Monday, October 15, 2001, Chandigarh, India






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Car buyers wait for festival discounts
Ludhiana
The US attacks on Afghanistan coupled with the prevailing recession in most industries has badly hit the car sales in the region. In fact, a section of car buyers have deferred the purchase as they are expecting the announcement of cut in prices by the manufacturers or discount on the eve of Divali.

HOW I INVEST

Real estate gives good returns
Mr T. Singh is the owner of New India Rubber factory. He also acts as a technical adviser to several companies. This apart he also deals in real estate . Mr Singh , who has been running business for more than 45 years now says he started thinking about investment options (apart from his own business) only ten years ago. He spoke to TNS about his investment strategies.

IN THE WONDERLAND OF INVESTMENT

Q: I read with interest your write-up. I am not a Chartered Accountant. What most of the companies do is that they purchase the vehicles in the name of the company and pass on to executives. They use the driver of the company. After three years of the purchase, the cars are transferred in the name of executives.




EARLIER STORIES
 
CHECK-OUT

Booklet to guide you on textile purchases
I
n recognition of consumers’ right to information, the Textiles (consumer protection) Regulation, 1988, stipulates that the manufacturers provide on the faceplate (the front side of the fabric) of each piece of cloth, information that is vital to the consumer at the time of purchase.

CORPORATE NEWS

Hero Honda may pay 300 pc dividend
New Delhi, October 14
In a move which is sure to gladden the hearts of investors, Hero Honda Motors Ltd is likely to announce a special dividend of about 300 per cent, company officials said today.

  • Reliance
  • Hind Lever
  • Moser Baer

Profit booking at higher levels likely
T
he much-awaited attack on Afghanistan was launched last Sunday and as it was expected the world markets opened lower on Monday. Our own Bombay Stock Exchange (BSE) opened lower by about 70 points but recovered during the session to close down by 1.69 per cent at 2765 from previous Friday’s close.

  • Selling to begin
  • Results
  • Ranbaxy
  • ITC

Bharti to tie up Rs 1,500 cr debt
New Delhi, October 14
Telecom major Bharti Group would tie up Rs 1,500 crore debt by March 2002, and has already received in-principal nod from Financial Institutions (FIs) and banks, for the amount.
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Car buyers wait for festival discounts
Manoj Kumar
Tribune News Service

Ludhiana
The US attacks on Afghanistan coupled with the prevailing recession in most industries has badly hit the car sales in the region. In fact, a section of car buyers have deferred the purchase as they are expecting the announcement of cut in prices by the manufacturers or discount on the eve of Divali.

The sellers are also expecting that a cut in the interest rate by the end of October, by which time the RBI usually announces credit policy, would have a positive impact on the car sales. This is despite the fact that US dollar is getting stronger against the rupee and logically the price of vehicles with imported components should go up, but it is otherwise.

In fact, the entry of various new models in the car market has drastically hit the traditional market leader, Maruti, especially in the upper segments, though it still has the largest share in the lower segment. The Matiz, Santro, Tata- Indica have successfully made inroads in the lower middle and upper middle segments.

The market experts say that the total sales of cars in the Punjab is hovering around 30,000 annually. Most of the buyers still go for the Maruti-800, usually first time buyers graduating from the scooter and motorcycles usage. The sellers say that the buyers are not only demanding value for their money but are also considering factors like maintenance cost, family size, safety, spaciousness, sturdiness, after sales service, colour range and even the proximity of the company showroom. The recent cuts in interest rates by the banks and the good paddy crop are also expected to give a fillip to the car sales in the coming festival season.

Says Mr Ajay Sandhu, Managing Director, Sandhu Automobiles, “The consumers should consider various other points, besides his pocket, such as whether he is going to purchase a car for family purposes or business purposes, the daily average number of kms that he would run the car, whether it would be used within the city or outside the city limits, before making a decision to buy a car.” The experts say the car buyers should also consider factors of the required parking space, road conditions in the area, maintenance cost and accessories needed in the car.

