-year time deposits in post office, NSCs, specified government securities and earnings from bank deposit of up to Rs 12,000, came in for flak from the salaried middle class, who form the largest chunk of urban voters.
The savings sop had been partially withdrawn on the basis of recommendations by a tax panel that also recommended increasing the upper limit of various tax slabs. The Prime Minister ruled that the government should withdraw the savings sop only when the slabs are re-arranged, allowing lower taxes at higher salaries.
However, Vajpayee has ruled out demands that the half per cent cut in interest paid out on small savings be restored. This too was a major demand made not only by the BJP MPs but even by various NDA allies.
Sinha will also announce in Parliament a new inflation-indexed savings scheme for senior citizens that will allow them to access higher interest rates. This is being seen as a halfway house to meet the strident demands for restoring the interest cut.
�The aim of the budget tinkering will be to win back the middle class. BJP still remains largely an urban phenomenon in many parts of the country,� said top revenue department officials.
Sinha had to take considerable flak from BJP MPs yesterday at a meeting with them. The MPs demanded several key changes in the Finance Bill, including the dividend tax, which has been affecting corporate pay-outs. Sources, however, said this is not likely to happen.
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Net profit jumped from Rs 313.16 crore to Rs 490.12 crore in 2000-01, while total income rose 45.21 per cent to Rs 1,803 crore compared with previous year�s Rs 1,241 crore. However, there was a decline of 7.59 per cent in profit after tax and extraordinary items, which came down from Rs 486.28 crore in the previous year to Rs 449.37.
The fourth quarter profit rose at the slowest pace ever as the software major cut rates to win new clients such as West Bend Mutual Insurance Company. Profitability at the firm, which counts General Electric as its biggest customer, was hurt as its US and European customers demanded lower rates to cope with a demand slump.
The company, which handed an interim dividend of 25 per cent, has given a final payout of 35 per cent (0.70 paise per Rs 2 share share), taking the total to 60 per cent. Satyam acquired the software services division of Sify for a consideration of Rs 33.25 crore in January and entered into an agreement with Mauritius-based GE Pacific, financial managing director B. Rama Raju said.
The company says it will float a subsidiary for business process outsourcing (BPO), and a separate outfit that will set up a chain of call centres.
Alliance with Sun
Sun Microsystems has entered into a tie-up with Satyam Education Services, a wholly owned subsidiary of Satyam Infoway, to offer enterprise learning solutions in India.
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The bench, presided by Chief Justice S.P. Bharucha, ruled that if the argument that both the states could levy tax was accepted, then the �state where the dealer supplying the electricity is located and the electricity originates for sale, as also the states in which the purchaser of electricity is located and it is delivered, shall both subject the electrical energy to taxation, by relying on the theory of territorial nexus�.
The judges said such an anomalous situation existed with respect to sales tax before the Constitution of India came into force and �led to complications and difficulties in administration of sales tax legislation� which was eventually resolved by the Sixth Amendment.
�Such multiple taxation would result in hampering free movement of electricity between the states and, therefore, would be prejudicial to freedom of trade, commerce and intercourse throughout the territory of India, and for the unity and integrity of the country. That would give rise to the same situation which was sought to be remedied by the Constitution and the Sixth Amendment,� the bench ruled.
The ruling comes as a shot in the arm for all power generators in power-surplus states that export electricity to power-deficit ones. It will especially benefit National Thermal Power Corporation (NTPC) which has multiple agreements with states under which it supplies electricity across the country.
The issue came before the Supreme Court because of two cases involving NTPC which generates power in Andhra Pradesh and Madhya Pradesh and sells it in Chhattisgarh and other states.
Both Andhra and Madhya Pradesh had wanted to levy tax on the corporation which NTPC had contested.
The apex court said the line of reasoning advanced by Andhra and Madhya Pradesh �run counter to the scheme of constitutional provision and specially the Sixth Amendment.�
Article 286 of the Constitution provides that �no law of a State shall impose a tax on the sale or purchase of goods outside the state.�
The apex court said levying tax by the state on power generated within its territorial jurisdiction would be �ultra vires of Articles 286 and 269 of the Constitution.�
Article 269 relates to �taxes levied and collected by the union but assigned to the states�. These items comprise estate duty, terminal taxes on goods or passengers carried by railway, sea or air.
The apex court said no state law could convert �an inter-state sale into an intra-state sale or create a territorial nexus to an inter-state sale�.
�When the generation takes place in one state from where it is supplied and it is received in another state where it is consumed, the entire transaction is one and can be nothing else excepting an inter-state sale on account of instantaneous movement of goods from one state to another occasioned by the sale or purchase of goods squarely covered by section 3 of the Central Sales Tax Act,� the judges said.
