'Revenue rise may prevent Kargil tax'
NEW DELHI, July 18 — Finance Minister Yashwant Sinha said today the economy was headed for a 7 per cent GDP growth during the current financial year and the current buoyancy in revenue earnings may prevent a special Kargil tax.

Pakistan’s next battle is with economy
KARACHI : After avoiding a potential war with India over the Himalayan region of Kashmir, Pakistan’s next battle is with a familiar foe — its faltering economy.

Inflation declines below 2-pc mark NEW DELHI, July 18 — For the first time in 17 years the annual rate of inflation fell below the 2 per cent-mark to 1.83 per cent for the week ended July 3, mainly on account of steady vegetable prices compared to last year.

Pharma majors may lose market
NEW DELHI, July 18 — Indian pharmaceutical industry will witness the busiest season of mergers and acquisitions in the coming months with four major companies, including Ranbaxy and Dr Reddy’s, consolidating their position, according to an industry research report by ICRA.

CII lists top 10
NEW DELHI, July 18 — Eight public sector undertakings — IOC, ONGC, BHEL, GAIL, MTNL, HPCL, BPCL, and NTPC — among the top 10 companies in terms of rich overall financial performance during 1998-99 a study of 165 companies by the CII says.

PSB seeks museum for Sikh paintings
NEW DELHI, July 18 — Punjab and Sind Bank has sought Atal Behari Vajpayee’s assistance for setting up a museum to house 300 priceless paintings collected over the years which depict the lives of the Sikh gurus.

BIFR raps Montari & IDBI
NEW DELHI, July 18 — The BIFR has objected to both Montari Industries Limited and IDBI for “acting in concert to settle deals behind the curtains” and restrained MIL from exploiting the BIFR’s protection against secured creditors.

PFC cuts rates
NEW DELHI, July 18 — Power Finance Corporation today announced slashing of its lending rates up to 2 per cent as part of its decision to pass on the benefits of lower cost of funds.

Revenue rise may prevent Kargil tax : Sinha

NEW DELHI, July 18 (PTI) — Finance Minister Yashwant Sinha said today the economy was headed for a 7 per cent GDP growth during the current financial year and the current buoyancy in revenue earnings may prevent a special Kargil tax.However, a firmer evaluation of the necessity of an additional tax for meeting the Kargil operations can be made only after the Finance and Defence Ministries work out this expenditure, Sinha told PTI.

“If we do well on the revenue front then we can perhaps avoid the imposition of an additional tax due to the Kargil operations,” Sinha said.

Sinha said his conviction had been strengthened by the views expressed during the two-day conference of Chief Commissioners of excise and Customs which ended yesterday that the central and excise revenue targets for the current year would be met.

On whether the economy could sustain the estimated 6 per cent growth registered last year also during 1999-2000, Sinha said: “We are looking towards a 7 per cent GDP growth during the current year”.

According to estimates, revenue collections have recorded a 21 per cent growth in the first quarter of this year despite the economic slowdown, signalling an industrial recovery.

While the excise growth stood at 29 per cent in the first quarter of this year as against a mere 9 per cent last year, the Customs collection recorded a 12 per cent growth during the period under review against just about 1 per cent last year.

Sinha expressed satisfaction at the current trend in the growth of the industry which grew by 7.2 per cent in May this year and hoped this would be sustained.

On the huge rise in the sensex in the stock market at Mumbai and the buoyancy in other bourses in the country, he said this was a positive indication, though he would not like to forecast the future levels.

Sinha said the government would go ahead with the mobilisation of the targeted Rs 10,000 crore through public sector disinvestments.

“The process of disinvestment during the current year has started but since the officials would be busy during the elections, this would be accelerated only in October”, Sinha said.

Asked whether the coming Lok Sabha poll would hinder achieving the targeted resources from the PSU disinvestment, he said it would not.

Samman Patra

Speaking at the “Samman Patra Award” presentation ceremony to honour tax payers and officials of Customs and Excise here on Sunday, Sinha said the award for the tax payers was an attempt to honour the honest tax payer who can show the certificate to the excise and Customs officials in case he feels harassed.

“The Award is aimed at making a distinction between the tax payers and the tax evaders”, he said adding that the officials of the departments who have discharged their responsibility were also being honoured.