The car market can be roughly divided into A, B, C, and D and further lower B and upper B, lower C and upper C categories based on market price. The segment A has Maruti 800 and Omni, which have maximum sales in the market, costing less than Rs 3 lakh. There are number of models in the B segment, costing up to Rs 5 lakh, such as Maruti's Wagon R, Zen and Alto, Fiat Palio, Daewoo Matiz, Hyundai Santro, Tata Indica and Ambassador. The cars up to Rs 3.5 lakh are considered in the Lower B segment, and those costing more in the Upper B Segment.

A survey of the local car dealers revealed that the Matiz has gained popularity in its segment. Mr Tarsem Lal Chandla, Executive Sales, Matiz showroom disclosed that about 40-45 cars were sold every month in the city alone. He said the consumers were preferring the Matiz due to its strong body, lower accident rate and good mileage.

Interestingly, the city market, which was dominated by Tata Indica till recently in this segment, has been replaced by Matiz, due to the large size of the Indica and greater cost of maintenance. The Fiat has also come up with four new models costing between Rs 3.5 lakh and Rs 5 lakh. The manufacturer claims that the car with a 1242 cc engine has all the modern accessories like AC, heater, centre locking and rear wiper.

Almost all the cars in this segment have 1000 cc engine and almost similar accessories. The Santro boasts of power steering an windows, central locking, rear wiper and internally operated petrol lid in its LS model. The GS model has additional features such as defoggers, fog lamps and wheel covers. The price difference between the two is about Rs 25,000.

In fact, Ludhiana has emerged as the biggest car market of the region only second to Delhi. Almost every car manufacturer has its showroom in the city, to offer wide choice to the buyers. The cut-throat competition between the bankers and the private finance companies have also made it easy for the buyer to finance a car. However, there is a big difference between the actual repayment despite similarities in the interest rates due to hidden costs charges by the financiers.

The models in segment C include Ford Ikon (Rs 6.5 lakh ), Maruti Esteem ( Rs 6.5 lakh) and Baleno ( Rs 7.7 lakh ), Opel Astra, Cielo and Honda city. The upper segment of D category is dominated by Mercedes E and S class. Number of industrialists in the city are buying these luxurious models. Mercedes Benz is priced at Rs 23 lakh for C class, Rs 33 lakh for E class and about Rs 57 lakh for S 320 model. The other entrants in the lower D class are Hyundai Sonata, Honda Accord Ford costing between Rs 12-18 lakh range.

Regarding the cost differences between Punjab and the neighbouring states, Mr Ajay Sandhu points out that thought the accumulated sales tax on cars in Punjab is 13.2 per cent as compared to 12 per cent in the neighbouring state of Haryana and others, however, due to government's restrictions and difficulty of getting registration numbers there, very few buyers go there.

Mr S.B. Aggarwal, Branch Manager, New India Assurance, who deals with the car insurance, cautions the buyers about the insurance costs also. He said, “The annual premium of the cars up to 1500 cc engine is around Rs 10,000 as compared about Rs 15,000 annual premium of the high value cars. The customers must take care about the chances of accidents, as some cars have shown greater probability of accidents in the region.”

Segment Models  Price (Rs)
(quoted by) dealers

A

Maruti-800 (Euro II)

2,22,662

 

Omni (8seater)

2,31,773

 

Matiz Non AC

2,93,000

B

Alto VX

3,63,551

 

Zen Euro II

3,47,552

 

Fiat Palio 1.2 ELPS

3,83,000

 

Tata Indica Non AC diesel

3,13,000

 

Tata Indica Petrol

3,27,000

 

WagonR LXI

3,66,207

 

Matiz AC

3,30,000

 

Matiz SA model

3,94,000

C

Maruti Esteem Euro II

5,49,000

 

Baleno Altura

8,24,919

 

Lancer Petrol

7,52,000

 

Lancer Diesel

8,06,000

 

City Honda (1300 cc) LX

6,31,000

 

City Honda (1500 cc)

7,97,000

D

City Honda Accord

15,73,000

 

Mercedes Benz

23,57,000


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HOW I INVEST

Real estate gives good returns

Mr T. Singh is the owner of New India Rubber factory. He also acts as a technical adviser to several companies. This apart he also deals in real estate . Mr Singh , who has been running business for more than 45 years now says he started thinking about investment options (apart from his own business) only ten years ago. He spoke to TNS about his investment strategies.

