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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

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B U S I N E S S

Pranab promises to lower credit costs
New Delhi, May 27
Union Finance Minister Pranab Mukherjee addresses a press conference in New Delhi on Wednesday. Concerned over high credit cost and availability of funds, Finance Minister Pranab Mukherjee today said he will ask banks for a "benign plan of action" while committing to stimulate economic growth by stepping up public expenditure and speeding up reforms.


Union Finance Minister Pranab Mukherjee addresses a press conference in New Delhi on Wednesday. A Tribune photograph

Sensex zooms 520 pts, regains 14,000 level
Mumbai, May 27
A stockbroker talks on the phone as he works at his terminal at a brokerage firm in Mumbai on Wednesday. The Sensex made a sharp upmove in the last hour of trading today on the back of global cues that showed increased optimism. The benchmark index was up by more than 520 points to close at 14,150

A stockbroker talks on the phone as he works at his terminal at a brokerage firm in Mumbai on Wednesday. — AFP



EARLIER STORIES



Bharti-MTN deal may be biggest in telecom space
Sunil Bharti Mittal New Delhi, May 27
At a time when the world is seeing a downturn, the bold step taken by Sunil Bharti Mittal-led Bharti Airtel of exploring the merger with South Africa’s telecom giant MTN, has generated excitement in the market.

Kingfisher, Jet to start code-share flights
Mumbai, May 27
Six months after entering into a strategic alliance, Jet Airways and Kingfisher Airlines will soon launch code-share flights on select routes. "We are in discussions with Jet Airways on code-sharing on certain routes," a Kingfisher Airlines spokesperson told PTI here today.

US may own 70% stake in GM
New York, May 27
The US government may own 70 per cent stake in the restructured General Motors, the ailing auto maker which is battling to avert a possible bankruptcy.

ONGC shelves plan to build greenfield unit
New Delhi, May 27
State-run ONGC has shelved plans to build a new 15-million tonne refinery adjacent to its subsidiary Mangalore Refinery and Petrochemicals Ltd, Chairman R S Sharma said today.

RIL strikes more gas in KG basin
New Delhi, May 27
After D6 in Krishna Godavari basin, Reliance Industries has struck big in two nearby blocks with estimates putting in place natural gas reserves at 20 trillion cubic feet.

Rajus’ remand extended by 14 days
Hyderabad, May 27
The disgraced former chairman of Satyam Computers, B Ramalinga Raju, and seven others accused in the Rs 7,800-crore fraud in the software giant will remain in jail till June 10 with a local court here extending their judicial remand.

Introduce credit linkage facility: RBI panel
Chandigarh, May 27
The RBI has expressed its displeasure that the financial literacy and credit counselling centres (FLCCs) are becoming extensions of the banks, promoting the financial products of the banks. Instead, these centres should help in financial inclusion by providing financial counselling, educating people about financial products and help to formulate debt restructuring plans for borrowers in distress.

 





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Pranab promises to lower credit costs

New Delhi, May 27
Concerned over high credit cost and availability of funds, Finance Minister Pranab Mukherjee today said he will ask banks for a "benign plan of action" while committing to stimulate economic growth by stepping up public expenditure and speeding up reforms.

"Industry and business have been hurt by the cost of finance and its easy availability... the cost and the speed with which finance can be accessed remains a matter of concern.

"One of the first steps I propose to take is to meet bankers and get them committed to a more benign plan of action," Mukherjee said at his first press conference since taking charge as Finance Minister earlier this week.

Listing out the concerns and constraints being faced by the economy, he said there was no alternative to pushing up growth in tandem with employment for which the government is willing to increase its borrowings.

"Let me say unambiguously that we are committed to restoring growth and employment and that would not have been possible without increased spending funded by incremental borrowing. This would need to be further continued in 2009-10.

"However, we are equally committed to the process of fiscal consolidation over a period of say 2 to 3 years," he said exuding confidence that early return to recent growth performance would help attain fiscal prudence.

Stating that government would present Budget in the first week of July, Mukherjee said consultations for the purpose would help shape up short-term and medium-term vision and strategy for India's economic growth.

On the stimulus package, Mukherjee said the government is assessing the impact of three packages, announced in December, January and interim Budget to boost economic growth.

The government has cut excise duty by six per cent, service tax by two per cent, in addition to announcing sector specific measures to arrest the impact of global financial meltdown on Indian economy.

However, the economy continued to witness a slowdown with industrial production figures in March showing a contraction of 2.3 per cent and exports falling since October.

