|B U S I N E S S||
Wednesday, October 14, 1998
Finance Ministry comes to
Economy to grow 4.5 pc
panel for ban
Sensex to include IT stocks
output continues to fall
Corp opens store
Finance Ministry comes to UTI
NEW DELHI, Oct 13- The Unit Trust of India, which is suffering from a crisis of confidence amongst the investor community, has got some breathing space with the Government, the Reserve Bank of India, nationalised banks and leading private institutions rallying support for the UTIs flagship US-64 scheme.
The US-64 scheme had come under a cloud after disclosures that it had turned negative and the UTI was distributing as dividend to the investors. The disclosure also led to a great fall in the Bombay than what earned Stock Exchange sensitive index (sensex) about 224 points on October 5.
While analysts estimated the net asset value of the scheme at around Rs 9 as against the original price of Rs 10 per unit, nervous investors have flocked to the market to sell the units at the repurchase price of Rs 14.25 offered by the UTI. Investors have sold units worth Rs 650 crore in the last two weeks, which the UTI claims was within acceptable limits. The UTI on its part does not disclose the NAV.
Fearing a run on the scheme, officials of the Finance Ministry, the RBI, and the UTI officials have started a fire-fighting exercise to contain the trend. The UTI has around Rs 64,000 crore in investible funds and stock investment and accounts for 8 per cent of BSEs total market capitalisation. Its failure could prove disastrous for a stock market which is already in a shambles.
The Finance Ministry officials, led by the Union Finance Minister, Mr Yashwant Sinha, who were away in Washington when the crisis erupted, straightaway got into action on their return and reviewed the status and prospectus of US-64. The Government would not allow the UTI to collapse, Mr Sinha said after the review meeting.
Mr Sinha blamed the foreign financial investors for manipulating the market and asked them to behave.
The RBI meanwhile stepped in to lend support to the UTI and said it would provide it the required liquidity in case of a redemption-induced cash crunch.
There was also good news for the UTI with Bajaj Auto Ltd putting on hold its plans to sell units worth Rs 172 crore in the US-64 scheme.
The chiefs of nationalised banks, who assembled here today for a meeting with the Finance Ministry, also did their bit by committing to hold on to the UTI units.
There is absolutely no question of offloading UTI units as we are confident of high returns from the institution, the Chairman and Managing Director of Bank of Baroda, Mr K.Kannan said.
Mr Kannan had earlier indicated that his bank was considering investing Rs 100 crore in US-64 in addition to Rs 250 crore it has already put in.
Similar assurances were given by the chiefs of the Andhra Bank, State Bank of Travancore and other leading banks.
To prevent the financial institutions from going in for redemption in a big way the UTI warned of retaliatory action in the wake of offloading their stocks. Since the UTI has big stakes in virtually all major FIs, the threat seems to be working.
The crisis has, however, generated demands from several quarters for the UTI to declare its net asset value. The UTI has maintained that since its investments are very diverse it would not be in a position to declare the NAV.
Stock analysts blame the
predicament of the UTI to its increased exposure to
equities in the last 10 years. About 64 per cent of the
UTIs investments are in equities and the depressed
capital market has had a negative impact on it.
Economy to grow 4.5 pc
NEW DELHI, Oct 13 (PTI) Indian economy is likely to grow only by 4.5 per cent during 1998-99, compared to the earlier projection of 4.5 to 5 per cent, the centre for Monitoring Indian Economy (CMIE) has said. Six months into the year, with some data for the first quarter now available and the monsoon behind us, we have reasons to believe that our earlier forecasts (4.5 to 5 per cent) was a trifle optimistic, CMIE said in its latest monthly review.
Economy is in the throes
of a major slowdown and is likely to grow by no more than
4.5 per cent in 1998-99, the independent agency said. It
also said the growth in 1997-98 was worse than estimated
earlier mainly due to a 5 per cent fall in agricultural
output during the year as against the earlier estimate of
about 3 per cent.
