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After today�s announcement, Indian promoters required to dilute their stake to 40 per cent as part of the central bank�s guideline will not have to do so any more.
In IDBI Bank for instance, where the promoters� holding is 58 per cent, lead institution IDBI will have to cut its stake only by 9 per cent. This could well be the case for new banks like Kotak Mahindra Finance Ltd (KMFL), where the promoters� stake is pegged at 61 per cent.
�In all such cases, the banks will be not compelled to bring their promoters stake below 49 per cent, if they were to follow the RBI rule. However, it all depends on the stress and the benefits that a bank sees through the induction of a strategic investor,� said an observer.
Under revised guidelines for new private banks issued on January 3, 2001, the RBI restricted the promoters� contribution to 40 per cent of the paid-up capital at all times. If the initial contribution overshot 40 per cent, it would have to be cut within a year of business.
Promoters� contribution included the equity of Indian shareholder and the foreign co-promoter, if any.
For new private sector banks established under a January 1993 norm, the promoters� equity was required to be brought down to 40 per cent within a stipulated period.
In February 2002, the Reserve Bank had clarified that foreign direct investment up to 49 per cent from all sources would be allowed in private banks under the automatic route, subject to guidelines issued from time to time.
As a result, foreign direct investment through strategic investment or private placement was permitted up to 49 per cent of a private bank�s equity.
Since this was higher than the limit of 40 per cent prescribed for promoters, it led to an �anomalous situation� against the equity of Indian promoters, the central bank said in a statement issued today.
The duality sparked calls from Indian promoters for a level-playing field.
The Reserve Bank of India reviewed the issue with the government, as a result of which the maximum shareholding for Indian promoters has now been increased to 49 per cent of their paid-up capital.
�The other licensing conditions for entry of new banks and those stipulated for foreign direct investment will remain the same,� it said.
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The finance and disinvestment ministries mooted the idea of selling NTPC and NHPC units to raise resources for further public investment in the power sector.
Unlike other disinvestment deals, where proceeds from sales are deposited with the central exchequer, money raised in this case would remain with the central power companies to meet future investment needs.
�The Disinvestment Commission forwarded the proposal to us recently. But we told them the need of the hour is investment, not disinvestment. To raise additional resources for the sector, we will have to find other ways. We have asked the Central power utilities to raise funds abroad,� Prabhu told The Telegraph.
The power ministry feels low tariffs and the relatively poor rates of return on net-worth would lead to an under-valuation of government holding, and poor realisations, if disinvestment in NTPC in carried out now. They feel that disinvestment in the company should not be allowed until reforms are implemented and new parameters for fixation of tariffs are announced.
NTPC accounts for over 25.83 per cent of all the electricity generated in the country, even though it has less than 19.14 per cent of the installed generation capacity.
At one point of time, NTPC was supposed to buy out NHPC. But the proposal ran into opposition from all quarters after which the government was forced to drop it.
NHPC has registered a net profit of Rs 469.09 crore on a sales turnover of Rs 1,289.32 crore in 20001-02.
Prabhu said it is estimated that for building over 1 lakh MW of additional power capacity and associated transmission and distribution infrastructure, nearly Rs 8,00,000 crore would have to be invested in the next decade.
The lack of escrow cover and the web of inappropriate user charges from all consumers is the only long-term solution to attract investments from outside.
In view of the current policy against giving counter-guarantees and reforms, the ministry has taken steps to set up alternate payment security systems for investors as an interim resource mobilisation strategy.
The mechanism has been evolved in consultation with the leading financial institutions like IDBI, SBI Caps and others.
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Lifespring was launched in August 2000 by Total Care Private Ltd, a company promoted by an overseas corporate body in Mauritius. Mahesh Patel, who is the promoter of Total Care, will now hold the remaining 5 per cent stake in the retail chain. Patel is a Fijian who has other retail business interests in the Pacific.
Lifespring, which runs a chain of six outlets in Delhi, offer a range of about 15,000 health and personal care products of both domestic and international brands. The retail chain recorded a turnover of Rs 7.5 crore last year.
�We are changing gears to speedier tracks and this will help us to learn the ropes of the new trade from them,� Sushil Suri, chairman of Morepen Labs, said.
Lifespring will operate under the branding of Dr Morepen.
�Pharma retailing is ready to take off in India and the Indian healthcare retail market offers several opportunities. Lifespring provides an excellent opportunity not only to increase visibility for Morepen�s existing product range, but also to serve as a platform to launch innovative healthcare products, Suri said.
Kartik Raina, managing director of Dr Morepen Limited, said that from Lifespring, the targeted turnover by March 31, 2003 is Rs 20 crore.