"Sustained stimulus to growth can be harnessed by the next round of economic reforms," he said, adding that the government has a broad plan of action to restore economic growth.

"I will get additional inputs when I have my pre-Budget consultations with different stakeholders," the Finance Minister said, pointing out that suggestions would be distilled and incorporated in action plan.

The Finance Minister said the government will present its vision and approach for the next five years in the coming Budget. — PTI

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Sensex zooms 520 pts, regains 14,000 level
Tribune News Service

Mumbai, May 27
The Sensex made a sharp upmove in the last hour of trading today on the back of global cues that showed increased optimism. The benchmark index was up by more than 520 points to close at 14,150 after hitting a low of 13,848 and a high of 14,122. In the broader markets, the Nifty gained 3.8 per cent to close at 4,276.

Among the Sensex pack, Reliance Infra was the biggest gainer shooting up 14.7 per cent to close at Rs 1,288. Others that ended in the green included Sterlite Industries, ONGC and DLF which were up more than 8.4 per cent each.

Of the sectoral indices on the BSE, the realty index was the biggest gainer closing six per cent higher. The BSE banking index was up 5.4 per cent while the BSE power closed 4.9 per cent higher.

Among banking scrips, IDBI, Axis Bank, ICICI Bank and SBI were the major gainers.

Globally, all markets shot up on the back of major overnight gains by the Dow in the US.

Japan's Nikkei was up 127.96 points while Hong Kong's Hang Seng gained 893.71 points to close at 17,885.27.

PTI adds: Buying activity gathered momentum in metal stocks on reports of the copper prices climbing in overseas markets, while bank and interest-sensitive construction shares rose after Mukherjee said the government would increase spending in infrastructure and get a commitment from banks for a benign plan of action to ensure cheaper credit.

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Bharti-MTN deal may be biggest in telecom space
Girja Shankar Kaura
Tribune News Service

New Delhi, May 27
At a time when the world is seeing a downturn, the bold step taken by Sunil Bharti Mittal-led Bharti Airtel of exploring the merger with South Africa’s telecom giant MTN, has generated excitement in the market.

The proposed $23-billion mega deal could turn out to be the largest global telecommunications transaction of the year, with it being the fourth biggest global merger and acquisition (M&A) deal this year.

Experts are of the opinion that the Bharti-MTN deal will give a fillip to the M&A market in India, which has been somewhat dormant for quite some time.

They feel that the lull in the M&A space is far from over. It may turn out to be a costly affair in the short term, but in the long run, it will help benefit both companies, which would end up with a global footprint and a presence in over 20 countries.

The current structure of the deal will lead to a major outflow of cash from Bharti’s coffers, making it necessary for it to raise fresh debt. But experts point out that Bharti would have made this move only after preparing all groundwork which would lead to its coffers ringing money in the long run.

Incidentally, the Bharti-MTN deal with a value of around $23 billion would be nearly half of the total telecommunication M&A transactions announced till mid of this month.

According to statistics, as of now, the global telecom volumes are at $49.2 billion through 410 deals.

The present round of discussions between Bharti and MTN would involve a complex structure to the deal. It would lead to the latter acquiring approximately a 25 per cent post-transaction economic interest in Bharti for an effective consideration of approximately $2.9 billion in cash and newly issued shares of MTN equal to approximately 25 per cent of the currently issued share capital of MTN.

On the other hand, after spending almost $7 billion, Bharti would acquire approximately 36 per cent of the currently issued share capital of MTN from MTN shareholders for a consideration of 86 South African Rand each in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts (“GDRs”) for every MTN share acquired.

This, when combined with MTN shares issued in part settlement of MTN’s acquisition of approximately a 25 per cent post-transaction economic interest in Bharti, would take Bharti’s stake to 49 per cent of the enlarged capital of MTN.

Bharti would have substantial participatory and governance rights in MTN, enabling it to fully consolidate the accounts of MTN and MTN's economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board.

Experts feel that it would be a unique deal as for the first time company stock would be monetised to make an acquisition.

This would also be the biggest M&A deal involving an Indian entity.

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Kingfisher, Jet to start code-share flights

Mumbai, May 27
Six months after entering into a strategic alliance, Jet Airways and Kingfisher Airlines will soon launch code-share flights on select routes. "We are in discussions with Jet Airways on code-sharing on certain routes," a Kingfisher Airlines spokesperson told PTI here today.

Both private air-carriers, afflicted by mounting losses, had inked an agreement last October to work together on certain business aspects to minimise losses.