Industrial output continues to fall
NEW DELHI, Oct 13 Industrial production continued its poor performance in August recording a 2.4 per cent growth compared to 5.2 per cent in August last year.
Cumulative growth of industry during April to August this year, also fell sharply to 3.5 per cent from 5.5 per cent in the previous year, according to the latest figures of the Index of Industrial Production (IIP).
The cumulative growth in industrial production has been coming down consistently during the year from 5.4 per cent in April to June , to 4 per cent in April to July and to 3.5 per cent in April to August, the IIP released by the Central Statistical Organisation (CSO) today said.
The manufacturing sector, which accounts for almost four-fifth of the total weight of the IIP ( base : 1993-94 = 100) , recorded a growth of 2 per cent in August against 4.8 per cent during the same period last year. So far in the year, manufacturing sector recorded a growth rate of 3.2 per cent compared to 5.4 per cent in 1997-98.
The decline in industrial growth was also attributable to the lacklustre performance of the capital goods and consumer goods segment. Both these segments recorded negative growth rates during the month.
During April to August capital goods and consumer goods segments recorded a 4.8 per cent and 1.7 per cent respectively over the previous year.
The growth rate of basic
goods industry during the month marginally to 3.9 per
cent from 4 per cent in the previous year. The cumulative
growth during April to August was much lower at 3.4 per
cent compared to 6.9 per cent during the corresponding
period last year.
Law needed to check
LUDHIANA: Punjabs gullible investors may have been duped of an estimated Rs 1,000 crore by non-banking finance companies (NBFCs) during the past one year before closing shop and vanishing.
The figure for Ludhiana alone, is estimated to be between Rs 25 crore and Rs 30 crore, according to Mr K.C. Verma, General Secretary of the Punjab Investors Forum, which claims to represent thousands of people who, lured by the promises of fantastic returns, invested their hard-earned money in these NBFCs and are now making the rounds, of police stations and courts in the hope of recovering their investments.
Investors hail from all sections of society. They include small-time traders and shopkeepers, office-goers, factory owners, retired civil servants and former army officers and even migrant labour from Bihar and UP now working in the factories of Ludhiana. Many of the investors had a lot of black money which they handed over to these NBFCs. The dilemma facing these investors is that they cannot go to the police with their complaint nor can they leave the money altogether, says Mr Verma. So they come to us again and again and want us to lodge complaints and fight cases on their behalf in the courts.
Mr Verma regards the Ludhiana police figures of Rs 5.09 crore as concerns the money collected by the NBFCs in the megacity during the past one year or so as too conservative. Even small, ordinary companies managed to collect up to Rs 2 crore in Ludhiana. I myself lost Rs 20 lakh invested in Bharat Green Co. And there were so many NBFCs operating in the city. So you can well imagine that the actual figures as regards the amount lost by the investors of Ludhiana ... is much higher.
The NBFCs appeared on the scene after Dr Manmohan Singh and Mr P. Chidambaram set in motion the process of liberalisation of the Indian economy. The RBI while allowing operations by the NBFCs, failed to lay down guidelines and regulations for them. This encouraged many unscrupulous elements and fly-by-night operators to enter the scene and make a quick killing.
According to Mr Dinkar Gupta, Senior Superintendent of Police Ludhiana, there was a virtual mushroom growth of the finance and leasing companies in Punjab. They lured the people by offering them high rates of interest and attractive packages and schemes. Gullible and unsuspecting people got lured by the promises of high returns offered by the companies and deposited their hard earned savings with them. Many of the investors are small investors who have little clout in the financial markets. Many are pensioners and retired people who have invested their whole lifes savings only to see them go up in smoke.
Some of these companies include Ashma Finance and Investment Co., Nittl Finance Co., Greenways Project Ltd., JVJ Finance Co., Hoffland Finance Ltd., Red Rose Saving Ltd., Bharat Green Finance Co., Prudential Capital Finance Co., SPG Green Land Plantation Ltd., Antodaya Housing Construction Ltd., Bee El India Ltd., M/s Rockland Leasing Ltd.
