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Monday,
May 28, 2001, Chandigarh, India   |
Govt to push on
with privatisation Lessons of Balco
Determined push
Real estate business in Gurgaon unaffected
Small units eye Board meeting |
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Buy Hughes
Soft for growth, Shipping Corpn for value The ammunition
of options BSNL gears up for Internet
telephony |
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Automotive
dealers seek tax relief AI union denies reports on
protest move
Q: In your answers to queries regarding
withdrawal of NSS 1992, in the Tribune dated 16.1.2000 and 21.2.2000,
it is clarified that the withdrawal of interest and invested amount
is not to be shown in the Income Tax returns but I had shown interest
earned in the income tax return for the assessment year 1999-2000, as
per the advice of the department concerned. Now I had shown the clippings
of your answers to the authorities of Income Tax, Jalandhar but they
had insisted that withdrawal amount has to be shown in the returns.
Tourist claims Rs 30 lakh damage
IA moves towards open
fare market
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Govt to push on with privatisation New Delhi, May 27 "All obstacles like Balco strengthen the process (of privatisation).
In the end the government's commitment to the process has become clear
and I think nobody can be in doubt about that now," Arun Shourie
told Reuters in an interview.
He said he was optimistic that despite the political opposition to
privatisation the government would be able to complete stake sales
in a majority of the 27 state-run scheduled for the current financial
year.
"I certainly hope so," Shourie said when asked whether
he expected substantial progress in his privatisation drive by the
year-end. But he did not say as to how many companies would privatised
by the of financial year.
Major companies on the block include Air India, Indian Airlines,
Videsh Sanchar Nigam Ltd, CMC Ltd, Hindustan Copper, Hindustan Zinc,
Maruti Udyog and National Fertiliser.
Lessons of Balco
Shourie said the most important lesson from the Balco standoff was
that "these storms were unavoidable. Don't try to dodge them,
go through them."
"The second lesson is, we must communicate much more with the
workers in particular, to the public at large. The government must
devise ways of dealing with trade unions," Shourie, a former
World Bank economist and journalist, said.
The government would use its experience from the privatisation of
Balco in future stake sales in state firm.
"Such things will happen four or five times and the government
will have to cut through this forest. Everybody learns and we will
certainly do that," Shourie said.
India's more than decade old privatisation programme has suffered
several setbacks —opposition from labour unions, from political
parties as well as from within the ruling coalition government.
The government, which has consistently failed to meet targets in
the past, plans to raise Rs120 billion ($2.56 billion) through sale
of its stake in state-run firm in the current financial year.
Determined push
Atal Behari Vajpayee's 19-month-old ruling coalition is reeling from
an arms bribery scandal.
Analysts say the political uncertainity has put a question mark on
the government's ability to press ahead with the economic reforms
drive, particularly labour law reforms and privatisation.
The labour unions have also vowed to oppose the government economic
policies, notably labour reforms and privatisation of state-run firms.
"The earlier phase of reforms was such that which by the mere
announcement of it something would happen. Now the reforms will actually
impinge upon the lives of workers, of established industrialists and
so on.
"The need of the hour is to do things in a much more determined
manner," Shourie said. Reuters |
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New Delhi, May 27 The industrial township has emerged as a commercial destination with developments like DLF Gateway Towers, DLF Square, Millennium Plaza, Signature Towers, Global Business Park, First India Place and Palm Court witnessing high occupancy, said the latest monthly report by Cushman and Wakefield, noted real estate market analysing firm. The township has emerged as a commercial destination, at a time, when the report said most property decisions have been put on hold in Mumbai, corporates have deferred expansion plans in Hyderabad and the capital value over the next two or three months could see a downward trend in some micro location. Rental values in Gurgaon, the report said have rationalised from a peak Rs 65-75 per sq ft per month to the current rate of Rs 35-40 per sq ft per month reflecting increased options of good quality commercial space. Values in the industrial belt of Udyog Vihar now seems to be coming out of the trough witnessed during the period 1998-2000. Recent land transactions involved values above perceived market rates, thereby raising expectations across the board. The key transaction in April was Global Business Park where INOX reportedly leased about 18,000 sq ft reportedly at Rs 36 per sq ft. And, key investment transaction was in Sector 18, Udyog Vihar, where ABB Analytical Ltd sold land measuring about 2.77 acres, the report said. Haryana’s new IT policy that allows upto 100 per cent increase in existing FAR for specific IT usage is likely to result in increased supply over the short-medium term. Ongoing development of high-profile retail malls, such as Metropolitan and DLF City Centre coupled with proposals by the Sahara group and Unitech to launch similar projects in the future are significant steps in building the social infrastructure for Gurgaon’s township. In its outlook for this township, adjoining Delhi, the survey capital values for office space are likely to soften in the medium term, where as land values in Udyog Vihar are likely to remain stable. Rental values are also likely to soften over the medium term, reflecting new supply entering the market. The residential market in Gurgaon has shown a rising trend since 1990 when HUDA along with other private developers such DLF, Ansals, Unitech started the colonisation project in a big way. In the last five years, Gurgaon witnessed frenzied activity in the residential market given Delhi’s unaffordable property prices, heavy pollution, sub-standard of living conditions, as well as the township’s proximity to South Delhi. The key transaction last month, the
