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HUTCH-ESSAR DEAL
Vodafone disconnects other bidders with $19 b offer
London/Mumbai, February 11
British telecom giant Vodafone today emerged the top bidder for majority stake in India's fourth largest mobile venture Hutch-Essar with an offer of about $19 billion (Rs 85,000 crore) and proposed to partner Essar in the joint venture.

A woman walks past a Hutch advertising hoarding in New Delhi. British telecom giant Vodafone on Sunday night emerged the top bidder for majority stake in India’s fourth largest mobile venture Hutch-Essar with an offer of about $19 billion (Rs 85,000 crore) and proposed to partner Essar in the joint venture. — AFP

A woman walks past a Hutch advertising hoarding in New Delhi.

 

EARLIER STORIES

 
Workers get ready to welcome customers at the new casino Grand Lisboa Casino in Macau on Sunday.
Workers get ready to welcome customers at the new casino Grand Lisboa Casino in Macau on Sunday. Billionaire gambling king Stanley Ho celebrated the long-awaited opening of his casino — a gleaming gold complex that is Ho’s biggest response to American rivals who have stormed into Macau and seized big chunks of the gaming market. — AP/PTI

Birlas acquire Novelis for $6 b 
Mumbai, February 11
The Aditya Birla Group today announced a $6-billion acquisition of US-based Novelis, a deal that would make it the world's largest rolled aluminium producer, adding another feather to India Inc after the Tatas' takeover of Corus.

India Inc to hold prices, says survey
New Delhi, February 11
India Inc is not expected to increase output prices following the rise in input prices, giving respite to the common man, who is feeling the brunt of inflation, which rose to two-year high of 6.58 per cent.

HDFC Bank ups PLR to 14 pc
Mumbai, February 11
Leading private sector lender HDFC Bank has hiked its prime lending rate (PLR)."We have hiked our PLR by 100 bps from 13 to 14 per cent," the bank's Head (trading) Ashish Parthasarathy said here yesterday.

DLF IPO to be Asia’s largest equity deal
New Delhi, February 11
When real estate giant DLF hits the capital market with its IPO later this year, it might write a new chapter in the booming IPO market by becoming Asia's biggest equity deal of 2007.

First chip-design facility
Kolkata, February 11
The first integrated chip design facility in India will come up at the Salt Lake electronics.

BSNL may rope in Preity Zinta
New Delhi, February 11
BSNL is considering to rope in Bollywood actress Preity Zinta as its brand ambassador.

Tax Advice
Interest on PO savings account exempt
by S.C. Vasudeva
Q. Is post office savings bank account interest exempt under the Section 10(15(i) (Nabbi’s Income-tax Mini Ready Recknor for 2006-07) page 123? Is it in addition to exemption under the Section 88C of Rs 1 lakh or is included in that limit.

Market Update
Inflation may spoil the party
by Lalit Batra
Amidst heightened volatility, the markets closed last week with marginal gains. Sensex closed last Friday at 14,538.90, gaining 135.13 points over the previous week’s closing. Nifty closed marginally in the green with a gain of 3.9 points over the previous week’s closing. Mid-cap and small caps took a beating last week. 

 

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Hutch-Essar deal
Vodafone disconnects other bidders with $19 b offer

London/Mumbai, February 11
British telecom giant Vodafone today emerged the top bidder for majority stake in India's fourth largest mobile venture Hutch-Essar with an offer of about $19 billion (Rs 85,000 crore) and proposed to partner Essar in the joint venture.

“Vodafone offer values Hutchison Essar at around $19 billion. This is a good price which reflects the premium position of Hutchison Essar as India's leading operator,” Essar, which holds 33 per cent stake in the venture, said in a statement.

Vodafone, which is yet to announce the acquisition, has offered to partner Essar, on which the Indian conglomerate said: “We are at the moment evaluating all our options in the best interest of the group.” Vodafone pipped Anil Ambani Group's Reliance Communications, a consortium led by Hindujas and Essar, whose top brass is in London presumably talking to the British telecom giant.

While, the winner emerged after a board meeting of HTIL, which is yet to make an announcement, the process of declaring the highest bidder got delayed till Essar, which had asserted its right of first refusal along with its bid, mulled various options in its agreement with the foreign partner.

Vodafone was the first to announce its intention to acquire controlling stake in Hutch-Essar after HTIL put its stake on the block in December. India born CEO of the British giant Arun Sarin had come to India last month to discuss regulatory and other issues to the deal and held meetings with the finance, commerce and telecom ministers.

During his visit, Mr Sarin had said he was open to partner Essar and described the Indian conglomerate as natural ally because of their stake in Hutch-Essar.

Earlier in the day, the Board of Directors of HTIL at their meeting in Hong Kong discussed the four bids for its 67 per cent stake put on the block late in 2006.

