B U S I N E S S

CORPORATE NEWS

Balaji Tele net zooms 566 pc
Mumbai, May 25
Balaji Telefilms (BAL) has reported a 566.24 per cent rise in the net profit at Rs 29.01 crore for the financial year ended March 31, 2002, compared to Rs 4.35 crore in the previous fiscal.

• LICHF net rises
• United Bank net up

Relationship questioned
In a case where the relationship of landlord and tenant is denied by the tenant, whether 0.15. R. 5 will be applicable?

AVIATION NOTES

Civil aviation, tourism ministries merger likely
The government is considering the feasibility to amalgamate Civil Aviation and Tourism Ministries. If this move becomes a reality, Jagmohan is expected to head both ministries for the development in aviation and tourism.

ANALYST’S DIARY

Time to book profit in PNB
With war clouds spotting our horizon again, it seems that some of the PSU banks which planned to foray into the capital market with IPOs will have to wait a while. No doubt, they have been egged on by the successful listing of Punjab National Bank (PNB) which made an IPO towards the end of the last FY comprising 530.6 lakh shares of Rs 10 each priced at premium of Rs 21 per share aggregating Rs 164.49 crore.

Q: I have availed a housing loan from a Housing Finance Institution @14.5 per cent interest during October 1998. My employer shares the burden of interest to the extent of 7.5 per cent. The rest 7 per cent is paid by me along with principal.

Power tariff hike to shock steel units
Business Community of Punjab is facing ups and down: First blow to the industry came when octroi was reintroduced. Apart from financial burden it is a most retrograde step which put barrier in the inter-state commerce.

Delay in power tariff hike concerns PSEB
Ludhiana, May 25
Delay in the settlement of power tariff suggested by the PSEB to the State Electricity Regulatory Commission is a cause of concern for PSEB as it faces a severe financial crunch.

Loans not enough for Swarozgar yojana
An important reason for the slow progress of the Swarnjayanti Gram Swarozgar Yojana (SGSY) is the sanction of loans by banks.

CORPORATE NEWS

Balaji Tele net zooms 566 pc

Mumbai, May 25
Balaji Telefilms (BAL) has reported a 566.24 per cent rise in the net profit at Rs 29.01 crore for the financial year ended March 31, 2002, compared to Rs 4.35 crore in the previous fiscal.

The Board has recommended a final dividend of 50 per cent (Rs 5 per share), which includes 25 per cent interim dividend declared and paid, the company said yesterday.

The total income in the period also increased to Rs 113.10 crore as against Rs 49.67 crore in FY-01.

For the fourth quarter ended March, 2002, the net profit was Rs 8.93 crore (net loss of Rs 2.10 crore in Q4 of FY-01) while total income rose to Rs 34.87 crore (Rs 14.77 crore).

The figures for the three months ended March, 2002 are not comparable with Q4 of the previous year due to change in the accounting policy wherein the entire cost of production of serials in respect of which BAL retains IPRs, was written in the last quarter of the previous year. The company continues to write off entire cost of production of serials in the current year.

The Board has also approved the enhancement in the limit of FII investment in the company from existing limit of 24 per cent of the paid up capital to 40 per cent, subject to nod of shareholders at the ensuing annual general meeting, BAL said.

LICHF net rises

LIC Housing Finance Ltd (LICFHF) has reported a 21.51 per cent rise in the net profit at Rs 147.66 crore for the financial year ended March 31, 2002, compared to Rs 121.52 crore in the previous fiscal.

The Board has recommended a 50 per cent dividend as against 40 per cent declared in the last year, LICHF Chairman A Ramamurthy told newspersons here yesterday.

The income from operations in the reporting period was higher at Rs 857.84 crore (Rs 744.62 crore in FY-01), he said.

For the fourth quarter ended March, 2002, the net profit was Rs 57.68 crore (Rs 47.14 crore) while income from operations stood at Rs 228.24 crore (Rs 195.98 crore).

