ING takes control of Vysya
Banks want 10% on loans to Unit Trust
State Bank net jumps 52%
Tribunal overrules Sebi in Videocon, BPL cases
Mahindras unleash Scorpio on rivals
SBI targets 25% growth in net profit
HPL lenders still in dark
Infosys buys Trade IQ for $ 3.9 m
Usha Beltron warms up for financial rejig
Foreign Exchange, Bullion, Stock Indices

Mumbai, June 20: 
The ING Group today sealed a deal to buy 23.99 per cent in Vysya Bank from the GMR Group, the Indian promoter, in what is the first acquisition of a private bank in the country by a foreign bank.

The Dutch financial powerhouse will fork out Rs 626.92 per share � a whopping 98 per cent premium on the stock�s closing price of Rs 315.95 on the Bombay Stock Exchange today � in a transaction worth Rs 340.8 crore.

The deal is reckoned to be the largest slice of foreign direct investment (FDI) in banks, and the first after the FDI cap for the industry was raised to 49 per cent. Once the deal goes through, ING will hold 43.99 per cent as the bank�s single largest shareholder. International Finance Corporation already holds 10 per cent.�

The price of Rs 626.92 per share for the 70-year-old bank surprised banking analysts and industry watchers, but other shareholders were dismayed when ING claimed it would not have to make an open offer. The group argued the share transfer from a promoter to a foreign collaborator, who is also a shareholder, obviates the need to give other investors a chance to sell out. The Reserve Bank regulation capping FDI in banks at 49 per cent of equity has queered the pitch further.

The purchase of GMR�s stake marks the end of a process that started in February this year, when Bank Brussels Lambert, part of the ING group, indicated it would increase its stake in the Bangalore-based Vysya Bank.

�We believe we are paying for a value already existing in the bank. The ING Group is, therefore, paying for the bank�s future potential, which is enormous,� an ING group spokesperson told The Telegraph.

Vysya Bank, with 480 branches, is seen as more of a regional player since its network is largely confined to the south. That focus, the ING official said, is likely to stay for now.

�ING is committed to developing its banking, insurance and asset management businesses in India, and has identified Vysya Bank as a vehicle to further the growth strategy. It provides us a strong banking platform to distribute our financial services products more widely to Indian retail customers, small and medium-sized enterprises and institutional clients,� said Peter Smyth, general manager of ING Asia Pacific.

Senior officials of the GMR Group said the stake sale would help them shift emphasis to its core areas of infrastructure, information technology and agri business. Even after that, it would hold 4.5 per cent in the bank.

Vysya Bank, established in 1930, initially financed traders and retail customers. It is reported to be the first private sector bank to introduce MICR cheques, float a housing subsidiary and enter the credit card business.

The ING Group, a global financial institution based in the Netherlands, is a market leader in insurance, banking and asset management. It has more than 50 million customers and assets over 700 billion euros. In India, ING is active in banking, insurance and asset management. The wholesale banking arm under ING Bank N.V. offers lending and structure finance products, M&A advisory and capital market origination products.

Insurance venture

The ING Group will emerge as the largest stakeholder in Vysya, but crucial questions have been thrown up about the equity structure of its insurance venture.

ING Vysya Life, a 24:76 life insurance joint venture, will now have to grapple with a key IRDA norm that limits the stake of a foreign partner at 26 per cent of equity.


New Delhi, June 20: 
Bankers who have been asked to bail out the cash-strapped Unit Trust of India (UTI), which faces an end-of-the-month payout problem on two of its assured income schemes, are insisting on charging a 10 per cent interest rate on loans to the mutual fund major.

The bankers� stand flies in the face of a government guarantee granted to UTI and its pressure on them to provide cheap loans to the mutual fund.

The chairman of a Delhi-based nationalised bank, which is part of the consortium, said: �We have offered money at 10 per cent ... but UTI would like this to be nearer 8 per cent and have not lifted anything till date.�

The bankers, who have pointed out to UTI that it has an existing credit line of Rs 4,000 crore offered to it by a consortium of bankers led by State Bank of India, are however unwilling to lend at lower rates as their unspoken perception is that UTI is a losing proposition.

Although UTI needs just a little more than Rs 1,000 crore at this point of time to bridge the current gap between what it has in its development reserves and the payouts it is bound to give to investors, it will have to fork out something like Rs 4,000 crore between now and mid-2004.

The lenders doubt its ability to earn this entire amount, and at the same time, pay back bankers. Many bankers feel UTI may well be headed for a debt trap.

Consequently, the sovereign guarantee on these loans by the government is not being seen as any major incentive to reduce the interest rate.

Nor are they enthusiastic over UTI�s offer to securitise various receivables in order to access cheaper loans. This has come about despite the fact that banks have been giving short-term loans to various companies at 9-9.5 per cent. With transaction costs on deposits at about 7-8 per cent, most public sector banks can, if they so wish, reduce interest to a little over 8 per cent.