report said a German company leased a three bedroom apartment at Beverly
Park reportedly at an effective rent of Rs 35,000 per month. |
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Small units eye Board meeting
P. D. Sharma Some crucial issues of Punjab industry are directly related to the Central Government. The SSI Board’s meeting will be held on May 31 which is to be presided over by the Prime Minister. The Chief Minister should resolve these issues. Senior bureaucrats of the state government are to represent the industry in the meeting and great responsibility lies on them also. About a month back the Centre framed a policy under which 300 odd items can only be imported through designated ports. Even ICD’s functioning in Punjab and other states can not route these imported items. The purpose of this policy is stated to check flood of imported goods as conceived by “war room” created for this. The policy seems to have been framed in hurry to overlook its side effects. For Northern states the Kandla port is the most convenient one for imports in terms of impact of freight and relatively swift movement. Now many imported items have been banned through this port. Edible oils were banned the government had to allow these oils through Kandla. The prices of furnace oil and its equivalent oils have been raised heftly by Rs 9,000 per KL because of this policy. For sizeable section of the industry these are the crucial fuel oils. The steel prices are also linked with their pricing. Much higher prices of industrial fuels and steel and taking heavy toll of Punjab’s industry. To face the WTO regime the reduction of price of finished goods is the key factor. If the government itself resorts to such exercises it is making the industry unviable. This is deplorable. All facts on the pricing of industrial fuels should be made transparent. The prices of steel have gone up very
high due to non arrival of some items of steel commonly used by small
scale units. Steel rounds are widely used by this industry. The steel
Ministry should be requested to direct SAIL to despatch these items
to Punjab in adequate quantities. Although with this removal of the
last phase of freight equivalisation principle on iron and steel Punjab
will get costlier steel compared to states near SAIL’s plants
but still this pricing will moderate the local steel prices. |
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Buy Hughes
Soft for growth, Shipping Corpn for value There are several ways of investing in the stockmarket. Two of these are to buy growth and value stocks. The first of the these primarily focuses on the growth of a company in the coming years. If the company is going to grow at the above average rate of the industry, it has sound fundamentals, its management is trustworthy and it has sustainable business model. The stock can then be termed as growth stock. Its philosophy is “great company at a good price.” Contrast this with value investing which is about buying “good companies at great prices.” Value investing is about companies that have good management, good earning power, sustainable business model and which quote cheap. These may be cheap due to lack of information about them. A company may be a turnaround case or the stock may be down due to overreaction of investors on account of bad news about it. The objective of both these approaches is the same — to get superior returns from the market. Hughes Software A stock that fits, into the category of a growth stock is Hughes Software Systems. This company focuses on the high growth and value added communication software market. The company provides products, services and solutions to major corporations worldwide. Apart from its focus on voice over Internet protocol and wireless technologies, it is expanding its internet and e-commerce business, thereby de-risking it vertical domain. It is estimated that the communication software industry will record a compounded annual growth rate (CAGR) of more than 25 per cent in the next few years. Hughes Software is a niche player in the communication software industry and it is bound to benefit from demand explosion. The US slowdown is unlikely to affect Hughes because it operates in the higher end of communication software. It has a backlog of $ 8.5 million in the product segment. On top of this, Hughes has a strong parentage of Hughes Network System. Hughes software is an excellent growth story. Its stock quoting at Rs 825, which can be accumulated on declines for good profits. Shipping Corporation The Shipping Corporation of India (SCI) is an asset play. It is quoting at a huge discount to its intrinsic value and the divestment plans of the government to sell its stake in the company should boost its value. SCI has a fleet of 115 ships with five million dead weight tonnage, which accounts for about 45 per cent of the total tonnage of Indian shipping. It has a diversified fleet which range from crude oil and product tankes to dry bulk carriers, liner ships and offshore vessels as well as passenger cum cargo vessels. It is the only shipping company in India that is of international size. The results of the company have been excellent for the year ended March 31. The sales have stood at Rs 3055.48 crore compared to Rs 2,542.76 crore in the last fiscal and the profit has zoomed from Rs 161.61 crore in the year 2000 to Rs 401.59 crore in the year ended March 31. The earning per share (EPS) works out of Rs 14.23. The Government of India (GoI) which holds around 80 per cent of the company’s equity is wanting to divest its stake during the current fiscal year. The company’s stock, which is quoting at Rs 38, should sail much higher once the divestment plans of the Government come through. A few stocks, which can fit into the