LICHF sanctioned 62,587 individual loans worth Rs 2,072.07 crore, up by 20.71 per cent. Besides this, the company sanctioned loans to corporate bodies, public housing agencies and developers for a sum of Rs 37.78 crore, he said.

United Bank net up

United Bank of India yesterday announced a staggering 578.95 per cent jump in its 2001-02 net profit to Rs 129 crore from Rs 19 crore in 2000-01.

“We are targeting a net profit of not less than Rs 150 crore in the current fiscal and after that will go for initial public offering to raise fresh capital from market,” UBI Chairman Madhukar told reporters here after announcing the results.

Madhukar said the net profit would have been substantially higher at Rs 335 crore had they not provided Rs 216 crore towards deferred liabilities such as arrear wages, arrear contribution to the gratuity and pension fund and full amount of leave encashment under VRS. Agencies

RENT CASES

by Praful R. Desai

Relationship questioned

In a case where the relationship of landlord and tenant is denied by the tenant, whether 0.15. R. 5 will be applicable?

Ans: In Rakesh and Company v M/s Hira Lal and Sons (2002 (1) RCJ 109) Allahabad H.C. was considering this point.

This revision has been filed by the defendants against an order striking off the defence in exercise of power U/o 15 R5 C.P.C. The defendants had in the written statement denied the relationship of landlord and tenant. The provisions of 0.15 R5 are not applicable to a case when relationship of landlord and tenant is denied.

The applicants relied upon a decision in the case of Maqsood Ali v Shamsher Khan (1979 UPR CC 161), wherein it has been held that if the tenant does not admit the liability to pay the rent, the written statement cannot be struck off. The law upon the point is well settled. The Court below by the impugned order has struck off the defendant’s defence and has granted the liberty to the tenant to pay the amount of rent within one month and further directed that if the amount is deposited by the defendants, the written statement shall not be treated to have been struck off.

In view of the settled law upon the point 0.15, R. 5 is not applicable to a case where the relationship of landlord and tenant is denied by the tenant, there was no justification for striking off the defence and further directing the tenant to make the deposit of rent, observed the H.C.

In the opinion of the H.C. thus, the Court below has exercised its jurisdiction with material illegality in deciding prima facie the question of relationship of landlord and tenant. Such a finding can be given only when parties had led evidence at the time of final decision in the suit.

Consequently, the H.C. allowed the revision and set aside the impugned order. However, since the suit is an old one of the year 1996, it is expedient in the interest of justice that the suit itself should be decided at the earliest.

In the circumstances, the H.C. directed that the suit pending before the trial court may be decided within a period of four months from the date of production of certified copy of this order.

That way the revision was allowed.

AVIATION NOTES

by K.R. Wadhwaney

Civil aviation, tourism ministries merger likely

The government is considering the feasibility to amalgamate Civil Aviation and Tourism Ministries. If this move becomes a reality, Jagmohan is expected to head both ministries for the development in aviation and tourism. The Prime Minister and his senior colleagues, including Pramod Mahajan, are convinced that economic growth and international image will be doubled if the two vital, but neglected ministries, are brought under dynamic minister.

Airline officials, travel agents and several associations and federations connected with aviation and tourism are of firm belief that the country’s rating and tourism traffic increase considerably if refreshing new policy is implemented. Mr Vajpayee is said to have taken active interest in Air-India securing a suitable slot for landing Heathrow Airport. “If British Airways can keep spreading its wings in this country, we are entitled to get a suitable slot at Heathrow Airport, no matter how busy it may be”, said two senior commercial officials.

While AI is planning to re-start its flights to Frankfurt and Chicago, foreign airlines are in touch with the DGCA to resume operations, which are limping back to normal post-September 11 attacks in New York.

In the recent national convention on “Aviation and Tourism: Opportunities and Challenges”, conducted by (Assocham) and Delhi Tourism, experts highlighted the importance of aviation and tourism.

Mr Shahnawaz Hussain revealed that the new civil aviation policy would be announced shortly. The national interest would be given the highest priority. According to statistics, Air-India has sustained heavy losses at the hands of general sales agents in the USA, Europe and other place. Indian Airlines, which has about 1700 agents, found that some agents were indulging in unethical practices.