Sources said they expected the finance ministry to exert more pressure on the banks through their nominee directors to get them to reduce interest on loans to UTI, as well as to agree to be sponsors for an asset management company for the mutual fund.

�Ultimately, the banks may agree to lower rates but that is a matter of negotiation and commercial judgement. The government will try to help out any of its babies which gets into trouble, that is natural. But this desire to help has to be balanced with judgement,� bankers said.

The problem that UTI faced, ministry officials said, is that these are all assured income schemes promising fixed rates of return varying between 10.5 and 14 per cent, whereas the real value of these schemes have been falling.

As a result, UTI has been paying assured returns by dipping into the capital base of these schemes. About a quarter of the MIP money is parked in stocks, while the rest is invested in the debt market. Repeated market crashes has resulted in the unit base�s value coming down while repeated cuts in interest rates on debt � which stand at about 9.5-10 per cent � has meant even the assured income schemes have been badly hit.

In some cases, even the debt investments have come unstuck as they were used to buy debt instruments floated by companies which are doing badly and have been unable to pay interest returns. These include steel makers and North India-based engineering companies.

With nearly Rs 35,000 crore invested in UTI�s MIP schemes, the gap between promised returns and actual money in the kitty could well increase in the future as markets show little signs of reviving.


Calcutta, June 20: 
The State Bank of India has registered a 51.57 per cent growth in its net profit at Rs 2,431.62 crore for 2001-02, as against Rs 1,604.25 crore in the previous year. The bank also declared a dividend of 60 per cent, up from 50 per cent paid last year.

Operating profit stood at Rs 6,044.83 crore compared with Rs 3,966.78 crore in 2000-01�a growth of 52.39 per cent. However, the results failed to enthuse the markets and the scrip moved only by Rs 2.15 closing at Rs 241.25.

Addressing a press conference here today, chairman Janki Ballabh, said, �The net profit for 2001-02 has been depressed by the provision for investment depreciation, as well as by pro-rata write off of deferred revenue expenditure relating to VRS. Further, the appreciation in the held-for-trading category of investments has not been recognised due to a revision in RBI guidelines in 2001-02. On a fully comparable basis, the adjusted net profit of 2001-02 (Rs 2,841.76 crore) has recorded a growth of 31.53 per cent over the adjusted net profit of 2000-01.�

The growth in profit has been achieved through a rise both in the net interest income and fee income. Net interest income was Rs 9,081.24 crore as against Rs 8,382.58 crore in the previous year. Profit on sale of investments was Rs 351.64 crore as against Rs 341.85 crore in the previous year.

The cost of deposits (excluding Resurgent India Bonds/India Millennium deposits) witnessed a reduction from 7.62 per cent in 2000-01 to 7.07 per cent in 2001-02.

Net interest margin was lower at 2.91 per cent, compared with 3.23 per cent in the previous year. Non-interest income grew by 7.51 per cent from Rs 3,883.04 crore in 2000-01, to Rs 4,174.48 crore in 2001-02.

The domestic deposits of the bank increased by 27,738 crore (14.51 per cent) during 2001-02. The average rate of growth of deposits was however, higher at 15.87 per cent. Reflecting the thrust on personal segment, deposits in this segment recorded a growth of Rs 19,868 crore and formed 60.44 per cent of the aggregate deposits of the bank as against 57.82 per cent at the end of March 2001.

The absolute level of the gross non-performing assets (NPAs) of the bank have come down from Rs 15,874.97 crore as on March 31, 2001 to Rs 15,485.87 crore as on March 31, 2002. The gross and net NPA levels have come down from 12.93 per cent and 6.03 per cent respectively as on March 31, 2001, to 1.95 per cent and 5.63 per cent respectively as on March 31, 2002.

The SBI chief said the bank has accrued new NPAs to the tune of Rs 4,000 crore in 2001-02.


Mumbai, June 20: 
In a major blow to the Securities and Exchange Board of India (Sebi), the Securities Appellate Tribunal (SAT) today set aside the market regulator�s orders banning Videocon International and BPL Ltd from accessing the capital markets for manipulating their scrips in 1998.

The Sebi orders under Section 11 and 11b of Sebi Act against the two companies banning Videocon for three years and BPL for four years were not in the interests of investors and have no legal backing and hence cannot be sustained, SAT said in its ruling here today. In the absence of sufficient material evidence to establish that the two companies had directly or indirectly indulged in market manipulation, the market regulator�s orders holding them guilty cannot sustain and therefore deserve to be set aside, SAT ruled.

Section 11 and 11b of the Sebi Act are mainly focussed on investor protection and the latter does not even remotely empower the market regulator to impose penalties, SAT observed.