�In the case of electricity, the events of sale and consumption are inseparable. Any state legislation levying duty on sale of electricity, by artificially or fictionally assuming that the events of sale and consumption have taken place in two states, would be vitiated because of extra territorial operation of state legislation,� the judges said.
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The bank, which planned to come out with the IPO almost one-and-a-half year back, had been deferring it due to depressed market conditions.
B. Samal, chairman and managing director of Allahabad Bank said: �We will take a final call on the IPO in mid-June when our balance sheet will be ready. Following this we have to move to the Securities and Exchange Board of India for its approval. We feel that we will be in a position to float the IPO by September.�
The issue will be lead managed by SBI Capital Markets and Kotak Mahindra.
Following the IPO, the bank�s paid-up equity will go up to Rs 346 crore from Rs 246 crore, diluting the government�s stake by 24 per cent. The capital adequacy ratio of the bank however is expected to remain at its present level of 10.6 per cent even after the IPO.
The bank expects to register a 100 per cent rise in net profit for the year 2001-02. �In 2000-01 we earned a net profit of Rs 40 crore. For 2001-02 the bank expects to earn a net profit of Rs 80 crore,� Samal said.
The gross profit of the bank will be Rs 367 crore up from Rs 266 crore in the previous year.
The growth has come mainly from two sectors�retail boutique and trading of securities. The interest income from retail banking is Rs 96 crore, compared with Rs 46 crore in the previous year.
The bank has registered a Rs 200-crore business from trading of securities as against Rs 52 crore in the previous financial year.�For 2002-03 the bank will mainly focus on the housing sector. We have done a business of Rs 320 crore in the housing sector in 2001-02. We would like to double it this year,� Samal said.
The bank�s non-performing assets as on March 31, 2001, stood at Rs 1,821 crore. �We had recovered around Rs 350 crore in 2001-02. But there had been fresh slippage of another Rs 350 crore. So the NPA figure is expected to remain the same for the year ended March 31, 2002,� he added.
The bank�s total business stood at Rs 34,000 crore. Of this, the deposits were around Rs 23,000 crore and advances were to the tune of Rs 11,000 crore. The bank expects business to be around Rs 40,000 crore in the current financial year.
The bank also has plans to add another 100 retail boutiques in the current financial year, to its existing tally of 200 boutiques.
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Addressing a press conference here today T. R. K. Rao, chief general manager of Nabard (West Bengal) said, �Since 1987-88 the tea industry is not availing of the refinancing facilities required for re-plantation and rejuvenation. They are only going to commercial banks for working capital. But the tea industry which is currently passing through a rough patch needs to rejuvenate plantations for future survival.�
Keeping that in mind, Nabard has decided to commission a study in association with National Tea Research Association to find out the present status of tea in West Bengal.
Nabard has also sounded the co-operative banks, commercial banks and the Tea Board of India so that the tea industry can avail of refinance facilities for re-plantation and rejuvenation.
Jute is another industry for which Nabard plans to come out with attractive schemes. �Basically we want to come out with bankable schemes for diversified jute products,� Rao said.
Announcing the performance of Nabard (West Bengal), Rao said that they have disbursed Rs 324.59 crore to banks in 2001-02 which is a rise of 29.24 per cent compared with Rs 251.15 crore in the previous year.
The agency-wise classification shows that commercial banks have received maximum of Rs 98.89 crore of refinance followed by state co-operative banks with a refinance offtake of Rs 87.9 crore. Regional rural banks and the West Bengal State Co-operative Bank (WBSCB) have drawn a refinance of Rs 85.48 crore and Rs 52.32 crore respectively.
Rural industries and the services sector account for nearly 55 per cent of the total refinance disbursed. �Rural housing alone has contributed 27.3 per cent of total disbursements. Nabard is also working out new scheme for purchasing agricultural land,� Rao said.
During the year 2001-02, Nabard has sanctioned Rs 474.41 crore for 4,087 projects in Bengal under the Rural Infrastructure Development Fund (RIDF). The amount sanctioned in the year constitutes 9.4 per cent of the total loan sanctioned under RIDF in the country.
Nabard has been able to establish credit linkages of 8,404 self-help groups with the banking system during 2001�02.
It has sanctioned credit limits amounting to Rs 97.10 crore to WBSCB for crop loan. Similarly, short-term credit limits to the tune of Rs 16.32 crore were sanctioned to eight regional rural banks for financing seasonal agricultural operation of farmers.
Nabard had mobilised Rs 77.91 crore in 2001-02 through placement of 5-year bonds with a coupon rate of 7 per cent. �We expect to garner a similar amount in the current financial year,� Rao said.