Samman Patra Awards were presented to some exporters, importers and industrialists besides the officials of excise and Customs in the Delhi region.

Revenue Secretary Javed Choudhury said the growth rate registered during the last two years had proved wrong the theory that India will be affected by the then prevailing East Asian crisis.

The Chief Commissioner (Personnel) in the Customs Department, Mr A.N. Prasad, said the Delhi zone had registered a 17 per cent increase in the revenue growth and was the highest among the other zones.

Pakistan’s next battle is with economy

KARACHI (Reuters): After avoiding a potential war with India over the Himalayan region of Kashmir, Pakistan’s next battle is with a familiar foe — its faltering economy.

The struggle to rehabilitate the economy, still bruised from last year’s nuclear test-related sanctions and heading for more trouble, is an immense task, analysts and economists said.

They added the government could not use the conflict around Kashmir’s Kargil sector as an excuse for slowing a reform process promised to donors, as it did by blaming sanctions last year.

“I don’t think they can use Kargil as an excuse. It’s not a valid excuse,” said an economist at a Western Bank.

He said the Kargil situation could have seriously threatened the economy if it had dragged on or turned into a full-blown war, but an early end to the crisis averted that.

The economist said the key issue would be whether the International Monetary Fund (IMF) was still convinced about Pakistan’s progress on structural reforms and economic targets.

Mr Arshad Arif, research head at first Capital ABN Amro Equities, said an IMF mission expected next month was unlikely to be satisfied with Pakistan’s performance.

“The mission will review exactly what we have done up to June 30. I’m afraid there are major slippages,” he said.

The IMF resumed a $ 1.5 billion lending programme to Pakistan in January after the United States and other countries partially lifted sanctions imposed after nuclear tests in May last year.

Officials blame the sanctions and suspension of aid that followed the nuclear tests for a potential loss of $ 8 billion to $ 10 billion to the economy in investment and trade.

Mr Arif said the most serious slippages had been on promises to widen the tax net and raise energy charges.

“We had promised to raise the number of income tax assessees to 1.8 million by June 30, the figure is 1.5 million,” he said.

Mr Arif said plans to introduce an agriculture tax and a general sales tax at retail level also remained unfulfilled.

“Increases in power and gas tariffs were also not implemented despite agreeing to them with the IMF in the policy framework paper.”

The economist said Kargil had caused uncertainty among domestic and as well as foreign investors already very cautious about investing in Pakistan.

He said the government still had a lot to do to revive investor confidence, including resolving a year-old power sector row involving foreign-backed independent power producers (IPPs).

“The IPP row, especially Hubco’s fight with the government, have to be resolved,” he said.

The government accuses Hub Power Co Ltd of overcharging for the electricity it sells to the state utility, Hubco denies the charge.

Mr Jehanzeb Naseer, Research Head at Jardine Fleming Pakistan, said conflicts such as Kargil had occurred in other countries but they had still attracted foreign investment.

He said the continuing IPP row and restrictions on foreign exchange repatriation, partially lifted early this year, had blocked foreign fund inflows.

“If you look at Morgan Stanley Asia index ex-Japan, it has gone up 200 per cent since January, our stock market is up 15 per cent, that is what you have missed out,” he said.

Inflation declines below 2-pc mark

NEW DELHI, July 18 (PTI) — For the first time in 17 years the annual rate of inflation fell below the 2 per cent-mark to 1.83 per cent for the week ended July 3, mainly on account of steady vegetable prices compared to last year.

The record low in inflation, based on the wholesale price index (WPI), is thanks to lower rates for vegetable compared to the unprecedented price rise last year.

The falling trend is also helped by a slackness in industrial demand, which kept the prices of manufactured products low.

During the current week, the rate of increase in prices declined by 0.20 percentage points to 1.83 per cent (provisional) from 2.03 per cent (P) the week before. In comparison, the inflation rate was at 8.15 per cent in the corresponding week of last year.

This is the lowest inflation rate since August, 1982, when it touched 1.66 per cent.

In the current fiscal, prices of agricultural produce remained rock steady due to a bumper crop. Foodgrain production in 1998-99 is estimated to have touched a record 205 million tonnes.

Pharma majors may lose market

NEW DELHI, July 18 (PTI) — Indian pharmaceutical industry will witness the busiest season of mergers and acquisitions (M&A) in the coming months with four major companies, including Ranbaxy and Dr Reddy’s, consolidating their position, according to an industry research report by ICRA.