After March the company plans to expand the retail chain, beginning with north India. To start with it may move into cities like Allahabad, Amritsar and Ludhiana. Initially it will follow the owner model but may opt for the franchisee model too.
This is the second brand acquisition for the one-year-old Dr Morepen brand. In December last year, it acquired Burnol from Reckitt Piramal Ltd for Rs 8.95 crore.
Dr Morepen, with a range of 12 OTC products at present, is going to launch Dab gel antacid and Y-Sugar, a low calorie sugar substitute within a fortnight, said Suri. Morepen Labs which already has a diagnostic product division, is also going to launch some home health diagnostic kits under the Dr Morepen brand name, he said.
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In the calendar year 2001, which is also the company�s financial year, the fast moving consumer goods (FMCG) major saw its A&SP spends rise to Rs 823.81 crore from Rs 696.58 crore in the previous year � a rise of 18.26 per cent.
�In a competitive scenario, we must have our share of the voice,� a Hind Lever official said, alluding to the increasing amount of money other companies have splurged on getting a big splash for their basket of products. Since Lever clubs advertising and sales promotion expenditure, it is tough to fathom where the rise is more pronounced. However, analysts tracking the FMCG sector are of the view that the spending would have tilted towards sales promotion, rather than advertising.
It is a reversal of sorts given that the past couple of years seen the company, which long had a reputation for being a big spender, suddenly tightening its purse strings.
In a letter to shareholders, Hind Lever chairman M.S. Banga said: �Anticipating a slowdown, your company had developed a new strategy at the end of 2000. Our overall objective is to sustain profitable growth in slowing markets with intensifying competition. We would drive growth in our FMCG businesses, especially home and personal care by focusing on 30 power brands out of a total of 110 brands�.
The strategy of focusing tighter has already started to pay off. �Our Power brands grew 6.5per cent � almost double the overall rate of 3.5 per cent,� Banga said. In 2000, HLL�s expenses on A&SP showed a fall of 5.59 per cent at Rs 696.58 crore against Rs 737.88 crore in 1999.
Analysts say unlike in 2001, the last few years have seen the firm�s effective media spending slowing down.In 1999, Lever, together with its subsidiaries, forked out a whopping Rs 774.81 crore on advertising and sales promotion compared with Rs 668.94 crore in 1998.
�The company is looking at getting more efficiency out of its advertising spend. They are unlocking resources and putting it behind specific brands,� an analyst said.
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Only a fortnight back IDC had pegged the market at 1.75 million units, which means in 15 days about 2.5 lakh PCs have been sold.
According to IDC, the market grew by 18 per cent (in unit terms) in 2001 over year 2000 primarily because of a very good first quarter (January-March), before the slowdown in the second quarter (April-June) 2001.
�At 18 per cent India probably has been positioned as the highest growth market in the World. The gray market has secured 65 per cent market share in India, up from 59.9 per cent last year. The market share of MNC brands has dropped by 4 per cent and the local brands have only 1.7 per cent market share,� said Sameer Kochhar, director Skoch consultancy.
IDC in its reports states, �Their (gray market) wider presence and accessibility particularly in smaller towns, helped local assemblers to improve their share in 2001 particularly in the price sensitive Home and Small Office segments. Based on a re-estimation (performed world-wide), the share of White-box (local assemblers) in Indian market has been estimated at 65.1 per cent in 2001.�
�It defies logic that only the gray market grows while everyone else shrinks. And particularly at a time when there has been no hike in duties or tariffs by the government,� said Kochhar.
Government, banking and insurance segments are among the few segments that continue to buy at a healthy level. However, IDC expects some recovery signs in the third quarter (July-September) and fourth quarter (October-December) of 2002.
IDC admits that the true recovery in hardware market will have to wait till 2003. It expects a growth rate (in unit terms) of 29 per cent in 2003 up from 8 per cent in 2002.
Aggressive price positioning helped MNC vendors by improving their standing in the government market.
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As the law to support round-the-clock operations in the information technology sector takes shape, West Bengal Electronic Industry Development Corporation (Webel) has stepped in to help call centres carry on with life, even on days like today when politics locked up commerce.
State information technology secretary D. P. Patra said Webel kept its guest-house open to accommodate officials who were here on a business trip. That, however, was not enough for everyone who travelled to the city.
So, the SaltLec electronic complex wore a deserted look when this reporter went around at 11 am on Friday. The gates to most offices, including Infinity, were shut.
For BNK E-Solutions, the only international call centre working out of Infinity, things were on a war footing.
Over 100 people had stayed overnight, though they would not get down to business until this evening. It couldn�t afford to miss out hands because of a bandh.
The company provides customer support and runs a help-desk catering to global telecom and medical companies, including some in the Fortune hall of fame. Though it has kept things going so far, there are questions on how long it can devote its energies to employee logistics, instead of taking calls from its clients.