If Essar decides to sell its stake by exercising the tag-along right, it could fetch the company over $6 billion.

Hutchison Telecom first announced in December last year that it had been approached by various bidders for acquisition of its stake in the Indian venture. This was followed by announcements by Vodafone, Reliance Communications, Essar Group and Hindujas expressing their interest in the acquisition.

The winner emerged at the Hutchison Telecom Ltd’s Board Meeting at Hong Kong convened for considering the four bids for its 67 per cent stake put on the block late in 2006.

Essar said in a statement that in response to Vodafone’s announcement about acquisition of 67 per cent of equity stake in Hutchison Essar from Hutchison that “this is a good price (Vodafone's offer)...”

The group Vice-Chairman Ravi Ruia, who is camping in London along with chairman Shashi Ruia's son and group director Prashant Ruia, said: “Essar Group is a strategic player in the infrastructure development in India and neighbouring countries.” “Telecommunications is a core business for Essar group and we continue to create value in this sector both within India and globally,” he added.

There were unconfirmed reports that Hindujas could have made a bid of about $20 billion, higher than that of Vodafone, but did not any response from HTIL. — PTI

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Birlas acquire Novelis for $6 b

Mumbai February 11
Corporate giant Aditya Birla Group today announced a $6 billion acquisition of US-based Novelis, a deal that would make them the world’s largest rolled aluminium producer, adding another feather to India Inc after Tatas’ takeover of London-based steel giant Corus.

Announcing the acquisition by Hindalco in an all-cash deal, group chairman Kumar Mangalam Birla said this would make the domestic copper and aluminium giant enter the elite Fortune 500 list three years ahead of target.

Mr Birla said the deal, which is expected to close in the second quarter of 2007, would double Hindalco’s turnover immediately.

Hindalco plans to fund the transaction with $2.4 billion through debt facilities.

The Hindalco-Novelis combine, which would have a current market capitalisation of over $7.5 billion, would propel Hindalco to become world’s largest aluminium rolling company, one of the biggest producer of primary aluminium in Asia and India’s leading copper producer.

Novelis currently operates in 12 countries and has employee strength of over 12,000.

Mr Birla said: “The acquisition of Novelis is a landmark transaction for Hindalco and our group. It is in line with our long-term strategies of expanding our global presence across our various businesses and is consistent with the vision of taking India to the world.” The combination would establish a global integrated aluminium producer with low-cost alumina and aluminium production facilities combined with high-end aluminium rolled product capabilities, Mr Birla added.

Novelis’ acting CEO Ed Blechshmidt said in a statement that the board unanimously agreed that the deal delivers outstanding value to the company’s shareholders.

Hindalco’s Managing Director Debu Bhattacharya said there are significant geographical market and product synergies and the acquisition would give the company immediate scale and a global footprint.

The two companies said in a joint statement that the deal was unanimously approved by respective boards and the closing of the transaction was not conditional on Hindalco obtaining financing.

The acquisition marks India Inc’s biggest acquisition in the North American market. Post acquisition, the combined turnover of the group will increase to around $20 billion, a target which it will be achieving three years ahead of schedule. — PTI

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India Inc to hold prices, says survey

New Delhi, February 11
India Inc is not expected to increase output prices following the rise in input prices, giving respite to the common man, who is feeling the brunt of inflation, which rose to two-year high of 6.58 per cent.

A majority of the 320 companies, surveyed by the Federation of Indian Chambers of Commerce and Industry (FICCI), have said although rising input prices are a matter of concern, they will continue to absorb it rather than passing the burden on to consumers.

The Third Quarterly Business Confidence Survey for the current fiscal, revealed a weak outlook on investments due to spiralling capital goods prices coupled with the rising cost of credit. The investment index plunged from 50 in the previous quarter to 39 this time. “Lower investments in the near future may have a long-term impact of slowing down the economy,” the survey cautioned. Only 45 per cent of the respondents expected higher investments to take place, in comparison to 54 per cent in the last survey.

The overall business confidence index, however, rose three points to 75, as against 72.1 the previous quarter. This was due to the strengthening economic profile of the country, the report said.

The sales index registered a two-point increase from 74 the previous quarter to 76 this quarter with nearly 78 per cent of the firms reporting higher to much higher sales over the next six months.

The survey indicated the government’s move to undertake reduction in customs duty on items used as industrial inputs and as capital goods was on the right track. — UNI

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HDFC Bank ups PLR to 14 pc

Mumbai, February 11
Leading private sector lender HDFC Bank has hiked its prime lending rate (PLR).

"We have hiked our PLR by 100 bps from 13 to 14 per cent," the bank's Head (trading) Ashish Parthasarathy said here yesterday.

One of the main reasons for upping the PLR with effect from last Saturday was the cost of funds going up for the bank in line with the trend in the banking industry, he said.