Ranbaxy Laboratories, Sun Pharmaceuticals, Wockhardt and Dr Reddy’s Laboratories will consolidate themselves, says the ICRA report on “The Indian pharmaceutical industry”.

The share of multinational drug companies in the Indian market will go up in the long run, although the aggressive domestic companies will continue to dominate the market.

The report, to be released soon, said some of the prominent Indian companies would turn out to be victims in the run for market supremacy by selling out their ventures.

However, it did not name the vulnerable takeover targets.

The ICRA report listed over 20 major M&A since 1995 which could peak in a shortwhile from now.

The latest major event in the series was Wockhardt’s takeover of Merind and Tata pharmqceuticals of the Tata group.

The trendsetting acquisitions during the current phase include Nicholas Piramal’s takeover of Boihringer Mannheim, Sun Pharma’s acquisition of three smaller companies and Knoll Pharma’s bulk drug plant, and Smithkline Beecham’s buyout of the popular “Crocin” brand from Duphar-Interfran.

While Ranbaxy merged with Crosslands Research Labs and acquired prominent brands of Gufic, Transnationals Glaxo and Johnson and Johnson were involved in one deal each in India.

The research expense of Indian companies was much below the global levels. The average R&D expenditure of top 30 Indian companies was less than 4 per cent of the turnover against the international level of 20 per cent.

Wockhardt spent 10.5 per cent of its turnover during the last financial year on R&D, while Torrent Pharma spent 6.4 per cent, Dr Reddy’s 4.4 per cent, Sun Pharma 4.2 per cent, Cipla and Ranbaxy 4 per cent each.

Interestingly, Dr Reddy’s and Ranbaxy have developed new molecules at a fraction of the international cost despite the fact that these kinds of research are very expensive.

Dr Reddy’s has entered into a tie-up with multinational Novo Nordisc to conduct clinical trials for the developed new molecules while Ranbaxy planned to carry out trials on its own.

Meanwhile, companies like Nicholas Piramal, Unichem and Korpan plan to offer their R&D set-up to other companies on contract, setting a new trend of contract research.

Another trend emerging in the Indian Pharmaceutical Industry was marketing alliance between Indian companies and multinationals with the latest being Ranbaxy-Glaxo.

Other major marketing tie-ups in the recent past include Dr Reddy’s-Biomed, Ranbaxy with Eli Lilly, Hoechst with Vorin.

Lupin Labs tied up with Fujisawa, Merck and Global Corp, Nicholas Piramal with Reckitt and Coleman, Stryker, Citran, Allergan and Ambalal Sarabhai. Smithkline Beecham Pharma has a marketing alliance with Knoll and Glaxo.

CII lists top 10

NEW DELHI, July 18 (PTI) — Eight public sector undertakings (PSUs) — IOC, ONGC, BHEL, GAIL, MTNL, HPCL, BPCL, and NTPC — among the top 10 companies in terms of rich overall financial performance during 1998-99 a study of 165 companies by the CII says.

Among the top 10 companies, five belong to the oil and gas sector while 21 to other public sectors.

IOC, HPCL, BPCL, ONGC and GAIL belong to the oil and gas sector, NTPC belongs to the power sector, L and T has diversified operations, IDBI belongs to the financial services sector, BHEL to the electrical machinery sector and MTNL to the telecom services sector.

In spite of industrial slowdown during the last financial year, the corporate sector’s income from operations and the net profits have shown an improvement during the last financial year.

According to an analysis of the financial results of 165 companies by the CII, the corporates undertook a massive cost-cutting exercise in the face of industrial slowdown and improved their bottomlines.

In terms of percentage growth, BPCL achieved an increase of 82.5 per cent, followed by HPCL 66.2 per cent, L and T 28.4 per cent, GAIL 15.8 per cent and MTNL 12.7 per cent.

IDBI achieved an increase of 7.1 per cent, IOC 6.4 per cent and BHEL 5.9 per cent. The income from operations of ONGC dipped by 1.7 per cent.

The full-year results show the income from operations or net sales registered an increase of 18.4 per cent in 1998-99 over 1997-98.