US giant General Electric, which is girding up to set up a 1,000-seat call centre in the city, has been finding out just how business ticks away during bandhs. It has been allotted land off the Eastern Metropolitan by-pass.
GE, running a call centre in Gurgaon near Delhi, wants to know how people commute to work when politics grinds business to halt. If it gets the planned centre up and running here, it would have to ensure that 2,000 employees are ferried to office and back home.
Industry sources say GE officials from Delhi have tried to find out from West Bengal Electronic Industry Development Corporation (WBEIDC) how companies maintain normal operations, especially the movement of workers, in the event of a day-long or a 24-hour closure.
At BNK�s 150-odd seat call centre today, employees had not returned home for two days and food was served on the house, because it could not risk missing out on their work.
Says Brigadier Suresh Menon, chief executive of BNK E-Solution: �Only a few weeks ago, I told my clients that services could be disrupted because of local political developments. My clients would certainly be worried if I repeat the same warning within weeks.�
He was happy with West Bengal information technology minister Manab Mukherjee�s pledge to bring call centres catering primarily to international clients under the Essential Services Act to minimise disruptions.
�Confidence of overseas customers in providing uninterrupted service was most important,� Menon said.
Mukherjee told members of the Bengal National Chamber of Commerce recently that call centres would be kept out of bandhs to ensure that the reputation of the city�s service industry is not sullied overseas.
Call centre operators and providers of other information technology and software solution services took the hint they would be spared in strikes sponsored by Left parties. Even so, they are hardly convinced that their employees would be able to get to work.
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This, according to Trai, will provide the much-needed impetus to services like tele-education, tele-medicine, information (newspaper on-line), and social education in remote areas.
Very small aperture terminals (V-sats) are antennas that use satellite to send and receive data and voice. It is useful in remote areas where telephone lines cannot be laid.
Recommending the introduction of a new type of licence called A class licence, to be given initially for a period of 10 years, Trai said this would establish a set of general conditions widely publicised among service providers and companies concerned.
The licences can be extended after carrying out a review of the profitability and the fulfilment of rollout obligations. The number of licences to be issued will depend upon the spectrum availability.
Commenting on the low entry fee, a senior Trai official said, �The telecom watchdog feels licences for receive-only V-sats should be given freely. This approach will simplify administration and encourage quicker roll out of these services.�
Trai has recommended a low entry fee of Rs 5 lakh since a market has to be created for the new service. Moreover a low entry fee will help to roll out these services in villages.
Trai has also suggested the inclusion of a performance bank guarantee of Rs 2 lakh which will be encashed if the rollout obligations are not met.
The licensee may start with his own hub / hub hired from V-sat service providers/ hub hired from infrastructure provider, within a period of one year of grant of licence.
A nominal licence fee amounting to 5 per cent of its adjusted gross revenue is recommended for the first three years. This would go towards universal service contribution and may be reviewed after this period.
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Says S. K. Mitra, managing director of West Bengal Electronics Industry Development Corporation (Webel), �The portal will provide information related to all government departments and agencies. Citizens will be able to access public interface forms, receive guidelines on how to fill them up and also the support documents required.�
The portal, which will be set up both in English and Bengali, will act as a comprehensive one-stop counter. It will allow citizens to download forms related to multiple activities like paying taxes online, publishing government orders, information regarding government tenders, issuing licenses, applications for agricultural loans, applications for trade licenses and request for issue of birth certificates. Depending on the success of the project, many more administrative issues will be made available through the portal.
The portal is aimed at making interactions between the government, citizens, business segments and inter-government agencies more transparent, convenient and inexpensive. It will use the state-wide area network backbone to deliver the applications to the citizen. Any citizen can access the portal through the internet or through kiosks which will be set up at various locations throughout the state. Benefits to citizens will include saving travel time, faster processing and availing of the benefits across geographical locations. �Another important application of the portal will be that citizens can directly email complaints to the concerned ministers or the secretaries,� says Mitra. The network of kiosks will be set up through private participation.
The portal has been developed in partnership by TCS under their s-governance initiative in association with Webel. The nodal agency has a 30 per cent stake in the venture.
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Bharti will also offer cricket scores, travel information, reservation services and ready access to information and services.
Rohtash Mal, CEO, Touchtel Delhi, said �We will provide a combination of services that will entertain and provide a utilitarian benefit to subscribers as well. We are keen to bring to our customers not just a regular service but the power of a totally integrated telecom package.�
For those looking at the lighter side of things, Touchtel offers �joke of the day� or �thought of the day� by dialling 1753. And for those trying to send flowers to near and dear ones, the flower delivery service provides access to 110 cities at a 25 per cent discount to Touchtel subscribers.
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