Initial Investments

I joined my father’s business in 1955. For quite a number of years, I used most of the business revenues for expanding the business only. So all these years, till around late 80s , PPF, an insurance policy and some bank deposits were the main investments. In real estate, however, which I always considered a good investment, I kept putting money . During these years I also started Indian Polymers (rubber component manufacturing company) for my son.

Equity Market

It was only in the 90s that started developing interest in the equity market. Initially I bought shares only on advise of my friends et al. Unimer (rubber polymer manufacturer), Kiran Overseas were among the few shares the value of which is either too low or are not even quotable.

However, later I started studying about companies and market trends. After that I bought shares like Indo Gulf, Reliance, Reliance Petro which have shown a substantial increase in value. My recent buys are ICICI, Satyam which I had earlier also and others including L&T, Tisco etc.

I strongly believe that share market is a gamble and one should invest only that amount which he thinks he can afford to loose. In case one has to invest then details about the company, its profits , the management of the company are the important aspects one must have a prior knowledge about. Then, one has to be in regular touch with the market.

Present Investments

Excluding my real estate investment, I have put roughly half of the money in the equity market and the remaining half in safe investments like debt related mutual funds etc.

I am not too much in favour of putting money in banks as the returns are very low keeping inflation factor and taxation in to consideration. Mutual Funds, bonds I feel are safe investments with good returns and save on tax as well. I have put some money in UTI tax free bonds and also in mutual funds like ICICI Prudential, HDFC, Templeton, Kothari Pioneer and IDBI.

Other Investments

Insurance, more than an investment should be considered as a security cover. Real Estate I feel, in the long run always gives good returns. I have earned profits even up to four-five times than my purchase price in real estate in a span of around 10 years. The safest investment which one must have is PPF.

My criterion of investing is that certain sum of money must be kept in safe and liquid investments . Risk should be taken cautiously and only if one can afford to loose.

(As told to Shveta Pathak)

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IN THE WONDERLAND OF INVESTMENT

by A. N. Shanbhag

Q: I read with interest your write-up. I am not a Chartered Accountant. What most of the companies do is that they purchase the vehicles in the name of the company and pass on to executives. They use the driver of the company. After three years of the purchase, the cars are transferred in the name of executives. Depreciation 20% first year, again 20% next year and again 20% and ultimately the value of the car will come down. The executives invariable have 2/3 cars and they go on changing. What is your opinion in the matter. The relatives of the Executives uses the car for days together and the expenses are debited to guest account.

— R. Narayan

A: Yes, I am aware of this practice. Since the car is sold at the book value, the cost of the company is nil and therefore this does not attract any perk. I have not understood the last part of your query. Normally the executives sell these cars in the secondary market and pocket the gains. The sale does not attract any tax not even capital gains since the term ‘capital asset’ does not include personal effects such as wearing apparel, furniture, air conditioners, refrigerators, motor cars, etc., held for personal use by the assessee or by any member of his family dependent on him.

Q: I intend to go to India on a long term (5 years) multiple entry Tourist Visa to spend some of my retirement years. I will be spending some of my savings from the USA while I will be living in India. I am planning to take Travellers Cheques in US$s to spend there. I am a US citizen and held Indian Passport before naturalisation.

What will be your opinion in my situation in terms of taxes in India? I realise I need to have Income Tax Clearance from Indian Authorities before departing from India. I will greatly appreciate your comments.