Investors now have little chance of recovering their money, feels Mr Gupta, Even post-dated cheques issued by these companies have bounced. The investors have been approaching the police little realising that the best that the police can do in such a situation is to register a case, book the offenders and put up the case in courts for a judicial verdict. This offers but cold comfort to the investors as the action of the police hardly ever helps them to recover their money. The promoters of these companies, in the meantime manage to sell all the assets much before the court trial even begins....
Mr Gupta says that there is an urgent need to enact legislation by the Punjab Government to provide for deterrent action against the cheating NBFCs. Some states like Tamil Nadu and Maharashtra have already passed such legislation. Once a bill on the same lines is passed in Punjab, the State Government will have the powers to take the required action against chit fund operations, business concerns and individuals who float dubious schemes to lure the public.
The Punjab Government
appears to have finally woken up to the menace posed by
bogus finance companies. The Finance Minister, Capt
Kanwaljit Singh, says that the Government is seriously
considering enacting a legislation to exercise some
control on finance companies. At a recent meeting of
Finance Ministers convened by the Government of India,
this issue was discussed and it as decided to frame a
model piece of legislation which would be adopted by all
the states. It is only a matter of time before we
catch up with the dubious finance companies and bring
them to book, he says.
Bose Corp opens store
NEW DELHI, Oct 13
Audio technology major Bose Corporation has opened its
first retail store outside the USA in New Delhi in
Connaught Place, here. Its President Mr Sherwin
Greenblatt, told The Tribune, there are no plans to set
up a manufacturing base here. Some of the initial
products to be offered will be lifestyle music, home
theatre systems and acoustic wave music system priced
upwards of Rs 70,000.
Fiat to launch Siena in January
NEW DELHI (PTI): Italian auto giant Fiat Auto has decided to launch its mid-size car Siena in India in January next, ahead of its small car Palio.
Palio will be introduced in mid-1999 as the company has decided to enter the premium segment first, G. Ravina, Managing Director of Fiat India Auto Ltd (FIAL) told reporters here on Tuesday.
Both Siena and Palio are part of the world car series that include six vehicles sharing the same platform.
To be priced around Maruti Esteem, Siena would be available in both petrol and diesel versions.
NEW DELHI (UNI): Ind Auto Limited is all set to roll out a new variant of its popular hatchback Uno with power steering. Fiat India Automobiles Limited MD Gianni Ravina told newspersons here on Tuesday. Ind Auto is a 51-49 joint venture between FIAL and Premier Automobiles.
However, the company is not mulling over the idea of introducing a Turbo charged version of the vehicle. Riding on these new versions, the company expects to sell over 20,000 units in 1999.
NEW DELHI (PTI): Despite the recessionary trend in the domestic automobile industry, market leader Maruti Udyog has sold more than 2,000 Esteem cars in September this year. Esteems market share has increased by over 46 per cent in September, double than that of its nearest rival.
NEW DELHI, (PTI): Six major consumer finance companies have agreed to finance Daewoos small car Matiz, which is expected to hit the roads by month-end.
Finance arrangement falls within the existing agreement between Daewoo and these companies Bank of America, Citibank, Standard Chartered Bank, Countrywide Finance, Kotak Mahindra Capital Company (KMCC) and AVCO Finance.
LUDHIANA (TNS): Car sales appear to have become sensitive even to minor developments in the market. The sales of Opel Astra in UP took a nosedive for a couple of months after a businessman was murdered in his car at Lucknow by notorious gangster S.P. Shukla.
The son of a businessman
kidnapped a 14-year-girl in his car and was caught after
a hot chase by the police at Bathinda a few days ago. The
car sped through a blockade put up by the police, dashed
against a dhaba, a police Gypsy and raced through
vegetable farms before coming to a halt at a railway
level crossing. Positive publicity about
toughness of the car has helped boost its sales,
according to car dealers here.