According to Travel Agents Association of India, it is a bold step and will help all involved actors. The agents will no longer be at the mercy of banks which, in addition to several stipulations, also charge 3 per cent service fee.

ANALYST’S DIARY

by Ashok Kumar

Time to book profit in PNB

With war clouds spotting our horizon again, it seems that some of the PSU banks which planned to foray into the capital market with IPOs will have to wait a while. No doubt, they have been egged on by the successful listing of Punjab National Bank (PNB) which made an IPO towards the end of the last FY comprising 530.6 lakh shares of Rs 10 each priced at premium of Rs 21 per share aggregating Rs 164.49 crore. PNBs shares have since been listed at the NSE, BSE and Delhi Stock Exchange. Its share price which had seen a high of Rs 48 and a low of Rs 35 now stands at around Rs 40. We had identified this IPO as a relatively better one in our electronic investment newsletter ‘Lotus Stock-Flash’ and recommended exposure therein to our clients projecting a 25 per cent upside on listing. Of course, the listing price exceeded that and ran up thereafter which is when we gave a ‘Book Profits’ call at Rs 45.

The prime objective of PNBs issue was to augment the long-term resources of the bank as well as its capital base to meet its future capital adequacy requirements. For the record, the Capital Adequacy Ratio of the bank as on September 30, 2001 was 10.65 per cent as against the RBI stipulation of 9 per cent. PNBs number of branches has risen from 619 at the time of nationalisation in 1969 to 3,861 in December 2001. The bank has a strong presence mix of rural and semi-urban areas, which incidentally accounts for 68 per cent of its total branch network. Over the past five years, its deposits have grown at a CAGR of 16.2 per cent while its gross advances have grown at a CAGR of 19 per cent. PNB has also diversified into gold, insurance and credit card businesses.

On the SWOT scales, the positives of this bank would include a satisfactory track record that spans over 106 years. PNB also enjoys the benefit of size, being among the largest banks in India. Then, the bank has a large network of branches spread throughout the country, more than half of which are now technologically upto date. Its financials too pass muster with a topline of Rs 3,783 crore for the first half of the current financial year and a RONW of almost 20 per cent for the last financial year. On the flip side though, PNB too like most of its PSU contemporaries suffers from the bane of NPAs, which at last count stood at 6.67 per cent of net advances. The bank has not exactly emerged with flying colours having been classified in the third category of banks by the Verma Committee report. Furthermore, the bank has a nascent ALM mechanism and it is yet to prove effective as is evident from the mismatch in its last financial year. Finally, like other public sector banks, PNB also suffers from limited workforce productivity.

It appears imminent that there will be a spate of M&As in the Indian banking sector that is in the throes of radical transformation. Given the fact that listing has enhanced PNB’s positioning, there is a fair chance that investors with the propensity to play the waiting game may still find that elusive pot of gold somewhere down the line. As for my team and me, well, we believe in taking profits when we see one. That, we believe, is the name of the game at the Indian bourses.

IN THE WONDERLAND OF INVESTMENT

by A.N. Shanbhag

Q : I have availed a housing loan from a Housing Finance Institution @14.5 per cent interest during October 1998. My employer shares the burden of interest to the extent of 7.5 per cent. The rest 7 per cent is paid by me along with principal.

As per the recent guidelines on perks, 3 per cent interest is now to be added to my salary as perks. Can I add this perk value of 3% to the interest paid by me for claiming the tax benefit on housing loan interest paid?

— Dinesh Suvarna,

A : In my article on the subject, I have raised the same query and prayed for a CBDT clarification. In my opinion, you are free to claim the benefit and hope for the best. I request you to let me know the result. I am not sure, CBDT will take the trouble to clarify.

Q: I have started dabbling in shares on a large scale recently. I am worried about whether the nature of my activity is normal, business or speculative. What is the difference? How do I treat the losses in each case?

—Taxpayer

A: Sec. 45(5) defines — “Speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stock and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips.”