— Lal C Vishwakarma

A: The funds you would be bringing into India are of capital nature and persume you will not be taking up a job here in India. Therefore you will be out of the tax net. Obtaining the tax clearance certificate would not pose much of a problem unless your investment income from taxable avenues crosses Rs 50,000 mark.
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CHECK-OUT

by Pushpa Girimaji

Booklet to guide you on textile purchases

In recognition of consumers’ right to information, the Textiles (consumer protection) Regulation, 1988, stipulates that the manufacturers provide on the faceplate (the front side of the fabric) of each piece of cloth, information that is vital to the consumer at the time of purchase.

Accordingly, the fabric should provide the name and address of the manufacturer, description of the cloth (shirting, suiting, etc) sort number, length in metres and width in cms, month and year of packing, besides the exact composition of the cloth expressed in percentage by weight of each constituent. And in case of blended fabrics, the stamping should give the percentage by weight of each component in descending order.

That is, suppose the total yarn content of the fabric is cotton, then the label should say 100 per cent cotton. If on the other hand, it is made up of more than one kind of yarn, then the marking should clearly say that it is a blended fabric and give details of the blend. Suppose it contains 25 per cent cotton, 40 per cent polyester and 35 per cent viscose, then it should give these details thus: polyester 40 per cent, viscose 35 per cent and cotton 20 per cent.

Every alternate metre of the fabric should also give this information on the composition of the fabric on its selvedge, so that a consumer can read it easily. The regulation also requires the faceplate to contain information on the colour fastness of the fabric. It must say whether it is “fast to normal washing” or “not fast to normal washing”. If the cloth has undergone any special finishing processes, such as “pre-shrunk”, “mercerised”, “crease-resistant”, “anti-static” etc, it should say so. If the fabric is defective, then it should also indicate it with words such as “seconds” or “damaged piece” or “defective piece”. In fact this information too is required to be mentioned on every alternative metre of the cloth.

But unfortunately, consumers, for whose benefit or protection this regulation has been introduced, are mostly unaware of it and as a result, very few make use of it. Of course a consumer looking at the label should also be able to understand the terms used. As against cotton, silk and wool, which are natural fibres, for example, rayons (viscose rayon, cuprammonium rayon and acetate rayon) are man-made fibres, but obtained from natural organic raw materials (cellulosic-based fibres). Nylon, polyester and acrylic, on the other hand, are man made synthetic fibres. All these fibres have certain disadvantages and advantages. While natural fibres and man-made cellulosic-fibres or fabrics made out of them, for example, are hydrophilic, non-cellulosic synthetic man-made fibres are hydrophobic. Then there are also textile processes and finishes that attempt to overcome the disadvantages of these fibses.

Without some of this basic knowledge about textiles, reading the label would be of limited use. Then there are also problems that a consumer may encounter such as misbranding. Mercerisation, for example, is a process of treating the fabric with a strong solution of sodium hydroxide. Mercerisation increases the luster of the fabric, improves its strength and also gives it a greater affinity towards dyes. However, manufacturers are known to use terms such as “mercurised”, “mercorised” to mislead consumers into thinking that the cloth is mercerised. And like all other products, in textile too, there are counterfeits or imitations of well-known names in the industry.

In fact a year after the Textile Regulation came into being, Lady Irwin College, New Delhi, conducted a study involving 100 MIG families, 50 shopkeepers and 100 fabrics. The results showed that the awareness of consumers about the markings was very low and so also their understandings of various textile terminology. The study also found 49 per cent of the markings to be confusing, misleading or fraudulent.

Well, if all this is making you wonder how you are going to cope your textile purchases, here is some good news. The Department of Textiles and Clothing, Lady Irwin College, in collaboration with the Textiles Committee, Ministry of Textiles, has come out with a ready reckoner on textiles for consumers, incorporating information that would help consumers make an informed choice. Besides explaining certain commonly used terms in textiles, the booklet gives useful tips for buying different kinds of fabrics, explains how to maintain them, and in short provides a brief, yet complete guide to consumers of textiles. It also tells you where and how to get redress in case of a problem.