category of value stocks, include Tata Power, Kotak Mahindra Finance,
Max India, Hindustan Zinc and Container Corporation. All the above
seven stocks can be bought at declines with profit in the medium to
long term. |
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The ammunition
of options SEBI has finally banned century-old carry forward from July 2, 2001 and 414 scrips forming about 95 per cent of trading volume have been put on rolling settlement while removing the price bands for all stocks in rolling settlement and having index-based circuit filters, with the stipulation to move the balance scrips on rolling settlement mode from January 2, 2002. All deferral products or badla variants would form part of the capital market history. However, time has been allowed upto September 3, 2001 to liquidate all outstanding positions worth about Rs 2000 crore. All interbourse arbitrage will no longer be possible since there will be a uniform Monday to Friday settlement across all bourses for all scrips which are not in rolling mode. Speculation will be provided through the ammunition of ‘options’ trading on individual scrips while deferring the instrument of ‘futures’ on individual scrips for the time being. The market operators shall have to learn about the ramifications of the instrument of options. An option is a deferred contract/transaction between the buyer and the writer/seller of the option and it is a right (privilege) the buyer of an option has, not the obligation, to buy or sell the specific underlying security at a predecided price on or before the maturity date depending upon the type of the option. An option can either be a ‘call option’ or a ‘put option’. A call option is where the buyer has the right to buy the underlying security from the writer on the date of maturity at the set price called the ‘exercise price’ or the ‘strike price’. A put option on the other hand is the right of the buyer to sell the underlying security at the exercise price on the expiration (maturity) date. The buyer of the option, whether call put has to pay negotiated price (premium) to the seller to acquire the right to exercise the option, called the “option premium” and the seller accepts the obligation for which he receives a fee. An option contract which can be exercised on or before the expiration date is an American type of option. Alternatively, a European type of an option can be exercised only on the maturity date. There are two components to the value of an option, one is the “intrinsic value”, which is the difference between the exercise price and the spot price (current stock price) and the other is the ‘time value’, which is the amount buyer is willing to pay for the possibility that, at some time prior to expiration, the option may become profitable. Both the components have to be greater than or equal to zero. To explain the valuation of the option better consider a stock XYZ whose spot price is Rs 100. A 3-month call option of the security has an exercise price say Rs 110. Three months hence, on the expiration date, if the spot price is Rs 120, then the option, would be ‘in the money’, i.e., it would be profitable for the buyer to exercise the option (because the buyer could exercise the option and get the security at Rs 110, rather than at the current market price of 120). If the spot price i.e., the current market price is Rs 110, then the buyer would be indifferent between exercise the option or buying from the market, this is called ‘at the money’. If the spot price is Rs 100, then the buyer would gain by directly purchasing the security from the market at Rs 100, this is called ‘out of the money’. In this case the buyer could loose the option premium. In the case of a put option, the reverse scenario applies. Options protect the investors from
risks of volatile price fluctuations, as they cap the loss that the
buyer of the contract has to bear, the only risk is the premia paid
for taking the option. On the other hand the losses of the writer
are unlimited, which would be transferred as unlimited gains for the
buyer of the contract. |
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BSNL gears up for Internet telephony New Delhi, May 27 The BSNL will be ready to offer Voice Over Internet Protocol (VOIP) in the next couple of months that will eventually bring down the costs of telecom services by one hundred times. Mr D.P.S. Seth, Chairman and Managing Director of the corporate said, “The Indian VOIP market provides tremendous scope and the BSNL will be adequately prepared to offer services on its network in the next few months.’’ Communications Minister Ram Vilas Paswan said the ban was not being lifted immediately, “Because if we do so now, it will only help those who already have Internet connections. When the Internet reaches villages and towns, we will allow Internet telephony.” Calls that bypass India’s public Switched Telephone Network (PSTN), such as those from PC to phone or PC to PC, are currently illegal, and individual users who make surreptitious calls from their PCs continue to run the risk of prosecution. A few hole-in-the-wall phone booths now charge customers about Rs 100 for a 30-minute conversation to select overseas destinations. The government announcement comes after an expert group advising India’s Prime Minister recommended the government to allow Internet telephony as a way to slash costs to consumers. State-owned Videsh Sanchar Nigam Limited. (VSNL) currently has a monopoly over international calls placed from India. That monopoly status is scheduled to expire in 2002.
