Tatas, govt bury VSNL hatchet
Kulti Works heads for the junkyard
Death rattle for jute industry
More sting added to Sebi bite
Reliance fined in L&T deal
Software moguls look for solace in sharing & growing
Infosys, Wipro come together for Union Bank
India Inc spooked by oil shortage fears
Bearing firms keen to shed �commodity� tag
Foreign Exchange, Bullion, Stock Indices

New Delhi, June 10: 
The government and the Tatas today hammered out a six-point compromise formula to end a two-week spat over the VSNL board�s proposal to invest Rs 1,200 crore in Tata Teleservices (TTL).

On the face of it, the compromise deal is a win-win for the Tatas who haven�t had to dump the proposal � a key demand made by communications minister Pramod Mahajan during the tense faceoff.

The Tatas who have a 45 per cent stake in Tata Telservices � 25 per cent that they acquired from the government in February for Rs 1,491 crore and another 20 per cent that they bought through an open offer � also backed down from their intransigent stand that the board would not review the proposal that was passed at a meeting on May 28.

Under the deal, the Tatas will induct a government nominee on the board sub-committee on inter-corporate investments and enlarge the scope of its terms of reference.

Yashwant Bhave will be the government�s nominee on the sub-committee which has been asked to finalise its deliberations on a six-point agenda by August 15. However, Mahajan isn�t losing face either because the overall figure of Rs 1,200 crore will now come under review as per an expanded terms of reference that has been set for VSNL�s board sub-committee on inter-corporate investments.

Under the deal, the committee has been asked to �study and decide the quantum and the valuation/price at which the investment will be made by VSNL in TTL at various points of time.�

The government sources said the use of the word �quantum� clearly meant that the figure of Rs 1,200 crore was not sacrosanct. They said the amount of investment would depend on the valuation of Tata Teleservices.

The sub-committee will also decide on the tranches and periodicity of investment in TTL. The Tatas had planned to make the investment over a period of four years but the government could push for a longer time-frame.

As part of the understanding between the two sides, the scope and extent of the committee has been enlarged to address the suggestions of communications minister Pramod Mahajan. The committee will identify and quantify any additional investment opportunities which are more attractive and submit these to the board for its consideration.

The sub-committee will also negotiate, finalise and execute shareholder agreements and other contractual arrangements with TTL to protect the interests of VSNL in respect of investment.

It has also been agreed that the sub-committee will determine the conditions of investments and these will be linked to defined milestones that TTL will have to achieve.

Sources in the communications ministry claimed the agreement vindicates the point made by Mahajan that there is a need for evaluation of TTL and investment in other companies, too, should be explored in the better interest of VSNL.

Mahajan�s biggest grouse against the proposal that was passed by the VSNL board on May 28 was that Tata Teleservices was a very small company of indeterminate value and such a large investment was totally unwarranted.

Mahajan had instead wanted the Tatas to clear the dues that VSNL owed BSNL, the state-owned company that provides fixed line services all over the country except Delhi and Mumbai. Mahajan has been upset because he felt VSNL was being stripped of its cash assets to prop up a company that is hobbled by losses.

Tata Teleservices equity is estimated at Rs 8,250 crore. This includes an equity component of Rs 4,325 crore and debts of Rs 3,922 crore. The company reported a loss of Rs 148 crore in the first quarter of 2001.


New Delhi, July 10: 
The 132-year old Kulti Iron Works, the oldest steel mill in the country, is to be shut down and almost all its 3,000-odd workers offered a voluntary retirement scheme.

The government has taken this decision as part of its plan to restructure Indian Iron and Steel Company Ltd, a plan for which is to come up before the Cabinet tomorrow.

Kulti Works, which was started in 1870 as an iron foundry, was called the Bengal Iron Works. Later renamed Bengal Iron & Steel Company, the mill started making steel in 1904 using small open-hearth furnaces, some four years before the Tatas set up their steel works at Jamshedpur, making Kulti the oldest steelmaker in the country.

However, Kulti later stopped making steel and concentrated on iron castings. After nationalisation, the government started a spun pipe unit at Kulti, which turned out to be loss-making proposition, due to competition from new privately-owned ductile iron pipe units.