With the RBI taking recourse to monetary tightening to combat inflation, the cost of funds has increased across the banking industry.

Earlier, private sector lenders ICICI Bank and Yes Bank had also hiked their PLRs. — PTI 

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DLF IPO to be Asia’s largest equity deal

New Delhi, February 11
When real estate giant DLF hits the capital market with its IPO later this year, it might write a new chapter in the booming IPO market by becoming Asia's biggest equity deal of 2007.

There are equity deals worth about $30 billion in the pipeline for this year across all Asian markets.

Among all Indian deals in pipeline for this year, the biggest is from DLF, which is estimated to raise over Rs 11,500 crore after a failed attempt in 2006.

The deal is set to become India's biggest ever public offer, but could be outsmarted by SBI, which is mulling over a follow-on offering worth about Rs 12,000 crore. — PTI

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First chip-design facility

Kolkata, February 11
The first integrated chip design facility in India will come up at the Salt Lake electronics.

The proposed `Indian Design Centre' will be a high-rise building to house research fabrication activity, training and incubation centres and offices of the companies, West Bengal Information Technology minister Debesh Das said. "If we could put the right infrastructure in place, a number of companies have expressed willingness to set up shop here," Mr Das said. — PTI

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BSNL may rope in Preity Zinta

New Delhi, February 11
BSNL is considering to rope in Bollywood actress Preity Zinta as its brand ambassador.

PSU sources said no agreement had been signed yet. BSNL, with a subscriber base of over five crore, has off late been very aggressive in its marketing exercise in order to shed the typical PSU image and be seen as a lively brand for all categories of users.— PTI

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Tax Advice
Interest on PO savings account exempt
by S.C. Vasudeva

Q. Is post office savings bank account interest exempt under the Section 10(15(i) (Nabbi’s Income-tax Mini Ready Recknor for 2006-07) page 123? Is it in addition to exemption under the Section 88C of Rs 1 lakh or is included in that limit.

— Dr Manmohan Singh,Tarn Taran

A. The interest on post office savings account carrying interest @ 3.5 per cent, which is credited annually is exempt under the Section 10(15)(i) of the Act. I may point out that Section 88C of the Act has been withdrawn by Finance Act, 2005 wef April 1, 2006. Section 80C of the Act now provides for a deduction of Rs 1 lakh from the total income provided an assessee who is an individual or HUF, has during the previous year relevant to the assessment year, paid or deposited various amount as specified in the said section.

LTC for pensioners

Q. The Punjab Government pensioners are paid their basic pension in the form of travel concession (called LTC) after every two years. If a pensioner avails travel concession in July, 2006, should he utilise the same in the financial year 2006-07 & 2007-08 so as to avoid tax thereon?

— B.R. Sharma, Amritsar

A. `The amount exempted under Clause (5) of Section 10 of the Income-tax Act, 1961, (the Act) read with Rule 2B of the Income-tax Rules 1962, in respect of the value of travel concession or assistance received by or due to an individual from his employer or former employer in connection with his proceeding:

(a) on leave to any place in India.

(b) to any place in India after his retirement from service or after termination of his service.

Shall be the amount actually incurred on the performance of such travel subject to the following conditions:

(i) Where the journey is performed on or after the October, 1, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination;

(ii) Where places of origin of journey and destination are connected by rail and the journey is performed on or after October 1, 1997, by any other mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and

(iii) Where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after October 1, 1997, between such places, the amount eligible for exemption shall be -

(a) Where a recognised public transport system exists, an amount not exceeding the first class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and

(b) Where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.

The exemption referred to hereinabove is available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986. You can thus avail the exemption for the amount received for the travel concession obtained in July, 2006, subject to the conditions specified above, in the financial year 2006-07.

Revised return

Q. I have invested in SCSS 2004. I am below 65. I have included the interest income of financial years 2004-05 in my Income Tax return of Assessment Year 2006-07. The post office of my deposit has deducted TDS @ 10.2 per cent from the interest income up to date for 2006-07 only, but only for the time being. Kindly advice as to how to avoid double taxation at the hands of Post Office authorities as I have already been assessed for these incomes of financial years 2004-05 and 2005-06?

— V.S. Seth, Ambala Cantt

A. The tax deduction at source in respect of interest income pertaining to the financial year 2004-05 and 2005-06 can be claimed by filing a revised return for the aforesaid assessment years before March 31, 2007. You should be able to get the refund in respect of the aforesaid financial years even if the return has been processed under the Section 143(1) of the Act. In case you have been issued a notice under the Section 143 (2) of the Act for scrutiny assessments you can tender your claim during the course of the assessment. I may add that by ‘assessment’ you possibly mean that your return has been processed under the Section 143(1) of the Act.