Kingfisher and Jet would soon launch such flights (code-share) shortly," the spokesperson said without disclosing any further details.

While initially the agreement would be limited to domestic routes, it would later be extended to international routes as well.

Code-sharing is an agreement between two airlines by which both can sell seats to customers on the same flight. — PTI

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US may own 70% stake in GM

New York, May 27
The US government may own 70 per cent stake in the restructured General Motors, the ailing auto maker which is battling to avert a possible bankruptcy.

"The latest plan for the troubled auto maker, which is expected to file for bankruptcy by Monday, calls for the Treasury Department to receive about 70 per cent of a restructured GM," The New York Times has reported.

Quoting people with direct knowledge of the situation, the report said the government would provide the auto maker at least $50 billion to get the company through Chapter 11.

The total amount includes more than $20 billion that has already been spent to prop up the ailing auto maker.

By some estimates in Detroit, tens of billions beyond that amount may be required, the daily added.

The United Automobile Workers (UAW), meanwhile, would hold up to 20 per cent through its retiree health care fund, and bondholders and other parties will get the remaining share. Shareholders would be virtually wiped out, the report pointed out.

"Although it has been clear for weeks that Treasury would have a majority stake of a reconstituted GM, a 70 per cent share, a figure that could still change, is higher than what had been expected," The New York Times said.

According to the daily, the prospect of GM effectively owned by the government raises a number of thorny questions.

"Countless policy decisions — on matters such as fuel economy standards, tax incentives to replace aging cars and green technology initiatives — will present conflicting interests," the publication noted.

However, the report pointed out that President Barack Obama aides have consistently said they would be reluctant shareholders, and they plan no operating role in the company. — PTI

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ONGC shelves plan to build greenfield unit

New Delhi, May 27
State-run ONGC has shelved plans to build a new 15-million tonne refinery adjacent to its subsidiary Mangalore Refinery and Petrochemicals Ltd, Chairman R S Sharma said today.

MRPL had planned to build a 15-million tonne a year grassroot refinery and a mega petrochemical complex after expanding its current unit to similar capacity by October 2011. "These plans after review, are not being pursued. MRPL balance sheet does not have the strength to support a greenfield refinery," he said.

MRPL will, however, continue to work on expanding its current 9.69 million tonnes unit to 15 million tonnes by October 2011 at a cost of Rs 12,412 crore, he said.

Sharma said ONGC had in June last year also exit from a similar Rs 25,600-crore grassroot refinery project at Kakinada in Andhra Pradesh.

ONGC was to hold 46 per cent stake in Kakinada Refinery and Petrochemicals Ltd and 26 per cent in Kakinada special economic zone. The company has walked out of both the projects. — PTI 

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RIL strikes more gas in KG basin

New Delhi, May 27
After D6 in Krishna Godavari basin, Reliance Industries has struck big in two nearby blocks with estimates putting in place natural gas reserves at 20 trillion cubic feet.

D-3 and D-9 blocks in the same KG basin may hold 9.5 Tcf and 10.8 Tcf of gas reserves respectively, UK-based Hary Oil and Gas Plc said in a statement.

Hardy, which cited estimates by independent consultant Gaffney, Cline and Associates, has 10 per cent stake each in the two blocks where Reliance is the operator with 90 per cent interest.

D6, which may hold upto 50 Tcf of gas reserves, began producing last month and is slated to double India's natural gas production by year end when it reaches 80 million cubic meters per day.

"The two discoveries on D3 in conjunction with the acquisition of risk mitigating technologies and geotechnical studies have resulted in the upward revision of the perceived Geological Chance of Success on both of our Krishna Godavari Basin blocks," chief executive Sastry Karra said in a statement.

GCA estimated the reserves based on two gas discoveries on the D3 block which have been named Dhirubhai 39 and 41, and extensive gelogical and geophysical work.

"This work includes over 2,000 square kilometers of new 3D seismic data on D3 and Pre-Stacked Time Migration (PSTM) 3D seismic data processing and a Constrained Source Electro Magnetism Survey (CSEM) on D9," the statement said.

In addition to undertaking to validate prospects identified by the joint venture, GCA employed a play-based exploration methodology on the D3 block to address both the current prospect inventory and the "yet to find" resource potential.

In D3, GCA estimated 9.5 Tcf of inplace reseves. "This includes identified prospects and leads and a number of postulated prospects based on the play area and field size distribution," it said.