PSB seeks museum for Sikh paintings

NEW DELHI, July 18 (UNI) — Punjab and Sind Bank (PSB) has sought Atal Behari Vajpayee’s assistance for setting up a museum to house 300 priceless paintings collected over the years which depict the lives of the Sikh gurus.

A delegation of the bank, led by its Chairman and Managing Director S.S. Kohli, recently called on Mr Vajpayee to hand over a cheque for Rs 51 lakh as contribution towards the welfare of the soldiers affected in the Kargil conflict.

The Prime Minister was also presented with a book, ‘Sikh Heritage in Paintings’, based on the bank’s collection.

However, as a matter of decorum no demand was made for a place for the museum. A letter was later sent to Mr Vajpayee seeking his intervention.

The calenders of the bank, which grace most Sikh households, have been inspired from these paintings.

Mr Harcharan Singh, General Manager (Credit) of the bank, suggested that the museum or the art gallery could also have the recorded cassettes of ‘ragis’ of yesteryear whose ‘shabads’ are no longer available.

The bank has a musical archive in Jalandhar where recordings of rare ‘kirtans’ which are many years old are done free.

The efforts of the bank spanned several years when they even met some Union Cabinet Ministers and Chief Ministers of Punjab exhorting them to grant a place from among the properties owned by the State Government in the Capital.

BIFR raps Montari & IDBI

NEW DELHI, July 18 (UNI) — The BIFR has objected to both Montari Industries Limited and IDBI for “acting in concert to settle deals behind the curtains” and restrained MIL from exploiting the BIFR’s protection against secured creditors.

The company (MIL), promoted by Bhai Manjit Singh, while “taking advantage of the BIFR’s protection had apparently started implementation of the scheme unilaterally and that too even without its sanction....It was, therefore, highly objectionable on the part of both MIL and IDBI to act in concert for settling deals behind the curtains,’’ observed the Bench in its latest hearing on the Rs 36.8 crore draft rehabilitation scheme.

Contrary to clear and specific orders from the BIFR, the company sold shares held by its subsidiaries in Bausch and Lomb (India) Limited (BLL) and settled dues with IDBI and ICICI of Rs 26 crore in preference to other secured creditors. In return, the company received no dues certificate from the financial institutions.

Also, the board found the explanations put forth by MIL and IDBI confusing and held their conduct as “obviously not above board and the company, in fact, was trying to mislead BIFR and others.”

The IDBI had submitted that the company raised loans to repay the dues prior to the sanction of the rehabilitation scheme. Only after the dues were cleared, the company’s shares mortgaged with it were released. The company sold the shares thus secured and utilised the amount for liquidation of the loans raised by it, IDBI asserted.

The company said the protection under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applied only to the assets of the sick company and the promoters in their personal capacity were not bound by the same. The company has deposited full money out of the proceeds realised from the shares held by MIL.

PFC cuts rates

NEW DELHI, July 18 (PTI) — Power Finance Corporation (PFC) today announced slashing of its lending rates up to 2 per cent as part of its decision to pass on the benefits of lower cost of funds.

The decision effective from July 1, was taken at the PFC’s Board meeting held here recently.

“Since we are raising money at a lower cost, we decided to pass on the benefits to our borrowers,” PFC Chairman and Managing Director Uddesh Kohli said.

“Besides we are passing on the entire benefit accruing to us for financing infrastructure projects to the borrowers who are covered under 10 (23G) of the Income Tax Act,” he said, adding that PFC was the only financial institution to have passed on the benefits.

The new interest rates range from 13.5 per cent for small transmission scheme distribution projects to 17.5 per cent for the private sector thermal projects.

The sharpest cut in the interest rate of 200 basis points is in case of loans for the public sector utilities for thermal generation and transmission projects above 132 kv, he said.

by K.R. Wadhwaney
BA to provide seats for toddlers

IN the no-hold barred first round of the fare war in the Delhi-Mumbai-Delhi sector, Indian Airlines (IA) has had a decisive victory over its rivals. Some of IA’s 18 flights a day on the route have carried about 80 per cent passengers.

This, unfortunately, is not the position with two private operators. Both of them are trying hard to woo passengers with different kinds of incentives. One great advantage that private operators enjoy is that their over-head expenses are much lower than that of the national carriers.

Industry analysts emphasise that heavy reduction in the fares does not augur well for the airlines. It is not a healthy practice and is not viable for a long duration.