UNI |
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Automotive
dealers seek tax relief New Delhi, May 27 “High level of sales tax at 12 per cent on implementation of floor rate as against an average of 6 per cent earlier is impending growth,” said Mr Kailash Gupta, the association president. Talking to newspersons here, he said implementation of uniform sales tax across the country is a welcome move, FADA would like the sales tax to be at maximum 8 per cent. The sales tax being charged on used vehicles by some states amount to double taxation, he said, adding that sales tax be charged only once at the time of first sale. The federation welcomed the government’s
steps to check unbridled import of used/new vehicles in the wake of
removal of QRs under WTO. |
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AI union denies reports on
protest move New Delhi, May 27 Responding to reports that the Air India Employees Guild, which has a membership of 12,000, was planning to strike work and paralyse the airline’s functioning to protest against the suspension of the Managing Director, the guild’s president, vice-president, secretary and assistant secretary, in a signed letter to the Civil Aviation Ministry said the reports were “far from reality”. Referring to the alleged remarks of guild secretary, Mr Y.E. Reddy, that 12,000 employees would wear black badges to show solidarity with Mr Mascarenhas, the union officials said that the managing committee of the union had taken no such decision. The guild officers, in their letter to the Civil Aviation Secretary, Mr A.H. Jung, said it was an individual expression of Mr Reddy and they were not informed of this directive. Air India said in a press note that it foresaw no threat whatsoever to its flights and the management was fully geared to ensure smooth operation of all its flights. Meanwhile, in another development,
the Civil Aviation Ministry defended the several bilateral air service
agreements with other countries signed at the behest of Mr Mascarenhas. |
cr
Rolling upwards There is a school of thought in market circles that far from declining once the rolling settlement system comes into effect in July, the BSE Sensex might zoom on the back of unhindered FII buying. Whatever happened to the gloomy outlook that the MSCI recast was supposed to cast? Castrol There could be good news in the offing for the shareholders of Castrol. The grapevine has it that this lube major might decide to bite the bullet and accept the SEBI dictated price for its buy-back offer. Is it coincidental there seems to be renewed buying interest at its counter. Bulls & bears Seems it pays to be rogue bull operator
in India, rather than a bear operator. Don’t believe it? Check
out the kid glove treatment meted out to the notorious erstwile ‘Big’
Bull and currently, the ‘K-Bull’. Then contrast it with
the relatively severe approach towards two perceived bear operators,
one connected to a corruption expose and the other who relinquished
a high office at the premier bourse. |
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Tourist claims Rs 30 lakh damage New Delhi, May 27
4 anti-AIDS drugs by Ranbaxy New Delhi, May 27
Cadbury India exonerated by MRTPC New Delhi, May 27 |
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by K. R. Wadhwaney IA moves towards open fare market Indian Airlines’ flexi-fare operation from May 25 is the initial step towards moving to open market fare formula, as is in existence in several developed countries. In the USA, for example, every airline adheres to its own fare structure. “It is our product and we have the right to sell tickets at whatever price we determine”, emphasise officials of several airlines. Tickets are sold at half or less price of the printed fare. Aviation analysts feel that it is an intelligent pholosophy to augment revenue. The fuller the load of passengers, the more is revenue since overhead expenses on cock-pit crew, cabin crew, fuel, food/snacks remain unaltered when the flight is ready for take-off. When one or two private carriers increased fares, the national carrier did not react. It has now increased fares on 68 routes, which are revenue-earning sectors. The more the demand, the higher will be the fare. With a view to wooing passengers, the national carrier offers concession to passengers who are returning to the base the same day. There are several other facilities offered to regular flyers. According to a senior official, the national carrier’s fares will now be determined on the principle of demand and supply. The fares will be more when the season is busy. The aviation experts are of the view that the concept of the open fare market will fetch better results that what has been the case at present. There was time — not long ago — when the International Air Transport Association (IATA) was rigid about fare structure on the national and international sectors. Now the IATA has become a mere paper body. It no longer bites nor does it bark any more. The anomaly in fare structure has reached such-level that tickets purchased in Punjab are much cheaper than tickets bought in Delhi. This kind of anomaly leads to several corrupt practices. Tickets sold in Delhi are being shown as sold in Punjab. Some time ago, Aeroflot did not have passenger traffic rights ex-India. But it did roaring business because its flights to east and west were the cheapest. How did it manage? It sold ticket in Delhi with an additional coupon of Moscow-Delhi. This was uplifted by the airline staff before handing over the ticket to the passenger. On the national carrier’s flexi-fare
operation, other domestic airlines have not yet reached strongly. They
say that they are ‘waiting and watching’. But the fact is
that they have been caught unawares by the national carrier’s sudden
flexi-fare move. |
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E-board Inflation up Vizag port busiest Food plazas Capital Bank New ONGC CMD |
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