For Sebi, it was the latest among a series of orders passed by SAT questioning its powers to impose penalties under Section 11 and 11B. In October last year, SAT had similarly set aside Sebi�s order against Sterlite Industries Ltd which was banned from accessing the capital market for two years for manipulating its scrips during the same time.

On an appeal by these two firms against prosecution proceedings launched by Sebi on them, SAT said it does not have jurisdiction to set aside the prosecution pending before the court.

The then Sebi chairman D.R. Mehta, in his order dated April 19, 2001 had directed Videocon not to raise money from the market for three years. Mehta had also directed that prosecution proceedings be initiated against the company through its directors/officers � V.N. Dhoot, S.K. Shelgikar and S.N. Hegde � for indulging in unfair trade practices and violating the Sebi Act, 1992.


Nashik, June 20: 
Mahindra & Mahindra (M&M) plans to go global with its indigenously engineered Scorpio, its sports utility vehicle launched here today. The ambitious project, conceptualised over four years ago, has been completed with an investment of over Rs 550 crore.

The utility vehicle maker has taken initiatives to drive Scorpio to Russia, Georgia, Brazil, Malaysia and Indonesia.

The model will be launched in Russia, Georgia and Indonesia in the first phase and in Brazil and Malaysia in the second phase. The company is also looking at the potential of China, which is a big market for sports utility vehicles.

�Scorpio has been developed with world-class technology, meeting all international benchmarks. The vehicle is surely going to make a dent in the global SUV market as well as in India,� said Anand Mahindra, vice-chairman and managing director of M&M. The Scorpio will be launched through a variety of arrangements, including a joint venture. �The SUVs are currently a craze in the global markets and the potential is enormous. We expect the same trend to take shape in India following the launch of Scorpio,� he added.

Scorpio, manufactured at M&M�s sprawling Nashik plant, will raise its market-share in the domestic utility vehicle segment from 34 per cent to 45 per cent in three years.

Alan Durante, executive director of M&M and president of automotive sector, said: �Scorpio is a world-class vehicle positioned to carve a new market segment encompassing utility vehicles and mid-size cars. Our aim is not just to break into the hard top category, but to achieve a 45 per cent market-share. We are truly confident of achieving the target over the next three years.�

Scorpio, available in diesel and petrol versions, has been priced aggressively to take on Qualis, Toyota�s prima donna. M&M said it did not see its new offering cannibalising on Bolero because of the price difference.

The Scorpio, sporting red, blue, silver, black and green colours, will be available in M&M showrooms across major cities. Deliveries will begin from June 24. The Euro I diesel turbo 2.6 and turbo 2.6 DX models will cost Rs. 5.5 lakh and Rs. 6.1 lakh respectively in New Mumbai.

The price (ex-New Delhi) Bharat Stage II for Diesel Turbo 2.6 & Turbo 2.6 DX versions will be Rs 5.82 lakh and Rs 6.35 lakh respectively; the petrol version will sell for Rs 7.19 lakh. M&M will also launch a new Scorpio variant with a naturally aspirated engine at a price of around Rs 5.2 lakh (ex-New Mumbai) within a few months.


Calcutta, June 20: 
State Bank of India has targeted a 25 per cent growth in net profit and a 16 per cent growth in credit offtake in the business plan for the current financial year.

Addressing a press conference here today, bank chairman Janki Ballabh said, �We have targeted a profit figure of Rs 3,200 crore and a credit offtake of Rs 20,000 crore for the current financial year. Since the margins are falling we are aiming at a 25 per cent growth in net profit for the current fiscal.�

Out of the Rs 20,000 crore advances, the bank has decided to lend Rs 7,000 crore for the personal segment, Rs 4,500 crore for the housing segment, Rs 4,500 crore for the agricultural sector and Rs 2,500 crore for the mid-corporate and trade financing.

Ballabh said the bank would focus on retail lending as part of its business strategy. �Since no big projects are coming up, we are focusing on mid-corporate and trade finance,� he added.

Commenting about the bank�s credit card business, Ballabh said that 4.30 lakh new credit cards were issued during 2001-02 taking the total number of cards in circulation to 9.03 lakh.

The bank is in the process of redeploying its staff for offering better service to the customers. It is framing a manpower plan with the assistance of National Institute of Banking Management to re-skill and redeploy existing staff. However, the bank has no plan to offer a second round of its voluntary retirement scheme.

Regarding the bank�s insurance business, the SBI chairman said it has already sold 5,800 policies and will leverage the rural penetration of the bank for marketing its policies.

State of subsidiaries

SBI is scouting for a foreign ally for its subsidiary SBI Capital Markets. �We want to become active in the ADR and GDR markets and are looking for a foreign merchant banker who will help us do that. Talks are on with several parties but nothing has been finalised yet. SBI Caps is doing pretty well,� Janki Ballabh said.