The proviso enumerates some exceptions which shall not be deemed to be a speculative transaction. These are —

“a) a contract in respect of raw material or ...

“b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuation.

“c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member.”

As per Explanation to Sec. 73, the business of purchase or sale of shares by companies (which are not investment, banking or financial companies) shall be treated as speculation business. The loss from such dealings can be setoff only against profits or gains of a speculation business. Speculation loss can be setoff in the same year only against the speculation profits.

Unabsorbed speculation loss will be carried forward and setoff against speculation profits of the subsequent assessment years upto 8 years. It may, however, be noted that loss under any other head of income other than ‘Capital gains’ can be set off against the speculation profits in the same assessment year u/s 71.

In respect of speculation business, the assessee has the following option :

i) either to first setoff the speculation losses carried forward from an earlier year against the speculation profits of the current year and then to setoff the current year’s losses from other sources against the remaining part, if any, of the current year’s speculation profits;

ii) or to first setoff the current year’s losses from non-speculation business and other sources against the current year’s speculation profits and then to setoff the carried forward speculation losses of the earlier years against the remaining part, if any, of the current year’s speculation profits [Vide Circular 23 (XXXIX-4), dt 12.9.60].

LETTER

Power tariff hike to shock steel units

Business Community of Punjab is facing ups and down: First blow to the industry came when octroi was reintroduced. Apart from financial burden it is a most retrograde step which put barrier in the inter-state commerce.

Unfortunately government has preferred to take the shelter of court in reintroducing octroi to hide its own failure to provide alternative sources of revenue for the local bodies.

Another misfortune is that the government has not changed the pattern of octroi put in place by the previous rulers which devised ways to benefit their cronies at the cost of the industry.

Where is the need to put octroi posts at every small town and intercept goods at multiple points.

This aspect should at least be taken care of even now if there is a will on the part of this government. The proposed power tariff hike is the severest blow at this crucial juncture. The tariff hike has many serious side effects to give blow to the industry.

Bulk of the steel consumed by the industry is produced locally. Steel making is a power intensive process. Every 10 paisa per unit hike raises the cost of steel by over Rs 100 MT.

The PSEB has proposed a hike of 119 paisa which rings death bells both for steel producers as well as for users.

China is posing a great threat to our exporters. So far voices in the country have been raised on the W.T.O. threat. That is one aspect.

We have to maintain competitive edge in the export market cost is the most crucial factor. When inputs costs are rising it is just not possible to reducing the cost of finished products.

In the current regime of market economy Punjab and adjoining states are the worst sufferers due to geography.

Freight component is becoming very heavy. Inputs come from outside and finished products go out of Punjab. For instance, Tata steel floated tenders for steel billets at a minimum price of Rs 11,000 MT ex works.

Punjab’s industry could not take advantage because of the freight of Rs 2,150 MT. On the other hand near by states took advantage as freight was just Rs 300 MT.

Banks have started collecting monthly interests instead of quarterly mode. They have ignored the RBI's instructions in this regard.

Although there is nothing wrong in the change over but some time for adjustment should have been given.

P.D. Sharma,
Ludhiana

Delay in power tariff hike concerns PSEB
K.S. Chawla

Ludhiana, May 25
Delay in the settlement of power tariff suggested by the PSEB to the State Electricity Regulatory Commission is a cause of concern for PSEB as it faces a severe financial crunch.

The PSEB has sent its suggestions for hike in power tariff for various categories of consumers, including the levy of power tariff on tubewells in the rural areas which have been getting free power for the past five years.

The PSEB has recommended Rs 240 per horse power as flat rate for tubewells per month or Rs 2 per unit. There are different opinions on the two structures recommended by the PSEB.

The authorities say per unit power tariff for the tubewells is impractical as they cannot procure meters for more than 8 lakh tubewells. The PSEB will not be able to check theft of power.

As per the flat rate for tubewells, a section of PSEB officials is of the view that this is on the higher side for five years the farmers were supplied power free of cost.

In 1990, PSEB had raised the tarriff for tubewells to Rs 65 per horse power.