The booklet is in fact the outcome of a research project taken up by one of the post-graduate students of the college, which revealed the low awareness level of consumers vis-a-vis textiles even today. Hopefully, the Textiles Committee, which takes up consumer awareness programmes, will make available the booklet to all consumers. It would also help to get it translated in all regional languages. The address of the Textiles Committee, Ministry of Textiles, is 79, Dr Annie Besant Road, Worli, Mumbai-400018. Website: www.textilescommittee.nic.in
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CORPORATE NEWS

Hero Honda may pay 300 pc dividend

New Delhi, October 14
In a move which is sure to gladden the hearts of investors, Hero Honda Motors Ltd is likely to announce a special dividend of about 300 per cent, company officials said today.

The country’s largest motorcycle maker may also hike the minimum limit for FIIs to 30 per cent from the current 24 per cent, which would be taken up in its board meeting on October 17, the officials said.

Reliance

Reliance has requested government to approve immediately a joint venture with Indian Oil Corporation to market petroleum products from its Jamnagar refinery in the deregulated oil market from April 1, 2002.

Apart from marketing of about nine million tonnes through the proposed JV, awaiting government nod for well over a year, reliance petroleum has also asked for approval of a marketing agreement for sale of products worth about seven million tonnes directly by IOC, sources said.

Hind Lever

Hindustan Lever Limited chairman M.S. Banga has said the Board of Directors of his company would finalise the decision to issue bonus debenture in the “best interest of the share holders” at its meeting on October 16.

Talking to newspersons here yesterday after the inauguration of the HLL 30,000 tonne plant for manufacturing detergent powder at an investment of Rs 40 crore, he said the debenture was very good for the share holders because “the bonus share does not really benefit them.”

Moser Baer

Data storage company Moser Baer India Ltd (MBIL) will invest $ 100 million in the coming months for the completion of its optical media project by March 2002, which will make the company the third largest producer globally.

“Out of the estimated investment of $ 210 million, $ 110 million has already been exhausted during the first and second phase of the project. Agencies
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Profit booking at higher levels likely
Lalit Batra

The much-awaited attack on Afghanistan was launched last Sunday and as it was expected the world markets opened lower on Monday. Our own Bombay Stock Exchange (BSE) opened lower by about 70 points but recovered during the session to close down by 1.69 per cent at 2765 from previous Friday’s close. The recovery in the markets started during the middle of the week when Hindustan Level Ltd (HLL) and Infosys Technologies surprised the markets with a debenture bonus issue and excellent results respectively. HLL on Tuesday declared a bonus issue in lieu of dividend. The bonus issue will be in 1:1 ratio. These debentures, of face value Rs 6 will carry interest at the rate of 9 per cent, will be redeemed at par in two equal instalments. It is an excellent financial innovation where the company has traded its reserves for debt. Moreover a bonus issue would have enlarged the company’s equity base which could have posed problems for the company in the long run. But the company has definitely enhanced the shareholders value in the process, which is the motive of any company. Infosys on the other hand beat the market expectations when it declared a 31 per cent increase in its second quarter profit to Rs 202 crore. For the period ended September 30, 2001 the company declared a total revenue of Rs 650 crore against Rs 446 crore for the same period last year.

Selling to begin

The news from HLL and Infosys provided the much-needed spark in an otherwise lacklustre market and the market moved northwards from Wednesday onwards to close the week at 2959-up by 5.2 per cent for the week. The sentiment in the market has improved considerably on the back of rise in Nasdaq, but a further rise should be used as an opportunity to book profit than to take long position. The immediate resistance for the sensex is 2966, 3005 and 3030. The support levels for the index are 2903, 2836, 2772.

The short-term rally, which has lasted for three weeks, may be nearing an end in terms of time. A failure to move above 2966 on Monday would confirm the beginning of the downtrend. We could see some selling in tech sector as profit taking sets in.