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The other two are Brazil and China. Says Bhaskar Pramanik managing director of Sun Microsystems India, �We expect to achieve this $ 1 billion target within the next seven to eight years. Presently, we are quite far from the magic figure.�
Sun India registered a turnover of around Rs 518 crore for the financial year July 2000 to June 2001. Pramanik says that given the slowdown affecting the IT sector in the US and India, the company does not expect any growth for the current financial year.
Pramanik, however, feels that the market will grow between 15 to 20 per cent in 2002 and 2003. He expects Sun to benefit from the market expansion and achieve a growth of 25 to 40 per cent in the next accounting year (July 2002-June 2003).
�The main revenue generation sectors in India will be telecom, services, financials and banking and education,� says Pramanik. �Telecom itself will contribute to a major chunk of the turnover, while revenues from services is expected to grow by at least 25 per cent in the next three to four years.�
Pramanik said that investments for the next fiscal are being planned and details are expected to be ready by May. As of now, the company has already invested around $ 120 million in infrastructure and developmental activities in the country. The company plans to leverage on its investments and strengthen and enhance channels and distribution network in the next fiscal.
Speaking on the release of the latest version of Sun�s Star Office 6.0, Pramanik says that the office suite has been well received.
�Through the Star Office 6.0 beta program, we gained valuable customer feedback regarding a paid version of the suite,� says Pramanik.
�Star Office will be provided at a nominal charge based on a tiered, per-user structure. Sun will offer services and support contracts for help desk and end-user support, training, software upgrades and deployment and migration services."
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Last year the steel industry operated at less than 80 per cent capacity on account of a glut in the market.
Tata Steel managing director B. Muthuraman said the OECD countries have taken an initiative to cut capacity by 75 million tonnes over the next four to five years in order to contain over-capacity in the steel market. Besides, there is no local greenfield project in the pipeline till 2005.
This will certainly put the local industry in a much more comfortable position both in the domestic market and abroad, he said.
Going by a conservative estimate, sources said, the steel ministry has pegged the production growth at 2.6 per cent.
According to the ministry�s calculations, steel production will be around 30.05 million tonnes during the current financial year against 29.27 million tonnes last year.
Earlier this month, the ministry held discussions with all the major steel companies in order to get a feel of the industry before making its annual projections.
A senior executive in Steel Authority of India Ltd (SAIL) said the current year�s projections are easily sustainable because of the production cut in western countries.
�Moreover, the domestic demand is also picking up, especially for long products, which are meant for the construction sector. The industry is hopeful about a growth in the flat product segment as well since auto and white goods sectors are generating demands,� the official said.
SAIL has decided to run its four integrated steel plants at Rourkela, Durgapur, Bhilai and Bokaro at full capacity. While Durgapur and Bhilai plants had operated in 100 per cent capacity last year as well, the other two plants could not afford to produce more than 75 per cent of their capacity as the flat products ran into rough weather due to slack in demand.
Tata Steel is also trying to squeeze its existing capacity to produce at least 0.4 million tonnes of more steel during the current financial year. The largest private sector integrated plant is also planning to add fresh capacity during the year.
The Vizag Steel Plant too has decided to produce at least 10 per cent more steel than its last year�s volume simply because the market is looking up, says B.N. Singh, chairman cum managing director.
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Speaking on the new corporate policies, STG chairman Yogesh Vaidya says, �The IT training industry has been the worst affected due to the slowdown last year. Though the financial results are yet to be declared, we could have a negative growth this year. In a bid to maintain our growth prospects, Software Technology Group has been evaluating other business opportunities in education.�
Based on the study of the education market, STG has identified two segments where there is requirement for professional training courses�for students from class IX to XII and those looking for career opportunities overseas. The company recently launched two initiatives�World Campus and Mindpower�to cater to the above mentioned segments.
For the World Campus Initiative, STG has entered into a strategic alliance with the US-based Student Recruitment Consortium of the President�s Network (PresNet). �The alliance has enabled us to gain access to a network of 46 US-based universities and help Indian students seeking enrolment to any of these universities for undergraduate and postgraduate courses,� says Vaidya. STG would not only counsel and train these students, but also help them obtain the required clearances.
The sub-brand Mindpower is targeted at students who seek professional help outside schools for their secondary and higher secondary examinations. The Rs 60-crore training company has tied up with Bangalore-based Edurite Technologies to develop content for CDs that will deliver the syllabus for different subjects from Class IX to XII. The CDs will cost between Rs 2,400 to Rs 3,200 for each subject.
STG also plans to set up 500 Mindpower franchisee centres by March 2003 to offer a combination of instructor-led and computer-based training methods for school students.
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