Kulti Works currently has besides the spun pipe unit, a general casting shop with a capacity of 30,408 tonnes per annum, a heavy and mechanical foundry with a 7,200 tpa capacity, a light castings shop with a 7,000 tpa capacity, and a 4,585 tpa capacity steel foundry.

SAIL chairman Arvind Pande had in fact prepared the unions for this shock treatment, calling them for a meeting at Calcutta some time back and bluntly telling them that Kulti was not viable as a business unit.

The only union to oppose this at that time was the Congress led INTUC, whose leader Subrata Mukherjee had put forward an alternative proposal to turn into a central casting shop for SAIL, a plan which was found even more unviable. Steel ministry officials said the IISCO revival package, which is to be taken up by the Cabinet tomorrow, provides for a total of Rs 540 crore towards the VRS, as more workers have to be retrenched from its IISCO�s mines as well as its main Burnpur works itself. Another Rs 230 crore will be spent on sinter and oxygen plants and repair of two blast furnaces, while Rs 111 crore will be spent in the colliery and mines. Some Rs 200 crore will be kept in reserve to meet anticipated losses over the next two years.

While the state government is to give IISCO a Rs 200-crore relief by way of waiver of cess, royalty, electricity dues. The central government too will provide write off of past dues to the extent of about Rs 200 crore. IISCO as a whole made a loss of Rs 186 crore in 2001-2002, most of it due to its Kulti works, on a turnover of Rs 900 crore.


New Delhi, June 10: 
The high level inter-ministerial group on jute will be asking the Union cabinet to agree to a roadmap to dilute the jute packaging order in a manner that could sound a virtual death knell for Bengal�s jute mills.

The high-level IMG chaired by textiles minister Kanshi Ram Rana, will ask the Cabinet to agree to a three-year phased dilution of the order which will free 75 per cent of sugar production and 60 per cent of foodgrain output from the rigours of jute bag packaging restrictions by July 2004. This will imply the huge packaging order would shift to cheaper polypacks, something which could virtually wipe out Bengal�s jute industry already teetering on the edge.

In the current year, restrictions will be lifted for 25 per cent of sugar and 20 per cent of foodgrain, which itself may not be something that the jute industry will not be able to live with. Next year, this amount will go up to 50 per cent for sugar and 40 per cent for foodgrain, which would mean quite tough days for the jute industry. However, the saving grace for the jute lobby is that the Cabinet decision will be subject to final hearing by the Calcutta high court on an appeal filed by them on the issue. The court, which is hearing a petition against diluting the Jute Packaging Order, has ruled that the Cabinet Committee on Economic Affairs can take any decision it sees fit but cannot notify that till it has deliberated on the issue.

The jute packaging orders are issued every year by the Union government on the basis of a law enacted in 1987 that sought to protect the ailing jute industry. But every year the protection to the jute industry comes under attack from powerful plastic sack makers.

The powerful plastic lobby is believed to have roped in among others Andhra Pradesh chief minister N. Chandrababu Naidu, who had earlier personally written to Prime Minister Atal Bihari Vajpayee asking him to relax the rules, pointing out that jute was often in short supply, especially at critical times like when new grain is reaped.


New Delhi, June 10: 
At a meeting held here today, the finance and law ministries today agreed to give limited search and seizure powers to the Securities and Exchange Board of India (Sebi). A draft proposal on the issue was jointly finalised by finance ministry and department of company affairs, in the presence of Sebi chief GN Bajpai.

The search and seizure power will be granted only for major offences such as insider trading and fraudulent market manipulation, DCA secretary Vinod Dhall said to the reporters after the meeting.

While the finance ministry was in favour of giving more teeth to the market regulator, the DCA had a few reservations on the issue. It was concerned that sweeping powers be not granted to Sebi regarding search and seizure and that specific areas and safeguards be ensured. �As a safeguard, search and seizure power For carrying out search and seizures, the order has to pass through the Sebi chairman and a higher authority like a magistrate,� Department of Economic Affairs Secretary C. M. Vasudev told reporters after the meeting.

The two ministries have also approved Sebi�s demand for a maximum penalty of Rs 25 crore for serious offences. This demand which was part of the draft proposal has been approved, Vasudeva, said. At present Sebi can impose penalties of only Rs 5 like even for serious offences running into hundreds of crores.