The PSEB filed a petition with the commission in March seeking ad hoc tariff hike for tubewells at the rate of Rs 100 per HP to meet the financial needs of the board.

According to PSEB sources, the regulatory commission took this petition in a routine manner and raised some objections.

The commission has sought objections from the public and the industry on the tariff hike suggested by the PSEB.

These objections would be filed within a month and after scrutiny of the same the regulatory commission will give its verdict.

Loans not enough for Swarozgar yojana
V.P. Prabhakar

An important reason for the slow progress of the Swarnjayanti Gram Swarozgar Yojana (SGSY) is the sanction of loans by banks.

Admitting this fact the Ministry of Rural Development has pointed out that during 2000-2001, against the total 13.55 lakh loan applications submitted by the District Rural Development Agencies only 7.56 lakh loans were sanctioned and 6.80 lakh loans disbursed. Similarly in 2001-2002 (up to November, 2001) against a total of 8.34 lakh applications submitted to the banks, only 2.86 lakh loans were sanctioned and funds had been disbursed only to 2.17 lakh cases.

The basic objective of the yojana is to bring the assisted poor families (Swarozgaris) above the poverty line by providing them income-generating assests through a mix of bank credit and government subsidy. The programme aims at establishing a large number of micro enterprises in the rural areas on the ability of the poor and potential of each area.

Subsidy under the yojana to individuals is uniform at 30 per cent of the project cost subject to a maximum of Rs 7,500. In respect of SC/STs, the subsidy is 50 per cent of the project cost, subject to a maximum of Rs 10,000. For groups of Swarozgaris, the subsidy is 50 per cent of the project cost, subject to a ceiling of Rs 1.25 lakh. There is no monetary limit on subsidy for irrigation projects. No interest is charged on the subsidy amount. It is released as part of the loan to be adjusted against last instalments on satisfactory utilisation of the loan for the micro enterprise.

Since the inception of the scheme from April 1, 1999, 57.49 percentage of the funds available were utilised and 71.97 per cent of the funds allocated were utilised. The credit mobilisation was only 32.80 per cent.

Over 10 lakh women Swarozgaris had been assisted since the inception of the scheme and 19,783 disabled Swarozgaris were given help.

BIZ BRIEFS

NFL gets award
New Delhi, May 25
NFL, the second largest producer of nitrogenous fertilizers in the country, has been honoured with merit certificate award for excellence in the achievement of MoU targets for 2000-01, a release said. TNS

Annapurna salt
Chandigarh, May 25
Hindustan Lever Ltd (HLL) has introduced the only stable iodized salt in the Indian markets, branded as Annapurna iodized salt with the revolutionary K-15 technology to preserve iodine in the salt. TNS

Vital Comm
New Delhi, May 25
Vital Communications has decided to increase the limit of Foreign Institutional Investors (FIIs) to 49 per cent of the paid up capital of the company. The company has also set up an expert committee to prepare a report for consideration of dividend/bonus in this quarter of financial year, a release said. TNS

Fortune oil
Chandigarh, May 25
Adani Wilmar Limited has launched Fortune Refined groundnut oil. The oil is available in attractive packs and ranging from 500 ml. pet bottles, 1 litre pouches & pet bottles, 5 litre jerry cans to 15 litre tins & jerry cans. It is currently available at Rs 61 for a 1 litre pouch. TNS

Fashion designing
Mandi, May 25
Mr Bhuvan Khanna, Director (Operation) of the School of Arts and Fashion Technology (SAFT) said here today that fashion designing had enormous potential of growth and could go a long way in generating self-employment besides being a good business venture in the modern times. Addressing a news conference he claimed that it was a unique business where saturation never came as fashion kept on changing with the time. Fashion was the largest growing sector and SAFT was making vigorous efforts to harness its vast potential. Director Regional Office Manish Gogia said fashion designing had the largest growth and offered job potential in and outside the country. There was a tremendous response for fashion designing even in a hill state like Himachal Pradesh where SAFT was running schools in Mandi and Nadaun in Hamirpur district. OC