Results

As for other results, Ranbaxy declared second quarter ended September 2001, the bottom line of the company posted a growth of 68 per cent to Rs 89.1 crore, swelled up by the extraordinary income arising from the sale of company’s stake in Eli Lilly. Top line registered a growth of 16 per cent to Rs 553.5 crore. On the other hand Hughes Software system (HSS) shocked the markets with a huge fall in the profitability for the second quarter ended Sep 2001. HSS posted a massive 52 per cent fall in PAT to Rs 6.3 crore although sales increased 21 per cent to Rs 53.6 crore.

The management has taken measures to align the costs in line with the revised top line projections to improve the bottom line. The company is also diversifying into other areas of telecom services. One of HSS’ early engagements, in this direction, is the Centre of Excellence for building peer to peer broadband communications applications for the Hughes Spaceway program.

This initiative will develop a strong team to learn and develop applications in this growing segment. Television Eighteen India (TV 18) has posted a net profit of Rs 1.35 crore for the quarter ended 30 Sept 2001 compared to a net loss of Rs 6.52 crore for the quarter ended 30 Sept 2000. Total income for the quarter ended September 30, 2001 is at Rs 9.95 crore.

Ranbaxy

Pharma major Ranbaxy, which had soared to Rs 691 during the week, declined to Rs 650 levels after the results. A close look at Ranbaxy’s results reveal that the company had improved its operating performance, which has more than offset the decline in its non-operating performance. The stock is still in bullish mode and a short-term position can be taken with a stop loss. The immediate resistance for the stocks is at Rs 670 and Rs 694. The support is at Rs 640 and Rs 625.

ITC

ITC, which started sliding when the news of ITC Bhadrachalam was announced, was in recovery mode this week. The uptrend may continue for some more time till the stock hits Rs 700 levels. The immediate resistance for the stock is at Rs 657 and Rs 671. A move above Rs 671 will take the stock all the way to Rs 700.

(The view expressed in the article are that of author and not that of the company that he represents)
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Bharti to tie up Rs 1,500 cr debt

New Delhi, October 14
Telecom major Bharti Group would tie up Rs 1,500 crore debt by March 2002, and has already received in-principal nod from Financial Institutions (FIs) and banks, for the amount.

“We expect to tie up at least Rs 1,500 crore debt in the current financial year as part of our plans to raise about Rs 3,000 crore debt over the next three to four years,” Bharti sources told PTI.

Stating that tying up of Rs 1,500 crore debt would be sufficient for the company to fund its expansion plans in the first phase, sources said that the group had initiated discussions with various banks and Financial Institutions (FIs) and received in-principal nod for the amount.

“We see no problems in tying up the specified amount in the current fiscal,” sources said while declining to name the banks and FIs that the company has established a dialogue with.

Sources pointed out that the proposed debt would be “long term”.

The company had recently estimated the total cost of expansion in various telecom segments at about Rs 6000 crore over the next few years, and the proposed Rs 3000 crore debt during the period was aimed at supporting part of the expansion plans.

The balance Rs 3000 crore has already been tied-up by Bharti through equity.

In May this year, the company announced it had received additional equity investment of $ 460 million from various global partners including $ 200 million each from Singapore Telecom and Warbug Pincus. PTI
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BIZ BRIEFS

Inflation falls
New Delhi, October 14
Overcoming the sharp rise in vegetable prices, inflation plummeted to year’s lowest level of 3.32 per cent as against 7.77 per cent in the comparable period of 2000 due to steep fall in prices of food articles. The week ended September 29 also saw a whopping fall of 1.54 per cent, the sharpest decline in many years, in the point to point inflation based on wholesale price index (WPI) with 1993-94 as base year. PTI

IA awards
Chandigarh, October 14
Hargobind Travels of Chandigarh won the best agent award for the third consecutive time at the annual awards function of Indian Airlines here last night. Mr Ashok Gulani, Deputy General Manager (Marketing) , presented the award. Other award winners in the domestic sales were Bajaj Travels and Amrit Airlinks while for the international sales, Bajaj International got the first prize and Khanna Enterprises the second. TNS

Coca-Cola
New Delhi, October 14
Coca-Cola India today announced expansion of its soft drinks product portfolio with the launch of energy drink ‘Shock’ from next week. PTI
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