The possibility of the national carrier augmenting its fleet has receded. The mood of the powers that-be is that no major expenditure or changes may be made until the new government takes over.

With schools, colleges and universities reopening, it is a lean season on the domestic sector. Indian Airlines is as keen to start turn-around as Air India is. Michale Mascrenhas is Air India’s seasoned Commercial and Marketing Managing Director. Anil Baijal is a seasoned bureaucrat and the Managing Director of IA. They should sit across the table to evolve a route strategy. If this is done, there may be a positive gain for both airlines.

BA’s feat

From August 1, British Airways will introduce seats for toddlers. Globe-trotting children (up to two years) will no longer have to sit on their parents’ knees or lie on in-flight carrycot, but can travel in safety and style in their very own seat — at no extra charge.

This is the direct result of research carried out as part of the airline’s new world traveller service which puts the emphasis firmly on the family.

According to BA, there will be 12 seats for infants on each 747 aircraft. They will be available in advance on a first-come, first-served basis. Carrycots will also be available on the aircraft.

Jet’s flight

Jet Airways has started operating a daily direct flight between Delhi and Trivandrum. The next generation 120-seater is Boeing 737-700. The single one-way fare in economy class will be Rs 10,745 and in business class will be Rs 16,585.

Scooter, motor cycle sales may rebound
By K. Garima

THE two-wheeler industry posted a strong but yet declining growth rate in the past three years, the slowdown being consistent with a period of consolidation in the overall economy.

Industry experts expect the growth rate to recover in FY99 led by a rebound in scooter sales. Nevertheless, it is widely expected that the motor cycle segment will record the highest growth rate overall. This recovery secnario is based on expectations of an improvement in consumer confidence and expectations of a gradual sustainable recovery in overall economic growth. Within the two-wheeler industry, the motor cycle segment is set to grow at a higher rate than the overall two-wheeler industry growth rate , reflecting both the out-look for rural demand and a shift in customer performance towards motorcycles. The slowest growth is anticipated in the moped segment. The emergence of competition in the two wheeler segment has contributed to a greater focus by manufacturers on these factors and a consequent extension of product ranges to both create different market niches and meet the diverse demands in the market place. Furthermore, the price-performance parameters of the various brands have started getting closer leading to a greater awareness amongst manufacturers of intangible product attributes, such as brand equity.

In future, the most significant product trend will undoubtedly be the launch of a significant number of four stroke variants slated to be launched over the next two years. Overall thus, the prospects of this segment appear to be quite satisfactory.

Hero Honda

Hero Honda has a cutting edge on account of its technological expertise, owing primarily to its association with Honda Motors, its sales and distribution capability, skills in niche marketing and financial strength. One perceived weakness that this company has is in its cost structure, though this is less of a concern when seen in the light of the shift within the industry towards four stoke technology, an area in which Honda has demonstrable strengths. It is expected that Hero Honda will continue to expand its market share in the motor cycle segment, though at a slower pace than in the past and enhance its market share from 36.2 per cent to 37.2 per cent by the year 2000.

Bajaj Auto

Based on current forecasts, Bajaj Auto’s earnings growth over the next two years will fall short of its three major rivals in the two wheeler industry, though the underlying trend in earnings is expected to improve. This company scores highly over its rivals in the terms of cost advantage, sales and distribution capability and financial strength, but lags the competitive edge in terms of technological expertise. With tough competition emerging in new products and stronger earnings growth prospects else where there could be continued slippage in Bajaj’s market share on the back of continued market fragmentation. Yet, given the company’s inherent strength coupled with the fact that its competitors have been at the receiving end of the last Union Budget, it should not be too long before this company bounces back.

TVS Suzuki

Based in the south, TVS Suzuki has been one of the major beneficiaries of the boom in the automobile industry. The company is a manufacturer of scooters, motor cycles and mopeds. Its venture into the manufacture of scooterettes, which is a hybrid version of a scooter and a moped, resembling a scooter but below 65cc has been a great success with the introduction of its TVS Scooty. TVS Suzuki was immensely benefited by the two wheeler boom in the south which was reflected in the company’s financial highlights. On the financial front, the company has fared satisfactorily over the years. Overall, TVS Suzuki appears to be a company with sound fundamentals and given these factors, its prospects in the medium to long term should prove satisfactory.