ULIP amount

Q. I joined ULIP in 1991 for a target amount of Rs 60,000 and the annual contribution was Rs 4,000 for a period of 15 years. Now, the ULIP matured in February 2006, and I have received a maturity cheque of Rs 1,60,661.14. The statement of account provided by the UTI shows Rs 29,031.45 as long-term gains and Rs 4,500.01 as short-term gains. How much will be my tax liability on the said amount i.e., Rs 1,60,661.14? I am already an Income Tax assessee.

— Ashok Kumar, Panchkula

A. The tax liability in your case would arise in respect of long-term capital gain of Rs 29,031.45 as well as in respect of the short-term capital gain of Rs 4,500.01. This is on the presumption for the dividend declared by the Unit Trust was declared in your income tax return for the years for which ULIP had been subscribed for.

Severe disability

Q. I am employee of HPSEB and my son has been declared permanent disabled by the medical board with 75 per cent disability, who is suffering from spastic deplegia - cerebral palsy disease.

As in the reply of the question of Mr S.S. Bhatia (Ludhiana) in the “The Tribune” of dated 13.03.2006 under the heading “Tax Advice” your good self has mentioned that in case of a person with more than 70 per cent permanent disability, the aforesaid maximum limit (Rs 75,000) is not reduced in this Budget 2006-07. But it is brought to your kind notice that only those who are suffering from severe disability are eligible for Rs 75,000 deduction and severe disability under the Clause (O) of Section 2 of National Trust for Welfare of persons with autism, cerebral palsy, mental retardation and Multiple Disabilities Act, 1994 (44 of 1999) state that “severe disability” means disability with 80 per cent, or more of one or more of multiple disability.

So you are requested t clarify whether I am entitle for deduction for non-taxable income of Rs 50,000 or Rs 75,000 (on behalf of my son).

— Satya Paul Vasistha, Dist Mandi (HP)

A. In case your son is not suffering from severe disability which means disability of 80 per cent or more multiple disability, the deduction allowable to you would be limited to Rs.50,000. It seems you have not carefully looked into my reply to the query of Mr S.S. Bhatia. The query was with reference to the non-taxable limit of total income. The reply was, therefore, with reference to the non-taxable limit only. The reply nowhere stated that a person with 70 per cent disability would be entitled to a deduction of Rs 75,000.

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Market Update
Inflation may spoil the party
by Lalit Batra

Amidst heightened volatility, the markets closed last week with marginal gains. Sensex closed last Friday at 14,538.90, gaining 135.13 points over the previous week’s closing. Nifty closed marginally in the green with a gain of 3.9 points over the previous week’s closing. Mid-cap and small caps took a beating last week. The BSE mid-cap index was down 53.41 points to end Friday at 6,064.79 and the BSE small cap index closed at 7,490, down by 71 points over the previous week’s closing.

Last week, the stock to watch out was Punjab Tractors Limited (PTL). PTL gained over 36 per cent amid reports that several auto companies were interested in bidding for private equity firm Actis’ 29 per cent stake in the firm. The Tatas and the Mahindra & Mahindra group are reportedly among the major bidders for the private equity firm’s holding in the Mohali-based tractor unit.

Inflation, that has hit a two-year high, prompted the sell-off on bourses last Friday. The RBI, which may take monetary steps (like a further hike in the CRR) to rein in inflationary pressures, will lead to on increase in the lending rates. This may spoil the bullish mode in the short run.

Idea Cellular

Idea Cellular is part of the Aditya Birla group and is the sixth largest wireless operator in India with an 8.5 per cent market share. It currently operates in 11 circles. The present operations of Idea Cellular in 11 of the total 23 circles cover 57.7 per cent of India’s population and about 57.9 per cent of India’s current subscriber base. The company had 12.44 million subscribers at the end of December, 2006.

Recently, Idea Cellular was awarded a national long-distance (NLD) licence by the Department of Telecommunications. It will set up the NLD network by March, 2008. To fund this expansion plan, Idea Cellular has lined up a public issue to raise Rs 2,125 crore (excluding the greenshoe option) at a price band on Rs 65 to Rs 75.

Idea Cellular has received UAS licences for Mumbai and Bihar circle. Soon, it will launch its services in these circles. As the mobile penetration level in Bihar is quite low, there is good growth potential for the company. The company’s NLD licence will allow the company to carry intra-circle as well as inter-circle traffic on its own network, resulting in saving of significant carriage charges that the company currently pays and reduction in operating costs.

Industry prospects

The Indian telecom market, including GSM and CDMA, is one of the fastest growing in the world, adding nearly six million subscribers a month. Mobile subscribers are estimated to increase to approximately 210 million by March, 2008, from 146.54 million subscribers in December, 2006. Factors like falling handset costs, attractive tariffs and extensive reach have reduced the entry barriers for new subscribers and, thus expanded the market available to telecommunication service providers.

Given the above factors, investors may apply at “cut-off” in Idea’s IPO, which is open from February 12 to February 15.

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