31 pc hike in Zee net
MUMBAI, Oct 13 (PTI) Zee Telefilms Ltd (ZTL) has registered an 31 per cent increase in net profits to Rs 29.43 crore for the first half of this fiscal as against Rs 22.46 crore achieved in the corresponding period of the previous year. The company has recorded a 45 per cent increase in its sales and services, from Rs 55.89 crore in the first half of last year to Rs 80.99 crore in the first half of current year. Total income amounted to Rs 104.78 crore compared to Rs 77.77 crore in the same period of the previous year. The companys stock price has gone up by 148 per cent since April 1998 from Rs 258 to Rs 639 and the annualised earnings per share increased from Rs 24.4 in the first half of the last year to Rs 31.5 as on September 30, 1998.
Crisil downgrades IPCL
MUMBAI, Oct 13 (PTI) Credit rating information services of India Ltd (CRISIL) has downgraded the ratings assigned to the two non-convertible debenture (NCD) issues of Indian Petrochemicals Corporation Ltd (IPCL) from AA+ to AA-. The revision in ratings assigned to the Rs 1.28 billion NCD issue and Rs 0.75 billion NCD programme reflect increase in risk profile of the company.
Hind Org export house
MUMBAI, Oct 13 (PTI)
Hindustan Organics Chemicals Ltd (HOCL) has been
conferred the status of Export House, after
it recorded an export growth of 187 per cent at Rs 20.22
crore during the financial year 1997-98. HOCL, which has
been a leader of the Indian chemical industry for over
three decades, is expanding its horizon in the
Dave panel for ban on agro schemes
CHENNAI, Oct 13 (PTI) A ban on plantation companies which guarantee returns to investors in collective investment schemes (CIS) has been proposed by the Dave Committee on draft regulations set up to look into the agro plantation industry.
Highly-placed sources in the SEBI told PTI today that the committee, headed by former UTI Chairman S.A. Dave would present the draft regulations to the board on October 15.
If the recommendations are accepted by the market watchdog, it would mean that teak investment companies and other firms promoting agro schemes would be barred from indicating any returns on their schemes.
SEBI is likely to take a final view on the recommendations on October 15 and announce the regulations a few days later, sources said.
Advertisements for such schemes would be required to desist from making any promises on assured returns and make clear that the downward risk in investing in such schemes was open-ended.
SEBI had already barred plantation investment companies from accepting public investment without getting a credit rating for their collective schemes. It has prescribed a scale of one to five for these plans.
Sources in the plantation investment industry said the rating system had led to a controversy with regard to the methodology adopted by the rating agencies in finalising the credit rating of a collective investment scheme.
One of the earliest entrants to the field, sterling tree magnum (STM) had refused to accept the current rating method of Credit Analysis and Research Ltd (CARE) and as a consequence, was out of business for the past seven months.
Sensex to include IT stocks
MUMBAI, Oct 13 (PTI) The Bombay Stock Exchange has restructured its most popular index of 30 scrips (sensex) to include representation of the information technology (IT) sector, as well as to provide adequate representation to the pharmaceutical and oil and gas sectors.
The new index, to come into effect from November 16, will include Infosys technology, NIIT, Castrol and Novartis, while excluding Arvind Mills, Great Eastern Shipping, SAIL and IPCL.
The market cap of the new index at Rs 1,65,558 crore would now represent 34.5 per cent of the total BSE market capitalisation, compared to 33 per cent earlier, BSE Executive Director, R.C. Mathur said.
The decision was taken keeping in view the liquidity, market capitalisation, industry representation and performance of these scrips, he told a press conference here today.
Considering the need for continuity and co-reliability of an index, it was necessary to include the it industry which had outperformed the index over the past six months and also had long term prospects, he added.
Commenting on the index
committees decision to delete textiles and the
shipping industry, Committee Chairman and BSE Boverning
Board Member, Anand Rathi said, ten years ago these
industries formed a larger percentage of the market
capitalisation which is not the case today.
MUMBAI, Oct 13 (PTI) The following were interbank forex and RBI rates (in rupees per unit):
US $ Rs 42.33/34
The RBI reference rate was 42.38.
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