LML

LML, the second largest player in the two wheeler market in India has a 29 per cent share in its segment. The company has been in news lately due the tiff between the two joint venture partners, the Singhanias and the Piaggio’s. However, on the financial front the company’s performance has not yet been affected. The company’s present manufacturing capacity is 4,50,000 scooters and by the end of this year, it plans to increase the production to 6,00,000 scooters. LML is launching four motor cycle models in ‘99 for which it has tied up with a Korean company for technology. The company also plans to launch 60 cc scooters and 75 cc scooters this year. Though the management claims that this controversy would not affect introduction of new models, further technology upgradation by Piaggio is unlikely until the controversy lasts. This in turn could affect its growth prospects.

By J.C. Anand
Time for profit-booking

Last week, the market touched its peak by scaling the 4800 points peak on the Sensitive Index, and it was but natural that it should move back in an orderly manner. The Index stood at 4639.9 points when the market closed on July 16. I expect the market to fall back further during this fortnight. I would even say that no rise in the market should be expected for the next two and a half months or so till election results are announced in October. Profit-booking is clearly indicated in scrips which have lean managements and uncertain future prospects.

The market had surged up by the tidal momentum of the Indian diplomatic and military success over Pakistan in the Kargil sector. Pakistan, discredited by its prevarications and double talk, has lost its creditability in the international community and had to concede the Indian demand of respecting the Line of Control in Jammu and Kashmir and to withdrew its forces from the Kargil and related sectors. The market was pushed up by large purchases by the FIIs. There were also reports that the Indian economy was turning its corner.

But the Kargil euphoria cannot last much longer. The FIIs have already started booking profit on a part of their investments. The first quarter results are not, with some exception in the software sector, very encouraging. Compared to the corresponding period of the last year, the first quarter results this year are a little better, but industrial revival has to sustain itself and even then their impact would be felt only in the financial year 2000-2001.

Some surveys have indicated that the BJP-led front has better prospects in the coming Lok Sabha elections but it is by no means certain that a stable government would be formed. Political stability is an important pre-condition for industrial and market revival.

An interesting development during the last fortnight was the announcement of the election dates by the Election Commission. The model code of conduct is now in operation and no government, including the Union government, can take any important economic or political measure. This rather too early announcement of election dates by the Election Commission is a clever move to put a hold on the powers and economic policies of the interim government of Vajpayee-led governmemt. Now that the market cannot expect any friendly gestures and actions from the government even in areas where such action is needed, the market is bound to feel depressed. All roads would now lead to election manifestoes and campaigning, with the economy and industrial revival taking back seats.

It is, therefore, time for booking profit, but one has to be careful in deciding as to where to book profit. Generally, avoid booking profit in high-priced multinational pharma as well as in blue-chip companies like Larsen & Toubro. Hoechst Marion is still, as I think, underpriced and it should be kept on the watch list and picked up at a suitable time.

Many friends have made enquiries about investing in UGS-64. My response is that for those who are interested only in fixed income schemes, UGS-64 still provides a good investment. What an investor in such a category needs is adequate safety, good return and ample liquidity. UGS-64 satisfies all these conditions. Its safety was at one time somewhat suspect but now that it is being restructured and its NAV has improved sufficiently to cover its face and issue-price values, there should not be any doubt about its safety. In a recent statement, UTI President P.S. Subramanyam has stated that to introduce transparency in its operations, the UTI has decided to publish results for UGS-64 on a quarterly basis. He even promised a better return to the investors of UGS-64 next year.

In fact, for those who want to invest in fixed income schemes, there is no better investment scheme than UGS-64. Debentures of companies may provide higher interest rates, but these are taxable and not so safe and liquidity-prone as UGS-64. The UTI monthly income scheme, which is likely to be announced in August, would promise not more than 10.75 per cent on an annual basis, and that promise stands only for one year. The investor cannot encash it before the minimum period of three years. The post-office saving scheme certainly provides better interest rate but it lacks liquidity and the invested amount has to be tied down for 6 years. And there is an upper limit for the total investment in the scheme. It may be wise for those who are investors in UGS-64 to stay invested.

Only Public Provident Fund provides better return and security but one has to stay invested for almost seven years or so to draw from the invested funds.