The two blocks were awarded to Reliance and Hardy under the fifth bid round of New Exploration Licensing Policy (NELP) in August 2005. — PTI

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Rajus’ remand extended by 14 days
Tribune News Service

Hyderabad, May 27
The disgraced former chairman of Satyam Computers, B Ramalinga Raju, and seven others accused in the Rs 7,800-crore fraud in the software giant will remain in jail till June 10 with a local court here extending their judicial remand.

Raju, his younger brother and former Satyam managing director Rama Raju, former CFO V Srinivas and six other accused were produced before the special court here today by the CBI, which is probing the corporate India’s biggest fraud case.

The 14th Additional Chief Metropolitan Magistrate K Sudhakar extended the judicial remand of Raju brothers, former CFO V.Srinivas, two former auditors of Price Waterhouse, S Gopalakrishna and Talluri Srinivas, and three employees of Satyam Computer by another two weeks.

All accused, including Ramalinga Raju, were brought to the court from Chanchalguda jail where they are lodged since their arrest. This is the fourth time that disgraced Satyam founder has been produced in the court since his arrest in January.

Earlier, appearing for Ramalinga Raju, high court senior counsel Prakash Reddy argued that his client had not committed any fraud and there was only an allegation of falsification of records.

“He has not diverted any funds. Instead, he pumped in Rs 1,230 crore into the company and strove hard for the firm,” he argued.

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Lead Bank Scheme
Introduce credit linkage facility: RBI panel
Ruchika M. Khanna
Tribune News Service

Chandigarh, May 27
The RBI has expressed its displeasure that the financial literacy and credit counselling centres (FLCCs) are becoming extensions of the banks, promoting the financial products of the banks. Instead, these centres should help in financial inclusion by providing financial counselling, educating people about financial products and help to formulate debt restructuring plans for borrowers in distress.

This was one of the recommendations made by the high-level committee of the apex regulatory bank to review the Lead Bank Scheme (LBS) and its effectiveness in promoting financial inclusion. The committee headed by the RBI deputy governor, Usha Thorat, said a concept paper on FLCCs was prepared which revealed that these centres, wherever they have opened, were not performing their intended role. Thus, a model scheme for FLCC centres has been formulated and the lead bank in each district will be expected to open one centre.

As many as 138 such centres are operational across India, with 20 centres in Punjab and six in Haryana, which will now be converted into model centres. It is suggested that the opening of these model counselling centres would also help in bringing down the NPA levels under priority sector lending (which, at present, is around 65 per cent).

In states like Punjab and Haryana, where 100 per cent financial inclusion has been achieved by opening bank accounts, it is recommended that credit linkage and credit plus activities like insurance products and making remittance facility should be introduced. A system of getting feedback from public should also be introduced. Representatives of various banks, RBI and representatives of district administration will be reaching out to the public, once in three months, at different places in the district to redress public grievances.

The committee, which made public its recommendations today, has also recommended that banking services through a banking outlet be provided to all villages having a population of over 2,000. At present, there are 47,000 rural and semi-urban branches spread across six lakh villages. The RBI would like to cover 1.07 lakh villages which have a population of over 2,000 by opening banking outlet at least once a week at every gram panchayat. It is recommended that in case it is not possible to open bank branches, the services of bank correspondents should be used.

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BRIEFLY

Re snaps 2-day fall, gains 22 paise
Mumbai:
Snapping its two-day losing streak, the Indian rupee on Wednesday appreciated by 22 paise to close at 47.70/72 per dollar on expectations of heavy capital inflows, as stock markets rallied after government promised to push economic reforms and ease credit costs. The local currency opened higher at Rs 47.55/56 per dollar as against the yesterday's closing level of Rs 47.92/93 before ending at Rs 47.70/72 per dollar.— PTI

MRPL net jumps two-fold
New Delhi:
Mangalore Refinery and Petrochemicals Ltd (MRPL) on Wednesday reported more than two-fold jump in its January-March quarter profits on the back of good refining margins. Net profit in the fourth quarter of 2008-09 fiscal stood at Rs 607.62 crore against Rs 255.33 crore in the same period the previous year, MRPL managing director Uttam Kumar Basu told reporters here. Sales however fell to Rs 6,535.15 crore from Rs 9,499 crore in the year-ago period.— PTI

ICI India MD
Chandigarh:
Paint manufacturer AkzoNobel on Wednesday said it has appointed Amit Jain as managing director for its operations in India and Sri Lanka. AkzoNobel operates in India through its subsidiary ICI India Ltd and markets its products under the brand Dulux.— TNS

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