The bank is also looking for a financing company which will take over the good assets of its ailing subsidiary SBI Home Finance. The SBI chairman said the bank has appointed consultants to scout for housing companies willing to take over SBI Home Fin�s assets. �We will absorb the sticky assets of the subsidiary,� he said.


Calcutta, June 20: 
The lenders to the Haldia Petrochemicals project are still in the dark over what decision the promoters of the company have taken on its shareholding pattern. If the cash-strapped HPL fails to repay the interest by June 30 then the account will become a non-performing asset (NPA).

Rajendra Asthana, deputy managing director and chief financial officer of SBI said, �We do not want to make HPL an NPA. That has already been communicated to the promoters. But they have failed to arrive at a settlement till date. We are yet to know what steps they are taking. They should consider the proposal of Indian Oil Corporation.�

SBI has an exposure of nearly Rs 170 crore in the Rs 5,170-crore project.

SBI chairman Janki Ballabh said, �We will do whatever we can do for HPL. After all it is one of the biggest projects in Bengal.�

The lenders are also not clear on what step the promoters will take over the company�s shareholding pattern even after the June 17 meeting. The promoters had met the banks and the financial institutions on June 17 to discuss the restructuring of the company�s debt.

The banks and the FIs, which together have a Rs 4,200-crore exposure in the project, are ready to convert a portion of their loans into equity.


Mumbai, June 20: 
In an overseas financial product business acquisition, Infosys Technologies Ltd has bought the Trade IQ product division of IQ Financial Systems Inc, a Deutsche Bank-owned outfit, in a $ 3.9-million all-cash- deal.

According to the terms of the agreement, the Infosys Banking Group will acquire, in addition to the product, all assets and trained and skilled manpower, which include Trade IQ domain experts. With this acquisition, Infosys� Banking Group will have ready-to-operate offices with employees in London and Tokyo.

The suite of products acquired from IQ Financial Systems Inc include, Trade IQ � an Integrated Treasury System, Limits IQ � Limits Management System and Desktop Risk IQ. Trade IQ is an integrated front, middle and back office system that provides full straight-through-processing (STP) and covers a full breadth of money market, foreign exchange fixed income and their full range of derivatives.

This deal would help the company provide end-to-end solutions to the retail, corporate and wholesale banking segment at a global level, Girish Vaidya, head, banking business unit, Infosys told newspersons here today.

Infosys will now have the strategic advantage of targeting the wholesale and investment banking segment and offer all banks a �rich and superior treasury system�.

Infosys had scanned three to four business units and then zeroed on Trade IQ, he added. The company has in the process acquired five clients including some of the top tier and largest commercial and investment banks of Europe, Japan and the US with installations in Switzerland, UK, the US and Japan.

Infosys in a communication to the exchanges said that the products are based on new generation technologies (OO design, ORB based 3-tier architecture) and open systems and offer a very high level of interoperability, extensibility and scalability. These products will be marketed and sold as modules or in a consolidated manner under the brand name, Finacle-Treasury.


Calcutta, June 20: 
Usha Beltron Ltd will go in for a major financial restructuring, besides organising around Rs 120 crore to fund its steel and steel products projects.

The company plans to raise a total of Rs 200 crore and use nearly half of the kitty to convert short-term debts into loans with long-term maturity. The company has a debt of around Rs 100 crore.

The Rs 1,000-crore steel and cable manufacturing company promoted by B. K. Jhawar is also weighing the possibility of hiving off the projects to a separate firm. Thus, the funding of the projects would be independent of its financial restructuring programme.

Equity of the new projects is expected to be around Rs 50 crore against UBL�s existing equity of Rs 13.2 crore. P. Bhattacharya, joint managing director of UBL said both the Washington-based International Finance Corporation (IFC) and German financial institution DEG have offered to fund the project.

While IFC is ready to extend around Rs 100 crore to the company in debt and equity, DEG has conducted a due diligence on the projects as well as the credibility of UBL and offered to participate.

�They are expected to let us know soon about the proportion of equity and debt that they would put in,�� he said.

The UBL board will meet on June 27 to facilitate a preferential allotment of equity shares to these foreign institutions. The enabling resolution that the UBL board will consider next week specifically mentions �IFC, Washington and the promoters,�� regarding the issue of equity/warrants, for part-financing company�s new projects.

The company is setting up a Rs 100,000 tonne directly reduced iron (DRI) unit, a 10MW waste heat power generation unit, expansion of heat treatment and bright bar manufacturing facilities to cater to the automobile sector and a steel cord plant for the conveyor belting industry. Ideally, UBL is looking for a debt equity ratio of 1:1. �But it all depends upon the final decision taken by the funding agencies on the proportion of equity contribution,� Bhattacharya said.



Foreign Exchange

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