Sebi had been demanding penalties in proportion to the offences committed. DCA secretary Dhall said that Sebi can impose penalty of up to Rs one crore for other offences. SEBI wanted search and seizure powers on the ground that it rendered strong evidences in a court of law to against the market manipulators.


Mumbai, June 10: 
The Securities and Exchange Board of India (Sebi) has slapped a fine of Rs 4.75 lakh on Reliance Industries Ltd (RIL) for delay in informing the exchanges about hiking its stake in Larsen and Toubro Ltd (L&T) beyond the five per cent limit under the takeover code.

�The adjudication proceedings against the company are complete and RIL was asked to pay the fine, which it has done last week,� Sebi sources said here today.

The probe into alleged insider trading of L&T scrip prior to the deal between RIL and Aditya group would, however, continue, sources added.

An RIL spokesman in a brief statement said the amount was paid and was in line with the voluntary payment offer made by it in February last to avoid any further controversy. The group had hiked its stake in L&T from 3.92 per cent to about 10.06 per cent before offloading in favour of Grasim Industries Ltd at Rs 306 per share, a hefty premium to market price, in November 2001.

Just about the time when Sebi launched adjudication proceedings for violation of the takeover provisions, RIL issued a cheque of Rs 5 lakh to the market regulator to avoid any controversy. Sebi, however, did not accept the payment saying the adjudicator would give a verdict.

Sebi in its report to Joint Parliamentary Committee said RIL had violated the takeover code.


Mumbai, June 10: 
So what if they are rivals. Infosys leading light N. R. Narayana Murthy and Wipro believe there is much to share as they race for a bigger slice of business. The way to do it is collaborative competition, something that gives clients the best solutions.

Premji and Murthy, who are jointly implementing Union Bank of India�s IT strategy, were candid in admitting that they were rivals, but were also realistic enough to accept more such collaborations in future as specialisation increasingly turns the norm in this industry.

Referring to the joint exercise undertaken by both the companies, Murthy said while Wipro is strong in hardware, Infosys had �zero expertise� in this segment. �In these days of specialisation, we need to indulge in collaborative competition to bring value to our valued customers. We both have certain expertise and there is a need to implement them,� he pointed out.

Murthy cited a similar effort in France during the early 1970s, when five companies joined hands to implement a project for the country�s airlines and customs.

The same feeling was echoed by Premji who revealed that his company will not hesitate even in integrating systems that had an IBM hardware. �End of the day, what matters is providing solutions to customers and ensure best value and delivery,� he said.

Such a joint effort comes at a time when software services companies in the country are grappling with the problem of lower IT spending, particularly severe in the US market. This has led to a decline in the industry growth rate, which is now put in the region of 30 per cent.

Premji, who later spoke to reporters, said he was confident that the current year would be better than the previous one in terms of earnings, sales and �practical IT spending�. Refraining from making any projections in terms of numbers, he pointed out that the company�s guidance for first quarter would still hold.

Wipro, with a net profit of Rs 231 crore for the fourth quarter of the financial year ended March 31, has projected a marginal 2.2 per cent growth in revenues at $ 123 million in the first quarter of this year. Premji however, said that the border tension has created an apprehension among investors and clients of IT firms over project schedules.


Mumbai, June 10: 
Union Bank of India has enlisted Wipro Infotech and Infosys to implement its redefined IT strategy. The project envisages an investment of over Rs 150 crore.

Wipro Infotech, the prime integrator, will be responsible for end-to-end implementation and integration of a centralised core banking solution and associated IT infrastructure. Infosys will provide banking solutions, Finacle and BankAway.

The project, labelled e-mpact, will implement core banking solutions. It would cover 500 branches in 36 months at 50 centres across the country. This would gradually be extended to 1000 branches over five years, said V Leeladhar, Union Bank chairman and managing director.

The decision to implement core banking solutions with a centralised database for inter-branch connectivity was taken last year. KPMG was appointed to assist in the effort. The solution also includes support of 200 ATMs, apart from other IT enabled products and services such as Internet banking and tele-banking.

Apart from Wipro and Infosys, the other partners in the project include FSS, Chennai for ATM Switch and B K Solution, Chennai for telebanking systems. �The objective behind this exercise is to enhance customer convenience through technology,� senior officials of the bank said.


New Delhi, June 10: 
Indian industrialists fear a sudden oil shock will lead to a drastic dip in economic growth, result in an inflationary spiral and adversely impact the balance of trade.

In a survey carried out by Ficci among 376 industrialists, an overwhelming 77 per cent of respondents said they believed oil scarcity, would lead to decline in economic growth.

At the same time 71 per cent respondents felt that it would lead to rise in inflation, while 74 per cent were of the view that it would adversely impact India�s trade balance.

Nearly 63 per cent respondents felt that international arrangement for oil management and reserves should be consequently encouraged, 60 per cent suggested improving oil refining and recovery capability through improved technology and strategic alliances and 68 per cent felt the need for developing alternate sources of fuel.

Also, 41 per cent respondents were of the view that oil demand should be well-managed.

The survey covered sectors like textiles, plastics, oil, agro products, FMCG, information technology, paints, pharmaceuticals, engineering, financial institutions, sugar and distillers, steel.

Amongst those surveyed were Mangalore Refinery, Raymond, Nestle, Apollo Tyres, Panasonic, Asian Paints, DSP Merrill Lynch, Britannia, Eureka Forbes and Graphite India.

The survey has supported the contention chalked out by the petroleum ministry�s Narad committee report which had called for creating a strategic oil reserve.

The main reasons attributed for the need of oil reserve include- India�s substantial dependence on crude oil imports from West Asia accounting to about 70 per cent, volatility in international prices of crude oil and products and geopolitical uncertainties in the region.

The chamber has suggested the government�s strategic reserve be good for 15 days. This would mean having a reserve of 4.5 million tonnes, at a cost of Rs 4,700 crore.

Some of the noteworthy findings of the survey reveal that sectors like transportation, aviation, petrochemicals, chemicals and fertilisers, travel and tourism and engineering will be hit hard if acute oil scarcity occurs.

A good 78 per cent respondents felt that if such a situation arises, it would retard the consumer behaviour and growth of the economy.

On the prospect of switching to alternative sources of energy, 52 per cent respondents felt that the prospect of developing and switching to alternative fuels is moderate to high whereas 48 per cent believed that this would be difficult in the view of our existing level of technology.

The chamber says that since India does not have sufficient indigenous hydrocarbon resources to satisfy demand, equity oil or oil mined by Indian companies abroad can play a significant role in improving the country�s oil position.

Countries falling in the �feasibility region� include Russia, Myanmar and Iran.


Calcutta, June 10: 
Bearing makers in the country are looking to shed the �commodity� tag to survive in the present scenario. With the grey market eating away at profits and cheap Chinese imports compounding their woes, companies are keen to present another side to the consumer�that of a �complex technological product.�

�Bearing is a very highly technologically driven work unlike the general perception that it is a commodity. So there is a need to decommoditise it,� Tata Steel B. Muthuraman told the 34th annual general meeting of the Eastern India Ball Bearing Association (EIBBA) here.

�We need to explain to the customer the technological input that goes in making bearings to get a better realisation,�� Muthuraman said. Only recently Tata Steel initiated the distribution concept in steel marketing. In bearings, it has been just a shade better. �But a proper distribution mechanism is required to reduce costs and ensure better realisation,�� he said.

Muthuraman noted that the bearings industry in the country was still fragmented and suffered from over-capacity, cheaper import and low returns. Annual growth was just about 2 per cent and often does not even cover the cost of capital. Imports, mostly from China, were over 25 million pieces.

Rakesh Makhija, managing director of SKF Bearings India, too expressed concern about the �huge grey market�� in the technology driven industry. �We need to combat this. Else it will destroy the industry and also the trade,�� Makhija told the city�s bearing merchants.

Speaking on the plans of SKF�s Indian arm, Makhija said the parent plans to use SKF Bearings India Ltd as its global export base. The $ 4.3 billion SKF has 80 production units in 22 countries. In his presentation, Sunne Axelsson, finance director of SKF Bearings India, highlighted distribution management to ensure better profit margins and stock planning.

EIBBA president C. R. Chindalia noted that the impact of import duty on bearings was as high as 57 per cent when 25 per cent import duty is applicable on other industrial components and spares.



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